purchasing disasters (learning from your mistakes)
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Purchasing Disasters (Learning from Your Mistakes). Warren Geltch MBA, CPPO, C. P. M., CPCM Assistant County Administrator RETIRED. Outline. The Men in Black The Conference Table Fiasco The President’s Car Calamity Don’t Go Down with the Ship! (aka The Great Bailout) - PowerPoint PPT PresentationTRANSCRIPT
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Purchasing Disasters(Learning from Your Mistakes)
Warren GeltchMBA, CPPO, C. P. M., CPCM
Assistant County Administrator
RETIRED
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Outline
• The Men in Black• The Conference Table Fiasco• The President’s Car Calamity• Don’t Go Down with the Ship!
(aka The Great Bailout) • The Drapery Abomination• The Office Supplies Faux Pas• The Sewer-sucking Screw-up• The Time Clock Cataclysm• The Fuel Apocalypse
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1976-1979
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1979-1981
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The Men in Black
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Davis - Bacon Act
• Federal Law stipulating: when any Federal Funds are used by local governments in a construction contract, the local government MUST verify that the awarded contractors are paying their employees Federal minimum wages and prevailing wage rates of similar projects in the area.
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Dénouement
• Letter from Feds to County Administrator threatening to cut off all Federal funding
• Meeting: County Administrator, Public Works Director, and me– Apology Letter– Purchasing handled all future construction
contracts
• No further issues (that I know of)
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Lessons Learned The Men in Black:1. Some contracts contain clauses that are ALIEN
even to the best purchasing professionals!
2. Always count on the Federal Government to muck up a perfectly good construction contract!
3. Always let your boss know of an impending disaster – no surprises!
4. Learn everything you can about your profession.
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1981-1985
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The Conference Table Fiasco
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The Conference Table Fiasco Hillsborough Community College
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Three Choices:
1. Send the table back and pay a 20% re-stocking charge,
2. Cut the table in half, or
3. Bring in a crane
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Cost $350 (in 1982)
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Lessons Learned
The Conference Table Fiasco:1. Never convert a nurses’ dormitory with a
small elevator, a winding stairway and balconies into an administrative building!
2. Bosses have a knack of appearing out of nowhere when you least expect it!
3. Always have a Plan B...and a Plan C...
4. Trust, but verify!
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The President’s Car Calamity
Oldsmobile 98
Low bid:Chrysler 300
Car wanted and specified:
Hillsborough Community College - 1983
Low Bid TWICE
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Lessons Learned
• The President’s Car Calamity1. Sometimes...bidding is just a suggestion!
2. Attorneys are usually a pain... but sometimes they can save your job!
3. “They can fire you, but they can’t shoot you!”… Live to fight another day.
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1985-1992
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Don’t Go Down with the Ship!(aka The Great Bailout)
• Parks and Rec. Mgr.: “We need a ship for an artificial reef.”
• Port of Miami Auction: Swedish Ship “Eidsvag”, 150’ Freighter
• Budget: $30K• County bidding requirement: $25K
Palm Beach County - 1985
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Don’t Go Down with the Ship!
• Board Meeting– Request for approval up to $25K– Commissioner “Opie”: “At the Parks
Advisory meeting, I said I wouldn’t spend a nickel more than $20K”
– Board approved staff request 5 to 1– Board Chair asked Commissioner Opie to go
with staff
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Don’t Go Down with the Ship!
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Don’t Go Down with the Ship!
• Registration, Itinerary, and Placard with Bidder #225
• Opening Bid for Eidsvag $10,000
$21,000
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Don’t Go Down with the Ship!
• Auctioneer: “I have a bid for $21K.”• “$21K going once...going twice...”• Placard raised...$22K.• “$22K...sold!...to #225.”• Hand-wrote the P. O.
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Don’t Go Down with the Ship!
• Back to Helicopter
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Don’t Go Down with the Ship!
• Commission Meeting
– Commissioner “Opie” Comments
– Formal “Sinking” Event: 90 Days
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Don’t Go Down with the Ship!(aka The Great Bailout!)
• Eidsvag Towed from Miami to W. Palm Bch.
_______
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Don’t Go Down with the Ship!
Total Cost: $48,000
Eidsvag Sinking
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Lessons Learned
• Fishes need a good home too!• Celebration plans by government?
Forget about it!• It’s probably not a good idea to drink
on the job!• The good things Purchasing Officials
do are usually unknown to the average citizen.
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The County Home Drapery Abomination
Palm Beach County - 1986
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The County Home Drapery Abomination
• “Spring Time” Design
• “Mr. Geltch...”
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The County Home Drapery Abomination
• County Home Tour
• “Spring Break” Drapes
• Solution: Pay for New Drapes from Purchasing’s Budget: $2,500 ($5,304 today)
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Lessons Learned
• The County Home Drapery Abomination1. Spring Time = Spring Break!
2. Itsy bitsy tiny little details can turn into great big huge embarrassing blunders!
3. Cost $2,500 (in 1986)...It’s always good to have a little fluff in your budget to make up for staff screw-ups!
4. Trust...but verify!
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The Office Supplies Faux PasPalm Beach County - 1987
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The Office Supplies Faux Pas
• Buyer sent memo to departments asking for estimated quantities for various lines of office supplies
• Buyer: “Mr. Geltch...”
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Lessons Learned
• The Office Supplies Faux Pas1. Anytime the word “rubber” is used (such
as “rubber room”, “rubber biscuit”, “rubber factory”, and “rubber baby buggy bumper”), pay attention!
2. It’s probably a good idea...when practical...to review staff correspondence! Trust, but verify!
3. Be careful of overloading good staff.
4. Learn to laugh at yourself...a sense of humor goes a long way!
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Orange County BCC
1992-2010
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The Sewer Sucking Screw-upOrange County - 1994
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Procurement Process: Sewer Cleaning Truck
• Specifications Received from Department• Bids Opened• Award Recommendation Posted• Protest from Second Low Bidder• (Heated) Protest Hearing– Specification Issue: all vendors’ specs included– Performance Issue: can low bidder perform?
• Award to Low Bidder
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Fallout After Award
• Delivery of truck: twice as long as promised
• Call from Utilities Director: “Mr. Geltch...”• FDOT: Park the Truck…for 6 months!• The 6:00 o’clock news• Meeting with the County Administrator• The fourth axle
39Sewer Cleaning Truck: Final Product
%$#@&%#$
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And That’s Not All!
Public Works Conference @ Orange Co. Convention Ctr.
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Lessons Learned
The Sewer-sucking Catastrophe1. Buying sewer-sucking equipment really
does suck!
2. Always count on the media...and scorned vendors...to twist the knife!
3. Never combine specifications from different vendors and expect to get “the best” result...use the “or equal” clause!
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The Time Clock Cataclysm
Wall Clock
Time Stamp
Blackberry Phones
Wrist Watches
Orange County - 2001
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Time Clock
• Time clock matched to wall clock
• Bids received after the time and date specified not accepted
• Received a number of late bids
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Board Discussion
• “The time stamp was coordinated with the wall clock....or was it?”
• “How do you know the wall clock is accurate?”
• “Do you use an ‘Atomic Clock’?”
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What’s an Atomic Clock?
From Wikipedia:
Atomic clock: a clock device that uses an electronic transition frequency...as a frequency standard for its timekeeping element.
Atomic clocks are the most accurate time and frequency standards known, and are used as primary standards for international time distribution services...and in global navigation satellite systems such as GPS.
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Revised Procedures
• IT connected time stamp in Purchasing Department to atomic clock...cost $800.
• New Bid Condition: “The time stamp in the Purchasing Department shall be the SOLE determinant of late or on-time bid submittals.”
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Lessons Learned
• The Time Clock Cataclysm1. Time is always your enemy!
2. Dealing with time issues can take you to the Twilight Zone!
3. Government always makes BIG new rules (at additional cost) to address SMALL situations!
4. There’s simply no way to keep up with technology!
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The Fuel Apocalypse
• IFB for Fuel issued Jan. 2005• IFB Terms and Conditions– 5-year term contract – County can terminate upon 30-day notice– Estimated quantities (no min. or max.)
• 87 Octane• 89 Octane• Diesel
• Right to purchase from other vendors• Individual shipments: as needed via P.O.
Orange County - 20005
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Performance
• 249 P.O.s issued• $3.5M of diesel fuel purchased• Contractor: “We quit” termination letter
4/14/06 • County: “You can’t do that” response 4/24/06• Contractor: “Yes we can” law suit 5/24/06• County: “We’ll see about that” counter-suit
6/19/06• Contractor continued honoring P.O.s• County Attorney
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Legal Precedent
“When there is no requirement that the government purchase, or limit it’s demand to any ascertainable quantity, the contract is not enforceable because there is no consideration and mutuality.”
Willard, Sutherland & Co. v.
United States (U.S. Supreme Court 1923)
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Legal Precedent
“Contracts are unenforceable where either party is without a legal obligation to perform. The inclusion of a minimum (or maximum) quantity successfully addresses the issue of lack of consideration in indefinite quantities contracts.”
Cities Service Oil Co. v. United States (1950)
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Legal Precedent
“Indefinite quantities contracts where the government has the option to purchase as it pleases are enforceable only to the extent that orders have been placed. Orders not yet placed are not enforceable due to lack of consideration and mutuality.”
Tennessee Soap v. United States
(1954)
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Legal Precedent
“Requirements contracts (i.e., term contracts) require that the contractor have the exclusive right and legal obligation to fill all of the government’s needs for the goods, work or services described in the contract.”
• Torncello v. United States (1982); • Ralph Const. Co. v. United States (4 Ct.
Cl. 1984); and• Pullman v. Hercules, Inc. (Fla. 1st DCA
1998)
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Result
• I had been doing these types of agreements for over 30 years
• Settlement “Oops” Agreement 9/5/06– Contract terminated– No penalty for either side– Contractor in “good standing”
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Lessons Learned• The Fuel Apocalypse
1. Contracts for GASOLINE can certainly FUEL doubts about their validity and can BLOW UP in your face when you least expect it!
2. You can do whatever you can get away with...until somebody catches you!
3. You’re never as smart as you think you are!
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Contracts...Lawyers...and Insurance Companies
• A lawyer purchased a box of 24 very rare and expensive cigars
• He then insured them for (among other things) fire.
• Within a month, having smoked the entire stockpile of these great cigars, the lawyer filed a claim against the insurance company.
• His claim stated that the cigars were lost in a series of fires.
• Did the insurance company pay or not?
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• The insurance company refused to pay the claim, stating the obvious reason that the man has consumed the cigars.
• The lawyer sued
• Did he win?
Contracts & Lawyers & Insurance Companies
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Contracts & Lawyers & Insurance Companies
• Delivering the ruling, the judge agreed with the insurance company that the claim was frivolous.
• BUT…the judge stated the lawyer held a policy (contract) from the insurance company that warranted the cigars insurable and guaranteed it would insure them against fire.
• Without defining what is considered to be unacceptable “fire”, the insurance company was obligated to pay the claim.
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Contracts & Lawyers & Insurance Companies
• Rather than endure a lengthy and costly appeal process, the insurance company accepted the ruling and paid $15,000 to the lawyer for his loss of the cigars that perished in the “fires”.
• Now, for the rest of the story…
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Contracts & Lawyers & Insurance Companies
• After the lawyer cashed the check, the insurance company had him arrested on 24 counts of ARSON!!
• With his own insurance claim form and testimony from the previous case used against him, the lawyer was convicted of intentionally burning his insured property and was sentenced to 24 months in jail AND a $24,000 fine!!
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Why Do They Bury Lawyers 12’ Underground?
‘Cause deep down they’re really nice people!
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THE END