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What’s spent in Flagstaff, stay’s in Flagstaff!
During a recent Flagstaff City Council work session, the Chamber testified about the need to have a “value added” provision as a part of our city’s procurement manual, currently being developed by City staff.
What is ‘value added’?
When the city ever needs to have a public project built (roads, parks, buildings, etc.), it puts out a “Request for Statement of Qualifications” (RSOQ). Essentially, this is asking for professional contractors and service providers – such as architects, engineers and surveyors- to submit a proposal about what would make their company the best to do the requested job.
When the recession hit in 2008 and cities all throughout the country reigned in the amount of money they spent on public projects, contractors and service providers felt the squeeze on a very dependable source of income for their companies. As a result, the largest of these companies began seeking contracts outside of their normal area of operations, and often won them because they could provide the extensive and somewhat “flashy” proposals and perhaps low pricing to add a completed job to their portfolio at the expense of higher paying projects elsewhere.
Should it really matter who we award a city contract to?
Well, consider where that money goes once it is paid by the city to the winner of the contract. For example, let’s say the city of Flagstaff decides it wants to build a new fire station and two companies bid for the proposal, one from Flagstaff and one from Denver. The Flagstaff company says it can build the fire station for $1,005,000. The company from Denver says it can complete the project for $1,000,000. Naturally, you would want to go with the lowest bidder and choose Denver. The problem is that very little of that money will stay in Flagstaff, and instead contributes to the economy of Denver.
By choosing a local company, the $1,005,000 that the city spent will be recycled several times over. Let’s say the Flagstaff company employs 50 people. Those 50 people all live in the Flagstaff area, so they take their paychecks, made possible by the city contract, and spend it on goods and services for their personal lives, provided by other local companies such as our grocers, medical providers, or our restaurants. The company itself will likely have contracts with local manufacturers (such as cement mixers for the fire station’s foundation) and pay them for their services. All of the money will reverberate throughout the community and help provide for a stable economy and job retention.
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| Govt. Affairs Director Mike Sistake Testifying to City Council on “Value Added” |
The alternative is to pay the company from Denver to do the job and watch those funds walk away from Flagstaff. The Flagstaff Chamber mission is to create a strong local business climate and a vibrant economy. That’s why we have trademarked Buy, Dine, Stay Flagstaff and constantly discuss the reasons why buying locally-for products and services of any kind-is essential to community growth.
Another benefit to awarding local companies is that it prevents a draining of valuable talent from our city. If an engineer cannot earn a livable wage in Flagstaff they will understandably move to a city that they could. If our STEM graduates at NAU enter the workforce only to find there is nothing for them in Flagstaff, they will take the first-rate education they received and let another company in another city benefit from it. As America’s first STEM community, we should be doing all we can to generate a robust economy that will provide a good job for those students who took the time to focus on such an education.
By placing a value added section in the Flagstaff procurement manual we would be giving our local businesses a leg up in the competition for city contracts. This section would award points to a company bidding for a contract if they can show such things as knowledge of the Flagstaff region, employment of local residents, and have their offices headquartered in Flagstaff or the county.
But doesn’t a local preference degrade the competitive process for city contracts?
Not really. There might be an RSOQ put out that no local business can compete for or perhaps an outside company can provide the service at a significantly lower price. A local preference doesn’t exclude others from competing, and it doesn’t guarantee an award to a local business, it only provides a leg up.
By hiring a local business as often as possible, we create a robust economic climate that will benefit all of Flagstaff.
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