The Goldwater Institute filed a lawsuit Friday against the City of Tucson, arguing the city’s bid preference policy violates state law and the U.S. and Arizona constitutions. They cite a city hall project in Florida that drove costs $10 million higher than the city could afford, and an Iowa city that’s out millions in taxpayer dollars because officials insisted on using an excessively expensive landfill for a hauling project, as bid preferences that are yet another crony tool governments are using to play favorites.
Goldwater hopes that their lawsuit could stop the back-scratching practice in its tracks.
Bid preference policies enable government officials to award contracts to bidders who may not give the lowest quote, solely because they operate or are headquartered within a predefined area.
Tucson’s bid preference ordinance violates both the Equal Protection Clause and the Privileges and Immunities Clause of the U.S. Constitution because it does not rationally advance a legitimate government interest and because it discriminates against businesses based on arbitrary criteria, according to the lawsuit. Additionally, the Institute argues that Tucson’s bid preferences policy violates the gift clause, a constitutional provision on the books in some form in nearly all fifty states that requires public expenditures to have a corresponding public benefit. The Institute is representing three Tucson taxpayers who think their tax dollars would be better spent on the best-priced services, not pricey government favorites.
Tucson adopted its bid preference policy in 2012, amidst claims from proponents that bid preferences to local companies within the county would give a boost to the local economy. But according to the Institute, these preferences end up costing taxpayers more money by driving away efficient and capable businesses whose headquarters fall outside of the arbitrarily defined area Tucson considers local.
“The data shows that these preferences drive up costs and do very little to help the local economy,” said Jon Riches, a staff attorney at the Goldwater Institute. “If the politicians wanted to give a boost to local businesses, they could do so easily and legally with tax cuts, which would put more money in the pockets of Tucson residents.”
Nearly every state has its some form of bid preferences at the state or local level. An economist at the University of California Santa Cruz studied bid preferences within the California Department of Transportation and found the policies were costing Californians more for every project, while the contracts were often awarded firms that were not only more expensive but also much less efficient. In other words, taxpayers paid more and got less.
The outcome of this lawsuit could sound the death-knell for illegal bid preferences policies in other parts of the country.
“Bid preferences are a lose-lose for taxpayers,” said Riches. “We are glad to be in court to restore responsible governance of taxpayer money while pulling back the mask on this illegal practice.”
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