The impacts of in-state procurement preference policies on the economy of South Carolina
| Pages | 240-256 |
| Published date | 03 September 2018 |
| DOI | https://doi.org/10.1108/JOPP-09-2018-015 |
| Date | 03 September 2018 |
| Author | Sawsan Abutabenjeh,Stephen Gordon,Berhanu Mengistu |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public finance/economics,Taxation/public revenue |
The impacts of in-state
procurement preference policies
on the economy of South Carolina
Sawsan Abutabenjeh
Department of Political Science and Public Administration,
Mississippi State University, Starkville, Mississippi, USA
Stephen Gordon
Public Procurement Strategies, LLC, Arlington, Virginia, USA, and
Berhanu Mengistu
School of Public Service, Strome College of Business,
Old Dominion University, Norfolk, Virginia, USA
Abstract
Purpose –This paper aims to answer the question: What are the impacts of implementing in-state
procurementpreference policies on the economy of the state of South Carolina?
Design/methodology/approach –Toevaluate the impacts, the following six economic indicators were
analyzed: jobs, personal income, real disposable income, output (sales), gross state product and value added. The
data were collected from the South Carolina Procurement Services Office and were then analyzed using the
Regional Economic Model Policy Insight (REMI PIþ) for economic forecasting and policy analysis. The results
from the REMI PIþshowed that implementing in-state preference policies benefitted the state and its
communities economically.
Findings –Specifically,from 2010 until 2017, the total economic impact of implementing preferencepolicies
generated $17m in total output, 135 totaljob-years, $10.22m in gross state product (GSP), $10.27m in value
added, $7.52m in income and$5.14m in real disposable personal income. The impact on the wholesaletrade
industry wasover $5m in total industry output and approximately 27 jobs-years.In the manufacturing sector,
the total impact was over $4m in output and approximately 17 jobs-years. The impact on the construction
industry was approximately $3m in output and approximately 30 jobs-years.Although the values of these
economic indicatorswere very small compared to the size of the state economy, theydid outweigh the direct
cost of implementing preference policies, thus demonstrating that overall the in-state preference policies
contributed to South Carolina’s economy.However, further research is warranted to identify more precisely
the benefits andcosts of implementing preference policies.
Keywords Policy, Economy, State procurement, South Carolina
Paper type Research paper
Introduction
Public procurement has been used for a long time as a policy tool to achieve various
political, economic, and social objectives around the world (Bolton, 2006;Coggburn, 2003;
Martin, 1996;McCrudden, 2007;Pitzer and Thai, 2009;Rolfstam, 2008;Thai, 2001).
Policymakers in many stateshave required procurement officials to grant preferences to in-
state suppliers and/or goods and services produced within the boundaries of the state’s
jurisdiction (McCrudden, 2007;Qiao, Thai, and Cummings, 2009); these policies are referred
to as in-state preference policies. In the USA, half of the states have in-state preference
JOPP
18,3
240
Journalof Public Procurement
Vol.18 No. 3, 2018
pp. 240-256
© Emerald Publishing Limited
1535-0118
DOI 10.1108/JOPP-09-2018-015
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1535-0118.htm
policies for state vendors and/orstate products (NASPO, 2012). Although implementation of
the preference policies varies from state to state, depending on the type of products and
services specified in the preference laws (State of Oregon, 2016), state governments enact
such policies with the stated or implied goal of increasing economic growth and creating
other economic benefits for theirrespective states 2009 Act No. 72, (2009).
One of the states implementing such preference policies is South Carolina, which is the
focus of this study. In 2009, theSouth Carolina General Assembly rewrote its previous law
about in-state preferencesand provided expanded legal authority to the state government to
use preference policies.The General Assembly’s Act reads in part:
[...] that it is crucial to this state’s economic recovery to purchase goods manufactured and
produced in the State, maintain the circulation of the funds of the citizens of this State within this
State, and encourage and facilitate job development and economic growth 2009 Act No. 72 (2009),
p. 3.
The purpose of this study is to assess the benefits of implementing in-state preference
policies by examining the impacts of the State of South Carolina’s in-state preference
policies. To this endthe research question for this study is: What arethe impacts of the State
of South Carolina implementingits in-state procurement preference policies on the economy
of that state? To explore this question,this study uses the Regional Economic Model Policy
Insight, known as REMIPIþ. REMI PIþestimatesthe economic impact of South Carolina’s
preference policies by tracing the economic impacts generated through increasing sales
when implementingthe preference policies[1].
Although public procurement is a frequently used method to intervene in the economy,
there are few in-depth and state-specificstudies related to this practice(MacManus, Watson,
and Blair, 1992;McCue and Gianakis, 2001;Snider and Rendon, 2008;Thai, 2001). Scholars,
government organizations, and public procurement professional organizations have all
pointed to the importance of analyzing state-specific preference policies in particular
(Abutabenjeh, Gordon and Mengistu,2017;Qiao, Thai and Cummings, 2009;NASPO, 2012,
the Connecticut Department of Administrative Services, 2012). Believing that “the practical
impact of policies is worthy of much more analysis”(Qiaoet al., 2009, p. 397); Qiao et al. have
called for in-depth analysis of the impact of in-state preference practices. This study hopes
to make a preliminary contribution to the study of public procurement policy and the
practice of public procurement by focusing on the economic benefits of in-state preferences
within the context of the state of South Carolina. To accomplish this task, the study first
presents background information about the in-state preference policies of South Carolina,
followed, then by the presentation anddiscussion of the REMI PIþas the research method
and finally presents the data analysisand the results.
In-state preference policies of South Carolina
Generally, governments enact preference policies for the stated or implied purpose of
protecting vendors and achieving a variety of social, economic, and political goals. Some
scholars support the view that procurement preference policies are an appropriate tool to
promote economic goals (Krasnokutskaya and Seim, 2008;Moreland, 2012;Qiaoet al.,2009).
Advocates of these policiesassert that they stimulate the economy and, as a result, improve
the welfare of disadvantaged membersof society and advance the collective interests of all
citizens. Another rationale for the adoption of preference policies is a state’s desire to
increase competition in a specific industry (Hefner, 1996;Krugman and Obstfeld, 1991). At
the state and local levels, preference policies help to engage and protect local businesses in
the marketplace, thereby servingas incentives for local businesses to stay, grow and thrive
Economy of
South Carolina
241
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