Forest Service ends controversial fleet maintenance contract

The Forest Service earlier this week terminated the California fleet maintenance contract that two years ago fueled a debate about federal employees' rights to appeal agency outsourcing decisions.

The agency cancelled the contract, awarded to Serco Management Services Inc., as the result of a public-private job competition completed in January 2004, because of concerns about the company's performance.

The contract was one of the first awarded under the Office of Management and Budget's May 2003 revised version of Circular A-76 that representatives of in-house teams attempted to appeal at the Government Accountability Office. GAO declined to hear the protest, but recommended that lawmakers look at the issue of employee appeal rights, eventually leading to a change in policy that allows official representatives of employee teams -- but not union representatives -- to file protests.

Performance issues identified in an April warning notice -- the second such notice issued by the Forest Service since Serco stepped in for federal mechanics 14 months ago -- included tardiness completing work orders, subpar work on orders filled and problems with qualifications of the company's employees.

"Based on Serco's inadequate response to the second [notice], and the region's deep commitment to the safety of both our employees and the public we serve, it has been decided to terminate for default the fleet maintenance contract with Serco," an agency briefing paper on the decision stated.

The briefing, from the Forest Service's Pacific Southwest region, noted a "significant and growing decline in Serco's performance" beginning early this year, including numerous brake failures and incomplete annual inspections. The contractors were responsible for maintaining and repairing a variety of agency vehicles, including fire engines.

Faulty repairs place agency employees and the public at risk, said Matt Mathes, a Forest Service spokesman in California.

"We were very concerned about having our vehicles -- especially fire engines -- ready for the upcoming fire season," Mathes said. "We need our vehicles ready to roll."

Serco halted work on May 1, the same day the contract was terminated, Mathes said. Hours later, contracting employees in the agency's regional office got in touch with people at each of the 18 forests in the region to begin work on blanket purchase and micro-purchase agreements that will be used to contract the work out to local shops, Mathes said.

He emphasized that though Serco is no longer involved, all the repair and maintenance work will continue to be performed by the private sector, with work going to local businesses whenever possible. Prior to the 2004 public-private competition, some of the work had gone to local shops and some had been performed by federal mechanics.

Following the award to Serco, many of the federal mechanics stayed on with the Forest Service, but entered more supervisory roles. There are currently 28 agency employees in those contract inspector positions, Mathes said. They will continue in that capacity, and will not go back to turning wrenches, he said. "We do support the concept of having the private sector do the [repair and maintenance] work," Mathes said.

The local agreements being negotiated now are an interim solution until the Forest Service can hold another competition for the work, said Jacqueline Myers, the agency's associate deputy chief of business operations. At this point, the Forest Service will be asking for proposals in a regular acquisition process, as opposed to a public-private job competition, she said. The work will be redefined, she said, but details are not yet available.

Meanwhile, Serco is looking to appeal the contract termination, said Paul Heagen, a spokesman for Serco North America. Final venues for appeals have not been decided, he said. The company has evidence documenting that Forest Service employees did "everything they could to thwart our ability to [fulfill] the contract," Heagen said. He declined to share specific examples, but said it was "pretty evident this was a contract the Forest Service employees in that region never wanted."

"Once everybody really looks at what happened here, I think it will send a very chilling signal about what it's going to be like to deal with an A-76 contract," Heagen said.

The company was making good-faith efforts to work through issues related to the contract with the agency, according to Heagen. 'This termination was a huge surprise to us," he added.

Mathes said he is not aware of any unprofessional behavior on the part of agency employees. The termination should not have come as a surprise to Serco, he added, considering the two warning notices.

"During the agreed-upon two-week period for improvement following the April 3 letter, things actually got worse," Mathes said. "For instance, the backlog of vehicles needing work increased."

Dan Duefrene, a leader of the National Federation of Federal Employees' chapter representing Forest Service workers in California, said agency employees had tried to help Serco. He said the company's employees may not have been accustomed to the scrutiny their work received, however, "especially when it comes to our emergency response vehicles."

In a press statement, NFFE said the canceled contract called into question the savings reported from the Forest Service's competitive sourcing initiative. "This fleet management competitive sourcing story is just the tip of a very large iceberg," said Rick Brown, president of the union. "The administration claims savings while hiding huge off-the-books costs."

Myers said the contract cancellation will not affect savings already reported to the Office of Management and Budget for last fiscal year. It will be taken into consideration in this year's numbers, she said, adding that it's unclear at this point what that impact will be. The agency is still tallying up the final costs of the 14 months Serco was working, but estimates that the company will have handled $5 million to $6 million in approved work, Mathes said. That's about what the Forest Service expected to spend over that period for maintenance of the fleet, he said, though he noted some bills were in dispute.