PJ Media

The Battle for America 2010: The Florida Governor’s Race and the Office Depot Overcharging Scandal

The Florida race for governor between millionaire Rick Scott (Republican) and state CFO Alex Sink (Democrat) has a $30 million dollar pink elephant in the room: a lack of oversight in the state’s purchasing mechanism that has led to the loss of taxpayer dollars totaling in the tens of millions, leading to concerns of mismanagement at the state’s main purchasing entity.

In a race already fraught with negative allegations on both sides, the problems at the Department of Management Services (DMS) puts forth the added complication of addressing how each candidate will handle the state’s broken procurement system, currently under the aegis of the governor’s office.

As any home owner knows, it’s ill-advised to hire a contractor who’s had their Better Business Bureau (BBB) membership revoked, has settled two attorney general fraud claims, and is under investigation by the Department of Justice and nine other agencies. Yet, in the apparently unregulated atmosphere of Tallahassee, the DMS sees no problem in awarding a portion of a near $40 million dollar contract to Office Depot— again – in spite of the staggering findings by numerous legal entities across several states, including Florida.

The dysfunction at DMS was highlighted by the recent Florida attorney general’s settlement with Office Depot for $5.9 million and an expose by Naples Daily News reporter Matt Clark which showed how the state of Florida may have in fact been overcharged by Office Depot by as much as $30 million dollars; monies paid by – and effectively stolen from – Florida taxpayers.

As the state’s CFO, Alex Sink has been an advocate of dismantling the DMS and placing the procurement function under the aegis of the CFO. Should Alex Sink be elected governor, will she want to retain direct power over procurement and leave the DMS under the office of the governor, or will she stay true to her convictions and continue to push for the dismantling of the DMS?

Rick Scott, who oversaw a corporation hit with the largest Medicaid fraud settlement in history, will have to choose between allowing the free wheeling and dealing in Tallahassee with state contracts to continue, or to likewise advocate a complete overhaul of the broken procurement system.

In either case, it will be incumbent upon the state’s next governor to immediately address the issue as to how state purchasing decisions have been allowed to run so rampantly unchecked: According to a DMS representative, “State Term Contracts and State Purchasing Agreements awarded by the Division of State Purchasing account for more than $1 billion in purchases annually.”  With that kind of money at their disposal, the DMS has no small responsibility to the state’s taxpayers. Even though in the case of Office Depot, it was the office supply giant’s fraudulent over-billing and padding of state contracts that was found by several independent investigations to be the culprit of the overcharging. But the fact that such conduct can receive the DMS’s stamp of approval time and again begs the following questions: who, if anyone, is checking these contracts, and who is holding the DMS responsible for exercising due diligence in administering fiscally sound procurement?

Such flagrant and rampant abuse of the state’s procurement system by companies like Office Depot also raises concerns regarding, at worst, the integrity of the DMS office in possibly turning a blind eye to such practices. At best, such practices question the competency of the DMS to implement responsible oversight.

A prime example is their latest decision to award portions of the new state contract to Office Depot – in spite of the fact that Office Depot recently settled a fraud case with the Florida attorney general’s office; had its membership in the Florida Better Business Bureau revoked; and is the subject of four federal and five state fraud investigations concerning potential over-billing and padding of their government contracts.

In response to PJM’s inquiry for this story, the DMS representative said, “DMS uses an open, competitive procurement process that allows multiple companies to present their proposals.” If so, the DMS’s decision that, in spite of its legal troubles in the state of Florida alone, Office Depot was the best choice, raises the question as to what the competition must have been like, and whether or not the DMS is looking out for the best interests of Florida taxpayers.

More importantly, will either candidate for governor have the stomach for looking at the dark under belly of Florida procurement, especially when the latest scandal centers around a corporation headquartered in the state? (Office Depot is headquartered in Boca Raton)

David Sherwin, a Former Office Depot senior account manager who was fired in 2008, is a relentless whistle-blower against the company’s practices and is credited with the launching of over twenty federal, state, and local fraud investigations of the Florida-based company.

Of the governor’s race, Sherwin says, “Which ever candidate wins the election for governor, they will have to demonstrate a commitment to integrity by dismantling the DMS, revoking the Office Depot contract, and setting high ethical standards for any company attempting to contract with the state.”

Whatever the outcome of the election, the scandal of Office Depot serves to highlight an underlying problem in the lack of oversight of taxpayer funds at the highest levels of state government, and, should the new governor decide to clean house, they may find that the Department of Management Services is likely not alone in its inefficiencies.

Neither Rick Scott nor Alex Sink responded to PJM’s inquiries, but as governor, one of them will have to address this issue, particularly as the state’s procurement system currently falls under the aegis of the governor’s office, and Florida continues to be one of the most economically challenged states in the country.