Amazon.com, Inc. (AMZN.US) is exposed to "pitiful" delivery contractors: An app misjudgment forces small business owners to bear exorbitant repair costs.

Amazon.com, Inc. is planning to update its aging fleet of blue delivery vehicles, but small business owners using these vehicles to transport packages say they are facing unexpected repair bills of over $20,000 per vehicle, a cost they cannot afford. Several contracting companies known as "delivery service partners" (DSPs) have revealed in interviews that they are forced to bear high repair costs. Due to concerns of retaliation from Amazon.com, Inc., they have requested to remain anonymous when discussing the issue. Previously, the e-commerce giant had been using an application called Pave, along with manual inspections, to calculate the required repair costs. However, after receiving multiple complaints from delivery companies, Amazon.com, Inc. announced on Wednesday that they will rely mainly on the application for evaluations in the future, while acknowledging that the Pave application itself sometimes underestimates repair costs. Following media inquiries into the controversy on Wednesday, Amazon.com, Inc. sent letters to partner companies promising to cover 20% of the repair costs estimated through the Pave application since April. The company also informed all delivery companies that all received repair bills are temporarily suspended and await invoices to be re-issued in October. "We are committed to establishing a sustainable and more predictable repair process for all business owners," wrote Beryl Tomay, Vice President of Transportation Operations at Amazon.com, Inc., in the letter to the companies. This dispute over repair fees is the latest conflict to emerge between the world's largest e-commerce platform and its delivery partners who hire drivers to deliver packages for Amazon.com, Inc. Amazon.com, Inc. describes the delivery service partner program as a way for entrepreneurs to start businesses within the Amazon.com, Inc. system. However, over the years, some partners have expressed dissatisfaction with the unequal power dynamic - Amazon.com, Inc. not only sets strict standards but also manages its massive delivery network with automated systems. According to sources, the current dispute began earlier this year, focusing on Amazon.com, Inc. occasionally reassigning vehicles from one delivery company to another. Delivery partners lease models such as Ford Transit for approximately $500 per month, but Amazon.com, Inc. has the right to recall vehicles for repairs, reallocation, or scrapping at any time. After a vehicle is recalled, it undergoes a damage assessment, and repair costs beyond normal wear and tear are borne by these mostly family-operated businesses. According to contract terms, delivery partners authorize leasing companies to deduct payments directly from their accounts to settle bills, but some companies have now canceled this authorization to avoid being overcharged for repairs. The Pave application estimates repair costs based on photographs of delivery vehicles, but this method may not fully reflect the actual extent of repairs needed. Several delivery companies have stated that in many cases, the repair costs determined by new manual inspections are more than 10 times higher than the estimated amount by the application. Some partners say that the costs incurred by just a few vehicles being reassigned to other partners could deplete their reserve funds, completely discouraging them from continuing to participate in the partnership program. A delivery partner in Washington state revealed that he had already spent about $10,000 on repairs for several delivery vehicles based on the issues indicated by the application, but now he has been told that it would require an additional payment of over $100,000 to fully repair these vehicles. The business owner said that this cost could lead to the bankruptcy of the company. Steve Kelly, a spokesperson for Amazon.com, Inc., stated that the company is "continuously negotiating to resolve these disputes with delivery partners." He admitted that the company has identified instances of the Pave application underestimating repair costs, as well as issues of "a small number of repair costs being incorrectly attributed." "We have committed to correcting these issues and providing refunds when appropriate," he said. Amazon.com, Inc. also revealed that it has temporarily suspended the delivery vehicle redistribution plans.