Myth: Vendor Overcharges To Government (Part 5)

Posted on May 8, 2013. Filed under: Journalism | Tags: , , , , , , , , , , , , |

9th in the series The Manipulators

Today’s proverb Alas, GEORGE DIDN’T DO IT!

Your words for the day:

  • scapegoat = one too helpless to defend itself, often by reason of circumstance
  • witch hunt = the search for a scapegoat
  • not my job, man = the universal escape clause — unstated, but, inherent — in every assignment of responsibility
  • consolidation = getting your shi…   uh, shituff…   your shtuff… getting your shtuff together for maximum personal benefit

US Communities (see previous post) DOES NOT consolidate orders for the signed-up members to the contract.  US Communities DOES NOT verify shipments from the vendor to the buyer at the receiving dock;  US Communities DOES NOT check the invoices against the receiving documents before the buyer pays them.

Per US Communities, they do complete regular 3rd party audits to “guarantee” adherence to that so-called contract, but…

  • IF THAT IS SO, how does one explain that 4-year gap gleefully filled by the City Auditor in seeking (job-enhancing?) retro-active rebates for his employer, the City of Houston?
  • And, IF THEY DID, then US Communities was satisfied that Office Depot was in compliance, which means that Dangerous Dave the City Auditor, is off-base with his assertions.

This is what happens when you expect George to do it:

  • You get that “self-promoted” extra cook hanging out in the kitchen pretending to “adjust” the existing recipes;
  • You get a vendor diligently watching his discount principle; delivery cost for a $64.00 order is the same as that for a $640.00 order.  That vendor will not be receptive to discounts — 300,000 times — for $64.00 orders.
  • You get a department full of watchdogs (a.k.a., bureaucrats) going on a full-time coffee break because they are quite content to LET GEORGE (the pretend cook hanging out in the fully staffed kitchen) DO IT.
  • You get department heads thinking they’ve bought a cure-all for government over-spending (without expending the effort they are being paid to expend) and underlings who think they’ve been given a garlic wreath to prevent ACTUAL WORK from sucking all the fun out of a bureaucrat’s vacation time — you know, that 9-5 daily time frame for which they are being paid TAXPAYER MONEY.

In reality, all that the bureaucrats have procured is a giant container of Dr. Feel Good’s Industrial Strength Cure All — snake oil in a much simpler time.

“Let George Do It”  is a very bad business practice.  But, apparently quite compatible with guv’mint ops, an undertaking that should be run like a business; however, it is handicapped by being staffed with politicians and toady bureaucrats.

I am totally perplexed.  When I was buying expendables for my employer, the greater the quantity I purchased, the cheaper the unit price per item became.  You buy one, you pay $5.00 per item; you buy a dozen, you pay $4.50 each; you buy a gross, you pay $3.00 per item.  I guess that is what they mean by “volume discount.”  Surely, an organization as pervasive as government with staff layered upon staff of taxpayer-paid professionals, with a hundred departments ordering the same items on a recurring basis, would have at least one manager who would understand the term “consolidation” and the financial benefits that result from it.

EVERY VENDOR GIVES VOLUME DISCOUNTS BY THE ORDER.  Every sizeable government entity can, by monitoring their expenses and their department requisitions, get those standard discounts by consolidating all of those individual departmental requisitions into one order per cycle.  No useless “third cook” (such as US Communities — a self-promoted, useless appendix to the body politic) needed in the kitchen.  All that the government entity needs to do is ensure that department heads, whether elected or hired, and their toady bureaucrats do the jobs they are being PAID to do.  Did I mention that they are being paid with TAXPAYER MONEY?

EVERY VENDOR HAS A ROCK BOTTOM PRICE AT WHICH HE CAN SELL.  Every order reflects the vendor’s cost of product, transportation cost, and storage and handling costs.  More product handled per shipment means lower overhead costs for each item shipped; this becomes the basis for price discounts on increasingly larger orders.  The fewer items shipped per order, the higher the price per item.  Office Depot (and any other vendor) would lose its financial ass if it adhered to a “best price” discount for 300,000 $64.00 orders.

The hazard for signers in this “co-op” agreement is complacency.  Office Depot, quite unlike the City of Houston, did not become complacent, and adhered to sound business principles even though the City of Houston tried to bury them under an unbelievable landslide of over 1,000 little bitty orders every week of their contract.

Dangerous Dave alluded to “several” price lists and stated that prices were moved from one list to another to give Office Depot a higher price per item.  Dave was almost certainly referring to the various volume discounts offered with rate schedules based on the amount of each purchase.  Apparently, all those coffee-breaking bureaucrats thought they could pick up the phone between donuts and order one package of napkins for lip-dabbing and get the same price break as if they had ordered 1,000 packages.  It takes a lot more than one package of napkins to pay delivery costs.

Looked at from the full term of the contract, if Office Depot had shipped the same amount of product in only 100,000 shipments, the City of Houston most certainly would have reaped the benefits of volume discounts and would have paid less than the $19.2 million — say, 1.7-6.6  million dollars less.  All the City of Houston had to do was have a central office (e.g., a non coffee-breaking manager) to consolidate all those rampant departmental orders into a SINGLE order once a week (or monthly).  This would automatically have given the city the best price for the product ordered, AND the Office Depot would have reduced its overhead outlay for delivery services.  Win-win, right?

Wouldn’t hurt, either, for the accounting department to verify that all items on the monthly invoice was actually received and that the price listed was the agreed upon price.   I’m just saying

Next up:  Myth (Part 6) Dear Mayor…  Mayoress?…   may I just call you Annise?…

 

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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?  http://www.uscommunities.org  (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 “dot.org?”

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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