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Can the City of Portola give preference to local contractors?

Diana Jorgenson
Staff Writer
3/19/2011

The subject of whether the city could give preference to local contractors, even when their bid is not the lowest, first came before Portola’s City Council during discussions about the A15 road improvement project scheduled for this summer.

Mayor Pro Tem Juliana Mark brought the subject up and referenced the local economy as the motivation. Since then, City Attorney Steve Gross researched the city’s possibilities and presented a concise report to the council at its Feb. 11 meeting.

Gross explained that whenever there are state or federal funds involved, a bidding process is mandated by program rules and the bid has to go to the lowest responsible bidder. The A15 road project, as well as most of Portola’s larger-scale projects, involved both state and federal funding.

Where grant money is involved, no preference can be granted. The local contractor must also be the lowest bidder in order to have the bid awarded.

Beyond that, Gross explained, there were two types of cities in California. Most cities, Portola included, are general law cities, and as such, conform to state laws governing them. These laws state that they have to award bids to the lowest bidder, no preference given, on any work project over $5,000.

There are exceptions to competitive bidding — such as for professional services like legal, financial, engineering, etc. — but primarily any work on sewers, streets, public buildings, streams and rivers require the public bidding process.

If the city of Portola drafts an ordinance in favor of preferential treatment for local contractors, it could do so on projects less than $5,000.

“We could, if we made some adequate findings, adopt a preference for local businesses in some of our contracting, but it’s going to be very limited because we’re bound by state law,” Gross said.

Other cities, like San Francisco and Truckee, are charter cities and can, if so specified in their charters, exempt themselves from competitive bidding. Any city can become a charter city by drafting a charter and having it go to ballot for the residents to approve.

The charter becomes a limitation of governmental powers, said Gross, and gives the city the ability to choose not to require a bidding process. Charters can be long and involved or very short.

“It’s not a panacea,” said Gross, “but it allows for flexibility.”

Any time the charter is amended, it must again go up for a vote.

Charter cities are more likely to have a local preference ordinance. Gross reported that the preferences given to local businesses range from 1 percent to 10 percent, with 1 percent being the most common because cities could balance the higher purchase price by the sales tax generated.

Beyond that, Gross pointed out that the city would have to pay the higher cost out of its General Fund. “You have to pay for the higher bid somehow.”

He encouraged council members to research charter cities further, citing the League of California Cities’ website as a good place to begin.

Otherwise, the discussion was inconclusive. Since the A15 project was not a candidate for local preference for bids, the urgency of the subject was gone, said Gross, and he left the council to mull over the general city/charter city alternatives and whether there are sufficient opportunities to use such a tool to justify drafting one as a general law city.

 

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