Office Depot is refusing to release certain data to contract auditors unless they sign a non-disclosure agreement
The latest twist in the ongoing issue of Office Depot’s contract pricing to state and local government agencies in the US revolves, not around actual allegations of overcharging, but whether Depot is withholding legally required information to auditors who are reviewing their contracts.
The public agency at the centre of the controversy is Hillsborough County, Florida, whose Internal Performance Auditor, Jim Barnes, sent a letter to Office Depot dated 21 December 2009, informing the company that his office was in the process of performing a contract adherence review and requesting contract usage reports.
A few weeks later on 2 February, Barnes wrote a memo to the Hillsborough Board of County Commissioners (BOCC) to provide an update and status report on his progress with the review.
In that memo Barnes stated that a "lack of cooperation" by Office Depot would prevent him from meeting his review deadline.
He also stated that Office Depot "would not release the data unless we signed a confidentiality agreement" adding that the office supplier was claiming possible trademark and other proprietary infringements. He added that Office Depot was also requiring that auditors in the Florida cities of Tampa and St Petersburg sign similar agreements.
In a follow-up memo dated 18 February, Barnes noted that the situation had not evolved and that "OD has been disinclined to provide data that is contractually required".
"Their [Office Depot’s] actions violate certain provisions of the contract relating to release of data/records for audit purposes. They are also attempting to direct our audit work and effort and with whom we discuss our audit approach, methodologies and related information," Barnes also said in the memo.
When contacted by OPI about the allegation of non-cooperation, Office Depot stated that it "has, and continues to fully cooperate with Hillsborough County".
The sticking point for Depot and the reason for requesting the county sign a non-disclosure agreement was the county’s communications with third parties, including whistleblower David Sherwin and a member of the NOPA board, "regarding Office Depot’s confidential, proprietary and trade secret information".
This raises the question as to what constitutes proprietary and trade secret information. We know that it is not manufacturer list price.
Following suggestions that Office Depot was refusing to provide manufacturer list price, four independent dealer organisations – NOPA, AOPD, is.group and TriMega – took the unprecedented step of co-signing a letter to local and state purchasing, auditing and investigations officials to confirm that manufacturer list prices are widely available and are not proprietary information.
In a response to that letter, Office Depot provided a statement to OPI. In that statement, Office Depot affirmed: "Contrary to the reports by our competitors and others, Office Depot has not taken and does not take the position that a list price is confidential and proprietary information."
However, Depot did say that it was still holding out for a non-disclosure agreement "to avoid the sharing of Office Depot’s confidential and trade secret pricing information".
"With respect to Hillsborough County BOCC, Office Depot has only sought written assurances that its confidential and trade secret pricing information would not be shared with third parties, including David Sherwin and individuals working for Office Depot competitors."
In response to subsequent claims that Office Depot is still withholding pricing information that is in the public domain, the company’s Business Solutions Division President, Steve Schmidt, issued a letter on 18 March. In that letter he wrote:
"We fully appreciate that certain information is subject to open records requests in Florida. In this case, we were not looking to protect information that would be available under the Florida Public Records Act.
"Rather, we were simply trying to gain protection for our information that is proprietary and trade secret, and which is protected under Florida law from disclosure to third parties. We are certain that you understand why this is so important. We have requested that the County provide written assurance of its intent to keep Office Depot proprietary information confidential as allowed under Florida Law."
It is still not clear exactly what information Office Depot considers proprietary and confidential. When asked by OPI to clarify exactly what this information included, Depot said that it had "no additional information to provide" to its previous statement.
As far as OPI is aware, Office Depot has provided all requested information for previous contract reviews, including those by the cities of San Francisco and Clearwater which are now in dispute with the company after their audits – the results of which are disputed by Office Depot – concluded that they may have been overcharged. It is unclear what is different, if anything, about the requests from Hillsborough.
Depot’s opponents are, of course, viewing the stand-off between the company and Hillsborough as an attempt to thwart an audit – and possible future audits – which may reveal overcharging.
Office Depot could certainly diffuse the situation by clarifying what exactly it deems "confidential, proprietary and trade secret information", assuming that it has nothing to hide.
A few days before Steve Schmidt’s 18 March letter, Hillsborough’s auditor Jim Barnes confirmed to OPI that he had not been in contact with Office Depot representatives since 18 February, but that he intended to issue a report to his board by the end of March.
It will be interesting to see what he says in that report.