Putting Competition Back into Government Procurement
With recent budget cuts and the increasing scarcity of funds to fund critical programs, you would think our government would rely on true competitive negotiations to make sourcing decisions as the rule, not the exception. Guess again. From maintenance contracts in your local county to the reconstruction of Iraq, government on all levels is spending more money than needed. What’s even more, insidious is the claim that government agencies are using true, “competitive” bidding processes today.
While a range of government agencies and municipalities are taking advantage of the latest negotiation technology—and in fact are forced by law, to open the bidding process for most contracts—how can their negotiations truly be competitive when they’re not inviting all potential parties to the table, or offering an unfair advantage to a special interest group participating in the market? Let’s examine three cases below on the federal, state, and local levels to illustrate this point.
Our federal government, despite mandating a competitive bidding process in its procurement charter, openly violates this directive when it suits its purposes. Take the case of Iraq. The largest contracts to date were not awarded on the open market—the only bidders the government considered were those who were invited to bid. Bechtel, one of the largest recipients of this corporate handout process, received a contract worth $680 million initially and was recently awarded another one for $350 million to continue its rebuilding efforts. Only after much outcry, did the government recently state that the next contract would include an open RFP process. And let’s not forget Halliburton, the largest recipient of Iraq reconstruction welfare. Halliburton, which, did not exactly face “competition” in the traditional sense during the bidding process, has extremely close ties with the Bush administration.
While the federal government is busy awarding contracts in Iraq to its favored corporate partners, many of our state governments—and unions—have been busy drafting up legislation that will force stales to pay 200% to 300% more than what they have to for a range of services. The specifics of the bills include “blocking companies from using foreign workers on stale contracts and requiring foreign employees to identify where they are located.” In choosing to block the free market, the New Jersey, Connecticut, Maryland. Missouri, and Washington legislators will spend hundreds of millions of dollars each year unnecessarily, money which could go to job retraining for those affected by the overall trend of moving low-wage, low-skilled jobs offshore.
The local level is just as bad. Earlier this year, the Madison School Board in Wisconsin rejected all of the low bids in a maintenance contract award decision because two union umbrella groups did not believe that the potential awardees had enough racial diversity in their employee mix. This occurred in a country where, last we heard, it is illegal to discriminate and award business based on anything other than the true merits of the suppliers bidding. Juan Lopez, the board member who fought hardest for the rejection of bids described this “not [as] affirmative action in the sense that I’m saying, please feel sorry for my people. It’s simply that I want them to get the same opportunity for high paying jobs.” Mr. Lopez should open his history books; if he did. he’d learn that Hitler used the same argument to prevent Jews from working in Germany.
Together, these 3 examples represent a broader problem in American government today: special interest groups—be they minorities, unions, or large corporations—openly continue to thwart the free market in government contract award decisions. Rather than competing on their own merits in an open market, they’re costing us billions of dollars a year in corporate and social welfare.