Schools contract didn’t achieve expected sales

Office Depot's recently cancelled classroom supplies contract was achieving just over a quarter of the sales originally estimated.

Office Depot’s recently cancelled US Communities classroom supplies contract was achieving just over a quarter of the sales originally estimated.
The request for proposals documents issued by the lead public agency Fairfax County Public Schools (FCPS) at the beginning of 2010 estimated the volume of the contract to be around $150 million per year.
Ron Hull, Acting Director of the FCPS Office of Procurement Services, confirmed to OPI this week that national sales figures for the Office Depot classroom supplies contract for the 2011 calendar year were approximately $42 million, just 28% of the original estimate.
Sales under the contract to FCPS customers in 2011 were just $300,000.
The original $150 million figure was based on spending from the lead agency (FCPS) and the 22 members of the US Communities advisory board – which committed to purchasing classroom supplies from the contract – and other sales at that time from the US Communities programme.
Quite what happened to the remaining $108 million in expected annual sales is a matter for speculation, but it is no doubt related to Hull’s answer to a question about whether FCPS intended to rebid its school and classroom supplies contract.
"Probably not," he stated. "Classroom supplies tend to bleed into other categories such as office supplies, so we’re not sure that a standalone category for classroom supplies is needed at FCPS."
Office Depot’s commitment to US Communities in general must questionable after its $500 million office supplies contract came to an end in December 2010 and it looked to move customers on to other cooperative contracts such as the one with TCPN.
There was also no doubt a conflict of interest for the US Communities advisory board members between the classroom supplies contract held by Depot and the office supplies contract that was awarded to Independent Stationers (IS) with effect from January 2011.
Advisory board member Fairfax County, for example, is currently the largest purchaser of office supplies under the IS-held contract, so it was likely that this cannibalised sales on the classroom contract.
"The categories of office supplies and school supplies are hard to segregate," explained Hull.
"For instance, scissors, markers, glues, etc, could be seen as both school and office supplies. I’m sure we’re buying some of these products through Independent Stationers, but we also have other contracts in place with providers of items such as clay, paints, etc."
US Communities’ Bryan Shumey expressed a similar view.
"They [FCPS] have used the US Communities contract with Independent Stationers for office supplies for the last 18 months and that contract has enabled them to meet the majority of their requirements for school supplies for the system," he told OPI.
Ron Hull also confirmed that it was FCPS that took the lead in ending the classroom supplies contract.
"FCPS deemed it to be in its best interests to cancel the Office Depot classroom supplies contract," he said.
He added that the contract was cancelled for "convenience and not for cause", but that this did not mean that any financial compensation had to be paid out to the supplier.
"In January 2012 we simply issued a notice that the contract would expire on 30 March 2012. Customers can continue to use the contract through close of business 30 March. No additional compensation was paid to the vendor."
The classroom supplies contract was set up early in 2010 and was seen as a spin-off of Office Depot’s larger office supplies contract which was attracting an increasing number of overcharging allegations at the time.
Originally, Depot shared the new classroom supplies contract with School Specialty, but the latter pulled out after just 12 months in order to focus public sector sales on its agreement with educational purchasing consortium AEPA.
FCPS also has links to AEPA, serving as the consortium’s Virginia representative. This means that FCPS awards all approved AEPA contracts so that these are available for use by other public bodies throughout Virginia.
Interestingly, two AEPA contracts for classroom and school supplies are held by Staples, but Hull said that FCPS doesn’t currently use these.
"FCPS is not currently buying office or classroom supplies from the Staples AEPA contract," he stated.
"Additionally, FCPS is not actively marketing or suggesting use of the Staples AEPA contract to former Office Depot classroom supplies customers."
Office Depot told OPI that the agreement with FCPS had been ended "cordially".
"We strongly support this decision and we look forward to continuing to provide outstanding value to FCPS after 30 March 2012 as a customer outside of its legacy role as lead agency of this cooperative," the office supplier said in a statement.
Depot added that the end of the contract would "have no immediate effect" on how its serves participating public agencies.
"How they purchase, what they purchase and the price that they pay will remain the same," the company stated.
"On 1 April 2012 we will transition the support of their school supply purchases to one of our nationwide cooperative agreements."
That will be its plan. But with $42 million in annual sales up for grabs, there is sure to be some stiff competition for that business.