The $48,000,000 or $80,000,000 Dell Lease Affair
Submitted by Allen Gwinn on Fri, 04/24/2009 - 05:17.
UPDATE: Developing Story - Check Back Often.
We have good news to report this morning.
Last night, six of our trustees (Ellis, Ranger, Garza, Medrano, Blackburn, and Price) voted to temporarily save us, and our kids, either $48 million or $80 million dollars by tabling a lease agreement for non-descript and undefined "$790 Dell computers" that the District plans on leasing, as opposed to purchasing.
Originally, we reported that the District planned on spending as much as $1,800 apiece for the computers. The price is closer to $1,000.
Depending on which DISD board document you believe, the whole Dell (or HP) lease (or purchase) was going to cost $48 million dollars or $80 million dollars.
Both were signed by Patricia Viramontes, Executive Director of Information Technology and the wife of the District's number two guy: Arnold Viramontes.
Patricia, offering no explanation, simply said there was an $80 million dollar mistake on the latter document. But we seem to have become used to big number mistakes from DISD this year.
According to Patricia last night, all this money was to be used to lease a non-specific number of "$790 computers" from Dell. Dell, of course, won't talk to us.
Some of these computers were to be laptops, according to Patricia. How many of them? Well, she didn't know.
About 1/4th of these computers were to go to teachers--the rest to... well, she didn't know that either.
The bulk of the computers, according to Patricia, are to be desktops.
Two weeks ago, we filed an open records request for the "kitchen sink" with respect to DISD's Dell Master Lease agreement. Yesterday, we received a 50-or-so page stack of everything the District claims it has. About 10 pages were actually useful. The rest were related to hashing out liability issues with Dell over the agreement.
According to DISD's records, there's no telling whether these $790 PC's are to be cheap ones or expensive ones. To date, according to both the documents and Patricia Viramontes, no one has decided on the specifications, or types of computers the District plans on buying. Laptops, desktops? The only thing we know is what they're going to cost.
And that, according to Patricia last night, will be $790.
This sort-of strikes us as being akin to buying "cars" for $23,689.73.
What kind of car? Any car!
One Board member asked why the District wasn't buying $500 PC's.
According to Patricia, she wants 5-year warranties.
Dell's website puts the cost of a 3-year warranty at around $69.
What didn't make sense is why DISD wouldn't just buy 3-for-the-price-of-2. Three $500 PC's = $1,500. Two $790 PC's = $1,580.
Doing that, the District could afford to have 1/3rd of its new inventory fail, throw them away, and still come out ahead! Certainly Dell's computers don't have a 33% failure rate, do they?
But, as we've pointed out in the past, money appears to grow on trees when you don't have to earn it!
UPDATE: Monday, April 27
We received a reply to an email sent late last week. According to Patricia Viramontes, no master lease agreement has yet been signed with Dell.
We originally reported that the District had planned to spend as much as $1,800 on these computers after lease interest based on information we received from the District in response to our open records request.
The documents (link 1, link 2) were apparently "planning documents" and were not apropos to the $790 computers. The actual cost to lease each PC will be "$16.53 per month for 5 years equating to a total cost of $991.80."
We have asked how the $790-per-unit price (as Patricia reported in the Board meeting) was derived. Was it in a quote? We also asked if there was a bid process and, if so, were there multiple bidders? So far we've seen no documentation on this figure.
We are also asking for clarification whether the additional $201.80 represents interest over 5 years ($991.80 - $790 = $201.80).
We'll bring you the District's response as soon as we get it.
Cheap Used Dell Computer
Mini-computers known as netbooks may be the biggest trend among PC makers.
[Ed Note: Yes, I just bought a Dell Mini 10 for $121.]
Dell Lease
DISD’s experience is not unique. Most organizations deal with the same confusion you face. I hope some of my information is helpful as you review the lease contracts.
Leasing is not regulated like banking. The language is tricky and expert lease negotiation will save the district a lot of time and money not to mention frustration.
Some of the surprises I predict you will face without outside guidance and extensive lease contract expertise are:
1. At the end of the lease, DISD will probably not own the computers.
2. The lease is likely to renew automatically for 12 extra payments. Track notification requirements.
3. The “Fair Market Value” purchase option offered will be between $100 and $250 per computer. Add that to the sum of the 60 payments already made. Be careful here for cost overruns.
4. If equipment is shipped back to Dell at lease end, damages and penalties will likely be assessed.Find out how much those charges might be. I imagine they have a list of common damage charges.
5. DISD pays to pack and ship equipment to Dell. Dell determines the ship to destination. Try to negotiate that Dell pays for the shipping.
These are only five of the lease surprises you will likely experience. If you want to learn, more about Lease Gotchas check out the free list of The 10 Biggest Gotchas in Leases and Ten Tips to Better Leases at www.leasespeak.com [Ed Note: Warning--we can't vouch for the legitimacy of, nor endorse (or not endorse) this company.]
PS: As long as the Master Lease has not been signed, there is still time to save a lot of money and negotiate a fair lease.
[Ed Note: Actually, the District ends up owning the leased computers after 5 years for $1 (according to what we've seen). According to Patricia Viramontes, Dell absorbs the installation costs, and a whole bunch of other things.
What we haven't seen is what they're getting for the nearly $1,000 a computer they're paying.
What is not clear is whether a public institution needs to be leasing in the first place. This may simply be a case of DISD getting hung with a "bad deal."]
Leasing vs Buying
Is there a reason we would want to lease computers? Why not just outright buy the computers and pay the extra money for the 3/5 year service plan?
I'm not sure why you average consumer can go into just about any electronics store and buy a package deal computer with just about everything you need for less than $1000 but we in DISD have to lease to get the same price.
Another question I have is why don't we invest that $43 million into our infrastructure. For the last two grading periods our internet grading system was down when grades were due, getting an internet connection that is stable and fast is a joke in most schools, and instead of fixing our fundamental technology problems, we're throwing money away on leasing computers.
[Ed Note: The price of computers varies greatly. As you can see from the Dell website, you can get basic PC's with Vista starting around $280.
Leasing really doesn't make sense for tax exempt entities--especially when you're on a "staggered" replacement schedule. You end up paying quite a bit more with no real benefits.
Just guessing, I would say they bought what someone sold them!]
DELL computers
I did watch the board meeting on public television and I what I gathered was that the board would be approving to increase the lease portion of the price agreement from three years to five years to lower the lease costs. Did I not hear correctly? The board apparently has already approved to spend the $43 million back in September. I guess what I am getting at is why weren't all those questions asked then? Which makes me be in total agreement with Carla Ranger by rushing to put things on the agenda without thinking them through. Is it just me?
[Ed Note: It was a general budget item for approval. It said "Lease" and "Purchase." It looks like (but we can't be certain because the District doesn't always give us all the documents) they asked for budget allocation, but didn't tell the Board what they were planning on doing.
Leasing doesn't make sense at a public agency. You get no tax advantages because DISD is tax exempt. You simply end up spending more.
Plus: what are they buying? Nobody seems to know--least of all Patricia.]
DELL computers
I agree which brings me back to my last statement, why would the board approve such an allocation without having all the information. It seems that they are their own worst enemy. "Approve allocations now, ask questions later".
Are the items new or refurbished?
I saw on the Dell Website about the school program computers, and the plan specifically states refurbished at far less than that option.
Can't we open a tech training program that can rebuild old hardware and train the kis at the same time?
Oh but there is no kickback in that....sorry what was I thinking?
Did any one check her emails
Did any one check her emails and see if she has been in contact with Ruben?