The Smaller Bidder: Local Business and Public RFPs

Over its 30-plus years in business, Boone Construction has helped shape Columbia, mostly through road and bridge work. The company built two bridges at Discovery Parkway, another in Capen Park, and sidewalks downtown, including the one in front of Flat Branch Park. If you live in Columbia, you’ve probably walked or driven on their handiwork.

The company won many of those jobs through the City of Columbia’s bid solicitation process. In the interest of helping more local companies tap into millions in government and private sector contracts, like those Boone Construction has won, city officials are looking at ways to give local businesses a stronger foothold when bidding on requests for proposal, or RFPs, on city projects.

Some ideas on the table include breaking larger contracts into smaller pieces, positioning the city as the general contractor on big projects, and putting goals in place for the percentage of jobs awarded to Minority Business Enterprises and Women Business Enterprises.

Today, when the City puts out a call for bids on electrical work, windows, paving, or other products or services, the process is open to anyone, and it attracts not only local companies, but also bidders from around the state. The same goes for bids put out by Boone County, the Columbia Housing Authority, and others.

“Our hope is to create good jobs and create opportunities in both the government and private sectors,” says Jim Whitt, a community leader, school board member, and consultant helping the city develop and implement its 2016-2019 strategic plan.

The City doesn’t currently offer any incentives or advantages for local businesses bidding, and — unlike state government and MoDOT — it doesn’t have thresholds for how many bids must be awarded to minority- or woman-owned business enterprises or disadvantaged business enterprises, also known as MBEs, WBEs, and DBEs. (City jobs that use certain state and federal funding, like some roadwork, do have DBE goals built in.)

Boone County, like the city, doesn’t currently provide any additional incentive or advantage to local businesses and doesn’t set goals for MBE and WBE contracts, but the county isn’t currently considering any changes to its RFP process or guidelines, according to director of purchasing Melinda Bobbitt.

City leaders, the city purchasing department, and REDI hope some of these new ideas could help award more local projects to Columbia companies and, in turn, give the local economy a boost.

Struggling to Compete

As a 50-person local operation, Boone Construction hits its sweet spot with jobs too big for very small companies but too small for the big ones. Its status as a certified MBE has helped the company get in on road projects and other work.

But project manager Noah Barnes said it’s still tough to compete with bigger firms from St. Louis and Kansas City on major projects, like housing developments downtown or construction work on the MU campus.

“That’s where you see the bigger companies coming out of the cities,” he says. “Of the bigger projects, we might get one or two a year, but bigger companies are getting five to 10.”

Whitt says many local companies do have a hard time competing with the bigger outside firms for city projects.

“It’s difficult to take a one- to two-person operation and compete with a 15-person operation,” Witt says.

This creates a vicious cycle: Local small companies can’t compete with bigger outsiders, so the local companies win fewer jobs and miss growth opportunities, which makes it harder to compete on the next bid.

“We have to focus on the work they can do and get on a growth path,” Whitt says.

Some cities, such as Houston, help their local business community by establishing advantages for local businesses within their bid process. For example, a city could stipulate that if a local company is within 5 percent of the lowest bid, and the lowest bid isn’t local, the city can award the project to the local company.

And while that policy isn’t currently under official consideration in Columbia, Barnes thinks it’s an interesting possibility — and potentially a controversial one.

“That would ruffle a lot of feathers around here,” he says. “If you create a bias for local companies, you might not always get the highest quality at the lowest price, and at the end of the day, that’s what everyone is looking for.”

Weighing Their Options

In alignment with the strategic plan, the City is, in fact, exploring possible changes that could help smaller local businesses compete for contracts, says city purchasing agent Cale Turner.

Breaking projects, and therefore bids, into smaller portions could help open the process up to smaller businesses that otherwise couldn’t compete on larger city projects. The City itself would likely consider acting as the general contractor.

That idea is being vetted through the city law department and finance department. It could pose a risk if the process was not codified in an ordinance or formal guidelines and faced a legal challenge. It’s possible the city could pursue a new ordinance or at least revisions to its purchasing policy, Turner says.

But having the city take on a general contractor role also raises a resource question — the city would need to manage the projects with an already tight staffing level.  With this concept still in the early discussion phase, the city has not yet studied or proposed potential ways to address the staffing needs, but it would be a factor in the decision-making process.

“If they have the manpower, I see how it could be extremely beneficial and could help some local businesses like us,” Barnes says.

The city-as-general-contractor idea could also raise some eyebrows of the local businesses the change would be designed to benefit.

From a construction perspective, Barnes says, general contractors often have some bias about who they subcontract to. As a publicly-funded entity, the City would find itself in situations where bias wouldn’t be appropriate.

“I can see where some people wouldn’t be on board” with the idea, Barnes says.

Building a Precedent

The City is also looking at ways to increase the amount of work going to DBEs. While the city doesn’t currently have its own set of goals, it often partners with state and federal entities that do, such as MoDOT, for highway work, and the Federal Aviation Administration, for projects at the airport.

“We have been putting some basic goals in place to try to promote subcontracting, but it’s been minimal and we don’t have a mechanism in place at this point,” Turner says, adding that it’s important to base the goals off DBE-certified companies.

The City’s focus is now on taking real steps forward, even if they’re small ones, Whitt says. Economic development through job growth is a top priority in the City’s strategic plan and will continue to be a major focus.

“Of the bigger projects, we might get one or two a year, but bigger [outside] companies are getting five to 10.”

– Noah Barnes, Boone Construction

“Right now, we’re working with small businesses, getting them MBE-, WBE-, and DBE- certified,” he says. “We’re looking at opening up the range of jobs they can bid on, and we’re helping build those mentor–protégé relationships,” he said.

Beyond the mechanics of company size and available resources, there are bigger issues at play: relationships and trust. Mentor–protege relationships are especially important and can form the basis for partnerships and growth for years to come.

As a former MBE owner in St. Louis, Whitt  saw firsthand how smaller operators formed strong relationships with the owners of bigger, more established companies. Those mentors helped the small businesses grow and succeed, and some later became mentors themselves to the next generation of small businesses.

“With Kansas City and St. Louis companies, in many cases they basically have a 15-year head start because of their mentor–protégé arrangements,” Whitt says.

In particular, MBEs and WBEs in the bigger cities have become adept at nurturing these relationships and leveraging their partnerships statewide — by bidding on and winning jobs in Columbia, for example.

“If MoDOT or the state wants to meet a goal [for DBE contracts], that’s who they’re calling,” Whitt says.

Barnes says having the City act as general contractor on bigger jobs would open up opportunities for subcontracting to smaller companies, especially on projects funded in part by state or federal money.

“That could be hugely beneficial for MBEs like us,” he says.

But the one big issue underlying all of this, Whitt says, is trust.

“These issues have been talked about for a very long time, and it hasn’t gotten better,” he says. “Part of our strategy is to address those issues and break down barriers, start building a base at the city level, and flow through to the private sector. The city is in a position to help.”