Auditor says Office Depot overcharged state

Office Depot overcharged state agencies by nearly $300,000 last year, according to a state auditor's report released today and confirmed by the N.C. Department of Administration.

The embarrassing overpayment, which has been recovered, comes two years after an administrative law judge ruled that the department improperly awarded Office Depot the state's office supplies contract. The judge ruled the department could have saved $1.8 million by giving the contract to the lowest bidder, Colorado-based Corporate Express.

The department opted to rebid the contract and again awarded it to Office Depot, though at a lower price.

The judge in that case, a lawsuit brought by Corporate Express, also criticized Accenture, the consulting firm hired by the state to set up the contract selection process. Accenture failed to disclose that Office Depot was one of its clients. Office Depot paid Accenture $30 million over the preceding three years for software and merchandising help.

"The problems identified in the 2008 auditor's report were predictable given the evidence established in the 2006 bid protest," said Hampton Dellinger, Corporate Express' lawyer in its suit. "It is critical that the next office supplies contract be awarded to a vendor who can deliver -- not just promise -- the best value for state taxpayers."

Today's report from State Auditor Les Merritt included a response from state purchasing officer James Staton. He said the state identified the overcharging before the auditor's office stepped in, and the money has been recovered.

"The net result is no harm to the taxpayers," Staton wrote, adding that the contract still provides "excellent discounts." He said Office Depot also has agreed not to seek payment for $500,000 in undercharges. Staton also said the state is implementing many of the safeguards that the auditor's report suggests and is changing the bid solicitation process.