Category: Government Purchasing

It’s official: Georgia ends contract with Office Depot

Posted on by chase

According to the Atlanta Journal-Constitution, after a back-and-forth legal dilemma lasting many months, state officials in Georgia have made it official: the state is ending its relationship with Office Depot over deliberate mispricing.

State officials recently terminated a multimillion-dollar contract with Office Depot after the company repeatedly overcharged and mispriced items for state employees, the head of purchasing confirmed Tuesday.

The company does about $40 million a year with the state and had been Georgia’s sole office supplier since March. Employees at the state’s 129 agencies used purchasing cards to buy everything from printers to desks on the company’s state of Georgia Web site.

Brad Douglas, commissioner of the Department of Administrative Services, said he found mismarked items on the site months after the company was notified there were problems.

“This supplier simply failed to perform,” he said.

Officials at Office Depot refused to answer questions, instead providing a brief statement saying the company has “worked continuously, and in good faith, with the State of Georgia.”

Good faith, Office Depot? That’s not how I remember it. Filter this blog by “Big Box News” and see how many articles are about Office Depot doing something shady. Oh wait, I did it for you. And that number is 10 stories in the past 3 months. That’s a lot of time to be in the news for something most people consider boring. (I personally find the sale and discussion of office supplies quite thrilling, thank you very much.)

Regardless, this is a step in the right direction. The more people who cease to deal with a dishonest corporation, the less likely that corporation is to stay in business. Simple economics, but apparently too far over the heads of Office Depot. I still don’t understand what’s so hard about “treat people the way you want to be treated” as a rule for a business. Some people never learn, I suppose.

State Department joins DHS in Office Supply Consolidation

Posted on by chase

Just a little update to the article I posted previously about President Obama saying he would help cut the budget, in part, by consolidating the purchase of office supplies by some governmental agencies.

The first article mentioned the Department of Homeland Security being where the idea originated, but according to Federal Computer Week, the State Department is on board, as well:

For example, the Homeland Security Department plans to consolidate its purchase of office supplies and computer software across the organization, qualifying the department for larger bulk discounts. DHS officials expect to save up to $59 million during the next five years. The State Department is taking similar measures.

Obviously this comes as part of a larger budget-reduction package that includes lots of cuts that don’t really apply to us here, at an office supplies blog. Still, for some reason this little quote has legs; pundits from all over have chided or lauded Obama’s “office supply cutbacks” line as something either indicative of a forward-thinking president who isn’t ashamed to make those sort of “it was right in front of us all along” sort of decisions, or as something indicating he’s out of touch if he thinks buying office supplies differently can save our budget.

Personally, I’m inclined to think he’s on the right path. A couple of simple changes here and there are how you tend to make real progress. And if the President is looking for a good company to snag those Sharpies* from, he can get in touch with me.

*Note: I doubt the government really needs Tropical Color Mini Sharpies. But if they do, that’s awesome.

Big Box Watch: Bad business? Blame the economy!

Posted on by chase

The Nashville Business Journal just posted an article regarding Office Depot and their most recent disastrous financial unveiling. According to the Journal:

Office Depot Inc. on Tuesday reported a loss of $54.7 million, or 20 cents a share, in the first quarter, down from a profit of $68.8 million, or 25 cents a share, a year ago.

Total sales for the Boca Raton, Fla.-based office supply company for the quarter fell 19 percent to $3.2 billion.

The retailer attributed the loss to one-time charges related to its decision to close 107 underperforming stores during the quarter. Office Depot has 1,160 stores as of March 28.

…Company leaders said the battered economy and the resulting dip in demand for office products was a major factor.

“Resulting dip in demand for office products?” I don’t think so, Office Depot. Internet retailers of office products are doing just fine, thanks. Maybe it’s time to admit that the era of the big-box dinosaur is over when it comes to office supplies? Or maybe that the constantly increasing reports of wrongdoing might be having some effect on your business? Just a thought. But you go ahead and blame everyone else, I suppose. I’m sure we’re the crazy ones for not buying from you.

NOPA to President: We appreciate the thought, now please reconsider.

Posted on by chase

The National Office Products Alliance (NOPA) has put out a statement that has both praise and some suggestions for President Obama’s plan to trim some of the federal budget by purchasing office supplies “in bulk”. During a discussion of the ways in which he could save money, the topic of office supplies came up, and President Obama mentioned a discussion he had with the Department of Homeland Security during which he was advised that bulk purchasing could save over 50 million dollars. While this sounds good on its face, NOPA has some caveats. Their press release is reprinted here.

The National Office Products Alliance (NOPA) is taking exception to President Barack Obama’s remarks this week regarding the ability of the U.S. Government to save money by purchasing office supplies “in bulk.” Specifically, the President advised reporters that “Secretary Janet Napolitano at the Department of Homeland Security estimates that they can save up to $52 million over five years just by purchasing office supplies in bulk.” The remark was made during a discussion of the President’s recent request to all Cabinet members to save at least $100 million through efficiency actions.

In a letter to the President, the Association applauded his determination to ensure that government purchasing is as efficient as possible, but pointed out that “bulk” purchasing does not produce that desired result. Decisions to “strategically” buy office products from a single, large national source have proven unsuccessful and have many unintended consequences. These include displacing competitive small businesses, precisely what our Nation does not need in this challenging economic environment.

In addition, sole-sourcing arrangements are subject to abuse, as an awarded vendor’s pricing on thousands of distinct products is rarely audited and there are no competitors left to challenge the awarded company for the government’s business every day.

NOPA proposes that a better model for government purchasing of office supplies is to use the GSA Multiple Award Schedule that preserves ongoing competition among many vendors and creates ongoing opportunities for successful, innovative small business participation.

“We strongly urge you to move your Administration’s purchasing strategy in that direction,” said Bob Chilton, chairman of NOPA, in his joint letter to President Obama with NOPA president Chris Bates. The letter outlined specific practical reasons why “bulk purchasing” is inefficient, wasteful and fails to deliver “best value” to customers who buy industry products. “We also ask that you encourage your staff and all of your Cabinet Secretaries to give full consideration to our proposed alternative competitive purchasing strategy for office products. We believe it is the superior approach and will save government customers and taxpayers more while producing greater value,” Chilton added.

I can only say that I agree whole-heartedly with NOPA’s assessment of the situation. While it’s easy enough to throw out the term “bulk buying”, it needs to be taken into consideration whether or not you are getting your supplies from multiple, reputable vendors, which eliminates the potential for misconduct. No word yet on the reaction to the NOPA release (if any), but I have seen the story passed around on several major news sites.

A lot of people  think it’s a gag that Obama is trying to cut costs by bulk-buying office supplies (One pundit quips, “What does the government do? Send a guy down to the store every time it needs a ream of copier paper?”), but those of us in the industry realize the seriousness of the issue and will be following it with great interest. Stay tuned for more updates!

Big Box Watch: Whistle-blower files more claims of Office Depot overcharging

Posted on by chase

The Atlanta Journal-Constitution has posted an article that David Sherwin, the ex-Office Depot work and whistleblower who was fired for writing a “nasty email” to his employers, has filed cases with even more states in his ongoing crusade to take Office Depot to task for overcharging government agencies.

Georgia is the latest state where Sherwin, who claims Office Depot overcharged state and local government entities by $100 million a year, has filed a complaint. In the last 10 days, he has filed similar complaints in Colorado, Michigan and Arizona.

Attorneys general in Florida and Missouri are investigating allegations of overcharging following complaints filed by Sherwin.

He said he wasn’t going to stop, and it sure seems like he meant it. Great work, David. Keep it up.

Big Box Watch: Detroit latest to file Office Depot complaint

Posted on by chase

I’m actually amazed it’s been this long since we had some new Office Depot news, but of course, when it came it was not surprising. The Detroit Public School system is the latest to accuse Office Depot of overcharging on their contracts, as reported by the Detroit Free Press:

The Detroit Public Schools chief investigator is researching allegations that its office supply contractor, Office Depot, overcharged the district over the past three years.

The company is already under investigation in several other states and, according to the whistleblower, agreed to repay the city of Berkeley, Calif., approximately $289,000 after that city’s officials uncovered overcharges spanning the past 3 years.

DPS Inspector General John Bell contacted the whistle-blower involved in the Florida investigation immediately upon learning of this alleged scheme Monday, said district spokesman Steve Wasko.

“We are looking into its impact on DPS,” Wasko said Monday evening.

Office Depot released a statement today by email denying allegations that the company overcharged the Detroit Public Schools.

“Office Depot enjoys a good relationship with Detroit Public Schools,” spokesman Jason Shockley said. “We are not aware of any complaints from the Detroit Public Schools regarding overcharging and we have no reason to believe we have been overcharging them.”

This is one of the times where this news has really hit home to me. Everyone likes to think of the big bad government sitting around all rich and corrupt, so who cares if we overcharged them a few pennies?

Well, I lived near Detroit for a long time, and had friends go through the DPS, some as students and some as teachers. These schools need every penny they can possibly get, and to try to overcharge them for the basic necessities of pencils and paper is just despicable.

Hopefully it won’t be much longer before I get to report that Office Depot has finally collapses under all of this wrongdoing, and we can just put the whole mess behind us.

NOPA Urges Governments to End Sole-Source Contracting

Posted on by chase

In light of recent allegations of big-box retailers abusing their stranglehold on government contracts, the National Office Products Alliance (NOPA) has put out a statement calling for an end to single-source contracts with state and local governments. The statement was triggered by an announcement to local government customers that, effective approximately March 30, nationwide pricing of office products under the “U.S. Communities” contract would be changed across-the-board without input from local government customers. According to the NOPA press release:

NOPA contends that more competition is essential at the local government and school district levels to ensure consistent delivery of “best value” and help government customers avoid the need for costly, time-consuming and sometimes embarrassing audits of their office product purchases. “Regrettably, such competition has been lacking and the growing number of public audit findings indicating non-compliance with contract pricing and product purchasing requirements should be a major concern,” said Chris Bates, president of NOPA. “In several cases, state and local governments have been refunded public funds that their audits determined were due.”

This sort of day-to-day competition would not only close the door on single companies that seek to abuse their contracts, but open a new one for smaller, independent retailers to get their products in the hands of those who need them. More competition leads to better value for the buyer, and more opportunities for the seller. It’s a win-win situation, and one that’s been a long time coming.

Big Box Watch: Story of a Whistle-Blower

Posted on by chase

Naples News has an incredibly in-depth article on the story of David Sherwin, who blew the whistle on his previous employer, Office Depot, for allegedly overcharging millions on government contracts.

David’s story is interesting not only for the facts he presented, but the way in which he presented them. Not knowing the best way to put forth his beliefs of the company’s wrongdoing, David ended up sending an explosive letter that cost him his job and downplayed the credibility of his accusations (warning, mild foul language):

What would become his resignation letter, the caustic e-mail, stared at him from the computer screen on his kitchen counter, near a half-drunk bottle of Smirnoff. The vodka helped him escape the obvious: don’t send it.

“I would kick your ass so hard that you would fly across Florida like Tinkerbelle,” read a part of the message, a “Reply All” with company Chairman and Chief Executive Officer Steve Odland as the intended recipient.

This, Sherwin said, was his breaking point. He wanted out of Office Depot.

“I actually had the e-mail sitting on my computer, I remember, for probably two hours, staring at it, and I would walk around the room,” Sherwin said. “I would get madder and madder and madder, and then I would take another shot of vodka, stare at it and scowl at it.”

As Sherwin paced, he passed plaques, certificates and photos on his walls and refrigerator — reminders of his successful law enforcement career.

“And then, finally, I just said screw it and I just hit the send button,” Sherwin said. “And at that point in time, I knew it was no turning back.”

Office Depot fired Sherwin a day later for, “workplace misconduct.”

While the entire article is worth a read, I found it particularly great how the story captured the emotion inherent in making such a difficult decision. It also highlights Sherwin’s career as an administrator and investigator, skills which would have made him the perfect whistle-blower had it not been for his ill-fated delivery of the news.

“Because I more or less had a mental snap, I didn’t think things through. Had I thought things through, I would have waited a couple weeks,” Sherwin said. “I would have actually gone to the Attorney General’s office as an employee and they probably would have kept me on, had me wired and stuff like that. But for somebody who did this precipitously, I was able to eventually gather up enough information for them to believe me.”

Regardless of his initial explosion, Sherwin has worked tirelessly to bring word of Office Depot’s misconduct to anyone who might have been affected. Working out of a home office, he sends out emails and is in touch with representatives from all 50 states, 700 countries and numerous government agencies, and he’s not stopping until his story gets out.

“Almost every day he turns around to me and he says, ‘Do you think Office Depot realizes that I’m not ever going to stop and that I’m going to continue until somebody’s in jail or they’re out of business?,’” (Sherwin’s friend Brett) Vining said. “And I keep saying, I say, ‘Yeah, I think they’re getting the idea now, David. I think they’re finally getting it.”

If the number of stories filling my inbox every day is any indication, we’re getting it too, David. Keep fighting the good fight.

Big Box Watch: Berkeley seeks reimbursement for alleged Office Depot overcharging

Posted on by chase

As reported earlier, Berkeley, CA has accused Office Depot of overcharging the city over a quarter of a million dollars for office supplies. According to the Berkeley Daily Planet, City Manager Phil Kamlarz has asked for a return of the money.

The article goes on to state that while Office Depot has only issued a standard “we are looking into the matter/taking it very seriously” form letter, Berkeley is by no means the first to find itself in this situation:

• Following a state audit last year, Office Depot agreed to reimburse the state of California $2.5 million for overcharges incurred during a two-year period of $57 million in state office supply purchases.

• A 2008 North Carolina state audit concluded that Office Depot had overcharged North Carolina state agencies by more than $294,000 over a six-month period. Among the charges in the state audit was that the company inflated base retail prices on the bid so that it would look like it was offering a higher discount than it actually was, included unauthorized items in shipments during the course of the contract, and switched brands so that the value of the products shipped to North Carolina was less than what was contracted and paid for. In a prepared news release, North Carolina State Auditor Leslie Merritt said that “There are numerous reports that Office Depot has engaged in a pattern of overcharging and violating state contracts in Georgia, California, Nebraska, Florida, and now North Carolina.”

• Last year, Nebraska State Auditor Mike Foley found that Office Depot overcharged the state as much as 400 percent ($1.06 for staples that were supposed to be bought for 21 cents, for example) on purchased items included in the state’s $3 million per year, three-year contract with the company.

• Also in 2008, the state of Georgia terminated its $40 million per year office supply contract with Office Depot over charges by state officials that the company “repeatedly overcharged and mispriced items for state employees,” according to the Atlanta Journal-Constitution.

• Earlier this year, the Missouri attorney general’s office began an investigation into allegations that Office Depot had overcharged government agencies, nonprofit agencies and charitable groups in that state by using “bait-and-switch” tactics.

So while this article is not really an update to the ongoing investigation (other than the City Manager’s public request for repayment), it goes a long way to highlighting some of the previous allegations and shady dealings that Office Depot has been involved in.

What I find morbidly curious is that this article appeared in my inbox right alongside a notice that Office Depot has opened a new “Caring Connections” website to help teach people about volunteerism, citing the Office Depot Foundation’s previous work providing college supplies to foster kids. While I’ll never turn my nose up at a charitable action that actually helps people (the kids got their school supplies, and were better off for it), it seems like parading it around now during a time of inter-company crisis is a cheap PR move. Maybe they can wrangle up some volunteers to help them pack their bags when this whole mess is over.

Universities suffering from “Paper Cuts”

Posted on by chase

In these troubled economic times, lots of universities are forced to cut spending wherever they can, and unfortunately office supplies are often first on the block. While it might seem like a few sheets of paper here or there don’t make much difference, new articles show the results of these cutbacks can be worse than originally anticipated. An article recently posted in The Central Florida Future, the University of Central Florida student paper, shows that cutbacks to office supplies are having a damaging effect on the way professors teach:

Humanities professor Debra Maukonen can no longer allow students to keep their tests as study tools because she has to collect them due to the recent cut in paper.

…

These changes are part of an effort to cut back on office supplies because of decreased budgets.

The lack of office supplies “makes it more difficult for instructors to do their jobs,” Maukonen said. “In the larger picture, it’s more than paper — it’s people.”

She said a smaller budget means just what students are seeing now: reduced faculty, staff and services; reduced course offerings; reduced face-to-face classes and more online classes; larger class sizes; and an higher student-teacher ratio.

“I know we are saving trees and money by going paperless, but I am seeing a difference in teaching,” Maukonen said.

The trend towards a paperless office has seen huge strides in recent years with the advancement of technology, and in certain places it works wonders for helping an office “go green” and cut back on costs. But it seems like in a university setting cutting the office supply budget is only hurting students.

At UCF, last year, office desk accessories, such as organizers and calculators, totaled around $164,500, and mailing supplies totaled about $34,000. This year, the totals dropped to about $83,800 and $11,900, respectively. Print, copy and fax supplies had the biggest budget for the two years. Last year, they cost the university about $182,800. That number was nearly cut in half for this year to about $94,600.

I think it’s important for universities to consider the impact of slashing budgets on the quality of education they can provide. Rather than unilaterally make huge sweeping cuts, institutions need to consider their options when picking an office supply retailer. Any self-respecting office supply dealer will offer bulk pricing on office supplies, as well as make special deals for educational and governmental institutions. It’s all a matter of shopping around for the best deal, and I can only hope that a university will exhaust all other options before making budget cuts that may harm students.