Fleet purchasing is often a time-consuming process, with collaboration required between fleet, purchasing, the user department, and possibly other staff members as well. With numerous rules and regulations to follow, it can take months to order a vehicle, and additional months before it is delivered. User departments may wonder why it takes so long to get anything purchased.
“For many years, I worked in a customer department and would become frustrated with purchasing and wonder why it took so long,” said Tammy Rimes, principal of Tammy Rimes Consulting. She worked for five years in the purchasing department of the City of San Diego, Calif., after spending 15 years at various other departments within the city. “Then I became purchasing and I realized, ‘Oh, we have to do all this stuff. It really does take three months to get a bid out on the street, and this is why.’ ”
Despite the inherently slow nature of government purchasing, there are changes procurement and fleet professionals can and have made to improve the purchasing process. In the past decade or so, new tools and technologies that make procurement faster and more streamlined have become more available. Rimes and other fleet and procurement professionals discuss these changes and how their organizations have worked to improve fleet purchasing.
Changes in Government Procurement
During the recession, many purchasing teams and other government departments were downsized, both in staff and resources, Rimes said. These departments have had to get scrappy and worry about cost containment above all else, which has led to some significant changes in the way they purchase products and services, ranging from revamping their purchasing methods to worrying about the details of purchases they didn’t think about before in an effort to save money.
Traci Gorman, purchasing agent for Arapahoe County, Colo., said she sees a big push for hybrid or green vehicles in the past few years, as well as ensuring accurate fleet size to meet an agency’s needs.
Ron Pigott, director of the Texas Procurement and Support Services division at the Comptroller’s Office, said the availability of developing automotive technology and options on the internet makes researching fleet purchases easier.
One essential tool that allows procurement officials to significantly improve their processes is e-procurement. This application connects vendors with buyers online, taking away the old paper-intensive method of purchasing.
E-procurement decreases the time it takes to purchase because it eliminates the time needed to mail out solicitations and wait for vendors to receive their solicitations. It also cuts down on paper and advertising costs, and vendors don’t have to go to the procurement office with their proposal to get a timestamp, a custom that Rimes said seems like a business practice that belongs to decades past.
“It really helps procurement get bids out faster, get responses from vendors faster, and [allows you to] track progress of the bid,” Rimes said.
Online procurement can often also expand the vendor pool, increasing the number of participants and competition for the bid.
Eric Kaiser, equipment maintenance manager at the City of Roseville, Calif., said he has seen more vendors since the city began using an e-procurement method less than a year ago. The solicitations used to be on the city website, and vendors would have to check to see if there was something they could provide. With the new system, however, they automatically get e-mails about new solicitations in their specialty. Kaiser added that the e-procurement system makes purchasing specialty vehicles easier. Take, for example, the case of a prisoner transport van.
“The local dealers might not know where to get a jail van, but when it’s [online], the jail van companies just sign up, and they automatically get our bid. It saves a little bit of the legwork of getting the bids out on the street. You’re just posting them online — you don’t have to track down vendors,” he said.
Numerous companies provide e-procurement services, some with lower prices than available in the past, allowing more agencies to get approval to move to an online service.
In addition to using electronic bid documents and allowing vendors to submit their bids electronically, the State of Texas also publishes its awarded fleet contracts online.
“The Comptroller’s office has also put its fleet contracts online, through
www. Txsmartbuy.com, to make it easy for our state and local entities to order cars and trucks, including any available options and accessories,” Pigott said.
Expanding Cooperative Procurement
Since putting out a bid can be time consuming and costly, many agencies are turning to other options, such as cooperative contracts, which have already done the work for them.
National cooperatives, such as the National Joint Powers Alliance (NJPA), National Purchasing Partners (NPP), and National IPA provide these contracts. State and regional contracts are also available for fleets to use.
“Cooperative purchasing has exploded in the past few years,” Rimes said. “If you’re in a tiny little city or county and you need just a few cars, it makes sense to look at anyone bigger that has some kind of cooperative contract to see if you can get more advantageous pricing.”
Carrie Woodell, procurement administrator for Orange County, Fla., who purchases about 200 fleet assets annually, agrees. The county buys about 97% of its fleet units through the Florida Sheriff’s Association contracts. The rest are piggybacked through the state contract or other agencies, and very rarely does she issue a solicitation for equipment.
“Because the Florida Sheriff’s Association and the State of Florida contracts are so competitively priced, we realized economies of scale by using those instead of issuing our own solicitation,” she said.
In addition to lower prices and ease of use, Rimes said cooperative purchasing allows agencies to buy a specific product or from a specific manufacturer if that is what they have to get. A purchasing agent can’t put out a bid stating the agency will only order from one company, but she can instead look for a cooperative contract to fulfill the agency’s needs. The contracts still often meet agencies’ procurement laws because they have already gone through a competitive bidding process.
State procurement offices often allow smaller agencies to piggyback off their awarded contracts. Public entities can also choose to piggyback off contracts from neighboring cities, counties, or law enforcement agencies. Optionally, smaller agencies can also get together to form their own cooperative purchasing agreements if they know they have the same needs in order to obtain better volume pricing.
The City of Roseville is initiating such a contract now with neighboring cities and counties for transit buses.
Moving Toward Solicitations
While cooperative contracts are great for some, recognizing when they aren’t the best solution can help save money. Four years ago, Arapahoe County was purchasing 100% of its on-road vehicles off the state contract. Many of its vehicles were sheriff’s vehicles, and Gorman found she was spending money removing the items the state included in its base model requirements and more money adding the options the sheriff’s vehicles needed.
“They build their vehicle for their customer, which is state patrol,” Gorman explained. “We don’t need some of the equipment they put on their vehicles. We have different types of equipment we require on ours.”
The other issue with the state contract was that it wasn’t done in the timeframe the county wanted. The county wanted to order the vehicles in the beginning of the year to get them in the first quarter of the year. The state’s timeline had the county taking delivery in the summer.
“I’m ordering a 2014 model-year vehicle. I don’t want to have to wait until July or August to put it on the street when I’ve paid for it,” Gorman said. To solve this problem, the county decided to issue its own solicitation for the 45-55 on-road vehicles it purchases each year. Gorman tried to work on a cooperative contract with other agencies but didn’t have any takers because everyone seemed to be using the state bid. The purchasing team took about six months to research and put out its own solicitation. The single solicitation asked for quotes for different vehicles the county historically purchased. The county awarded one-year contracts to the winning bidders, with the option to renew for three additional one-year periods.
The new method has been a resounding success: Gorman said the county saves $3,500 per vehicle on average in comparison to its prior method, and she has received positive feedback from vendors. She now buys 90% of the county’s on-road vehicles off this bid, and other agencies have been piggybacking off it as well.
Kathy Beach, CAFS, fleet administrator and parts supervisor for the county, said most of their bids and awarded contracts are to companies within the Denver Metro area, stimulating the local economy. This also allows the fleet to develop relationships with its vendors, and having them nearby is particularly helpful when it comes to warranty repairs and recalls, as the county gets quicker service, Randy Campbell, CEM, fleet manager, said.
The new process is going so well that in 2015, when the extensions expire and the county goes out to bid again, it will be adding more vehicles, such as hybrids, electric vehicles, Toyotas, Hyundais, and Kias. Gorman is also confident she will be able to create a cooperative contract, as other agencies have expressed their desire to work on one.
With next year’s solicitation, Gorman expects to purchase 100% of the county’s on-road vehicles on its own contracts.
Analyzing Trends Driven by Cost Containment Goals
As fleet professionals continually looked for cost savings during the recession, one purchasing trend Rimes has seen has been the outsourcing of vehicle parts warehousing. This way, the agency would not be storing hundreds of thousands of parts inventory, some obsolete, and paying an employee to manage the parts. When that function is outsourced, it often reduces work for the purchasing agency, which can issue one contract, one purchase order, and one check to the winning vendor.
Not only does this cut down on time, but it also cuts down on costs. Rimes said the average national cost to complete a government purchase order and issue a check is about $127, a cost that includes the time of everyone involved in the process. By reducing the number of purchase orders, an agency can save a lot of money.
And just because one vendor is awarded doesn’t mean that one vendor is solely benefitting from the contract. The vendor may get his parts from local stores, bringing business to local companies.
Another trend Rimes sees is in reverse auctions, which are best for specific products such as fuel, where the only specification is the octane rating for gasoline. During a reverse auction, vendors can see how much the others bid, allowing them to offer a lower price, resulting in a drive to lower prices as vendors compete for that contract.
“Reverse auctions can get very competitive, and some procurement officers have gotten some super pricing,” Rimes said.
Vendors, who tend to dislike reverse auctions, warn purchasers reverse auctions are not always the best answer. At a recent Fleet and Procurement Services Forum held in Cerritos, Calif., by the Municipal Equipment Maintenance Association, a vehicle manufacturer said this method puts too much emphasis on price, discarding other factors such as company reliability and total cost of ownership. Additionally, while a reverse auction may work a few times, once vendors realize they can’t win in a race to the bottom, they may stop participating. This reduces the competition, and a fleet may end up with a higher final price than if it had just gone with a regular bid process, one vendor said.
In addition to reverse auctions, fleets are looking at other purchasing methods to save on fuel costs. In the past, Rimes said fleets bought fuel and didn’t worry as much about the nuances of how they purchased it. In addition to a growing number of cooperative fuel contracts, she said fleets are now paying more attention to price indexes when they purchase, deciding between weekly or daily pricing structures. Or they may check the rack prices at surrounding locations to see which area has the better price. Some agencies are even buying price protection insurance in case fuel costs dip below the price for which they had contracted, she said.
Tips for Improving Procurement
➤ Don’t Go Out to Bid Every Year
Gorman said one of the things vendors like most about the Arapahoe County’s procurement method is it doesn’t have to go out to bid every year. The option to renew for three one-year periods makes it easier and cheaper for both parties — she explained that a dealership may spend $11,000-$15,000 to build a proposal, a cost that is ultimately passed on to the customer. When extension time approaches each year, she sends vendors a letter asking what the increases are for each vehicle. Purchasing reviews the numbers by December so it can have its orders in the first week of January.
In the City of Roseville’s contracts, vendors can check a box that will allow the city to use the same contract to purchase the same vehicle for the rest of the year. In a long document, it’s easy to miss a check box, and Kaiser helped vendors understand that checking the box means both the agency and the vendor can avoid an unnecessary bidding process.
➤ Form a Vehicle Review Committee
In order to ensure that vehicles purchased are truly needed and purchases are reviewed, Orange County formed a Vehicle Requirement Utilization Committee.
The committee consists of representatives from nine different user departments as well as representatives from procurement, management and budget, and fleet. They convene quarterly to review all vehicle requests, make sure funding is available, and see that the features requested are within the guidelines of what is allowable.
The committee can also decommission vehicles that are underutilized and may also assign that vehicle to another department that needs it.
“It’s really helped streamline the number of vehicles we have in the fleet and makes sure we are not over-purchasing for our fleet just because there is a request,” Woodell said.
➤ Develop Standardized Forms
At Arapahoe County, Gorman is working on another project with fleet to help end users. They are developing standardized forms that detail what is needed for each vehicle being ordered.
“We’re trying to standardize these forms so that when we have people transitioning in and out, we don’t lose any information and knowledge,” she explained.
For example, if someone in the sheriff’s office has been ordering vehicles for a long time and retires or leaves, that vehicle ordering knowledge may not get passed on. The forms would tell his replacement what needs to be included for every vehicle, such as three sets of keys, emergency lighting, graphics, and window tinting. It would also state that the person should check with fleet to see if any equipment can be reused on the new vehicle.
Working Toward the Same Goal
Major procurement changes can result in an improved purchasing method, but effective communication and realizing that purchasing, fleet, and vendors are working toward the same goal are also essential.
For Gorman, keeping an open dialogue with vendors and end users has made purchasing easier.
“If they hear something that’s come up or if I have a question, I can reach out to the vendors that I’ve awarded to and have a conversation with them,” she said.
They can send her information about new vehicles or vehicle changes. She also meets with vendors and end users to see what the department can do better, what’s working, and what’s not.