Leasing Equipment Can Extend Tight Budgets
Many government fleets have seen acquisition budgets cut sharply in this economy, and some even have had equipment procurement spending eliminated entirely, at least for the time being, as local governments struggle to manage with dwindling revenues.
In situations where purchasing new or used equipment isn't an option, leasing off-road equipment can provide an attractive opportunity for public sector fleets.
Leasing could be a pragmatic move, especially for a short period — perhaps for the duration of one or two projects. The overall expense of leasing for a limited time is substantially less than the outright purchase of equipment, of course, and once the work is done and the equipment returned, no continuing cost remains.
The City of Oxnard, Calif., pressed by economic factors, made adjustments in securing construction equipment. The Oxnard fleet numbers about 950 pieces and includes police sedans, a range of trucks including light-duty pickups and refuse trucks, and construction equipment.
"Typically we don't lease, we purchase," said Dan Berlenbach, fleet services manager for Oxnard. But these are atypical times, he noted.
"Essentially, the City is cash-poor," Berlenbach said. "This fiscal year and the last fiscal year, because of the economic situation and the lack of revenue for the City, we're doing lease-purchase." The leased equipment, with an option to purchase, includes "some of the more critical vehicles and equipment," he said.
Leasing has pros and cons, Berlenbach noted. "It is less expensive at the outset for sure," he said, "but obviously, long-term, it's not less expensive. Money's not free."
That cost of money — the interest on a lease — is something to avoid long-term. However, short-term, "it is a good way to cut your maintenance costs and renew some of those unreliable [pieces] in your fleet. In our case, we did it mostly for regular fleet vehicles — light and heavy trucks. We had a couple of pieces of [construction] equipment in there," said Berlenbach.
Oxnard was not in dire need of new or replacement construction equipment, Berlenbach said. "We just basically kept what we had and sunk more money into it," he explained. By making repairs and replacing parts as needed, the fleet has been able to make do, he said. The fleet continued work on planned projects.
Preventing User Department Mismanagement of Heavy Construction Equipment
User departments can make mistakes with heavy construction equipment. However, there are ways to avoid these common and not-so-common mistakes.
"One problem when municipalities spec and purchase equipment is they don't spec it heavy enough," said Tom Collins, equipment maintenance supervisor for the Town of Natick, Mass. "They just spec to what's out there."
Collins explained, "You've got to spec for the minimum job you expect the piece of equipment to do, then add to it because you're never going to get rid of it when it should normally be gone."
Municipal fleets tend to keep such equipment longer than its typical allotted service life, Collins and others noted.
Coming to agreement with user departments on what exact equipment is needed is a continual challenge, said Warren Patrick, fleet manager for Harford County, Md. "I think oftentimes, the using agencies have a difficult time discerning what it is they need to have their equipment do," he said.
If user department staffs include knowledgeable, experienced operators, they should be sought out and consulted, Patrick suggested. These subject matter experts can be valuable contributors to spec development.
The value of operator input "depends on the individual," said Stephen Hawes, garage and equipment supervisor for the Town of Needham, Mass. Some have a sound grasp of what the specs should be, Hawes explained, and their suggestions are given due consideration.
Researching Utilization Options
"We tend to keep equipment longer than some contractors might," Hawes said, echoing what his peers in other municipalities said about anticipated heavy equipment service life. "There may not be a lot of heavy construction use, but there's a lot of maintenance work. Usually we'll pick a different machine than a contractor might look at." The town typically needs something a bit more versatile than a contractor would require, Hawes said.
"It's going be used by more than one department, for more than one type of job or project," Hawes said of any heavy equipment the town acquires.
Training for the New
Because heavy equipment is usually used for many years, some adjustment is often required when the time finally comes to operating a new piece of equipment.
"Things can change considerably," noted Hawes. "Our operators always need some further training, no matter how good they were on the previous machine. Controls could be placed differently. There's always something different."
A good working relationship between fleet and user departments can go a long way toward avoiding common mistakes related to managing heavy construction equipment. The ideal is a partnership that begins with the spec'ing process and extends through the service life of the equipment to its eventual resale or trade-in. By collaborating, fleet and user departments can benefit mutually, both in day-to-day operations and over the long-term.
6 Steps to Analyze Street Sweeper Lifecycle Costs
1. Devise the Right System. Before you can begin to create an accurate lifecycle analysis, you must create a system — a database, spreadsheet, or other electronic resource — to accurately collect all data and store it in one organized place. A software package can do more than simply calculate costs; it can also help schedule preventive maintenance.
2. Gather Data. In analyzing the cost of an existing street sweeper, fleet managers should look carefully at the unit's operating costs, including acquisition price, fuel, tires, maintenance, main broom life, gutter broom life, replacement parts, and importantly, labor costs. The data is generally found in fleet records or the operator's manual, or from the manufacturer or distributor. Additional factors to consider include accident history, depreciation, and inflation. When purchasing new units, buyers should compare models carefully, keeping in mind the application. Equally important as finding the right sweeper for the right function is accurately assessing maintenance-related labor costs.
3. Talk to Experts. Many industry experts can offer practical advice and valuable knowledge about how sweepers run and their true operating costs. Talk with the person who knows the unit best: the operator. Others outside fleet can help as well, such as the local dealer or manufacturer.
4. Continue Gathering Data. Today, most fleet services departments keep excellent records of equipment utilization and maintenance. Thorough records of all maintenance, fuel consumption, consumables, and unexpected costs related to the equipment is valuable information in guiding budget estimates and future purchases. Consistently and continually tracking this data helps managers in their purchasing decisions.
5. Remember Sweeper Operations Differ. While all equipment runs on fuel and needs regular maintenance, new tires, and an occasional repair, sweepers require special considerations. In particular, the environment in which they operate can significantly affect their longevity. The way a sweeper works matters, too. The stop and start conditions under which a sweeper operates will ultimately shorten its lifecycle. Unlike a car that can get out on the freeway, a sweeper operates at slow speeds within the city. Also, because sweepers are tasked with many functions, they are taxed more than a typical fleet unit.
6. Justify the Purchase. Performing a lifecycle cost analysis isn't simply a routine effort of putting an "X" in the "run the numbers" box. Fleet managers must justify purchases with hard numbers. That's when a lifecycle analysis becomes truly valuable. When purchasing new sweepers, the numbers can help reveal the true value of a purchase over its lifetime — a consideration that can reduce sticker shock and help fleets get equipment that yields the most value.
When fleet managers can present a solid case for equipment purchases, they use taxpayer dollars wisely and garner the best fleet equipment. A lifecycle cost analysis helps accomplish this important and often difficult task.
Incorporating Telematics to Manage Off-Road Equipment
Telematics are producing greater efficiencies and cost savings in managing on-road vehicles. The technologies can also provide similar benefits for fleets with off-road equipment. The following tips offer guidance:
• Prioritize Needs. When purchasing telematics devices for off-road equipment or even when evaluating an existing program, the first question fleet managers need to ask is, "What results do I want to achieve?" No single solution fits every need, so fleet managers must weigh price against a number of available options.
• Determine Return on Investment (ROI). Once a fleet manager knows what data to collect, it's important to know it will yield results and whether the purchase investment is justified. A product's ROI comes from many areas, including theft prevention, reduction of unnecessary maintenance stops, remote payroll, remote utilization monitoring, actual off-road fuel use data capture for tax purposes, location verification, and more. Reduced idling is also another major ROI driver.
• Put Vendors "to the Test." Choosing a telematics provider can be just as important as choosing the type of devices. Fleets should research telematics companies, choose 2-3 that appear the best fit, then pilot the vendors to see whether they truly meet the fleet's requirements. Research can begin with a simple Web search. Look for providers who service agencies similar in size and fleet composition. Also, look for vendors with a wealth of information about their hardware and capabilities, as well as case studies and real-life examples of product use and achieved results.
• Start with the Basics. Start with a product that can be successfully implemented and will achieve immediate, guaranteed return on investment. Start with the basics, using the system to automatically capture machine hours, measure idle time, maintain preventive maintenance schedules, increase security through GPS location and geofencing. Use geofencing to help allocate job costs to the proper site. Assign a "champion" responsible for learning the system, tracking the data gathered, and initiating changes required to reap the benefits.
• Standardize Platforms. Use a telematics solution that supports all makes and models of machinery.
• Invest in Safety. On a daily basis, telematics can monitor switches and sensors to interpret and control remote events, such as shutting down a vehicle left idling too long. Sometimes, remotely turning off the ignition could be the difference between life and death. With large equipment that can do damage in an instant, telematics can do more than benefit the bottom line, it can help companies avert liability and serious accidents.