Wisconsin Legislature Considering Changes to Procurement Law: How Will it Affect Your Business?

January 21, 2009

The State legislature is considering making changes to Wisconsin’s domestic preference law. The following describes the current domestic preference law in Wisconsin, the proposed changes just introduced in the legislature and some issues businesses may want to keep in mind.

Current State of Wisconsin’s Domestic Preference Laws
Currently, Wisconsin’s domestic preference law is what is commonly referred to as a reciprocal preference law. Rather than uniformly favoring in-state businesses, Wisconsin penalizes contractors from states who have in-state preference laws. Wisconsin applies the same domestic-preference rules to a non-Wisconsin bidder to which Wisconsin businesses would be subject when competing for contracts in that bidders home state.

Pursuant to the Wisconsin Procurement Manual, if the low bidder is not a Wisconsin business and the state in which the bidder resides grants an in-state preference, Wisconsin will give a preference to a Wisconsin business, if any, by penalizing the non-Wisconsin business. The state will apply the penalty to the non-Wisconsin bidder at the same percentage preference as is applied by that bidder’s home state.

Wisconsin will apply the penalty only when the result will benefit a Wisconsin business. It will not be applied if it only changes which non-Wisconsin business receives the award. The penalty could be applied to more than one non-Wisconsin business if that would cause the award to be made to a Wisconsin business.

AB 1 – Local Products and Services Preference
AB 1 would get rid of Wisconsin’s reciprocal preference law described above and replace it with the requirement that the state “shall attempt” to ensure that at least two percent of the total amount expended for goods and services is from Wisconsin-based businesses. In addition, the total percentage of purchasing from Wisconsin-based businesses in any fiscal year cannot be lower than the percentage from the previous fiscal year. Lastly, the bill sets a goal for local units of government in Wisconsin to reach the two percent mark, and a goal that the total percentage of purchasing from Wisconsin based businesses in any year cannot be lower than the percentages from the previous year.

Issues for Businesses
There are a number of things that businesses need to keep in mind and watch for as AB 1 makes its way through the legislative process.

  • The bill only requires the state to “attempt” to reach 2 percent. Also, it does not describe what methods the state may employ to attempt to reach that two percent. The Department of Administration will need to draft administrative rules outlining what those methods would be. There are many possible methods the state could choose to utilize in its attempts to reach 2 percent. Business input on this issue is crucial.
  • The bill creates a rising floor for the percentage of purchases that the state must make with Wisconsin-based businesses. For example, if the State purchases 3 percent of its good and services from Wisconsin-based businesses in 2010, it must purchase at least 3 percent in the future years. Each year that the percentage goes up, it creates the new mandatory floor for the following year. There is no provision in the bill to lower the reset floor.
  • The State procurement systems are not currently set up to track what percentages of goods and services it purchases from Wisconsin-based businesses.
  • Currently the bill defines a local product or service as “a product or service that is purchased from a person whose principal place of business is located in this state.” How will the State define “principal place of business”?
  • If you are a Wisconsin business and currently bidding or may be bidding on work for other states, be aware what the ramifications of this bill may have on your business. Many states have reciprocal preference laws similar to Wisconsin’s current law. If you are non-Wisconsin business bidding for work in Wisconsin, you also need to be informed about how the bill could affect your ability to successfully compete for work in Wisconsin.
  • How will local governments in Wisconsin respond to the goals set for them in the bill? How many will change the way they procure goods and services and in what ways?

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