Austrian on audits In part two of OPI’s interview with Neil Austrian, the Office Depot CEO hits out at public sector auditors and defends former BSD President Steve Schmidt
Interview by Andy Braithwaite andy.braithwaite@opi.net
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hen OPI interviewed Office Depot CEO Neil Austrian back in September, one line of questioning related to the continued controversy surrounding allegations of overcharging in the company’s government contracts business. Published exclusively for this annual review, here is that part of the interview in full. OPI: Let’s turn to the North American Business Services Division (BSD). One area that OPI readers are very interested in is the public sector audits that have been performed over the last two or three years. We had two more reports recently from Dallas and Detroit claiming that Office Depot had overcharged them. So it seems to be a problem that’s not going away. When and how is all this going to end? NA: Well, I can’t answer when it’s going to end. Both of those audits – Dallas and Detroit – relate to a contract entered into many years ago that has now expired. As you probably know, public sector contracts are extremely lengthy, the wording is difficult, the interpretation can be on either side and in some cases these contracts run hundreds of pages. I’m not denying that we’ve made mistakes because we have. In Dallas, though, we strongly disagree with the auditor’s assertions that the County was entitled to certain additional
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discounts. The auditor’s contention is based on a fundamental misunderstanding of the contract. In Detroit we are aware of, and have been cooperating with, the audit by the Detroit Public Schools. As we understand it, the audit is ongoing and we are continuing to work with the customer to ensure that the results are based on a correct understanding of the relevant contract terms. But let me say, at the end of the day if we were wrong, we make it right. And I would say that in the past, in a large number of these situations where we had public sector issues, the customers have stayed with Office Depot going forward. That indicates something. It indicates the fact that they have the confidence in us, in the new systems that we’ve put in place in terms of contract compliance, in terms of how we’re going to go to market and really define things in the contract on both sides far better. And I think if you look at the former US Communities customers, we’ve retained over 85% of our customer base. OPI: The latest figure you have quoted is 86%. Does that refer to the number of customers or the sales figure? NA: Basically our revenue and our customers. It almost matches. It’s pretty close. OPI: Does that include other US Communities contracts? I know you have a separate contract for school supplies and you also have something with Tech Depot as well. NA: It’s inclusive in terms of what we’ve kept.
US Office Products Industry Annual Review 2011