Oklahoma pays 400% More for Toners on Statewide contracts

[Anonymous]

Oklahoma pays 400% more for toner on Statewide contracts

Oklahoma Statewide contracts don’t always mean cheapest price, legislators told
Some items on a statewide contract can be found at lower prices elsewhere, agency officials say. Oklahoma’s purchasing director says the first full year the contract was used the state saved about 13.5 percent.

A statewide contract on a wide variety of supplies has saved the state about $1.2 million in the past year, but the savings could be more if agencies would have more freedom to buy items that are being sold elsewhere at a lower cost, a legislative panel was told Tuesday.

A box of 20-to-30-gallon trash bags cost more than twice as much on the statewide contract than the previous contract and agencies that don’t seek and receive permission from the state to buy the lower-priced items are stuck with paying the higher price, Mary Reznicek, purchasing director for the Oklahoma State Bureau of Investigation, told members of the House of Representatives Government Modernization Committee.

“In order to avoid paying more than necessary, the OSBI must now request an exception each time we buy trash bags,” she said.

“Mandatory contracts are not always in the best interest of the state,” she said during an interim legislative study looking at central purchasing procedures. “Conditions change; prices fluctuate and fewer providers can result in higher prices. When a supplier has a five-year contract, what is the motivator to lower the price when they know state agencies have to use the contract?”

Reznicek told Rep. Jason Murphey, the committee chairman, that she couldn’t recall an instance when she was denied permission to buy the item at a lower price.

“There are always going to be challenges to get the best deal, but it’s how they react when they’re confronted with an obstacle and do they do the right thing and get the lowest price,” said Murphey, R-Guthrie, after the meeting. “It looks like they are. They’re giving the exceptions and there’s not a single instance of them forcing someone to buy something that’s more expensive.”

Charlene Bredel, in charge of buying items at the James Crabtree Correctional Center in Helena, said she also has found some items that are more expensive on the statewide contract.

“I want to use the taxpayers’ money the best way that I can,” she said. “It is a good concept, but when you’re being furloughed you don’t always have the time to do a lot of research on it.”

State Purchasing Director Scott Schlotthauer said more than 900,000 items are listed on the maintenance, repair and operations statewide contract.

He said when state agencies find a lower price they are asked to report it to his agency, the state Central Services Department, and then ask for permission to buy the lower-priced item. His agency then contacts the supplier and seeks to get a lower price for the item.

$1.2M saved first year
In the 2010 fiscal year, the first full year the contract has been used, the state has saved about 13.5 percent on the contract, or about $1.2 million on approximately $9.2 million worth of purchases. Estimated savings for the 2011 fiscal year, which ended June 30, are about $2 million.

Regarding complaints that items can be bought at a lower price than what is offered on the state contract, Schlotthauer said: “It depends on the specific areas. I have found that what is most important is to make sure we’re comparing like items.

“If we find that our state contract suppliers’ pricing isn’t as good as it should be, we turn it around and send it back to them and say, ‘What do you make of this?’ So they’re held accountable.”

Reznicek said the Central Services Department is not doing a bad job, but that recent changes in state law setting up mandatory statewide contracts have removed the option when it is better for an agency to buy elsewhere.

“Although (the Central Services Department) is in the process of renegotiating and rebidding portions of the contract, with thousands of items on this contract, it is almost impossible to assure the state receives the best price on each item,” she said. “And more items are being added.”

Schlotthauer said the state has about 145 statewide contracts, resulting in about $350 million of annual sales. Overall, the Central Services Department handles about $933 million of purchases a year.

Boosting buying power

The state saved more than $8 million through central purchasing-managed contracts during the 2010 fiscal year, he said. Savings for the past two years could be about $20 million.

The savings have been realized because central purchasers have been able to manage and renegotiate state contracts in an effort to leverage the state’s buying power, he said.

Reznicek also suggested a change in a state program that supports companies that hire developmentally disabled workers to teach them job skills while making products.

The OSBI supports the program, she said.

“However with budget shortfalls, paying 400 to 1,000 percent more for some items than the open marketplace is unreasonable,” Reznicek said.

State law prohibits the Central Services Department from giving permission to a state agency to buy the products elsewhere if it is being sold at a lower price.

As a result, OSBI is paying $307.85 for 50 Blu-ray Discs, compared with a price of $37.99 from an online retailer, she said. The state could be buying No. 2 pencils from a federal contractor at 2 cents each instead of 18 cents each.

“Certain ink pens are 1,000 percent higher when purchased from a state use vendor,” Reznicek said. “Some toner cartridges and CD sleeves are almost 400 percent higher than can be purchased on the open market when comparing the same product number and applicable shipping costs.”

Reznicek, a past president of the Oklahoma Association of Public Purchasing, said agency and public purchasing agents are trained and certified to acquire goods and services.

“Oklahoma purchasing agents are very conscientious about getting the best value for the taxpayer dollar,” she said. “They should be given the opportunity to buy at the lowest price.”

[Author]

November 15, 2011 at 8:27 AM