A month ago their small business was humming along. Today, Carl and BJ Streko, husband and wife owners of Supplies-Supplies Inc., are faced with the crisis of their business lives. They are worried about their business surviving – due to one decision by the State of New Jersey.
Their business is one of 17 small suppliers of office products to state and local governmental agencies, schools, libraries and other public institutions. Yet, without so much as a ‘thank you but we’ve decided not to renew your contract,’ the state has awarded all the office supply business to a single company – a very large corporation.
Now here’s where it gets interesting: there was no competitive bidding process that Supplies Supplies Inc was notified of to participate in. Even though Supplies-Supplies has had a state contract since 1984, they started hearing rumors that the state was not going to renew, but to date have never received official notice of nonrenewal. Then on August 17, 2009 the State of New Jersey issued a press release (PDF) announcing the new arrangement.
By their action, the State of New Jersey is substituting one large vendor in place of 17 smaller local businesses. The National Office Products Alliance, a trade group representing independent office suppliers, cried foul, issuing a statement saying that the “New Jersey Treasury Abandons Small Business.” A State Assemblyman also criticized the move.
New Jersey law requires competitive bidding on public contracts. The bidding, if you can call it that, took place outside the state, in Minnesota, a number of years ago. Sound strange? It is.
New Jersey is acting under a state law that it says allows them to enter into joint purchasing agreements with other governments. This is one of six such cost-saving cooperatives entered into by New Jersey.
This is the first I’ve heard of such joint cooperative purchasing agreements, and for all I know my state of Ohio may be part of them. But the whole idea is troubling. Today it’s office supplies. Tomorrow it could be YOUR industry. All contracts get handed by one official to a single large entity in each industry – potentially that could be one nationwide contract for all government buyers. Think about the implications of that for a while.
But Can These Small Businesses Really Compete?
There’s a twist in this story I wasn’t expecting. Initially when I set up the interview with the owners of Supplies-Supplies Inc., I was afraid this would turn out to be another case of a small business not being able to compete on price against a large company with more buying power. Regrettable — but a reality in retail today.
But that is not the case, according to the business owners.
When I asked point blank (perhaps with a little skepticism poking through), “Do you really think you can compete on price with that large vendor?” Carl Streko replied: “Yes, we can compete. We have in the past. We have been up against the big companies and beat their prices.”
“Some time ago we joined a buying group, with 2,000-3000 dealers in the buying group. We buy wholesale at the same prices as the big companies. We start off on a level playing field with the big competitors.”
Carl went on, “Another point of interest: there’s another giant office supply company headquartered in Boston. They originally won the contract for the office supplies back in 2004 as one of the suppliers, but in November backed out of it because they could not make a profit. We picked up business from them, by competing head to head.”
“But we don’t know what discount is being offered, because we were never given a chance to bid. So how can the state say they are saving money over renewing with existing vendors?”
Adds BJ: “Seventeen vendors have the state contracts today. We all have the ability to purchase through 2 wholesalers and also buy direct from manufacturers. We believe and also have been told by our customers that we have a larger selection of products than Staples. Therefore, our prices are competitive, our range of products that this type of customer needs is better, our ability to service the customer is without question better. So who does the State think is really to benefit in this change?”
The reality of owning a small business is that losing big customers, as the state and local agencies are to these 17 suppliers, can be disastrous to the small business.
BJ says: “It’s very scary. We will definitely have to eliminate positions to try to stay in business. It will hurt our company. All we want is a fair chance to bid head to head.”
Governments: Learn to Walk the Talk
State and local government officials often say: “We support small businesses.” Or, “We want to attract small businesses.”
Too bad some of them don’t walk the talk. Even while they loudly profess their “love” of small businesses, they heap on taxes, regulations and red tape. They make policy decisions that cost small businesses their profit, or drive them out of business. Then officials pat themselves on the backs as they issue a press release about some program or other designed to “attract” more businesses to their area.
It doesn’t seem to occur to them that they should just treat the businesses already there a little better.