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L.A. gives local businesses a leg up in city contracts

October 14, 2011 |  3:23 pm

Los Angeles City Council member Paul Krekorian
In a move intended to juice the economy, the Los Angeles City Council unanimously approved a new law that will give preferential treatment to local companies seeking city contracts.

The ordinance, which was spearheaded by Mayor Antonio Villaraigosa’s office, is intended to keep the city’s money close to home, strengthen local businesses and create jobs.

“We’re purchasing pencils and stationery from companies that are outside the state of California. That is ludicrous and that needs to change,” said Councilman Paul Krekorian, who introduced the measure almost a year ago with Councilman Bernard C. Parks.

Under the ordinance, companies with at least 50 full-time employees or half their total employees or their headquarters in Los Angeles County would get preference on contracts worth more than $150,000.

Villaraigosa said in a statement after the vote that the program “helps level the playing field, making it possible for local businesses to compete more effectively for city government contracts.” The cost of doing business in Los Angeles is about 10% higher than in other cities, according to his office.

The city spent more than $2.4 billion on contracts in the last fiscal year, but that does not include information from nearly 20 departments that have not reported their spending, according to the mayor’s office. Less than a third of that amount would be covered by the new ordinance, however, because it  does not apply to the port, the airports, the Department of Water and Power, the Department of Recreation and Parks, the libraries or the Community Redevelopment Agency. In 2008-09, 84% of the city’s contract money went to businesses that were not located in the city. 

The council also voted to instruct city staff to look into drafting a charter amendment that would allow the new ordinance to be limited to the city of Los Angeles. The city attorney’s office has advised the council that the charter limits preferences to businesses in the county or state.

“I think limiting this to L.A. County gets us halfway where we want to be,” said Councilman Paul Koretz.

The idea of making it a city preference rather than a county one is supported by the mayor and many council members. But Councilman Tom LaBonge cautioned against it, noting that helping businesses in nearby cities, such as Pasadena and Glendale, could have a spillover effect in Los Angeles. “If we go too parochial, we miss opportunities to be the regional leader that we are,” he said.

The ordinance gives businesses a bonus for being located in the county. In competition for city contracts, the amount submitted by a local company would be reduced by 8% when bids are ranked, although the company would still be paid the full amount proposed. For example, a local company’s bid of $1 million would be ranked as though it were just $920,000.

The ordinance is based on one in Philadelphia, but other cities, including San Jose and Pasadena, have adopted similar preferential programs. Although the L.A. ordinance does not apply to the departments with their own boards that do substantial contracting, it encourages the boards to adopt it.

The mayor’s office said he would press them to act. Noting the mayor’s support and the 12-0 vote by the council, Krekorian said, “I would say they should consider themselves encouraged.”

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-- John Hoeffel at City Hall

Photo: Los Angeles City Councilman Paul Krekorian co-authored a measure to give local businesses preferential treatment in city contracting. Credit: Allen J. Schaben / Los Angeles Times

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