YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

January 27, 2004

Report No. 2004-07

Copy machine maintenance costs could be reduced and increased oversight needed of state computer hardware purchases

The Office of Administration (OA) oversees the statewide contract for copy machine maintenance agreements.  These maintenance agreements are priced based on a maximum number of copies per month, referred to as a base level.  In addition, OA oversees the prime vendor contract for state purchases of computer hardware and peripheral equipment.  Purchases through the prime vendor totaled approximately $26.5 million in fiscal year 2003.  This audit focused on copy machine maintenance agreement contracts as well as the contract for state computer hardware and peripherals.

Most maintenance and rental agreements were not cost-effective due to excessive base levels or non-statewide contracts

Auditors found maintenance and rental agreements were not cost-effective for 86  percent of the 77 copy machine agreements reviewed.  Of the contracts reviewed, entities could have saved an estimated $43,900 of the $108,100 annual maintenance expenditures had more cost-effective agreements been used for these copy machines.  (See page 3)

Agreements purchased outside the statewide contract proved more costly

None of the maintenance agreements purchased outside the statewide contract for the 30 copy machines reviewed were cost-effective.  Entities could have saved an estimated 57 percent in annual maintenance costs by using the statewide contract.  (See page 4)

Statewide contract did not offer base level options for all copy machines

In most cases, state entities paid more for maintenance agreements when the state contract offered only one base level than if various base levels had been available.  Entities could have saved an estimated 48 percent in annual maintenance costs for 11 of 15 copy machines reviewed if various base levels had been available.  In addition, auditors found agreements for two of three rental copy machines reviewed had base levels higher than the average actual usage.  (See page 5)

Infrequent bidding hindered competitive prices for computer hardware and peripheral equipment

OA extended the prime vendor statewide contract for computer hardware and peripheral equipment for almost seven years without competitive bids and, as a result, did not ensure it obtained the lowest prices possible.  (See page 8)

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