Late Bills Cost DWP

Three Los Angeles city agencies reported Tuesday that they missed out on $1.9 million in discounts this fiscal year because they failed to pay their bills promptly.

The city Department of Water and Power, which so far this fiscal year has taken advantage of only 55% of the discounts available under contracts with vendors, accounts for almost all of the lost savings. The fiscal year ends June 30.

The Harbor Department reported that it missed about 10% of the discounts available in the fiscal year, and Los Angeles World Airports, the city’s airport agency, failed to secure 9% of the discounts available. The airport and harbor departments handle a much smaller volume of contracts than does the DWP. The two agencies missed out on discounts totaling $41,000.

Combined, the three semi-independent city agencies pay more than $1 billion each fiscal year on city contracts, of which many do not have discount provisions.

Frustrated City Council members called on the city controller to look for ways to overhaul the bill-payment system at the DWP and to improve the timely payment of bills by other city agencies.

“I am very, very disappointed that the DWP has missed out on nearly $2 million in discounts,” said Councilman Tony Cardenas. “That’s ratepayers’ money. It’s unacceptable.”

Many city contractors offer to discount their prices by 5% or more if the city pays its bills quickly, within 20 or 25 days in many instances.

Cardenas, who is chairman of the council’s Commerce, Energy and Natural Resources Committee, said he has heard complaints from companies that they are losing out on contracts to bidders who are offering discounts, knowing the city will not meet the deadline.

“The department ends up paying more than they would have to the losing bidder,” Cardenas said after his committee held a hearing on the issue.

Cardenas said he may ask that discounts be excluded from consideration in the competitive bidding process, unless the DWP can significantly improve its payment record.

In choosing between competitive bidders, the airports department gives an advantage to firms that offer discounts when bills are paid within 25 days. The Harbor Department subtracts the amount of the discount from bids when the city is offered 20 or more days to pay its bill.

Albert Stephens, a DWP manager, said that the agency may extend the discount period to 27 days, up from 21.

At the same time, the agency is working to improve its automated system for processing bills. It also needs to streamline the process that requires payments to be approved by three city offices, including the controller, he said.

“There are bottlenecks in the process,” Stephens said.

Controller Laura Chick said she is required to review bills to make sure they are appropriate. She blamed the DWP for not doing enough to get the proper paperwork to her on time.

Andrew Virzi, who oversees DWP’s vendor payments, said that an audit has confirmed the need for improvements but noted that his agency handles contracts worth much more than other city agencies.

That excuse drew skepticism from Councilwoman Janice Hahn. “I would think once a good system is in place it would not matter what is the number of invoices,” she said.

The committee asked Chick to report back in 60 days with a plan for improving the bill-payment performance of city agencies.