March 2, 2022
A debate about paying a local company $130,000 more than a Brisbane firm to build a pump station switchboard led to a lengthy debate at the South Burnett Regional Council’s February meeting.
In the end, the local firm was awarded the contract, but the decision was not unanimous.
The Council had set aside $900,000 for the pump station project in this year’s Budget, and called tenders last November which drew several responses.
At last week’s meeting, Councillors were told a local firm had submitted a tender lower than the amount Council had budgeted.
However, that company’s bid was still $130,000 higher than the lowest offer Council received, which came from a Brisbane-based company.
Cr Kirstie Schumacher opened the debate by moving Council accept the tender from AMG Electrical Solutions for $885,092.
She said the tender response showed AMG had the relevant experience and skills to undertake the project.
Cr Schumacher also noted the total tender price was within the project’s approved budget and because the company was locally based, the outcomes would support the local economy and increase Council’s local spend.
Her motion was seconded by Cr Kathy Duff, which opened the debate.
Cr Scott Henschen said the issue was “a classic example of a double-sided sword”.
He said Council already had a policy that gave a price preference to locally based suppliers, but the difference in this case was well above the 5-10 per cent the policy allowed.
“Ratepayers want us to save money,” he said.
And while he agreed awarding the contract to AMG would keep the money in the local economy, he understood that local clubs, motels and restaurants who would normally cater for outside contractors might take a different view.
“Honestly, I struggle with this,” Cr Henschen said.
Cr Kathy Duff said she supported Cr Schumacher’s motion because she “absolutely supported local”.
“Don’t be penny wise and pound foolish,” Cr Duff said.
“We’ve spent a lot on economic development over the years, and now we have an opportunity to support a local business and lots of jobs.”
Cr Duff said she got “hammered all the time about Council buying outside our area” but this was an opportunity to show that wasn’t always so.
Cr Roz Frohloff said she was “all for supporting local businesses” but not when the price difference was so big.
“AMG already get work with Council, and the (Brisbane company) will also spend money in the area,” Cr Frohloff said.
Cr Danita Potter said she was concerned the quote was well outside the local buying preference and thought it might set a bad precedent.
Cr Gavin Jones said he had wrestled with the issue for a long time and while he initially backed the idea of awarding the business to a local firm, the $130,000 price difference had been too big to ignore.
He said recent cuts to FAGs and TIDs grants, along with CPI increases, was already pushing the Council towards introducing a 3.5 per cent rate rise in next year’s Budget.
For these reasons, he felt he could not support the motion.
Summing up, Mayor Brett Otto underlined that the project came out of Council’s capital budget – not its operational expenses budget – so there would be no affect on rates whatever Councillors decided.
He said the Council had already set aside $900,000 for the project, and all tenders came in below that amount.
He said the $130,000 difference represented just 0.37 per cent of the Council’s $35 million capital expenditure budget, which was negligible.
However, the long-term benefits of awarding the tender to a local company could be found in supporting local trade jobs and apprenticeships, and building capacity.
“Very rarely do we get the opportunity to award a big capital project to a local company,” Mayor Otto said.
The Mayor noted the Council’s own Corporate Plan mandated the SBRC try to achieve a 50 per cent “local buy” target.
Giving this project to a local firm would go a long way towards achieving that target, he said.
In the end, the decision to award the tender to AMG was carried 4 votes to 3, with Crs Henschen, Frohloff and Jones opposed.
I’ll be voting for Cr. Jones if he runs for re-election. Thanks for voting against wasting $130,000.
Congratulations, Council, for leading the way in supporting local business.
Looking at the positive reaction this story has had on social media – usually a paradise for whingers – I think you’re right, Smiler. A cheaper tender offer can just be a way for a business to get their foot in the door. The true test is what the final bill is, not what the initial bid may have been.
If we ever want to see more big jobs going to local firms, we need to help build up the sort of companies that can do them. So good on Council for doing this.
There remains a question for this ratepayer about the source of funds for Council’s capital budget. It’s almost sounds like a decoy to say it doesn’t affect rates.
I understand it is funded depreciation that funds the capital budget and the “funded” part would have a cash origin somewhere. Is it rates, paid by ratepayers, or 100% government grants?
If it is the former, how does the summary that it has “no affect on rates” align with the Mayor’s election platform of applying careful financial management principles (news article 10 March 2020) to expenditure he oversees that has a focus on debt reduction and relief in rates for pensioners and farmers? If I was a farmer or a pensioner I would have a lot more questions about how this decision leads to, or could lead to a rate relief.
I have no opinion on the outcome of the contract debate or local contractors receiving a small premium, but I do have a question about whether a smokescreen has been put up about the capital budget not having any impact on rates now or in the future.
My concern is that this has set a precedent. Local firms will be expecting to be awarded contracts no matter how high their tender submission, as long as it’s within the council’s budget.
This is ratepayer money, not the South Burnett Regional Council’s to throw around. From my understanding this money is from the water/waste budget and $130k could do other work or upgrades in the South Burnett area.
Recently the SBRC was complaining about state or federal funding being cut, and now they throw $130k to a higher bid on a tendered job. I’m so happy the work stays local, but the argument the money stays in the local community is a fallacy as the major part of the job – possibly 70 to 80 % of the total cost – will go to a Brisbane, Sydney or Melbourne company, not a local (though yes, the wages and profits will stay local).
My argument with this decision is that it will now set a precedent of local first – no matter what the cost – as long as it’s within the Council’s highest price estimates to cover a worst case scenario. The council has its own percentage to buy or use local trades and services, but it has blown this percentage out of the ball park.
To the elected Councillors that put up a fight against this misuse of ratepayers money, I appreciate your fruitless efforts. But to the other Councillors and the Mayor, hang your head in shame. This is a poor decision on your behalf, and I believe you should all tender your resignation. I an totally disgusted.