In-state purchasing preferences: The complexities
There is an allure to policies that promote purchasing preferences for state or local companies. The idea is that buying local increases jobs and tax revenues. This issue has been playing out nationally, as well as in individual states.
This legislative session, we’ve been following several bills in Maine that seek to increase strong preferences for local and U.S materials and Maine contractors. We were interested to see the Maine Association of General Contractors (AGC) oppose two bills, “An Act to Help Maine Manufacturing” and “An Act to Establish the Maine Buy America and Build Maine Act,” and point out numerous problems with a third, “An Act to Quantitatively Evaluate State Contracts.” The bills were under consideration by the Joint State and Local Government Committee. None of this legislation has been passed by the legislature.
We talked with Matt Marks, the chief executive officer of the Maine AGC, to get a better understanding of why Maine contractors opposed bills that, at least on the surface, looked as if they’d provide more work for firms located in Maine.
The gist of his answer boiled down to the following words: “It’s complicated.”
Here are some of the reasons he gave us for his association’s position.
If Maine insists on a strong preference for Maine contractors and materials, other states will take the same action. “We enjoy that we can do work competitively in other states,” he told us. “What happens when you give an advantage to in-state contracting is that other states do it, too.” In a letter to the Maine state and local government committee, he wrote: “Any provision that places Maine in a silo for goods or services will lead to legislation in other states that would impact Maine firms.
”It’s very difficult to determine the source of manufactured goods and insisting on Maine or U.S. products adds burden to contractors and cost to agencies. “Who is making the determination of what is considered a Maine good? Is it assembled here? Is it actually manufactured here?”
It’s also tricky to determine what constitutes a Maine firm. What if it’s a subsidiary of a larger company that’s located in another state? One concern is that a strong local preference might discourage firms from growing or expanding. It might discourage purchases by larger or international companies that could benefit local business owners. It also could discourage larger out-of-state companies from doing business in Maine, not necessarily the smartest choice for a state that is worrying about a lack of population growth.
Often out-of-state firms, which might be discouraged from bidding, provide work for Maine subcontractors and suppliers for jobs that are too complex to be handled exclusively by local firms.
The provision of one bill, which identifies a Maine company by taxes paid in the state, limits the ability of Maine contractors to take jobs in other states. Many contractors work in multiple states and need to take jobs, and pay taxes, elsewhere when local work slows down, as it did during the recession.
Implementing strong local preference bills is costly and difficult. “Our concern is with the practicality of this. Who is going to manage this? What’s the cost? The intent is good, but the implementation is the problem,” Marks told us.