Sometimes the leaders of a new trend can emerge in the most unlikely places. In the ongoing trend of private industry competition with municipal fleets, that unlikely place is Indianapolis, home to Indianapolis Fleet Services (IFS). In a landmark decision, the city of Indianapolis has renewed its contract with IFS to manage its fleet of 2,900 vehicles. "We were the first major municipal fleet to successfully compete against the private sector, and now we're the first to get beyond that initial stage and receive an extended contract," said IFS Administrator John McCorkhill. For municipal fleet managers across the country who are facing similar competition from private companies, IFS's victory is a milestone. In other industries, public institutions have lost out to private companies because of typical government pitfalls like overspending and a top-heavy management hierarchy. In order to avoid these potential pitfalls, IFS adopted a strategy that can be seen as a model for any municipal business facing competition from the private sector. Because of its quick actions to evaluate and restructure itself, Indianapolis Fleet Services was able to trim its budget and streamline its procedures by the time the initial bids were placed in December 1994. The story of Indianapolis Fleet Services' competition with the private sector goes back to the election of Indianapolis Mayor Stephen Goldsmith in 1992. Having based his platform on government downsizing and spending cuts, Goldsmith immediately started his term by opening up city contracts to bidding from companies in the private sector. In two of the first bidding wars, the private sector came out on top, winning management of 10 local golf courses and two large wastewater treatment facilities. As one of the largest monopolies in Indianapolis government, IFS immediately became the center of media attention to the mayor's policies. At the time, IFS was very top-heavy in its personnel structure and faced heavy debt from the construction of a new $7.5-million maintenance garage. To make matters worse, its union had supported Goldsmith's opponent during the election. Immediately after his election, Goldsmith took action to bring about change within IFS. He halted construction of the maintenance garage and threatened to send all vehicle repairs to private vendors. Realizing their jobs were now at stake, McCorkhill and his staff quickly responded to Goldsmith's actions by developing and presenting to the mayor a comprehensive plan of reorganization, cost cutting, and staff downsizing. The plan called for downsizing over a two-year period, culminating with a bid of its services in 1994. "All our restructuring basically was on the front end of it, when we did the initial competition. We went through a lot of restructuring prior to that because of the bid," said McCorkhill. Following closely the initial proposal, several important changes were made to prepare IFS for competition with the private sector:

• Staff size was reduced from 119 to 84 by the bidding deadline. Most of the positions eliminated were upper and middle management. Each position within IFS was closely evaluated, and those found to be redundant or bureaucratic were the first to be eliminated. Organization was streamlined, and self-management techniques were implemented to replace the old hierarchical system.

• Customer relations were improved by increasing customer meetings from 32 to 192 per year. Customer concerns were treated with greater concern in an effort to escape the perceived indifference common in government agencies.

• Union relations, which had previously been unstable, were improved by greater cooperation between management and the union, who now worked together to reduce spending. This new-found cooperation resulted in $3.9 million in savings by 1995.

With the plan firmly in place, a new and improved IFS was ready to compete with bidders from the private sector when the request for proposal was sent out to bidders in November 1994. The request was sent to 33 fleet management firms, including IFS, with all bids due by January 1995. Of the bids received, the IFS bid was the lowest, barely edging out the second lowest bid by less than $100,000. IFS was awarded a three-year contract with two one-year option periods. The contract started on May 1, 1995 and lasted until April 13, 1998. At that time, IFS's performance was evaluated to determine if the contract would be extended. This was the real challenge for IFS; if the performance was unsatisfactory, the contract would once again be open to bidding, and IFS would cease to exist. "What would have happened, if the service provided during that initial three years was bad enough, is they probably would have thrown us out," said McCorkhill. "If that had happened, Indianapolis Fleet Services would pretty much disappear, and the private contractor would probably come in and hire the employees left behind." Luckily for McCorkhill and the other IFS employees, this scenario did not happen. Rather than putting IFS out of business, bidding against the private sector strengthened and refined the company, paving the way for expansion beyond maintaining the city fleet. As McCorkhill explained: "Since the initial bidding process, we've been successful in cultivating business relationships with some additional either quasi-government or government fleets that are separate entities from the city of Indianapolis." By successfully competing against the private sector, IFS has set an example for other municipal fleets in the same situation. Since then, several other major cities have followed suit, among them Charlotte, NC, and San Diego, CA. San Diego fleet maintenance employees recently succeeded in bidding against private companies to win a 46-month contract servicing the county's 3,200-vehicle fleet. The proposal they submitted was $1.4 million lower than the nearest competitor. Through effective cost cutting and reorganization, IFS was able to meet the challenge of competition with companies from the private sector, and in the process have set a precedent which other municipal fleets will hopefully follow. "The union employees at IFS continue to meet the challenge that was given to them with professionalism and display a high level of confidence that we can compete with private com- panies," said union president Bernie Ahaus.

3 Keys to Successful Competition with Private Fleets

Indianapolis Fleet Services Manager John McCorkhill feels three essential ingredients are necessary to effect change, win a bid, and be successful with the ensuing contract:

• A willingness from the top CEO to bring about change in city government and to support the rules and process changes needed to make it work.

• You cannot measure cost until you know your cost. It is essential to have a cost accounting system in place supplemented by a good fleet management system to capture data. Without sound data and cost information, you may bid a high artificial cost and lose the bid or bid low and not be able to satisfy the contract within the bid price.

• Empower and trust your employees to make decisions and learn from their mistakes. Typical municipal government has many chiefs (usually more than is needed) and major decision making resides with them. Burden the line employees with a generous share of the decision-making process. Hold them accountable for the results, but be supportive when they make mistakes, knowing it is all part of the learning curve.