Bill gives Vt. firms first shot at state contracts2/12/09

Local companies deserve preference, McCullough says

Feb. 12, 2009

By Greg Elias

Observer staff

Rep. Jim McCullough has proposed legislation he touts as a homegrown economic stimulus package.


Jim McCullough

The Williston Democrat submitted a bill last week that gives preference to Vermont-based businesses that bid for state contracts. Projects would be awarded to Vermont companies unless an out-of-state firm’s bid is 20 percent lower.

McCullough said the legislation, H.164, would boost the local economy by keeping tax dollars closer to home and promoting job growth.

“It’s about making money spent in Vermont work for Vermonters,” he said. “As long as we’re spending taxpayers’ money, why not spend the money locally?”

McCullough acknowledged that the new law could drive up state contracting costs. But he said the added expenditures could be offset by increased economic activity, which would in turn boost tax revenue.

Even members of McCullough’s own party, however, have their doubts about the legislation.

“Basically, the big issue will be that this is a very expensive proposition,” said Rep. Donna Sweaney, D-Windsor, chairwoman of the Government Operations Committee, which will consider the proposal. “But the intent is good, trying to keep business here in Vermont.”

“I understand what he is trying to do here,” said Rep. Warren Kitzmiller, a Montpelier Democrat and chairman of the Commerce and Economic Development Committee. “I suspect the real controversy with be with that number, whether it should be 20 or 10 or 5 percent.”

Thom Serrani, executive director of Associated General Contractors of Vermont, said bills similar to McCullough’s have been proposed over the years.

He said such measures are well-meaning but ineffective because they are trumped by rules governing expenditures of federal money. Federal funding at least in part pays for many projects — particularly highway construction — that the state puts out to bid.

“We appreciate the good intentions of this legislation,” said Serrani, whose organization represents 160 contractors and vendors in Vermont. “But I doubt it has a real chance of passing or being effective.”

The legislation also raises legal issues. The Commerce Clause of the U.S. Constitution gives Congress the exclusive right to regulate interstate commerce. McCullough said he checked with legislative counsel and was advised his bill was in fact constitutional.

The bill alters existing rules regulating the state bidding process for contractors and suppliers. It requires contracts to be awarded to “a business or industry with its principal place of business located in Vermont and employing citizens of this state.” The existing law requires only that contracts be awarded to “one of the three lowest responsible bidders.”

The legislation still allows the state to reject a bid if it decides a company cannot satisfactorily carry out the project. But the legislation eliminates the $50,000 threshold at which projects must be bid. Bids would be required for all contracted work.

The legislation’s key provision, however, is the preference given to Vermont companies. To win a contract, an out-of-state business must submit a bid that is at least 20 percent lower than those made by Vermont firms. If more than one Vermont company bids on a project, the bill says the contract must be awarded to the local firm “whose bid is in the best interest of the state.”

McCullough said there was no particular reason he picked the 20 percent threshold. He said he considered it a starting point for deliberations and suggested the final figure could be based on a sliding scale, with a lower threshold for more expensive projects.

The bill is scheduled for its first reading this Thursday before the Government Operations Committee. Sweaney said with her committee already assigned 45 bills, it is unclear how many of them will reach the House floor. With the state facing a massive budget deficit, she said her committee’s first priority will be legislation that streamlines government and saves money.

McCullough, who owns a Vermont business himself — Catamount Outdoor Family Center in Williston — said he has long been annoyed when he sees tax money flowing to out-of-state companies. He views the legislation as a chance to correct the problem and at the same time give local businesses a helping hand.

“The economy was really the catalyst for my getting off my duff and really doing it,” he said. “Because our state is really in a tough spot and the state government is in a really big hole.”