Privatization isn't a new phenomenon among government fleets, but recently it has come to the forefront again following the signing of several prominent outsourcing contracts. The most recent was by the state of Washington to outsource accident claims management. Earlier, the states of Georgia, Utah and Wisconsin contracted to outsource certain segments of their fleets to third-party maintenance management, while other government fleets continue to outsource fuel management and glass repair.
However, many fleet service providers do not view public sector fleets as being receptive to the types of services they offer and believe that governments are only interested in keeping the work in-house. This issue promises to gain greater prominence in the coming years, especially within the ranks of the National Association of Fleet Administrators (NAFA). With almost half the members of NAFA now public sector fleet managers, this has prompted some Affiliate members (fleet service providers) to question whether government fleet operations are receptive customers for the types of services they offer.
Some Government Fleets Want to Unbundle
Government fleet managers argue that they are indeed prospective customers for fleet services providers. The problem, they say, is that some fleet suppliers do not take the time to understand their procurement process.
NAFA has stressed that it is committed to working aggressively to build better relations between suppliers and government fleets and to facilitate change in today's status quo. The first step NAFA took in this direction was assembling a focus group of suppliers and government fleet managers last June to discuss how Affiliates can sell more products and services to government fleets, upon which this column is based.
Several prominent public sector fleet managers say they would like to unbundle some of their fleet services and partner with a fleet service provider, but find it difficult to get the attention of these suppliers. These government fleet managers say that a demographic shift has been occurring during the past 10 years, and an increasing number of them are entering the profession with financial backgrounds rather that fleet backgrounds, viewing themselves as asset managers who are more receptive to unbundling.
Stumbling Blocks For Fleet Suppliers
There are several reasons why fleet service providers say they are not pursuing government fleet business.
- Governments are low-bid buyers. Fleet service providers contend that governments only buy on a low-bid basis. Governments, on the other hand, say this is not always true. Some bids are "best value" bids that are awarded to the vendor providing the best value or lowest lifecycle cost rather than the lowest cost per item. Government fleets emphasize the importance of assuring that specification for bids are properly prepared so that qualify of service and products can be measured and factored into the bid process. To promote increased business with smaller fleet suppliers, there is a growing trend by government fleets to use procurement cards, which eliminate the need for bids and expedite payment.
- Prohibition against multi-year debt. Other fleet service providers argue that governments cannot guarantee funds beyond a specific budget. They point out that many governments cannot enter into-multi-year debt obligation. Governments counter by saying they routinely enter into multi-year contracts with vendors, such as a lease-purchase agreement, that include a non-appropriation of funds clause stating that monies will only be appropriated annually. Although the non-appropriation of funds clause can be an area of concern, as one fleet manager points out, regardless of future budget constraints, vehicle services are generally funded year-after-year since they are linked to essential services.
Procurement Process Needs to be Understood
Government fleet managers point out that major equipment vendors have succeeded in establishing close working partnership with their fleet operations. Many cite Caterpillar, which has been very successful in leasing its large equipment to governments by helping them find creative ways to fund the equipment. According to governments, the key reason other fleet suppliers do not win more business from them is because they do not understand their procurement process. To make it easier to deal with government procurement offices, many now provide training for vendors to help them better understand the bid process. Government fleet managers say there is business available for fleet service providers, but they need to make the commitment to understand their procurement process.
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