Outsourcing Generates Savings for Utility Agency

January 2005, Government Fleet - Feature

by Kristen Force

Faced with growing competition in the electric utility industry, the Tennessee Valley Authority (TVA) recognized the need to distinguish itself as a leading supplier of wholesale electric power with a competitive, efficient, and reliable operation.

The TVA's role as a government agency operating with public funds made it especially important to set a standard for responsibility that could be strived for among competitors in the private sector.

Its power system pays its own way by selling electricity to customers throughout the Tennessee Valley.

Outsourcing vehicle maintenance was one of many actions taken to cut operating costs and reduce the agency's workforce. Contracting out this service was found to be the best way to ensure that all vehicle maintenance requirements are performed at the lowest total ownership costs, says Michael Metcalf, manager of fleet and procurement business services for TVA.

Most recently, the TVA awarded its vehicle maintenance contract to Automotive Resources International (ARI), a fleet leasing and management company based in Mt. Laurel, N.J.

ARI's national database of suppliers provide routine preventive maintenance, corrective repairs, collision repairs, and emergency roadside assistance to the TVA's light-duty fleet of sedans, vans, light trucks, and SUVs.

The TVA can also work with local repair shops if a national supplier is not located in the area, an important benefit for vehicles located in rural areas of the Tennessee Valley, says Metcalf.

"Through a comprehensive strategic sourcing initiative, we performed an overall program review that was aimed at providing fleet services at the lowest total ownership cost," says Metcalf. Since it began outsourcing, the TVA has eliminated its five full-service garages.

The fleet has also been reduced from 4,500 vehicles in 1997 to about 2,800 vehicles today. These are used in seven states for the TVA's work, including environmental research, navigation and flood control projects on the Tennessee River, and power generation.

The TVA chose ARI for its vehicle maintenance by conducting competitive negotiations with interested companies. Each side entered into a 10-year contract, which can be terminated at any time by mutual agreement. The government/utility segment represents about 15 percent of ARI's total fleet maintenance business.

Congress established the TVA in 1933 primarily to provide flood control, navigation, and electric power to stimulate economic growth in the Tennessee Valley region.

Today, the TVA is doing its part to improve regional air quality by reducing sulfur dioxide and nitrogen oxide emissions from its coal-fired power plants.

The TVA is spending $1.5 billion on scrubbers to further reduce sulfur dioxide emissions by 85 percent by 2010.

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