Tuesday, August 03, 2010

The root of the problem

I saw the news story yesterday about Toledo Public Schools choosing a supplier from Michigan due to a lower bid, despite the fact that a Toledo company could do the work.

TPS, because it is governed by state laws on bidding processes, is required to select the lowest bid - and that's supposed to be a good thing for the taxpayers.

However, the idea that Toledo tax money is spent outside of the jurisdiction seems to upset some people, especially when the difference in the cost is somewhat minor ($2700 in this particular case).

So cities have decided to give a percentage advantage to local suppliers - a 'local preference' as you would have it - though school systems, townships and counties do not have the legal ability to do the same. The 'local preference' is usually a policy that states that a 'local' company's price is considered to be equal to a non-local company's price if the difference in pricing is within a certain percentage. It's a handicapping system designed to provide an advantage to the local company.

But the point that everyone is missing in all this is WHY the prices from our local suppliers are higher. In this instance, the two companies bidding to do the work for TPS might also bid for other projects as well. And the Michigan company will probably end up with the lower price again and again.

So WHY is this the case? Is it because of the high property taxes in Toledo with all our levies? Is it because of high overhead costs in Toledo, like energy, workers' compensation and income taxes? Is it because of regulatory issues from the city, the county and the state?

All the people who want us to give a local preference to local companies and have the taxpayers pay more through some convoluted logic of it 'helping the local economy' are either, intentionally or ignorantly, ignoring the root of the problem: that the local companies shouldn't NEED a local preference in order to be competitive.

If we want our local businesses to be able to compete not just for Toledo work, but for work across the nation and even the world, we need to ensure that taxes, regulatory policies and other costs are competitive in order to give those businesses the advantage in the marketplace.

So all those who would push for instituting 'local preferences' in bidding need to, instead, push for a business-friendly environment - not a preferential treatment because we are 'not-business-friendly.'

Sadly, our politicians and special interest groups who push for such 'not-business-friendly' policies are usually the same people who then want the taxpayer to pay more in a failed attempt to promote the local companies their policies have harmed.

But those 'not-business-friendly' policies are more costly than just for local projects. They hamper our companies in EVERY project they bid to undertake, resulting in a disadvantage to our local companies and the decline we see in the number of successful businesses in the area as they either go out of business or move to more profitable climes.

We need to stop addressing the symptoms - the non-competitive bid - and start addressing the disease - the overall business climate in Toledo/Lucas County/Ohio.

4 comments:

Hooda Thunkit (Dave Zawodny) said...

Amigo Maggie,

You bring up a very good point and have stated it eloquently.

You leave dissenters without a leg to stand on ;-)

That said, there are still basic flaws in the procurement procedures which need to be fixed; items like quality and performance.

This is a battle that I've tried to fix in my own little way when I could.

skeeter1107 said...

Excellent!

Well said.

Tim Higgins said...

Maggie,

Setting aside state law in this process (which TPS I would find difficult, though it appears to come easy to the Blade), one would still have to wonder about "local advantage". Perhaps taking such a practice to the next level would help.

If such local practices dispensation could be granted, would taxpayers be willing to give more money to TPS to pay the higher budget that such a practice implies?

Would the city be willing to make up the difference from the general fund, since local companies would generate revenues for the city?

Would the state be willing to kick in more money since the same would be true for them?

Would the same practices by other areas have a negative impact on Toledo businesses?

Hmmm ... I guess what the story makes sound so easy is not nearly as simple as the daily newspaper would like to imply.

James said...

Hooda: Maggie' dissenters would resort to their usual name-calling if they choose to disagree with her. That's their "leg" they stand on.

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