County often pays above retail price to meet its social aims

Miami-Dade Commissioner Sally Heyman just made a startling point: a team of county professional buyers spends more on goods and services than she would on her  own out of ads.

Yes, despite county buyers’ detailed and complex rules and the power of mass purchasing, you and I can go to retail ads and pay less. The county’s extra costs come right out of taxpayers’ pockets.

Let’s be fair: Ms. Heyman didn’t say everything costs less at retail than the county pays. County professionals surely try to save. But given a team who buy goods and services for a living, how could you and I ever beat them just by looking at advertisements? 

Simply because you and I buy based on value and cost alone. We don’t artificially limit who we’re going to buy from or what sellers must do to get our business. Just get us exactly what we want fast at the right price.

The county, on the other hand, erects barriers to sellers to even consider buying from them. The harder vendors must work to pass those barriers, the more the county procurement team must pay, because it’s handicapped by a stack rules that have nothing to do with what the county is buying. 

First, the county won’t buy from just anyone. Vendors must be certified, which takes a lot of paperwork – including, in our experience, attesting that a vendor won’t do business with multiple foreign regimes and other forms attesting that the vendor meets an ever-growing favoritism list and non-discrimination rules.

The county screens vendors by wage levels, company size, minority owners and employment, location and where the headquarters is, and financial history. 

In addition, a draft of rules that Mayor Daniella Levine Cava issued two weeks ago makes vendors list their sustainable business practices. They must show how they use durable products, reusable products, and those “that contain the maximum level of post-consumer waste, post industrial and/or recyclable content, without significantly affecting the intended use of the goods or services required.” (I am not making any of that up.) They must also detail their “environmental policies, programs, certifications, in addition to specific requirements.”

Just to fill out the forms, vendors need experts whose services are added to the price of what the county buys. 

Labor standards that vendors must meet include “wage/benefit determination practices” and “detailed documentation on employee development and evaluation processes.” That’s a separate trip into the obscure to properly fill out county forms, and more costs.

Then vendors must certify to equal access to small, diverse and disadvantaged suppliers and show that they are increasing opportunities to all of those supplier groups.

There’s more: the county is so intent on buying locally that it builds in an advantage of up to 15% for local bidders. That erases most out-of-town firms that don’t even bid, because bidding with the county is costly.

As Commissioner Raquel Regalado put it at the April meeting, “There’s a lot of priorities that this board establishes, and those priorities have a cost, and we have to be cognizant of [those] costs, whether it’s small business, living wage or whatever it is.”

Moreover, even when bidders meet the seemingly irrelevant rules, commissioners sometimes roadblock a major award because a competitor objects, stalling a deal for months or even years and then reversing the winner. 

And that, Commissioner Heyman, is why any private citizen can beat county professionals on purchase prices. Citizens don’t buy as social engineers. The county, on the other hand, tilts the playing field to fewer vendors willing to jump through all the hoops the county prescribes, sellers it deems more worthy of getting its business.

Maybe you do something similar: buy at a nearby store rather than save by having goods shipped from China via Amazon, or choose a vendor who pays higher wages. But you alone pay the premium for your social preferences. 

At the county, on the other hand, every taxpayer pays a premium for a growing list of preferences, from company size to minority ownership to wage levels to environmental practices to business location to whether a vendor deals with “bad” nations. All may be good causes, but each preference commissioners add also raises your tax bill, as Commissioner Regalado noted, and few actually have anything to do with what the county is buying.

We often warn about local preferences. A study at the University of California, Santa Cruz, found a 5% preference kept many firms from bidding on a government request. Handicapping efficient out-of-town companies allows local firms to charge more and still win – yet the study found winning bidders’ profits with a 5% preference were actually 3.1% lower because the winners were so inefficient. 

Local preference thus became a lose-lose, with taxpayers paying extra and winning bidders profiting less. Remember too, our local preference margin is far higher, up to 15%. That’s a lot more to spend to get inefficient vendors.

Whenever you tilt the market to benefit one group, competition declines. The less competition, the higher the cost to everyone. It’s economics 101.

But the county makes social engineering a centerpiece of its purchasing.

“The goals of Value-Based Procurement are to ensure greater small and local business participation, environmental resiliency, access efficiency, and transparency,” Mayor Levine Cava wrote proudly in her April memo. “Implementation of this effort commenced in 2021 and has already resulted in new opportunities.”

Note that while social aims may be advanced, those stated county procurement goals do not mention either lower price or better quality.

Commissioner Heyman, you need look no farther than that to explain why you can buy for less than the county does. The county is packaging a lot of tangential aims into every purchase. You just wanted the goods and services, period.

Think about that the next time the commission adds social aims to its contract specifications.