Councilman outlines owner-direct purchase policy to expand small contractors' buying power, cites $1.1 million in sales-tax savings

Councilman Mike Gay, District 2, told the True Commission that Jacksonville implemented an owner-direct-purchase (ODP) process on certain construction projects to allow the city to buy materials tax-exempt and pass the purchasing benefit through to contractors, especially Jacksonville Small Emerging Businesses (JSEB).

Gay said the city’s ODP approach was adopted in July 2024 for some projects and that, to date, the city has captured about $1.1 million in sales-tax savings. He described the policy as a tool to boost the buying power and working capital of small contractors bidding on city work, and said the contractor remains responsible for approving, installing and warranting materials under contract terms.

The policy described by Gay sets purchase thresholds that differ by contract type: JSEB purchases qualify when single-purchase line items are $10,000 or greater, and on other municipal construction contracts the threshold is $100,000 per purchase. Gay said the stadium and other large projects could substantially increase tax savings because, by construction industry rule of thumb, about half of project cost is materials.

Why it matters: Councilman Gay framed the policy as both an economic equity tool for local, small contractors and a means to return tax savings to the city without cutting services. He said the city’s participation can reduce a small contractor’s retained contract value and therefore reduce the usual 10% retainage effect on working capital (noting state retainage law limits retainage to 5 percent). Gay also said the stadium negotiation included provisions for local participation, apprenticeship requirements and Buy American provisions specific to that project.

Discussion and follow-up: Commissioners pressed Gay for data on program results and implementation details. Questions focused on aggregate dollars purchased through ODP, whether the city or contractors hold liability for stored materials, how payments and draws flow through procurement, and whether the program has demonstrably increased the number of small business awards.

Gay said he did not have a JSEB-specific breakout at the meeting but estimated total purchases through ODP were about $19.1 million (aggregate across vendors) since the policy started. He said procurement and public-works processes were adjusted to accept the ODP workflow and that the contractor remains responsible for timing, installation and warranty. The council auditor’s office and other commissioners urged the office to produce a fuller data report showing how many JSEB firms won contracts after implementation, year-over-year comparisons, and the program’s effect on bids and participation.

Council members also raised procedural and legal caveats. One commissioner cited Department of Revenue guidance and state law requiring that bona fide purchases shift the risk of loss appropriately; the commissioner warned that if materials are delayed or not available it could create critical-path delays on projects and shift responsibility to the city.

Gay said the approach is intended to be incremental: "It's a win-win," he said, adding that the city’s buying power allows smaller firms that lack large lines of credit to compete for work they otherwise could not finance.

Ending: Gay said the administration and procurement staff are still refining implementation and will consider lowering thresholds once the approach is fully adopted and data confirm outcomes. He said he will work with JSEB staff and the council auditor to provide an informational briefing with more detailed performance data for commissioners.