In the trenches: Acme discovers it has highly rewarding but unsavory billing practices

An acme employee alerts upper management of a pricing scheme within the company that cost clients millions annually. Instead of investigating the accused, Acme demoted and eventually fired the accuser.

PlantServices.com

Acme completely filled a niche market with a string of service contracts it inked with manufacturers across the greater metropolitan area. While many competitors considered their claim that “no job is too small” was a powerful strategic marketplace advantage, Acme topped it with a claim that “no job is too off-the-wall.”

Over the years, Acme has courted, won and kept what might be called an “interesting” group of clients. They bring odd, many times ad hoc, requests for services. Some have work that needs to be done immediately, perhaps in response to a hazardous chemical spill or catastrophic mechanical failure. Some want Acme to perform extraordinarily risky, dangerous work. Others bring some highly irregular, one-of-a-kind task. Some have urgent work that requires Acme to commit the bulk of its resources right now, which results in putting ongoing work for other clients on temporary hold. These latter situations raise scheduling problems and have the potential to irritate anxious clients whose once equally important work now has been suspended. It’s an Acme balancing act that can have financial ramifications.

The atmosphere in Acme’s customer service department is hectic and, because of the need for timely responses, most client communications are conducted via e-mail and other high-tech channels. In this nearly paperless environment, Acme’s three customer service reps receive client requests and key the relevant information into a custom database that feeds an automated work scheduling module. After a minor bit of manual analysis and shuffling to level the workload for the various field crews, the reps price the proposal. Then, they prepare a formal scope of work showing exactly which tasks Acme would perform, those that are to be performed by others, and exactly when the work will be started and completed. Finally, the scope of work, the proposal price and the standard boilerplate documents are returned to the client over a secure Web link for acceptance via the same channel. All this takes place within a few hours of the initial request for proposal.

Of course, the labor involved in preparing proposals and cost of operating the high-tech service center are rolled into the lump-sum price that Acme submits. If the customer service reps spend too much time trying to make sense out of the material a client submitted, the process slows to a crawl and backlogs increase. It’s another variable that can have financial ramifications for Acme.

To make its process go as smoothly as possible, Acme makes it possible for clients to submit the necessary information in a standard format that meshes neatly with the Acme work routine. This makes it easier to prepare a timely response, which Acme touts as a high-tech way for clients to save money.

Acme’s Web site allows clients to input their work request information to an automated proposal handling system. Using this avenue merits Acme’s standard pricing schedule. Some clients preferred to use e-mail, so Acme published a set of guidelines on its Web site for them to follow in preparing a request for proposal. This class of submittals is subject to a surcharge because of the extra handling required in the Acme office.

Acme’s price hinges on details about the client’s timing, scope of work and method by which the request was submitted. But, the reps exercise certain discretion in how they price the proposals.

It was that unbridled freedom that came to the attention of Kelly Mann-Jarrow, a lower-level manager in Acme’s accounting department. Part of his duties included performing various perfunctory surprise audits of Acme’s operating departments. The objective of this exercise was to prevent any funny business by making departmental managers think the corporate honchos were taking a sudden interest in the way the department consumed Acme resources.

After reviewing his investigative data from the customer service department, Kelly concluded that something didn’t look quite right. Then he noticed a pattern. The reps were using the higher pricing schedule for every proposal, regardless of the manner in which it was submitted. True to his mandate, Kelly told the accounting managers that the customer service reps regularly overcharge clients that submit work requests through the Web site. Kelly could unambiguously document several million dollars of overcharges annually.

After it was clear that nothing was being done about his warning, Kelly dutifully sent several managers an e-mail that reiterated his findings and provided additional details about the pricing practices. The outcome of this move resulted in Acme assigning Kelly to the lightly-staffed night shift and giving him non-supervisory duties, such as sweeping floors and cleaning the lunchroom. Finally, his manager accused him of doctoring a subordinate’s timesheets by three minutes, ostensibly to prevent a key performance indicator for Kelly’s department from dropping below a targeted minimum acceptable value.

Kelly strongly protested this accusation. Then, Acme trotted out the subordinate, who, somewhat sheepishly, backed up Acme’s claim, despite the fact that an admission he wasn’t on the job when his supposedly doctored timesheet claimed he was working was, in itself, grounds for termination. Instead, Acme terminated Kelly for falsifying documents while claiming that blowing the whistle on a pricing scheme was irrelevant.

How could this situation have been avoided? Is Acme’s practice of not delivering the touted savings illegal or unethical? Is it politically savvy to point out an operational error, the fixing of which diminishes revenue? Is it ever possible for in-house auditors to avoid conflict-of-interest allegations? Is there any way to control pricing for highly customized work? Are punitive job assignments ever justified? What legal recourse does Kelly have?