Editor’s Note: This story has been updated from its initial version published on March 27 to include details from the council’s discussion on the proposed policy from Tuesday night, April 4.
The City of San Clemente will soon develop an ordinance that would assist local small businesses in competing for public contracts with the city, per a unanimous, 4-0, City Council vote on Tuesday night, April 4.
City Manager Andy Hall explained during his staff report on Tuesday night that the new code would help stimulate the local economy, both creating and keeping local jobs.
“In some respects, we want to make sure that the residents here in San Clemente have (the) first opportunities to serve their community,” he said. “Not only that, we want to support our local businesses.”
Councilmember Mark Enmeier was absent from Tuesday’s meeting.
While the advantages wouldn’t be as broad as Councilmember Gene James initially suggested when he first pitched the policy, the proposed Local Vendor Preference Ordinance would allow San Clemente businesses to bid 7% less on a contract.
Currently, contract proposals from local businesses are not eligible to receive a Local Preference discount. However, businesses can receive a 3% discount from the city for supplies, equipment, materials, and services.
Should the council approve the ordinance in the coming weeks, the consideration on all bids from prospective local contractors would be at the city’s discretion, meaning the council can ignore the policy if it does not serve the city’s best interests in certain instances.
“(Local businesses) get the value unless we determine for whatever reason (that) it’s not appropriate,” Mayor Pro Tem Steve Knoblock reasoned, which Hall confirmed
James’ motion at the council’s March 21 meeting, which was supported by Knoblock and Enmeier, asked for city staff to produce the report on giving preference to local businesses that participate in the city’s solicitation for contractors, or requests for proposals (RFP).
“As local vendors apply for business within the city, I think local vendors should have at least a 10% break on contracts,” James said, referring to a company’s bid price. “If they come within 10% of what I’ll call a foreign vendor, a vendor from outside of the city, that business should go to the local vendor.”
Under the city’s policy related to the solicitation of competitive bids, a contract must be awarded to the lowest responsible bidder after the city receives proposals from companies competing for a service contract. The City Council, however, does have the discretion to reject all bids.
James’ proposal comes roughly two years after a council majority voted to award the city’s five-year tree services contract to the Anaheim-based company West Coast Arborist, ending a yearlong procurement process.
At the council’s direction, the contract went to bid a total of three times, first as a three-year contract, then a five-year contract, before going out again, but under a revised policy that allowed the city to consider additional criteria and factors besides cost.
In all three instances, WCA was the city’s recommended choice to the City Council, beating out the locally owned and operated Rod’s Tree Service, which had long been the city’s tree services provider. Eventually, Rod’s withdrew its bid, which eventually led the council to vote, 4-1, to select WCA.
After the council at the time reached an impasse over the third attempt to award the contract, then-City Attorney Scott Smith had warned the council of the “significant (legal) exposure” the city faced by not selecting WCA. He noted that the company won the bid three times based on criteria related both to price and other subjective factors.
“There’s some pretty significant exposure here if we don’t do that. This is left to the council’s discretion, and we would defend any decision you made,” Smith had said, adding: “State law requires that awards of contracts be awarded and given competitively and given on competition and not on favoritism and past successes.”
Giving preferences to local small businesses is not uncommon across America’s counties, municipalities and school districts.
According to a report from sourcesuite.com—an arm of BidNet, which specializes in helping public organizations simplify their contract purchasing processes—37 out of 50 states, including California—have policies that favor local vendors.
California law gives small businesses a 5% preference when competing for state contracts, according to the Institute for Local Self-Reliance.
Businesses must be certified and can obtain certification after verifying they are independently owned, are centrally located in the state, have owners that live in California, do not dominate their respective industries, and roughly comprise fewer than 100 employees.
As of January 2020, Orange County also utilizes a County of Orange Local Small Business (OCLSB) Preference with qualifying requirements that pertain to the county. Eligible businesses receive a 5% preference.
Such policies allow for higher vendor participation, local economic growth, and keep tax revenues within entities’ respective regions, according to SourceSuite.
The report added that disadvantages do exist when favoring local vendors.
“A lack of vendor competition can drive up the cost of purchasing, which can be detrimental to the local agency and, ultimately, the taxpayer,” according to the report. “In addition, if all local agencies within a region were to enact local preference policies, local vendors would have fewer opportunities to grow their businesses, as they would have a lower chance of being awarded contracts from nearby government agencies.”
Shawn Raymundo contributed to this report.
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