Herman Miller Contract Is Real Morale Booster

May 21, 2002
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ZEELAND — A new 10-year, $93 million contract with the U.S. Social Security Administration provides Herman Miller Inc. a solid morale boost, as the company struggles through the worst downturn ever for the office furniture industry.

The contract is one of the largest Herman Miller has ever received and, while it won’t contribute greatly to the bottom line, represents an important business win for the company during a down period, said Mark Schurman, Herman Miller’s director of external communications. Herman Miller posted a $2.9 million loss and 25.1 percent decrease in sales, to $410.9 million, in its second quarter. The company is scheduled to release its third quarter financial results this week.

“It’s nice to have a positive win like this that gives encouragement,” Schurman said. “It certainly is helpful to us. It’s obviously a down time in the market right now and this kind of project win is important.”

Herman Miller, working through its Global Customer Solutions program, will serve as the sole source for office furniture and workspace management services for 800 Social Security Administration field offices nationwide. About 60 percent of the contract is for professional services, with the rest for furnishings, Schurman said.

The contract builds on an $85 million deal Herman Miller signed with the Social Security Administration in 1995 to provide new office furniture for the federal agency’s field offices. That project involved building and equipping more than 20,000 workstations, and at the time was the largest order in Herman Miller’s history.

The company views the new agreement with the Social Security Administration as validation of a successful business relationship and the agency’s decision at the time to seek a waiver from Federal Prison Industries (FPI) to buy its office furnishings from the private sector.

“The long-term relationship Herman Miller has with the SSA, and our proven performance over the last six years, allowed us to craft a unique agreement that better serves the customer for the next 10 years,” said Mike Kratt, vice president of government sales at Herman Miller. “It’s a significant contract, one that we’re pleased to have been awarded. It’s a strong vote of confidence in the company, our products and our services.”

FPI is the arm of the federal government that teaches inmates job skills and uses prison labor to produce a myriad of products, including office furniture. Federal agencies are required to buy from FPI, or seek a waiver to buy from the private sector.

Schurman does not expect that the new Social Security Administration deal alone will open the door to more FPI waivers and government contracts in the future with other federal agencies. In this case, the Social Security Administration needed to contract again with Herman Miller, as well as obtain a subsequent FPI waiver, to service a base of products that were already installed.

“These products clearly can’t be served by FPI,” Schurman said.           

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