The News & Observer

Editorial - September 13, 2008

Minding the Store

An audit shows problems in a state purchasing deal that must be addressed with candor and an ounce of prevention

State Auditor Les Merritt, as he's had to do all too frequently, has embarrassed another state agency with a report of careless spending practices. This time, it's the Division of Purchase and Contract, part of the state Department of Administration.

Merritt's office found, in short, that the division paid too much for office supplies last year to Office Depot, which has the state contract. The amount involved was almost $300,000. This comes from a report by Mark Johnson of the state capital staff of The News & Observer and The Charlotte Observer.

Officials of P&C, as it's called by Merritt, were quick to defend themselves, saying that while Office Depot may have been overpaid, the excess payments have been recovered and that the company has agreed not to collect $500,000 in undercharges. Purchasing Officer James Staton said the company's contract had "excellent discounts" and "saved the taxpayers millions of dollars each year." It's understandable, perhaps, that Staton would rise quickly to defend his office.

But a competitor's lawyer said there were problems two years ago, when that competitor, Corporate Express of Colorado, sued the state because it said it had put in the lowest bid to provide office supplies but Office Depot still got the contract. A judge ruled that the state could have saved $1.8 million with Corporate Express. The contract was rebid, and again given to Office Depot. The same judge also noted that a consulting firm hired by the state to arrange the process of choosing contracts also had Office Depot as a client.

Merritt's audit is detailed, to put it mildly, which boosts its credibility. (Devils in the details?) His office reports, for example, that the state could have gotten batteries for far less under part of the contract, and that the state also paid too much for erasers and cork boards. In other words, the auditor hasn't offered up generalizations and empty criticisms here. He's done his job.

Britt Cobb, secretary of the Department of Administration, is a former commissioner of agriculture and a veteran of state government with a top-to-bottom understanding of bureaucracy. He has properly asked the State Bureau of Investigation whether there should be some kind of criminal investigation regarding the pricing practices of Office Depot.

But it sounds like the performance of the Division of Purchase and Contract also needs a healthy review. This division makes purchases for all state agencies. Millions of dollars are involved.

Staton has said his agency is changing bidding practices and is putting some of the auditor's recommendations for change into effect. He also says that his office had found the overcharging before Merritt did his audit and that "the net result is no harm to the taxpayers."

Maybe so, but these problems never should have happened in the first place, and Cobb, while he's taken a good step, clearly needs to do some internal checking of his own to make sure they never happen again.