Managing Today's Fleet Budgets: Acquisition & Labor Raise Concerns

Like skillful jugglers working to keep all the balls in the air at once while one or two seem destined to fly totally out of control, public sector fleet managers are grappling with budgets assailed by a cascade of unexpected forces: fuel prices doubling, vehicle costs rising, parts and supplies scarcities and labor shortages.

Care to detail, innovative thinking, proactive steps, and networking with fleet colleagues, according to a group of seasoned fleet managers, can help keep those budget balls aloft as smoothly as possible.

In this four-part series, we hear guidance from fleet managers on managing their budgets amid uncertain times.

Like most public sector fleets, Kevin Myose manages a diverse fleet in San Joaquin County, California, just east of San Francisco in the state’s Central Valley and home to 800,000 residents. The county’s fleet numbers 1,100 vehicles and serves most government departments except transit and fire. “We handle the county’s fleet ‘cradle to grave,’ buying, maintaining, repairing and remarketing,” Myose says.

A county fleet employee for 18 years — the last seven as fleet manager — Myose runs the department as a business, with a revenue stream from county customers for leasing, daily rentals, and asset management services. The county’s fleet Internal Services Fund provides support for operating and replacing county-owned automotive assets, functioning on a break-even basis.

The Fleet Services Division operates six fueling sites, three maintenance facilities, a daily rental pool, and a law enforcement vehicle fabrication shop. Vehicles and equipment are outfitted and maintained at three locations. In addition to normal fleet maintenance, the division provides repair services for county bridges, ferries, compressed natural gas (CNG) stations, stationary generators, and utility district pump stations.

Purchasing fuel directly from wholesalers has reduced the division’s exposure to some of the price spiking and has provided a degree of fuel budget stability. Still, Myose says, where last year the division paid $3.50 per gallon, the cost is now more than $5.50+ per gallon. “We can certainly see the difference in what we’re paying and what fuel companies are charging at the pump,” he adds.

Buffering Acquisition Costs

In vehicle acquisition, however, Myose finds “prices going through the roof.” In 2011, a Ford Crown Victoria patrol car was $21,000. Today, the replacement, a Chevrolet Tahoe, is $40,000.

What’s more, Myose points out, as manufacturers update models more often, reusing vehicle equipment may not be feasible as the equipment may not be adaptable to newer models. Previously, his team recycled vehicle equipment from year to year. “Now we just buy new equipment with the vehicle,” he says.

To buffer the added expense, Myose directly contacts manufacturers, particularly regarding vehicles the division builds. “We actually build vehicles for other agencies, so we can buy in larger quantities for better pricing.”

Myose, who holds bachelor and master’s degrees in business administration, also goes out of state to buy vehicles, particularly for law enforcement vehicles, “a must have when those vehicles wear out. You have to replace them,” he explains.

Transitioning to electric vehicles (EVs) is paramount in California; new ICE vehicles will no longer be sold in the state beyond 2035. Although the cost of EVs can triple an acquisition budget, Myose sees potential opportunity. He is working on a pilot project — an off-grid solar-powered charging station — to not only provide badly needed EV infrastructure but also reduce electric energy costs. With funding in place, he hopes to install the first station in the near future and offer free charging for at least the first 12 months.

The fleet also receives $5,000 to $8,000 per month from California’s Low Carbon Fuel Standard credits, a program designed to encourage EV charging station installations.

The tight labor market is another budget concern for the division. “People are leaving government service in droves for the commercial market, where they can earn $110,000 per year versus the public sector’s $75,000 to $80,000,” Myose says.

An apprentice program launched eight years ago has helped mitigate some of the labor exodus — 100% of the division’s lightweight vehicle technicians are former apprentices. However, Myose also plans to make a strong case to county administration to increase pay rates.

Internal Service Fund Grants Control

Myose advises public sector fleet managers to establish an internal service fund to put funding and budgets under their control. “The fund gives us the freedom to run fleet as a business,” he says.

To help plan more effectively for fuel price increases, Myose recommends including “contingency funds” when arriving at a budget figure.

He offers a final suggestion: “Find a way to build an apprentice program.” With fewer available high school and community college technician training programs, apprenticeships offer another way to build a fleet’s technician bench.