Archive for August, 2010

Tuesday, August 10th, 2010

In a move that one veteran industry observer described as a “gamechanger
for the entire contract market in the public sector,” Office
Depot announced last month it will not seek to renew its contract
with Los Angeles County, which has served as the lead agency contract
for office supplies under the U.S. Communities Government
Purchasing Alliance since Office Depot was first awarded that contract
in 1996.
The current contract, which represents about $515 million in projected
annual sales, expires at the end of the year.
Office Depot’s decision not to participate in the upcoming bid came
as a surprise to many industry observers, since prior to the announcement,
the company had given every indication it intended to
compete aggressively for the contract’s renewal.
In a “Dear Valued Customer” mass e-mail last month, Steve
Schmidt, president of Office Depot’s Business Solutions Division,
said, “We chose not to submit a proposal because the RFP contains
terms that are substantially different than our prior office supplies
contract,” adding that Office Depot believes those terms are “onerous
and inconsistent with our long-term strategies and ability to provide
the best value on office supplies to our customers.”
While saying the organization respected Office Depot’s decision, a
senior executive with U.S. Communities offered a very different perspective
on the RFP terms.
“Regrettably, they appear to find the strict obligations in the U.S.
Communities program that are designed specifically to protect public
agencies by providing a guarantee of best government pricing to
be ‘onerous’ in their words,” commented U.S. Communities national
program manager Michael LaPierre.
“What they have termed ‘onerous’ we consider a high bar … There
are other suppliers who are participating and we fully expect that
this review process will yield a result that will provide improved value
to the public agencies that we serve at a time when they need it the
most,” LaPierre added.
The decision not to seek a new contract award comes at the end of
a three-year period that has seen numerous state and local government
inquiries into Office Depot’s performance and practices under
various office supply contracts.
According to the Naples Daily News, Office Depot has issued over
$11.4 million in refunds, credits or other settlement payments in
connection with those inquiries.
The Naples Daily News reported ongoing investigations are also currently
underway in Texas, Detroit, Colorado, California and Ohio,
and said three federal agencies—the Departments of Defense and
Education and the General Services Administration—are working
with the Department of Justice in investigating the company’s government
contract pricing practices.
Also last month, a special report in the Naples Daily News charged
state purchasing officials in Florida may have cost taxpayers millions
of dollars under a contract used for office supplies purchases that
Office Depot has held on an exclusive basis since 2003.
According to The Daily News investigation, many of the state contract’s
prices were higher than Office Depot offered to smaller government
agencies and even to customers in its stores.
For example, a daily planner refill priced at $27.55 on the contract
was available at a nearby Office Depot store for $12.89, or 53%
cheaper, the newspaper reported.
The Daily News compared purchases made by the state during the
first half of 2009 to prices listed on Office Depot’s public web site
during the same time period and said it found the state’s average
price was at or above public web site prices for 24% of the products
The Daily News also compared the 25 most costly over-retail products
to prices in the company’s 2009 in-store catalog and prices
currently on Office Depot’s public web site.
Of the 19 products in the catalog, The Daily News said all were
priced lower than the state’s cost. Of the 24 products that were on
the web site, it said all but one is still priced lower today

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