CO-OP KAMIKAZE`S: OUR PRICES ARE INSAAANE!
BY BILL MANNING
As of this writing, members of the United States Senate and House of Representatives are set to confer on the fate of Section 1555 of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355, a.k.a. “reinventing government”). Section 1555, known as the “cooperative purchasing” program, allows state and local governments to purchase goods and equipment through the General Services Administration, the federal government`s purchasing agent, which only buys products at the lowest prices in the market.
A political balloon filled with hot air by bureaucrats and blown upward by the GSA`s puffy promise of huge taxpayer savings, Section 1555 floated through Congress without debate or hearings. The public was not in the loop. Strike a blow for bureaucracy and centralism: Uncle Sam, once caretaker of capitalism, was to become, as one commentator put it, “the world`s biggest buyer of almost everything.” In typical Washington doublethink-ese, our lawgivers said, in effect, “Sure, we`ll give you less government. Only it will take more government to do it.”
Businesspersons across the country–pesky paragons of free enterprise that they are–threw up the red flag. Congress placed a moratorium on Section 1555. Suddenly, Section 1555 didn`t look quite as good or as certain once the blinders were yanked off. For some, enlarging the GSA exponentially no longer seemed apropos to “streamlining.” Government rebates; compensatory pricing; “commodity” buying; and issues of research and innovation, product maintenance, warranties, and customer service smeared doubt on a rosy picture. Taxpayer savings no longer were a sure bet. Two reports from the General Accounting Office, investigating on behalf of Congress, did not corroborate purported savings.
Suddenly, people were talking about the destruction of thousands of small businesses, the impact of which there is no good quantifiable answer, though it might be approximated with mathematical metaphors. Suddenly, they were talking about the upheaval of the free-market economy itself.
In late July, the Senate repealed Section 1555. Naturally, this offended its bureaucracy-bound proponents. Frank Pugliese, commissioner of GSA`s Federal Service Supply, complained, “I`ve been in this town for 20 years, and every time we get close to cooperative purchasing, these folks come out of the woodwork.” The “folks” he refers to are largely representatives of the pharmaceutical and fire apparatus industries, to whom he credits the Senate defeat of Section 1555, even though by way of appeasement GSA excluded fire apparatus from the Federal Supply Schedule. The National Emergency Equipment Dealers Association (NEEDA) was very active in this fight.
In the House it was a different story. Although the House Appropriations Subcommittee for Treasury, Postal, and General Government adopted an anti-1555 stance, the House floor determined it had no view on the issue. The mess, therefore, is thrown into Senate-House conference, whose participants will determine whether cooperative purchasing will be repealed or remain public law. That will be decided before this magazine issue goes to press.
For the municipal fire service, a defeat of Section 1555 would be great news. Should it be implemented, virtually all industry business other than apparatus purchasing would be conducted directly through the federal government because the vast majority of customers are local government entities. The local politicians would be enticed by “hassle-free” purchasing (that is, no bidding process) at “unbeatable” prices.
The GSA would stick to its current procedures. Market analysis is not part of its process. It simply would receive product proposals from manufacturers throughout the industry, group the products by basic functions, place them into comparison matrixes, select those with the best prices, and list them in a catalog posted on the Internet. Click the mouse and make your purchase. You`d barely have to lift a finger. At Co-Op Kamikaze`s, real market competition is an easy trade-off for the cyberbuy via a bloated bureaucracy.
Dealers would be removed from the sales equation. Without profits from sales to sustain them, local and regional dealers would suffer deep hits or go under altogether, taking with them vital customer services such as field demonstrations and training, parts, maintenance and repairs, and warranty work. The vital communications link between buyer and producer would be lost. Local economies would be wounded. Workers would lose jobs and towns would lose tax ratables.
Manufacturers would be forced to fill the service void, thinning the service network but necessitating increased product cost. The manufacturers` direct-to-the-consumer, multipoint shipping operation would mean another price hike. Higher prices still would offset a mandatory one-percent sales rebate levied on manufacturers by Co-Op Kamikaze`s to feed its fattened operation–a fee for services set by GSA without restriction, and when was the last time you paid less for a loaf of bread? According to Kenton H. Pattie, executive director of NEEDA, cooperative purchasing will increase manufacturer prices by at least 20 percent.
On the other hand, GSA would categorize most firefighting equipment as commodities–that is, as mass-produced, unspecialized products. One pencil is the same as any other pencil. One halligan tool is the same as the next. It is cost almost exclusively that would determine what you could buy from Co-Op Kamikaze`s–not quality, not performance features, not local need, not local preference. If your favorite manufacturer doesn`t come in at the lowest price in the country, you`re out of luck–and don`t think the city manager would be sympathetic to your fine taste in equipment enough to let you–Heaven help us–purchase equipment on that “costly” free market, where you`re required to have some brains and market savvy. Next thing you know, we`ll all be drinking Victory Gin.
And what about that favorite manufacturer? He would be pulling his hair out because he raised prices to compensate for customer service needs formerly provided by his dealers and to compensate for GSA surcharges, but competitors less dedicated to quality and service and innovation undercut him on price. There`d be no room for Cadillac in this market; as long as it has an engine, a body, four tires, a couple of seats, an NFPA label, and a low-low sticker price, it`s a deal. You want whitewall tires? Sure, retrofit on your own. It`s another “hidden” cost in this scheme. Of course, Mr. Favorite Manufacturer with his “frivolous” tool could wait for the next GSA product selection period to get back in the game, if he could only afford to keep his doors open for another three to five years of little or no sales.
So the market shrinks, quality and service are sacrificed, jobs are lost, research and innovation are cut short, and local needs are ignored. The Made-in-the-USA label is sullied. Small businesses are raped by a government that knows what`s best for them. Sounds like a great deal. Mr. Manufacturer had better keep his bankruptcy lawyer on speed dial and one eye open for our NAFTA buddies or other international friends with cheap labor pools that can produce equipment the way Co-Op Kamikaze`s likes it: basic and cheap.
Say, what is this, anyway–Cold War Russia? Government has no right holding such power over American industry in a free-market economy. If Section 1555 is not scrapped as of this writing, shame on the politicians and God help America. If it has been, let us all remember this brutish government intrusion on freedom the next time it rears its ugly head, in whatever form.
