Auditor General, not MEDC, should hire reviews of corporate welfare programs
For many years, the Michigan Economic Development Corporation has always selected a friendly vendor to calculate the return on investment of its state tourism promotion funding effort (Pure Michigan), rather than seek bids from several possible choices. Last year, it finally requested proposals from other vendors for the right to make these estimates. The winner of the new contract — and the costliest bidder, too — was … wait for it … the very same firm (Longwoods International) the agency had for many years simply selected on a no-bid basis.
The second place finisher, Valient Market Research, distinguished itself in two major ways from the winning bidder. Valient offered to do the job for $44,500 less than Longwoods, which bid at $164,000. And perhaps more importantly, Valient made “100 percent transparency” a centerpiece of its proposal. The MEDC has a reputation for obfuscation and secrecy and its winning vendor, Longwoods, provides an assist by refusing to reveal precisely how it assesses claims of success for the Pure Michigan program.
The Michigan Legislature should strip from the MEDC the right to review its own purported successes — or hire a third party to do so. It should ask the Office of the Auditor General to take responsibility for doing so under some simple guidelines.
State documents show that the winning bidder, Longwoods, was selected on a no-bid basis years ago because state officials believed the vendor would tell them what they wanted to hear. In fact, the company once bragged on its website about its ability to help tourism officials engage in “budget justification.” This alone suggests a government-business relationship that is a little too cozy.
Worse, Longwoods uses a dark methodology to calculate Pure Michigan’s ROI. It refuses to precisely explain how it generates credulity-straining figures on the return on investment from Pure Michigan. The MEDC has appeared perfectly comfortable with the secrecy and this is all the more true now. It is akin to the agency and its hired gun saying, “Hey, taxpayers and lawmakers, we know we’re right and you’ll just have to take our word for it. Now spend $34 million again this year on the Pure Michigan program.”
At least the losing bidder was prepared to have its approach questioned by others. In addition to the promised transparency of survey design and data sets, Valient had promised to “provide press briefings to improve transparency and public understanding of the return on investment (ROI) results of this important campaign.”
Valient was apparently unaware of the MEDC’s reputation for preferring to buy studies that comport with its views as well as its secretive nature. Both qualities of the agency’s officials make it difficult to review their work, offer criticism based on programs they champion and suggest less expensive alternatives, including shuttering ineffective incentive tools or the department itself.
Because MEDC officials have incentives to make what they do appear relevant and useful — their own employment and prestige — no one should take their braggadocio as an objective assessment of their successes. This is particularly important when it comes to the agency hiring its own consultants who generate alleged evidence of programmatic success but refuse to demonstrate their methods. The Pure Michigan program, after all, costs $34 million a year, money that might be better put to use somewhere else.
Lawmakers should offer guidance by mandating 100 percent transparency and that all costs associated with programs be included in future assessments. They also should require that program evaluations can be independently replicated and verified. Finally, evaluations should calculate the opportunity costs of each program so that the MEDC’s programs can be compared to some alternative, such as cutting taxes across-the-board.
The MEDC has a history of secrecy and every incentive to puff up its own image by buying studies that comport with its own vision. It should no longer be allowed to do so.