Thursday, August 21, 2014
Inquirer Daily News

City controller: Make colleges, hospitals buy from Philly firms (updates)

Butkovitz's "Make it and buy it in Philly"

City controller: Make colleges, hospitals buy from Philly firms (updates)

Philadelphia City Controller Alan Butkovitz. (AP Photo/Matt Rourke/File)
Philadelphia City Controller Alan Butkovitz. (AP Photo/Matt Rourke/File)

(adds more employer comments) City controller Alan Butkowitz, not content to audit public spending on behalf of the hard-pressed taxpayers who have voted him three four-year terms, wants "dramatic action" to get Penn, Drexel, Jefferson, Temple, CHOP, SEPTA, the ailing Philadelphia School District, and the Eagles, Phillies, Sixers and Flyers to stop "exporting over $2 billion a year to buy goods and services" to out-of-town suppliers, and "shift" more purchases to Philadelphia vendors -- and pay locals to set up Philly-based vendors in businesses where there aren't any.

Butkovitz wants a "make it and buy it in Philly program" that would "persuade" these institutions to patronize city companies, and "perhaps require" them to help finance the creation of new companies where none now exist. Won't a strict "Buy Local" campaign mean paying more for worse quality goods and services? "Of course it assumes that local producers can meet quality and cost standards," says Butkowitz. He assumes every $100,000 these institutions spend locally will create a new Philadelphia job.

Why focus on non-profit hospitals, schools and government authorities instead of, say, the airlines, the banks, Aramark, Comcast, and other big, profitable corporations? Because the nonprofits and government entities are "anchor" institutions, Butkowitz said in his re-inauguration speech (at the Academy of Music) today.  "Anchor" means they are tied to expensive building complexes and can't easily run away across the city line to escape forced-procurement programs, the way private business could.

"This development strategy is NOT complicated," Butkowitz insisted in his talk. "Some of the anchor leaders... have shown a strong interest in exploring this sort of a locally-focused procurement strategy." Butkowitz told the crowd that Baltimore, Cleveland and Detroit -- three cities more depressed than Philadelphia -- have similar programs in place. I asked his assistant Brian Dries how exactly Butkovitz is going to make this work. We're working on a study, he told me.

Why would any city institution have a "strong interest" in adding this responsibilty and potential expense to its current cares? Maybe it's cheaper than facing fat multi-million-dollar "PILOT" Payments In Lieu Of Taxes, as some of Butkovitz's fellow Democrats in City Council have been suggesting.

Should the schools and hospitals do more? Penn already spent "more than $100 million in goods and services from Philadelphia-based vendors" in fiscal 2013, as part of a larger 'economic inclusion" program that includes local purchasing as well as local hiring and construction, Marie Witt, vice president for business services at Penn, told me in a statement. "Our procurement efforts are focused not only on buying from local businesses but on helping businesses develop the infrastructure and capacity to provide quality services to Penn and other large purchasers." Penn says its budget totals $923 million/year. 

UPDATES TUESDAY: "Temple University issued nearly 15,000 purchase orders totaling more than $44 million [revised by Temple to include change orders] to Philadelphia firms in FY 2013," chief financial officer Kenneth Kaiser told me in a statement. (Temple U, Med School and doctors' purchases and change orders totalled $294 million in 44,000 purchase orders, not including the hospital system. $173 million of that, or more than half, in 26,000 purchase orders, went to Pa. firms. Unclear if change orders double-count purchases or no.)

"Temple would welcome more opportunities to support city firms. But as a public university, we must follow a bid process. Our first responsiblity is always to control costs in order to keep Temple affordable," Kaiser added.

"Due to federal requirements, SEPTA is prohibited from using geographic preferences when making purchases," spokeswoman Jerria Williams tells me. "We use an open competitive bid process for procuring products and services. There is an exception for contracting architectural engineering consulting services: local bids may be solicited.

"Even with these restrictions, during the two year period starting 1/1/11 and ending 12/31/12,  Philadelphia County vendors were awarded 17.20% of all SEPTA procurements and contracts. Vendors located within SEPTA’s five county region were awarded 29.54%," Williams told me.

Still waiting for comments from Drexel, Jeff. 

Joseph N. DiStefano
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
Business Videos:
Also on Philly.com:
Stay Connected