LA considers plan to favor local businesses' contract bids

Construction crews at work on Horizon at Playa Vista. File photo.
Construction crews at work on Horizon at Playa Vista. File photo.
JebusHChrist/Flickr CC

Local businesses would be given preferential treatment by the City of Los Angeles when bidding for contracts under a proposed ordinance unveiled today.

Mayor Antonio Villaraigosa said the so-called Local Preference Ordinance would create about 10,000 jobs.

"Currently the city of Los Angeles spends approximately 84 percent of its procurement dollars with businesses that are located outside of the city of Los Angeles,'' he said. "Therefore, out of $1 billion allocated for governmental contracts, only $180 million goes back to local businesses. This represents a significant missed opportunity to stimulate the local economy.''

The ordinance would favor local businesses by sweetening their bids by 8 percent over those of outsiders. For example, when the city is deciding to award a contract to the lowest bidder, it would deem a local firm's $1 million bid to be $920,000.

Also, when the city is soliciting bids, local businesses' proposals would be awarded extra points. For example, if a local business scored 100 points in the evaluation, the city would deem it to have scored 108 points.

To receive the "local preference,'' a business would have to lease or own a building in Los Angeles County, and at least half of its full-time employees would have to work in the county at least 60 percent of the time.

The company would also have to maintain a business tax registration certificate for the prior six months.

Leron Gubler, president and chief executive of the Hollywood Chamber of Commerce, said local businesses are currently at a disadvantage when competing with outsiders.

"(The playing field) is not level because of the higher cost of doing business in a city,'' he said. "You have a lot of businesses way out on the fringes where the cost of real estate is a lot less, the cost of building taxes
is a lot less, and all those things factor into the cost of doing business. The city's gross receipts tax here is much higher than in other areas.''

Sydney Chase, vice president of business development at Armorcast Products Co., also spoke in favor of the measure.

"We're not focused on the right to prosper anymore; we are praying for the blessing of surviving these difficult times,'' she said. "This local preference will help make that happen.''

The mayor's office cited a study by USC professor Charles Swenson, who found that a local preference policy would generate about 10,000 new jobs and new revenue for the city.

"For too long, the city of Los Angeles has awarded contracts to private companies without considering if any of those funds will filter back into the local economy,'' Councilman Bernard Parks said.

"This short-sighted practice of selecting the lowest qualified bid without considering where the bidding company is located or where their employees live is to the great detriment of the economic vitality of Los
Angeles,'' he said.

Councilman Paul Krekorian agreed.

"Nearly a billion dollars of this city's taxpayers' money should not be going to create jobs in Illinois, in Texas, in Florida, in New Mexico,'' he said. "It should be going to create jobs and stimulate small business right here at home in Los Angeles.''

The proposed ordinance would have to pass muster with City Council committees, then by the full council, before making it to the mayor's desk for his signature.