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Friday, February 8, 2013

Of tax breaks and bids

The following story would be a run of the mill bid protest except for one thing. The protestor had been promised significant tax breaks if it got the bid. Doesn't pass my smell test for impartiality.

Many states and towns, probably countries, offer investment and other tax breaks to encourage businesses to invest or operate in the jurisdiction. Doing that, of course, gives them a competitive leg up on other businesses, so it would be bad enough if one of the tax concession businesses bid against other bidders, it should be disallowed or the tax advantage factored out of the bid amount, otherwise they would be double dipping in the public trough; getting the tax break for bringing in it business, then costing other competitors either by way of forced lower bidding or loss of opportunity.

But when the offer of the tax break is a condition of winning a bid, it certainly will skew the contest. And it will drive out competitors. If government doesn't foster fair competition, it will not get it when they need it. Costs will rise where there is no competition.

Wisconsin-based Skyward files notice of protest over losing bid to Minnesota company
The [bid] process of soliciting and awarding the bid has been shrouded in controversy from the beginning. In March, Walker's semi-private economic development agency offered nearly $12 million in tax breaks to Skyward contingent upon it winning the bid to provide student information systems to Wisconsin's more than 440 school districts and non-district charter schools.

The day before the bids were due in June, Walker's administration said it was suspending the process because of concerns about the propriety of the offered tax breaks.

It then started the process over and hired an independent observer — former Democratic Gov. Jim Doyle attorney Cari Anne Renlund — to monitor the process. Last week, when the bid was awarded to Infinite Campus, Walker's administration released Renlund's report that found no problems.

"The procurement, evaluation, and selection processes were reasonably and appropriately geared to afford all vendors an equal opportunity to compete for this contract," Renlund wrote. "There was no bias in favor or against any bidder."

Skyward Inc., of Stevens Point, said in a statement that it had filed the protest with Gov. Scott Walker's administration, saying its bid was lower than that of the winner announced last week — Infinite Campus of Blaine, Minn. Skyward has threatened to leave Wisconsin if it loses the contract.

The company said based on its analysis of the two proposals, that its bid was $2.6 million less per year. Skyward also said that implementation costs identified by the Wisconsin Department of Public Instruction, which are the responsibility of each school district, were not considered in the evaluation.

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