Fox Guarding the Henhouse: Allentown and a Misguided RFP
We recently received a Request For Proposals from the City of Allentown, PA. This RFP was intended to procure a “consultant” to assist the City with the sale of its cell tower lease income. The City of Allentown wants the consultant to review the city’s cell tower leases and advise the City on whether it makes sense to sell them. Then the “consultant” is supposed to solicit offers to buy the leases. But instead of paying the consultant, the City of Allentown expects that the consultant will work out side deals with the prospective buyers and get paid by the buyers. In short, the City wants an independent and unbiased “consultant”. But in reality, the “consultant” will end up being neither because they are paid by the buyers of the leases instead of by the City.
The “consultant” has little incentive to bring offers to the City that won’t pay the consultant as much regardless of whether those offers would be better for the City. Because the “consultant” gets paid by the buyer, if a particular buyer doesn’t pay as good a commission, the “consultant” will ignore that company and the City will not get all the offers that it should. Furthermore, the “consultant” won’t bring offers to the City that may have more favorable terms and conditions if those same offers don’t pay as much in commission. We wonder whether the “consultant” will advise the City of the fact that it might have increasing recurring tower maintenance and operational expenses in the future after selling its leases. Perhaps not because it might otherwise reduce the “consultant’s” finder’s fee.
In this case, it seems that the City received a proposal to purchase its leases and a proposal from a “consultant” to review the proposal perhaps from the same entity at the same time. I assume that the City could not authorize a commission based contract without putting it out to RFP and thought that they would be thrifty by putting the cost burden on the “consultant” to collect his fee from the same people that are interested in buying the leases.
In the end, it is very unlikely that the City will end up with the best deal for its citizens. The City will save money by not having to pay for an unbiased consultant- small savings considering the money it will almost certainly leave on the table. If you review our blog, you will see that this is the first time we have called out a municipality by name. We are hoping that exposure to this ill-conceived endeavor will encourage the City to reconsider and think long term instead of short term.
