SF re-examines its procurement process after business ban on 30 states backfires

SAN FRANCISCO (KGO) -- For seven years, San Francisco kept a ban on states that would defy the values of the city. There were no contracts awarded and certainly city workers were not allowed to travel for business purposes to those states. But the plan backfired and in the end - the ban hurt San Franciscans more than the other way around.

Here's an example. By now, you've probably heard of the infamous Noe Valley public toilet and how San Francisco was ready to dish out $1.7 million for its construction rather than pay for a much cheaper modular model from a company in Nevada. Here's why San Francisco could not, would not do business with any entity in that state.

MORE: A sigh of relief: SF's Noe Valley neighborhood will finally get a public toilet

San Francisco had a ban on doing business with 30 states that had laws that undermined LGBTQ and voting rights as well as blocking abortion access.

It was those states against San Francisco, and that eventually became too costly for city government.

"The Noe Valley bathroom is not a one-off case. That's a problem that is replicated throughout the city government," explained San Francisco Supervisor Rafael Mandelman.

"Or we couldn't buy toilet paper from where we historically bought toilet paper. These market players are smart enough to know they had a captive audience and they could raise their prices," said Supervisor Aaron Peskin.

It's economics 101. Competition results in lower prices.

MORE: SF is in need of public restrooms, but is $1.7M too much for a 150-square-foot facility?

Also, because of the ban, public employees were not allowed to travel to one of those 30 states to potentially lure companies to bring business back to San Francisco.

The city tried to get around it by granting waivers and between July 2021 and 2022; 35 departments approved a total of 538 waivers.

The problem there, even the process was granting waivers was costing the city more money in added staff and paperwork.

In one case, the Recreation and Parks Department had to get a waiver to do business with a local LGBTQ vendor who had recently been acquired -- you guessed it -- by another company in one of those 30 banned states.

"Because of that, we couldn't use her services until we got a special dispensation which took a really long time and was frustrating for us and for her," explained the San Francisco Recreation and Parks Department spokesperson, Tamara Barak Aparton.

Time is money and a report by the Budget and Legislative Analyst found that "While it is difficult to measure how the city's contracting costs have been affected by the legislation, researchers have found that full and open competition for contracts can result in savings up to 20%."

MORE: Inflation fell markedly in January as Fed weighs interest rate cuts

After that report, San Francisco finally cried uncle and last April, the Board of Supervisors voted to get rid of the ban.

Instead, San Francisco government now allows itself to do business with any individual company that aligns with its values.

"Then we'll do business with that company regardless of where it's located so we had to adjust the law because San Francisco was getting hurt at some point," said Supervisor Ahsha Safai.

Though the city lifted some of the restrictions on who they do business with, it still has a long list of conditions and requirements that companies, industries, states, and even countries must follow in other to do business with San Francisco.

Up to now, only one city department has been given a reprieve to operate outside the rules, the Department of Homelessness and Supportive Housing.

That's why they've been allowed to expedite the construction of shelters and housing.

"It saves us at least three months on every project we open and has allowed us to be nimble and take advantage of opportunities to open new project and spend the resources that the public has entrusted us with," said Emily Cohen of the Department of Homelessness and Supportive Housing.

That department is asking for a five-year extension of its streamlining process to circumvent the still lengthy list of off limits places and vendors.

Except that it's getting some push back from a few in city government.

If the extension is not granted, projects like the proposed 60 tiny home cabins on Jerrold Avenue and a youth supportive housing building at 42 Otis will be delayed.

Supervisor Madelman calls it the molasses of city government.

"I don't think we are advocating our social policy goals one bit, in fact, we're holding them back to the extent that we make San Francisco this great blue progressive city look like a basket case that can't get anything done," added Mandelman.

If you're on the ABC7 News app, click here to watch live