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The Goldwater Institute filed a lawsuit Friday against the city of Tucson, arguing the city's bid preference policy violates state law and the U.S. and Arizona constitutions.
Bid preference policies enable government officials to award contracts to bidders who may not give the lowest quote solely because they operate or are headquartered within a predefined area.
"The outcome of this lawsuit could sound the death-knell for illegal bid preferences policies in other parts of the country," Goldwater Institute officials said in a statement.
The lawsuit alleges Tucson's bid preference ordinance violates both the Equal Protection Clause and the Privileges and Immunities Clause of the U.S. Constitution. The suit said Tucson's policy "discriminates against businesses based on arbitrary criteria."
The Institute alleges that the city's preference policy violates the gift clause.
"The data shows that these preferences drive up costs and do very little to help the local economy," said Jon Riches, a staff attorney at the Goldwater Institute. "If the politicians wanted to give a boost to local businesses, they could do so easily and legally with tax cuts, which would put more money in the pockets of Tucson residents."
Nearly every state has some form of bid preferences at the state or local level.
Tucson adopted its bid preference policy in 2012.
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