The Myth or Truth Behind the $20,000 Wrench

[911pcars]

SammyG,
Your Home Depot scenario makes sense if the govt. is only purchasing a single toilet seat from your company. Does your company repeat that scenario for each item in a quantity order or for repeat orders?

and from Rick:
"Ten min. ago I got off the phone with someone who makes sure the gov't. gets less for the taxpayers' dollar. A major gov't. agency we've all heard of is a big client of mine. BUT they don't ever pay their own bills directly to us. Instead, they have a "contractor" get our bills, submit them to the gov't. agency for payment, they pay the contractor and the contractor pays us. As far as I can tell, this contractor does nothing except pass bills and checks between us and this gov't. agency. From what I can tell, this contractor is one-man shop and most likely some kind of minority set-aside or affirmative action thing. He takes our bills, marks them up by XX% and keeps the difference. A lot of PR firms do this too, but they usually offer some kind of service for the money, like writing the press releases for the client or fielding media calls. This contractor does none of that. Sound scandalous? I bet it'd be a lot more scandalous if this gov't. agency tried to cut out the middleman."

Rick,
Sounds like the contract was awarded to this "minority" contractor and your company was selected to be his partner or sub-contractor. Without the "correct" front man, your company may not have been eligible to bid directly or provide the manufacturing services. Who knows how he landed the contract.

However, I don't think that's in the spirit (or the law) of what the govt. had in mind to allow bidding available to a wider segment of the society. If the front man is a one-man operation, his "business" is either a shill to bypass govt. regs. or he found it necessary to find a vendor/partner to wade through the requisite labyrinth of bureaucratic paperwork. Whatever, it's a waste.

In many of the examples described in this thread, the common denominator is
that certain individuals/companies are getting rich on the taxpayer's dime. At a minimum, it's a tremendous amount of waste. Unfortunately, many people are resigned to this system. Halliburton's cost plus program is the ultimate example of the "govt. contract". We get what we vote for.

Sherwood

[Shaun @ Tru6]

Originally Posted by Rick Lee

Ten min. ago I got off the phone with someone who makes sure the gov't. gets less for the taxpayers' dollar. A major gov't. agency we've all heard of is a big client of mine. BUT they don't ever pay their own bills directly to us. Instead, they have a "contractor" get our bills, submit them to the gov't. agency for payment, they pay the contractor and the contractor pays us. As far as I can tell, this contractor does nothing except pass bills and checks between us and this gov't. agency. From what I can tell, this contractor is one-man shop and most likely some kind of minority set-aside or affirmative action thing. He takes our bills, marks them up by XX% and keeps the difference. A lot of PR firms do this too, but they usually offer some kind of service for the money, like writing the press releases for the client or fielding media calls. This contractor does none of that. Sound scandalous? I bet it'd be a lot more scandalous if this gov't. agency tried to cut out the middleman.

From what you can tell, he's a minority set-aside or affirmative actions thing?

Can you please explain that?

I don't know how much your company pays this intermediary, but you may want to let your C-level staff know that for $200K fully loaded annually, they could have a true government cost accountant and software, most likely Deltek, handle your billing.

[Rick Lee]

Originally Posted by Shaun 84 Targa

From what you can tell, he's a minority set-aside or affirmative actions thing?

Can you please explain that?

I don't know how much your company pays this intermediary, but you may want to let your C-level staff know that for $200K fully loaded annually, they could have a true government cost accountant and software, most likely Deltek, handle your billing.

I've never met the guy. I just took the account over from the previous sales rep. who had met the guy and told me that. We don't pay the billing contractor anything. We just send him the bills that the gov't. agency racks up, he tacks on xx%, probably 30% as most PR firms do, sends his bill to the gov't. agency, they pay him, he keeps his cut and then pays our bill to us. Again, as far as I can tell, he does nothing else for this gov't. agency. What private or public company would ever hire such a middleman just to spend more money? This kind of stuff can only exist with the government, which, by law, has to give a certain percentage of their business to minority or women-owned businesses.... or non-profits.

My wife works for a non-profit that has so much money, they have to look for new ways to piss it away - 35 hr. work week for full time pay, 403b matching to 10%, even if you contribute nothing, unlimited sick days and it's not even counted if it's less than 5 hours, they sponsor H-1B visas for all who need it, etc. When you have people who've been working there for 35 yrs., you know they are a gravy train.

[M.D. Holloway]

Rick,
If they got $$$, I know of a way to get rid of it!

[Shaun @ Tru6]

Originally Posted by Rick Lee

I've never met the guy. I just took the account over from the previous sales rep. who had met the guy and told me that. We don't pay the billing contractor anything. We just send him the bills that the gov't. agency racks up, he tacks on xx%, probably 30% as most PR firms do, sends his bill to the gov't. agency, they pay him, he keeps his cut and then pays our bill to us. Again, as far as I can tell, he does nothing else for this gov't. agency. What private or public company would ever hire such a middleman just to spend more money? This kind of stuff can only exist with the government, which, by law, has to give a certain percentage of their business to minority or women-owned businesses.... or non-profits.

My wife works for a non-profit that has so much money, they have to look for new ways to piss it away - 35 hr. work week for full time pay, 403b matching to 10%, even if you contribute nothing, unlimited sick days and it's not even counted if it's less than 5 hours, they sponsor H-1B visas for all who need it, etc. When you have people who've been working there for 35 yrs., you know they are a gravy train.

[sammyg2]

Originally Posted by 911pcars

SammyG,
Your Home Depot scenario makes sense if the govt. is only purchasing a single toilet seat from your company. Does your company repeat that scenario for each item in a quantity order or for repeat orders?

It was strictly a hypothetical situation to demonstrate how screwed up the bureaucracy is.
There are so many silly rules that common sense has absolutely nothing to do with it.
But to answer your question, no. In that scenario where the bid is cost plus, the price per piece should go down dramatically as the number of units goes up.
But, if the governemtn buys one toilet seat for 4600 and then later that same year needs 100 more, they may go back to that company and order all 100 for $600 each, as that is the price that is set and accepted so it must be right. it happens. Now if that toilet seat went out for competitive bid and someone bid $50, it would probably be rejected because it is too low. They already know what one costs, $600. so the system will not allow a bid to come in so far under that price.

there are types of bids (hard money bids) where the government decides beforehand approximately how much a unit should cost and will not accept a bid that is drastically higher or lower no matter what.
In some cases they also will reject a bid that is more than a set percentage below the competing bids and they think that if it's that low it can't be right.

Suppose there are you three companies who are requested to bid on a job.
They are all busy, full up with orders or the job is a major pain or whatever and they really don't want to take on this job so they all bid exceptionally high in order to NOT get the contract.
Guess what? it is awarded as long as all three bids are fairly equal, even if the price is ridiculously high.
The rules are set up in a way that completely takes logic and judgement out of the picture. They don't trust people to use good judgement so they don't allow them to use any judgement at all.

[911pcars]

"It was strictly a hypothetical situation to demonstrate how screwed up the bureaucracy is. ...."

No wonder the US is doing so well in the global economy. We're pissing our money and resources down the drain (or to others more fortunately connected). Doesn't matter. In the end, we're all collectively disadvantaged.

We all have a vested interest in making our system a win-win situation. Some folks have the attitude that the government is them. No, it's us.

Sherwood

[Rick Lee]

Hey, look at the bright side. Yes, the gov't. pisses billions down the drain, overpays for everything and gets little for it. But that money does often go to American businesses which pays part of it back in taxes. So it's not a total waste.

[red-beard]

Circle jerk

[M.D. Holloway]

Red - I just looked at my notes from months ago. I have down that you were gonna send me a lil sump'n sump'n via PowerPoint. Do you remember?