Dallas Says Office Depot Overcharged the City By Up to $3.6 Million

Categories: City Hall

Office_Depot_Corporate_Headquarters.jpg
Lizsummers
Office Depot has earned a reputation in recent years for screwing over local governments. San Francisco got $4.25 million to settle claims that it overcharged for office supplies. Maricopa County claims $5.3 million in overbilling. Houston is demanding $6.6 million.

All because a disgruntled corporate employee in Florida got himself fired with a drunken email, then filed a lawsuit claiming his former company was systemically overcharging local governments.

No telling why it took the city of Dallas so long to give its Office Depot contract a thorough examination (Dallas County did one in 2011, and it was included in the city's audit plan for the same year), but the results are finally in.

According to an report released today by City Auditor Craig Kinton, Dallas overpaid for office supplies between January 2006 and August 2010.

"The minimum amount of overcharges appears to be $1.3 million based on a comparison of the prices paid by the City to the contracted prices," it says. "The amount of overcharges could be $3.6 million or higher based upon the 'Most Favored Public Entity' clause in the contract."

The audit also says the company failed to pay $124,447 in rebates for purchases made between June 1, 2008 and December 31, 2010.

Office Depot denies this, as it has in other cases, meaning Dallas isn't going to get its cash as easily as San Francisco did.

Send your story tips to the author, Eric Nicholson.


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14 comments
GAA214
GAA214

In the private sector someone would lose their job over this.  Why is municipal government held to this standard?

Montemalone
Montemalone topcommenter

But did they recycle their ink cartridges? I got a $20 g.c. for mine.

LeroyJenkem
LeroyJenkem

I'm not surprised at all by this from Office Depot, because its stores are notorious for pulling the same shenanigans with private businesses, too. My "favorite" was accidentally on-purpose misunderstanding instructions for copy orders, always in favor of a much more expensive option that benefited Office Depot. A manager deciding that an order of 5000 double-sided black-and-white copies needed to be done in color, for instance, jacking the price from 5 cents per copy to $1.29. Knowing that most of these were on tight deadlines, the decision was then "redo it and hope that it's ready when Office Depot promises, or take the order, put it on the corporate account, and have something to give to everyone at the board meeting today?" Judging by the way Office Depot managers always got butthurt about complaints of this sort, they were apparently used to getting the victim to pay the overcharge and not simply leave the order at the counter and refuse to pay.

holmantx
holmantx topcommenter

Let's not give Trinity East any ideas . . .

ozonelarryb
ozonelarryb

So this was on Ms expert's watch. Mary Suhma cum lousy. Bit I bet she has a kickass excuse.

WylieH
WylieH

So... let me summarize the findings:

1)  The City had no formal policies and procedures for monitoring the contract.

2)  The City lost its original copy of the signed contract as well as all the signed contract amendments.

3)  To circumvent a requirement that all change orders over $25,000 be approved by City Council, city staff processed 35 separate change orders, which permitted a total increase in the contract of $900,000.

4)  The City made a math error of $100,000 in the favor of Office Depot.

5)  City staff routinely violated Council Resolutions establishing limits on office supplies purchases and purchasing prohibited items under the resolution (such as digital cameras, fax machines, and microwave ovens).  941 prohibited purchases were identified.


ThePosterFormerlyKnownasPaul
ThePosterFormerlyKnownasPaul topcommenter

Well, gee, if you wait some 4 to 8 years to complain about charges, or price paid, just what kind of response do you expect?

Who is checking the invoice and the contract?


Typical credit card agreements give you one billing cycle to contest anything on the statement.

ruddski
ruddski

Sentence them all to five years in the private sector.

Guesty
Guesty

@ThePosterFormerlyKnownasPaul  But when the contract has a most favored nations clause that requires sales be made at the lowest price made available to the seller's other customers, how is such a thing enforced until someone at the seller spills the beans?  

ThePosterFormerlyKnownasPaul
ThePosterFormerlyKnownasPaul topcommenter

@Guesty @ThePosterFormerlyKnownasPaul 

"Most favored nations" clauses in contracts are the result of lazy negotiators and are a pain to deal with.  If you are going to insist on a MFN clause from a vendor, you should also insist on having access to the other negotiated contracts in order to determine the agreed pricing terms.

For a contract like this, I would insist on a report every 90 days of the prices charged for items that I was purchasing and I would audit the vendors books at least once every three years.

I would not be surprised that Office Depot had this clause with every major government entity that they dealt with.

ruddski
ruddski

In the private sector, vendors are kept on their toes because those responsible for purchases and budgets are kept on their toes.

It's very stressful for all, and this is likely one reason certain entities don't like the idea of school vouchers - they cause too much stress by introducing choice, which leads to accountability.

Ask any doctor, stress is a killer.

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