I would argue that the prices that Steve Hilton is using in this post are not correct and it is worse then he is stating.
Using the $0.16 figure per diaper is Target's retail customers' price, which is not the wholesale price that Target is paying for the diapers.
The state should be able to buy from the manufacturer at Target's wholesale price. There is a possibility that there maybe volume discounts above Targets wholesale prices that would make the final pricing lower still for the State of California.
Instead of the $0.50 price per diaper being only three times higher then the price the State of California could be paying at, it maybe four or five times higher then the price if the State of California would go direct to the manufacturer for the diapers and cut out the NGO's

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