County’s moves to bar out-of-town bids harming taxpayers
Written by Michael Lewis on February 20, 2018
When Miami-Dade buys goods and services, it has already stacked the deck against out-of-town vendors. Now the push is on to eliminate any outsiders at all.
The result will be continually rising purchase costs to taxpayers and continually declining quality, while continually adding to local firms’ political debts to county commissioners.
For years, citing a need to build local business and keep tax dollars at home, the county has made it harder and harder for out-of-town companies to win bids.
It created a 10% leeway for businesses that operate locally in awarding contracts. That means an out-of-town bid that is 9% lower than a firm that operates locally loses – and taxpayers pay the extra 9%.
Not content with that, the county set up a 15% margin if a firm not only operates but is headquartered here. That firm wins if a non-local firm bids 14% less. The taxpayers get to pay 14% more for the local firm to win.
Going even farther, the commission voted several years ago to hire local competition advocates to make sure all bids are written so that locals aren’t at a disadvantage.
If a local firm can’t provide enough goods or services to fill a contract, for example, the work is to be split up so that several local firms get pieces of the action instead of having a larger out-of-town company win. If local firms can’t offer the right brand, the contract is to be rewritten to seek brands that locals offer.
So we pay extra county workers to make sure we write contracts that locals can win by charging us more.
Even with all that against them, however, some out-of-towners do win Miami-Dade contracts, even overcoming a 15% edge to local bidders.
But that chance for out-of-towners to win against all odds troubles commissioners, who are pressing purchasing officials to find more local bidders that can win – a not-so-subtle order to name locals the winners come hell or high water.
Next came the commission order to purchasing officials to rewrite bids so that if a non-local comes in first even with a handicap favoring locals, the low out-of-town offer will be handed to the locals so they can shave their bids after the fact just enough so that their 15% higher price wins.
Why in heavens name would out-of-towners bid facing all those handicaps and knowing that if they somehow overcame them all, their bids would be turned over to companies that would get a second chance to use all the advantages of local favorites to beat them? The out-of-towners get no second chance, just the locals.
That’s like making an out-of-town swimmer in a race here pull anchors on each foot and, if they were still able to take the lead, allowing their local opponents to hold them under water.
And now, as we reported last week, commissioners are seeking another roadblock, pressing purchasing officials to not even rank out-of-town firms as qualified to compete for contracts, much less actually win.
When commissioners this month voted on a pool of 27 pre-qualified vendors for security systems, Rebeca Sosa, the commission’s buy-it-local voice, voted no because one vendor didn’t have a Miami-Dade address but qualified despite the price differential handicap, meaning that vendor was well below all other prices.
The push is to have no non-local bidders at all, even if the out-of-towers can’t win. Commissioners don’t even want them competing.
The US Department of Justice battles contract price fixing, bid rigging and market division. Miami-Dade policy legalizes all the advantages of those practices to spread contracts among local friends.
We love local businesses and, all other things being equal, would love them to get all county contracts. But the things that have to be equal are quality and price. And when you eliminate most competition, we don’t usually get the best of either.
As anyone who took Economics 101 knows, the more competitors in the market, the lower the cost and the higher quality. If competition falls so does quality, and price rises.
As anyone who deals with Miami-Dade government knows, business at county hall entails red tape. Bidding is tedious and costly. Out-of-towners that can’t win won’t bid. With no national competition, locals can raise prices even without collusion – they know that what county hall is doing makes it easier for them, and they like it.
So what happens?
Local businesses don’t have to sharpen their pencils to bid low, because the county wants to spread business around town. So they charge more and the taxpayer pays more. And winners are indebted to commissioners for the favor.
Thus preferences rise by even more than the automatic 15% extra profit margin tacked onto county bids. That could be a $100 million or more drain every year on our $7 billion budget. Can you think of a better use of $100 million than directly subsidizing overpriced contracts?
None of this waste is illegal. It’s just waste.
Just as political debts of winning bidders are perfectly legal, and so are any campaign contributions that might result.
That’s why the NIGP, the national institute for public procurement that has more than 15,000 members in government purchasing agencies across the US, “maintains the position that preference policies, including local preferences, conflict with the public procurement principles of impartiality and full and open competition. Therefore, NIGP does not support the use of preference policies.”
The national group is talking about any advantage at all for local bids, a pernicious practice that many local governments have. The newest stance in the commission, however, is no longer mere local preference. It aims at a full barrier to outside firms’ bids whenever possible. Commissioners have said so.
Preferences are the local equivalent of national tariffs, which tax imported items to help US manufacturers who charge more. The county’s newest aim, however, is like not allowing ships with foreign goods to even enter our ports, a full embargo.
To claim that a barrier to outsiders spurs our economy is balderdash, especially in Miami-Dade, where organizations like the Beacon Council, the Greater Miami Convention & Visitors Bureau, Miami’s Downtown Development Authority, the City of Coral Gables and others struggle to bring in outside investment.
What, for example, if we were trying to attract a national company to open a headquarters here? How would an Amazon, to pick a current example, react to a county that aims to bar outside businesses?
We can’t be bush league and big league at the same time. A locals-only policy at county hall is bush league.