Political Subdivisions – Chasing Windmills Can Be Expensive

The problem facing political subdivisions in seeking competitive bids are many. Politics almost always plays a pivotal role in the process and oftentimes encompasses a mixture of ignorance, money, clan loyalties, and employment.

By Bill Rusteberg

Political subdivisions differ in many ways from commercial business. They can raise money almost at will to cover their costs by forcing consumers to pay for them under threat of confiscation of personal property. For example, when group medical expenses increase beyond budgetary constraints, the general public stands to be on the hook through higher taxes of some sort. Since few vote, it is relatively easy for career politicians to gather their flock of loyal supporters to show up on election day to pull the appropriate levers.

Political subdivisions are usually required to seek competitive bids for products and services including their second biggest budget expense, medical entitlement benefits. (Under current federal law, medical coverage is a de facto societal entitlement. Employers who don’t provide government mandated health coverage are punished).

The problem facing political subdivisions in seeking competitive bids are many. Politics almost always plays a pivotal role in the process and oftentimes encompasses a mixture of ignorance, money, clan loyalties, and employment.

Ignorance

Ignorance may become evident when a vendor researches past RFP’s in an attempt to determine if the case is a viable candidate to expend time and energy in responding to an RFP. A recent example is that of the San Benito Independent School District – San Benito ISD Believes Practice Makes Perfect. They are currently seeking competitive proposals for their group medical plan. But in researching the past history of their RFP process as we have, there is not a sane vendor in the marketplace that would touch this case. The Board of Trustees have certainly proven their ignorance in the past and there is little evidence things have changed.

Money

Money affects behavior and that could not be more true than with politicians who hold power and want to continue to do so. Without funding, it is hard to keep “friends.” Without access to funding, it is hard to help “friends.” For example, a constituent may approach a sitting Board Member with a plea like this: “I am self employed mechanic, and my 12 year old daughter needs treatment for leukemia. We have no insurance. Can you help our family!” Knowing he has access to money, and knowing Juan’s clan of family members is worth 67 votes at election time, the Board Member responds “Yes Juan, report to the HR department in the administration building tomorrow. I will have paperwork ready for you to fill out and you can begin to work in the bus barn on Monday. Of course, you will have health insurance provided by the district, and all pre-existing conditions are covered thanks to us Democrats. Don’t forget to vote Democrat at election time!”

Clan Loyalties

Clan loyalties play when favors are owed. Local politics is a science, well documented. Politicians know how to count. In the above example, Juan’s extended family numbers 67 voting age members. When Juan calls for a Sunday after church bar-b-q at his home, the message is clear – This is how you are going to vote next election! Of course those 67 votes cost +$500,000 in this case.

Employment

Employment within a political subdivision is reliant upon keeping your benefactor fat and happy by not rocking the boat. To do otherwise is certain suicide. Well intentioned employees who want to do what is best from a purely prudent financial perspective must remain silent to survive. Thus innovation and out-of-the-box strategies typically have no place in any RFP process.

Thank Goodness For Exceptions

Of course there are exceptions. We know of many political subdivisions that have avoided all of these problems. These are usually run by business minded trustees who employ prudent and proven business practices common to the private market.  In fact, I am confident there are more political subdivisions that fit this mold than not. Unfortunately, we only hear about the bad ones. Their stories sell newspapers.

Vendors are wise to pre-determine their chances before expending time and energy in chasing windmills. A recent BUCA study showed that it cost about $10,000 to respond to an RFP and that chance of success was one out of ten.

Chasing windmills can be very expensive.