The State of Washington decided that it was time for a bidder preference law. Many, including me, feared that not only would it make construction more costly for public agencies, but that the state was feeding an “eye for an eye” mentality instead of being a leader in cost-effective construction. The more I have mulled it over, the better I feel that it is the right decision.
At the end of this month (3/30/12), the State of Washington will begin taxing the bids of out of state contractors whose home states likewise tax Washington contractors. The law is reciprocal in nature, meaning that if Washington contractors are taxed abroad, so will contractors from that taxing state.
The Washington State Department of Enterprise recently released a quick fact sheet on how the law works. But, it is fairly straightforward: Whatever your home state would add to a Washington bidder’s bid, will be added to your own. Currently, there are four states known to provide a bidding preference to resident contractors who bid on public works contracts: Alaska, Nevada, New Mexico and Wyoming.
The purpose of this law is to level the playing ground with out of state contractors who experience benefits at home. Many fear that this means higher costs or worse deals for public agencies. Other were concerned that the law would simply permit contractors to circumvent the law by setting up Washington offices. But, in my mind, both of these issues have been addressed and the law appears to be well suited to promote cost-effective government purchasing.
“Resident” contractors are defined only as those contractors who have been incorporated or formed an entity within the State of Washington. While this certainly leaves the door open for subsidiary contractor corporations, it creates a significant circumvention burden on the contractor and allows the state to gain control over the entity for taxation purposes.
My biggest concern was that the state was responding poorly by crafting an “eye for an eye” approach. By punishing contractors from states that punish Washington contractors, I felt that the state was missing a great opportunity to set the tone as a “open market” contracting states unaffected by other unfair regulatory tactics. But considering the alternative, I think that their approach was acceptable. The law does not set an affirmative preference for Washington contractors; if your state gets rid of its own preference your bid will not be taxed in Washington. In essence, the law could have zero effect if the four bidder preference states eradicate their preferences.
I am interested to hear from others as to whether they think that the preference law is fair or not. Feel free to leave your comments here on this post!