Local Firms Losing Contracting Bids
You can only do so much. If the state only allows for the acceptance from the lowest bidder, there is not much that can be done. I'm no economist, but if huge chunks of money are going out-of-state, the odds that that money is coming back to the South is slim to none.Raymond Pizzitolo was banking on a nearly $1 million contract with the New Orleans Police Department to jump-start his uniform business after Hurricane
Katrina.But last month, a Kentucky company beat out Pizzitolo on the deal, bidding a full $160,000 less for the business of providing replacement police uniforms…
Pizzitolo's situation illustrates a debate playing out as the local economy struggles to regain its footing in the wake of Hurricane Katrina: Should a less-expensive bid from a national company always trump one from a small local firm fighting for survival?...
"This is like an age-old dilemma," said Bruce Freeman, who writes a weekly syndicated column called "The Small Business Professor" and is president of ProLine Communications in New Jersey. "Competitive business dictates that you go with the lowest bidder; I don't think anyone would argue with that point. But at some point business has to take on a social conscience. My opinion is that, given the special set of circumstances, the local small businesses should be given a break…"
State law requires that contracts awarded through an open bid process go to the lowest bidder. The process is complicated when the funds to pay for the work come from the federal government, as is the case with the police uniforms.
Phala Mire, director of the Louisiana Minority Business Council, which helps minority-owned firms get supplier contracts, said more needs to be done.
GNO Inc., a regional economic development group, is drafting state legislation that would help businesses by offering better access to immediate cash grants and bridge loans, similar to those issued to businesses in Lower Manhattan following the 2001 terrorist attacks.
In the next 30 to 90 days and without the guarantee of new work, businesses that have survived will have decide whether they can continue to do so, Mire said.
"These businesses are going to die before our eyes. It's just a sad fact." Mire said.
In other cases, firms will leave the city. That's what Pizzitolo is considering.
Brown's Uniforms is a $1.5 million company that has produced uniforms for the police department and other local agencies for decades. But Pizzitolo, who bought the firm in 1999, is thinking about relocating.
If we don’t keep the businesses in New Orleans, what do people have to come back to? If there are not going to be businesses then there are not going to be jobs, and there will be no source of money. This all comes down to keeping the money in New Orleans. At the very least keep the money in Louisiana.
I honestly believe that New Orleans is going to become strictly a tourist city. If the city is not going to be up and running for another year, businesses are going to have to relocate to stay afloat.
posted by Casey at 3:31 PM
5 Comments:
I have a question. Why is Pizzitolo's bid so high?
Maybe it is because in the wake of tragedy there are those who see opportunity and think, "I'm a local guy. You should have sympathy on me while I charge you more than an honest price."
You have a police department in New Orleans that has zero funds. There is no tax base anymore and most of their equipment is destroyed. Let's stick them for an extra $160,000.00. Hey, I'm local have sympathy on me.
I love the line about business taking on a "Social Conscience." What the hell does that mean?
We are talking about a government entity bidding out for a service that will be paid with by tax payer's dollars and we have some "Social Conscience" jockey saying we need to spend more than what something is worth because it will make someone "feel better” and help the economy.
Ah, that's nice. Maybe if we did not take this approach so often New Orleans would not be in the crapper right now. We helped the economy out when we paid out millions of dollars for a levee system that did not work. Over 60 years of tax payer dollars down the tubes, but I’m sure it spurred the economy. So let's keep that time honored tradition going and spend more money and get less.
And lastly, why does there have to be business in New Orleans? Three years ago our legislators voted down a bill that would allow the state to build a second major port/airport in Donaldsonville. No levees needed. It would have spread our economy out across a larger area. One of the points in favor of this scenario was that 70% of the states economy was situated in one place and that place was an easy target for disaster.
There other issues that favored this project as well but with recent events I’m invoking all the power of “Duh, I told you so.”
At the time Katrina and Rita hit we would have had a good deal of our shipping, export and economy located in a safer location and still up and running. Fewer jobs would have been affected and the state, although still in a crunch would have been in a better situation. But no, the right thing was avoided because a few people who historically receive tax payer dollars wanted to keep the "government pays more and gets less" scenario in order to spur the economy.
Well, Mr. Pizzitolo and Louisiana are learning a most important rule of business - price sells.
In the end, people like Mr. Pizzitolo will make enough noise and pull in every favor they ever did and the right thing to do will be avoided once again. The "I deserve something" mentality is alive and well and not even a horrific hurricane season like 2005 can rid the earth of these people. And we wonder where Saint’s Owner Benson gets his business model from.
In refrence to New Orleans becoming strictly a tourist city, do you think it could survive like that? The tourism is a big chunk of income, but with the city's national image the way it is, I'm not so sure it garner the number of tourists it once did.
And what effect will that have New Orleans' other assets. Will the 5th Circuit Court of Appeals stay in New Orleans if the city falters into a Detroit-like state? This is why I think it is important rebuild business in New Orleans. Granted, as mayosligo pointed out, it does make sense to spread the economy out over the whole state, but that would mean a bunch of mid-sized cities and no obvious economic stronghold that would warrent economically-beneficial assets like Superbowls, Sugarbowls, NFL, NBA, Federal Appeals Courts, Democratic/Republican National Conventions, etc. These things bring much needed publicity to a city that is in need of positive publicity.
Pizzitolo’s losing bid brings several things to mind. Mayosligo wants to jump to the jaded conclusion that the bid is higher in an effort to garner more money through a sympathy vote. How do we know what this firm is facing in light of a depleted work force and a shortage of necessary supplies to complete the contract. Taking into account that Burger King was offering signing bonuses, I would think that the old law of supply and demand is making the labor costs of the local concern much more than those of the winning contract.
Here’s “what the hell” a social conscience is at this point— the only way there is going to be a New Orleans again is if a community is established around working people who have an investment in the success of such menial things as making uniforms. This is not war profiteering as we are experiencing in Iraq—I guess that’s okay—this is people trying to hold on the a community that is slipping away as fast as the flood waters can carry it. We made the major mistake in Iraq of not employing enough of the local businesses to rebuild the country we blew apart—maybe that “social conscience” would be more amenable to the United States if we had.
Maybe the legislature could readdress the rules on bidding in light of the Katrina debacle, giving a little leverage to local firms and the obstacles they may be encountering in making viable bids.
I can sympathize with smaller companies on the aspect that the government should at least "owe them" the right to take jobs which they can fully handle, as these will give the locals jobs and will pump money back into the state. But when these small local companies are obtaining these contracts unethically, either through the good ole boy network that we have here or by overcharging, I have no pity. Its easy to see why we are viewed as such a corrupt place. We've already had so many scandals since the hurricane especially involving money issues, its no wonder that they are hesitant about giving us total control to rebuild. But on the flipside, we would like to see the government get more active in providing us with funding and other necessities that we still need in many devistated areas. I agree with mayosligo's reference to our "time honored tradition going and spend more money and get less"... i mean isnt that why we're in this situation in the first place? I don't necessarily believe, however, that New Orleans will be strictly a "tourist" spot, because many of the areas (CBD, Uptown, Warehouse, etc) made it through rather unscathed. These areas provide a huge source of business for New Orleans. Many of the suburban cities like Old Metairie, Metairie, Kenner are also getting back on track, as most of my neighbors and neighborhoods have already moved back weeks ago. From what I hear, its close to seeming normal on that side of town. This is excluding of course the entire st. bernard/chalmette/etc areas who were completely wiped out. Maybe I'm being too optimistic about the state of the city, but I do believe its important to focus on what is going right and what has been done. It gives us all hope. The bidding battle is a very complex situation and i'd love to read more about it if you have any good info. great post!
Hi, Im Neal Thibodeaux (Raymond Pizzitolo's step-son) On regaurds to the article in the paper. Before the storm we had the Police contract and i saw the bids placed and it wasent much higher than the company that got the deal, we had gotten the RTA account (the taxies and bus transportation) before the storm and they lost about 1/2 of their work force. My step-dad company got back on its feet in early April I think and its going great
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