Yesterday, City Council took a major step forward in helping local businesses by asking the City Attorney to draft the Local Preference Ordinance. Developed by the Mayor's Office of Economic and Business Policy, the Local Preference Ordinance rewards our Los Angeles businesses by viewing these companies more favorably than non-local businesses. Local companies seeking government contracts will receive an 8% advantage on their bids and proposals with the City.
Right now, the City of Los Angeles spends approximately 84% of its procurement dollars on businesses that are located outside of our city limits. Of the over $1 billion allocated for government contracts, only $180 million dollars goes to our local businesses. Los Angeles can no longer miss out on this great opportunity to stimulate our local economy and create jobs.
"For too long, the City of Los Angeles has awarded contracts to private companies without considering if any of those taxpayer dollars will filter back into the local economy," Councilmember and Chair of the Budget and Finance Committee Bernard C. Parks said. "This
short-sighted practice of selecting the lowest qualified bid without considering where the bidding company is located or where their employees live is to the great detriment of the economic vitality of Los Angeles."
I agree with Councilmember Parks; there is simply no down side to giving local companies an advantage when competing for government contracts. To support this, let me explain how it would work in an actual scenario. For instance, a local company's bid of $1 million, would actually be valued at $920,000 by the City after the 8% preference to local businesses is applied. In short, this 8% reduction in cost estimation would favor local businesses and could very well be the deciding factor in awarding more government contracts to local
entities.
We have the facts to prove it will create jobs and stimulate the local economy. My office commissioned a study at USC Marshall School of Business which suggests that the Local Preference Ordinance wouldn't cost a dime. In fact, this ordinance will generate 10,000 new jobs due to the heightened economic activity of awarding more contracts to local businesses.
"It makes no sense to continue the status quo at a time when our unemployment rates are skyrocketing in the city. Now is the time to take these steps and encourage businesses to stay in Los Angeles," said Councilmember Paul Krekorian, vice-chair of the Jobs and Business Development Committee. "It makes no sense to be spending our money outside of the city, outside of the state, outside of the country. We should be taking every opportunity that we can to keep that money here so that out taxpayers' money is spent to create local jobs.''
This policy is just one of the many examples of how my Office of Economic and Business Policy is thinking creatively and strategically to jumpstart our economy and create a competitive operating environment for businesses to thrive. My office's deeply-rooted philosophy is that the City of Los Angeles is a service business and our local, thriving companies are our most-prized customers that we need to fight to keep in our City.
And with the Local Preference Ordinance, we will be able to do just that. Giving preference to local businesses will help us keep them--and the jobs they create--in LA. Also, this policy, coupled with other incentives such as our Business Tax Holiday and State Enterprise Zones, sends the message loud and clear to companies inside and outside of LA to stay and locate here to take advantage of our business-friendly climate. Therefore, we must urge City Council to pass this ordinance immediately so that we can keep our local businesses here while also attracting new companies that will put our City back onto the road to economic prosperity.