Thursday, August 12, 2010

Yet Another Detroit Practice that Breeds Corruption Comes To Light

The Detroit News: Detroit moves to reduce costs of purchasing

Mayor Dave Bing is vowing to end the so-called Detroit penalty, a 15-20 percent surcharge the city spends on purchases and services because of its reputation for late payments and bureaucracy.

Bing appointee Andre DuPerry, a former General Motors Corp. purchasing executive, is trying to persuade more businesses to sell goods and services to Detroit. Some have written off the city for years, including an unnamed prominent office supply chain, DuPerry said.

A lack of competition has helped create a niche for third-party companies that charge inflated rates for enduring the city's hassles, DuPerry said.
Reforming purchasing could save the city $22 million a year, according to a report presented last year to Bing. Among the possibilities: consolidating contracts, buying goods in bulk with other governments and -- most controversial of all -- re-examining the preferences Detroit businesses are given during the contract process.

Detroit spends $99.99 for toner ink that goes for $89.10 in other cities, for example, and $6.93 for copy paper that averages $5.86 nationally, according to data supplied to Bing's office from the National Intergovernmental Purchasing Alliance.
The preferences for Detroit business are a hassle, as is the Detroit Slavery Ordinance passed in 2004 that requires anyone doing business with the city to trace back their business ownership and declare if the business ever owned any slaves or made any money from slavery or had insurance policies on slaves. Yes, it is a current ordinance and a complete waste of everyone's time.

The Detroit business preference creates a weird situation where Detroit could save thousands ordering parts it needs directly but it instead funnels the purchases through middlemen, many of whom are politically connected, who take a cut with the result that Detroiters pay more for less than they otherwise would have.

I had a case involving such a middleman - Detroit wanted certain widgets worth $50 thousand, he added his cut of 18 thousand and the business even shipped the parts directly to the City. In short he did nothing but be a politically connected minority with the connections to be a supplier to the city. The problem in addition to the economic inanity of the situation? He got greedy and decided to keep all $68 thousand for himself. That's where I came in on behalf of the supplier to divest him of his ill-gotten gains - which I did, quite successfully I might add.

This middleman is still a supplier to the City of Detroit and that was not the first time he's done this to a supplier. No wonder Detroit is in the shape it is currently in.

Reforming the purchasing process is a needed step in the right direction and it will be telling indeed if such a reform is actually implemented.

1 comment:

Scott said...

You must get a lot of satisfaction sticking it to crooks like that! You get to actually do what most of us can only dream of.