Research shows the effects of bid preferences on contracts

Two bills have been filed in the Colorado General Assembly that would provide a preference for firms that bid on state contracts if 90 percent or more of their employees on the contracts are Colorado residents. The Bell Policy Center is neutral on this legislation. We reviewed the research on bid preference laws to answer two of the major questions raised in the debate on the proposals, namely:

1. Do bid preferences increase the cost paid by state and local governments on the contracts subject to the bid preferences?
2. Do bid preference laws have a positive economic impact on the states or localities that use them?

We found that there are limited academic and economic studies that analyze the effects of bid preference laws similar to those being considered by the Colorado General Assembly. However, the research conducted to date on other bid preference laws shows that they have limited or no effect on the prices paid by the state and local governments that use them.

Research on local government bid preferences indicates that they are likely to have a positive impact on economic activity within the local area and to promote creation of jobs.Researhers concluded that the economic impacts outweigh any potential increased costs of the contracts subject to the bid preferences.

Click here to read our complete summary of the research.