Whether one calls it "leveraging procurement dollars in a zero-growth budget environment" or simply "getting the most bang for the buck," it amounts to much of the same thing: Government fleet managers are dealing with budgets that have stayed the same over the past few years or more - if they've been lucky. Just as likely, they've seen budgets cut and have been left to puzzle over what they really need to procure and what they can do without.
Increasing Cost Predictability
Dennis Hogan, fleet services manager for the City of Cedar Rapids, Iowa, uses a Microsoft Excel spreadsheet program he developed at his previous job to track vehicles and parts.
"I use it to help me identify the most costly pieces," Hogan said, and to compare his vehicle and equipment replacement forecasts to dollars in the procurement budget.
The fact that the City fleet has been increasingly standardized year-over-year for the past three or four years is an advantage, Hogan added. "A City pickup truck is a City pickup truck regardless of the department," he said.
That adds to predictability of replacement costs at a time when budgets cannot necessarily be predictable one year to the next. The Cedar Rapids City fleet has fared better than some in that the procurement budget has held steady for the past three fiscal years: $2 million on the general fund side, which is for the Department of Public Works and the police department; and $1.2 million for the City's utility fleet, according to Hogan.
The formulas Hogan worked out for the spreadsheet program help him take into consideration what the department can afford versus what must be done to minimize operating costs, enabling informed judgments when creating a "true needs list," he said. A certain vehicle or piece might be in the top spot on his wish list, he noted, but the spreadsheet program might show a different decision that will have a more positive effect on the operating budget.
When vehicles and equipment are kept in service beyond their usual service life, operating and maintenance costs can be expected to increase, which affects user departments, not just the fleet department. As an internal service fund, the fleet must charge those user departments more to reflect the increased costs, Hogan noted.
To monitor vehicle and equipment costs, Hogan's replacement plan assigns each piece to a class and creates an average for that class. The spreadsheet weighs total fuel consumption, average miles per gallon, and odometer readings for each piece. If a vehicle or piece of equipment exceeds the average for its class, then the spreadsheet program adds a weighted factor so Hogan can identify it for replacement.
In the past three years, the average life of the fleet's 800 rolling vehicles, from sedans to large trucks, dropped from the previous average of about 22 years to 16 or 17 years, Hogan said. His goal is to eventually reduce the average to 12 years.
'Making Do' with What You Have
Stephen Andrews, fleet manager, City of Kettering, Ohio, said that in each of the past three fiscal years, the procurement budget required him to scale back his replacement plans. For example, the fleet recently needed nine sedans but could only purchase five. "At this point, we're just limping along with older vehicles," Andrews said.
Aged vehicles that would have been cycled out of the fleet are sometimes shifted to different departments where it is expected they will be used more gently or used less. By doing this, fleets hope vehicles will last longer and that the shift will reduce increases in operating and maintenance costs to some degree.
Andrews said his department skips some end-of-life work. "We won't do major repairs," he said. Instead, an older vehicle will be substituted. He said the number of cars in the motor pool has dropped from eight down to seven. "'Making do' is the best way I can put it," Andrews said.
To squeeze the most out of the procurement budget, the fleet opted to switch to a four-cylinder Ford Fusion for City staff. That saved $4,000 per vehicle and enabled the purchase of one more vehicle, Andrews said. "It's a bit smaller, so if you're transporting people to a meeting it might be a bit crowded, but it's a minor inconvenience," he noted.
Warren Patrick, fleet manager for Harford County, Md., said the word he would use to describe the procurement budget is "emaciated." Increased fuel costs, and fluctuations in same, are a wild card. Current spending on fuel is at $4.3 million on an annualized basis, Patrick said, while spending on maintenance is at $1.8 million on an annualized basis. That level of spending on maintenance represents an increase of $460,000 from the amount two years ago, he noted.
The fleet replaced "a lot" of equipment in the 2008 fiscal year - "We had a lot of money," Patrick said. However, in each fiscal year since the procurement budget has decreased, and Patrick said he expects it to decrease again in the 2012 budget.
With what is left, the fleet's procurement priorities have been public safety and snow removal equipment, Patrick said.
The County operates 72 5-ton dump trucks. "Every year, we should buy eight," to replace those that should be cycled out, Patrick said, with each unit costing approximately $130,000. With the most recent budget, he was able to purchase three dump trucks.
The wild card - fuel expenditures - sometimes works out in Patrick's favor toward the end of the fiscal year, he commented. If there is money left over in that budget line, he uses it to purchase new vehicles. However, the vehicles and equipment that should be replaced at the moment, by his reckoning, total 200 pieces and would cost approximately $6.5 million.
Despite the tight budget situation, Patrick said he believed economic indicators signal better times ahead, and he observed that the County is on sound fiscal footing and just received a triple-A bond rating. "I'm optimistic," he said. "I'm positive."
- Stephen Andrews, fleet manager, City of Kettering, Ohio.
- Dennis Hogan, fleet services manager, City of Cedar Rapids, Iowa. E-mail: D.Hogan@cedar-rapids.org
- Warren Patrick, fleet manager, Harford County, Md.