The county often pays more than the retail price to achieve its social goals

Written by Michael Lewis on May 3, 2022

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Miami-Dade Commissioner Sally Heyman just made a startling remark: A team of professional county buyers are spending more on goods and services than they would on their own. own ads.

Yes, despite the county’s detailed and complex buyer rules and mass buying power, you and I can access retail listings and pay less. Additional county costs come directly out of taxpayers’ pockets.

Let’s be fair: Mrs. Heyman did not say everything costs less at retail than the county pays. County professionals are surely trying to economize. But given a team that buys goods and services for a living, how could you and I already beat them just by watching the ads?

Simply because you and I only buy based on value and cost. We do not artificially limit who we will buy from or what sellers must do to do business with us. Get us exactly what we want fast at the right price.

The county, on the other hand, is erecting barriers for sellers to even consider buying from them. The harder suppliers have to work to break through these barriers, the more the county’s procurement team has to pay, as they are handicapped by a stack of rules that have nothing to do with what the county buys.

First, the county will not buy from just anyone. Sellers must be certified, which takes a lot of paperwork – including, in our experience, certifying that a seller will not do business with multiple foreign regimes and other forms certifying that the seller meets an ever-growing patronage list and non-discrimination rules.

The county selects suppliers based on salary levels, company size, minority owners and employment, location and location of corporate headquarters, and financial history.

Additionally, draft rules that Mayor Daniella Levine Cava released two weeks ago require sellers to list their sustainable business practices. They must show how they use sustainable 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’m not making any of this up.) They must also detail their “environmental policies, programs, certifications, in addition to specific requirements.”

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

Labor standards that vendors must adhere to include “wage/benefit practices” and “detailed documentation of employee development and evaluation processes.” It’s a separate trip into the dark to fill out county forms correctly, and more costs.

Next, suppliers must certify equal access to small, diverse and disadvantaged suppliers and show that they are increasing opportunities for all of these groups of suppliers.

There’s more: the county is so committed to buying locally that it creates an advantage of up to 15% for local bidders. This wipes out most out-of-town businesses that don’t even bid because bidding with the county is expensive.

As Commissioner Raquel Regalado said at the April meeting, “there are a lot of priorities that this council sets, and those priorities come at a cost, and we have to be aware of [those] costs, whether it’s a small business, a living wage, or whatever.

Moreover, even when bidders play by seemingly irrelevant rules, commissioners sometimes block a major award because a competitor objects, stalling a deal for months or even years, then overturning the winner.

And that’s why, Commissioner Heyman, any private citizen can beat county professionals on purchase price. Citizens do not buy as social engineers. The county, on the other hand, tilts the playing field toward fewer sellers willing to jump through all the hoops the county prescribes, the sellers it deems more worthy of doing business.

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

In the county, by contrast, each ratepayer pays a premium for a growing list of preferences, from company size and minority ownership to wage levels, environmental practices, business location and if a supplier is dealing with “wrong” nations. All can be good causes, but every preference added by commissioners also increases your tax bill, as Commissioner Regalado noted, and few actually have anything to do with what the county buys.

We often caution against local preferences. A study from the University of California, Santa Cruz found that a 5% preference prevented many companies from bidding on a government request. Disabling efficient out-of-town businesses allows local businesses to charge more and still earn – yet the study found that the profits of winning bidders with a 5% preference were actually 3.1% lower because the winners were so ineffective.

Local preference thus became a lose-lose, with taxpayers paying more and winning bidders profiting less. Also keep in mind that our local preference margin is much higher, up to 15%. That’s a lot more to spend getting inefficient providers.

Each time you tilt the market in favor of one group, the competition decreases. The less competition, the higher the cost to everyone. It’s Economics 101.

But the county is making social engineering a centerpiece of its procurement.

“The goals of value-based procurement are to ensure greater small business and local business participation, environmental resilience, efficient access, and transparency,” Mayor Levine Cava wrote proudly. in his April note. “The implementation of this effort began in 2021 and has already given rise to new opportunities.”

Note that while social goals can be advanced, these county procurement goals do not mention lower price or better quality.

Commissioner Heyman, you need look no further than that to explain why you can buy cheaper than the county. The county incorporates many tangential objectives into every purchase. You just wanted the goods and services, period.

Think about it the next time the commission adds social objectives to its terms of reference.