Wednesday, July 26, 2017

Springs fleet contractor, Serco, sues the city — again

Posted By on Wed, Jul 26, 2017 at 3:37 PM

click to enlarge Police cruisers like these are maintained by Serco, a United Kingdom-based company. - PAM ZUBECK
  • Pam Zubeck
  • Police cruisers like these are maintained by Serco, a United Kingdom-based company.
The city's fleet maintenance contractor has filed suit after losing its case before a city review panel over how contract payments are to be computed for the fourth and fifth years of its five-year agreement with the city.

Serco Inc., which maintains most city and Colorado Springs Utilities vehicles, was heralded as a way to save the city millions of dollars over the five years of the agreement. But as we reported not long ago, ("Colorado Springs faces lawsuit over out-sourced fleet maintenance contract," News, April 5, 2017):
The United Kingdom-based firm is demanding a 22 percent price increase for 2017, the fourth year of a five-year deal, saying it's lost money in the first three years. If granted, the hike would drive the price to nearly $8.2 million by adding $1.4 million over the city's 2016 cost — a move that would squeeze the city's already tight budget.
It was the city's first major attempt at outsourcing, and cost roughly 60 city workers their jobs.

After Serco claimed it was losing money on the contract, which didn't specify a contract price for the final two years of the agreement, and wanted a big rate hike, the city said the contract doesn't allow that and offered a modest bump. That led Serco to court.

Meantime, the dispute over how contract disagreements would be resolved was heard on March 7 by the internal review panel, which ruled on behalf of the city. That ruling, obtained by the Independent via an open-records request, says:
The Panel finds that if the Parties had intended for the Contract to be void after Year 3 because Exhibit C did not explicitly include price terms for Year 4 and beyond, then the Parties would also have intended for the Contract to have a term of three years. There would have been no reason for the term of the Contract to have been specified as five
years, and no reason for the Contract to specify that it may be extended for up to five additional one-year terms.

The Panel concludes that the Parties intended for the Contract to have a term of not less than five years.

It is not likely that omission of the price terms for Years 4 and beyond was an oversight. For the omission to have been an oversight, each Party would have had to miss the fact that Exhibit C listed price terms only for Years 1 through 3. It is not reasonable to assume that neither Party detected an error that is so blatant and is of such great magnitude in light of the specified intent that the Contract was to be for a term of five years, subject to five additional one year extensions.
In truth, records show that Serco personnel told the city they didn't want the contract to contain a contract price for the last two years because they expected the price to drop, not increase. But, of course, now Serco says the company needs more money.

Here are the detailed findings of the review panel:
(1) The Panel was properly constituted under Section 6(b) and that the Panel may make the determinations specified in Section 6(b) notwithstanding the bias Serco believes is inherent in the composition of the Panel.

(2) The Panel resolved the dispute by interpreting terms of the Contract for which there was disagreement between the Parties.

(3) The Contract on its face provides sufficient information for the Panel to determine that the price terms for Years 4 and beyond are specified or determinable from the Contract.

(4) The Contract is not void for failure of a material term.

(5) The Parties did not intend to, and did not attempt to, confer jurisdiction in the District Court under C.R.C.P. 106(a)(4).

(6) The Parties intended that matters addressed by the Panel be binding on the District Court unless that Court determines that the Panel abused its discretion or exceeded its authority.

(7) The Parties intended for the District Court to apply the principles of C.R.C.P. 106(a)(4) in an action brought to consider matters addressed by the Panel.

(8) The Parties intended to, and did, apply the principles of C.R.C.P. 1 06(a)(4) to limit the time during which a Judicial action could brought to consider matters determined by the Panel to 28 days after the date of the Panel’s Determination and for the District Court to dismiss an
action brought more than 28 days after the date of the Panel’s Determination.
On July 13, exactly 28 days after the panel's finding, Serco filed a lawsuit. The panel, the lawsuit says, "exceeded its jurisdiction and abused its discretion."

Serco is seeking to have the review panel's decision set aside. If that happens, the initial lawsuit litigation would proceed.

Here's the entire review panel's findings:

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