*NEWS*KINKO’S SCHOOL CONTRACT,TOO COSTLY

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*NEWS*KINKO’S SCHOOL CONTRACT,TOO COSTLY

 user 2006-01-31 at 11:17:00 am Views: 67
  • #14179

    Kinko’s deal is costly to DISD
    Exclusive: Principals lament expense; firm stands by copying, printing program
    When
    the Dallas schools announced a groundbreaking plan to outsource copying
    and printing to industry giant Kinko’s, W.T. White High School jumped
    on board.
    Company reps told Principal Joy Barnhart that she could
    slash copying and printing expenses by 21 percent, money she could plow
    back into classrooms. Instead, those expenses nearly quadrupled,
    according to district records. From 2003 to 2005, such expenses rose
    from $42,000 to $158,000.
    Across the entire Dallas Independent
    School District, copying and printing costs more than doubled. In 2003,
    the district spent $5.87 million; by 2005 it was spending $12.82
    million, according to records obtained by The Dallas Morning News.
    “I just think that somebody needed to scrutinize that contract, and I’m not sure anybody did,” Mrs. Barnhart said.
    FedEx/Kinko’s
    spokeswoman Maggie Thill referred requests for cost figures to DISD.
    She did not dispute The News’ findings, which were based on DISD’s
    figures, but said the company stands by the program – which, she said,
    allows DISD to opt out with only 30 days’ notice
    “Based on a school-by-school assessment, we are in fact saving the district money,” she said.
    District
    records and interviews don’t support that claim, however. Kinko’s based
    its estimates on industry averages and other assumptions that DISD says
    do not apply and which ended up inflating estimates of the district’s
    expenditures. For example, Kinko’s included such things as estimated
    time workers spent making copies and repairing machines, as well as
    office supplies like toner.
    “It has been said by FedEx/Kinko’s that
    we simply didn’t understand our total cost to copy equation and the
    expenses are not out of line,” the district’s purchasing director, Greg
    Milton, wrote to his boss in September. “My professional opinion is
    that they’ve come up with this explanation as a means to justify their
    costs, but the argument is ridiculous when analyzed. … [Current
    charges] are double to eight times our real costs!”
    In addition to complaints of excessive cost, public records examined by The News indicated that:
    •DISD’s
    handling of the project was led by Ruben Bohuchot, DISD’s former
    director of technology, who was ousted last fall after becoming the
    subject of an FBI investigation into a separate computer-services
    contract. Mr. Bohuchot, who did not return phone calls from reporters,
    played in an exclusive golf tournament subsidized by FedEx/Kinko’s that
    was included as part of the deal with DISD. A FedEx/Kinko’s spokeswoman
    said the company has not been contacted by the FBI. No charges have
    been filed in the FBI investigation.
    •The contract obliges schools
    to lease equipment from FedEx/Kinko’s, so hundreds of perfectly
    functional printers the district already owned now sit in warehouses,
    wrapped in plastic.
    •The project’s grand vision was to create a
    network of high-tech printers and copiers throughout the district,
    allowing teachers and administrators to print anything, anywhere. Two
    and a half years into the three-year deal, that remains only a dream.
    •Some
    school budgets are breaking under the cost of operating new equipment
    leased through the program. T.C. Marsh Middle School’s copying charges
    for the current school year would amount to more than $80,000,
    Principal Kyle Richardson estimated. He said the amount he had budgeted
    for the year “would not even cover three months of charges.”
    “One of
    my chief responsibilities is to be a good steward of public funds,” he
    wrote in a November e-mail to central office administrators. “How can
    that goal be accomplished when we have a system that is much slower and
    costs twice as much to use?”
    Superintendent Michael Hinojosa said he’s heard complaints about the contract since arriving in the district in May.
    “We’re concerned not only with the cost, but also the service,” Dr. Hinojosa said. “We’ve started looking at it.”
    Origins of the deal
    The idea to privatize the district’s copying and printing needs gained steam in early 2003.
    Enthusiasm for the contract went to the top of Kinko’s corporate ladder.
    The
    company’s stake went beyond this one deal. Records and interviews
    indicate that top executives hoped to establish a trend-setting program
    with DISD that could then be marketed to other large districts around
    the country.
    The potential of such a deal was “huge, huge, huge”
    according to one former executive who was involved in the early stages
    of the project DISD “was a huge deal for the company,” said the former
    Kinko’s executive, who spoke on the condition of anonymity. “We simply
    could not fail.
    Once the deal was inked in 2003, then-Superintendent
    Mike Moses urged his employees to sign up with Kinko’s, telling them
    they could redirect any savings into their schools.
    Trustee Hollis
    Brashear, who was board president at the time, voted against the
    contract. He questioned why the administration pushed for the deal even
    though schools were not complaining about their equipment.
    “Kinko’s was never able to prove they could save the district money,” he said.
    Kinko’s
    had told DISD it could save $6.7 million on equipment alone over the
    first three years of the deal. More than 60 schools and numerous
    district departments signed onto the deal, each hoping for a piece of
    those savings.
    The contract called for Kinko’s, which was soon
    bought by FedEx, to analyze how every school and office could improve
    productivity. Its suggestions centered on replacing old equipment and
    handing large printing jobs over to local FedEx/Kinko’s stores.
    Rising costs
    As
    schools signed on with Kinko’s, they began to wonder why anyone had
    thought it could save them money. From the principals’ perspectives,
    costs were rising steeply.
    When FedEx/Kinko’s looked at W.T. White
    High School, for example, it concluded that the school was spending
    $104,116 per year running its Oce copiers. The company said it could
    save the school an average of $45,000 a year.
    Principal Barnhart
    told The News she can’t figure out how the company arrived at its
    figures. In previous years she spent $42,000 annually for equipment
    rental, copying costs, toner and repairs – the same costs included in
    FedEx/Kinko’s billing, district officials say.
    The principal at
    Reinhardt Elementary also stated that her school’s estimates were way
    off. The company told her that Reinhardt ran 20,000 sheets through its
    ink jet printers per year and made between 400,000 and 600,000 copies.
    The principal, Jill Barney, told central office administrators that the
    actual figures were 2,500 ink jet printouts and more than 1 million
    copies.
    “Their original estimate of what we spent on inkjet
    cartridges and printers was too high so the savings they were claiming
    to give us was incorrect,” Ms. Barney wrote in an e-mail to district
    officials.
    In an effort to better understand how FedEx/Kinko’s
    arrived at its estimates, the district’s purchasing department examined
    financial records at 10 campuses before and after the schools joined
    the FedEx/Kinko’s project.
    The conclusion: district officials could
    not figure out how Kinko’s came up with the estimates, which were based
    on a complicated formula that included not just what schools paid for
    copying, but also things like the time teachers spent in the copy room
    and the amount of time repairmen spent on campuses. The estimates also
    included supplies like toner, which schools had received for free under
    previous contracts.
    To DISD’s bookkeepers, however, those labor
    costs were irrelevant. Teachers got paid whether they were standing
    over a copier or doing other things to prepare for class. The district
    also said Kinko’s used industry average costs in its estimates, but
    presented the figures as if they were actual DISD expenses.
    By late
    2004, some managers warned that the program was blowing school budgets.
    Records show that top officials were unsure what to do. In July 2005,
    DISD froze the project and stopped allowing new schools to join.
    However, they continued paying for schools that had already signed up.
    One
    of the first administrators to question the deal was Mr. Milton, DISD’s
    purchasing director. Last summer, he wrote his bosses to share his
    concerns: Nobody at DISD really understood how Kinko’s arrived at its
    estimates, and therefore all were surprised at the expenses that
    followed, he said. Plus, he said, upper management didn’t make
    addressing the concerns a top priority.
    “I think we are throwing
    good money after bad trying to salvage something that doesn’t even meet
    the needs of the campuses,” he later wrote in a September e-mail to his
    boss. … “We are spending millions of dollars … which the
    competition [other companies] offers for millions less.”
    In response
    to complaints from principals, DISD’s central office began absorbing
    the cost overruns incurred by the participating campuses.
    The total copying charges, however, were rising fast enough to put a dent even in DISD’s $2 billion budget.
    In
    2003, the year before trustees ratified the deal, DISD spent $5.87
    million on copying, printing, equipment and associated costs, according
    to district records. In 2005, districtwide spending for copying hit
    $12.82 million – $2.1 million more than DISD had budgeted. Those costs
    do not include charges to school credit cards many principals used for
    copying expenses after becoming frustrated with the contract. The
    district has not provided complete records of those transactions.
    Earlier
    this month, The News reviewed 15 months of billing records from
    FedEx/Kinko’s. Those records indicated that the company has billed the
    64 participating schools and some departments $7.1 million in printing
    and copying charges for 2005. Copying expenses for the rest of the
    district, 153 schools, were about $5.7 million, according to district
    records.
    Ms. Thill, the company spokeswoman, said The News’ figures were “exactly in line” with the company’s records.
    FedEx/Kinko’s
    said that if the deal is indeed bad for the district, DISD can simply
    cancel it with 30 days’ written notice. That the district has failed to
    do so for 2 ½ years indicates that the program is working, Ms. Thill
    said.
    Superintendent Hinojosa, however, said terminating the
    contract would require the district to have a plan to provide copy and
    printing services to campuses. Some schools had been renting their
    equipment.
    Reached last week, Mr. Moses said through a spokeswoman:
    “It is very disappointing if printing costs have increased, because the
    idea was presented to our purchasing department as a way to bring
    cost-effectiveness to the district’s printing and copying expenses. If
    costs have not been driven down as promised, then the board definitely
    should review and cancel the contract.”
    District officials,
    including Superintendent Hinojosa, say what’s needed is a thorough
    examination of the costs, and a detailed analysis of where the
    projected savings have gone.
    “We have to question why we’re doing so much, and what’s causing it to be so high,” Dr. Hinojosa said.