Who Controls Public Purchasing Controls the Economy
When local governments buy everyday essentials — from classroom supplies to janitorial goods — those seemingly incidental decisions can have a big impact on shaping the entire economic landscape. They determine which businesses survive, which communities thrive and whether public dollars circulate locally or feed the coffers of corporate monopolies.
A new investigation from the Institute for Local Self-Reliance (ILSR), created with contributions from Local First Arizona, reveals a troubling reality: Amazon has quietly seized massive influence over public purchasing — and local communities are paying the price.
How Amazon Became a Hidden Gatekeeper
ILSR examined purchasing data from 128 cities, counties and school districts serving 51 million people. The pattern is clear: Amazon has inserted itself into government procurement systems in ways that inflate costs, eliminate competition and weaken local economies.
Unlike traditional contracts that lock in pricing and protect taxpayers, Amazon uses a shifting algorithmic pricing system. Under this system, one city bought a 12-pack of Sharpie markers for $8.99, while that same day, a nearby school district paid $28.63 for the exact same item. Across thousands of purchases, governments are regularly overpaying — often without realizing it.
Local Suppliers Are Being Squeezed Out
While government procurement practices often award contracts to the vendor with the best pricing and terms, Amazon’s dominance in this ecosystem isn’t a result of the online behemoth offering better deals than smaller companies. In a comparison of 628 common school-supply items, an independent office-supply dealer beat Amazon’s price on 68 percent of them and provided consistent delivery and real customer service.
So why are local suppliers disappearing?
By claiming its marketplace provides built-in competition, Amazon has persuaded officials to abandon competitive bidding and fixed-price contracts. Local governments are led to believe that regional suppliers can continue to compete simply by making their products available in the Amazon marketplace. In reality, Amazon’s steep seller fees — which average 45 percent of each sale — make that nearly impossible. In one West Virginia school district, Amazon and overseas vendors captured $1.3 million in government spending. Only $142 went to in-state vendors.
When independent suppliers collapse, communities lose:
Local jobs
Local tax revenue
Accountability
Real competition
And governments become even more dependent on Amazon’s opaque, high-cost system.
Quality and Oversight Are Declining
Amazon’s marketplace structure, with millions of unvetted sellers, exposes public agencies to fake, unsafe or mislabeled products and the potential for fraud. Investigators found hundreds of questionable purchases, including items clearly ordered for personal use.
Independent vendors — the ones being pushed out — source from vetted manufacturers and adhere to established quality standards. Amazon does not.
Arizona Is Already Leading the Pushback
There is good news. Some cities — notably, Tempe and Phoenix — have already recognized the risk and taken action.
Tempe City Council rejected an Amazon purchasing contract after efforts sparked by Changing Hands Bookstore co-owner Gayle Shanks, and coordinated by Local First Arizona, elevated concerns from local businesses. Between 2017 and 2023, the city cut Amazon spending by 84 percent while increasing purchases from local suppliers. Phoenix has spent almost nothing with Amazon over the last decade — proving that strong procurement policies can keep dollars circulating locally.
These examples show what’s possible when governments commit to fair competition and community benefit. Kimber Lanning, Founder & CEO of Local First Arizona concurs. “I’m proud that Phoenix and Tempe stand as national examples of what happens when cities choose community over convenience. It’s time for every municipality to examine where their dollars go — and who they’re really benefiting.”
Why This Matters for Arizona’s Business Community
Government procurement is one of the largest markets in the state. “Government purchasing has the power to strengthen local economies — or quietly erode them,” notes Lanning. “When public agencies default to Amazon, they’re not saving money; they’re diverting opportunity away from local businesses and local workers.”
If Amazon becomes the default supplier, Arizona businesses lose access to enormous revenue opportunities. But when governments intentionally buy local, they create:
More stable markets for Arizona companies, which helps shield our economy from the volatility of the federal climate.
Stronger regional supply chains, with stable, locally owned companies.
Job retention and growth that stays in the state
A competitive landscape that rewards performance — not monopoly power
Source AZ: Making Local Procurement Easier
Source AZ, a Local First Arizona program, connects public agencies, anchor institutions and major employers to qualified Arizona-based suppliers. With a growing statewide vendor database and personalized matching support, Source AZ helps procurement teams:
Identify vetted, locally owned businesses
Meet supplier diversity goals
Reduce risk and increase transparency
Keep purchasing dollars working in Arizona
We hand-select suppliers aligned with buyer specifications, values and operational needs — and with every purchase, Arizona’s economy becomes stronger.
A Better Path Forward
Public dollars should serve the public good; after all, they are our tax dollars. By reforming procurement policies, banning volatile dynamic pricing and prioritizing local suppliers, Arizona can reclaim control of its public spending — and ensure that tax dollars build resilient, locally rooted economies.
This isn’t just about office supplies. It’s about who shapes our economy and whether Arizona’s future is built by local businesses or handed to a single corporation.
Related Information:
Visit the ISLR site for the full report and check out the “How to Help Your Local Government Break Up with Amazon: A Citizen’s Guide”
Visit the Source AZ webpage to locate — or apply to become — a Source AZ-qualified Arizona-based supplier
Dive into the Local First Learning Lab for more resources and information on procurement
Interested in being a part of policy discussions around procurement? Contact us at info@localfirstaz.com
