Wrenching decisions

Outsourcing vehicle maintenance can make fiscal sense: for a monthly fee, local governments eliminate wages, health benefits, garage upkeep and safety compliance — in other words, all the costs of running a fleet maintenance operation. However, outsourcing can lead to the transfer of government jobs to the private sector and, in some cases, the loss of jobs altogether.

There also are maintenance control and response time issues when considering outsourcing. Government fleet operators often are responsible for fire and rescue trucks, police cars, snow plows and other equipment that cannot sit on the side of the road broken down because the private maintenance contractor’s doors do not open until the morning.

However, some communities are examining their operations to determine if they would be better served to contract some, if not all, of their fleet maintenance needs. “There’s obviously a place for privatization in the municipal fleet world — but only if the fleet has lost its capability to manage maintenance,” says Bill DeRousse, fleet maintenance superintendent for Everett, Wash. “I do not believe a fleet can perform 100 percent of its vehicle maintenance in-house. We need to outsource what someone else can do cheaper.”

He says that fleet management operations should be evaluated to determine if they are competitive with local dealerships, small maintenance shops, larger truck repair and specialty equipment repair facilities. “However, you need to pay attention to what you, as the municipal fleet, are doing in terms of maintenance,” he says. “You have to ask yourself: What is the productivity of my technicians? What are we paying for the buildings we operate out of? What do we pay for parts? And, how do we pay for the repair and replacement of capital assets that belong to the municipality?”

Outsourcing: old and new

Municipal fleets have been outsourcing maintenance for more than 20 years, starting with Des Moines, Iowa, in the mid-1980s, says Paul Laria, president of Gaithersburg, Md.-based Mercury Associates. “We’re not at the beginning of an outsourcing trend by any means,” he says. “Over the last three years, there’s been an increase in outsourcing momentum that’s directly related to the fiscal conditions city and county governments have been suffering.”

As budgetary pressures build for cities and counties, many officials are at least considering fleet outsourcing to reduce costs, Laria says. “[Outsourcing efforts] are being driven by top government managers and elected officials, not fleet management,” he says. “And the expectation is that by outsourcing they will save money. They are dealing with adding vehicle fleets, a shrinking and aging workforce and the need to save money where they can, so I expect we’ll see more outsourcing in the future.”

The fact that vehicle maintenance technicians are getting harder to find — and the cost of keeping their knowledge current is growing — fuels the outsourcing debate. By 2012, the automotive and heavy truck repair sector is expected to face a shortage of 107,000 personnel, according to the Bureau of Labor Statistics, largely because the number of young people hired into the field is far less than the number of those retiring. “Truck mechanics represent an aging workforce, and we’re not attracting anywhere near the same number of new hires to replace the ones that will retire,” says Chuck Roberts, executive director of industry relations for the Leesburg, Va.-based National Institute for Automotive Service Excellence.

While it is difficult to point to any one reason for the shortage of “new faces,” he notes that other factors are affecting the automotive and truck technician labor pool. For instance, the job is still stereotyped to a large degree: tough, greasy, dirty work, as opposed to a computer-based job.

“The job is much, much different than it was 15 or even 10 years ago,” Roberts explains. “Today, the computer skills required to be a truck technician actually match the skills the labor force has today. Yet they are choosing to go into computer repair, for example, rather than truck repair, based on outdated images.”

As attracting truck technicians has become an issue of perception rather than skill sets, Roberts believes the industry will have to start recruiting much younger workers. “It’s going to take a grass-roots effort to recruit new hires for these jobs, and it’s an effort that’s going to have to get under way sooner rather than later,” he says.

Responsible for a fleet of 1,500 units, Ric Hiller, chief of Arlington County, Va.’s equipment division is one fleet manager trying to come to grips with that issue. “It’s getting harder to find qualified technicians because the job has become so computerized,” Hiller says. “We’re talking to the local school system to see if we can’t find a way to grow our own technicians from the local community, getting vocational students into part time jobs while they go to school so we can recruit them when they graduate.”

Hiller also sees the value of ongoing employee training. “I’ve doubled my training budget to try and keep our guys current with all the technological changes going on in trucks and heavy equipment today, especially their electrical and computer systems,” Hiller says.

Partial outsourcing

To keep up with the workload, Arlington County is outsourcing specialized or long-term repairs to keep the maintenance bays free for more immediate needs. “We need to outsource the maintenance which takes up time and space in our shop,” Hiller says. “We’ll ship [automatic transmissions] to the dealer to repair even though we have the diagnostics to analyze the problem, so we can concentrate our resources where they are needed. For instance, if we have a fire truck lock up in fourth gear, we need to get a mechanic to the scene.”

The deciding factor on whether Hiller keeps a job in-house or ships it out comes down to how quickly his own team can get a unit back into service and at what cost. “We used to rebuild cars here, for example, but we don’t do that anymore because it’s too costly and time consuming,” he says. “The real determination is efficiency: is it more efficient for us to take the time to do it or to send it out.”

Decisions like that come down to the productivity and efficiency of the maintenance operation, DeRousse says. “If you are performing preventive maintenance — your scheduled services and repairs should be equal to or greater than 70 percent of your labor time — then the amount of time needed by your mechanics or those of a private contractor should be the same. Other costs would fluctuate some — parts, overhead, etc. — but should basically be the same.”

DeRousse says it is important that there is enough work to keep the technicians busy. “However, things change — new vehicle service intervals have been extended and require less maintenance. So you need to look for more outside work to keep your current maintenance staff busy or reduce your staff,” he says.

Totally outsourced

Space Coast Area Transit (SCAT), which operates 74 buses in Brevard County, Fla., came to that conclusion almost 20 years ago when it totally outsourced the maintenance for its fleet to Miami-based Ryder System. Jim Liesenfelt, transit director for SCAT, credits author Tom Peters with the reasoning behind the decision to outsource fleet maintenance: “Whatever your back room functions are, outsource them to someone whose front room is that specialty.”

SCAT operates 15 regular routes, 25 irregular routes for disabled or elderly residents and six home pick-up routes for mentally disabled people. SCAT also operates the largest commuter van pool fleet in the state, handles Medicaid transportation on contract and runs 10 minivans for volunteer transportation service for the elderly.

“Not worrying about maintenance allows me to completely focus on those services,” Liesenfelt says. “Based on the level of service we get, it is still cheaper to outsource than to do it ourselves.”

With 108 employees and six supervisors, Liesenfelt notes that to perform maintenance in-house, he would have to add one or two extra supervisors and 12 technicians to run the fleet’s two shops. “So we’re saving on overhead expense as well,” he says. “Parts management alone is a huge deal. With all the different vehicles we have, we’ve got three bids out for different parts at any one time. If we had to manage parts ourselves, we’d need a 400-square-foot room and probably two people to run it.”

Dan Schearer, executive director of transportation for Scottsdale, Ariz.’s School District, echoes Liesenfelt’s analysis of outsourcing. “As a manager, outsourcing maintenance allows me to construct our [fleet] budget faster and better,” he says. “Instead of taking hours or even days to compile vehicle maintenance expenses and parts costs, that all gets put on the outsourcing contract — so I can get that part of the budget done in minutes.”

This year, Scottsdale outsourced fleet maintenance for its 150 school buses to Cincinnati-based First Vehicle Services as part of a five-year maintenance contract. Schearer says the city still owns the vehicles and its maintenance facility, but the contractor purchased his parts inventory and now supplies his shop. “Outsourcing [maintenance] this way obviously saves us money in terms of less overhead and less overtime, but [the contractor] gets a lot more warranty coverage than we could on our own.”

Partnership is key

Both Liesenfelt and Schearer point out that outsourcing would not work as a cost-saving strategy if they did not work hand-in-glove with their maintenance provider — treating them with the same respect given to their own employees. “We keep up that relationship because it’s important,” Liesenfelt says.

Schearer notes that another reason outsourcing works for Scottsdale’s school bus fleet is that there are enough checks and balances in case something goes wrong. “From my perspective, [the contractor has] done everything we’ve asked, especially by providing a mechanic to be on-site at all three of our bus parking areas, so if there’s a problem when they start up for the day, we can fix it,” he says. “But if we were really having problems getting emergency service, for example, we have a ‘30 day out’ clause in our contract so we could get out of a bad situation.”

Sean Kilcarr is senior editor at American City & County’s sister publication, Fleet Owner.

Who turns the wrench?

How do state and local government fleets handle vehicle maintenance? A Toledo, Ohio-based Havill & Co. survey found:

• About 77 percent of government fleets — defined as state and local operations — handle their maintenance on-site with their own staff.

• For off-site maintenance, 69 percent of government fleets use independent local garages, 20 percent use vehicle dealerships and 11 percent use a leasing or contract maintenance company.

• 79 percent of government fleets base their maintenance operations on vehicle mileage, and 45 percent use time to measure service intervals.

• On average, government fleets maintain their fleet units 6.4 times per year — one of the lowest numbers of service intervals recorded from fleet segments in the survey. By contrast, long haul fleets serviced their vehicles 10.3 times per year, short haul 9.6 times annually, and wholesale delivery fleets 9.3 times per year.
  — Sean Kilcarr

Price still primary factor

What are the determining factors for most fleet managers when they are considering outsourcing vehicle maintenance?