The City of Colorado Springs, Colo., has not realized as much savings from its outsourced maintenance plan as anticipated, according to a new report from the city auditor. For the three calendar years 2014 to 2016, the city expected to save $2 million by outsourcing its fleet management and maintenance to Serco, but instead saved $1.4 million, or 30% less than planned.

The original outsourcing decision analysis projected that the cost of maintaining an in-house fleet for the first three years would be $29.1 million. The actual cost of fleet between 2014 and 2016 was $27.8 million. The auditor found that while project cost met expectations, overall savings weren’t achieved due to “other operating costs & one-time expenses.”

Part of the cost variance was a new service facility added by Utilities after the decision to outsource had been made. Another cost was a new software to handle billing for outsourced work, The Gazette reported.

In 2017, Serco asked for an increase in the contract amount to more than 20%, or $1.4 million annually. The settlement between the city and the vendor included price escalations ranging from 2.6% to 8% over 2016 contract costs in 2017 and at least an 8% increase over 2016 costs in 2018. This increase is expected to reduce savings.

“We appreciate the efforts of the audit committee but due to their limiting of the audit to the original outsourcing estimate, important savings and contributing factors were not considered for the report," said Ed Muse, vice president of fleet management at Serco in a written response. "For example, the average age of the city’s fleet increased by three years and related maintenance costs were not part of the original outsourcing estimate. In addition, Serco’s delivery of improved service levels resulted in an average of over 100 more vehicles available daily. With these and other factors, we are confident that a complete analysis will show actual savings far exceeded the outsourcing justification estimate.”

The audit also included several recommendations for improvement of contract management, including: improve vendor billing to reduce inaccuracies, review billing to accurately reflect inventory and eliminate overpayment, and classify work orders as targeted or non-targeted work. Management agreed with all recommendations.

The five-year contract expires at the end of this year, and city officials expect bids for a new contract to come in at even higher prices. Reinstating an in-house fleet is an option, although it would likely also cost more than it did in the past, according to The Gazette.

To view the audit, click here.