What Do We Know about Local Price Preferences in Food Procurement?
Rebecca Wasserman-Olin (Assistant Professor, University of Kentucky) and Lauren Chenarides (Associate Professor, Colorado State University and C-FARE Board Member)
Public procurement is usually a straightforward process: an agency buys the lowest-cost good that meets its specification. Yet institutions increasingly attach price preferences, or price adjustments applied at evaluation to qualifying bids, for attributes such as locally grown food, minority- or women-owned suppliers, and small-business status, hoping to shift who wins a contract toward the preferred attribute while keeping costs low.
‘Locally grown’ is a common preference in public procurement. Such calls for local food attract businesses and account for billions of dollars in public spending. School food authorities spent $1.8 billion on local food during the 2022-2023 school year (USDA FNS 2024), and local purchasing preferences are common across municipalities and school districts nationwide (COFSAC 2021). In New York City, Local Law 50 allows a contract to be awarded to qualifying “New York State” bids if the price is within ten percent of the lowest non-local bid. Examples of two agencies that apply this rule are the Department of Corrections and the Administration for Children's Services.
Price preferences for local food could significantly support local producers; it could also increase procurement costs. The net effect on what agencies (and ultimately the public) pay is not obvious ahead of time: Added competition could offset, or exceed, the extra cost of steering a contract toward a qualifying but pricier bid. Businesses that can supply the locally sourced product may face higher costs to do so, so their bids could run higher, on average, than bids without it. Non-qualifying businesses, facing that added competition, could respond by lowering their prices to stay competitive. A new study* examines whether New York City’s Local Law 50, which adjusts qualifying local bids by ten percent at evaluation, can achieve its procurement goals while maintaining a competitive contracting environment for non-local bids. Using bid-level data from the Department of Corrections and the Administration for Children’s Services, this research finds that qualifying items attract about 13 percent more bids than non-qualifying items, consistent with the prediction that a lower effective bar to win draws in more bidders.
Cities and states are increasingly experimenting with price preferences for minority- and women-owned businesses, small businesses, and other attributes in public procurement, betting that a price preference can shift who wins a contract while keeping costs low through increased competition. NYC’s local food preference provides some evidence that price preferences draw more competitive bidding without a large cost premium. Whether that finding extends to preferences built around firm characteristics rather than product attributes is the question policymakers weighing similar tools should watch closely.
* Wasserman-Olin et al. (2026) uses data shared through the City Food Policy Project (cityfoodpolicy.com), a partnership between the New York City Mayor’s Office of Food Policy and researchers at Colorado State University and Cornell University that provided access to procurement contract and bidder data used in this analysis.
References
Colorado Food Systems Advisory Council (COFSAC). 2021. A 50-State Policy Scan of the Role of State Procurement Policy. Tech. rep. https://cofoodsystemscouncil.org/wp-content/uploads/2021/08/InstitutionalProcurement_Brief_8-20-21.pdf
USDA Food and Nutrition Service (FNS). 2024. "Farm to School Census Results Overview." https://farmtoschoolcensus.fns.usda.gov/census-results-overview
Wasserman-Olin, R., et al. 2026. "Local Sourcing Preferences and Non-Local Bidder Response in Food Procurement." Working paper, Colorado State University.
University of Kentucky’s Department of Agricultural Economics is the state’s primary source of research and extension programming on the economics of agriculture and rural communities, delivering research-based outreach to farmers and communities through its Cooperative Extension Service.
Colorado State University’s Department of Agricultural and Resource Economics is home to nationally recognized research on food systems and natural resources at one of the nation’s leading land-grant, R1 research universities.
