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Purchasing Disasters (Learning from Your Mistakes) 3.

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Presentation on theme: "Purchasing Disasters (Learning from Your Mistakes) 3."— Presentation transcript:

1 Purchasing Disasters (Learning from Your Mistakes) 3

2 Outline The Men in BlackThe Men in Black The Conference Table FiascoThe Conference Table Fiasco The President’s Car CalamityThe President’s Car Calamity Don’t Go Down with the Ship! (aka The Great Bailout)Don’t Go Down with the Ship! (aka The Great Bailout) The Drapery AbominationThe Drapery Abomination The Office Supplies Faux PasThe Office Supplies Faux Pas The Sewer-sucking Screw-upThe Sewer-sucking Screw-up The Time Clock CataclysmThe Time Clock Cataclysm The Fuel ApocalypseThe Fuel Apocalypse 4

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5 The Men in Black 7

6 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.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. 8

7 Dénouement Letter from Feds to County Administrator threatening to cut off all Federal fundingLetter from Feds to County Administrator threatening to cut off all Federal funding Meeting: County Administrator, Public Works Director, and meMeeting: County Administrator, Public Works Director, and me –Apology Letter –Purchasing handled all future construction contracts No further issues (that I know of)No further issues (that I know of) 9

8 Lessons Learned The Men in Black: 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. 10

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10 The Conference Table Fiasco 12

11 The Conference Table Fiasco Hillsborough Community College 13

12 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 14

13 15 Cost $350 (in 1982)

14 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! 16

15 The President’s Car Calamity Oldsmobile 98 Low bid: Chrysler Car wanted and specified: Hillsborough Community College Low Bid TWICE

16 Lessons Learned The President’s Car CalamityThe President’s Car Calamity 1.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. 18

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18 Don’t Go Down with the Ship! (aka The Great Bailout) Parks and Rec. Mgr.: “We need a ship for an artificial reef.”Parks and Rec. Mgr.: “We need a ship for an artificial reef.” Port of Miami Auction: Swedish Ship “Eidsvag”, 150’ FreighterPort of Miami Auction: Swedish Ship “Eidsvag”, 150’ Freighter Budget: $30KBudget: $30K County bidding requirement: $25KCounty bidding requirement: $25K 20 Palm Beach County

19 Don’t Go Down with the Ship! Board MeetingBoard 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 21

20 Don’t Go Down with the Ship! 22

21 Don’t Go Down with the Ship! Registration, Itinerary, and Placard with Bidder #225Registration, Itinerary, and Placard with Bidder #225 Opening Bid for Eidsvag $10,000Opening Bid for Eidsvag $10,000 $21,000 $21,000 23

22 Don’t Go Down with the Ship! Auctioneer: “I have a bid for $21K.”Auctioneer: “I have a bid for $21K.” “$21K going once...going twice...”“$21K going once...going twice...” Placard raised...$22K. Placard raised...$22K. “$22K...sold!...to #225.”“$22K...sold!...to #225.” Hand-wrote the P. O.Hand-wrote the P. O. 24

23 Don’t Go Down with the Ship! Back to HelicopterBack to Helicopter 25

24 Don’t Go Down with the Ship! Commission MeetingCommission Meeting –Commissioner “Opie” Comments –Formal “Sinking” Event: 90 Days 26

25 Don’t Go Down with the Ship! (aka The Great Bailout!) Eidsvag Towed from Miami to W. Palm Bch.Eidsvag Towed from Miami to W. Palm Bch. 27 _______

26 Don’t Go Down with the Ship! 28 Total Cost: $48,000 Eidsvag Sinking

27 Lessons Learned Fishes need a good home too!Fishes need a good home too! Celebration plans by government? Forget about it!Celebration plans by government? Forget about it! It’s probably not a good idea to drink on the job!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.The good things Purchasing Officials do are usually unknown to the average citizen. 29

28 The County Home Drapery Abomination 30 Palm Beach County

29 The County Home Drapery Abomination 31 “Spring Time” Design“Spring Time” Design “Mr. Geltch...”“Mr. Geltch...”

30 The County Home Drapery Abomination County Home TourCounty Home Tour “Spring Break” Drapes“Spring Break” Drapes Solution: Pay for New Drapes from Purchasing’s Budget: $2,500 ($5,304 today)Solution: Pay for New Drapes from Purchasing’s Budget: $2,500 ($5,304 today) 32

31 Lessons Learned The County Home Drapery AbominationThe County Home Drapery Abomination 1.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! 33

32 The Office Supplies Faux Pas 34 Palm Beach County

33 The Office Supplies Faux Pas Buyer sent memo to departments asking for estimated quantities for various lines of office suppliesBuyer sent memo to departments asking for estimated quantities for various lines of office supplies Buyer: “Mr. Geltch...”Buyer: “Mr. Geltch...” 35

34 Lessons Learned The Office Supplies Faux PasThe Office Supplies Faux Pas 1.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! 36

35 37 Orange County BCC

36 The Sewer Sucking Screw-up 38 Orange County

37 Procurement Process: Sewer Cleaning Truck Specifications Received from DepartmentSpecifications Received from Department Bids OpenedBids Opened Award Recommendation PostedAward Recommendation Posted Protest from Second Low BidderProtest from Second Low Bidder (Heated) Protest Hearing(Heated) Protest Hearing –Specification Issue: all vendors’ specs included –Performance Issue: can low bidder perform? Award to Low BidderAward to Low Bidder 39

38 Fallout After Award Delivery of truck: twice as long as promisedDelivery of truck: twice as long as promised Call from Utilities Director: “Mr. Geltch...”Call from Utilities Director: “Mr. Geltch...” FDOT: Park the Truck…for 6 months!FDOT: Park the Truck…for 6 months! The 6:00 o’clock newsThe 6:00 o’clock news Meeting with the County AdministratorMeeting with the County Administrator The fourth axleThe fourth axle 40

39 Sewer Cleaning Truck: Final Product 41

40 And That’s Not All! Public Works Orange Co. Convention Ctr. 42

41 Lessons Learned The Sewer-sucking Catastrophe 1.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! 43

42 The Time Clock Cataclysm Wall Clock 44 Time Stamp Blackberry Phones Wrist Watches Orange County

43 Time Clock Time clock matched to wall clockTime clock matched to wall clock Bids received after the time and date specified not acceptedBids received after the time and date specified not accepted Received a number of late bidsReceived a number of late bids 45

44 Board Discussion “The time stamp was coordinated with the wall clock....or was it?”“The time stamp was coordinated with the wall clock....or was it?” “How do you know the wall clock is accurate?”“How do you know the wall clock is accurate?” “Do you use an ‘Atomic Clock’?”“Do you use an ‘Atomic Clock’?” 46

45 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. 47

46 Revised Procedures IT connected time stamp in Purchasing Department to atomic clock...cost $800.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.”New Bid Condition: “The time stamp in the Purchasing Department shall be the SOLE determinant of late or on-time bid submittals.” 48

47 Lessons Learned The Time Clock CataclysmThe Time Clock Cataclysm 1.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! 49

48 The Fuel Apocalypse IFB for Fuel issued Jan. 2005IFB for Fuel issued Jan IFB Terms and ConditionsIFB Terms and Conditions –5-year term contract –County can terminate upon 30-day notice –Estimated quantities (no min. or max.) 87 Octane87 Octane 89 Octane89 Octane DieselDiesel Right to purchase from other vendorsRight to purchase from other vendors Individual shipments: as needed via P.O.Individual shipments: as needed via P.O. 50 Orange County

49 Performance P.O.s issued249 P.O.s issued $3.5M of diesel fuel purchased$3.5M of diesel fuel purchased Contractor: “We quit” termination letter 4/14/06Contractor: “We quit” termination letter 4/14/06 County: “You can’t do that” response 4/24/06County: “You can’t do that” response 4/24/06 Contractor: “Yes we can” law suit 5/24/06Contractor: “Yes we can” law suit 5/24/06 County: “We’ll see about that” counter- suit 6/19/06County: “We’ll see about that” counter- suit 6/19/06 Contractor continued honoring P.O.sContractor continued honoring P.O.s County AttorneyCounty Attorney

50 Legal Precedent 52 “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)

51 Legal Precedent 53 “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)

52 Legal Precedent 54 “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)

53 Legal Precedent 55 “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);Torncello v. United States (1982); Ralph Const. Co. v. United States (4 Ct. Cl. 1984); andRalph Const. Co. v. United States (4 Ct. Cl. 1984); and Pullman v. Hercules, Inc. (Fla. 1st DCA 1998)Pullman v. Hercules, Inc. (Fla. 1st DCA 1998)

54 Result I had been doing these types of agreements for over 30 yearsI had been doing these types of agreements for over 30 years Settlement “Oops” Agreement 9/5/06Settlement “Oops” Agreement 9/5/06 –Contract terminated –No penalty for either side –Contractor in “good standing” 56

55 Lessons Learned The Fuel ApocalypseThe 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! 57

56 Contracts...Lawyers...and Insurance Companies A lawyer purchased a box of 24 very rare and expensive cigarsA lawyer purchased a box of 24 very rare and expensive cigars He then insured them for (among other things) fire.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.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.His claim stated that the cigars were lost in a series of fires. Did the insurance company pay or not?Did the insurance company pay or not? 58

57 The insurance company refused to pay the claim, stating the obvious reason that the man has consumed the cigars.The insurance company refused to pay the claim, stating the obvious reason that the man has consumed the cigars. The lawyer suedThe lawyer sued Did he win?Did he win? 59 Contracts & Lawyers & Insurance Companies

58 60 Delivering the ruling, the judge agreed with the insurance company that the claim was frivolous.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.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.Without defining what is considered to be unacceptable “fire”, the insurance company was obligated to pay the claim.

59 Contracts & Lawyers & Insurance Companies 61 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”.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…Now, for the rest of the story…

60 Contracts & Lawyers & Insurance Companies 62 After the lawyer cashed the check, the insurance company had him arrested on 24 counts of ARSON!!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!!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!!

61 Why Do They Bury Lawyers 12’ Underground? ‘Cause deep down they’re really nice people! 63

62 THE END 64


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