Plan would give break to city firms Councilman Nutter says a bid-preference program would help Phila.-based businesses compete with suburban companies.

Posted: July 31, 2003

Rick Carocci, chairman of TransAmerican Office Furniture Inc. in Manayunk, has tried for years to persuade city officials to help Philadelphia-based businesses compete with suburban companies on a more even footing.

Faced with higher business taxes, insurance, and other costs, Carocci said, city-based companies often lose lucrative municipal government contract work to suburban-based firms that have lower overhead expenses.

"I'm up against a cadre of people who can bid inexpensively, and they don't have the overhead I have," Carocci said. "They might have a one-person office here in Conshohocken and the company is based in California."

So Carocci is pleased that in November, voters will be asked to amend the City Charter to create a program that - for ranking purposes only - would allow the city to slice 5 percent off the bids of qualified Philadelphia-based firms vying for city contracts.

"That would make the playing field a lot more even," said Carocci, who said he planned to urge other business owners in the city to ask their employees to vote for the change.

Currently, when the city seeks contractors, it advertises by issuing a request for proposals. After interested contractors respond, the city chooses a company for the project.

Generally speaking, under the charter amendment, if three suburban companies and one city-based company each bid $100,000 for the same city contract, Philadelphia would deduct 5 percent off the city-based company's bid for ranking purposes, reducing the amount to $95,000. However, the actual sum the city would pay the Philadelphia-based firm would be $100,000.

The amendment is the result of several measures that City Council and Mayor Street approved in May. "In some situations, this could really mean the difference between winning and losing a bid," Councilman Michael Nutter, the sponsor of the measures, said in an interview.

Nutter said his legislation was prompted by phone calls from Carocci and other business owners concerned about the business climate for city-based firms.

City Commerce Director James Cuorato told a Council committee at a public hearing in April that the amendment would address "additional costs that often force businesses to relocate outside the city limits to remain competitive."

Nutter said he had wanted the city to adopt such a bid-preference program for years but was prohibited because the charter says that the city must award contracts to the "lowest responsible bidder."

But, after hearing about bid-preference programs in Detroit and Los Angeles, Nutter asked the Philadelphia Law Department to craft something similar. The City Solicitor's Office, he said, concluded such a program was possible with a charter amendment.

Since 1989, Los Angeles has offered a bid preference to city-based companies seeking contract work from the city worth $100,000 or less. The bid preference is currently set at 10 percent.

Detroit has had a bid-preference program for city-based firms since 1985. It ranges from 1 to 10 percent and caps the dollar value of the contracts that are eligible for the program. The caps vary, depending on the type of work and the type of business.

While they have not studied whether their programs have achieved the desired goals, officials in Los Angeles and Detroit said anecdotal evidence suggests their programs work.

Dennis Mazurek, chief assistant in Detroit's law office, said one sign that their program is working is that Detroit has raised the dollar cap for equipment, supplies, demolition and construction contracts that fall under their bid-preference program.

"We do know that it has had an effect in the sense that the money amounts have been increased," Mazurek said.

In Philadelphia, the proposed program would not be capped. City Procurement Commissioner William Gamble said his office awards an estimated $300 million in contracts annually for supply services, equipment and construction. About $78 million of that goes to city-based businesses each year, according to Gamble.

Gamble said it was too early to tell how many more of the city's contract dollars would go to city-based businesses if voters approved the charter change. But, he said, "from the face of it, it appears to be good legislation."

Carocci of TransAmerican would like to see that $78 million gradually grow by thousands of dollars for qualified firms based in Philadelphia.

"Don't you want to keep your companies in Philadelphia?" Carocci said, adding that city-based companies help support Philadelphia's economy by paying taxes.

When Carocci started his business in 1976 in Manayunk, he said, he had three employees and posted $250,000 in annual sales. Today, he has 70 employees and handles about $15 million a year in sales, providing desks, chairs and office furniture. Less than 10 percent of his business comes from the city.

"About 90 percent of [my] employees live in Philadelphia," he said.

Each year, Carocci said, his company pays a total of about $119,000 in wage, real estate, business-privilege, and use and occupancy taxes. Suburban companies don't have such high expenses, he said.

"I have three buildings here, and I have all my employees here," Carocci said. "That's a benefit to the city."

Contact staff writer Anthony S. Twyman at 215-854-2664 or atwyman@phillynews.com.

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