This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
The adoption of local preference policies and practices run contrary to one of the core global principles of open public procurement since domestic and international reciprocal non-discrimination protocols grant all suppliers within established trading blocks equal access to government contract award competitions. As the following case studies illustrate, while governments worldwide have been quick to promote the benefits of obtaining access to external markets for their local suppliers, many have been reluctant to relinquish control over granting advantages to their own local suppliers.
The issue of local preference is as recurring as each election cycle and raises significant legal and policy concerns. The following discussion offers a series of recommendations for public institutions that are considering implementing local preferences in their contract award decisions.
Before adopting protectionist policies in favour of domestic or local suppliers or products, a public institution should assess the potential impact on domestic and local suppliers of retaliatory protectionist practices adopted by other institutions and jurisdictions.
Public institutions should respect any applicable reciprocal non-discrimination rules and, to the extent that those rules apply, should adopt clear policies against local supplier preferences or other biased specifications
Before adopting any local content preferences, public institutions should consider how these policies would benefit their own taxpayers and the net effect of such policies on expenditures and revenues (e.g. will the costs of a subsidy paid by local taxpayers to local suppliers and products create more jobs and revenues within the jurisdiction that will offset the potential higher costs of those local preferences?).
Public institutions that are subject to the open procurement rules should govern their procurement practices in accordance with the requirements of those rules. Any departure from the general standards of open procurement should: (i) be based on the established exceptions recognized by the applicable rules; (ii) be based on decisions made at the appropriate senior levels within the organization; and (iii) be properly documented to ensure accountability and transparency in the expenditure of public funds.
5. Respect Transparency and Avoid Politicization
Public institutions should ensure their contract award criteria meet the standards of clarity, transparency, and objectivity required to ensure a legally defensible tendering process. As a general rule, government contract award decisions should be based on clear, transparent, and objective criteria that are applied free from political considerations or political interference.
