- The Washington Times - Monday, January 7, 2002

Police officials have allowed the company in charge of keeping Metropolitan Police Department cruisers in top running condition to do only half the preventive maintenance its contract requires and collect bonuses it hasn't earned.
According to an outside audit, which recommends a broader investigation of financial mismanagement, Serco Management has also been allowed to overcharge the District for labor.
A copy of the audit by Bert Smith & Co., which was obtained by The Washington Times, shows Serco reaped profits of 22 percent, or $80,000 a month, on the $350,000-a-month deal it has with the city. That arrangement is "probably ongoing today," even though profits on city contracts must not exceed roughly 10 percent, the auditors said.
Part of those profits come from a $28,000 performance bonus to reward Serco for meeting police department goals, even though no goals have ever been established. The money is paid out for no good reason, the audit says.
Serco's deal is even sweeter, auditors suggest, because the company does not pay rent for use of the police department garage and it receives parts directly from a parts vendor, rather than paying to stockpile its own inventory of spare parts to ensure speedy repairs of police cruisers.
This is the second audit to find both police mismanagement of its contract with Serco and overbilling by Serco. The D.C. police department intends to rebid the contract because of Serco's poor performance yet Serco is among three companies being considered, despite Bert Smith & Co.'s scathing review.
Besides failing to get permission to increase payments to Serco, police fleet managers also failed to negotiate reduced payments for the decrease in preventive maintenance on police cars, the auditors found. The contract required Serco to perform oil changes and inspect all police vehicles every 3,000 miles, but Serco only did the work every 5,000 miles, auditors said.
The auditors recommended a complete financial audit be conducted and the overcharges and mismanagement be investigated.
David Tetreault, Serco's manager, did not return telephone calls made to both his office and cellular telephones and could not otherwise be reached for comment on this report.
Brender Gregory, the police department's director of business services, has been directly overseeing fleet maintenance for more than a year, and has had a copy of the audit since Dec. 3, but police sources told The Times there have been no changes in the way Serco does business and charges the department.
Eric Coard, the police department's executive director of corporate support, confirmed in mid-December the audit was completed but said it will take weeks to review it and provide a rebuttal. He did not send a copy of the audit to Police Chief Charles Ramsey.
The contract was originally approved by the General Services Administration. Any changes or price increases must be made in writing and approved by both the GSA and the police department.
The audit reports that Serco is claiming police officials agreed with changes in its contract, including an 11 percent boost in labor charges, but auditors found no evidence that any such changes were approved.
Chief Ramsey said he was unaware of the audit's findings. Since the audit criticizes Miss Gregory and Mr. Coard, he thinks the department's Office of Professional Responsibility should look into the charges of mismangement, not Mr. Coard or Miss Gregory.
"I have not had a chance to see [the audit]. I haven't received a copy of it. If there are some things that are not done properly, we'll take a look at it," Chief Ramsey said. "We need to see if this is something intentionally, or if a new contract would take care of it."
In May, an audit by the General Services Administration inspector general found the police department wasted more than $1.2 million by mismanaging the contract. The GSA said the department used an unqualified manager, which weakened the department's ability to properly supervise Serco.
The most recent audit also found the fleet inventory is not accurate. Police managers do not know how many vehicles the department owns. Also, the department does not have access to its own account on Serco's computers.
The Metropolitan Police Department enlisted the General Service Administration to contract with a private company to provide vehicle repairs in 1999 because the department felt repairs could be done cheaper with a private company.
But as soon as Serco began making repairs on Nov. 1, 1999, it began charging more, the audit said. The audit shows that between Oct. 13, 1999, and May 26, 2000, Serco was given five price increases, which were authorized by contract modifications.
At the time the police department began paying Serco more money, it began experiencing cost overruns of the $3.6 million, and Mr. Coard said the cause for the overruns was that the contract was "underfunded." In layman's terms, this means Serco, for whatever reason, submitted a bid that was far too low.
Among the biggest discrepancies found in Serco's billing was the company did not "adhere to labor industry billing rates," as the contract required. The auditors found that Serco began using a rate that increased the police department's costs.
The auditors did not provide details of the difference in the two labor rates, but a police department source said the increased labor costs are about 25 cents higher per hour, or about 5 percent to 8 percent higher than the contract stipulates.
"No written modification addressing this change was signed by GSA," the audit said.
Although Mr. Coard defends Serco by saying the fleet is better maintained than when it was serviced by city employees, the auditors said they could not determine the condition of the fleet from Serco's police vehicle-service records.
"Inaccurate and incomplete records increase the risk that unnecessary or improper work and related billings would not be detected on a timely basis," the audit says.
"Because of the nature and purpose of each vehicle and the need for maximum utilization, the amount of time a vehicle is out of services is important to MPD," the audit says.

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