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Reciprocity Powered By Docstoc
                                    Revised 02/09/2007

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Texas law requires that out-of-state bidders who reside in states that grant resident bidder
preferences for that state’s purchases be evaluated in the same manner that a Texas
resident bidder would be evaluated in the out-of-state bidder’s home state. Specifically
the law states:

A [Texas] governmental entity may not award a governmental contract to a nonresident
bidder unless the nonresident underbids the lowest bid submitted by a responsible
resident bidder by an amount that is not less than the amount by which a resident bidder
would be required to underbid the nonresident bidder to obtain a comparable contract in
the state in which the nonresident’s principal place of business is located.[1]

This process of evaluating out-of-state bidders is generally known as “reciprocity.”

What do we mean when we talk about “reciprocity”? Reciprocity is defined in the
dictionary as “the quality or state of being reciprocal: mutual dependence, action, or
influence: GIVE-AND-TAKE.”[2] You may think that “reciprocal” and “to reciprocate”
means giving back the same. Literally, it means something that is inversely related or the
opposite. Take your muscles for example. When you bend your arm, your bicep contracts
and your triceps reciprocate by stretching. One muscle contracts while the other stretches.
The actions of the muscles are opposite but the amount is equal.

How does this work in a bidding situation? If a nonresident bidder’s home state grants a
preference to its resident bidders, an equal penalty is added to the nonresident bidder’s
proposal when bidding in Texas. The action is opposite, a preference becomes a penalty,
but the amount is equal.

For example, state A grants its in-state bidders a 10% preference when bidding on
agricultural products. By granting a 10% preference to in-state bidders, state A is
essentially penalizing Texas bidders 10% for not being residents.

Now let’s look at this same bidding process in Texas. Texas reciprocates by adding a
10% penalty to the bidder from state A which essentially gives a 10% preference to
Texas bidders. The state A bidder gets a 10% preference over Texas bidders in state A.
Conversely, the state A bidder get a 10% penalty when bidding in Texas. That’s how
reciprocity works: give-and-take. If you get a preference there, you get a penalty here in
an equal amount.

Reciprocity and resident bidder preferences do not apply in the evaluation of solicitations
that involve the use of federal funds.[3] Further, reciprocity only applies to the
evaluation of the bids and only applies in situations where the preference from the
bidder’s state is based on residency. Awards are made at the original bid price.

To help governmental entities in their duty to evaluate bids in a reciprocal manner, the
Texas Building and Procurement Commission is required to publish a list of the states
that give a preference based on residency.[4] The list is published annually in the Texas
Register. The list provided on this web site will be updated as changes occur. The list is a
valuable resource. However, the Commission stresses that statutes should be construed in
their entirety. Before relying on any section for evaluation of a bid, the Commission
recommends obtaining and reviewing the relevant law or regulation in its entirety.

Reciprocity Reference Documents:

List of States with Resident Bidder and Reciprocal Preferences revised [pdf version]

State Map with Links to Individual States’ Resident Bidder and Reciprocal Preferences

Statutory Citation Chart—States with Resident Bidder and Reciprocal Preferences [pdf
file revised 02/09/2007]

[1] Tex. Gov’t Code § 2252.002

[2] Webster’s Third New International Dictionary, Unabridged 1895 (1961)

[3] Tex. Gov’t Code § 2252.004

[4] Id. § 2252.003(a)