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National Journal—Sidestepping the Lowest Bidder

By Admin

[As published by Fawn Johnson in National Journal]

It’s a longstanding practice in government to give big contracts to companies that offer to do a specific job for the lowest price. A multi-billion dollar contracting industry is built on this premise, and generally it functions well for everyone. We as citizens get our roads and pipelines and subways through a competitive process that ensures our tax dollars aren’t wasted. (Or not completely wasted, anyway.) Competition among contractors spurs new inventions for better and faster service.

A consistent, sometimes antagonistic, counterpoint tends to run through this narrative, questioning the reliance on baseline price and nothing else. Is the lowest bidder in fact the best bidder? What about hard-to-calculate factors like corporate citizenship or being located inside the country? Unions have been the most prominent peddlers of these questions over the years. More recently, community organizations and equity oriented groups are weighing in. Slowly, they may be changing the dynamics of procurement.

A coalition of more than 40 such groups took the time last week to point out their success on this front. In several passenger rail projects currently underway, bidders on contracts were asked to disclose how they would create American jobs and detail the contours of those jobs—wages, benefits, training opportunities, and recruitment of disadvantaged workers. Because that disclosure was part of the bidding process, job creation became part of the conversation up front. Price was no longer the sole defining characteristic of the winning bidder. That changes the dynamics of everything that follows.

“Jobs shouldn’t be an afterthought when you’re spending billions of public dollars,” said Jorge Ramirez, president of the Chicago Federation of Labor and a member of the coalition Jobs to Move America. Ramirez was involved in one of the victories being touted by the group, a $2 billion upgrade to Chicago’s transit system that will add more than 800 new rail cars. Chicago Mayor Rahm Emanuel announced in July that bidders would be required to “provide the number and type of new jobs they will create related to the production of the new rail cars.”

Amtrak is also on the coalition’s list of good guys because it included similar provisions in its bidding call for 28 new high-speed rail cars earlier this year. Los Angeles has gone a similar route with rail in California, and the Maryland Transit Administration also is including such language in its plans to expand parts of the Washington D.C. area Metro’s Purple Line.

This is a sea change, coalition members say. Until now, basic standards on job creation or wages have “been treated as the ceiling rather than the floor,” said AFL-CIO Transportation Trades Department President Ed Wytkind. “There have been perverse pressures to submit to the lowest bid possible.”

What changed? Center for Neighborhood Technology Vice President Jacky Grimshaw says it may have been the government’s simple realization that they could expand their contractor reviews to factors beyond dollars and cents. “I talked to general counsel for the Federal Transit Administration asking, ‘Why not? Why we couldn’t have this kind of change in policy?'”

Once the FTA was comfortable with asking bidders for jobs-related data, regional transit authorities felt emboldened to expand their bidding criteria.

This more expansive view of contracting is percolating back into the community.

Residents in two counties in Maryland have teamed up to develop recommendations for how the expanded Purple Line on Washington’s Metro system will bolster their neighborhoods rather than pricing out the lower-income people. The call it the Purple Line Compact. Among other things, they intend to push for funding for affordable housing along the corridor to ensure that the economic boost that comes from the rail site will benefit everyone. This write-up of a recent public meeting on the project shows the extent of community involvement. It’s impressive.
At their best, infrastructure projects should come out to be more than the sum of their parts. They should last beyond the time that it takes to pay for them and be designed to benefit the community around them. It’s much easier to make that happen when the officials charged with finding people to do the actual work are empowered to ask broader questions than simple price. From the looks of some of these rail projects, that may be starting to happen.

For our insiders: What are the most common challenges for cities and states in seeking contractors for infrastructure projects? How intense is the pressure to judge solely on price? Will putting job-related questions on RFPs become a long-lasting practice? Or are the examples cited here too isolated to make a difference? How can community organizations other than government be effective in influencing the bidding process? How far can procurers deviate from price?