REFERENCE TITLE: state contracting; businesses

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HB 2858

Introduced by

Representative Blackman

AN ACT

Amending title 41, chapter 23, article 1, Arizona Revised Statutes, by adding section 41-2505; relating to procurement.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Title 41, chapter 23, article 1, Arizona Revised Statutes, is amended by adding section 41-2505, to read:

START_STATUTE41-2505. Contracts; in-state; purchasing agency; definitions

A. NOTWITHSTANDING any other law, For contracts issued pursuant to section 41-2533, an Arizona bidder shall be given a one percent increase over an out-of-state bidder if there are two or more low responsible and responsive bids from qualified bidders that are identical in all material respects, including price, quality, delivery terms, warranties, past performance and compliance with specifications.

B. A purchasing agency shall add a percentage increase to the bid of an out-of-state bidder equal to the percentage, if any, of the preference given to the bidder in the state in which the bidder resides. On or before january 1 of each year, the department shall publish a list of states that give preference to in-state bidders with the percentage increase applied in each state. A purchasing agency may rely on the names of states and percentages published in determining the lowest responsible bidder without incurring any liability to any bidder.

C. The percentage increase authorized by this section applies solely for purposes of bid evaluation and does not require the award of a purchase order to any bidder.

D. The percentage increase authorized by this section may not be applied if it would result in a higher actual price when determining the true value paid by this state for a contract.

E. This section does not apply to purchase orders issued by a purchasing agency that, in the aggregate, exceed $1,500,000 in a fiscal year.

F. For the purposes of this section:

1. "arizona bidder" means a bidder who meets all of the following:

(a) Is authorized to transact business in this state.

(b) Has paid all assessed taxes in this state.

(c) Maintains its headquarters in this state for at least twelve consecutive months before submitting a bid.  The requirement of this subdivision does not apply if the bidder employs five hundred or more full-time residents of this state who are provided health care benefits through the employer.

2. "headquarters" means a principal central administrative office where primary headquarters-related functions and services are performed, including financial, personnel, administrative, legal, planning and similar business functions.

3. "purchase order" means a written or electronic authorization issued by a purchasing agency to a vendor that obligates state monies for acquiring goods or services, whether issued under a statewide, agency, or cooperative contract or as a stand-alone procurement. END_STATUTE

Sec. 2. Legislative findings

The legislature finds:

1. Arizona small and locally based businesses are a foundational component of this state's economy, employing a substantial portion of Arizona's private sector workforce and contributing to job creation and long-term economic stability in this state.

2. In Arizona, small businesses account for approximately ninety-nine percent of all businesses in this state and employ approximately one million one hundred thousand Arizonans, representing about forty-two percent of the state's workforce.

3. These businesses contribute substantially to job creation, especially in rural Arizona, with small enterprises generating tens of thousands of new jobs and serving as a critical engine of employment growth, innovation and economic resilience.

4. The economic impact of Arizona-based small businesses extends beyond employment, supporting state and local tax revenues, consumer spending and community stability throughout this state.

5. Ensuring that state procurement dollars circulate within Arizona's economy enhances long-term economic stability and opportunity for Arizona business owners and workers statewide.

6. Ensuring meaningful participation by Arizona-based businesses in state procurement strengthens the state's supplier base, enhances accountability and supports employers that pay state and local taxes and that employ Arizona residents.

7. This state has a legitimate interest in encouraging qualified Arizona businesses to compete for state procurement opportunities, without restricting competition or excluding qualified bidders from other jurisdictions.

8. Reciprocal preference provisions are designed to neutralize interstate procurement advantages, preventing Arizona taxpayers from being disadvantaged by procurement preferences adopted in other states while maintaining an open and competitive bidding process consistent with the United State Constitution's commerce clause and Arizona Constitution.

9. These findings and policies are consistent with the state's authority to structure procurement in a manner that protects taxpayers, promotes fiscal responsibility and ensures equitable treatment of in-state businesses, while respecting constitutional limits and the principles of interstate commerce.