Companies that do business with local municipal governments might assume that these entities would want to support operations in their cities or states. While certainly this can happen, there may be a variety of factors that go into a city council's decision to award a contract to a vendor from outside the area. In one recent situation involving this type of decision, the local company is pushing to have the contract award reviewed and reconsidered.
At issue is a contract that would allow one company to haul coal for a period of three years. As reported by Transport Topics, the city of East St. Louis opened up bids to the incumbent and one other vendor to bring in coal for the City Water, Light and Power department. The incumbent is a company from Georgia and the other vendor is based in Illinois.
In the bids provided, the incumbent company offered no protections in the event of a spike in fuel costs, but it did stipulate a refund if fuel costs dropped below a certain point. The competing, local company instead chose to offer a fixed price even if fuel prices rise as they are expected to do. This is one of the key points on which the competitive company is urging the city to review the bids.
Based on the original submissions, the incumbent's fee of roughly $13 million was about $100,000 less than the competing bid. This relatively small difference in the scope of the complete contract may well make the fuel cost component a key decision point.