'Money-Saving' Contract for Office Supplies Results in Higher Costs. In September 2006, the Department of General Services issued a press release touting a new contract under which all executive branch agencies would purchase office supplies through a coalition involving Office Depot, small businesses and businesses owned by disabled veterans. The press release touted the benefit for the small businesses, and said, "At the same time, the new contract … is projected to save the state an average of 48 percent compared to what it has historically paid for comparable supplies."
However, a San Jose Mercury News investigation reveals that "the annual cost for office supplies rose 20 percent under the contract and included tens of thousands of dollars in overcharges." The paper also reported that while many discounts were mentioned in the 2006 press release, a newspaper staffer went online this month and "found dozens of items, including data storage tapes, toner cartridges and batteries, that were either the same price or cheaper than the special rates stated in the California contract."
In addition, the nine small businesses that were part of the contract appear to have minor roles in the operation. The Mercury News reported that "not a single employee of any of these companies actually works at the Lafayette office where orders are processed," despite the fact that all nine companies used that office's address as their address on state forms.
Rick Marlette, a professional marketing analyst whose audit of a similar arrangement in Georgia led the state to cancel its deal with Office Depot last month, said he has reviewed California's contract and billing records and found that the state has overpaid more than $1 million for office supplies.
In October 2006, the four Department of General Services employees in charge of the office supply system received the "Governor's Award" – the highest honor in the 7th Annual State Agency Recognition Awards. They were described in a handout as being "crucial to the economic prosperity of California." (Sources: San Jose Mercury News, April 6; Department of General Services press release, September 19, 2006; State Agency Recognition Awards materials, October 26, 2006.)
Cal-Taxletter April 11, 2008
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