In-House or Outsource: State Fleets Take Different Maintenance Paths

The right-sourcing options of a fleet with vehicles located across an entire state may differ from those of a centrally located fleet. That's not to say there's only one good option. Fleet managers for the states of Nevada and West Virginia have different approaches to maintenance, with one fleet keeping a balance of in-house and outsourced services and the other finding it more cost-effective to outsource light-duty maintenance to a fleet management company (FMC).

West Virginia Outsources Light-Duty Maintenance

The State of West Virginia has a fleet of 6,509 light-duty vehicles and 21,600 heavy-duty/specialty vehicles. For Clay Chandler, MBA, CPFP, executive director of the Fleet Management Office, which handles maintenance of the light-duty vehicles, outsourcing maintenance to a fleet management company is the most cost-effective solution for the light-duty fleet. The State already outsources repair and maintenance on 3,000 light-duty vehicles to ARI, with the rest scheduled for migration to outsourced maintenance in the near future.

"The State of West Virginia has determined that outsourcing vehicle maintenance and repair for its light-duty vehicles provides the greatest cost-benefit to the state," Chandler said. "Through outsourcing, the State benefits from a controlled authorization process (human-to-human interaction between the FMC and vendor). Our current vendor also provides the state the additional benefit of access to negotiated national maintenance and repair account discounts. In FY-2011, the State of West Virginia saved $11,664 by leveraging FMC national account vendor usage."

Chandler added that for the light-duty vehicles, the State lacked maintenance resources to support a fleet spread across the entire State. Another benefit of going with a fleet management company is one consolidated invoice for each affected agency, which saves on average $75 per individual maintenance purchase order, he said. In FY-2011, 8,340 maintenance purchase orders were consolidated into one monthly invoice, resulting in $625,500 in savings to the State. Total savings in the last fiscal year of $787,925 will be exceeded in FY-2013 as the State transitions the remainder of its light-duty vehicles to an FMC, he said.

[PAGEBREAK]Nevada Continually Compares Costs with the Private Sector

The State of Nevada's Motor Pool Division chose a different method for maintenance. With a fleet of 750 light-duty vehicles, it is one of several divisions managing the State's fleet. Through a combination of mostly preventive maintenance (PM) services kept in-house, outsourced repairs for larger projects, and continued cost comparison with the private sector, Keith Wells, administrator of the division, believes the fleet he manages is right-sourced for optimal efficiency and cost-effectiveness.

The division's eight technicians are located in three repair shops, but vehicles are spread across nearly every town in the State. This creates many challenges due to Nevada's rural environment - many areas do not have sufficient private-sector resources to where repairs can be outsourced, Wells said. Wells said roughly 20 percent of all maintenance and repair services are outsourced to local vendors. "We focus on the core maintenance requirements and high-volume repairs that need to be done," he said. Other functions are outsourced.

About 15 percent of the division's vehicles, assigned to rural locations, are exclusively maintained by outside vendors. This distinction allows the division to accurately and continuously compare the cost of internal work versus outsourcing functions to a private agency.

"For the 15 percent of my fleet that's continuously maintained by outside vendors throughout the State, and not just in one geographic region, I get to see what those costs are continuously and compare them to our costs," Wells said. "We consider that solid data because we're actually outsourcing a car to a vendor, having a specific repair performed, and seeing what those costs are. We're doing that same thing in many different geographical regions, so the pricing fluctuates and the vendors fluctuate. This provides us with ongoing data and snapshots of what that outsourcing is really costing us."

Additionally, within areas of close proximity to state maintenance facilities, the division periodically outsources PM and safety checks to local dealers to keep up-to-date cost comparisons.  

For tire repairs, PM, and safety checks, Wells has routinely found outsourced services to be on average 30 percent moreexpensive than in-house services at the fully-burdened labor rate.

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Wells added that several considerations have to be taken into account when outsourcing: customer service, downtime, and quality of work.
Vehicle downtime must be a factor when looking at outsourcing routine repairs - for example, if a vehicle requires tires in addition to PM, this should be done at one vendor, he said. Many times, fleets outsource PM work to express lube facilities. They must consider the downtime required to move the vehicle from one shop to another, and which employee is moving the vehicle.  Employee labor costs and loss of productivity must also be a factor; many fleets require the driver to perform this function, even though this is not her primary role and she may be working at a higher pay rate.

Quality is another issue, and Wells reports the frequency of errors or omissions in outsourced work can be as high as 10 percent. The division hands over to vendors a checklist of all the services that need to be done during a PM/safety check, and when possible, the staff review the services, many times finding omissions. For example, tires may be not properly inflated or windshield wipers may be in bad shape, Wells said. In these cases, fleet staff speak to the shop and if it continues, the division stops doing business with that shop.

"A lot of [public sector] fleets will tell you the quality performed in their shop is higher and it's easier for them to maintain that quality," Wells said. "Many in-house programs are successful; we just don't always do a great job of justifying our existence."

NCSFA Survey Says Maintenance Practices Vary

The National Conference of State Fleet Administrators (NCSFA) conducted an informal survey of vehicle replacement, maintenance, and repair practices. The survey inquired as to how fleets perform maintenance and repair functions, internally or externally. Respondents manage state, university, and department of transportation fleets.

The survey found the majority of respondents (about 75 percent) utilize a combination of in-house repair shops and outside vendors. The majority also reported they performed 90-100 percent of repairs in-house. Services for which fleets utilize outside vendors range from overflow work, glass repair, body repair, and light maintenance, to major maintenance and repair tasks.

NCSFA President Chris Hoffman, CAFM, stated that fleets utilize varied approaches to maintenance and repair based on what best meets their needs. "In many cases when in-house shops are established and economically operated, they can be a good alternative. For entities that do not have shops, it may be more cost-effective to look to vendors to meet maintenance and repair needs. It is necessary to perform a cost benefit analysis to determine the best fit for a particular fleet," he said. Hoffman went on to say that partnering between government and private sector service providers is a solution the majority of fleets surveyed utilized.

Most fleet respondents stated that they based their maintenance practices on operational efficiency and cost comparisons.