May a Tennessee city subject to the Municipal Purchasing Law favor local businesses in contract bidding?

Subject

Opinion No. 13-92, Granting Preferences for Local Businesses Under Municipal Purchasing Law of 1983, November 25, 2013

Plain-English summary

Rep. Jon Lundberg asked whether a Tennessee city subject to the Municipal Purchasing Law of 1983 could give a preference to local businesses when awarding city contracts. The AG said no.

The Municipal Purchasing Law of 1983 (Tenn. Code Ann. §§ 6-56-301 to -307) requires that most municipal purchases be made "only after public advertisement and competitive bid." § 6-56-304. The purpose of competitive bidding is to give bidders a fair chance to compete on equal terms, guarding against favoritism and fraud. Metropolitan Air Research Testing Auth. v. Metropolitan Gov't of Nashville. Tennessee Supreme Court precedent requires that "all bidders be placed upon the same plane of equality and that they each bid upon the same terms and conditions." State ex rel. Leech v. Wright.

A local-business preference policy does not put all bidders on equal footing. The opinion concludes that such a policy conflicts with the Act's competitive-bidding requirement.

The AG cited two prior opinions reaching the same conclusion: Op. 87-83 (1987) rejected a minority business preference under a similar competitive bidding statute, and Op. 78-303A (1978) rejected a "Buy American" policy. Local business preferences fall in the same category.

Per Crawley v. Hamilton County, "[m]unicipal ordinances in conflict with and repugnant to a State law of a general character and state-wide application are universally held to be invalid." A local-preference ordinance conflicts with § 6-56-304 and is invalid. Cities subject to the Municipal Purchasing Law lack authority to adopt such a policy.

Currency note

This opinion was issued in 2013. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The opinion addresses municipalities subject to the Municipal Purchasing Law of 1983 and notes that § 6-56-302 contains exceptions. Check the current statute and whether it governs the purchase at issue.

Background and statutory framework

Municipal Purchasing Law of 1983. Tenn. Code Ann. §§ 6-56-301 to -307. Applies to "all purchases by authorized officials in all municipalities using or encumbering municipal funds," with exceptions in § 6-56-302. § 6-56-304: most purchases require "public advertisement and competitive bid."

Purpose of competitive bidding. Metropolitan Air Research Testing Auth. v. Metropolitan Gov't of Nashville, 842 S.W.2d 611, 616-17 (Tenn. Ct. App. 1992): purpose is to provide a fair opportunity to compete and to guard against favoritism and fraud. Computer Shoppe, Inc. v. State, 780 S.W.2d 729, 737 (Tenn. Ct. App. 1989): bidders have the right to have bids considered honestly and fairly, competing on the same footing.

Equality requirement. State ex rel. Leech v. Wright, 622 S.W.2d 807, 815 (Tenn. 1981): "all bidders be placed upon the same plane of equality and that they each bid upon the same terms and conditions involved in all the items and parts of the contract, and that the proposal specify as to all bids the same, or substantially similar specifications."

Preemption. Crawley v. Hamilton County, 193 S.W.3d 453, 456 (Tenn. 2006): "Municipal ordinances in conflict with and repugnant to a State law of a general character and state-wide application are universally held to be invalid."

Prior AG opinions. Tenn. Att'y Gen. Op. 87-83 (May 5, 1987): minority business preference under Tenn. Code Ann. § 49-2-203(a)(4) violates competitive bidding. Tenn. Att'y Gen. Op. 78-303A (July 26, 1978): "Buy American" policy violates competitive bidding requirements.

Common questions

Why does this opinion reject a local-business preference?

The opinion says the Municipal Purchasing Law requires competitive bidding for most municipal purchases. A preference gives some bidders an advantage, while competitive bidding requires that bidders compete on the same footing.

Could a Tennessee city favor local businesses through criteria other than price?

The opinion does not evaluate bid specifications or non-price criteria. It answers whether a municipality subject to the Municipal Purchasing Law may give local businesses a preference when awarding contracts.

What about a non-purchasing preference, like a tax incentive for hiring locally?

The opinion addresses only a preference for local businesses bidding on municipal contracts. It does not assess tax incentives or other economic-development programs.

Does the opinion decide the rules for every Tennessee city?

No. The question expressly concerns a municipality subject to the Municipal Purchasing Law of 1983. The opinion does not decide whether another city's charter or private act changes which purchasing rules apply.

Can the General Assembly authorize local preferences?

The opinion does not consider a proposed statutory amendment. Its conclusion concerns a local-business preference under the Municipal Purchasing Law as analyzed in 2013.

Citations

Tenn. Code Ann. §§ 6-56-301 to -307, 6-56-302, 6-56-304, 49-2-203(a)(4). Cases: Metropolitan Air Research Testing Auth. v. Metropolitan Gov't of Nashville, 842 S.W.2d 611 (Tenn. Ct. App. 1992); Computer Shoppe, Inc. v. State, 780 S.W.2d 729 (Tenn. Ct. App. 1989); State ex rel. Leech v. Wright, 622 S.W.2d 807 (Tenn. 1981); Crawley v. Hamilton County, 193 S.W.3d 453 (Tenn. 2006). Prior AG opinions: Op. 87-83 (May 5, 1987); Op. 78-303A (July 26, 1978).

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2013/op13-092.pdf

Original opinion text

November 25, 2013

Opinion No. 13-92

Granting Preferences for Local Businesses Under Municipal Purchasing Law of 1983

QUESTION

May a municipality that is subject to the Municipal Purchasing Law of 1983 implement a policy that grants a preference to local businesses bidding on municipal contracts?

OPINION

No.

ANALYSIS

The Municipal Purchasing Law of 1983, codified at Tenn. Code Ann. §§ 6-56-301 to -307, applies to "all purchases by authorized officials in all municipalities using or encumbering municipal funds," with certain exceptions set forth at Tenn. Code Ann. § 6-56-302. Under the Purchasing Law, municipal officials must make most purchases "only after public advertisement and competitive bid." See Tenn. Code Ann. § 6-56-304.

The purpose of such a competitive bidding statute is to provide bidders with a fair opportunity to compete for public contracts and to promote the public interest by guarding against favoritism and fraud. Metropolitan Air Research Testing Auth. v. Metropolitan Gov't of Nashville, 842 S.W.2d 611, 616-17 (Tenn. Ct. App. 1992). A participating bidder has the right to have its bid considered honestly and fairly, competing on the same footing as all other bidders. Computer Shoppe, Inc. v. State, 780 S.W.2d 729, 737 (Tenn. Ct. App. 1989). Competitive bidding "requires that all bidders be placed upon the same plane of equality and that they each bid upon the same terms and conditions involved in all the items and parts of the contract, and that the proposal specify as to all bids the same, or substantially similar specifications." State ex rel. Leech v. Wright, 622 S.W.2d 807, 815 (Tenn. 1981).

When a policy gives a preference to certain bidders, the policy violates the competitive bidding principles set forth above. In short, such a policy does not place all bidders on the same plane of equality. Accordingly, this Office has opined that a policy by a local board of education giving preference to purchases from minority businesses would violate the competitive bidding provisions of Tenn. Code Ann. § 49-2-203(a)(4). Tenn. Att'y Gen. Op. 87-83 (May 5, 1987). This Office has also opined that a "Buy American" policy would violate competitive bidding requirements. Tenn. Att'y Gen. Op. 78-303A (July 26, 1978). Similarly, a municipal policy that gives a preference to local businesses bidding on municipal contracts would violate the competitive bidding provisions of Tenn. Code Ann. § 6-56-304. Due to this conflict, a municipality lacks the authority to adopt such a policy. See Crawley v. Hamilton County, 193 S.W.3d 453, 456 (Tenn. 2006) ("Municipal ordinances in conflict with and repugnant to a State law of a general character and state-wide application are universally held to be invalid.").

ROBERT E. COOPER, JR.
Attorney General and Reporter

WILLIAM E. YOUNG
Solicitor General

LAURA T. KIDWELL
Senior Counsel

Requested by:

The Honorable Jon Lundberg
State Representative
20 Legislative Plaza
Nashville, TN 37243