A small community receives only one bidder for the community’s garbage contract and one bidder for recycling contract. A city tries unsuccessfully to attract a large company to its location. A state holds many information sessions to attract new bidders to a trade contract. Congress approves funding to support a strategic industry. Each case has policymakers trying to attract private industries to a problem.
How do policymakers, seeing a problem, attract entrepreneurs to the marketplace to develop solutions? Business schools often teach about how entrepreneurs can seize a market. Yet policymakers can feel that there is an unserved market with unmet needs waiting. From government policies to non-profits to public-private partnerships, policymakers are trying different approaches to provide a path towards economic development and innovation.
During the pandemic, many governments began reconsidering policies that seemed to promote low prices to customers as the overall goal. Competition was not always considered a factor. For states and local governments, the challenges of having a competitive market can be vast. Many stakeholders in communities are questioning how funds are being used and whether those funds seem to support consequences that stakeholders no longer agree with.
One way to address increasingly complex buying decisions is to redefine the decision goal from lowest price bidder to best value bidder or various tradeoffs. While lowest price bidder was often used for commodities, it is now used for everything, including professional services. Business people often become entrepreneurs who see lowest price as a no-win long-term game and try to find a better solution. But then there is the question of whether a bid is truly lowest price or if it simply shifts costs around to hide the proposal’s true cost.
Best value, however, requires the bidding government to value carefully the services or goods a bidder will provide. The GAO did a study in 2014 that can give local policymakers an important idea: go beyond lowest price. In fact, bidding out a good or service requires broader objectives and understanding of costs beyond a stated price. In Appendix II of the GAO report, titled Body Armor Vest Acquisitions in Fiscal 2013, the agency found that past performance was important — yet often government contracting doesn’t justify the lowest price bid. By using an alternative to lowest price, governments can change bidders’ responses and the culture.
As ESG (environmental, societal, and governance) becomes important to governments as well as companies, policymakers will need to support buying decisions that include total costs. Constituents will demand that agencies consider economic development factors, and policymakers will need to change the culture of their own people. In a world where one factor — price — no longer dominates buying, innovative solutions will come to the marketplace in partnership with government buyers looking to the long term.
Christopher Rabzak is the founder of CRXJEM Consulting LLC, a management consulting firm that focuses on technology companies. Chris received his Aerospace Engineering degree from Penn State University, and worked in private industry for Teledyne Ryan and Boeing, as well as government entities including NASA. Chris earned an MBA and a JD from Widener University. He founded CRXJEM in 2008, and works with tech firms, develops continuing legal education courses to help attorneys understand how technology works, and is a certified continuing legal education provider in Pennsylvania. He is currently forming an international advisory board for a growing tech company.
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