Buying fleet vehicles: Options are standard
Buying a car is not as simple as it used to be. The Internet, price guides, rebates, incentives and a proliferation of late model, “off-lease” vehicles are among the wild cards that can complicate vehicle acquisition. With a diversity of makes, models and specifications, the purchasing job is not getting any easier.
However, local government officials have several ways to streamline what could otherwise be a protracted and arduous decision-making process. Software programs and state contracts typically save local officials from having to perform excessive legwork. For instance, many local governments routinely purchase sedans and light trucks through state contracts.
Since the states buy in large volume from manufacturers, they can command low prices and pass the savings along to cities and counties, says Paul Lauria, a vice president for DMG-Maximus, a Rockville, Md., fleet management consulting firm. Typically, states consult with representatives of local governments on how best to write specifications, he notes. Big cities, however, often write their own contracts for vehicle purchases because their large fleet sizes enable them to achieve economies of scale.
Still, several fleet managers agree that, when it comes to sedans and other light duty vehicles, state contracts offer municipalities the best deal. Local governments, which in many states are regarded as adjuncts of state government, are entitled to participate if and when they please. They are under no obligation to purchase a minimum number of vehicles or commit to a minimum length of time.
New or used? Catherine Mitchell, fleet services division manager for Tacoma, Wash., oversees a fleet of 1,700 vehicles. “We have always bought new, up until recently,” she says. A few months ago, the city council approved a contract with a local vendor that sells program cars (vehicles used as demonstration models or for marketing) that usually are about 6 months old.
By purchasing program cars, the city expects to save about 20 percent over the price of new cars. “We’re trying to provide more and better services to our citizens with the same tax base that we’ve had for years,” Mitchell says.
In the past, Tacoma had to arrange for police vehicles to be fully outfitted with radios, equipment racks and decals. Now, however, the city is paying the vendor extra to handle all accessory installations and detailing. “Our tradeoff is we get those vehicles on the road in about a quarter of the time,” Mitchell says.
Other cities, such as Gainesville, Fla., also take advantage of low used-car prices. Milton Reid, the city’s director of fleet management, says Gainesville buys standard-issue new vehicles (e.g., those for municipal officials who need to travel on business) through a state contract.
Police cars are purchased through the state contract or a separate Florida Highway Patrol contract. The selection process for patrol cars is narrower than for fleet vehicles in general, since only Ford and Chevrolet offer “police package” vehicles (the Crown Victoria and Lumina).
Of Gainesville’s 1,230 vehicles, about 200 were purchased used. The oldest used cars Gainesville buys are 1-year-old cars that just came off a lease; most have less than 20,000 miles on the odometer. By purchasing used vehicles, the city often saves 15 to 20 percent off the cost of purchasing, and the vehicles tend to be well-equipped and retain resale value.
When the fleet division wants to purchase an off-lease vehicle, it first gets authorization from the city council to spend a certain amount on a specific type of vehicle, then advertises for bids. With the money in hand, the division can quickly make a purchase once it receives the bids — before the desired vehicle is snapped up by another bargain-hunter. “We can’t ask the vendors to hold on to [the vehicles],” Reid says.
Although many cities occasionally buy used vehicles, not everyone believes that is a wise decision. Lauria notes that discounts for new vehicles often are too attractive to pass up, and that buying used may raise concerns about liability. “What if there were some undetected structural or mechanical flaw that causes an accident, and the city got sued?” he asks.
Selection criteria According to a survey by the Alexandria, Va.-based National Association of Fleet Administrators (NAFA), job suitability (whether a vehicle is fit for its intended use) is the number one factor that goes into vehicle purchase decisions for both public sector and commercial fleets. >From that point on, however, the criteria vary in ranking. (NAFA has two government fleet categories: “Public Service” and “Law Enforcement.”)
Although depreciation/resale value ranks second in the private sector’s selection criteria, it is way down on the list for the public service and law enforcement categories. “Local governments don’t look at depreciation or resale value because the public sector tends to keep the vehicles for a long time,” Lauria says.
After job suitability, repair record and serviceability/ease of repairs are tied for second in NAFA’s public service rankings, followed by safety record and warranty program (tied for third) and delivery time. In the law enforcement category, safety record ranks second, followed by repair record, and initial cost and serviceability/ease of repairs, which are tied for fourth.
Lauria says that, after job suitability, he believes initial cost and the country in which a vehicle was manufactured are the second and third most important considerations. “Very few government jurisdictions will buy imports,” he notes. One reason is that many foreign manufacturers release new models and fleet pricing incentives later than do the Big Three American manufacturers, making comparison shopping difficult.
Many governments take pains to learn their employees’ preferences before buying. “We do a lot of that,” says Steve Hennessey, fleet manager for Kent, Wash. “Just about every vehicle we buy is a joint effort with the using department.” Prior to developing bids, Hennessey solicits employee input and conducts separate surveys for each department.
Software simplifies selection Numerous companies and organizations offer fleet management software that aids in developing vehicle specifications. PC CarBook by Chrome Data, Oregon City, Ore.; “The Complete Car Cost Guide” by IntelliChoice, Campbell, Calif.; Guide 2000 from the National Automobile Dealers Association, McLean, Va.; and CarPoint from Redmond, Wash.-based Microsoft, are among the packages available.
In addition to containing such data as specifications from domestic and import manufacturers and special pricing levels, the software often features information on rebates, warranties, safety information, repair and insurance industry data, and ownership cost analyses. “It standardizes and streamlines the specification development process,” Lauria says.
Because vehicle incentives and option packages frequently change, software companies typically update vehicle spec data with CD-ROMs or floppy disks mailed weekly or monthly to customers. In some cases, updated information is available via modem. Unlike bids for more modestly priced items such as lawn sprinklers or paint brushes, bids for vehicles are not necessarily awarded to the lowest bidder. Sometimes, as with Gainesville, a city may put out three-year RFPs to local dealers. The winner will be guaranteed the city’s business if the dealership meets up with annual bid specifications at competitive prices.
“The big advantage to that is we can standardize our fleet,” Reid says, noting that buying parts and training mechanics are simplified when a fleet consists of vehicles from only one or two manufacturers. (Overall, standardization appears to be gaining support. According to NAFA, more than 60 percent of its survey respondents do not give their drivers any choice of make or model, and half do not let drivers choose interior or exterior colors. Such a “one size fits all” approach is intended to give fleet managers better leverage with manufacturers, ease the order and delivery process, and eliminate the time and confusion of special orders.)
Additionally, delivery of new vehicles is more likely to be timely with one dealership than with several, and establishing a relationship with a vendor can keep fleet managers informed of rapidly changing technology, according to Tacoma’s Mitchell. Technological advances, she says, can dramatically affect the spec-writing process.
Bid selection strategies While some local governments comparison shop by evaluating competing models’ prices and features, others dig deeper by ascertaining the difference between dealer invoice price and actual sales price. Steve Saltzgiver, director of fleet operations for the state of Utah, says his state uses “triple net pricing” in evaluating bids. That method subtracts advertising costs, dealer markup and interest costs from the base price and then works from there. The emphasis is on finding vehicles with the minimum markup relative to base price.
In selecting a bid, some local entities may lean heavily in favor of buying from a local dealership; others may regard airbags and general vehicle safety as more crucial than reliability. Additionally, as bidding practices vary, and as fleet vehicle acquisition technology continues to evolve, federal regulations are influencing some cities’ purchasing decisions. For example, under the Energy Policy Act of 1992, those cities with metropolitan populations greater than 250,000 must make alternative fuel vehicles (AFVs) a certain percentage of their total fleets.
“The (AFV) selection is really small, still,” says Glendon Mitchell, purchasing agent for the state of Utah. That, along with software, RFPs and bid submissions, is bound to change. Meanwhile, as Tacoma, Gainesville and other cities demonstrate, fleet managers must learn from past experience, seek input from their employees and determine which vehicle attributes are most important.
Equipped with such knowledge and aided by software and state contracts, they can develop the right specifications at a good price, satisfying the drivers and, more importantly, the taxpayers.
Maintaining a large fleet of vehicles generates plenty of waste, including used anti-freeze, motor oil, transmission fluid and auto parts packages of many shapes and sizes. But, as the Lexington-Fayette County (Ky.) Urban Government has demonstrated, it also offers plenty of opportunities for recycling.
The Urban Government’s Division of Fleet Services has 60 employees, more than 1,200 licensed vehicles and several hundred nonlicensed vehicles such as tractors and backhoes. During the past few years, the division has begun recycling items such as oil filters, cardboard and windshield washer solvent jugs.
In addition to implementing new recycling policies, the division has purchased the following equipment: * three antifreeze recyclers designed to cut costs and reduce hazardous waste generation; * a refrigerant machine, which recovers and recycles the R134a refrigerant found in most new vehicles; and * parts cleaning machines that use water-based rather than petroleum-based solutions. Employees cart plastics and cardboard to a regional recycling facility about 3 miles away at least once a week, says Richard Murray, director of fleet services. The division thus saves money on solid waste disposal fees while also helping the environment.
“Our concern was to minimize our waste material, and some of these things we are doing are quite economical,” Murray says. He notes that the heavy equipment shop’s waste oil heater, for example, burns used motor oil to supplement the heating system. Consequently, the fleet services division avoids paying someone to haul away oil for recycling, and it also saves by supplementing its natural gas heater, which struggles to keep the garage with its frequently open overhead doors heated. “It is difficult to heat a shop with 18 bays,” Murray says.
Murray has noticed an increase in fleet garages in Kentucky and other states with environmentally friendly equipment, but he says recycling of cardboard and plastic has not caught on. He adds he is pleased with the support that division employees have given toward recycling efforts. “I’ve actually been pleasantly surprised,” he says.
The Regional Transportation Commission of Clark County, Nev., which serves the fast-growing Las Vegas metropolitan area, hopes to keep up with growing demands on its bus fleet with a new integrated bus maintenance facility. The $35 million project, which boasts environmentally friendly equipment and energy-saving lighting, is the largest federally funded bus maintenance facility in the nation.
It consists of a 10-building complex on a 36-acre site in North Las Vegas. A fixed-route maintenance garage for 238 diesel buses and a paratransit garage for 134 compressed natural gas (CNG) buses are attached to the original shop, which has been converted to a preventive maintenance, fueling and storage garage.
In addition to its maintenance equipment, the new fixed route transit facility includes a diesel fueling area and a vault for fare revenues. The paratransit facility features a “fast-fill” CNG fueling station that greatly reduces fueling time. Each garage also has a bus wash area, administrative offices and a dispatching facility.
The garages use environmentally friendly cleaning solvents, and the bus wash drains into a trench equipped with a water reclamation system. Oil/water separators were placed between the floor drains and the sewage system, and collection traps prevent oil or other hazardous substances from entering the sewer lines. A contractor pumps out the waste material every three to four months.
Other features include * above-ground storage tanks for substances such as oil, anti-freeze and transmission fluid. The tanks are double-walled so that a leak on the inside liner can be contained, and a monitoring system sounds an alarm if a leak is detected. As an added precaution, grates underneath the tanks catch any leaking fluids in a trap. The tanks also are easier to repair and maintain since they are not buried. * a fuel management system, which records consumption by vehicle and fuel type. It also serves as a sort of diagnostic tool by indicating when a vehicle is consuming an unusually high amount of fuel, which may be indicative of an engine problem. * sodium vapor lights that are bright but consume less energy. Motion sensors in certain offices turn lights on only when someone enters the room. * cable trays, conduits and fiber-optic cables, which were installed in anticipation of future Intelligent Transportation Systems components such as automatic vehicle location systems.
Several challenges — including issues concerning native soil conditions and foundation problems — were successfully resolved during the project. Compaction faults and fissures caused by a drawdown of nearby water wells were remediated, according to Fred Ohene, the transportation authority’s principal engineer. The unstable surface soil was excavated to a depth of several feet, hauled away and replaced with imported soil.
Fort Worth, Texas-based Carter & Burgess was the prime architect; the Las Vegas office of Lenexa, Kan.-based Terracon was the geotechnical engineering firm. The construction manager, Las Vegas-based Harris & Associates, received an award from Southwest Contractor magazine for the project, which was named the 1998 Best Public Mechanical/Electrical Project in Nevada.
Under the direction of Fleet Manager Riley Harrison, the Office of Fleet Management (OFM) in Philadelphia improved vehicle availability citywide from 70 percent in 1993 to 91 percent by the end of 1997. For the past five years, OFM’s focus has been on preventive maintenance for and rehabilitation of its 5,720 vehicles.
The OFM has taken several steps to bring down costs and increase efficiency: * Because the city’s maintenance and repair needs require a growing staff of skilled technicians, OFM has initiated an internship program with several high schools during which students can learn the automotive repair trade from experienced mechanics.
* OFM regularly conducts in-house seminars covering preventive maintenance, safety laws, customer relations and other topics. Cross-training, in which mechanics and technicians learn to work on as many types of vehicles as possible, also is emphasized. According to Harrison, improved training has saved OFM nearly $500,000 since 1996, at a cost of about $27,000.
* The city has contracted with a single distributor to receive lower-than-retail automotive parts prices. Common parts such as oil filters, mufflers and break pads now cost 16 percent less than when purchased from the city’s former vendors. Additionally, parts delivery is prompt and consistent, thus ensuring that repairs are made quickly.
* The city has replaced leaf springs on its trucks with drive axle air suspensions made by Muskegon, Mich.-based Neway AnchorLok. The suspensions provide better performance and save vehicles from shock and stress damage caused by driving over curb lines and off the road, according to Lt. Len Knobbs of the fire department. Additionally, a smoother ride will reduce the likelihood that items carried on the fire trucks will bounce around during transport and fly off the truck, causing damage to the equipment and/or civilian property.