Monday, September 14, 2009

Octogon Bad

The NY Daily News is reporting that the DOE is poised to award a new beverage contract-and those canny folks who brought the Snapple deal to the city are the deal makers once again: "The consultant behind the city's troubled Snapple deal stands to make big bucks if its new schools contract is approved tonight. Education officials want the marketing firm Octagon to find new corporate sponsors for kids' sports - despite the Snapple deal Octagon brokered that resulted in $5 million less than guaranteed."

But, the fiduciary aspects of this contracting process aside, what's missing here is the fact that the original RFP for a school beverage was designed to come up with a healthy drink-something that the sugar-laden Snapple certainly is not. According to our sources, however-and we had a good friend involved in the bidding-Octogon, had no interest in any of the health components of the new drink and was only concerned about the dollars, and, of course, its vig.

The outstanding question, then, is how appropriate was the DOE's decision to once again outsource this process to Octogon? Bill Thompson doesn't think it was such a good idea: ""The Snapple and Octagon deals were bad the first time," Controller William Thompson wrote in a letter urging Panel for Educational Policy (PEP) members to reject the contract. "We teach our kids to learn from their mistakes; the DOE should learn from its mistakes."

In examining the PEP decision, the real issue revolves around the policy objective-will the new drink be the healthy alternative that the RFP asks for? And the corollary here is; Does allowing Octogon to profit share corrupt the overall purpose of the process. As the News points out: "A 2004 Thompson audit found Octagon had selected Snapple through a tainted process - a charge company and city officials denied. DOE officials acknowledged Friday the contract with Snapple to install vending machines in schools brought in $35 million from 2003 to 2008, $5 million less than guaranteed. Despite that record, Octagon may collect an even larger commission this time around - 15% to 18%, records show. The payment is lower than industry standards, DOE officials said."

Industry standards? How about health standards? And why can't the city vet the bidders without giving away the store to the company that has demonstrated its incapacity? Anyway, it will be interesting to see what the PEP/Octogon comes up with-and whether any real questions are asked by the mayor's lap dogs.