You need to buy what? - A Sample Chapter from The Beancounter

 

“Large latte please.” “Right away ma’am.” Melissa has finished her morning walk and has stopped at a small bistro not far from the resort. After placing her order, she takes a seat at one of the tables close to the street and starts reading through a tourist brochure which was left behind on the table.

 “Hey Isaac!” As Melissa is enjoying her morning drink, she sees Isaac walking out of an apartment building.

 “Good morning, Melissa!” Isaac, who had started to walk the other direction, turns and crosses the street to join the young lady.

 “Is that where you live Isaac?” Melissa inquires beckoning him to join her at the table.

 “I do have a suite there, but I own the building.” Isaac takes a seat across from Melissa.

 “You’re a landlord as well?”  Melissa laughs “you are a busy man.”

 “That is one of my investments.” Isaac explains most of the clients are ‘snowbirds’ who only come down for the winter, but there are two apartment suites rented year-round.

 “You seem distraught this morning Isaac.”

 “I’m getting some of the suites renovated, but I’m having problems with the contractor.”

 “Oh, why’s that Isaac?”

 “The problem is the work is not being done correctly.”

 “Do you have a written contract?”

 “Absolutely; but despite me explaining and documenting it, we are having our differences.”

 “That’s not good!”

 “One of the issues we have to be careful with is the language barrier; although my Spanish is good, I always get the contracts checked over by a local lawyer friend of mine.” Isaac explains.

 “So Isaac, what’s the problem?”

 “Well, he was to repair some cracks and paint the walls and trim.”

  “Sounds straight forward.”

 “Yes, but a month later the walls are cracked again, and he wants more money to fix them!”

 “No warranty?” Melissa questions.

 “The issue is not the right mix in the coatings; I have friends whose walls were fixed by other contractors here that have gone for years before having to be redone.”

 “I have never heard of this Isaac.”

 “Yeah, concrete is not the same as the drywall we are used to up north.”

 “Why don’t you use drywall here Isaac?”

 “Oh no! With the humidity here in the summer, the mold would destroy them!”

 “I see.” Melissa never thought of that. “So, what about the warranty clause Isaac?”

 “That’s the problem; he tries to blame the building and the way it was built.” Isaac is clearly frustrated.

 The barista brings Isaac a black Americano coffee.

 “One of the problems Melissa is the court system on the island often leans towards the contractor.”

 “That’s not fair Isaac!”

 “Not at all.”

 Isaac gives Melissa a couple of other examples of issues with repairmen on the Island.

 “You mentioned you were interested in contracting Melissa.”

 “Yes, I looked at it as a cross between law and accounting Isaac.”

 “Well, technically contracting is not an accounting function, but it has been my experience accountants often get involved in that portfolio; for example, when I worked in government, we had contracting specialists who were part of our division.”

 “So, you have lots of experience with contracting Isaac?”

 “We had specialists, but I was very much involved, so I would have to say yes; in fact, it was probably the most intriguing part of my job.”

 “I read the story about the misplaced comma that cost a company over a million dollars Isaac, and I was hooked.” This was a case Melissa’s class talked about in university.

 “I showed that story to three different lawyers Melissa, and they each scratched their heads.” Isaac takes sip from his coffee.

 “Do you remember all the elements of a contract Isaac?” Melissa tests her mentor.

 “Oh yes, and my favorite being capacity.”

 “Why! Are you lacking it Isaac?” The two share another laugh.

 “Perhaps, but I do recall many managers and contractors whose sanity I questioned based on some of the things they would come up with.”

 Melissa leans forward intrigued “Do tell Isaac?”

 “We had this regional manager who ordered six units of a specialized piece of equipment, one for each facility in the region, at a cost of $7,000 each. These items had to be sourced by the supplier as a special order, and it took three months to receive them. When the items arrived, the manager decided they were not quite what she was looking for so returned them.”

 “And?”

 “The supplier charged us a thirty percent re-stocking fee Melissa.”

 “Sounds unreasonably high Isaac.”

 “It was a special order Melissa, and because our manager did not clearly outline her requirements, nor did she properly research the items she ordered to ensure she knew what she was buying, this is what it was going to cost!”

 “Requirements definition - I remember this part from a procurement class I took Isaac.”

 “One of the elements of a contract Melissa is sum consideration; the obvious part is the money I will pay, the not so obvious part being what it is you are going to give me in exchange for the money.”

 “So, an unclear definition of requirements cost your company over $12,000 for nothing.”

 “I though you weren’t good at math Melissa?” Isaac points out, to which the young lady only smiles in response. “It would have Melissa had we not had a contracting officer who had been around a long time, knew a lot of people, and found a buyer for the items.”

 “Whew! What a lucky break Isaac!”

 “There were other issues though Melissa, such as the fact the manger only had $10,000 in spending authority per purchase, and trade agreements required a forty-day solicitation for an order over $25,000.”

 “But the items were $7,000 each? Isn’t that below the limit?”

 “But the combined order was $42,000.”

  “What if she made six different purchases Isaac?” Melissa questions innocently.

 “Nope! We called that ‘contract splitting.”

 “What if each site just ordered their own unit Isaac?” Being that Melissa is not familiar with government procurement nuances, it was an innocent question.

 “The Procurement Ombudsmen would consider it one requirement Melissa.”

 “These rules seem rather silly Isaac.”

 “Well, you have to understand why we had them Melissa. You see, this was the federal government, and we were spending taxation dollars; with this we needed to ensure we gave fair and open access for suppliers to get the government’s business.”

 “Oh! Like the requirement for open bidding on a requirement over $25,000 Isaac?”

 “Exactly Melissa!” Isaac continues. “There are many stories I could tell you; for example, a bidder who forgot to submit all his documents before the closing date, yet the manager wanted us to be flexible.”

“Let’s just throw away two hundred years of contracting practice and precedence Isaac,” laughed Melissa.

 “Precisely, and don’t even get me started on the topic of Employer – Employee relationships!”

 “We covered that in Business Law class Isaac.”

 “Well, it’s a real problem Melissa; people want to be contractors versus employees, but due to a number of factors they are deemed to be an employee.”

 “I found this topic interesting when we covered it in class Isaac.”

 “Do you remember what happens if they are deemed employees Melissa?” Now her turn for a test.

  “For sure Isaac! The payer ends up remitting pension entitlements, unemployment insurance premiums, and income tax on their behalf.”

 “And they could end up paying holiday pay and severance depending on the jurisdiction Melissa.” 

 “That’s right Isaac! I forgot about that!”

 “Here on the island it’s a big deal as the laws require Christmas bonuses and severance pay to employees, and many of the contractors think they are entitled to these!”

 “The bonuses are mandatory Isaac?”

 “Oh yes Melissa - and they can be substantial!”

 “Wow! I wish I was guaranteed a Christmas Bonus!” The two laugh, and then Melissa probes for more information as she is intrigued by the subject. “Did you come across any of these employee-employer cases up north Isaac?”

 “It was a common issue when I was at the tax department, and the determination could be for a number of reasons Melissa: directing the payee’s work and hours, providing their tools and equipment, integrating them into your office culture, and the risk for profit and loss for the so-called contractor.”

 “And what about when you were doing contracting for the government Isaac?”

 “I only heard of contractor versus employer-employee relationship problem once Melissa, but it was in a different region.”

 “Wow!”

 “Well Melissa, I have one more errand today before I open the bar.” The two finish up their drinks and go their separate directions to carry on with their day.