A moral story: Buying retail is hell

By Bob Little

Special to GCN

First the anthrax vaccine, now citrullus vulgaris. But if truth be known, it was the other way around.

The plight of the only U.S. company that makes the anthrax vaccine was detailed recently in The Washington Post. The newly formed company, after acquiring the vaccine production facility, was suddenly close to bankruptcy and needed the Pentagon to pay triple the price for the vaccine it uses in its immunization program.

Now, another story can be told of an experiment gone wrong, involving a buying strategy. But I get ahead of myself.

Go back two years. Many pricing strategies were on the table as procurement reform got under way The buzz was that fair and reasonable prices were for sissies. The government was never going to buy retail again.

In one experiment, civil servants were required to bring coupons to work. Or else. Sure, management called it the 'commercial discount coupon metric,' but everyone knew there was a quota.

A brisk black market emerged in Sunday supplement and junk mail coupons. Thefts had been reported at bulk mail warehouses. 'We don't understand it,' one source said.

Desperate civil servants had spawned an underground trade in hot coupons. Late at night, grown people were trying to score mayonnaise and tire discounts. Or else.

Soon, the authorities stepped in and began confiscating the coupons in random searches and seizures. Civil libertarians were outraged. The seized coupons never made it to the evidence room. Everyone began to sue everyone else. Lawyers began issuing coupons. That's when the authorities knew something had to be done.

It was not a bold move to appoint Ollie 'One-liner' Davis to the position of senior acquisition official, but it was a necessary one. He had served as a flag officer in a major military organization, although as far as is known he had never been associated with the citrullus vulgaris project. When asked exactly what he did in the military, he said, 'If I told you, you'd have to kill me.'

Pricing of the citrullus vulgaris project got his attention. For reasons unclear, there was only one vendor for this much-needed commodity. The financing seemed a bit thin, the company's chief source of capital being a bank credit card issued by the Guano Islands National Bank, an institution with no fixed address and found only on an intermittent Web page.

Nevertheless, the Pentagon had provided seed money, which the company immediately spent on seeds.

Meanwhile, the government's pricing people had made up their minds that citrullus vulgaris was a commercial item, that the price would be fixed, and that they would not pay retail. Their pricing strategy was straightforward: threats.

From the company's point of view, the equation was simple: 'Get the contract!' But under his breath the company's president, Cucu Sativus, was heard to say, 'At any cost.'

And so it came to pass, as Mr. Sativus recalls, that 'we had them where they wanted us. We were the only supplier of citrullus vulgaris, they were on a tight time line; so, naturally, we were forced to drop our prices.'

Audits by the Accounting Agency confirmed that the company's production costs per unit were twice the contract price per unit.

A reporter for a way-left-end-of-the-dial FM public radio network asked One-liner about the Pentagon's intentions.

One-liner said, 'When watermelons cost $7 to produce and you sell them for $3.50, it's hard to make it up in volume.'

Reporter: 'What does pricing watermelons have to do with citrullus vulgaris?'

'Look it up,' One-liner replied.

''Bob Little, an attorney who has worked for the General Accounting Office and a Washington law firm, teaches federal contract law.

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