National challenge for fleet managers: "Best service at lowest cost"

Michael Corbett, Publisher/Fleet Consultant, California Fleet News/Spectrum Consultants, Inc., San Diego, California

Judy Workman, Fleet Manager, City of Greeley, Colorado, and member, APWA Fleet Services Committee

As the nation's governments feel the ongoing budget crunch, public works organizations are making a distinct "choice" to more intensely manage their vehicle and equipment fleets to achieve balanced budgets and the "best service at lowest cost." Directives to cut budgets or forced budget cutting are common as governments struggle to meet falling revenue projections. Fleet managers report strict objectives to cut their current budgets, some as much as 20 percent. A whole host of management tools is being used to meet this challenge. Fleets across the nation are utilizing techniques such as fleet consolidation, privatization, managed competition, fleet size and utilization reviews, outsourcing selected services, and strong management audits that suggest modernizing fleet operations.

Public-private competition, or "managed competition," is a management tool that gained favor in the late 90s. Over the past several years public fleets that have utilized this concept have a track record of producing lower bottom-line costs of up to 25 percent. Managed competition also allows fleet departments and employees the opportunity to join the bidding for these services. At the same time, there are a substantial number of local governments that have discarded privatization and returned to in-house management. The bottom line is that fleet managers continue to search for "best practices," "best benchmarks" and "best business models" in order to meet the latest financial challenge in the management of local government fleet assets.

Privatization rebuffed
One example of a city choosing to bring their fleet management services back in-house is the City of Greeley, Colorado. After five years of City-operated fleet services, the department continues to monitor accountability and types of shop repairs in fleet operations. The staff quotes work against outside agencies to ensure that the cost of repairs is at the lowest price and best turnaround time for customers. Downtime, proper equipment, and analysis of repairs enter into the decision of whether a vendor or staff is the best choice. An annual comparison to local vendors and neighboring shops is conducted to ensure that shop charges are competitive, being careful to measure "apples and apples." Today's fleet manager must compare and evaluate overhead and administrative costs, steps required to complete various service activities, types of shop equipment available to perform repairs, and how accidents and unanticipated repairs, such as engine rebuilds, are processed.

Other examples of local governments choosing to bring their fleet operations in-house are the City of Bremerton, Washington; the counties of Lee, Collier, Volusia, Manatee, Hernando, Pasco and Putnam, Florida; and the Cities of Gainesville and Winter Park in Florida.

Privatization, however, continues to have a presence with new bids in the District of Columbia; City of Des Moines, Iowa; and the County of Los Angeles. In 2002 and 2003, new contracts began in the Scottsdale Unified School District, Cecil County, Maryland; Hazlet Township, New Jersey; Chelsea, Massachusetts; Augusta-Richmond County, Georgia; and, most recently, the City of Arlington, Texas. In addition, the A-76 contracting guidelines along with recent Bush Administration initiatives to contract more services have resulted in fleet management privatization throughout the federal government.

Privatization of other fleet services
In the 90s, underground storage tank legislation prompted many local governments to consider outsourcing fueling services. Outsourcing fueling and other fleet services such as specialized repairs and car pool rentals are viewed by fleet managers as tools to solve practical problems, increase service, and cut costs. There are few employees involved in these functions and thus few political barriers. Analyzing and outsourcing these services is proceeding in many cases without much opposition, and with some interesting results. One pilot project has onsite motor pool contracts with commercial rental car companies. Another is expanding the fueling infrastructure with fuel card providers in large metropolitan areas where the jurisdiction can never hope to meet the need with in-house resources.

Slow march of managed competition
Fleet management is frequently targeted as the first municipal service to undergo managed competition. Progressive local governments are testing the competitiveness of a whole host of municipal services. In Texas, for example, the City of Houston conducted a managed competition opportunities study in 1999 and has completed several projects. Of interest nationally is the Houston Police Department's institution of flat-rate pay for technicians that maintain its fleet of over 3,000 units. The City of Dallas just completed its competition and the Houston Fire Department is planning one in 2003. Still other governments that went this route five years ago are deciding on courses of action to continue their financial successes.

Lower cost to market standard
At the very minimum, the goal of all these management tools is to lower the cost of fleet services to a competitive market standard. Expect these trends to continue as the economy slowly emerges, government budgets remain constrained, and fleets show they are capable of operating under new efficiency standards.

The issue for all fleet managers is managerial accountability with the focus on cost identification and reduction, greater asset utilization, and assets that can be turned into cash. By all accounts, 2003 looms as a key year in which public works fleet owners are increasingly making the distinct "choice" to more intensely scrutinize the cost and performance of their fleet operations. So, the question for all fleet managers is whether they will have begun this scrutiny putting into place the needed improvements before their owners and senior managers do.

Michael Corbett can be reached at (619) 238-0688 or at mcorbett@fleetnews.com; Judy Workman can be reached at (970) 350-9375 or at workmanj@ci.greeley.co.us.