More tilting of county’s contract rules is too costly to public
Written by Michael Lewis on January 31, 2017
Miami-Dade commissioners are trying to raise the cost of county purchases and lower their quality.
They’re doing it by rejecting bids from out-of-town companies so that local firms must win.
They say the reason is to add local jobs, but in the process they’re going to cost the local economy far more than it gains.
Last month a commission committee forced the Aviation Department to reject five bids for $15 million in signs at Miami International Airport because no local firms won a contract, although four of the 16 bidders were local.
The committee sent the airport back to figure out a way to get new bids that local firms will win to add jobs. In other words, they want rigged bidding that outsiders can enter but can’t win.
But the process is already rigged to favor local firms, who in most county bidding get a 5% advantage. They win on price if they cost 5% more than an out-of-town firm. In the case of the sign contracts, that would be a $750,000 head start. If the firm is not only local but also locally headquartered, the price advantage jumps to a huge 15%, which would be $2.25 million total advantage on the sign contracts.
That already tilts the playing field to put out-of-town bidders at a huge disadvantage. So if out-of-towners still win, they have to be far superior on price, quality or both.
Commissioners say forget superiority, just give us local contracts.
But taking anything but the best bid raises county costs.
At the airport, higher costs are borne by airlines. To cover added costs, airlines raise fares to passengers, who include local taxpayers and visitors who might then choose Fort Lauderdale instead at lower costs. The higher the cost to fly here, the fewer visitors we may get – and the visitor industry is still our number one job engine.
So giving inefficient, higher-cost local businesses airport contracts they don’t deserve will boomerang on the far larger visitor industry, which creates many more jobs than sign manufacturing.
Apply this same new county handicap to contracts outside the airport and it’s not airlines that will pay the initial costs: it’s taxpayers, who in the end absorb higher county costs on their tax bills. Should we be taxing ourselves more to support contractors, especially those who can’t win bids even with a 5% to 15% head start?
Commissioners have asked administrators to find a way for more local businesses to win bids.
That isn’t a hard question: the best way to win is to offer better quality at lower costs, which is what county bidding is all about – or should be, if commissioners didn’t grandstand about building local jobs at whatever cost to the public.
We already have local preferences to tilt the playing field and exclude good out-of-town bidders who might only be 3% or 4% less expensive than a Miami bidder, in which case they would automatically lose to a 5% preference advantage. So any local preference already raises costs to taxpayers.
As for building up local companies, as preferences spread from place to place our local firms find themselves at a bidding disadvantage elsewhere in the nation. In the end, preferences raise costs of government nationally by pushing bids artificially higher than they would be in fair bidding, because protectionism always backfires. (The same thing applies to tariffs among nations that raise costs to consumers, but that’s another story.)
The county commission’s drive to ensure local winners has another insidious impact: in a county that says it’s a national and global business hub, we are putting a “Keep Out of Miami-Dade” sign on our borders. We can’t have it both ways: we want business and investment from everywhere, but we want only local companies to do that business.
Business and trade work best when all sides win, not favoring less efficient and more costly local companies. And when local companies know going in that they’re going to win bids, they’re far less likely to sharpen their pencils and offer the county good prices. Costs will balloon.
Miami-Dade has a solid bidding process and solid professionals who vet those bids. Every time the county commission overrides its process and its professionals, the public loses.
That doesn’t happen at the state level, because the legislature doesn’t get involved with contracts: the professionals do.
That doesn’t happen at the federal level because Congress doesn’t get involved in contracts: the professionals do.
Yet commissioners made clear last month they want to be far more involved in who bids and who wins county contracts. It should be just the opposite.
In fact, when a team reviews the charter this year, as law requires, the review should look closely at formally keeping commissioners’ hands off contracts.
That would come at two costs: many lobbyists would lose a lot of work, and commissioners would lose some campaign contributions.
We think the gains for taxpayers would far outweigh those loses.