Pilot program to give small, local businesses preferences for city contracts

In October, the city will begin a two-year pilot program that will attempt to give preference for some contracting opportunities for small and locally owned businesses.

At Wednesday’s meeting of City Council’s Audit and Finance Committee, staff from the city’s Central Procurement office presented plans for the program, which was called for when Council adopted a disparity study looking at the practices and needs for hiring women- and minority-owned businesses as subcontractors.

The updated versions of both programs will be capped at $50 million, with ongoing monitoring to avoid any negative impacts and identify elements that would need to be further revised. The local preference considerations would be limited to companies with headquarters in the five-county local area, with varying levels of preference allowed for contract amounts from $50,000 to $50 million.

Procurement staff noted that state laws limit preferences for contracts for construction and professional services, making goods and services companies the sector most likely to see an ongoing impact. Small-business considerations would be much the same, using federal guidelines to qualify as a small business, along with city and state policies covering minority or historically underutilized businesses that may qualify for the program.

Contracts that are opened via a call for bids would allow a 5 percent scoring weight for being local or small, with a 10 percent boost available for companies that qualify as both. For contracts valued at more than $500,000, the weighting is capped at 6 percent. Contracts open via a request for proposals would use a points-based weighting, with 10 points available for each category. Similarly, contracts above $500,000 would have a cap of 12 points.

James Scarboro, who is the city’s chief procurement officer, said feedback from small businesses while conceiving the pilot program showed some concern over combining the preferences for small and local businesses, which had been separated previously.

“There was an interest in maintaining the local preference and the small-business programs separately so that companies that did not qualify for one would still have benefit from the other one, and the companies that would qualify for both would have benefits from both,” he said. “There was equal value for both programs and there was an interest in having a subcontractor element in these programs if possible.”

Scarboro said there was also concern from stakeholders that the changes could result in unexpected advantages for some kinds of businesses, which is why the office worked to make the revisions as broad as possible.

“Because these changes are broad, they’re … not tailored in a way to target any specific category of contractor,” he said. “We want to make sure it works before we lock it in long-term and make any changes to our administrative rules or pursue any necessary updates in the municipal code.”

Council Member Alison Alter said the proposed pilot program appears to line up with the city’s goal of maximizing the local impact of city contract spending.

“There’s a refocusing on looking at procurement and how we’re doing that, both to be effective and efficient to get through the process, but also to make sure that we’re maximizing the return on our dollar,” she said. “When we first started talking about this, we did research with a lot of other cities and a lot of other conversations that were going on, and this was definitely the direction that folks were leaning.”

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