Many fleets outsource some of their work, but others also insource it — that is, they provide maintenance, repair, or upfitting for other public entities. Perhaps it’s for a police department, or a small town without its own fleet division, or a volunteer fire department. Fleet managers who insource work say there are significant benefits, including the ability to spread overhead costs across more vehicles, reducing costs for everyone.
Wondering whether insourcing is right for you, now or in the future, and how to start? Here’s what you need to know.
Obtaining work from outside entities often depends on reputation, referrals, active searching, and sometimes, luck.
Marilyn Rawlings, fleet manager for the City of Cape Coral, Fla., recalled receiving a phone call about a school bus stuck on the side of the road. The charter school needed help with the maintenance and repair of its 19 buses, which were breaking down too often. The school’s sole mechanic, who was also the inspector, was signing off on buses that Rawlings’ team later found had numerous safety violations, including torn seat covers, bald tires, broken swing-out safety arms, and air conditioning that didn’t work, said Pete Milana, fleet supervisor for the city.
Rawlings, confident her team was up to the task, sought approval from management and submitted and was awarded a proposal to take over bus fleet maintenance, the operation’s first and only insourcing contract.
The Sonoma County, Calif., fleet had more experience performing insourcing work, performing maintenance, repair, and upfitting for various small towns and police departments, said former fleet manager David Worthington (now manager of fleet and construction support for the East Bay Municipal Utility District in California). Officers talked to each other, leading to word-of-mouth referrals to other agencies unhappy with their own services. The county fleet team has been taking on additional work for years as it became available.
In Prince George’s County, Md., Fleet Manager Rick Hilmer, CAFM, saw insourcing as an opportunity. During the economic recession in 2008, the county froze hiring, leaving the fleet division staffed at just two-thirds its usual level. As the economy improved and Hilmer could hire back more staff members, he realized that insourcing more work (the county fleet has always performed work for small towns, volunteer fire departments, and even the state) would allow him to spread out the costs of his expanding team.
Last year, the county added a small town and a library system fleet to its list of customers. The library’s lone mechanic was retiring, and it couldn’t justify a full-time hire, so its staff members approached the county, Hilmer said.
Lee Hall, fleet manager for the City of Fairfax, Va., has a different experience. Rather than insourcing, he’s brought back previously outsourced work in house. The city’s vendor for fire truck and ambulance service was not meeting the turnaround time outlined in the contract agreement, leading the city’s own fire department staff to have to borrow other jurisdictions’ vehicles just to stay in service, he said. There had to be a better solution — that’s when the fleet team stepped in.
Evaluating Costs & Revenue
Insourcing work can be a big project, but it can help fleet agencies reduce costs for all its customers. It’s important to determine costs and savings, calculate charges for external customers, and, in most cases, ensure you stay cost neutral.
Worthington said insourcing has allowed him to reduce overall costs such as parts for patrol car setup — the fleet operation gets volume discounts by purchasing parts in bulk.
“It cut our costs — of brand-new parts for a patrol car set-up — by $1,300,” he explained.
As for charging customers, Worthington has found that they often wanted a guaranteed price, which he couldn’t offer because the fleet is a zero net cost operation. He had to explain that he would charge the internal rate county departments are charged. As for external vendor work, the customer would also be billed through the labor rate to accurately reflect the time spent processing the order.
Rawlings estimated that it took about $400,000 to get the charter school’s vehicles up to acceptable working condition — a shock for the school.
However, she provided a $20,000 monthly cost estimate for preventive maintenance (PM), inspections, and minor repairs for the buses (although they are billed for actual work) and reported that the estimate is about accurate, with the city billing between $10,000 and $20,000 monthly.
“Now we’re under where we projected, so they’re thrilled,” she said.
Rawlings’ fleet charges the charter school the same as it does its internal departments and sells fuel at no markup.
“We’re trying to help the charter school become solid,” she explained.
The Prince George’s County fleet operation charges a slightly higher rate for external clients. That’s because most county departments are charged a normalized annual cost based on vehicle classes. But Hilmer said with external clients, he stays cost neutral and has a below-market labor rate.
“I think we’re very competitive and very attractive to customers. They’re not going to get this service at this cost in the open market,” he said.
For the City of Fairfax, Hall said he ran an analysis for vendor work for the fire and ambulances, which previously took up half of his vendor outsourcing budget. Comparing one-year costs of outsourcing work and doing it in-house, in-house work allowed the city to save $184,600 while also increasing in-service time by 7,331 hours, he said.
Addressing Manpower and Training Needs
It’s not just costs fleet managers have to consider, but also technician time and training.
Worthington attributes Sonoma County’s ability to absorb additional work — without hiring additional staff or increasing overtime — to talented fleet staff. The operation was constantly looking for efficiencies, allowing it to free up some labor time to take on the work.
As for working on the transit system’s newer vehicles, he said technicians took it in stride. One new thing they encountered: high rail transit vehicles that drive on railroad tracks.
“The whole mechanism was something we’d never been exposed to before. So there was a little bit of a learning curve with it, but we found that a lot of the components were similar to snowplows.”
Rawlings’ staff, which hadn’t worked on school buses, set out to train themselves. One mechanic received certifications from the National Institute for Automotive Service Excellence (ASE) to work on buses, and two studied for months to become certified bus inspectors.
As for workload, Rawlings said that as the fleet operation began the process to get the buses back in good shape, she outsourced other work to free up technician time. This ended once the initial work on the buses was complete.
Hilmer said incorporating the library’s vehicles into the fleet maintenance program meant technicians were seeing more variety in the vehicles they were servicing — such as Nissan and Chrysler vehicles. This meant ordering and stocking different parts.
When bringing fire and EMS equipment in house, Hall tripled the training budget and sent technicians out to get factory training. He began working on an incentive promotion program for emergency vehicle technician (EVT) certifications to mirror the city’s ASE incentive program. These efforts worked, and technicians now have EVT certifications in four different fields.
In addition to increasing the training budget, he hired a part-time employee to offset other work that comes into the shop. This person is a retiree with 34 years of service, and he’s still there. Hall also filled a vacant position with a technician who had previous fire apparatus repair experience.
Hall re-evaluated PM schedules, using repair cost and downtime data to extend service intervals on some vehicles to free up technician time — for example, trash truck PM schedules were increased from three to four months.
Like Rawlings’ experience, Hall also focused on intense PM procedures to get the vehicles up to standards in the beginning.
The fleet operation believes PM means “fix it now before it causes a breakdown in the future,” he explained.
Helping Neighboring Fleets
The benefits of insourcing aren’t only related to costs.
Worthington said because Sonoma County was doing vehicle upfitting for police cars for multiple cities and towns, patrol car setup for many agencies in the region was standardized. This helps officers during multi-agency emergency response.
“If any one of those officers show up, and they’re not near their vehicle but they need to call out on a radio or get into another vehicle, everything intuitively is in the same place,” he said.
For Rawlings, insourcing school bus work pushed staff members to earn additional ASE certifications, allowing the fleet operation to achieve its ASE Blue Seal of Excellence. The certifications and recognition from the city manager made them proud and boosted the morale of the staff. She added that the good work “does a lot for your reputation in town.”
For Hall, the biggest benefits aside from cost savings are increased service time and not having to borrow vehicles from other agencies.
Another benefit? Not having to spare two employees to drive 22 miles to the vendor for outsourced repairs.
As for Hilmer, he thinks of it as “being like a big brother” by helping smaller jurisdictions that don’t have the resources or staffing the county does.
“I think it’s a service to us to be able to provide high quality maintenance at a reasonable price,” he explained.