Downey Votes to Settle With Company That Overbilled City

DOWNEY —  After months of investigation, the City Council has decided to settle with an air-conditioning maintenance firm that has admitted overbilling the city by thousands of dollars since 1985.

The council voted unanimously Tuesday to accept a settlement of $14,789 from the Weatherite Service Corp. for the excessive charges, as well as staff time to investigate the matter. The overbilling went undetected until it was brought to the attention of city officials last year by a former Weatherite competitor who is also a Downey resident.

Officials say they are concerned that the overbilling escaped detection, but they as yet have no plan to change the way the city monitors contract compliance.

‘Not Comfortable’

“I’m sure the council will be looking at other contracts,” Mayor Robert G. Cormack said. Public Works Director William A. Ralph said he will seek to cancel the contract with Weatherite, which runs through September, 1989. The city would then rebid the contract, which calls for the maintenance of cooling and heating systems at the Civic Center. But the council is not likely to consider the change for about two months, Ralph said.

“I think the contract needs to be rebid,” Councilman Randall R. Barb agreed in an interview. “I’m not comfortable doing business with (a company) that sloppy.”

Weatherite officials have said a computer error was partly responsible for the overbilling. Other excessive charges occurred when Weatherite did not follow its contract with Downey, which pays the firm for labor and parts. In about a dozen cases, Weatherite charged a lump sum per job rather than billing the city for parts and labor as required by the contract. That resulted in overbillings of about $2,000. Ralph said the city has been satisfied with the way Weatherite has maintained the heating and cooling systems at the Civic Center.

“I don’t consider our accounting sloppy,” said Weatherite spokesman Steven Smith. “We made an error and we regret it.” Smith said Weatherite, which is based in the City of Industry and has about 500 accounts in the Los Angeles area, would seek to win back the contract if city officials decide to rebid it.

Ralph acknowledged that the city fell short in its obligation to ensure compliance.

“We signed off on those jobs and that was incorrect,” he said. “That was an oversight on our part.”

Would Require Invoices

Ralph said his department does not have the personnel to check every item on every contract, and Weatherite has not been required to provide itemized documentation of charges. Ralph said the new contract would be rewritten to require itemized invoices on major jobs. He said he would also use a consultant to advise him whether future charges for air-conditioning and heating maintenance are excessive.

Local businessman Robert Henderson alerted Downey officials to the overbilling. Henderson owns Handy Engineering Inc., a heating and air-conditioning firm that held the Civic Center maintenance contract before Weatherite.

Henderson discovered the excessive charges while reviewing Weatherite’s billings in an effort to win back the contract. Weatherite’s original 2-year agreement ran from December, 1984, to September, 1986, and Downey renewed it for three years. Henderson said he has since decided not to pursue the contract if it is rebid.

Last February, Weatherite regional manager James J. Barnings said his company had overcharged Downey $11,195.74 since 1985 because of a computer error.

The city’s contract with Weatherite allows the firm to mark up materials 25% over cost for overhead and profit. Those materials included filters, belts and more expensive items such as pumps.

But on some occasions, Weatherite had billed the city 70% to 80% over cost, Ralph said.

In May, at Henderson’s urging, the City Council rejected a $13,000 settlement offer from Weatherite and directed city staff to further investigate.

When Ralph determined that the city had not accounted for another $2,179.60 in excessive charges, he recommended a settlement of $15,180. But after further review, the council determined that Weatherite had failed to bill the city about $390 in labor costs. So that amount was subtracted--resulting in the $14,789 settlement approved Tuesday night.

Lee Powell, director of administrative services and the city’s chief financial officer, said individual departments are responsible for monitoring contract compliance. Powell said all charges should be checked before the department head or responsible employee approves payment.