City rule change could cause more problems than solutions for local builders
On Tuesday, the city of Vancouver passed an option given to them in state law (RCW 39.30.040) to consider local tax revenue from the purchase of supplies, materials or equipment from a firm located within its boundaries when determining the lowest bidder.
While this proposal is limited in its application, the policy of favoring local bidders creates a slippery slope that could end up hurting local businesses. We all want businesses to do well, but these types of policies may ultimately do more harm than good for Vancouver suppliers.
This proposal has the right intention – to give local firms a leg up when it comes to bidding on government projects. However, it's important to remember that in today's world, local is a lot bigger than it used to be. Giving Vancouver suppliers advantages on bids because they operate in Vancouver could set a dangerous precedent and ultimately cost the city a lot more than it receives.
Local contractors and subcontractors, which will not be directly impacted by the ordinance, are traveling greater distances to survive in a tough economy. The ability to compete on a level playing field for government contracts outside the area is keeping many local companies in business. For most "local" suppliers, it's the region as a whole, not just the city, where they make their living. If other jurisdictions, such as our large neighbor across the Columbia River, were to adopt similar policies, the result could be harmful for a large number of Vancouver-based employers.
At issue is the ability of local suppliers to compete for contracts across the region. The decision this week by the Vancouver City Council to pass the ordinance change could trigger other jurisdictions to provide the same benefits to their local suppliers, limiting the opportunity for Vancouver suppliers to do business. Many regional suppliers provide jobs for Vancouver citizens. While the city collects additional tax revenue by using local suppliers, those savings are lost by way of the increased cost to taxpayers associated with the bid.
The result is more tax dollars being spent on city projects with the potential for the tax revenue from that project being spent on something that doesn't help the economy.
The most critical component to a functioning free market is a level playing field. A better result might come out of eliminating sales tax and the Business & Occupancy tax on gross receipts for public works projects. The best policy for the city on this issue is to ensure fair opportunity for all bidders and to focus on improving the general business climate in Vancouver.
Bomar is executive director of the Southwest Washington Contractors Association, a 200 -member trade association that seeks to provide contractors with the professional resources to build a stronger community through growth and development.
