"Keeping it local" divided a Wanganui District Council committee this week.

The audit, risk and finance committee was discussing a draft procurement policy and a section that directs the council to buy locally. This "buy local premium" would apply to tenders of less than $100,000.

Audit NZ has reviewed the draft policy and recommended the "buy local" element be removed - however, the full council will be asked to retain it when it votes on the policy on September 8.

The policy outlines the rules the council would follow when buying goods and services, and is aimed specifically at transparency and fairness.

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Finance manager Mike Fermor said that by law council could not discriminate against suppliers and had to give all New Zealand suppliers a "full and fair" opportunity to compete for contracts and services.

Mr Fermor said the council had contacted 15 other councils and 13 of them had said they did not have a "buy local" policy. Those councils all favoured an open market with suppliers nationwide competing on an equal basis.

However, Councillor Rob Vinsen said buying local was "paramount for our community".

He also argued that the $100,000 threshold was "far too low" and that a limit of $1million was more reasonable.

"It means that local companies could tender provided all their attributes measure up."

But Mr Fermor said given the policy was about fairness, promoting a "buy local" policy could penalise out-of-town businesses and that went against the Local Government Act.

"If council wants to go down that path I'd suggest it gets Audit NZ to comment on it," he said.

Councillor Helen Craig said best value for the council equated to best value for the community. "We're one of the biggest businesses in Wanganui and it would be terrible if we shopped elsewhere just based on value for money," she said.

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Mr Vinsen said the council was usually dealing with contracts of around $100,000 and contracts of more than $1million were rare.

"But keeping the threshold at $100,000 means the bulk of our contracts could go out of town. That damages both the council and community," he said.

Councillor Hamish McDouall said taking the limit to $1million was contrary to the act. "We want to help the community without getting slapped by Audit NZ or the Government. We've got to adhere to the act - it's the law," he said.

Mayor Annette Main said councillors needed to remember that the policy would be open to review at the end of 2016 and council could make changes "if we're not happy".

"The LGA requires us to deliver services in the most cost-effective way," Ms Main said.

"Many businesses in Wanganui are already doing business outside the district. We recognise the importance of local business but we must work within the act."

She said going against the act could leave council open to legal challenge. "This is still a brave policy we're adopting because other councils aren't doing what we're intending."

Mr Vinsen said the fear of legal challenge was a red herring. "Those who don't support the 'buy local' policy should be standing at the front of the queue explaining why."