Michigan’s economic development strategy could be much stronger if it prioritized supporting local businesses. While the state is quick to offer incentives to attract large, out-of-state companies, Michigan-based firms—especially small and medium-sized businesses—continue to face systematic barriers when competing for state contracts and accessing incentives. The current rules unintentionally put our homegrown businesses at a disadvantage when it comes to keeping jobs and tax dollars in Michigan.
A recent state contract competition clearly illustrates the problem. Among the bidders, one Michigan-based company achieved an evaluation score within just one percentage point of the winning bid, yet its proposal was approximately $3 million less expensive. Despite this, the contract was awarded to an out-of-state firm. This wasn’t an isolated occurrence; other Michigan companies, including those designated as Geographically Disadvantaged Michigan Businesses (GDBE), also submitted competitive, lower-cost bids but were passed over. In these scenarios, Michigan essentially paid a premium to send taxpayer dollars and jobs beyond our borders, even when local firms offered equal quality at a much lower price.
Awarding this contract to a local firm would have kept at least ten high-salary STEM jobs—each paying over $100,000—here in Michigan. These wages far exceed our state median, putting more tax revenue into state coffers, all without a single additional tax break. Instead, the state spent more to hire an out-of-state company, exporting both our tax dollars and employment opportunities.
It’s important to recognize that state procurement officials are simply following established rules and evaluation processes designed to ensure fairness. However, these policies don’t fully account for the broader economic impact of supporting local companies, nor do they reflect the advantages of keeping business, employment, and revenue anchored in Michigan communities.
The issue also extends to economic incentive programs. Many initiatives—like the Michigan Business Development Program (MBDP)—primarily offer grants or tax breaks to entice companies relocating from out of state or planning major expansions. As a result, businesses already committed to Michigan, unless undertaking significant growth, rarely qualify. According to the Michigan Economic Development Corporation (MEDC), most incentives are specifically linked to generating new jobs or sizable investments, rather than rewarding the ongoing positive impact that long-standing Michigan businesses deliver every year. Awarding work to Michigan businesses has an immediate impact – it retains talent within the state and helps businesses attract people to Michigan for work, rather than relying on tax credits to draw more businesses and residents over several years.
If Michigan genuinely seeks long-term, sustainable growth, it’s time to give equal—if not greater—consideration to the businesses already fueling our state’s economy.
Michigan’s procurement practices and incentive policies need urgent reform, not only to reward excellence but to recognize the broader impact of keeping business and jobs local. It’s time for the state to adopt several pragmatic changes:
- Prefer Local When Results Are Close: If a Michigan business scores within a narrow statistical range of the winning proposal and offers a substantially lower price—as in the recent case of a $3M cost advantage—it should be favored. This supports local companies without sacrificing quality or value.
- Targeted Incentives for Disadvantaged and Veteran-Owned Firms: Procurement policies need explicit goals and incentives for Geographically Disadvantaged Businesses and Service-Disabled Veteran-Owned Small Businesses.
- Align Incentive Programs to Support Existing Employers: Tax breaks and economic grants should be equally accessible to Michigan’s incumbent businesses—not just to those considering a move or a dramatic expansion.
- Transparent Reporting: Annual state budget documents should clearly report the distribution of funding and incentives to in-state versus out-of-state firms, increasing public accountability.
Small and medium businesses represent over 99% of companies in Michigan and employ approximately 65% of our workforce. These businesses fuel our neighborhoods, sustain our schools, and keep our communities thriving. If Michigan is truly committed to building a stronger and more equitable economy, our public policies should start by leveling the playing field and putting Michigan businesses first.
Michigan Economic Development Corporation, “Business Resources, Incentives & Taxes” (MEDC, 2024).
Matt Russell is the Founder & President of Cynerge Consulting.
