A flap over a District government contract to cut grass on city property has exposed anew a long-running philosophical divide: Should the city seek vendors who can do the job for the absolute lowest price, or should it hire local companies who might contribute more to the city economy?

The D.C. Council explored the question at a Friday hearing, cued by controversy over whether a Baltimore landscaping company should have its contract renewed or whether, as Mayor Vincent C. Gray prefers, the deal should be rebid in hopes that a local firm might win the business, worth over $2 million a year. The contract became a political flash point this week after Washington Post editorials questioned Gray’s decision not to extend the contract with Lorenz Inc.

Firm owner Joe Lorenz testified how the contract he had won last year was cut short in May after a city official told him it would be bid again in a procurement “set aside” for local firms only. “We’re from Maryland,” he said. “That’s all we’re guilty of. We’re from Maryland.”

But Lorenz testified that his company employed no District residents, which earned him disapproving comments from several council members. That contrasted with a competing firm, Community Bridge Inc., or CBI, whose owner testified Friday that more than 70 percent of its employees live in the city.

Lorenz won the groundskeeping contract for six of eight city wards, underbidding other firms — including CBI, which has the contract for the other two wards — by as much as $1.6 million a year. Lorenz and CBI representatives were quizzed repeatedly about the disparity in bids, with few clear answers. “Our price is a standard price; we’re not out of line,” Lorenz said, adding that he “thought our price was too high to win anything” when he first bid.

Representatives of CBI, including owner Denise M. Shelton, testified that the firm’s higher price reflected the higher costs of doing business in the District, including business taxes, parking costs and a city law requiring paid sick leave for employees.

A deep dive into the economics of grass-cutting sparked larger discussions of whether the city should be seeking bottom-dollar bids or taking other factors into account. Lorenz prevailed in its contract despite not receiving preference points given to certified local or minority competitors.

“I’d rather pay a little bit more for service from a D.C.-based company that’s hiring D.C. residents,” said Marion Barry (D-Ward 8). “That helps close the employment gap.”

David A. Catania (I-At Large), however, referred to a recent council vote to raise income taxes on the city’s highest earners and said the government has a responsibility to get the lowest price. “Why in the world in this environment would we re-compete a contract and pay more than we have to?” he asked.

What went largely unchallenged is that Gray (D), who ­campaigned on promises of lowering District unemployment, was within his rights to decline an extension on Lorenz’s contract and instead pursue a rebid.

An e-mail and policy memo circulated inside the Gray administration this spring showed that both policy and political considerations came to bear on the decision.

A May 2 e-mail with the subject line of “Lorenz!!!” raised the prospect that a contract extension would not pass a council vote.

Zachary D. Weaver, an administration policy analyst, noted that objections from Harry Thomas Jr. (D-Ward 5) had nearly derailed the original contract award in 2010. His e-mail, to Gray policy director Janene Jackson, came after a meeting with Warner Session, a lawyer for CBI. A vote was set for the next day.

Session, according to Weaver, said that “Thomas is planning to protest the extension of the option years with Lorenz” and that he “has the vote to prevent that contract from moving forward.”

In a policy memo drafted days prior to the meeting with Session, Weaver laid out various considerations in proceeding with the contract. Weighing in favor of Lorenz, he wrote, the firm “delivered landscaping services . . . in an efficient and effective manner.”

On the flip side, he wrote, “the District is facing . . . [a] lack of local contractors providing these types of services.” He added that Gray’s support for a Lorenz extension “could be viewed as a departure from previous policy positions concerning hiring out of state contractors to provide local District services and could further be viewed as not consistent with [his] policy goal of local job creation and local business development.”

In recent days, Gray and top administration officials argued that the non-renewal helped further his policy to decrease city unemployment and support local businesses.

On Tuesday, the D.C. Council approved a partial extension to Lorenz’s contract that will pay it through the end of this year’s grass-growing season. It remains unclear whether the new contract will require the vendor to be a certified local business, though Gray’s chief of staff, Chris Murphy, said Friday the “thinking at this time is to have it be an open competition.”

Barry, at several points during the hearing, said a contract representing only a tiny portion of the $6 billion annual city budget represented a matter too picayune for what turned out to be a six-hour hearing.

But council member Muriel Bowser (D-Ward 4) disagreed. “I assure you, cutting of the grass is not a small matter,” she said. “Let the grass not be cut, and we will all see how big a matter it is.”