State Department Pays $6,600 per Kindle for 2,500 Kindles

Economic Policy Journal ^ | 6-12-12 | Economic Policy Journal

[JohnKinAK]

Yup, the State Department has awarded a $16.5 million contract to Amazon to stock designated libraries and U.S.-friendly educational centers around the world with 2,500 Kindle e-Readers, procurement databases show, according to Nextgov.com. The contract includes 50 titles, a secure central management system and round-the-clock help desk service.

The purchase works out to a cost of $6,600 per reader. No doubt there may be extra support and software that comes with these Kindles, but $6,000 plus worth? Kindle's on Amazon's web page now sell for between $79 and $379.

Is this a procurement horror story reminiscent of years past that saw the Defense Department by claw hammers for $435, toilet seats for $640 and coffee makers for $7,600? It sure smells like it. But don't expect the State Department to own up to it.

During the Reagan Administration, when President Reagan learned of the outrageous prices for hammers, toilet seats and coffee makers along with news that the military was paying $1,118.26 for a spare plastic cap for a navigator’s stool on a B-52 bomber (worth about two cents), he demanded answers from Secretary of Defense Casper Weinberger. Weinberger promised he would get to the bottom of the outrageous prices.

What happened though is that Weinberger appeared on Capitol Hill and defended the shocking prices.

Murray Rothbard made the case that all government spending is waste and should be subtracted from GDP and this is correct. As Mark Thornton writes:

...government spending does not have its value tested with consumers in the market, and much of the spending is actually bad for the economy. Government could pay people to dig ditches and other people to fill the same ditches, [Or it could pay $6,600 for kindles!-RW] and it would increase GDP, but no one argues this is the path to prosperity...

Murray Rothbard addressed the problem of measuring a big government economy with the concept of private product remaining (with producers), or PPR, which basically takes GDP and subtracts from it twice the amount of government spending. Government spending is subtracted once to obtain gross private product and it is subtracted again to account for all the resources that government has siphoned off from the private sector.

Rothbard has the theoretical point about ALL government spending right, but it is nice to come across an example of government spending that appears so totally absurd, that even Warren Buffett and Henry Blodget will have to think twice before defending the expenditure and calling for higher taxes to pay for the expenditure. It's a teaching moment.

Clearly, what really needs to go on is cutting of government expenditures and cutting and cutting. Not increasing taxes to pay for bureaucratic government spending.

[Yaelle]

This needs to get out. And we need to show outrage!

[92nina]

I can't conceive of how this happened. I was trying to think of how many books a Kindle would have to come with to cost that much - around 600 recently published books. Or maybe the books are super-expensive technical manuals and the Kindles are being used for something unique?

Or the Kindles are coming with pre-paid international wireless internet access?

Unless some answer comes forth, this procurement mess is exactly why everything the government touches eventually turns to crap. No market forces = no accountability.

[92nina]

Ah - an update.

Update: After some discussions with Amazon and the State Department, we've learned the price tag on the Kindle contract is not as cut and dry as we first reported. The contract authorizes the State Department to pay Amazon up to $16.5 million over five years for an English-language teaching program and the 2,500 Kindles cited in the procurement documents has been described to us as merely the initial order. We do not know the maximum amount of Kindles the State Department can purchase in their deal with Amazon. Still, it's clear that our $6,600-per-Kindle calculation is not accurate. Previously: we reached out to the State Department's Philippe Reines, who emailed to say that the department was getting the actual Kindle devices for 10 percent off retail price. The rest of the cost goes to cover the service and content-providing agreements in the department's four-year contract with Amazon.

http://www.theatlanticwire.com/global/2012/06/state-department-buying-english-teaching-kindles-6600-each/53407/

[sickoflibs]

‘Stimulating the economy’ ping!

[CitizenUSA]

I wish another FReeper could explain it to me, but why do some say the economy is growing? GDP is expanding at about 2% per year, right? At the same time, government is borrowing about $1.5 trillion or 10% of GDP every year. So, how is this considered a growing economy? Doesn’t that work out to something like an 8% decline in real GDP?

[dr_lew]

Unless some answer comes forth, this procurement mess is exactly why everything the government touches eventually turns to crap. No market forces = no accountability.

The best proof of this that I ever saw, in my own mind, was the snack bar at Island Beach State Park in New Jersey, back in the day. It's a substantial piece of geography completely under state control, an "idyllic" version of the numerous municipal beaches along the Jersey coast. If you took a picture of the snack bar, it would look like what you might expect, with customers standing and waiting for their orders. But if you took another picture 10 minutes later, you would see the same customers standing in the same places waiting for the same orders. As I stood there, I couldn't imagine a clearer example of the lack of motivation on the part of the snack bar attendants, their supervisors, or indeed the State of New Jersey, to provide prompt or satisfactory service to the clientele.

[oyez]

Hey. The government knows best. We down here don’t don’t didley. That is why the government is going to control everything. So they paid a little more. They know what they are doing. So we need to STFU about this kind of thing.

[oyez]

Hey. The government knows best. We down here don’t don’t didley. That is why the government is going to control everything. So they paid a little more. They know what they are doing. So we need to STFU about this kind of thing.

[I see my hands]

[Jack Hammer]

Six thousand bucks apiece?

Hey, why not - it’s not their money, after all, it’s only the blood, sweat, and tears of the taxpayers.

So who gives a rat’s *ss about ‘em.

[Politicalmom]

I don’t care about the details. This is a complete waste of money. I missed the part of the Constitution which authorizes the government to confiscate my money to buy frivolous items to send to people in other countries.

[microgood]

There is one thing the Federal Government does extremely well: waste money. Nobody does it better.

[Recon Dad]

The purchase works out to a cost of $6,600 per reader

.....so what, you’re still not paying your fair share!!!

[radioone]

"$16.5 million contract to Amazon"

Amazon?? Smart move. They get to avoid state and local Sales Tax. /sarc

[Eric in the Ozarks]

Good luck with that.
This is so small compared to the rest of the crap...

[Venturer]

I buy books from the library.
I donate them back to the library so hey can sell them again when I am done.
The cost is pretty insignificant when compared to the price at the store.

$6600 dollars for a book is pretty ridiculous when I don’t even like to read books off a computer. I like to hold them in my hand dogear the corner to keep my place, take them to the bathroom with me, read them at night in the bed.

[libertarian27]

Hey, Kindle needs a Dog-Ear app! :)

[mikey_hates_everything]

The price is reasonable for what is being required in the contract. It’s the contract specs that are overkill. The maintenance and support infrastructure and requirement for 3G access as well as Wi-Fi is driving the per unit price up. Perhaps whoever did the RFP should consider the cost of the scope and back off a bit.

[khelus]

Good point. Here's the inflation adjusted GDP:



adjusted by CPI, unemcumbered by 'enhancements that suppress inflation: