Myth: Vendor Overcharges To Government (Part 4)

Posted on May 2, 2013. Filed under: Journalism | Tags: , , , , , , , , , |

8th in the series The Manipulators

Today’s proverbLet George Do It

Your words for the day:

  • crowd = three (as in “two’s a couple, three’s a crowd); or, one too many cooks in the kitchen
  • facilitator = a catalyst in the social not chemical sense; or, one too many cooks in the kitchen
  • not my job, man = the universal escape clause — unstated, but inherent — in every assignment of responsibility

The City Auditor (Dangerous Dave) said:

  • …contract pricing did not accompany the invoices,
  • …(and, yet) he also said that product prices were switched from one list to another list…   even though he said that there were no lists to reference.
  • …”US Communities contract” — intoned as though it were a supernatural incantation that should bring good fiscal luck to the intoner.

According to Dangerous Dave, there were no price lists associated with the invoices, yet, somehow, Dave asserts that prices were floated between these phantom lists to get a higher price for the vendor.  If one’s knowledge base is ignorance, how can one’s conclusion be so assertive?

US Communities.  Who are those guys, anyway?  (Look ’em up yourselves for enlightenment)

What I got out of their online advertising was:

  • …they got nothing to do with government.  Their “dot category” is “org” not “gov.”  They claim to be non-profit, but they take a cut of the gate.
  • …their schtick is to get a lot of organizations (private and government) to sign on as customers (membership) of a single “contract” to be serviced by a single contractor, purportedly to get cheaper everything with minimal bureaucrat effort.
  • …the attraction for the membership is to get product a lower price — with minimal bureaucrat effort.
  • …the attraction for the seller would be a large guaranteed customer base which would more than make up for selling at a lower price (the assumption being that large quantities will, in fact, be ordered.)  Win-win for everybody.

And, if they are NON-profit, what is in it for the “”

Why, PROFIT…   of course!  Say, a 1% to 2.5% administrative fee, payable by the seller.  It didn’t say “percent of what,” so I’ll go with a cut of the seller’s take.  With the City of Houston thing, 1% of $19.2 million = $192,000; jump that to $480,000 at the 2.5% rate.  Sweet deal, eh?  Is that tax-free ’cause they are non-profit?

What do they actually do for that fee?  They write-up a form contract that says, in essence…   (in case I’m too subtle here, this is the part where I cynically paraphrase my understanding of all this)

  • “I, the party of the First Part (insert name of vendor here) agree to SELL enormous amounts of post-its, pens, pencils, staples and all kinds of paper and other expendables to buyers signed up on US Communities membership list (insert control number of list), which is attached to this contract, at the cheaper bulk rate prices I offer to all my big-order customers all the time, even without a rinky-dink contract.”
  • “I, the party of the Second Part (insert name of buyer — or a whole list of ’em) agree to BUY from (insert name of vendor again) enormous amounts of post-its, pens, pencils, staples and all kinds of paper and other expendables and pay according to the attached price lists (insert price list control number) which I understand is cheaper than buying from the same vendor in little bitty quantities.  I also understand that NONE OF THE EMPLOYEES in our accounting department, PAID BY THE TAX PAYERS TO KEEP TRACK OF TAX MONEY, WILL HAVE TO DO ANYTHING to monitor either the uncontrolled ordering by hundreds of individuals in scads of departments or to cross-check vendor invoices against our understanding of the contract and get all incorrect invoices clarified BEFORE we pay them.  Further, all that those employees need to do henceforth is show up at the office, enjoy coffee and donuts all day, clock out for the evening, and collect a tax-subsidized paycheck for doing nothing.  Free coffee and donuts would be real nice.”
  • “We, the party of the Third Part, US Communities, will (1) match up our standard prepared price lists (which we got from the stated vendor, JUST LIKE THE GOVERNMENT ENTITY COULD HAVE DONE ON-LINE OR BY USING THE TELEPHONE) to the appropriate contract, (2) insert the names of the Buyer and the Seller, and, voila, our contribution to this “Market Place Meeting of Interests” is done…   although, (3) we will diligently listen for future “ka-chings” and check our monthly up-date from the bank of our choice.  Oh, and (4) we might monitor all that stuff we told you about to get you signed up.

This “co-op” thing sounds to me more like a dating service type of operation.  “We are just a facilitator.  We found your match, but marriage relations are up to you two.  Sign on the dotted line, and we are outta here.  Should anything go wrong — or simply not go right — we ain’t got nuthin’ to do with that!  You are on your own.”  US Communities then exits stage left.

Next up:  Myth (Part 5) George didn’t do it.



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Myth: Vendor Overcharges To Government (Part 2)

Posted on April 7, 2013. Filed under: Journalism | Tags: , , , , , , , , , , , , |

6th in the series The Manipulators

Your words for the day:

  • auditor = one who analyzes processes and figures, frequently on a short-term recurring cycle
  • extortion = coercion, pressure, blackmail, squeezing, shakedown
  • cheat = deceive, swindle, bilk, take advantage of

The target of my mockery:  The Houston Chronicle (again), December 9, 2012, Section A, Pages 1 and 14, Article title:  Auditors find 4 years’ worth of overcharges, Writer:  Mike Morris (hereinafter referred to as Jack-Hass).

Every business (or government entity) creates a Purchase Order when it agrees to buy product from a vendor.  That order constitutes a contract with an offer (to sell), an acceptance (of the product and the terms of sale) and transfer of the consideration (the monetary payment).  This contract can be verbal, but big business prefers the accountability of that paper trail; it gonna be in writing.

The City Auditor in our story alludes to a contract that “was part of US Communities, a government purchasing cooperative.  The contract ran from March 2006 to the end of 2010.”  That would be 252 weeks by my calculation.  And that is all that Jack the Writer thinks we should know about this third cook in the accounting kitchen.  What is US Communities?  I’ll get to them in Part 3.

I’ve spent a bunch of years preparing specifications lists for needed products and contacting various vendors for availability and best pricing of our needs.  I have prepared purchase orders, detailing the final agreement of purchase (product description, unit price, total price)).  I have cross-checked the product received against the vendor’s shipping bill and my company’s Purchase Order for compliance with specs, and prepared a receiving ticket to document the delivery.  This receiving ticket was then affixed to the purchase order.  ANY DISCREPANCIES, whether of quality or quantity, WERE ADDRESSED WITH THE VENDOR AND CORRECTED BY THE VENDOR, or I ISSUED A CHANGE ORDER TO THE PURCHASE ORDER TO ACCOMMODATE THE DOCUMENTED VARIANCE.

When the vendor’s invoice came in, I went to the purchase order and the attached documentation and compared it to that invoice.  If it matched all of my documentation, I approved that invoice for payment.

If the invoice differed, it was kicked back to the vendor for clarification and compliance.

That invoice was not paid until it complied with my company’s documentation.  It is basically the same thing that everyone does in the department store:  select a suitably priced product, take it to the check-out, then scream bloody murder if the register ka-chings a higher price than that shelf price tag that attracted your attention.  You ain’t payin’ until the cashier re-rings at your understood price, or until you change your expectation and agree to the now-higher price.  You take care of the variance at the point of sale.

So, WHY does a multi-billion dollar a year operation (e.g., guv’ment) with whole departments on the payroll to oversee such things, pay those invoices as they are received and wait 5 years to see if it is overpaying for its weekly/monthly purchases?  Oh!  I really haven’t told you the particular newspaper story, have I?  Strap on that seat belt; this is going to be quite a ride.

Our writer, Jack-Hass, has a ripping good story — another one of those big business-ripping-off-the-taxpayer scoops.  This was going to be a no-brainer for this Hass, and the chosen headlines accentuated that:  Office Depot could owe city millionsAuditors find 4 years’ worth of overcharges, and, Controller says firm didn’t cooperate with audit.  We gullibles, by and large, just see the hot-button headlines and conclude that “our local paper has uncovered another anti-taxpayer plot.”  Rah!  Rah!  Sis-boom-bah!  Obviously, that’s not what I read.

Our city auditor (City of Houston), hearing that other government entities (Dallas County, Texas; Los Angeles, California; State of Florida) were successful in cheating * Office Depot out of millions in alleged overcharges, checked the sign on his office door and discovered that he, himself, David Schroeder, was in fact being hyped as a bona fide AUDITOR.  “Wow!” he must have thought.  “Why don’t I…   AUDIT…  and make it look like my employer, the City of Houston, has been getting overcharged, too?  I’ll bet everybody will sit up and realize that I am a…  I am a… ”  (he read the cue card on his office door again)   “… an AUDITOR!”

You will have to excuse Dangerous Dave’s uncertainty.  Auditors, as a rule, cruise around their kingdoms at least once a year to rap the knuckles of those departmental bean counters.  This would be Dave’s first venture in the AUDITING of this contract, so he was probably both mystified and elated when he discovered that Office Depot’s contract had been on-going and un-reviewed FOR OVER 4 YEARS.  “What was the auditor doing,”  he must have thought.  (I figure this is the FIRST audit since, had it happened before, this story would be 1, 2, 3, or 4 years AGO.)

Now, one would think, being the auditor for the CITY and all, that his job would be to audit CITY DEPARTMENTS for accountability and adherence to city departmental protocols.  You know, “Show me what you did with all that money the city budgeted to you this year just ending!  Paperwork.  Show me the paperwork!”

Anyway, one would think that.  Yet, the clue to bureaucratic goldbricking was in the headline “Auditors find 4 years’ worth of overcharges.”  Get real.  NO ONE in accounting noticed ANYTHING for 4 years??  NO ONE in the auditors office, during that 4 years, thought to go over and ask someone in accounting, “WHAT’S UP DUDE??”  (Or, Dudette.  I don’t want to be labeled a sexist.)

Let’s give Dangerous Dave his due.  He at least STARTED OUT mucking around in the files of the city’s accounting department.  We use the term “files” somewhat loosely, here, ’cause Dave couldn’t find the documented history of just under 300,000 transactions from Office Depot.  He did find a total for the amount paid out by the accounting department over 4 years and 10 months for those transactions — $19,200,000.  YES, an undocumentated payout of TAXPAYER MONEY by city employees to the tune of $19.2 million.  But, Dangerous Dave, the Cinderella Auditor, rose to the occasion in true bureaucrat mode — and in keeping with his original intent for leaving the comfort of his office in the first place — announced that…

…it was all Office Depot’s fault.


*being government entities and all, they did the cheating legally.   Using the extortive weight of GOVERNMENT, they leaned on the private business and said, “Give us a BIG REBATE or we’ll have to play rough with you.”  The Big Pee ignored the extortion by officialdom, and went for vendors ripping off the tax payers.

**A national office supply retailer.


Next upMyth, Part 3Can you spell t-o-t-a-l-l-y  a-b-s-u-r-d?

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