How to Manage a Government Fleet

This article was prepared by David Utzinger, fleet sales manager, Eastern Region, for American Isuzu Motors.

Managing a government fleet, whether federal, state, or local is a difficult, complex, and frustrating job. What contributes to this situation are the constant demands that the fleet "customers" make for new vehicles and equipment.

There are a variety of other challenges that affect government fleet management. For instance, the fleet manager has responsibility for a large investment in equipment; however, sometimes he or she is not given the necessary authority to manage this responsibility.

In these demanding situations, the fleet manager's "best friend" is the purchasing agent. The purchasing agent shares responsibility with the fleet manager for monitoring the final purchase descriptions and assuring the very best prices from bidders.

This article will examine government fleet administration in managing motor pools, the acquisition and cycling of equipment, preventive maintenance, computerization of operations, and the current trend toward privatization.

A Growing Trend

A few government fleets have contracted out virtually all fleet operations to fleet management companies. These companies are employed to manage the entire fleet. They assign a fleet manager to work on the premises running the operation on a daily basis. Although there are advantages to hiring private companies (such as controlling union activity), the benefits do not seem to outweigh the additional costs.

Despite the trend toward privatization, if a political subdivision employs its own fleet manager (empowered with the proper authority), he or she should be able to effectively manage fleet costs, while providing the necessary transportation services to government employees.

Motor Pool Efficiencies

Managing a motor pool is no different than running a small business. A motor pool is designed to provide reliable, safe, and clean vehicles or equipment that is capable of performing the required job. The fleet manager's function is to prepare a budget, buy or lease equipment, and dispose of it at the proper time.

One of the best ways to provide this service is with a centralized motor pool under a single manager. (The exception to this rule would be agency fleets, such as police and fire, which have specialized requirements and problems,) However, the average administrative sedan should be managed from a centralized motor pool operation which is a self-funding operation (using a revolving fund to generate its own income).

To achieve this, fleet management needs to establish daily, weekly, and monthly rental rates that are competitive. On the other hand, these rental rates should produce adequate revenues to cover all costs such as equipment, depreciation, maintenance, fuel, insurance, payroll, utilities, building and grounds rent, and administration. Sometimes these costs are not identified and factored into rental rates.

How Much Equipment To Buy

A perennial concern in government fleet management is determining the appropriate number of vehicles or pieces of equipment that are required by the political subdivision to meet its civic responsibilities. The ideal is to have the exact number of vehicles and pieces of equipment required for any given workday. But 100 percent utilization is a goal that is not often reached. Without question, it is necessary to acquire vehicles for employees who drive 12,000 to 15,000 miles annually. However, for employees who drive less than this and only need occasional transportation, other alternatives should be explored such as the use of taxi cabs or other public transit. Another alternative for occasional drivers is contracting with a local rent-a-car company. These are management options the fleet manager must explore. For example, a small rural town has different fleet problems than a large city or state jurisdiction. Should a $40,000 back-hoe be purchased when it will only be used occasionally? Why not rent or lease this type of equipment, or buy a used one from another municipality? If equipment is not being used at least 50 percent of the time, maybe other options beside purchase should be explored.

Buying New Vs. Used

Whether new or used equipment is purchased depends on specific circumstances. If a driver needs a vehicle daily and drives 12,000 or more miles per year, then a new car with air conditioning and other convenience items should be considered. Government employees are not "second-class" citizens and should not be treated as such. A few government agencies still force employees to drive "stripped down, bare bones sedans."

[PAGEBREAK]According to a study conducted by Runzheimer International, entitled Survey and Analysis of Business Car Policies and Cost 1989-1990, nine percent of government fleets do not provide air conditioning, 19 percent do not offer AM/FM radios, while 72 percent do not equip vehicles with cruise control. If a motor pool is charging to its agencies a commercially-competitive rental rate, adequate funds should be available to purchase properly-equipped vehicles.

Buying used cars does have some advantages. Used rental cars make excellent under cover police vehicles since they can be purchased in a variety of makes, models, and colors. The fact is, most of the time, used cars cost less than new cars. Generally, the first year of depreciation on new cars is 20 to 30 percent, depending on market conditions. If a used car in clean condition can be purchased for $ 1,000 to $2,000 less than a new car, maybe this option should be explored.

However, if vehicles are going to be kept for a long period of time, then buying new should be considered. In addition, manufacturers normally provide additional fleet money to dealers on government bids, which produces very competitive prices on most models.

Refurbishing Stretches Dollars

Municipalities are starting to refurbish specialized equipment such as fire trucks, often saving thousands of dollars. For instance, Onie Crosby, fleet manager for Jacksonville, FL, rebuilt a city fire truck from the ground up, saving the city tens of thousands of dollars.

Several municipalities are also exploring the possibility of selling expensive equipment to smaller towns which don't have funds to purchase new equipment. As government budgets contract, fleet managers and purchasing agents are required to constantly look for innovative ways to save tax dollars. Refurbishing specialized vehicles or the sale of equipment to other political subdivisions is one way to stretch those dollars. Tight budgets are a problem that won't go away.

When to Cycle Vehicles

The most controversial and discussed subject in fleet management today is vehicle cycling. Some fleet managers, operating vehicles with 125,000 miles or more, do so until the wheels fall off. Runzheimer's 1989-1990 business car survey reports that 59 percent of government fleets use time and mileage as replacement criteria, while 22 percent use condition, 11 percent mileage only, one percent time only, and seven percent have no policy. The average months of service for a government vehicle is 59 months and 77,994 miles. However, vehicle service life varies by political subdivision. According to the Runzheimer survey, seven percent replace vehicles at less than 60,000 miles, 15 percent at 60,000 to 70,000 miles, and 78 percent recycle at 70,000 or more miles. (Police vehicles were not included in this survey). Unfortunately, determining the best time to dispose of vehicles is not an exact science. There will never be a single right time for all fleet managers to dispose of vehicles which can be applied to all fleets. However, there are some guidelines that should be considered.

The most expensive miles are during a vehicle's first year of life. The longer a car is driven, the cheaper the cost per mile becomes. If a car costs $10,000 today, it will probably be worth 20 percent, or $2,000 less, the same time next year, depending on market conditions. By making this $2,000 available for maintenance, a fleet manager can fix up an average, 60,000-mile car and drive it another 20,000 to 80,000 miles. However, the maximum mileage a vehicle can attain will vary by fleet location.

For instance, a car driven in New York City, generally, will not last as long as a vehicle driven in Florida or Arizona. The reasons for this are that there are not as many potholes in the South, roads don't freeze up and thaw out year after year, and salt and other chemicals are not used. Cars parked in New York City garages are prone to get banged up more than vehicles parked in less congested areas. In addition, stop-and-go traffic is especially hard on vehicles. For instance, a 60,000-mile car driven on the open road should be in better condition than a vehicle driven 30,000 miles in a metropolitan area.

So how is fleet replacement policy established? A vehicle replacement policy needs to be flexible, rather than firm. Each time a vehicle is brought in for scheduled preventive maintenance, it should be inspected by the garage foreman and its records reviewed. The foreman determines the mechanical repair work required, the condition of the body, upholstery, tires, brakes, and shocks.

A simple "appraisal" will determine whether a vehicle is clean, safe, and reliable, and the cost of required repairs. If a vehicle is two-years old but "shot," sell it. If the odometer indicates 80,000 miles, but the vehicle is still clean, reevaluate it for continued fleet use. One possibility is to keep the high mileage vehicles by turning them over to departments which require less employee driving. Another option is to use high mileage units as spare vehicles.

Often, bids are requested for a one-time buy of 100 or more of one kind of vehicle. If the right vehicle is purchased at the right price, fine, however, what happens if these 100 or more vehicles happen to be "problem cars?" Buying a mix of vehicles and colors helps eliminate this problem. The rent-a-car industry has employed this type of fleet acquisition program for years.

As long as motor pool rental rates charged to agencies adequately covers vehicle depreciation, there should be ample funds to replace units as required. In addition, if vehicles are disposed at auction, a mix of makes and models will help maximize resale dollars.

Why Government Colors?

Government fleets for years have used non-standard colors for trucks such as Omaha orange, DOT yellow, or forest green. Some government fleet managers argue, "We order these colors for safety and identification; besides that's the way we always bought them." However, some municipalities are moving away from non-standard paints.

For instance, the City of Baltimore does not, for the most part, request exotic colors for its vehicles anymore. Currently, white is Baltimore's color of choice, but it also orders a mix of standard factory colors. Vehicles painted in standard factory colors cost less up front and at the end of their service life sell for higher prices at auctions. In addition, the city indicates that a white truck with a strobe light is more than adequate for safety purposes.

In order to identify a vehicle as a government fleet car, some agencies are still blemishing their vehicles with the typical "meatball" logo on the driver's door. An alternative is to affix a decal to the rear window or design a license plate bracket identifying the vehicle. Both can be easily removed prior to disposal.

Logos are fine for a commercial fleet operator, since they are part of the company's advertising, but is it really worth the expense to a local government agency?

Computerizing Operations

The Runzheimer 1989-1990 business car study indicated that 91 percent of government fleet managers use computers in their daily fleet operations. Managing a fleet today is much too complex not to utilize computers. Fleet managers can compare maintenance costs, monitor preventive maintenance, identify driver/vehicle cost exceptions, identify new vehicle selection, prepare budget reports, and other needed information for management.

Policy Changes Made By Government Fleets to Control Costs

	Percent Government Respondents*
Changes	1983	1985	1987	1989
Tightened Operating Expense Control	51%	36%	43%	26%
Lengthened VehicleReplacement Cycle	57%	35%	32%	21%
Tightened Personal Use	11%	4%	3%	20%
Adopted More Economical Cars	86%	72%	56%	17%
Changed Vehicle Manufacturers	N/A	N/A	N/A	17%
Switched To Self-Insurance	N/A	N/A	N/A	13%
Instituted Safety Program	N/A	N/A	N/A	13%
Added Preventive Maintenance	N/A	N/A	N/A	14%
Tightened Vehicle Eligibility Requirement	33%	23%	28%	12%
Issued Credit Cards To Drivers	N/A	N/A	N/A	5%
Contracted With National Service to Provide Maintenance	N/A	N/A	N/A	3%
Increased Insurance Deductibles	8%	6%	16%	3%
Changed Insurance Company	N/A	N/A	N/A	1%
Sold Vehicles To Employees	N/A	N/A	N/A	**
No Changes	4%	11%	13%	30%

N/A=Not Asked

* Total exceed 100% because of multiple answers.

** Less than 0.5%