Is your fleet vulnerable to being privatized – maintenance – government fleet 3 gases in the atmosphere

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Why would high-level leadership be interested in privatizing fleet maintenance? Is it cost, quality, or other issues? The decision is made based on customers’ needs, wants, and expectations. How well you meet these is a principal factor in determining your success.

Fleets can prepare for the situation now to be at an advantage if and when the privatization is brought up — by reducing cumbersome purchasing methods, educating and building credibility with upper management, obtaining vehicles when needed, and ensuring customer satisfaction.

The threat of privatization may rise due to emerging autonomous vehicle and electric vehicle technologies. These technologies will change the way fleets operate, eliminating the need for a driver, reducing maintenance needs, and changing fuel needs — changes that can bring on interest from those higher up in administration. This may lead fleet managers to have less control, increasing the risk for privatization.

Another vulnerability is an increasingly recognized best practice that’s still often misunderstood and undervalued by fleets — leasing. This provides opportunities including lower costs, higher quality services, and eliminating a multitude of non-value added functions. This can be leveraged to a fleet’s advantage, or it can present a threat from a prospective privatization firm. Manage Perception

It’s not just about cost and quality. While service performance is certainly a dominant consideration for privatization, others can escape attention. Perception is how customers determine performance, and it’s entirely based on their perspective and what’s real to them. This may not come solely from facts or experience, but it can also come from other sources — such as what they are told.

If you don’t, they can create unseen vulnerabilities. This is particularly true for fleets solely focusing on service performance. The competition may leverage these potential weaknesses at every opportunity. If the company has your high-level leadership’s ear, who knows where this could lead?

First, it’s not simple to measure fleet cost and quality. Thus, comparing these to an external fleet contractor can be difficult and create added risks. Add to this the fact that others may choose how to compare these costs — undoubtedly based on what’s most favorable to them. Move Away From Class-Based Accounting Rates

If your fleet’s vehicle costs are based on generic equipment class-based accounting rates — where users pay the same rate for all vehicles within a class, despite age or operating and maintenance (O&M) costs — this is particularly disadvantageous.

First, this actually leads to higher costs since there are no incentives for operating groups to manage their portion of the costs effectively. Secondly, using class averages can create the appearance of higher costs to those who don’t have fleet knowledge.

Making this situation worse are the hidden costs some fleets include in their normal O&M expenses, such as accidents, damage, and abuse costs. A privatizing firm won’t make this mistake. Fleets need to separate these from their normal O&M expenses to compete on equal footing.

Generic rates also present another often missed issue for fleets and customers. With class-driven vehicle and equipment costs being the same, most customers want all-new equipment. Even if this doesn’t result in unnecessary newer equipment procurements, it still guarantees falling short of customer expectations.

Another approach to cost comparisons is to look at overall O&M costs. However, this presents a number of opportunities for unscrupulous contractors to “lowball” their costs. These include intentionally creating fraudulent profits by underfunding preventive maintenance functions; utilizing lower-cost, substandard replacement parts; or just replacing parts unnecessarily.

Despite the success of leasing, many fleets and their executive leaders still misperceive and undervalue its effectiveness. This is typically because they view leasing as only a financial tool, failing to recognize the savings in avoiding purchasing processes and overlooking the opportunities to improve customer service and satisfaction. Simplify Your Purchasing Strategy

Fleet purchases through a capital budget process can be inherently limiting and create numerous unnecessary requirements. One is prioritizing equipment to “fit” a final authorized budget. This not only results in unnecessary costs, but may also result in the fleet falling short of customer expectations and the potential for contentious negotiations.

A leasing program will allow fleets to reduce overall costs while still meeting all procurement requirements and objectives. Fleets can eliminate many procurement procedures, including procurement and vendor communications, follow-up and coordination, and the bid analyses and selection processes. It also reduces otherwise extensive equipment specification requirements. Obtain Vehicles When Needed

Leasing replaces equipment at the optimal replacement time to ensure the lowest lifecycle costs. Additionally, rather than procurement being based on price and delivery criteria, typical in the bidding selection process, leasing decisions are based on lifecycle costs. Many fleet managers know that reducing up-front procurement costs may give the appearance of short-term savings, but it can result in hidden expenses.

Major fleet leasing firms also benefit from strong purchasing power, resulting in lower-cost vehicles, a further advantage over bids from local dealers. And with timely replacements, vehicles are more reliable, effective, capable, and fuel efficient. Leave Remarketing to the Experts

Improved procurement practices, accurate individual equipment costs, and incentives to work cooperatively with customers to minimize their costs leads to optimum relations and results. With this approach, together with optimum costs and quality, customer satisfaction is redefined — often producing results beyond everyone’s expectations.

About the Author: Tim King is a retired fleet professional with 30 years of experience in the utility industry. He is the author of “Fleet Services — Managing to Redefine Success,” published by SAE International. He can be reached at [email protected].

We were lucky when the fleet I led (Sierra Pacific Power Company, now NV Energy in Nevada) was approached by an external fleet contractor. The contractor, too, was new to the process, and its focus was on easy-to-identify cost savings and quality opportunities.

Fortunately, we presented a competent image to this contractor and “passed the test.” We never heard back from the company again but were able to make changes to improve our operation, including eventually adopting individual equipment costs rather than using a class-based cost accounting system, as well as realizing all the advantages of leasing.The process taught us a few things: