Ruling: State bungled bidding

Office supply deal unfair, judge says

The state mishandled the seemingly easy task of buying paper clips, pencils and other supplies, a judge ruled Friday.

After four days of testimony, including a focus on ethics in government, Administrative Law Judge Beecher "Gus" Gray said the state's handling of its office supplies contract appeared unethical and was unfair.

The state, Gray said, "should get the taxpayers the best deal it can," but didn't do that in this case.

Gray did not void the contract but said he expects the state to make changes soon. A spokeswoman for Administration Secretary Britt Cobb said it was too early for the state to respond.

The $18.2 million-a-year contract on everything from pencils to toner cartridges was awarded last year to Office Depot, even though the company wasn't the low bidder. The length of the contract is six years.

The low bidder, Corporate Express, which has North Carolina headquarters in Henderson, challenged the process.

A big issue in the hearings was the state's hiring of consulting company Accenture to help prepare and evaluate the bids. The state paid Accenture $300,000 for the work, according to court documents and the company.

Accenture has received millions from Office Depot under separate contracts at the corporate level.

Other documents in the case -- one was described by Corporate Express lawyers as the "smoking gun" -- showed that Accenture played a role in deciding a key point: that extra weight would go to bidders with retail outlets.

Office Depot has retail stores across the state.

Corporate Express does not, though it promises faster delivery to state workers' desks.

How bidding worked

Testimony in the hearings showed that state workers generally are not demanding access to office supplies at retail outlets. Corporate Express argued that the retail aspect is a detriment because it requires state workers to leave their offices. The state's request for bids said office supplies would be ordered electronically.

Moreover, Corporate Express argued, bidders were not told that the retail outlet aspect would be a significant determining factor in which company got the bid.

The state said it had discretion in how it could award the contract. In previous years the contract was based solely on price.

Vendors were asked to bid on three categories of supplies. But the state consolidated the three sets of bids into one contract. Corporate Express argued that splitting the awards based on the bids in each category would save taxpayers millions.

The judge said it did not make sense for the state to ask for individual bids and then end up paying more overall in the end.

Office Depot's bid was $1.22 million higher than Corporate Express on the first category and $96,500 higher on the second.

But Office Depot was $1.28 million lower than Corporate Express on the third category.

The judge questioned Accenture's involvement in the bidding.

"What I see here is an appearance of impropriety," Gray said. He added that continuing talk about ethics in state government was important to consider. "It looks like Accenture drove this too much."

In a statement, Accenture officials disagreed with the ruling and its basis. "We run and have always run our business in a professional and ethical manner," said James McAvoy, a spokesman.

State purchasing officer Mike Mangum said he was surprised by the judge's ruling. He declined further comment.

Hampton Dellinger, a former state deputy attorney general who represented Corporate Express, called the judgment a victory for state taxpayers and for government ethics.