Philippines orders fraud probe after paying MacBook prices for Celeron laptops

Most large vendors had contracts with the state which we would use to buy equipment which avoided having to go out for bid. And, competitive bid only came into effect if a purchase price exceeded $50K (and no existing state contract). For equipment purchases, I never saw the bid process used-- the preferred vendor always had a pre-existing contract.

We got very good prices from Dell, much less than their retail pricing (I don't recall the exact percentage off list, but Dell orders were a fraction of the retail pricing the Dell website "build your server" page stated). Cisco would not discount hardware more than 30% for us (software and contracts 40%), but Alcatel Lucent gave us 73% off list. Nobody but giant telecoms buying massive volumes could get an equivalent discount from Alcatel Lucent.

We did however favor local contractors for services (somewhat rural area), and often times, those contractors were less competent / did poorer work than out of area alternatives at similar cost. The last contractors that expanded the fiber plant were complete clowns, and took 30 times longer to do the equivalent amount of work (they had to redo a lot of their work that failed testing, and they were just plain slow) compared to a great contractor, from LA, that we used previously (before the 'use local companies' mandate was handed down).

We're a major supplier to government agencies, and I personally wrote our pricing engine. Obviously I see the inputs to the pricing, and I can assure you that this is very far from the truth.

First, margins on products like this are very, very thin. Like, it's not unusual for the state to make more in sales tax from an order than we're taking in margin.

Second, specifically relating to US public sector contracts, there's a federally-negotiated contract that any public sector entity can buy off of - look up "GSA contract"[1]. The way pricing is arrived at is defined here, and it would really stupid for some government entity to go off the ranch and buy something at a higher price than this would dictate. They may well negotiate their own contract that is better (we have tons and tons of customers who do this), but why would they pay more if the GSA contract dictates a lower price?

[1] https://www.gsascheduler.com/gsa-contract/gsa-schedule-prici...

A directed bid is one that makes very specif requests or weights them in such a way that only a "preferred" supplier/contractor can meet.

Of course, the preferred contractor is provided with the info through different channels. There may even be some back and forth to "tune" the bid before it officially makes its way into the formal bidding process.

https://aws.amazon.com/partners/programs/distribution-resell...

https://aws.amazon.com/partners/programs/solution-provider/

Its not competitive bidding processes; government contracting before competitive bidding became the norm with exceptions requiring justification was much more prone to this kind of failure (to the point where it wasn't even a newsworthy failure.)

> If the government needs a Dell server

IF the government needs a Dell server, there are generally exceptions to bidding requirements that would allow a sole-source purchase, direct from Dell. While this might have has much bureaucratic overhead as bidding arrangements, its completely different bureaucratic overhead.

OTOH, Dell mostly sells commodity servers; and the government rarely just wants to buy a server, it wants to but a server with specified forms of support. So, what actually happens even if the government official for whom the purchasing is being done expects that a Dell server with first party support from Dell would be the best option is that there is competitive bidding processes where vendors able to provide a commodity server with the necessary functionality and support bid.

Actually, that’s not really true either, because basically no government is doing competitive bids for a server. What they actually do for many things, and commodity servers and associated support would usually fall into it, is a have master contracts that are either sole-source or competitive bid with set prices and schedules for a high level part of government (GSA does this at the federal level, and some of them can be used by tribal, state, and local government as well, either generally or for specific uses; most states also do it at the state level, and individual state agencies and local governments also do it), and individual programs that need something just buy off the master contracts made above them. At the scale of a single server, if it wasn't off a master contract, they wouldn't have a high-formality post and bid, though if they didn't have a sole source justification they'd probably need to solicit quotes from multiple vendors.

> Quite why there isn’t competition I don’t know. Maybe writing bids really is that expensive?

It’s expensive for a genuine competitive bidding process, which tends to be long, drawnn out, and have a hard requirement for at least three bidders, at least two of whom will fail. Maybe not considered over the long term, with multiple opportunities, some of which succeed, put you have a lot at risk, and a long time between putting resource in and getting sales out, so not every business can do it.

I have no relation to the subcontractor, they joined a hardware enthusiast discord server, but all their information checked out.

Problem: a fraud occurs, e.g. someone was bribed to favour one contractor

Solution : strict must-be-respected rules are put in place to ensure that the process is competitive and transparent.

Problem 2: now the process is very cumbersome and complex to set up for the administration as each field (e.g. document management consultant vs external study vs external auditor vs IT hardware vs contractor for the canteen vs medical services vs ...) has very different requirements but each has to respect the same general process. For some it works well for others it doesn't.

Most importantly, the procedures are usually slow as you need to give everyone time to do their part and be transparent and predictable. And everyone is busy - e.g. you might get five 200 page offers (much of which is boilerplate to respond to boilerplate pieces of the tender itself) and several staff need to read those, capture their observations, agree on a rating for each tender, ...

You also need to be transparent, so you need to communicate very openly - e.g. some governments have an obligation to allow all bidders to be present when the bids are opened, so it is obvious that all are treated fairly. Also all the documents you write must later be publicly accessible/can be seen by all bidders, so you need various internal reviewers to ensure you don't get sued. Even if a bid is obviously bad you still have to go through the motions for that bid as every government has at some point been sued by a bidder for discrimination/non-respect of some rule and then had to seriously pay out..

All this is complex and there are many rules, so many smaller bidders are from the beginning excluded. Moreover, the effort to make such tenders is high, so the bidders calculate that into their offer price (and they have to cross-subsidise other offers where they put in the work but lost the bid).

Not to forget also that you usually need to define precisely what you need and often those precisions are written by non-experts or copy pasted from previous similar tenders (such as I bet happened in this case...) .

Solution 2: all have an interest to find ways to get faster contracting with more flexibility. For instance a common solution is something like a 'framework contract' (different names in different places) - essentially a contract with one or more parties that they will swiftly give you a certain kind of service/good (an external auditor, some laptops, air conditioning repair, office moving services, ...). So you tender for someone to provide you potentially in the future repeatedly at time X one or more products of type Y. The contract will run for 3 or 5 years or so (to be worth the effort) and provides more or less a monopoly to that one party, in return for flexibility in getting what you ask for without new tendering.

Problem 3: the tendering for such a framework contract is in the abstract, i.e. you (as government employee) might be asking for services/goods that you (or anyone in your building or even in other government bodies!) may want 3 or 5 years in the future and you have no clue what those will be. So you define as far as you can, but you'll always get it wrong. Maybe when you tender a celeron was good enough and the price is great, but when you actually take action to make use of the contract the technology is outdated and the (locked-in) price far too high. Or you tender thinking of the minimum viable need, but the power users are left in the cold. Or as the tendering rules are so complex you are sitting in a specialised procurement department that knows nothing of actual business practice and so you have been told to tender this thing but just have no clue on the substance (procurement department is the least attractive place to be in, so don't expect the creme-de-la-creme of employees to do that work) and so get the trainee to write the tech specifications as young people know these things...

Solution 3: ?? change the rules and go back to problem 1 ??

https://www.princeton.edu/news/2021/05/12/princeton-adopts-p...

I'm not sure, though, if it's really doing much more than lining the pockets of the new batch of suppliers. It sounds like they're not building up any expertise or ability in these suppliers. They sound like they're just dropshippers with a higher markup.