Los Angeles County officials admit they erred in drawing up a key section of their biggest-ever privatization contract, a mistake that could lead to loss of control over costs on the $50-million motor vehicle repair contract, The Times has learned.
The cost-control section that was to have set limits on repair costs was inadvertently omitted from the contract awarded last July to Holmes and Narver Services Inc. of Orange, officials said.
In testimony before the Board of Supervisors, county officials had promised that Holmes and Narver Services would be required to absorb the costs of repairs per vehicle up to certain agreed upon amounts no matter how often the vehicle went in for repairs.
But, because of an oversight, specific limits were never written into the contracts. As a result, whereas the contractor agreed to make repairs of up to $1,500 per vehicle, there is no contract language specifying whether the ceiling amount applies to one trip to the garage for a given vehicle or to indefinite repair jobs for the life of the five-year contract.
Attempt to Save Money
One reason for awarding a contract was so the county would know from year to year how much vehicle maintenance costs would run. But with no clear contract obligations spelled out on the question of repeat repair work, the overall price tag for maintaining the county's 6,500 vehicles is cast in doubt. One justification for turning the work over to private enterprise was that it would save the county money.
Though the county has suffered no cash losses so far, its contracting omission should immediately raise danger flags, according to the head of a trade association representing firms doing business with government agencies.
Gary Engebretson, president of the Washington-based Contract Services Assn. of America, termed the cost-control section in the Los Angeles County contract "very poorly written" and said such errors can lead to costly conflicts between government and private enterprise.
"Anytime a government entity does not make its specifications clear, it creates problems," Engebretson said. The cost-control section of the county contract with the vehicle maintenance company "needs to be cleaned up," he added.
County officials at first insisted that the cost-control language existed in the contract or other documents. After searching their files, however, they conceded that it had been left out.
"That's the only mistake we made," said Jerry Lee, deputy director of the county's Facilities Management Department that negotiated the contract. He added, "It hasn't been an issue to date."
Whether the company can bill the county more for multiple repair jobs, said Lee McIntire, vice president of Holmes and Narver Services, is a "gray area."
Similar contract confusion exists for accidents to county vehicles. Holmes and Narver Services is supposed to absorb the first $2,500 in damage repair costs. Again, the county meant it to apply each time a vehicle was damaged, but officials neglected to write that into the contract.
William F. Stewart, deputy chief administrative officer, said he wishes that the contract had clearly spelled out the terms but the issue "is not material at this stage."
Besides the contract difficulties, the county has been beset by major backlogs of vehicles tied up for repairs ever since Holmes and Narver Services began work Oct. 1. Overall, the backlog has often been worse than when county workers did the repairs.
County officials have given the private firm until Wednesday to meet contract terms for both the backlog and installation of a computer system for tracking the vehicles and work performed on them. Officials said they have already begun estimating fines due the county from Holmes and Narver Services for failure to meet contract conditions.
The three conservative members of the Board of Supervisors who have backed privatization programs could not be reached for comment.
The two liberal members were predictably critical.
Supervisor Kenneth Hahn, an opponent of turning the automotive repairs over to private enterprise, has asked the board to consider ordering a full investigation of the contract when it meets next week.
But Hahn and the board's other critic of the contract, Chairman Ed Edelman, have repeatedly been outvoted by the three-member conservative majority on privatization issues.
"You get what you pay for," Edelman said Wednesday. "I have great doubts about contracting out in general. The employees you get are not as qualified (as county workers) because you pay them a lot less."
In addition, Edelman said, even as board chairman he does not feel the departments keep him well informed on problems that arise. Under pressure from the board's majority to find work that can go to private industry, Edelman said when trouble arises with contractors, department heads "don't want to raise the flag of distress."