Customer service concerns, including many complaints, drive a move to consolidate
POSTED: 1:30 a.m. HST, Jul 11, 2011
The city is trying a new approach to providing a public service that in recent years has generated major controversies, lawsuits, fines, scores of consumer complaints and an ongoing criminal fraud investigation.
NEW TOWING CONTRACT
Some specifications in a new contract the city expects to award to a company to handle police-initiated tows for the entire island:
>> Duration: Five years
Instead of dealing with multiple companies to handle police-initiated vehicle tows in 13 zones around Oahu, the city plans to hire one vendor for the entire island, essentially turning all of Oahu into a single zone. It also intends to consider factors beyond price, such as how complaints will be handled, in making the selection.
The city is expecting the new approach to result in better, more consistent service to motorists throughout Oahu, while boosting efficiencies for the city.
But motorists and others voiced concern about how the new system actually will work, especially given the problems that emerged since the city last issued new towing contracts in 2002.
"It will be risky," said Adam Mastandrea, whose car has been towed twice in the last six years. "They're putting all their eggs in one basket."
The city currently deals with five vendors to handle the thousands of accident, parking violation, stolen-vehicle recovery and other tows initiated by police each year in the 13 zones.
Stoneridge Recoveries, which has been the focus of much of the controversy and is the target of the fraud investigation by the state Insurance Division, handles the busiest and most lucrative of the zones, stretching from downtown to Makapuu.
To select the new vendor, the city intends to evaluate a multitude of factors, including where the contractor plans to store the towed vehicles, what the process will be for addressing complaints and other aspects of the company's operational and management plans.
In the past, if the contractor met the basic qualifications, the city awarded contracts based solely on who offered to pay the highest monthly premium for exclusive rights to a particular zone.
The new approach will enable the city to get more specifics on customer service issues, resulting in better accountability and better, more consistent service islandwide, according to Mike Hansen, the city's finance director.
"That's one of the aims of this whole thing," Hansen said.
The city has been in discussions for more than a year with the industry about how to structure a new contract. But the method the city ultimately selected caught many industry folks off guard.
"It's an interesting, innovative approach," said attorney Mark Kawata, who represents Stoneridge, "but it sort of took everybody by surprise. I don't think anybody envisioned this coming."
Industry officials have a number of concerns, including price.
The city is expecting the selected vendor to pay a monthly premium of $62,000 for the exclusive rights to all police-initiated Oahu tows for five years. Currently, the city collects about $48,000 in monthly premiums from the five vendors. Each is on a month-to-month contract.
If the city doesn't lower the new premium, several towing company executives said the selected vendor likely would have to ask the Legislature to increase regulated tow charges to make ends meet, especially given the decrease in tow business as the economy has slowed in recent years.
In 2009, for instance, slightly more than 20,000 tows were reported for all 13 zones, a 10 percent drop from the 22,762 in 2005, according to city data.
The $62,000 premium "is going to put a serious hardship on the contractor," said Barney Robinson, who owns a gas station and towing business that partners with another firm to handle city tows in several zones.
"That amount is way too high," agreed Brian Kunishige, who operates Oahu Auto Service, another vendor for the city. "If the city sticks with that, the motorist is going to end up paying more money."
Hansen said the city believes the $62,000 is fair, noting that the amount was calculated by adjusting the 2002 premiums to account for inflation since then. But he also said the city is continuing to have discussions with tow carriers about the premium and other matters.
Another concern expressed by people inside and outside the industry is how one vendor will be able to manage towing for the entire island.
No single company has the capacity to handle the contract on its own, according to industry officials. Companies that ostensibly are competitors would have to partner up, with one being the primary vendor that signs the contract, deals with the city and presumably makes the overall business decisions, they say. How multiple companies can work under such an arrangement is in question.
"It can be a good approach — assuming you get the right lead contractor," said Kawata, the Stoneridge attorney.
Kawata said Stoneridge probably would submit a proposal, though the company hasn't made a final decision.
Kunishige likewise said his company is preparing a bid but won't decide whether to submit it until the last minute. Robinson said he is expecting to partner with Kunishige.
The city has set a July 27 deadline to receive proposals. Hansen said he expects the city to award a contract in early September.
Although the city says the number of overall complaints has subsided, Stoneridge has been the target of numerous complaints over the years from motorists whose cars were towed. Several who won court judgments against the company for damaging their vehicles had trouble collecting those judgments until the Star-Advertiser inquired about the cases.
Kawata has said the overall number of complaints was relatively low given the huge volume of tows Stoneridge does and that the company's performance in recent years has been exemplary.
Last year the state Insurance Division launched a criminal fraud investigation into Stoneridge's pricing practices. Some auto insurers have said questionable billing practices led to inflated bills for some motorists.
A division spokeswoman said the investigation is continuing.
Kawata has told the Star-Advertiser that his client has cooperated with investigators and, after conducting its own internal probe, found instances in which employees made billing mistakes. He said customers were reimbursed for the billing errors.
Some motorists say the ability to obtain quick and fair resolutions to complaints without having to go to court will be a critical factor in determining whether the city's new approach will work.
Unless such a resolution process is established, "I have little confidence there will be an improvement in the level of service or a significant reduction in the number of complaints," said attorney Dennis Phillips, who was successful in getting a $3,500 court judgment against Stoneridge for damaging his client's car.