When you work in procurement, every penny counts. When you work in government procurement… well, let’s see how many ways we can stretch that penny!
Government procurement agencies have a particularly important job–ensuring taxpayers aren’t overspending for government services.
They’re accountable to the public, meaning each bid is held to rigorous standards of accuracy and legality. Every line must be reviewed, and each price must be verified.
Government fleets are incredibly diverse. Military agencies are transporting heavy equipment around the U.S. for testing, so they tend to have very high volumes. Transit authorities need fuel to keep buses on the road and on schedule – a run-out here may not be a national security concern but is quite disruptive to residents and local businesses. Different still are state agencies, which have numerous groups such as DOT, State Police, and various other departments’ all burning fuel.
Despite the multiplicity of needs, government agencies do have a few commonalities. Most issue complex fuel RFPs that require significant time and resource investments from procurement teams and suppliers. Across the widely variable government fuel procurement arena, though, there are a few best practices that have emerged as particularly useful for most government fleets.
Price Risk Management
Government agencies are given a fuel budget at the beginning of the fiscal year and are expected to stay within that budget. When governments exceed their budgets, funding must be appropriated from other spending areas, which often requires legislative intervention. A severe budget overrun may even cause a political controversy.
Some commercial entities have the luxury of passing fuel costs on to consumers, whether through fuel surcharges or higher prices.
Government agencies, on the other hand, cannot expect taxpayers to pay more than they already do. Unlike private sector companies where an expense overrun could be offset with other gains or simply result in negative profits, many states are legally prohibited from running at a deficit.
Fuel price volatility can cause severe budget overruns, which is particularly concerning for agencies wherein fuel is a major operating expense. Because government agencies, both local and state, must closely adhere to their budgets, many agencies choose to lock in an annual fuel price for a large portion of their gallons. These agencies – transit authorities, fire and police stations, and state agencies among others – all often use fixed prices to mitigate their budget risk.
Many government fleets operate with a mandate to reduce emissions and waste. State agencies in Illinois, Wyoming, and Minnesota, among others, have mandated the usage of biofuels or alternative fuels for their fleets. The Navy’s Great Green Fleet is a Carrier Strike Group launched in 2016 using energy efficient technology and alternative energy like biofuels.
After all the work of researching and selecting the right vehicles and fuels for a fleet, government procurement teams must then find suppliers who fulfill these unique energy requirements. Finding a reliable supplier who meets flexible biofuel or renewable diesel standards is an important part of the process, and the supply availability of specific fuel types should be considered when choosing green strategies.
Tracking vehicle efficiency is another way for fleets to achieve green mandates. For instance, Mansfield partnered with one northeastern state’s numerous agencies to provide transparency into fuel consumption, enabling the state to adopt efficiency policies and measure a 0.5 miles per gallon improvement across all state fleets in 2016.
Agencies looking to meet strict carbon mandates might consider using a carbon offset program such as Arsenal Zero to make quick gains toward greenhouse gas reductions. These programs mitigate the effects of greenhouse gases through investments in carbon sequestration, reforestation, and other clean initiatives. Governments can fully offset carbon emissions for pennies on the dollar with a simple solution that meets strategic priorities, without the expensive capital investments.
Data Collection, Monitoring & Reporting
Transparency and accountability are quite important in the government arena, even more so than for private fleets. After all, every citizen is a stakeholder in the agencies that provide public services. With clear transparency into fuel transactions, fleet managers are empowered to hold drivers accountable and promote more efficient fueling practices.
A fleet card, for instance, might require odometer readings each time a driver fills up at a retail station. In addition to yielding valuable vehicle maintenance data, this repetitive record collection helps prevent fraud through automated variance analysis. Regularly transmitted reports identify anomalous MPG readings, which may indicate either fuel card misuse or vehicle efficiency concerns. The proper insights ensure that honest drivers remain honest and safe while preventing fraudulent purchases via government fleet cards.
As mentioned above, the insights from fuel reports could be used to drive efficiency. Enhanced data and accuracy enable agencies to monitor significant increases or decreases in fuel consumption. Without transparency into fueling transactions, a government fleet cannot reliably improve its efficiency.
Collecting data from back yard fueling equipment is equally as important as tracking retail activity. Installing card readers on bulk fuel tanks ensures that all transactions are authorized and capture the same level of detail as at the retail pump. Tank monitors make inventory management feasible, allowing fuel suppliers to time deliveries and take advantage of market moves. When all of this information is readily available through an online customer portal such as FuelNet, fleet management becomes easier than ever before.
Standardization & Collaboration
Government fleets benefit by leveraging their fuel spend together with other agencies to create one standardized program. For example, many state agencies operate within a few miles of each other – ambulances, fire trucks, police cars and more, each with their own bulk fuel tank and fleet card program.
If those agencies are not already coordinating on fuel procurement, they likely are using a patchwork of retail fueling, mobile fueling, and backyard fuel tanks. The agencies pay widely varying fuel prices, lack the ability to leverage their combined volume for cheaper products and services, and all spend more time and resources administrating their respective programs.
Why act separately when a combined approach would be better for all parties? By using fleet cards that work at any backyard tank owned by a participating agency and at retail stations, fuel consumption is monitored by consuming agency and billed accordingly. Cooperatives allow disparate agencies to leverage their entire fuel spend, utilize otherwise idle tank assets, and secure steeper discounts at retail stations. Mansfield architects and manages these “mini-networks” all over the U.S.
Finally, while we all hope for the best, it’s crucial that government fleets prepare for disasters with emergency fueling plans. Natural disasters such as hurricanes may come with advanced warning, or they may be as sudden as earthquakes or wildfires. Regardless, government fleets must have a strategy and a plan to keep their equipment running during a disaster event.
Many government fleets maintain a secondary fuel supplier, who is set up and ready to deliver fuel at a moment’s notice. This situation works well for localized emergencies, when fuel is available to some –but not all –suppliers. However, during widespread natural disasters such as a major hurricane, more redundancy is required.
The ideal solution employs dedicated fueling assets contracted during a storm. These assets haul in fuel from the closest safe market, which can be hours away. When a local terminal is taken offline by power outages, this solution ensures back-up options in other available markets. For fleets in disaster-prone areas, having a reliable emergency fueling plan is crucial.
Making Government Procurement Simple
Government fuel procurement is a complex endeavor, requiring significant labor hours from procurement teams. A 2017 study by Onvia found that 40% of government procurement staff feel “stretched” or must work overtime to complete their workload. The RFP process itself can be slow and cumbersome, and interacting with multiple fuel vendors requires close attention to detail.
When selecting a fuel supplier, suppliers must be vetted to ensure they can meet an agency’s holistic fueling needs. Buying fuel is about more than a price and a commodity – considering price risk management, reporting capabilities, innovation and sophistication, as well as emergency preparedness is imperative. A reliable fuel partner should make it simple to do business, bringing expertise and unique solutions to save governments – and their tax-paying stakeholders – from overpaying on fuel.
Contact: Brian Hutchinson