Pay Me Now or Pay Me Later

By Mike Antich

Fleet maintenance costs are trending upward compared to prior years. The key reason is the higher frequency of repairs on higher-mileage units as a result of the widespread deferment of equipment replacement by many government fleets. Nationwide, equipment inventories are aging as lifecycles are being extended for all vehicle classes. This longer service life has created an upward trend in unscheduled, higher-cost maintenance. In addition, extended mileage and increased engine hours lower the threshold for catastrophic component failures. It is a true case of "pay me now or pay me later." The challenge is how to hold maintenance costs down while operating an aging fleet.

Political subdivisions are funded largely through sales and property taxes, two areas devastated by the economic downturn, resulting in dramatic revenue reductions. This has prompted steep reductions in capital budgets used to purchase fleet equipment. Extending replacement cycling is a short-term budget Band-Aid to buy time. However, some vehicle replacement programs were never fully funded and there was an existing backlog of vehicles that needed to be replaced even prior to the decrease in tax revenues.

Deferral is a Fiscal Band-Aid

Fleet managers are finding themselves with rapidly aging fleets, which will stretch existing maintenance funds to keep them in service. One way to stretch maintenance dollars has been to extend, modify, or enhance PM intervals.

Another challenge in keeping older, higher-mileage vehicles on the road is turnaround time as repairs become longer, more frequent, and more complex. With older/higher-mileage vehicles, these factors slow a vehicle's return to service. The consequence is a perceived degradation of service levels by drivers. When repairs take longer than usual, some drivers, not all, blame the mechanic, even when the delay has nothing to do with the mechanic's capabilities. There are concerns about the increase in maintenance requirements negatively affecting service levels, which, in turn, negatively affect constituents served by these user groups.

Some fleets are paying close attention to the service lives of component systems. "As fleet vehicles age, certain component systems on these vehicles fail more frequently and require more attention to repair instead of preventive maintenance," said Frank McIlvenny, supervisor of stores and properties for the City of Long Beach, Calif. "When feasible, these component systems are replaced or refurbished on a regular cycle. This reduces vehicle downtime, labor costs, and part costs."

Many fleets are internal service funds, with all costs recaptured through user rates charged to customers. As the economic downturn worsened, departments sought to cut costs by turning in large numbers of assigned vehicles. End-user departments reduced staff, which also prompted voluntary turn-in of vehicles at record numbers. Fleets are redeploying these vehicles, cherry-picking those in best condition for reassignment, and disposing of older, less serviceable units. One inadvertent benefit of the availability of these surplus vehicles is a reduced number of required replacement vehicles, helping minimize the impact of eviscerated capital expenditure budgets.

One benefit to the recession is an increased number of fleet operations now have fully staffed maintenance facilities due to the increase in the technician labor pool following the termination of many automotive dealer franchises around the country. However, not all fleet operations are so fortunate. Many vacant fleet positions are frozen, with management prohibitions to filling unanticipated vacancies, even when resulting from retirements. Burnout is becoming a concern as operations struggle to maintain "normal" operations with an increased workload. Compounding this problem is the elimination of overtime at some fleet operations, which only exacerbates the problem. Despite these manpower limitations, user groups continue to expect (and demand) the high level of service to which they are accustomed. But in any situation, there is a silver lining. Many technicians see the increased workload as a form of job security in an era of furloughs and layoffs.

Two Different Perspectives

Not all fleet managers agree with the arguments against extended replacement cycling. A case in point is the State of Utah. Recently, the State of Utah extended its replacement mileage from 90,000 to 105,000 miles, following two-and-a-half years of research on the viability of this decision. (See the letter to the editor in this issue from Scott Bingham, assistant fleet manager for the State of Utah, to get more details on this strategic decision.)

"It is true that you run the risk of catastrophic failures when replacement mileage is increased," wrote Bingham. "We saw a 0.0008 cents per mile increase in repairs costs, but this represented a cost of $9,000 annually in a fleet of 3,500 vehicles." According to Bingham, the decision to extend replacement parameters saves the State of Utah $1.82 million annually.
However, other fleets take a different perspective.

"The best way to manage maintenance costs is by having an established replacement plan. In most cases, a short-term deferral of vehicle purchases will not destroy the operation, but if allowed to continue for more than 12 to 24 months, operating costs will rise well above the economic replacement decision point," said Ron Lindsey, fleet services manager for the County of San Bernardino, Calif.

These are two equally valid perspectives.  

Let me know what you think.

mike.antich@bobit.com