Fleet Standardization: Pros and Cons

Most government and utility fleets are comprised of diverse vehicle types owing to the myriad of functions they must perform. Add to this the technological evolution, even within the same make and model of vehicle over several years, and you can easily end up with hundreds of variations in a fleet of only a few thousand units. Standardizing a fleet with one make of chassis, body, equipment, and major components can greatly reduce the degree of fleet diversity and many of the problems it brings.

Pro: Save Significant Costs with Standardization

Standardization can produce significant cost savings in several areas. Some are more easily quantified than others. The readily apparent benefits include the following:

• Improved Maintenance Efficiency. The complexity of vehicle systems is increasing with the addition of electronic sensors and controls, new emissions technology, and safety devices. This steep learning curve for fleet maintenance technicians can be reduced by limiting the variety of new systems. Proficiency in the maintenance garage is largely a function of solid training and experience, so a standardized fleet can expect quicker repairs and fewer mistakes, all other factors being equal.
• Fewer Diagnostic and Specialty Tools. Test equipment and software updates or subscriptions can be an expensive, recurring cost. To a lesser extent, so can unique hand tools. Saving a few thousand dollars a year by reducing the variety of drivetrains, transmissions, brake systems, etc. can ease a tight budget.
• Smaller Parts and Bulk Fluid Inventory. Obviously, the more variety in a fleet, the more spare parts and bulk fluid types you must stock. A bloated parts room takes up valuable shop space that could be better used for another service bay or two. There is also an opportunity to shave cost from the value of parts on the shelves — unless they are on consignment or your parts operation is outsourced. What else could your organization be doing with the cash if it weren’t tied up? {+PAGEBREAK+} Less obvious savings from standardizing a fleet accrue from:
• Increased Operational Efficiency and Safety. Vehicle operators become accustomed to the controls, displays, and “feel” of a unit. Standardizing fleet segments allows your customers greater flexibility in making driver assignments without loss of productivity or the increased safety risk of drivers switching between dissimilar units. They also learn the capabilities of a given unit (e.g., how full a dump truck looks when at its maximum rated payload for a given material, or how many scoops of what size with the wheel loader it takes to hit that fill point).
• Closer Vendor Relations. Fleet organizations and their vendors can become effective partners in delivering services to your customers. Long-term associations foster good relationships, a situation more likely to develop if a fleet standardizes.
• Proven Reliability. There is no guarantee that a particular manufacturer’s line of products will maintain its quality over the years. However, an assurance of quality appears more likely with one manufacturer than trying every new product that hits the market and bids low. Your vehicle replacement schedule is built on expectations of a predictable lifecycle. Historical experience is a good indicator upon which to base that prediction, all other things being equal.
• Faster Specification and Bid Evaluation. Once segments of a fleet are standardized, the workload for each new purchase is significantly less difficult and time consuming.
• Fewer Contracts and Invoices to Process. Fewer vehicle makes mean fewer sources of OEM parts, fewer warranty claim processes to qualify for, fewer contracts to let and monitor, and fewer sources of invoices. These seemingly small administrative issues can consume more fleet staff effort than you might expect — large fleets might even be able to eliminate an overhead position.

Con: Standardization Does Present Some Risks

Now for the other edge of the standardizing sword. While all of the following issues can be mitigated, the risks are very real and need to be considered upfront and monitored regularly.

• Loss of Competition. The foundation of public purchasing is fair, open competition, the conventional wisdom being that this approach ensures judicious use of public funds. Standardizing a fleet does eliminate some competition in an effort to ensure wise selections based on lifecycle costs rather than lowest acquisition cost. This is the primary hurdle to overcome in standardization. Certainly, if not done properly, standardizing can increase costs.
• Missed Innovation. There is the risk that one vehicle or equipment manufacturer might make a leap forward in technology while you have standardized on another product line. Truly innovative improvements usually level out amongst competitors within a couple of years. In the meantime, however, your sanity may come into question.
• “Lemon” Risk. “Putting all your eggs in one basket” by standardizing could result in excessive downtime or even premature replacement of vehicles if a design flaw creeps into the line of products you have selected.
• Appearance of Collusion. Any measure that appears to stifle competition will inevitably raise complaints that the process is unfair. It may even result in personal attacks on elected officials or others involved in the standardization process.

Standardizing the Right Way

There are several techniques and considerations for implementing standardization the right way. Writing thinly veiled specifications to arbitrarily eliminate some bidders would not fall into this category.

First, everything about standardizing the fleet must be done openly, above-board, and in full view of the public. Potential vendors must be included in the process when evaluation rules are established and their concerns addressed — but not necessarily acquiesced to. A formal pre-bid conference is a good venue to meet this requirement. An open process is the best defense against potential allegations of wrongdoing.

Consider standardization for one segment of the fleet at a time (e.g., heavy truck chassis; wheel loaders). Standardization should be based on a demonstrable lifecycle cost saving. The initial selection should, therefore, be based on a competitive bid that incorporates quantifiable fixed and operating lifecycle cost elements for a given operational life expectancy. The bid specifications should be performance-based at this stage of the process.

Establishing a multi-year procurement agreement based on this competitive bid outcome, when permitted, simplifies the standardization process. A multi-year agreement would include a cost escalation clause, take advantage of all new incentives, and offer an easy-out provision for both parties. When a multi-year procurement agreement cannot be established, a proprietary bid specification can be used to implement standardization for a pre-determined number of years. It is important to have the intention to do this upfront, when the initial performance-based specification is bid to establish standardization. It is also important that bids of this type not be awarded unless at least two separate vendors can and do bid to guarantee some competition.

Worth Pursuing

The pros in favor of standardizing are significant enough to pursue if the cons can be avoided. Visit the issues with your procurement officials and executives to determine if standardization can be implemented in all or, at least, in those segments of your fleet where it makes sense.

Be careful that a decision to pursue standardization is legitimately based on the best interests of the overall organization. Bad experiences with one vehicle make or supplier can influence decision-making if you don’t guard against pre-bias.

Moving an organization from a “low-bid” mentality to standardization based on lifecycle cost analysis is not a task for the faint of heart, so your motives must be pure. Don’t be dissuaded by the “we’ve always done it this way” attitude or even by claims that standardization violates some regulation, ordinance, or law. Regulations, ordinances, and laws may not be interpreted correctly, and they can be changed if they are counterproductive and you are patient enough.

Look for instances where standardization and multi-year purchases have already occurred —computer hardware and software are often standardized for the same reasons for which you may want to standardize the fleet.

Finally, don’t travel down the standardization route alone. While many of the benefits accrue to the fleet organization, so do some advantages benefit your customers. Enlist their help to improve your chances of success.