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This is how the government buys computers. The order goes to a Small Disadvantaged Business, who takes a 10% cut, with the computers being drop shipped from the

This is how the government buys computers. The order goes to a Small Disadvantaged Business, who takes a 10% cut, with the computers being drop shipped from the manufacturer.

ryandrake 7y ago
This is how a lot of government contracting works, too. The prime contractor is always some [I'll gently call it] Incentivized-Demographic-Owned company whose only job is to subcontract all their contracts out to a bigger company who actually does the work. The "IDO" company (often one person) does nothing but takes a small cut and passes the rest of the profits to the company doing the work.
- Spooky23 7y ago
  They do more than that -- the prime contractors are as ridiculous as the government is. It's a sweet deal until it isn't... a black-swan event, usually a fuckup one of the parties means that the reseller is stuck with a bankruptcy-level bag of poo. As vassals of the big company, they act as a buffer for whatever the goals of the big company are. When the big co needs to make it's quarterly goals, they'll "ship" a bunch of software to the vassal company (which is at best a piece of paper) to hit their nut. With physical equipment, the same thing happens. Most notoriously, car dealers get stuck with accepting cars they don't want in order to get cars they need. A Ford dealer won't get an extra allocation of $75k F-150 trucks unless they take a load of Ford Focuses. If you get a great deal on a specific printer or something from a reseller, this is why. On the other side of the transaction, the government sucks in terms of on-time payment. Wall St. doesn't like receivables from the customer, so the bigco will shaft the female-nativeamerican-disabled-veteran owned reseller with a Net-30 payment schedule, and they need to finance that receivable for the Net-180 paying government entity. The other issue is terms and conditions. The government will demand most-favored nation status for price and impose onerous terms. The subcontractor company accepts that risk, deals with whatever wacky terms need to be dealt with, and enters the contract -- so big company doesn't get sued for fraud when the US Department of Agriculture gets a more expensive price than the Wyoming Department of Health for a product, or when the pallet used to ship a server includes wood sourced from Brazilian hardwood.
- Frondo 7y ago
  I can't speak to federal-level contracting, and I can't speak to much contracting outside the Pacific Northwest and parts of the east coast, but this is largely untrue. In virtually every capital construction project I've seen or been aware of, the prime is always a regional, national, or multinational company, with capacity to do a lot of the work themselves; they do sub out work, but that is the layer at which they're expected to hire a certain amount of historically underutilized companies. Usually they're given goals of 30-40% contract spend on historically underutilized companies, and they usually miss it by about 10%. This is considered a success, because in the past, they wouldn't hire such businesses at all. In the past, minority-owned and woman-owned businesses would simply never be hired for the ongoing well-paid government capital construction projects. All of this is now extensively tracked, as well, though the information is not easy to come by. I know a few people who regularly FOIA their city procurement offices to get the information, and it's there, just not publicly distributed. It's tracked at the city level, county level, and always state DOT level (though not necessarily other departments; DOTs have extra tracking requirements because of their reliance on federal funding). In deference to your story, I know several people who have an anecdote about "a woman who ran a business and added a 10% markup to contracts, passing everything through to someone else" -- the individual changes, the markup changes, but the story's the same, and the implication is always that it's a scam, the system is rife with fraud, tear it all down, etc., and that is simply untrue by the numbers. It's an anecdote to reinforce personal biases, not a reflection of the world.

This is how the government buys computers. The order goes to a Small Disadvantaged Business, who takes a 10% cut, with the computers being drop shipped from the manufacturer.

ryandrake 7y ago

This is how a lot of government contracting works, too. The prime contractor is always some [I'll gently call it] Incentivized-Demographic-Owned company whose only job is to subcontract all their contracts out to a bigger company who actually does the work. The "IDO" company (often one person) does nothing but takes a small cut and passes the rest of the profits to the company doing the work.

Spooky23 7y ago
They do more than that -- the prime contractors are as ridiculous as the government is. It's a sweet deal until it isn't... a black-swan event, usually a fuckup one of the parties means that the reseller is stuck with a bankruptcy-level bag of poo. As vassals of the big company, they act as a buffer for whatever the goals of the big company are. When the big co needs to make it's quarterly goals, they'll "ship" a bunch of software to the vassal company (which is at best a piece of paper) to hit their nut. With physical equipment, the same thing happens. Most notoriously, car dealers get stuck with accepting cars they don't want in order to get cars they need. A Ford dealer won't get an extra allocation of $75k F-150 trucks unless they take a load of Ford Focuses. If you get a great deal on a specific printer or something from a reseller, this is why. On the other side of the transaction, the government sucks in terms of on-time payment. Wall St. doesn't like receivables from the customer, so the bigco will shaft the female-nativeamerican-disabled-veteran owned reseller with a Net-30 payment schedule, and they need to finance that receivable for the Net-180 paying government entity. The other issue is terms and conditions. The government will demand most-favored nation status for price and impose onerous terms. The subcontractor company accepts that risk, deals with whatever wacky terms need to be dealt with, and enters the contract -- so big company doesn't get sued for fraud when the US Department of Agriculture gets a more expensive price than the Wyoming Department of Health for a product, or when the pallet used to ship a server includes wood sourced from Brazilian hardwood.
Frondo 7y ago
I can't speak to federal-level contracting, and I can't speak to much contracting outside the Pacific Northwest and parts of the east coast, but this is largely untrue. In virtually every capital construction project I've seen or been aware of, the prime is always a regional, national, or multinational company, with capacity to do a lot of the work themselves; they do sub out work, but that is the layer at which they're expected to hire a certain amount of historically underutilized companies. Usually they're given goals of 30-40% contract spend on historically underutilized companies, and they usually miss it by about 10%. This is considered a success, because in the past, they wouldn't hire such businesses at all. In the past, minority-owned and woman-owned businesses would simply never be hired for the ongoing well-paid government capital construction projects. All of this is now extensively tracked, as well, though the information is not easy to come by. I know a few people who regularly FOIA their city procurement offices to get the information, and it's there, just not publicly distributed. It's tracked at the city level, county level, and always state DOT level (though not necessarily other departments; DOTs have extra tracking requirements because of their reliance on federal funding). In deference to your story, I know several people who have an anecdote about "a woman who ran a business and added a 10% markup to contracts, passing everything through to someone else" -- the individual changes, the markup changes, but the story's the same, and the implication is always that it's a scam, the system is rife with fraud, tear it all down, etc., and that is simply untrue by the numbers. It's an anecdote to reinforce personal biases, not a reflection of the world.