Freeman

ARTICLE

Spending for Spendings Sake

NOVEMBER 01, 1991 by JOHN SEMMENS

Mr. Semmens is an economist for the Laissez Faire Institute in Tempe, Arizona.

Few of us are in a position to act as if price were no object. We weigh prices against values, so as to avoid wasting money. It would seem that this would be a useful way to control public spending. Unfortunately, government’s own procurement policies often forbid comparison shopping.

Consider the recent case of a Federally funded study of the need for a new regional airport in Arizona. This expensive study was delayed. The delay wasn’t due to doubts about the utility of the study, though doubts were certainly warranted. Neither was the delay due to spending cutbacks aimed at trimming the Federal budget deficit. The delay was caused by the fact that Arizona bureaucrats were attempting to factor in price as one of the elements for deciding whom to hire to undertake the study.

The effort to consider price was relatively meager. In a list of factors to be evaluated, price was to have a total weight of 10 percent. Even this overstates the implied impact of price. Since bids are typically ranked as a percentage of the low bid, even a price twice as high would still get half the allowable points. The norm is for all the bids to fall within a few percentage points of each other.

Nevertheless, the possibility that price might account for as much as 2 to 3 percent of the weight in selecting a consultant to do this study was too much for the Federal Aviation Administration. The FAA’s procurement rules forbid bureaucrats from factoring in prices when selecting a consultant. The Arizona bureaucrats were told they must choose a consultant without considering price.

Eliminating price as a factor defies all logic. Surely, such a bizarre requirement demands an explanation. The only explanations offered, though, ranged from the stubbornly uninformative “we don’t allow it” to the old standby of “this is the way we’ve always done it.”

These “explanations” explain nothing. They merely illustrate the intransigence of a bloated government determined to spend more money. Of course, the Federal bureaucracy does have the support of Congress with its own mandates for higher prices (like the Davis-Bacon Act, which forbids contractors on Federal projects from competing on labor costs) and unnecessary purchases (like requiring the Navy to buy obsolete aircraft it doesn’t want).

The Arizona bureaucrats resolved the issue of the regional airport study by re-advertising the project and selecting a bidder without regard to cost. The FAA’s rules are followed by state bureaucrats because it is the only way to assure that Federal money will be spent in their state. The questions of whether a study was needed or whether taxpayers got the best value for their money were left unanswered.

The only way to answer such questions is to abolish the government program. Determining the need for a commercial airport is a question the market is ideally suited to answer. If a study is needed, it would be worth it for a private business to fund it. A private business would be likely to carefully weigh prices versus values in determining the scope of the study and in selecting who to perform it.

Usually government pretends to be cost conscious. Elaborate bidding rituals are conducted to buttress this pretense. Occasionally, though, the pretense falters, as in the case of the FAA’s “no price” bidding regulation. This provides a clearer view of the real objective: spending for the sake of spending.

This clearer view should remind us that overextended government doesn’t work very well. The sooner a majority of ns realize this and stop depending on government to do what it is unsuited to do, the sooner we can replace its malfunctioning parts with higher performing free market alternatives.

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November 1991

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