US Communities blow for Depot

 

Office Depot’s office supplies contract with US Communities is to be rebid later this year after the lead agency, LA County, decided not to exercise a further contract extension.

 

Under the terms of the existing contract, LA County could have extended the contract for a further 12 months beginning in January 2011.

 

However, the county, which is responsible for issuing the solicitation, evaluating the bids and awarding a new contract, has said that it will not extend the contract when the current extension expires at the end of 2010.

 

In a news update on the US Communities website LA County said that it was rebidding the contract – which has been in place for five years – due to the general economy and public agency funding issues "in an effort to drive added value for public agencies".

 

However, there are bound to be concerns at US Communities about the reputation of its office supplies contract following a number of high-profile audits that concluded that some agencies had been overcharged by Office Depot.

 

Depot, without admitting that it overcharged customers, has made several refunds – including one of almost $300,000 to Lee County School District – and there are still a number of ongoing audits.

 

Dave Sherwin, the whistleblower whose actions have led to the audits, estimates that actual overcharging by Office Depot could amount to as much as $100 million.

 

Some agencies are known to have switched to the rival National Joint Powers Alliance (NJPA) piggyback contract that is held by Staples. There are also other similar contracts, either national or regional, that are largely serviced by either Staples or OfficeMax. There are also at least two multiple award contracts involving Staples, OfficeMax and independent dealers.

 

It will be interesting to see who bids on the new contract which is estimated to be worth around $600 million in sales per year.

 

Staples and ‘Max both have existing piggyback contracts which, in theory, means that current US Communities customers can switch over to contracts such as the NJPA or OfficeMax’s America Saves programme. However, the chances of enticing around 39,000 agencies to switch are so minute, it would make more sense to go after their business by bidding on the US Communities contract. It appears that there are no restrictions on being a supplier on more than one cooperative contract as long as certain best pricing conditions are met.

 

Furthermore, Staples’ NJPA contract itself has just been rebid as it reaches its maximum limit of five years in July this year. There is no guarantee that Staples will be awarded the new contract (though who else could be awarded the contract with the NJPA being based in the town of … Staples, Minnesota?).

 

OfficeMax’s America Saves piggyback contract has been extended until June 2011, but the office supplier has recently been successful on bids on regional contracts in Texas and Utah (as has Staples, by the way), so there appears to be no reason for it not to bid on the US Communities contract as well.

 

Are there opportunities for the independent dealer community?

 

Any bid would have to provide for national coverage, essentially ruling out a bid from a single independent supplier. There could also be other contractual and invoicing issues that make it difficult for a single dealer to act on behalf of a group of dealers.

 

AOPD has the coverage, but historically has worked with the private sector. Any bid would also have to be brokered by AOPD itself and not by one of its members.

 

This leaves the possibility of a wholesaler-sponsored bid on behalf of dealers, similar to the efforts made by United last June for the State of California contract, although the negative reaction from the dealer community ultimately prevented United from going through with a bid.

 

Almost a year down the line, however, United may have another go. President of United Stationers Supply, Cody Phipps, recently told OPI that the wholesaler has been developing initiatives to help its dealers win more business in the public sector.

 

Don’t count Office Depot out, either. The $600 million in annual sales from US Communities represents about 17 percent of the total sales of its North American Business Solutions Division. After seeing divisional sales already slide 16 percent in 2009, losing another 17 percent would be a major blow. It would also leave the company without a public agency cooperative contract for office supplies; although agencies generally have the possibility of tagging onto a Depot-run statewide contract, that would require a massive sales effort from Depot. Therefore, Depot is likely to make winning the new contract a top priority.

 

"Office Depot fully intends to compete for the new contract and we view the re-solicitation as an opportunity to affirm and improve the value of our offering to public agencies nationwide," said Senior Manager, Public Relations, Jason Shockley, in an email to opi.net.

 

Shockley echoed the US Communities position on the reasons for the contract rebid, saying that the decision to take the contract to market is "in response to current economic conditions and related public funding challenges and cutbacks".

 

And a successful Depot rebid is certainly not out of the question. After all, after a scathing audit carried out in 2008 in Nebraska, Depot was subsequently awarded the rebid state contract. At the time, Nebraska’s State Purchasing Manager told opi.net that the problems had essentially been due to the wording of the contract itself. It may well be that this is also the view of US Communities and they are seeing this is an opportunity to tighten up the contract, but still view Office Depot as being very much in the frame. In addition, the two organisations are bound to have developed strong relationships over the last ten years that they have worked together, potentially giving Depot an advantage over its competitors.

 

LA County said a team of public procurement professionals from agencies across the country will assist it in evaluating responses and that it plans to award a new contract by the beginning of October 2010.

 

It appears that the new contract will be slightly different in scope to the previous one, which included school supplies.

 

A new US Communities school supplies contract has just been awarded to School Specialty, with Fairfax County, Virginia, acting as the lead agency. School Specialty estimates that this contract could be worth up to $100 million a year in sales.

 

The US Communities website also lists a separate contract for Print Solutions that is attributed to Office Depot. However, the master agreement number for this contract is the same as the current office supplies contract, so presumably this portion of the contract will be put out to bid separately and not form part of a new office supplies agreement.