Up until this past year, California’s “local preference” requirement was unenforceable if federal funds were involved in a public project. However, this law is changing. In fact, 2015 FTA-funded projects are prohibited from enforcing the federal preemption. What this means for California public agencies is that, in letting certain public works projects, they may now give local preference to California companies, even when there is FTA funding involved.

On March 3, 2015, U.S. Transportation Secretary Anthony Foxx announced a one-year pilot program that will allow state and local transportation agencies to utilize local hiring preferences on federal-aid highway and transit projects. Previously, the U.S. Department of Transportation (DOT) has interpreted these preferences as conflicting with federal law, which requires federal-aid contracts to be awarded through a competitive, low-bid system, unless otherwise specified in another part of the statute. In launching the pilot program, U.S. DOT is citing a 2013 legal opinion from the U.S. Department of Justice, which now interprets federal law as giving U.S. DOT discretion to permit local hiring preferences provided they do not “unduly limit competition” in federal-aid procurement. The year-long pilot is proposed as an experiment under the Federal Highway Administration’s (FHWA) “Special Experimental Project No. 14 (SEP-14) and Federal Transit Administration (FTA)” experimental authorities, provisions made possible by Congress to allow the agencies leeway in finding new and more effective means of building, maintaining and managing federal transportation projects.