*NEWS*KINKO’S SCHOOL CONTRACT,TOO COSTLY

[Anonymous]

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.

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January 31, 2006 at 11:17 AM