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Colorado Springs reconsidering privatization of fleet maintenance after savings lag

January 6, 2018 Updated: January 6, 2018 at 9:32 pm
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Colorado Springs reconsidering privatization of fleet maintenance after savings lag (Photo by Mark Reis, The Gazette)

Shedding 68 Colorado Springs employees and outsourcing their jobs hasn't delivered the expected savings, nor has it streamlined how the city maintains its fleet of more than 4,500 vehicles, a recent audit found.

The 2014 privatization saved about 30 percent less than officials anticipated and muddied a once-efficient system with clerical errors and overpayments from the city and Colorado Springs Utilities totaling nearly $150,000.

The city and Utilities recently agreed to pay the fleet manager, New Jersey-based Serco Inc., even more money in the remaining two years of a five-year contract, further diminishing the already-slim savings.

In all, switching to Serco was supposed to save the city $2 million within the first three years, but City Auditor Denny Nester said a recent audit shows the savings were closer to $1.4 million.

"I can't say it was a bad decision (to outsource)," said Nester. "It hasn't cost the city more money doing it this way. But it has not been as beneficial as what they thought it would be when the decision was made."

"Expenses of administering the contract, along with other expenses that came along with outsourcing ended up being more than what was originally estimated," he said.

For example, the city bought a new type of software to handle billing for the outsourced work, Nester said. And several city employees were paid to monitor and coordinate the work. In addition, some of Utilities' fleet maintenance work requirements grew, further increasing costs.

In July, Serco sued the city and Utilities over a disagreement about the contract. The company sought an annual pay increase of $1.4 million, Nester said.

Total costs for the city and Utilities' fleet maintenance work - which includes Serco's contract - were $27.8 million between 2014 and 2016, Nester said.

While both entities initially fought Serco's request for more money, they settled in August, agreeing to increase the company's payments in 2017 and 2018.

That increase is expected to amount to an additional $600,000, said Ryan Trujillo, the city's sustainability manager

The boost will detract from the city's anticipated $2 million in savings over those two years.

Ousting the national award winning maintenance crew in favor of Serco's services also opened the door for clerical errors in billing, Nester said. Over the first three years of the contract, the city and Utilities overpaid the company by a total of $149,908.

A misunderstanding of a billing spreadsheet caused the mistake, Nester said. Eventually the city and Utilities will recoup those overpayments.

Once Serco's contract expires the city and Utilities will be at a crossroads.

The two entities plan to seek new bids from companies which might be able to handle the maintenance work moving forward, said Trujillo. But he and Nester acknowledged that those bids might be even more expensive.

The other option would be to reinstate the in-house maintenance crew, Trujillo said.

"The cost of materials, the cost of parts and labor have gone up," Trujillo said. "Likely we couldn't do it for what it was done before."

Asked at what point rebuilding the city and Utilities' maintenance crews makes sense, Trujillo and Utilities spokesman Steve Berry said they were unsure.

"We don't have a defined trigger at this point, we're really just going back out to bid and then looking at all of our options," Trujillo said.

The city and Utilities will seek new bids in the coming months.

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