Ballot Question: Should city move to ‘best value’ from ‘lowest bid’ for contracts?

Councilman Bobby Henon, backed by the Kenney administration, thinks it’s time to update the city’s procurement policies.

On Tuesday, voters will decide whether the city should change how it picks vendors for city contracts, altering the criteria from the “lowest responsible” bidder to one who promises to provide the “best value.”

Henon and his supporters say that such an amendment is a best practice adopted by most other large cities and the federal government. It will allow Philadelphia to select vendors based on more complex criteria than simple cost, giving a better chance to minority-owned businesses and local businesses.

May 16, 2017 Ballot Question #1:

Shall The Philadelphia Home Rule Charter be amended to allow for the award of certain contracts based on best value to the City?

Plain English Statement: This proposed amendment would allow the City’s Procurement Commissioner to award some contracts based on the overall “best value” to the City, rather than based only on dollars. In other words, the City would be allowed to choose a responsible business based on more than just price. Currently, when the City buys things like equipment or construction services, the Home Rule Charter requires the City to choose the responsible business that offers the lowest price. Similarly, when the City allows a private business to operate on City property, the Charter usually requires the City to choose the responsible business that offers the City the highest payment. This amendment would allow the City to use “best value” in awarding contracts under certain circumstances. For example, a City department might need to find a business to perform complicated maintenance services. If the Procurement Commissioner determines that there are unique aspects of the purchase that makes price not the best predictor of value, the City can make the purchase based on “best value,” rather than price alone. “Best value” evaluation criteria could include things like a business’s past performance on similar work, including the quality of the services or products delivered by the business; or its ability to meet diversity goals; as well as price. These “evaluation criteria” would be listed in regulations, as well as included in advertisements (which are used for contracts worth more than $32,000). All “best value” purchases would be subject to the same rules as apply to purchases of professional services.

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“Best value has been around a long time,” said Henon, who notes that of the 20 largest American cities Philly is one of only two that hasn’t adopted such a measure.

“I think it really will reflect the change of the city and who the city is,” said Henon. “It’ll be a big win for local vendors, a way to do outreach to contractors right here locally instead of having folks from out of town. Philly first, right?”

But since Henon introduced the bill back in December, critics have argued that this charter change will introduce politics into a contracting process that has safeguarded its honesty with its simplicity. The vendor who offers the cheapest bid wins. “Best value” is a more slippery concept.

“This charter change allows bids to becomes a matter of argument, a matter of advocacy,” said Jay McCalla, who served as deputy managing director under Ed Rendell and John Street’s administration and penned an op-ed warning against Henon’s legislation. “It will create an opportunity for lobbyists to pressure the procurement commission. Whoever has the strongest politics will win.”

McCalla oversaw demolition contracts during Street’s Neighborhood Transformation Initiative program, designed to remove blight from the city. Although he sat on a $120 million fund, McCalla says that no one approached him with shady or politically-connected bids because they knew he couldn’t act on favoritism even if he wanted to because of the low bid requirement.

Henon’s best value initiative would change this lowest bidder system as it relates to non-professional services, like janitorial contracts, and the procurement of supplies like automobiles or asphalt.

McCalla says that under Henon’s proposal, the procurement process for these goods and services would be more akin to the one that the city uses for professional services—and in his opinion that wouldn’t be a good thing.

“The mayor can just hand out million dollar legal contracts like candy if he chooses,” said McCalla. “That’s why one of the first places any mayor goes for campaign contributions is the law firms.”

Henon argues that such concerns are addressed by regulations ensuring transparency and oversight that have been adopted in the last 15 years. In 2005, the city adopted an anti-pay-to-play law, which decreed that if a candidate is given more than $2,600 by a particular organization or individual they can’t be awarded a city contract worth over $10,000.

Under best value, Henon says, the lowest responsible bidder will still be the baseline anyway. Where a case can be made that other variables should be considered, a detailed explanation will have to be offered to the public about why those concerns override low cost. Any Requests for Proposals would be online for the duration of a contract and a detailed explanation will be supplied with an explanation of how proposals were scored.

The good government watchdog group the Committee of Seventy, for one, agrees with Henon that there is little risk of corruption. It’s even endorsed his initiative.   

When it first became aware of the best value proposal, Committee of Seventy was skeptical about the effort. But after studying the issue for the past several months, it determined that best value is a best practice that should be adopted, and that the city’s oversight regulations have evolved mightily since McCalla’s time in City Hall.

“We’ve made real strides forward in the 21st century with regard to our ethics [regulations], much more so than most people realize,” said Patrick Christmas, policy program manager for the Committee of 70.

Christmas ticked off the safeguards his organization sees in place: the 2005 pay-to-play law, the independent board of ethics, the chief integrity officer position. He says that the city’s procurement policies with professional firms should give voters confidence in the Henon’s proposal.  

“The other thing to keep in mind is this procurement process would be centralized in the procurement department,” said Christmas. “I know the procurement department and the chief integrity officer and the chief administrative office have been working on this for months to make sure those processes are sound and fully transparent.”

Still, doubters like McCalla persist, fearing best value will favor the well-connected. Some former city officials PlanPhilly spoke with questioned Henon’s ties to the powerful electricians’ union, Local 98, where he used to serve as political director. Mayor Kenney also received significant backing from that union and other building trade unions. The fear is that “best value” could be used as leverage to bring more work to favored unions.

But Henon assures PlanPhilly that there is no “clandestine union takeover” at work in the best value initiative.

“I don’t even know if the building trades support best value,” said Henon.  “this has nothing to do with union or non-union, just the quality and best value of a product.”

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