Colorado Springs will pay a contractor to take care of its vehicles in 2014, a move that could leave 70 city workers unemployed.
The city expects to begin negotiations on a contract with an international automotive fleet management company to maintain the city's 4,500 vehicles and pieces of equipment, including police squad cars and Colorado Springs Utilities vehicles. The company's name was not disclosed, but it has a U.S. headquarters with a parent company overseas.
Negotiations with the automotive company could take about 90 days. If successful, the private firm would likely begin Jan. 1, 2014.
News of the outsourcing was announced Monday to the city's 70-member fleet management team. At least one employee left the meeting in tears.
"It was emotional for many of them," said Laura Neumann, chief of staff for Mayor Steve Bach.
"They are very proud of the service they have provided - it was a difficult meeting,"
But the decision to outsource wasn't personal nor was it an indictment on the fleet maintenance crew's performance, she said. It's a business decision and part of the city's larger reorganization efforts.
The city has reduced staff in recent years. Last year the city outsourced some of its snowplowing crews and laid off six employees and eliminated 13 positions from streets, planning and finance departments.
"This would be the most significant outsourcing of an entire department," Neumann said.
In recent town hall meetings, Bach said he was committed to outsourcing to save the city money. His attention turned to fleet management last summer.
The explored whether the private sector could maintain the city's 50 types of equipment and vehicles for less money than the city was paying. This year, the city budgeted $16.2 million for the fleet management department. Outsourcing was listed as a "breakthrough strategy" in the 2013 budget with plans for the city to contract out fleet management by the end of 2013.
The city estimates it could save $2 million over three years -saving that could be spent in areas more visible to the community, such as parks or bus service, Neumann said.
Meanwhile, the automotive company, in its interview with the city for the job, expressed interest in hiring some of the city's staff, Neumann said.
Employees who are not hired by the firm will receive a severance package of one week of pay for every year of service up to eight years and six months of health and dental coverage. An employee hired by the firm would get half of that package. The city expects to spend about $700,000 the first year in severance and other separation costs. Human resources officials are looking into how to deal with sick days accrued by the employees. Typically, accrued sick days are paid out when a city employee retires.
Over the years, the city's fleet management program has earned high marks from the Government Fleet Magazine, which named Colorado Springs fleet management department in the Top 10 of 100 top government fleet management departments in 2012 for outstanding performance.
Bruce McCormick, Colorado Springs Utilities chief energy services officer, said the decision to outsource was never about performance. It was about saving money. One potential benefit in contracting with a national and international automotive management firm is long-term cost savings, he said.
"A contractor with national expertise and connections to parts and markets can be leveraged for further savings into the future," he said.
Of the 4,500 city vehicles and pieces of equipment, about 1,600 are specialized utilities vehicles. Utilities had considered doing its own fleet management or at least a mix of inhouse and outsourcing. But the best option was for the city and utilities to partner on the contract, McCormick said.
"The preferred firm does have the technical expertise," he said.
The city's fleet management team mostly works out of a facility on Fontanero Street. The automotive firm expressed interest in taking over that facility, Neumann said. And while it would be up to the private firm where it buys its auto parts, the firm did say it would look into doing business with local vendors, she said.