US Office Products Industry Annual Review 2011 | Big interview
“In Dallas […] the auditor’s contention is based on a fundamental misunderstanding of the contract” OPI: So, as far as you are concerned, the impact of all this has been fairly minimal on the business. NA: You know it’s certainly hurt our reputation. I’m not going to deny that, but I think we’re gaining it back. I think people understand that mistakes were made; we’ve admitted that and we’re moving forward. On an economic basis that has not been the major issue in terms of the performance of the company. OPI: Where have the former US Communities customers gone in terms of your other cooperative contracts? I know you were pushing TCPN quite hard earlier this year. NA: We’ve got two different consortiums that we’re involved with: TCPN and National IPA. OPI: You’ve mentioned some customers coming back to Office Depot who had moved away. Can you quantify that at all? NA: No, I can’t. OPI: You mentioned the word “mistakes”. Can you be a bit more specific about what those mistakes might have been? NA: I think we’ve publicly talked about the two price plans – Option 1 and Option 2 – under our now expired office supplies cooperative agreement. As we have said before, the issue related to concerns regarding the past marketing of the Option 2 price plan, which Office Depot had begun to address before any allegations were made regarding it. Importantly, there was nothing wrong with the Option 2 price plan itself, which simply gave customers the choice of a flat discount from retail pricing. These price plans were implemented several years ago and the contract has now expired. We have made significant changes since that time, including the implementation of a world-class contract compliance organisation and training programmes to ensure that the contracts we enter into are unambiguous and that we can comply with the terms.
go up any higher than that. Would you stick by that version of events? NA: I’m not going to get into whether it was one salesman or ten salesmen. But as I said before, we have made significant changes since that time and the organisation is benefiting from the new systems, the new training, and the new processes we have put in place. OPI: There has been a line of argument that all these auditors have been influenced by one “disgruntled former employee” called David Sherwin. How is it that one person could have such a major influence on all these auditors? NA: I’ve never said that. I don’t know that any company executive has ever said that. (Pause) I’m not going to comment on David Sherwin at this point, Andy.
Office Depot • Founded 1986 • Headquarters: Boca Raton, FL • 2010 sales: $11.6 billion • Employees: c. 40,000 • Number of stores worldwide: 1,620 (approx. 1,130 in the US) • Operates in 56 countries
OPI: Something that has come out of the Dallas and Detroit issues, as well as the Option 1 versus Option 2 pricing, is this issue of most favoured government pricing. Surely that has to be a major concern going forward if other agencies start… NA: I understand from my teams that Dallas County and Detroit are operating under a fundamental misinterpretation of a key contract provision. But remember, this is a contract entered into several years ago and that has now expired. We are working with and cooperating with these customers. I’m focused on going forward right now. OPI: There seem to be a lot of disagreements from your side with some of the reports from the auditors. NA: When you say disagreements, all I’ll say is that with multi-hundred-page contracts,
OPI: The message coming out of Office Depot, certainly if I go back to 2008 to 2009, is that these option switches were the work of rogue sales reps and it didn’t www.opi.net/USAnnualReview2011
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