I recently dealt with a vendor who was irritated for being left out of a fair bidding process for a government project. The project under question was a building that the city was planning to heat and cool with a heat pump system. The vendor's complaint was based on the fact that he did not sell heat pump equipment, but instead, sold another type of HVAC equipment. This provides a situation representative of a large policy question - how does a government entity allow for fair bidding practices that allow all interested parties to compete on an even field without taking exorbitant time and resources for the bidding process itself?
In this particular situation, a heat pump was the best system for the building's end use. So how does the government expedite their design process when the choice is evident?
One idea that came to me was for the government to maintain staff engineers and designers whose job it is to assess varying technologies for a given application and to provide a recommendation to the bidding group to limit the technologies to a short list. This may work, however, it may also provide the possibility for design preferences to systems that the staff engineers know well, creating a bias against new technologies.
Another idea is to request outside consulting to determine the best system for a given application, to achieve the goals of the first proposal, but with the opportunity to distribute work among many organizations and to allow for periodic refreshing of the reviewing engineers if a bias is observed. This work would also need to be bid, per the prior issue. This work, however, could be bid on annual (or other periodic) contracts rather than case by case, so individual projects couls still have a relatively short turnaround time.
I work in a company that specializes in energy efficiency measures, and may have a vested interest in this type of work being farmed to companies like mine, but in all honesty, there is a lot of work available in energy efficiency right now and I am not in particular need of more work just to keep ahead. I am more interested, as a citizen, in seeing my government operate effectively and use the best technology for a given application.
I do not know how issues like the one raised by this vendor are traditionally dealt with, but a fair system that can still work with expediancy would be good to see.
Tuesday, May 27, 2008
Tuesday, May 13, 2008
Common Cause
In my working years, few as they may be, I have encountered a number of different philosophies of compensation. One such encounter was with a friend at a previous employer. I was proposing that the company could get a much better result from the employees in positions similar to mine if they received more training, tools, and support. By providing these tools (software in this case) and training to use them, many unnecessary hand-offs could be avoided, which were currently resulting in miscommunications which, in turn, resulted in excessive amounts of time to complete relatively simple tasks. This training, I proposed, could significantly increase the productivity of the on-site workforce, removing much of the need for some the work that was becoming more and more dependent on outsourced labor. In return, the company would have significantly reduced costs for achieving the same amount of work at a higher quality. For this increased level of productivity and increased potential for profitability, the company should compensate those workers willing to engage in the training and increase their productivity. Everyone would win, right?
My friend suggested that the company make the training mandatory, ask for the increased productivity, but maintain pay at the same levels that they were at currently. Why pay more if you don’t have to? I countered that this would take advantage of the workers, making them feel less appreciated for their efforts, which would result in a higher turnover rate, and the company would lose its training investment. Still, this did not seem to sway his opinion. I left the company within a year, partly due to this type of attitude being systemic in the company.
A principle I believe in is cooperation. Labor and management working to a common cause with fair compensation for the labor provides a positive workplace, better productivity, more creativity, higher retention rates, and benefits for both. Labor and management opposing each other provides situations for high turnover, unionization, strikes, lockouts, and a general distrust, in which neither party benefits. Both sides need to take responsibility in order to create a better environment. Labor needs to be honest with management about work loads, high or low, and show a willingness to sacrifice some personal comfort in times of high intensity for the benefit of the company. Management needs to fairly compensate the workforce, sharing profits with those generating them, as well as maintaining a proper workload so that people are neither bored nor consistently overworked. Anyone can initiate this principle, from the top or from the bottom. Its acceptance will provide better opportunities for increasingly better promotion of combined benefits, while its denial after a genuine effort may appear as a sign to try the approach better.
The principle also applies to companies and customers. In the auto market, investment in fuel efficiency, for example, will create a product that costs more, but provides a better quality and lower operating cost to the end consumer. The company benefits because they can make a profit on a more expensive, more valuable item. The customer benefits because their overall costs of owning AND operating the vehicle are lower over the life of the car. Companies that have this long-term view of providing a good product to their customers (currently these are primarily foreign companies in the auto market) are gaining market share, and those companies that are trying either to cost-cut their way to profitability or to push higher cost vehicles, due to size only and not based on value, are doing poorly. The free market should decide which companies are providing the best value, but in the interest of maintaing domestic manufacturing jobs (see Surplus), it would seem good policy to increase CAFE standards significantly, as one example.
My friend suggested that the company make the training mandatory, ask for the increased productivity, but maintain pay at the same levels that they were at currently. Why pay more if you don’t have to? I countered that this would take advantage of the workers, making them feel less appreciated for their efforts, which would result in a higher turnover rate, and the company would lose its training investment. Still, this did not seem to sway his opinion. I left the company within a year, partly due to this type of attitude being systemic in the company.
A principle I believe in is cooperation. Labor and management working to a common cause with fair compensation for the labor provides a positive workplace, better productivity, more creativity, higher retention rates, and benefits for both. Labor and management opposing each other provides situations for high turnover, unionization, strikes, lockouts, and a general distrust, in which neither party benefits. Both sides need to take responsibility in order to create a better environment. Labor needs to be honest with management about work loads, high or low, and show a willingness to sacrifice some personal comfort in times of high intensity for the benefit of the company. Management needs to fairly compensate the workforce, sharing profits with those generating them, as well as maintaining a proper workload so that people are neither bored nor consistently overworked. Anyone can initiate this principle, from the top or from the bottom. Its acceptance will provide better opportunities for increasingly better promotion of combined benefits, while its denial after a genuine effort may appear as a sign to try the approach better.
The principle also applies to companies and customers. In the auto market, investment in fuel efficiency, for example, will create a product that costs more, but provides a better quality and lower operating cost to the end consumer. The company benefits because they can make a profit on a more expensive, more valuable item. The customer benefits because their overall costs of owning AND operating the vehicle are lower over the life of the car. Companies that have this long-term view of providing a good product to their customers (currently these are primarily foreign companies in the auto market) are gaining market share, and those companies that are trying either to cost-cut their way to profitability or to push higher cost vehicles, due to size only and not based on value, are doing poorly. The free market should decide which companies are providing the best value, but in the interest of maintaing domestic manufacturing jobs (see Surplus), it would seem good policy to increase CAFE standards significantly, as one example.
Government
Increasingly, I hear of government contractors and government officials discussing cost-benefit analyses of public programs. There has always been something unsettling about this to me, although I have not been able to put my finger on exactly what was the troubling aspect. Listening to the news this morning, in a discussion of the Iraq war, still in progress after more than 5 years, I heard a government contractor discussing the potential for the region – the economic potential. He said “I’m not here because I’m interested in the people. I believe there’s money to be made – a lot of money.”
I believe in business and free enterprise. I believe that a company that can add value or do a job efficiently has every right to profit from these endeavors and that these profits will help the laborers at the company as well as reward the owner for taking the appropriate risks, making the right decisions, and providing their product or service to their customers. Government, however, should operate differently. Increasingly, it does not. Government is overrun with business-minded people and lacking in public servants.
Government, namely the United States federal government, exists to “form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty.” They do not have any mandate to generate a profit. This government should be the long-minded policy developer to ensure that the profits of today do not damage the opportunities of tomorrow, to ensure that the benefit of some does not endanger the well-being of the population. While businesses should be free to explore new avenues for investment for profit, government should be engaged in ensuring that the policies it sets forward are for the benefit of the governed.
I do not see this opinion as naïve or overly idealistic. By limiting government investment to those areas where it may promote otherwise unavailable economic growth and those areas where the actions directly promote the common short-term and long-term benefit of the population, the government may operate on a limited budget, reducing the tax burden on the people, and may promote just policies that can be supported by the majority of the governed. Areas of public concern most notably include, among others, health care, education, sustainable development, economic stability, and equal protection under the law. A simple litmus test for any public policy could be “does this policy benefit the society as a whole?” Anything that does not pass this litmus test should be seriously questioned as a matter of public policy. In no way does this litmus test include any sort of cost-benefit analysis. Dollars and cents are the language of business; public well-being should be the language of government.
I believe in business and free enterprise. I believe that a company that can add value or do a job efficiently has every right to profit from these endeavors and that these profits will help the laborers at the company as well as reward the owner for taking the appropriate risks, making the right decisions, and providing their product or service to their customers. Government, however, should operate differently. Increasingly, it does not. Government is overrun with business-minded people and lacking in public servants.
Government, namely the United States federal government, exists to “form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty.” They do not have any mandate to generate a profit. This government should be the long-minded policy developer to ensure that the profits of today do not damage the opportunities of tomorrow, to ensure that the benefit of some does not endanger the well-being of the population. While businesses should be free to explore new avenues for investment for profit, government should be engaged in ensuring that the policies it sets forward are for the benefit of the governed.
I do not see this opinion as naïve or overly idealistic. By limiting government investment to those areas where it may promote otherwise unavailable economic growth and those areas where the actions directly promote the common short-term and long-term benefit of the population, the government may operate on a limited budget, reducing the tax burden on the people, and may promote just policies that can be supported by the majority of the governed. Areas of public concern most notably include, among others, health care, education, sustainable development, economic stability, and equal protection under the law. A simple litmus test for any public policy could be “does this policy benefit the society as a whole?” Anything that does not pass this litmus test should be seriously questioned as a matter of public policy. In no way does this litmus test include any sort of cost-benefit analysis. Dollars and cents are the language of business; public well-being should be the language of government.
Surplus
This brief discusses a basic economic idea of surplus as an economic driver. Surpluses in production produce wealth that allows the development of other industries that, while not purely productive in nature, enhance the quality of life in a society. Because these other industries rely on productive industries as the backbone of an economy, economic development plans within public policy should focus almost exclusively on production industries.
*
Not long ago, I drove past a riding stable, and, in the state of mind I was in, I wondered how the stable came to exist. More directly, if the people and the horses in the stable do not produce a product, how is this a viable business. I thought, “perhaps the original owner had horses that were used for farm labor, or perhaps the original owner had horses used to deliver messages or people from one place to another more quickly, providing a service to the local community. In time, the owner bred the horses and expanded the business, eventually developing a surplus – horses that could be available for recreational riding and were no longer required for labor.” This idea awoke a realization. If the horses were used for labor, eventually they were replaced by mechanized farm equipment. If used for travel, eventually they were replaced by cars and trucks. In the meantime, if the community around the stable grows to have sufficient recreational income, the recreational stable is now self-sustaining. However, the local community has recreational income because there are people in the area who work and profit from their work developing and manufacturing the farm equipment and cars that replaced the labor horses. In this microcosm, this progression is how I imagine the community developing.
On a larger scale, communities, cities, states, and nations amass wealth by their work. In time, surpluses develop, and recreational industries can develop that cannot exist without the backbone of the productive work that is being done. This, in my opinion, is a great development – producers supply the needs of a community; service people facilitate communication and transportation, allowing systems to run smoothly; and workers in the recreational industries enrich the lives of everyone involved. Each facility compliments the others.
A precarious situation arises if the producers are removed from the situation. Any wealth that has been amassed will keep circulating around the rest of the service and recreational industries, but will ultimately be channeled to wherever the production is coming from. Therefore, when a locality loses its production capabilities, it is likely to suffer a significant economic decline. If reliable transportation is available to a neighboring locality that still engages in production, travel will become a necessary expense to sustain the economy of the non-producing area, rather than being a facilitator of further growth and expansion of the local area.
This view provides many potential tangents within the realm of economic development. Regarding public policy, it would seem that any investment of public funds and public policy with the intention of economic development should be directed toward maintaining a productive sector, with minimal if any funds provided to other facilities. In other words, investment in new technology manufacturing will eventually provide economic benefits to the entire society. Investment in the service industry will distribute resources more quickly, which may be of public value, justifying some investment. Large scale investment in recreational industries for the purposes of economic development, however, would seem foolhardy.
Many case studies are available for analysis with respect to these ideas. In Michael Moore’s documentaries, specifically Roger and Me, he shows the connection between the departure of manufacturing jobs from Flint, Michigan, and the city’s ensuing downfall into one of the most poverty-stricken areas in the country. In contrast, during the baseball strike in 1994, many leaders cried out for their economic plight, projecting massive economic losses to their cities from the loss of the sporting revenues.[i] In actuality, the strike had little if any impact on the cities that lost baseball revenues. Much of the recreational income that would normally be spent on baseball was instead spent on other forms of entertainment.[ii] Similarly, retail big box stores often argue for access to public assistance due to the large numbers of jobs that will be brought to an area. Instead, these stores merely divert funds from other retail stores rather than producing any new jobs because they do not produce anything new.
This brief is not a support for protectionism, or purchasing domestic products only. Instead, it is an argument for a public policy that supports trade and at the same time supports manufacturing products with sufficient value to balance the imports and exports of such trade. An economy cannot survive at length without the “backbone” of a productive sector.Public policy may provide support for any industry for any number of reasons. Public welfare or support for valued cultural institutions, to name a few, may be reason enough for public support. Economic development, however, should be critically assessed if an industry other than production is proposed.
[i] The U.S. Conference of Mayors, The Economic Impact of the Baseball Strike. Washington DC, (August 1994)
[ii] Zipp, John F, The Economic Impact of the Baseball Strike of 1994. Urban Affairs Review, v32, n2, 157-185 (1996)
*
Not long ago, I drove past a riding stable, and, in the state of mind I was in, I wondered how the stable came to exist. More directly, if the people and the horses in the stable do not produce a product, how is this a viable business. I thought, “perhaps the original owner had horses that were used for farm labor, or perhaps the original owner had horses used to deliver messages or people from one place to another more quickly, providing a service to the local community. In time, the owner bred the horses and expanded the business, eventually developing a surplus – horses that could be available for recreational riding and were no longer required for labor.” This idea awoke a realization. If the horses were used for labor, eventually they were replaced by mechanized farm equipment. If used for travel, eventually they were replaced by cars and trucks. In the meantime, if the community around the stable grows to have sufficient recreational income, the recreational stable is now self-sustaining. However, the local community has recreational income because there are people in the area who work and profit from their work developing and manufacturing the farm equipment and cars that replaced the labor horses. In this microcosm, this progression is how I imagine the community developing.
On a larger scale, communities, cities, states, and nations amass wealth by their work. In time, surpluses develop, and recreational industries can develop that cannot exist without the backbone of the productive work that is being done. This, in my opinion, is a great development – producers supply the needs of a community; service people facilitate communication and transportation, allowing systems to run smoothly; and workers in the recreational industries enrich the lives of everyone involved. Each facility compliments the others.
A precarious situation arises if the producers are removed from the situation. Any wealth that has been amassed will keep circulating around the rest of the service and recreational industries, but will ultimately be channeled to wherever the production is coming from. Therefore, when a locality loses its production capabilities, it is likely to suffer a significant economic decline. If reliable transportation is available to a neighboring locality that still engages in production, travel will become a necessary expense to sustain the economy of the non-producing area, rather than being a facilitator of further growth and expansion of the local area.
This view provides many potential tangents within the realm of economic development. Regarding public policy, it would seem that any investment of public funds and public policy with the intention of economic development should be directed toward maintaining a productive sector, with minimal if any funds provided to other facilities. In other words, investment in new technology manufacturing will eventually provide economic benefits to the entire society. Investment in the service industry will distribute resources more quickly, which may be of public value, justifying some investment. Large scale investment in recreational industries for the purposes of economic development, however, would seem foolhardy.
Many case studies are available for analysis with respect to these ideas. In Michael Moore’s documentaries, specifically Roger and Me, he shows the connection between the departure of manufacturing jobs from Flint, Michigan, and the city’s ensuing downfall into one of the most poverty-stricken areas in the country. In contrast, during the baseball strike in 1994, many leaders cried out for their economic plight, projecting massive economic losses to their cities from the loss of the sporting revenues.[i] In actuality, the strike had little if any impact on the cities that lost baseball revenues. Much of the recreational income that would normally be spent on baseball was instead spent on other forms of entertainment.[ii] Similarly, retail big box stores often argue for access to public assistance due to the large numbers of jobs that will be brought to an area. Instead, these stores merely divert funds from other retail stores rather than producing any new jobs because they do not produce anything new.
This brief is not a support for protectionism, or purchasing domestic products only. Instead, it is an argument for a public policy that supports trade and at the same time supports manufacturing products with sufficient value to balance the imports and exports of such trade. An economy cannot survive at length without the “backbone” of a productive sector.Public policy may provide support for any industry for any number of reasons. Public welfare or support for valued cultural institutions, to name a few, may be reason enough for public support. Economic development, however, should be critically assessed if an industry other than production is proposed.
[i] The U.S. Conference of Mayors, The Economic Impact of the Baseball Strike. Washington DC, (August 1994)
[ii] Zipp, John F, The Economic Impact of the Baseball Strike of 1994. Urban Affairs Review, v32, n2, 157-185 (1996)
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