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Guest column | Ken Trufant

Local-preference bidding is nothing more than politics

Public purchasing has always been based on the strict tenet that the lowest and best bidder got the work. Anything that impedes this process or artificially gives one bidder an advantage over another is simply politics at its worst.

It is true that we are in a weak economy and many businesses in Hernando County are suffering. However, Hernando business people are not unlike those in our surrounding counties, or even the rest of the United States. In fact, many businesses all over the world are depressed and are trying to set up a new model that will make them more competitive in today's environment.

It is free and open competition that makes the public purchasing environment unique and different from the private sector. Private sector folks are free to wheel and deal around a conference room table or in a back room somewhere, awarding contracts to friends or allies. In essence, there are no rules in the private sector, contracts can and are awarded on the basis of who you know and how much clout they have in the marketplace.

A local-preference ordinance usurps the free and open competition rule. What it does is give an unfair advantage to a local bidder by allowing a company to submit a higher bid and still win the contract. Usually, it takes the form of a percentage that a bid can be higher by and still be considered low.

Take for example the following scenario:

Bidder A from Pasco County submits a bid for $101,000. Bidder B from Hernando submits a bid for $103,000. Bidder C from Pinellas submits a bid for $102,000.

Bidder B from Hernando would win the award even though it is the highest bid submitted. The 2 percent preference artificially adds $2,020 to Bidder A and $2,040 to Bidder C.

The other way to calculate the 2 percent preference is to artificially remove this percentage from Bidder B's bid and see if that makes it the low bid.

In either case, Bidder B from Hernando County would win the contract at the actual bid price of $103,000. The preference clause does not lower the bid price, it merely calculates a lower price to favor the local bidder.

This really serves no public good! If every city, county or state enacted preference laws to favor their local business folks, we might as well do away with public bidding. After all, it stands to reason that if you are a Hernando business and you wanted to submit a bid in another county that had a preference policy, then you would be at a strict disadvantage and probably not waste your time and money to calculate a bid under those circumstances.

There is another issue: What truly constitutes a low bid? For illustration purposes, assume that all the bids were identical in quality, service, and amount. In reality, the bidder farthest away would be the low bidder. The rationale being that the bidder has more expense in delivering the product and service than someone closer to the governmental agency, hence less profit, truly making it the lowest bid.

How does one define "local?" Let's take a major retailer, perhaps Staples. This store hires local folks to run the store, they live in Hernando County, spend their wages in Hernando and generally pay taxes in Hernando. However, profits generally go somewhere else. Yes, a few local people may own stock in the company, but by and large, you would not consider Staples a local vendor. Or, would you?

If Staples were to compete for supplying office needs to the county against a mom-and-pop store, who would be considered the local vendor of choice? In an even worse case, what would happen if the city of Brooksville were to adopt a city preference policy, giving city vendors an advantage over other vendors within the county?

Preference laws only defeat the public good. A local vendor should be able to legitimately submit a lower price on most goods and services. Take the case where a Fort Myers lawn care company submitted a lower bid than a Hernando company. In reality, the Fort Myers company should have submitted the higher bid simply because its costs of travel had to be considerably higher. Assuming that manpower, wages, gasoline, equipment, etc., had to be relatively identical, why was the Hernando vendor's bid higher? The only real factor was profit. And now, the commissioners may just allow it to happen.

Mixing public bidding and politics is like trying to mix water and oil. They just will not gel. The only way to conduct business in government is on a lowest-and-best-bid basis in the open without strings attached. Failure to adhere to these fundamental principles ultimately leads to higher prices, with fewer bidders and unfair competition.

As a taxpayer, I am concerned. You should be, too.

Ken Trufant of Aripeka is a past president of the Florida Association of Public Purchasing Officials and the National Institute of Governmental Purchasing for which he also taught public purchasing courses.

Local-preference bidding is nothing more than politics 08/08/09 [Last modified: Saturday, August 8, 2009 4:31am]
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