Friday, November 19, 2010

Durham Taxpayers Deserve Something Better Than “Lowest Bidder”

The “lowest bidder” process used by Durham’s local governments works well enough as long as tax dollars are reinvested back into the very economy from which they are levied.  However, when it leads to purchasing supplies and services that are not locally based, it is a false economy indeed and shortchanges Durham taxpayers.

Local taxpayers deserve not only the best price possible for the initial purchase but the direct, indirect and induced economic impact their tax dollars can create when injected back into the local business climate, including the creation of jobs and additional tax revenue that can lessen the per capita burden.

It is time for Durham’s local governments to develop a formula that goes beyond “lowest bidder” and factors in the economic impact, including jobs and additional local tax revenues that will be lost if and when a non-local vendor is selected.  If the decision is made to ship tax dollars out of Durham for a purchase or contract, it should be made on more than the price of the goods and services alone and with full awareness of what that decision will cost the local business climate.durham_skyline_l

I’m not merely referring to the 5%-10% preferences given by some communities and states.  I’m very familiar with that approach from  managing the destination marketing organization in Anchorage, Alaska, a community and state long aware of the importance of developing economic self-sufficiency by leveraging every purchase possible to invigorate and stimulate development of Alaska-based businesses.  However, I’m talking about something much more sophisticated and accurate than a simple preference.

It is now possible with models like Implan Input-Output which has been deployed for more than a decade now by the Durham Convention & Visitors Bureau with the assistance of HIS Global Insight to very accurately assess the true value to Durham’s economy specifically from visitation including the many industries that comprise the tourism sector but also leakage lost when those businesses fail to use local vendors or hire employees who commute here for work but then take all but a small fraction of their spending out of Durham.

I believe Durham’s local governments could cost-effectively develop and use a similar approach to help factor economic opportunities that are lost when local tax dollars are used instead to purchase goods from vendors located outside Durham.  This approach would result in far more informed decisions and another demonstration of Durham’s innovative spirit.

The formula could be quickly applied to any purchase or contract decision to better inform the “lowest bidder” process and balance any decisions to use non-Durham vendors with a full understanding of the “cost” of lost economic opportunities when those tax dollars are not injected back into the local economy.   Leading the way, Durham’s local governments would then be in a position to demonstrate to major employers like Duke University how their purchasing decisions can likewise be more beneficial to the local economy.

As a result Durham taxpayers would get far more “bang for the buck” than is currently generated by solely using the “low bidder” process.

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