|At a Glance|
When analyzing fleet efficiency, consider:
Outsourcing is a scary term. It can mean a risk to your department, your employees, and your job. But it doesn't have to be that way. When Government Fleet asks fleet managers what services they outsource, some automatically say, "none." A bit of prodding will get the real answer out: transmission work, heavy-duty equipment work, overflow work, etc. Outsourcing certain functions is a part of running an effective fleet maintenance program, and finding the right balance of what to outsource, what to keep in-house, and even what to insource is key to running a successful shop. We'll call it right-sourcing, and it's the best way to stay competitive with the private sector.
John Clements knows all about right-sourcing. As deputy director of the fleet services division at the City of San Diego, he led the fleet team to win a managed competition for fleet functions, including maintenance, acquisition, and administrative services. This is the second bid public sector employees have won under Clements' leadership -- in 1997, while Clements was fleet manager at San Diego County, his team won the managed competition for fleet maintenance.
Clements talks about why his teams proposed certain functions for outsourcing, and how for the City, managed competition was an opportunity to right-source, create efficiencies, and start over.
Winning the Bid
Two employee teams within the fleet division had been set up -- one to develop a statement of work, and the other to create the proposal.
"The employees were part of the process -- it's not just a management driven process," Clements said.
Clements and the teams examined each service. The fleet division, like all other bidders, was able to look through the RFP, ask questions, and receive official published answers from the Purchasing Department, which managed the competition.
The bid team worked on the entire process, while specially assigned teams worked on specific processes. "We needed to decide if the current organization structure worked for us," Clements said. "We ultimately redesigned our whole organization."
The final proposal included plans to outsource parts management, towing, and heavy tire repair; insource certain functions; and consolidate fleet facilities. The fleet division expects to save taxpayers an estimated $4.4 million annually, or $22 million over the five-year life of the proposal.
As of February, the fleet division's proposal had not yet been fully implemented.
- Parts management to NAPA integrated business solutions (IBS). "One of the biggest [considerations] is cost of ownership of inventory and obsolescence," Clements said. Clements had worked with NAPA at San Diego County and was satisfied with the service. Although the employee proposal team could not enter into a contract without a competitive procurement process, it could get enough information about cost of parts, discounts, and staffing, to write the proposal.
- Heavy tire repair to a local company. The City stored its 131 trash collection vehicles at a centralized location, and two full-time tire technicians were charged with ensuring tires were safe and usable. The fleet chose to do a pilot program to outsource tire maintenance for these trucks. A local vendor proposed to come in every night the trucks ran, check tire air pressure, check for damage, fix flats, and put on new tires. In the daytime, the vendor would respond to road calls for flats -- all for a flat fee per truck per month.
"We ran all the numbers and found out it's easier to let them do it," Clements said. A flat-fee program is like an insurance, Clements explained, meaning savings can fluctuate. "We don't necessarily know how many flats we're going to have and how many damaged tires, but it's more cost-effective for them to do the service that we do now. If we happen to have a lot of flats or a lot of tire repairs, or a lot of replacements in a given month, it could become even more cost-effective," he said.
Other intangible costs that can't be factored for comparison purposes include safety costs - the last two back injuries were related to tire maintenance, Clements explained.
- Towing to a local company. The fleet division is primarily a two-shift operation, though most towing needs are done during the day. The City employs 1.5 employees for towing and maintains a large tow truck. "It was more cost-effective to call an as-needed tow truck rather than maintain our own," Clements said. "We just don't seem to have a lot of tows to justify having that program."
- Work for "time and material" people. On the City's bid, the fleet division had to give a guaranteed price per vehicle type to maintain it for its entire life, broken out in monthly payments. However, some services still have what are considered "time-and-material" people: body and fender repair technicians, an equipment trainer who does DMV testing and other training activities, welders used by various other departments, and a machinist fall under this category. "They're reliant on getting work into their facility," Clements said.
To get additional work, the fleet division is reaching out to neighboring agencies, offering to provide estimates for the work they outsource. The equipment trainer is certified to do commercial testing for motor vehicles, and Clements knows San Diego County outsources body and fender work.
"We've contacted informally some other agencies, and they're interested. We just have to get down to the nuts and bolts of a signed agreement," he said.
Before managed competition, the fleet division already outsourced tractor tire maintenance, glass replacement, upholstery, specialized repair, and overflow work.
Implementing Further Changes
In addition to outsourcing various functions, the fleet division also consolidated facilities. Years ago, the City ran three separate fleets (police, fire, and general fleet) and so had 13 different shops. These ranged from small two-bay facilities to 30-bay facilities, some of which are located close to one another. The fleets were consolidated in 2007, but the number of facilities remained. The employee team proposed to reduce the number of facilities to 10 by consolidating workload, closing a fire repair facility and two police-only shops.
"We have a very nice facility for our trash collection fleet. It's exclusively right now for trash collection only. We're going to leverage that and move some other workload in there," Clements said. He added a graveyard shift to the facility -- for a total of three shifts -- to take advantage of the unused facility in the early hours. Technicians will now also maintain part of the fire fleet at this facility.
Clements and the employee team also proposed a change in the management structure, proposing seven brand new positions - six for vehicle maintenance and one administrative. Where now a shop supervisor oversees a single facility or a single shift, the new organization proposes a supervisor per facility with lead people on the shop floor to run the specific shift. The lead people will supervise and greet customers, but will also work on repairs and services. In the case of the smaller facilities, supervisors will oversee multiple facilities.
Other efficiency changes aren't related to the division's managed competition bid. The division is proposing its fleet management software company take over the operation of the software under its application solution provider (ASP) program, as the City is changing its computer mainframe server contracts. It is also working on further consolidating the three fleets, including tasks such as installing new, common task codes. In addition, the fleet is putting in bar coding to improve efficiency and more accurately track labor and parts, Clements said.
Taking into Account Staffing Changes
Staffing changes are another consideration the fleet has to handle. The employee proposal eliminates 92 of the fleet's 249 positions. Twenty of these are already vacant, and upcoming retirement incentives may prompt other employees to retire, Clements said. As of press time, he was not aware of how many employees would take the incentive.
Like many government organizations, seniority is the main guidance for layoffs.
The fleet division is still working on implementation. "We're moving ahead as best we can with our new organization while completing meet and confer processes with our labor organizations," Clements said.
Take the First Step
Taking a thorough look at how fleet services is handled, and whether it's the most efficient and cost-effective it can be, starts with an internal review. With so many public agencies cutting costs, it's better to stay ahead of the competition.
"I think for fleets, particularly government fleets, the handwriting's on the wall about being competitive and doing more with less," Clements said. "I think there's a lot of things [fleets] can do ahead of or in lieu of any managed competition process to be more efficient"
Where to Look First for Efficiencies
Jim Wright, president and CEO of Fleet Counselor Services, visits public-sector fleets and evaluates the efficiency of their fleet operations. Wright pulls from his 42 years of experience in fleet management and consulting to discuss possible efficiencies fleets can consider when evaluating their own operations.
"Most fleets want to do as much work in-house as possible, but there are some things they should evaluate for outsourcing," Wright said.
He provided the following list of services that could be considered for outsourcing first when a fleet analyzes its operations. Some of these parallel the services the City of San Diego chose to outsource.
- Heavy-duty tire repair and replacement. It's highly competitive in the private market. If the fleet already owns the equipment for this service, see if the equipment is under-used. Protecting workers from tire injuries is another factor.
- Towing services for all vehicle types. Wright pointed out the expense of maintaining a towing truck, especially if the truck is not often used. He also stated that calling a towing operator in during off-hours can lead to costly overtime pay. In this case, paying on a per-use basis may be more cost-effective. If outsourcing, Wright said the fleet can include in the request for proposal (RFP) that the winning bidder purchase the agency's towing equipment.
- Body and paint. This is a highly competitive service in the private sector. If a fleet operation already owns the equipment, it might be time to do a cost-benefit analysis in comparison to local businesses that offer this service.
If outsourcing seems to be a good option during his review, Wright asks the fleet to perform an in-house cost-benefit analysis, totaling cost of running that specific service as well as all related costs. The fleet will then ask two to three vendors to come in and provide a written estimate for that service. If the estimate is close to the in-house actual cost, the fleet could then ask the vendors to submit a formal bid.
Find Opportunities for Staff
As for staffing considerations, moving away from providing a service in-house can lead to opportunities for some employees, Wright said. For example, for fleets considering hiring a shop technician, an outsourced tire repair function provides an excellent opportunity for tire technicians to learn a new, often better-paid trade.
"We'd like those employees to be retrained as preventive maintenance (PM) technicians, and that allows the fleet to build up the PM program, which in turn will reduce costs in the future. That way, no one is laid off," Wright said.
In his experience, tire technicians already working within an agency are sometimes given special consideration for advancement.
Trends in Fleet Maintenance
In his years in fleet, Wright has noticed a marked trend in fleets getting away from major rebuilds on heavy equipment. As fleet managers improve PM programs, major rebuilds are becoming less necessary. As demand decreases, fleets are finding it more cost effective to outsource most rebuilding jobs, he said.
Other trends in fleet maintenance repair that Wright has noticed include smaller agencies looking to larger agencies for upfitting services, such as upfitting police vehicles and mounting radios and plows to trucks. This is true for smaller entities that don't have enough work to keep one full-time person busy, or the one full-time person is unable to upfit the vehicles with the speed customer departments demand.
"That's where you see a lot of intergovernmental agreements pop up," Wright said.