Amazon faces backlash for sky-high delivery van repair bills

Amazon.com Inc. wants to refresh its aging fleet of blue delivery vans, but the small businesses that use them to ferry packages say they’re getting blindsided by repair bills of $20,000 or more per vehicle that they can ill afford.

Bloomberg interviewed several contract firms, known as delivery service partners or DSPs, which relayed the same account of sky-high repair bills for aging vans. They requested anonymity to discuss the matter because they fear retribution from Amazon.

The online retailer had been using an app called Pave along with manual inspections to assess required repair costs. But after receiving multiple complaints from delivery firms, Amazon on Wednesday said it would rely on the app going forward, while acknowledging that Pave itself was prone to sometimes underestimating repair costs.

“DSPs have always had the ability to review and contest repair invoices, and we’ve encouraged them to do so whenever they have questions or concerns,” Amazon spokesperson Steve Kelly said in an emailed statement.

The dispute over repair bills is the latest dustup between the world’s largest online retailer and contract firms that hire drivers to deliver packages to Amazon shoppers. Amazon describes the delivery service partner program as a vehicle for entrepreneurs to start small businesses under the Amazon umbrella. Over the years, some delivery partners have bristled at the power imbalance between them and Amazon, which dictates strict standards and uses automated systems to manage its sprawling delivery apparatus.

The current disagreement began brewing earlier this year, according to people familiar with the matter, and concerned Amazon’s occasional redeployment of vans from one delivery firm to another.

The delivery service partners lease vans such as Ford Transits for about $500 a month, but Amazon can call the vehicles back for repairs, redeploy them to another contractor or retire them at any time. That process includes inspections to assess damages, with repairs beyond normal wear and tear billed to the firms, many of which are mom-and-pop operations.

As part of their contracts, the delivery partners give leasing companies permission to withdraw money from their accounts to pay bills, but some are canceling that permission to protect themselves from being overcharged for repairs.

The Pave app bases estimated repair costs on photos of the van, which don’t necessarily capture the full extent of what’s required. In several instances, the delivery firms say the new, manual inspection was leading to bills of more than 10 times the app estimate. Some say charges triggered by shifting just a handful of vans to another contractor threatened to blow through their reserves and eliminate any incentive to stay in the program.

One delivery partner in Washington state was told it would cost more than $100,000 to fix several vans on which he had already spent about $10,000 to repair problems identified in the app. The cost could bankrupt the company, the owner said.

Kelly, the spokesperson, said Amazon was “continuing to work through these differences” with delivery firms. The company had identified instances of underestimated repair costs provided by the app, as well as “some smaller instances of costs that were incorrectly passed along.”

“We have already committed to correcting these errors and issuing reimbursements, where appropriate,” he said. The company also said it has paused the van redeployment program for the time being.

Amazon says contractors have until Sept. 10 to contest repair charges received since the beginning of April. But the review is expected to take months, meaning the issue will linger into the peak holiday shopping season. Fleet management companies that issued the bills will be sending itemized invoices and photos regarding any disputed charges, according to correspondence Amazon sent to delivery partners. Delivery firms then have an opportunity to dispute those charges, as well.

— By Spencer Soper and Matt Day (Bloomberg)