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Should city give preference to local businesses?

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Marcia Nelesen
September 21, 2013

JANESVILLE--A Janesville business owner is questioning the fairness of a city policy that doesn't give preference to bids from local businesses if the price differences are small.

Acting City Manager Jay Winzenz said staff is considering bringing such a policy to the council, but he warned that such a policy could increase city costs and discourage non-local vendors from bidding on projects.

Earlier this year, Brian Williams of Northland Equipment, 306 W. State St., submitted a bid to add equipment to a dump truck that was within $1,702 of a bid from Burke Truck & Equipment of Madison.

Northland's base bid was $51,747 with an add-on option of $1,250 for a total of $52,997.

Burke's base bid was $50,500 with an add-on option of $795 for a total of $51,295.

Burke was awarded the business.

Williams noted in an email to John Whitcomb, city operations director, that the difference in base bids was $1,247, or about 2.5 percent.

“Northland Equipment has a long-standing relationship with the city of Janesville, and we are a short, five-minute auto ride for a visit should something come up during the building process,” Williams said.

“We're employing over 20 employees (full time and part time) down here, and the majority of them live in Janesville,” Williams said.

“I am just trying to keep the business in Janesville," he said.

Northland Equipment pays more than $16,000 a year in property taxes, Williams said.

He also pointed to the millions of dollars the city spends in its attempts to attract companies to Janesville, including forgivable loans to companies that agree to expand here.

“I haven't asked for any handouts,” Williams said. “We mind our business down here.

“The city should support a local business that, for 75 years, has given the city of Janesville nothing but top-notch quality equipment,” Williams said.

“How … do we grow in Rock County and the city of Janesville if we do not encourage buying locally?

“Who would go to Madison to save 2 percent on their groceries?” he asked.

Winzenz said city staff has talked about establishing criteria to allow the city to buy from a local business if bids fall within a certain percentage range.

Winzenz said he could see the issue from both sides.

State statutes require the city to accept the lowest qualified bid for construction projects over $25,000.

Local purchasing, such as the equipment contract bid on by Northland, is not covered by state requirements. The city is free to buy from any provider it wants, regardless of the bids.

“The city council certainly could establish a local preference in some cases,” Winzenz said.

Other communities give preference to local vendors who are within a certain percentage of low bids.

He understands that companies such Northland Equipment pay a lot of property taxes, employ Janesville residents and would like to see their products in the city.

“I think there's a valid argument that can be made, there,” he said.

“On the other hand, from a global taxpayer perspective, why would you pay more for a product than you have to?” Winzenz said.

“Ultimately, municipal employees have a fiduciary obligation to spend money in a wise manner,” he said.

Granting local preference in the long term discourages others from bidding, especially on competitive items. He worries that the out-of-town businesses won't go through the work of submitting bids if contracts are awarded to local businesses every time.

“Once you start losing those vendors, you may not have any points of comparison knowing whether or not the price you are getting from the local vendor is a good price or a bad price,” Winzenz said.

The city has given local preference in the past when it bought police cars from a local GM dealer. But eventually, when the price difference rose from $100 a car to about $400 to $500 a car, staff opted to buy the cars through a state-contracted dealer to save money, Winzenz said.

The city also standardized its purchase of medium-duty trucks after GM stopped manufacturing them.

The city buys International trucks from Lakeside International Trucks, Janesville.

Standardization makes sense because city mechanics learn to work on only one brand and stock parts for only that brand, he said.

Lakeside periodically shows the city copies of bids it writes to other municipalities so staff is sure the city is not paying more than it should, he said.

“Our concern is if you make the playing field not level, then out-of-town bidders stop bidding,” Winzenz said.

“Then, is there any competition for the local vendor and would that just end up leading in the long term to the escalation of prices?” he asked.

Winzenz said there might be some middle ground.

The city must consider the interests of the local business and the benefits it provides the local economy while keeping in mind the interests of the taxpayer, he said.

“It ends up being a balancing test,” Winzenz said.



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