Amazon’s ‘RFP fever’ has infected Manitoba

Opinion

Hey there, time traveller!
This article was published 18/09/2017 (2692 days ago), so information in it may no longer be current.

Manitoba government officials and politicians have recently made headlines with their interest in the Amazon request for proposal (RFP) for a new headquarters location that is promising to bring 50,000 jobs.

Amazon clearly tells us in its RFP that money will be the single most important element in separating the one winner from the more than 100 cities that have indicated they are interested. “Incentives offered by the state/province… will be significant factors in the decision-making process” and that “initial cost and ongoing cost of doing business are critical decision drivers.” No other decision criteria are identified as “significant” or “critical” in the document.

Sure, Amazon mentions “preferences” such as quality of life, sustainability and thinking big and creatively, but don’t be fooled — the decision will be solely about money, just as it is in almost every other RFP.

Regardless of my advice to clients that you should never respond to RFPs, the reality is that sometimes you must. If that is the case, my advice shifts to making good decisions about which RFPs to respond to. Let’s use five simple questions about the RFP to determine whether Manitoba should respond to Amazon.

First, do we have the option of not responding? In this case we have the option to respond, or not respond, so let’s play along and proceed to the next question.

Second, can Manitoba actually deliver what is being asked in the RFP? No. We cannot meet their criteria. One clear example is that Manitoba does not have direct flights to Seattle, New York, San Francisco and Washington, D.C. There are several other examples, some of which could possibly be overcome, but many just can’t. At this point, you would normally shift your business development time and money to other more suitable targets.

But let’s assume somehow all hurdles can be overcome, and proceed to our third question: do we want Amazon in Manitoba? This can be argued from many perspectives. My perspective is that no community should hand over that much control to any single entity. It is much less risky, less costly and far more sustainable to target 50,000 jobs from 1,000 companies in a cluster of complementary industries. Yes, there will be positive effects from an Amazon presence, but Amazon has said those benefits must be heavily subsidized by the community. Small businesses create jobs and tax revenue without huge subsidies.

Let’s assume we keep considering this RFP. The fourth question: can we win the RFP? Again, no. We can never match the subsidies that large U.S. groups will offer. The state of Mississippi recently offered US$600 million to land a Continental Tire plant that will create 2,500 jobs, with more incentives to follow. How much do you think they would offer for 50,000 jobs?

Remember that Amazon has told us upfront that to win this, a location will have to be the highest, or a very close second-highest, subsidy provider. We are not just talking about providing rebates on incremental taxes; Amazon also wants free land, grants for utilities, workforce grants, relocation cash and permit and fee rebates with no cap or time limit.

Our cool Prairie vibe and high standard of living are not going to make a difference if we are not the highest subsidy provider.

And the final question: does the new revenue we might win from Amazon justify the cost of submitting a proposal? In this case, a Manitoba proposal will cost hundreds of thousands of dollars to assemble, largely in the form of government employee time, so spending that to potentially bring in tens of billions in new revenue does make sense.

Unless, of course, those billions in new revenue are so heavily subsidized that Manitoba ends up losing money on the deal, painting us into a corner of even greater Hydro rate increases, health-care premiums and civic development fees to pay for Amazon subsidies.

Manitoba, I’ve seen this “big RFP fever” before, and it rarely ends well. My advice is to ditch Amazon and spend our time and effort helping the thousands of small businesses already working to build this community.

Cal Harrison is the president of Beyond Referrals, a Winnipeg business-development advisory firm, and QBS Canada, a business coalition that advocates the use of Quality Based Selection when hiring professional-services firms.