March is known for the start of spring, March Madness and St. Patrick’s Day celebrations, but did you know that March is also National Procurement Month? According to the National Association of State Procurement Officials, or NASPO, it’s a time to recognize the state government professionals who annually enter into hundreds of contracts with suppliers for everything from office supplies and construction to complex IT projects.
Taxpayer dollars support these contracts, and state procurement officials are charged with getting the most bang for the state’s buck through a transparent and fair process. While executive agencies or central procurement offices usually enter into these contracts, state legislatures often direct the process.
In-State Preference Laws
Often, legislatures exert authority over the procurement process through policy preferences for specific groups. In-state/local preference laws, which establish a preference for in-state bidders, are among the most common. Some states have a so-called low-tie bid preference, which says that if two bids are equal, preference will be given to the in-state company.
In-state preferences can also prioritize goods that come from a particular state. For example, North Dakota has a preference law that directs state agencies to acquire coal mined in North Dakota. In-state preference laws relating to contracts for public construction projects are also common. They can range from preferences for in-state construction companies to those for in-state labor or project materials.
Some states may establish an in-state or product preference tied to a percentage of the price of out-of-state companies or products. Louisiana requires state entities to purchase steel rolled in Louisiana if the cost of the steel does not exceed 10% of the steel rolled in another state. According to NASPO, almost all states, Guam and the U.S. Virgin Islands have at least one in-state preference law. NASPO maintains a repository of state and territorial preferences.
Reciprocal Preference Laws
Preferences for in-state companies and goods are popular, but they often lead to reciprocity from other states. States might apply a preference for their companies and goods in response to a preference enacted in another state. They may also prioritize the purchase of goods from another state that does not place restrictions on the purchasing state. For example, Illinois directs purchasing entities buying products from another state to give preference to states that do not have laws prohibiting the purchase of goods grown or produced in Illinois. At least half of states reported having a reciprocal preference law to NASPO.
Other Preferences
There are a wide variety of other product preferences nationwide. Many states, for example, have product preferences for recycled materials. Several states also have a preference law for goods made in America.
Status preferences, which give state contracting preference to different classes of individuals or businesses, also are common. These preferences often benefit small- and minority-owned businesses, veteran-owned businesses and people with disabilities.
Procurement plays an important role in ensuring governments can provide the best services for their constituents, and preference laws are one way that legislatures can be involved in the process.
Erica MacKellar is a program principal with NCSL’s Fiscal Affairs Program.