Fleet managers are on the hot seat in 2008
Colorado Springs administrators say that the city’s fleet has aged from an average of 6.3 years in 2001 to 8.4 years in 2007, because the City Council has failed to allocate enough money each year to buy SUVs, police cruisers, dump trucks and snowplows.
While allocations averaged $2.6 million for 2006 and 2007, Colorado Springs officials say that $9.1 million a year is needed to keep the fleet’s average age from growing older than seven years.
Tom Monarco, the city’s fleet division manager, told the Colorado Springs Gazette that the city is falling behind in fleet maintenance. The result, he said, is that maintenance costs for the city’s general fund fleet have been running an extra $600,000 per year for the past four years.
To remedy the situation, Colorado Springs City Council is considering a $4 million, seven-year payback lease/purchase proposal that would buy more vehicles for some city departments. The monies for the lease/purchase proposal would be in addition to this year’s $1.2 million budget allocation for city fleet purchases.
Colorado Springs is not alone in its predicament.
“At the end of the day, vehicle replacement is all about organizations committing funds to the acquisition of vehicles,” Paul Lauria, president of Gaithersburg, Md.-based Mercury Associates Inc., told GovPro.com. “We’ve worked with organizations that have current replacement backlogs literally in the hundreds of millions of dollars. The problems in Colorado Springs are very small compared to problems we see in some other municipalities we are working with around the U.S.”
Lauria suggested that organizations conduct “an empirical analysis of optimal replacement cycles for key types of vehicles in their fleet.”
“We’ve done that for clients ranging from Salt Lake County, Utah, to the Ontario, Canada provincial police, to the city of Houston, Texas, recently,” Lauria said.
When is the best time to replace vehicles in government fleets?
According to Lauria, fleet managers “can determine optimal replacement cycles for particular types of vehicles.”
“And needless to say, the optimal replacement point for police cars is not going to be the same as for a ladder truck or an ambulance, or a refuse truck or a street sweeper,” he said. “Overall, our experience has been that for state and local government fleets, the average replacement cycle, taking into account all the different types of fleet assets that a municipality or a state government typically operates, is going to range from between seven and nine years.”
Lauria added that public safety fleets, which are mainly patrol vehicles, will have shorter replacement cycles, while fleets that are predominantly construction equipment will have longer replacement cycles.
Lauria urged government fleet administrators to be open to different ways of acquiring new vehicles.
“There are too many government jurisdictions that continue to pay, up front, for vehicles using what we call a pay-before-you-go approach, where they pay 100 percent of the cost of every vehicle, before they ever drive it one mile, and those are the jurisdictions that tend to have the oldest fleets,” he said. “In a down economy, they tend to be the first ones to slash appropriations for their replacement vehicles, because they don’t have a mechanism for paying for the replacement of their vehicles incrementally.”
In that scenario, Lauria noted, the jurisdiction is paying 100 percent of the capital cost up front, rather than paying for the use of the vehicle over time.
‘Don’t get caught with your pants down’
Lauria offered this advice for government fleet managers: “Don’t get caught with your pants down.”
“By that I mean make sure that you understand the strengths and weaknesses of your fleet operation, that you understand the costs of the fleet and the appropriateness of those costs,” Lauria explained. “Astute fleet managers have done their homework, they’ve pored over the numbers for their fleet, they know where the strengths and weaknesses are and they know where their costs are competitive and where they are not competitive. To the extent that the costs of the fleet are not as competitive as they might be, good fleet managers understand what the factors are behind that, and how many of them are within their control.”
Could be a busy year
Considering the uncertain state of the economy, Lauria is anticipating a busy year at Mercury Associates. He said that he expects “more requests for consulting services that focus on cost reduction and cost containment.”
He added that “the return on an investment in a consulting study is often many, many, times the actual cost of the study.”
In certain cases, Mercury offers its services on a contingent fee- or gain-sharing basis, in which the company collects a small percentage of the savings that Mercury realizes for an organization.