June 25, 2007

THE TRUE COST OF MINORITY PURCHASING AND WHO BENEFITS

Watchdog has been studying the subject of minority purchasing for some time, trying to get to the true cost of this practice. The Herenton administration has undertaken to hide the cost of minority preferences from the taxpayers through a very clever mechanism, the ACS subcontract.

This contract started in the year 2000 with a service agreement contract dated December 15, 2000 between SCT Government Systems Inc and the City of Memphis. The genesis of the contract is interesting. What has actually happened to this contract of which Tom Marshall said was fair?

• SCB Computer Technology, a Germantown Company, had a $467,000 contract to help choose the outsourcing firm but was involved in various legal problems such as its own admission of overstating earnings and lawsuits alleging stockholders were defrauded.
• In late 2000, just prior to the City awarding the IT outsourcing contract, Reginald French purchased Associated Softworks (ASW) from Ronald Jung for roughly $100,000 and Jung sued French claiming French funneled company money to start a new IT firm called Integrate Technologies.
• The City awarded Systems and Computer Technology (SCT) an IT outsourcing contract for $41 million in November 2000, which would be purchased by ACS six months later.
• Due to a watchdog open records request the cost of the ACS contract as of May 22, 2006 was $69.4 million. This contract which was to cost $41 million over seven years has cost $69.4 million in 4-1/2 years. At this rate, the seven year cost will be $108 million. See the attached file showing the monthly minority report from ACS.

In April of this year I sent an open records request to the City of Memphis asking for various breakdowns on payments to various favorite minority contractors. The mechanism used by the Herenton Administration to steer these contract to buddies is contained in the attached RFP dated January 5, 2007. Under this RFP, only authorized resellers can bid.

The City has standardized on the following products:
 Dell Desktops Must be an Authorized Reseller
 Dell Laptops Must be an Authorized Reseller
 Hewlett Packard Printers Must be an Authorized Reseller
 Extreme Routers and Switches Must be an Authorized Reseller
 Nortel Telephone Equipment
 APC Brand UPS
 Microsoft Products Must be an Authorized Reseller


The effect of this is that only the firms shown on the ACS monthly purchase sheets get to bid without any real competitive bids. The result is predictable, the taxpayers are paying up to 30% more for millions of dollars worth of computers and other equipment.

Recently in an open records request, I verified this when I received documentation about a computer purchase. The bid was for Dell GX620MT computers Type 1. Thomas Consultants bid $1033.55 each. Tech Express bid $1064 each and Mitchell Technology Group bid $1145 each.

The MLGW is still buying through these parties and Shelby County used to do the same. However recently, Shelby County purchased the same computers through the Dell State Contract for $751, a 28% savings. See the attached documentation and the complaint from Darryl Thomas about the County buying direct from the Dell State contract.

We could save millions of tax dollars by competitive open bidding so that the taxpayers know who is bidding, who has the low bid and who gets the contracts. Only by opening up the process to the light of open records on the internet can we hope to bring honesty to local government.

Click here to see the monthly reports of Minority contracts given without true competitive bidding


Click here to see how much more we taxpayers are paying for minority preferences