Maintenance

Houston Sues Parts Supplier for $1M Overage

March 28, 2016

The City of Houston has sued its auto parts supplier, Genuine Parts Company (NAPA IBS), after an internal audit found the company overcharged the city more than $1 million. NAPA claims it has saved the city money and the city is “misreading several of the contract provisions in the audit and ignoring generally accepted industry practices,” the Houston Chronicle reported.

The city has been using NAPA for parts management since 2011. The five-year contract had a maximum spend amount of $95 million, which was increased to $118 million in July 2015, according to the audit document. The audit covered calendar-year 2014.

The overcharges include $299,421 in management fees charged based on percentage of sales rather than basic operating costs as outlined in the contract, auditors stated. In NAPA’s response, it claimed that these costs were clearly identified in the company’s bid and also discussed during the contract negotiation. Auditors reiterated that the contract does not mention percentage of sales, but actual costs.

Auditors also claimed NAPA overpaid its employees by more than $147,521, exceeding the contract’s labor rates. NAPA stated that it paid more experienced people higher rates and less experienced people lower rates, and used a combined payroll cost, which was less than the combined contract labor rate. Auditors stated that if the company wanted to use averages, it should have requested a change order to do so.

Other disputed findings relate to invoices for property taxes on inventory and billing for a delivery driver exceeding the annual contractual labor rate limit.

NAPA agreed to credit the city for two findings: the billing of $24,426 of inventory that the city owned and the duplicate billing of one week of delivery drivers’ salaries, totaling $12,667. NAPA stated both were errors.

The audit also stated that the Fleet Management Department (FMD) needed to provide effective contract management oversight of the NAPA contract. FMD agreed to do so.

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