Does this sound honest to you?

As some of you know, I run/manage a couple of small labs at an SEC university (go ahead and guess). I am entrusted with ~ $50K/year for Operations and Maintenance to keep things running and to keep needed stores on hand for future use.
In pursuit of this, I have become very adept at Internet Shopping. I'm really good at finding vendors for different materials at the lowest price/shipping comination of pretty much anyone here. People come to me for suggestions on how to save money on projects.
Over the last 5 years, this institution has installed more and more "Preferred Vendors" for various goods. It started with Rental cars (2004). Then, Scientific supplies (2004). On to Computer peripherals (2006), Computers (2008), Office supplies (2009) and Shipping (2010). These have never meant much to me in my position.
And now, Operations and Maintenance Supplies (2011). This last means pretty much everything not listed in the previous catagories. These contracts have been struck without knowlege of the needs of any department representatives. The term "unilateral decision" comes first to mind...
I'm sure that many of you out there are in a similar position as I-you have X amount of dollars to spend per fiscal period. To squeeze every penny you can, you have done as I: researched to find the very best vendors for any given commodity for the very best price. This can also be a balance of price vs. delivery vs. availablity vs. quality. I've found over a long career that McMaster-Carr has been a valuable resource for most of my needs.
This new contractor is Grainger Supply. One I have turned to many times in the past for pumps, motors and hoses for various projects. Not for fasteners, raw materials or electrical goods. Their prices are just too high and it takes 2-4 days for delivery.
Now for the particulars: if you are a researcher, you get contracts and grants from a number of sources. U.S. government, Corporate, private funding etc. When this money is received, our institution places a 5.75% cut on it for "Overhead". OK, Granted. When one signs the contract, it states in various ways that the PI (Principle Investigator) must find the most economical means of procurement. OK too-one is a fool if he runs out of money by NOT finding the most economical means of procuring goods.
Now for my problem: after looking through 1 year (126 separate orders) and comparing the prices (including the 10% discount Grainger has given us, their prices still range from 10% to 200% higher than McMaster-Carr. With poorer dilivery. and, to boot, many of the items I need are not carried by Grainger. BUT I have to submit, in writing, the reason I want to use a different vendor for any given purchase in this catgory. And mere price (taxpayer cost savings) is not an acceptable reason. I started to ask around of other folks in my position and found that everyone is really pissedoff about this. Lots of money will be wasted by this manouver. Suspicions were raised about why they even did this to us. Are they accepting kickbacks? Sweetheart deal? Hmmmm. Please read on (Cut and Paste from our PPS website, the X's are to hide my employer):

Preferred Vendor Contracts
Frequently Asked Questions
General

Are we required to purchase from the Preferred Vendor Contracts?

Once you see the pricing on these contracts, we think you're going to WANT to purchase from them due to their very competitive pricing! Beyond that though, these vendors have been designated as the "Preferred Vendors" for XX for these particular commodities. In general, making purchases outside the contract shouldn't be necessary. However, there may be occasions when there is a very valid reason for going outside the contract. In that situation, please just attach a note of explanation to the voucher/purchasing card recon. In some cases, PPS may follow up with you…in others cases, the Preferred Vendor may follow up with you.
Do keep in mind that the Preferred Vendor contracts have been negotiated with the best interest of XX as a whole in mind. With several of the contracts, in addition to deeply discounted pricing and any other financial incentives the vendor may have provided XX, the University will receive rebates based on the total expenditures of the University (including XXXX, XXXX and XXX).

What if I can get a better deal on a particular item with a vendor/store other than the Preferred Vendor?

Keep in mind that the Preferred Vendor contracts were negotiated with the best interests of XX as a whole in mind. While you may be able to find a particular item at a lower "fire sale" price at any given moment, use of these contracts leads to: Increased financial incentives, higher volume discounts and rebates, and better data for negotiating larger discounts/cheaper prices in the future.

Do PI's (or other University employees working on C&G projects) have to use these contracts?

Yes. Any money, regardless of the source of funding, becomes XX money/funds when it is received by the University and is therefore subject to XX policies and procedures.
As we move toward more and more "contracts" I feel our purchasing options are becoming quite constrictive with very little room for shopping for the best prices.
Contracts are negotiated by PPS in an effort to assist XX departments with procuring the items they need at great prices in an effort save budget dollars. The Preferred vendors have been very forthcoming with financial incentives to XX including volume rebates, signing bonuses, and scholarship dollars...all of which will greatly benefit the University. PPS worked hard to consolidate discounted purchasing with vendors so that campus departments do not have to spend their time "shopping around" but concentrating on advancing the efforts of their mission. Before these items go out to bid again, we will evaluate if this approach best served XX...if not then we can try something different.

So, through Kickbacks, signing bonuses and rebates, this institution is taking even more of the contract and grant money on the back door (I wonder if the grantors and contractors know this?). And, in my case, the very money handed down from the University to the College to the department to me is being funneled back to the general fund and tying my hands as to purchasing power. They mention "... in an effort save budget dollars. ".

I have proven to myself, and others, that I can buy items from the other catagories for less and MUCH less than the Preferred Vendors" prices

I say BullSh!t. What do you think?

 

First, Your observations about Grainger VRS Mc Master-CARR are spot on. We go to Grainger last in the procurment process.

Second, this phenome happens in the private sector as well. Becoming the best vendor often equates to becoming someone's best friend. However, in the private sector, two important things must be remembered. One, such actions make your company less efficient and less competitive and Two, It is perfectly legal.

However, in the Public sector, it technicaly is not. Public officials are given public funds and are intrusted to spend them fairly, properly and without prejudice. While discretion is allowed, there must be a reasonable review of the decision process to insure patronage and unfair discrimination is not allowed.

Hard to do when a large entity must delegate functions to smaller components with subordinate decision makers.

As for the case you describe, i'm not sure where a public University falls in this. Since not all revenues come from the State is it a Public institution or a Quasi Private one with public "supplemental" revenues.?

So, is it Legal? Yes, more than likely in your case.

Is it fair and rational? Well, there is more to be considered than the review/decision of a supploier's price and service.

Accounting proceedures may suggest that streamlining the purchasing works best if suppliers are "Preferred" Keep in mind they have to balance and close the books with paperwork, invoices and recieving documents all coming together from many depts.

I like you, spend time finding the best deals. We buy our poly bags and janitorial supplies at SAM's club. We buy other items at Uline, but shipping boxes from a local distributor. Thus meaning I must go to the city twice a month and shop. Drive the company truck around town to pick everything up. And then detail all the receipts for accounting.
It would be easier to just have Uline do all of it. Then we have one bill for those items, from one vendor. Easier to handle in accounting.

So, does accounting have more power than the President here in Wentzville?

Nope. Not until she puts on her CEO hat.

Besides, the accountant gets a bigger paycheck if she makes her husband go get everything at the best place, best price.

And sometimes, I get to go in the Crossie

 

Are these cozy relationships with preferred vendors ones that were established years ago by your predecessors? ... or current management?

The benefits of the relationships may have had value at one time, but we all know what happens over the course of ongoing out-of-contract or out-of scope work. The natural inclination to gouge and overprice work or materials sooner or later leaks into the pricing. And sooner or later it implodes and someone (usually everyone, even the innocent) looks embarrassed in the least, or down right unethical at worst.

Keep at arms length from these guys. Might suggest preparing an objective and comprehension spreadsheet of pricing from all of your sources and put it in front of the decision-makers. Someone will either get the hint or at least appreciate your diligence. But this seem to be the fuzzy math that only a few people are in on:Again, I would just give the upper management the numbers and be prepared to live with the outcome. It's up to them to reassess and see if the "rebates and scholarships" are still worth it. Or, if someone's a$$ should be grass.

 

I believe that if a company gives you rebates or what ever they want to call them, you have paid too much to begin with. They are giving you back some of your money and make out they are being good to you.

If they really wanted to be good to you they would have charged you a fair price to begin with.

These days accountants rule and a bad deal can be made to look like they have found the goose that lays the golden eggs.

Ask an accountant what one plus one is and he'll reply 'anything you want it to'.

 

Max....look to your bean counters... Here's what I use to run up against at my old company. I would do as you do, shop for the best product, at the best price, with the best delivery or availability. That never changed. I was in a position to fight it there. My bean counters would get bills from several vendors, and the first thing they would ask, is why don't we just deal with one, it would be much easier. I explained to them I would pit one against the other on certain parts, to keep them honest for one thing. But, to also save money, and time, if one kept a better supply than the other. Sometimes one vendor would have close outs on certain products we used, and I would take advantage of that when I could.
The company I work for now, goes to one vendor, and they have cheap parts, slow shipping, and low inventory. I just laugh as I bide my time. I will put in for this position when their guy retires in a few years. He is costing them thousands of dollars each year by not shopping around, let alone the down time....you are spot on Max...give'em hell...

 

Thanks, guys. A copy of this letter was requested to be sent to a couple of the Profs and dept. heads (Math and Science College dean, too) because it was the best example of our complaint to date.

There is no "labor saving" for the PPS dept. All of these purchases are by VISA card and SunTrust takes care of the accounting.

So far as I can see, this is just dirty dealings and I am not impressed.

I hope I qualify for all of that great unemployment benefit BHO has set up. Folks have been "disappeared" for bucking the trend in these parts!

 

Be confident in what you believe and stand your ground sir. They can take away your job,or you title, or your paycheck. The canevensoil your reputation. But they can't take away your integrity.

Or you soul



Best of luck with it.

Franc

 

Max....it's politics my friend...politics of the university...you can't change it, until you are in a position to chnage it...just see it for what it is...and move on to fight another day...register your complaint, but move on...admin's change, and that is the time to strike...patience in this case...

 

Sounds like typical job justification by others to me. A good friend of mine is an electrical engineer consultant that used to do a lot of work for one of the local junior colleges. The junior college hired him directly for probably 15+ years. He knew more about their systems than they did.

And then one day the Big Dogs moved in and said they could only hire for "approved vendors". He went through all kinds of hoopla including a personal interview to get approved to do a job same he had been doing all along. By the end of the interview, the Board agreed that he was well qualified to do the job. In fact they were a bit embarrassed of what they had put him through. Today he is doing the same job he did before but adds a "surcharge" to his invoices to cover the extra time it takes them to process his payment.

 

I have now been with this company a little over six years, and recently, went to work for them directly rather than contract. Their guy wasn't too pleased and is trying to get at me every way possible, but I just smile, and bide my time with him. The owners have already told me once their 24 mill construction project is done, they will focus on a new truck shed, and the transportation end. He isn't included in those plans and is due to retire in 3 yrs. So, people move on, and that is usually the best time to petition for changes. Max, don't risk your position, but do let them know you are watching...lol. Patience my friend.

 

You've run into something very standard and common. The sales rep gets to someone near the top, works a deal as a preferred vendor. Incentives are provided at that level and above. Managers then have to use these preferred vendors, often at a detriment to their P&L, assigned goals and or budgets, without the advantage of the incentives.

Usually, it eventually backfires on the sales rep. The lower level managers make their displeasure known, they point out every single problem and flaw, sometimes they even work to sabotage the relationship.

Make enough noise and it will eventually go away.

 

I was in procurement too maxci, and this is common as relationships are built etc. Usually there is no money changing hands at all, it's primarily a matter of convenience and knowledge. I mean, ya can't keep changing all the time either because vendors know you're a monthly mary and you won't count for anything.

On the other hand to comfortable is not good either, so I say run a sheet every 3 years or so, and show what the results are. It'll either change or not, but you have done your job. It'll all eventually backfire as the word gets out that stuff isn't coming in on time. But it's always good to keep these relationships honest and longterm you pay more for some parts, but get alot more in service or whatever when you need it. You may not be getting that either right now, so it's your job to bring this up.

 

M4,

Service from companies like these, (McCarr and Grainger), in our case, is very small. A very occasional return/RMA is about it.

If you read my OP really close, the cut and paste from our PPS website, they admit that these "relationships" are built along the lines of cash signing bonuses and year-end rebates.

What I don't understand is that these contracts are awarded on the basis of competitive bids.

How can that be if the "rules" listed are allowed (rebates, signing bunuses etc.)?

As I see it, these guys are talking out of both sides of their mouths. The "openness" of competitive bids AND the crap? I don't buy it.

 

not sure who is getting signing bonuses, that makes no sense to me, but again, if the rebates coming back are enough to offset the point of sale purchases then all is well. I think again maxci that you need to report your findings and unless you have hard evidence that someone in particular is beneefiting illegally then it really is up to them to decide if it's worth it or not to change it.

 

Honest - No... Legal - Yes...

Even small private colleges such as mine do this. We are in a weird contract with the company Aramark. Not only do they provide food, they also hire our house keeping and various other positions. From looking at the prices associated with the company and the services they provide to our school (they basically grab anyone from the immediate area and pay them minimum wage with poor benefits and rude demeanor), they are over priced when compared to other services, even ones that are much better in quality.

So why wouldnt we just dump them and move on? Turns out Aramark made some financial incentives for our school, by funding one or more of our very lovely buildings. This was a while ago and it turns out that recently the Aramark contract was finally up for a renewal. Many students at my college protested for at the very least, additional food services or options... But you guessed it, we kept the same service after being told that students "didnt mind the food and overall liked it", this being contrary to the overall wide consensus that our schools food ranked a letter "C-" for both quality and cost compared to similar schools... (up to 14 bucks a meal depending on your plan)... Smells fishy to you? me too...

Magically however, (after builiding ALOT of new homes/apartments, which was supported by an independent investor), we have a very nice multi million dollar science building being constructed... Is it linked? Who knows... but are there some very obvious under the table deals going on? Oh I think so.... Especially when you have to pay 10-14 dollars a meal with a REQUIRED meal plan (atleast 3 years) and yet if you pay by CASH it only costs 4-6 dollars a meal. In the words of the a top school official at a meeting i attended when this was vrought up he said "I know where every dime goes, but thats not something I can tell you."

Just for an overcast of the figures... @ an average of 12 dollars a meal via meal plan and 5 dollars avg for cash prices... The student population at my college overspends about 2.5million dollars a year on food versus cash price... Tell me that doesnt make you sick to your stomach...

 

Max,

I see your dilemna here, and since I spend several million a year personally purchasing IT technology for my company, I can relate. I am responsible for every transaction and have to answer for it. I buy from 20+ different sources and yes, at the end of the day, there is a little more work for our office manager, but in the long run I save tens of thousands of dollars. The biggest reason for plans like yours to be put into place is to take the decision out of your hand because most people can not 'let one go'. By this I am referring to the fact that most people who shop around and are price consious have to save EVERY CENT they can and this is where it gets interesting.

They will spend 30 minutes to save $3.67 not realizing their lost productivity FAR outweighed the savings. I took over from a guy who had this attitude and it cost my company lots of money - either spending too much time on it or ordering 10 of something 'because of the deal' when we have never sold any of that particular item. I am hyper sensitive because this is part of what my job is assessed on, so I say show them your track record.

You are clearly one who can, and has shown, to be able to use descretion when purchasing and has saved lots of money. I would show them some of the discrepencies between what you are getting and the 'preferred' vendor price, anyone who does not think 200% is a raping, will never listen to any reason.

Good luck, but do not loose your job over this, there is always another battle to fight....

99 weeks or something absolutely absurd like that