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The original implementation of this flag was too naive and all it did was restricting gems to locally installed versions if there are any local versions installed. However, it should be much smarter. For example: * It should fallback to remote versions if locally installed version don't satisfy the requirements. * It should pick locally installed versions even for subdependencies not yet discovered. This commit fixes both issues by using a smarter approach similar to how we resolve prereleases: * First resolve optimistically using only locally installed gems. * If any conflicts are found, scan those conflicts, allow remote versions for the specific gems that run into conflicts, and re-resolve. https://github.com/rubygems/rubygems/commit/607a3bf479 Co-authored-by: Gourav Khunger <gouravkhunger18@gmail.com>