Wednesday, May 21, 2014

What is a Photocopy Machine?

I received a link recently for an article in the ABA Journal. In the article, there is a tongue-in-cheek video of a "deposition that got sidetracked." The video is entertaining and interesting. The crux of the matter is a debate about what is a "photocopy machine;" the case which it parodies involved this as a part of the deeper debate of what is a photocopy. Is a PDF image a photocopy? Is your computer a "photocopy machine?"

The dialogue comes from a case involving copy charges in Ohio. The Cuyahoga County Recorder's Office charged $2.00 per page for photocopies of documents (it appears that the actual copy provider may have been a vendor acting on behalf of the clerk, see the name of the case below). As technology evolved, and they entered the digital age like the rest of the world, there was a desire to adapt to the evolving methodology. Instead of copying papers to provide to requestors, they would copy those pages as PDF images onto a CD. 

According to the Office Depot website, CDs can be purchased for as little as $20.95 for 100, or $.21 each. In fairness, if you wanted to look really professional, the little paper envelopes cost about another $.05. So the raw materials to make someone a CD could be as high as $.26. That is of course retail, and they could likely be purchased in bulk a bit cheaper. 

There is little time required to "burn" a CD, it is a matter of a few mouse clicks to "drag and drop" files and then click "save." The computer does the real work and I have never had one fail to save, unlike the feeder on the photocopier, which you may have to watch for mis-feeds.

According to the ABA Journal, the Ohio clerk's office was taking the position that it could charge $2.00 per image (PDF) page saved to the CD. So a CD containing 100 pages, was provided for $200.00. According to the article, the capacity of a CD makes is possible that a single $.21 CD could contain up to 2,500 PDF pages to substantiate a charge of $5,000.00 using this alternative to paper copies. 

The decision, State ex rel. Data Trace Information Services LLC v. Cuyahoga County Fiscal Officer, Slip Opinion 2012-Ohio-753 is summarized on the Ohio Supreme Court website. It is described as a 7-0 per curium decision granting a writ of mandamus "ordering the Cuyahoga County Fiscal Officer to provide electronic copies of real estate title documents that have been recorded and scanned into the county’s computers to persons requesting such copies at the actual cost of copying the digital images of the requested documents onto a compact disc." (Emphasis added).

According to the ABA Journal, the Ohio Supreme Court concluded that the maximum charge for a CD full of documents should be limited to $1.00, a profit of only 284% ($.26 investment) to 376% ($.21 investment) on the actual cost of the CD. Certainly, there is also a hardware cost, computers cost money. There are personnel costs, people do not routinely work at the Clerk's office or anywhere else for free. It does take time to burn a CD. The U.S. Postal Service will still charge to deliver it, though not as expensive as paper, still a cost.

Should those who possess records have the option of how to produce duplicates? In other words, when a doctor's office or a hospital receives a request for records, should they decide how they are produced? If the documents are already PDF images on a computer, that is digital records, of medical care and treatment or personnel reports of an injured worker, and they are subpoenaed, can the owner of the documents choose to print them on paper rather than producing the images on a disc? Alternatively, if the records are in paper form, can the owner choose to scan them as PDF images and produce them on the disc instead of photocopying them? Should this be the choice of the requestor instead? Should there be a standard?

What is a fair price for the documents, whether on paper or a disc? Florida Statutes delineate the amount state agencies can charge. Section 119.07 provides "up to 15 cents per one-sided copy for duplicated copies of not more than 14 inches by 8 1/2 inches; no more than an additional 5 cents for each two-sided copy; and for all other copies, the actual cost of duplication of the public record."

I have seen charges of $1.00 to $2.00 per page for duplicates in Florida, similar to the Cuyahoga Clerk charges. Some medical providers have the records digitized already and currently want $1.00 to $2.00 per page to copy them onto CDs just like that clerk. When attorneys object, some doctors then insist on printing the digital records onto paper for their response to lawyers (at that price) because there is a huge profit margin in copies at even $1.00 per page.

The justification for the $1.00 or $2.00 per page is the cost of paying personnel to produce the CD or copies. Proponents also argue that the computers or copiers are also large hardware investments. 

Assume the document producer pays someone $10.00 per hour. A moderate copy machine prints at 35 pages per minute. With time between jobs, it would be reasonably easy to produce 1,500 pages an hour with this moderate machine (45 minutes x 35 ppm = 1,575). High-end machines can produce 100 ppm, which would be 4,500 (45 minutes x 100 ppm = 4,500) pages. 

With all the investment in the machine and toner and paper, the cost per page for duplication is less than $.10. We know that because Kinkos and others charge less than that, and they are still in business. They must be making a profit even at $.10. The state has perhaps concluded that $.15 covers the cost of producing copies. 

If someone has the moderate copier, that 1,500 pages per hour at $1.00 per page produces income of $1,500.00. The expense for that hour is $.10 to .15 per copy, so $225 ($.15 x 1,500). The expense for labor for 1 hour is $10.00, plus payroll taxes, benefits, etc. Assume that this labor is there fore $20.00 (ignoring that Kinkos has that payroll expense already included in its total charge of $.10). The profit of this one hour of copying is $1,255 ($1,500 - $20 - $225). 

Mailing the records back out presents an expense. Some will charge for that, "shipping and handling not included." If we hypothesize that the requests are for an average of 100 pages each, then the postage to send these copies back out (manila envelope, $2.50 postage) is approximately $45.00 (1,500/100 = 15 packages x $3.00 each). So after the "shipping and handling" is deducted, the profit is about $1,200 per hour. 

If you have the high capacity machine at 4,500 pages per hour, the income is $4,500.00. The payroll is the same, and the expense of actual printing is $675.00 (4,500 x $.15). The "shipping and handling is $135.00 (4,500/100 = 45 packages x $3.00 each). The profit from on hour of copying is about $3,600 ($4,500 - $675 - $20 - $135). 

Keep in mind that this profit could be generated without even buying a copy machine by paying someone to carry the records to the Kinkos and paying Kinkos full-price to make the copies while your employee stood there and watched. Profit of $1,200 to $3,600 per hour. If you only maintained that pace for four hours per day, the daily profit would be $4,800 to $14,400. You would double those figures if the charge were $2.00 per page, or if you kept it up eight hours per day. 

Keep up the lower figure of just $1,200 per day for 200 working days per year and the profit is only $240,000 per year. At the $3,600 per day the annual profit is $720,000.

I did an experiment burning a CD. I copied the content of a large "file folder" on my computer to a CD, burned it, removed the CD from my computer, inserted it into another to verify that the copy was complete, checked the copy, inserted the CD into an envelope, typed a short letter to say "here is the CD/copies," printed the letter and an envelope. Total time invested was about 7 minutes. So, I could have done that five or six times an hour. I suspect that someone could be more efficient with practice and do this faster.

If each CD had only 100 "pages" or images, then the charge using the hypothetical $1.00 per "page" or image would have been $100 per CD, or at only 5 per hour, $500.00 per hour producing CDs. The CDs and envelopes to generate that $500 is $.26 each. The postage is lower for mailing CDs, "shipping and handling" adding $1.50 per CD response. The total expense less than $2.00 each. The profit per hour, less $20.00 for labor, $3.00 for CDs/sleeves and $7.50 for postage and envelopes, is about $460.00. Keep that up just four hours a day and the profit is almost $1,800 per day producing CDs. Do that for 200 working days in a year, and the profit is a mere $360,000. 

Alternatively, at the rate cited in the ABA Journal, of $1.00 per CD, you would lose money on the CDs. That limitation would lower the revenue for that 5 CDs per hour to $5.00. The Labor, postage, etc. would still be about $31.00. So, you are losing about $26.00 per hour. If you charged separately for "shipping and handling," so that your fixed cost is limited to the $20.00 labor and your variable cost is limited to the CD and sleeve is limited to $.26, then you would break even at $1.00 per CD if you produced 27 of them each hour, or lowered that production time to about 2 minutes each. 

So, $1.00 per CD is not likely covering the actual cost of producing the images. $1.00 per page, whether on the CD or on paper is capable of producing significant profits, and $2.00 per page produces even more. Some compromise between these two may be appropriate. Allowing preparation reimbursement (that 7 minutes at $20.00 per hour) about $3.00, the actual CD cost of $.26, and the "shipping and handling" of $1.50 would result in a total cost of under $5.00 per CD regardless of it containing 100 images or 2,500 images. 

It bears thinking about. The "cost" should not be generating thousands of dollars of profit. This subject in the context of electronic court records was recently addressed by the Sun Sentinel. Of digitizing court records and providing public access, they note "Online access to court records shouldn't be the next cash cow." Likewise, no one should be losing money on providing people with the relevant information they need for decision making. Watch the video about what a photocopy machine is, and post a comment about your thoughts on all of this.

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