Report to the 2007 General Assembly 

Legislative Report 26

Title: Fleet Report

Fleet Management Services -- Annual Report

The reasons for having a fleet program are just as valid today as they were in 2003 when we began exploring the reasons for centralizing fleet services under one umbrella. 
 
Background

In 2003 The Department of Buildings and General Services (BGS) began an analysis of fleet services that were being provided by agencies and departments within Vermont state government.  The data suggested that

1. Agencies and departments were reimbursing employees for travel in personal vehicles on state business at a cost that was more than the state would incur if these miles had been driven in state vehicles.
2. There were inefficiencies and duplication of administrative services that could be reduced with a centralized approach to program delivery.
3. Under the existing system, agencies were having varying degrees of success managing their fleet needs.
4. Reports tracking the cost of fleet administration were not always consistent with the Bulletin 2.3 rules governing the program.

After careful consideration and after a number of national fleet models were studied, it became clear that there were benefits to be derived by centralizing these services under one umbrella.  

As the task force moved forward in building the architecture of a centralized fleet management program goals were identified to assist the task force in establishing the criteria under which this program would be managed.  Four broad premises were adopted by the task force:

1. The program is sensitive to the state’s air quality standards and demonstrates that a state fleet program could successfully meet high fuel economy standards while lessening the total overall emissions of green house gasses. 
2. The program is rule based, cost effective, and accountable.
3. The program is to assist agencies to right size their fleet needs and reduce the cost of travel per mile when compared to the federal reimbursement rate.  
4. Employees are provided with a choice of safe and economical vehicles to use for state travel.

The Decision is Made

The task force adopted two critical service delivery components in building its program. They were:

1. To provide long-term leases and support to agencies whose travel history indicated that use of centralized fleet vehicles would cost less than the federal reimbursement rate paid to reimburse employee travel in private vehicles.  Fleet started leasing vehicles in September of 2004.
2. To create a centralized pool of vehicles that could be accessed for daily rentals by state agency employees from its largest state campuses in Montpelier and Waterbury.  The motor pools began operation in February  of 2005

Fiscal Year 2006

While FY 2006 was a busy year at FMS, we kept a close eye on two driving principles:  customer service and controlling our costs.  Both are critical to the success of this program.  Although we have received high marks from many of our customers, we know we have more we can do to improve this program in the future.  We look forward to the challenge in 2007 and welcome suggestions.  

It is important to note that many of the changes we have made in Fleet have been a result of suggestions that we have received from the Fleet Users Advisory Group who meet periodically with FMS staff.  Their input has been instrumental in assisting us to resolve concerns and to make adjustments in our policies and/or procedures that result in better service to our customers. 

Financially we have some very good news to report as we begin another fiscal year.  A reduction in our operating costs has allowed us to keep our rental rates stable in FY 2007.  Our goal is to do the same in 2008.  We know that, with our Phase I vehicles, we are able to offer service at 28% less than the current federal reimbursement rate of $0.445.  We know as a result that we can save significant money for state agencies using fleet vehicles for state travel.

Phase I of Fleet refers to the purchase of 100 compact automobiles that were selected for reliability, safety, low emission standards and high fuel economy.  Those vehicles came into use during FY 2005 and have performed very well in assignments to state agencies and as the core of our state motor pool fleet.  We have been authorized to purchase an additional 100 vehicles (Phase II) to help state agencies lower their travel costs.  We are enthusiastic to tell our story to any agency/department interested in hearing about the services offered.  We are proactive in our outreach to departments to offer fleet services as a way of lowering their cost of travel. 

The Fleet Motor Pool located on the Waterbury and Montpelier campuses, 10 cars and 15 cars respectively, was successful in 2006 -- possibly too successful.   We often had all motor pool cars rented and had to issue regret statements to employees seeking daily rentals.  Our utilization rate for these vehicles exceeded 90%.  This tells us we need to expand the motor pool fleet at both sites.  We have two goals for the motor pool this year. 

1. As we issue this report, we are looking at other locations to expand the motor pool service.  There is a documented need for more motor pool vehicles in Montpelier.  We are considering satellite sites at National Life and in the Burlington area.  We expect this expansion to multiple locations would better serve our customers’ needs.  The expansion to additional sites will require a collaborative effort with other departments to manage the pickup and return process at those locations.
2. The second goal has to do with pride of ownership.  Our daily rental vehicles will be kept as clean and safe as those you would obtain from a private sector rental agency.  It is a commitment we are determined to achieve.

Fleet Facts For FY 2006

Size of Fleet

In 2006 the Fleet inventory averaged 418 vehicles.  Those vehicles were distributed to 24 agencies and/or departments across the state.  Attachment 1 lists those agencies/departments that are utilizing fleet services.

Age of Fleet
The fleet today is younger than it has been in a number of years. The average age of the fleet when inventoried in FY 2004 was 8.46 years old; the average age of the fleet in FY 2006 is 3.8 years old.   In FY 2004, the age of fleet vehicles ranged from 1979 models to 2004 models.   In FY 2006 the age of vehicles ranged from 1989 to 2006 (with one 1986 that is being replaced in the near future).   A younger fleet is safer, more economical, and more comfortable to drive.  The younger the fleet, a higher return will be realized on the sale of the surplus vehicles. (See Attachment 2 – Age of Fleet Vehicles)

Disposal of Surplus Vehicles

As the Fleet Program matures, it must dispose of surplus vehicles.  Timely disposal of these assets and garnering the highest value for these vehicles has been the objective.  Per the authority granted in Title 29, Chapter 59 and in Administrative Bulletin 2.3 (Attachment 5), the Department of Buildings and General Services disposes of Fleet vehicles

After assessing the outcome of previous methods of marketing surplus vehicles, the Department decided to take a departure from traditional ways and anticipated better results from a more pro-active approach.  In collaboration with the Surplus Property Division, a strategy was devised for the sale of the batch of vehicles FMS was sending for disposal.  We are marketing much more aggressively and are benefiting from a dramatic improvement in revenue. 

From this improved marketing, we have realized a return of 82% of the vehicles’ Private Sale Value.  This is a decisive improvement over the 40% we experienced from previous efforts. 

Below is the advertisement used to market the vehicles:

To achieve these results requires a partnership effort of close cooperation between the Surplus Property Division and FMS in order to move surplus vehicles quickly to market and to an ultimate sale.  The relationship, as you can see, is paying dividends.  

The sale process continues.  Another group of 10 vehicles has been prepared for sale.  We look forward to reporting another successful sale cycle.    

Fleet Miles Driven in FY 2006

Phase I Fleet vehicles traveled 1,994,917 miles in FY 2006.  If those miles had been reimbursed at the blended federal rate1 of $.452, it would have cost the state $901,702.48; however, the actual Fleet cost was $640,368.36.  This was a savings of $261,334.12. 

The total miles driven by all vehicles in the FMS program are 5,543,000.  The savings on mileage can be calculated on only the 992 Phase I vehicles because those vehicles were purchased specifically to replace mileage reimbursement for employee travel.  Other FMS vehicles are service vehicles that would not claim the federal reimbursement rate or vehicles that departments were using before the start of the FMS program.  Mileage and expenses were not consistently tracked; therefore, not having that data for comparison, we cannot prove that FMS could provide the service in a more cost effective method. 

Twenty-five of the Phase I vehicles were set aside to be used in a Motor Pool; 10 of these vehicles are located in Waterbury and 15 in Montpelier.  The vehicles provide a safe and clean method of transportation for state employees and are available on a daily reservation basis.  The vehicles traveled 585,435 miles in FY 2006 and saved the state $76,691.98 which is part of the total savings noted above.

Reducing Greenhouse Gas Emissions

The Fleet had a positive impact on reducing green house gasses in 2006.  Utilizing data from the 99 Phase I vehicles, the total emission reduction was 340.6 tons per year.  Purchasing hybrids and low emission vehicles was a program priority.  For more detailed, vehicle-specific information relative to Fleet’s role in green house gas reduction, see Attachment 3.

How An Agency Knows It Should Be Using A Fleet Vehicle

FMS monitors the travel patterns of agencies to identify employees and work groups that would benefit from use of a fleet vehicle.  We receive periodic updates on the amount of miles and dollars reimbursed for travel by the various agencies and/or departments.  FMS has contacted and explained the service FMS offers to every department identified as high mileage users.

These reports capture mileage and dollars reimbursed to state employees at the blended federal reimbursement rate of $0.452. The FMS rate of $.321 per mile is 29% lower than the blended federal reimbursement rate.  In FY 2006 state employees (using personal vehicles) were reimbursed $4,832,961 for travel on state business.  While it is not realistic to expect this could happen, if those same miles had been driven in fleet vehicles the savings to the state would have been 29 percent or $1,401,558.69. 

It is more realistic to look only at employees identified as “high mileage users”3 or clusters of employees who constitute a high mileage user situation and could share a vehicle.  Those employees drove 1,825,186.52 miles in 2006 and were reimbursed ($.452 per mile) at a cost of $824,984.31.  If those same miles had been driven in Fleet vehicles, the savings to the agencies and the state would have been $239,099.44. 

Education is the key to increasing the use of fleet vehicles.  FMS will continue to work closely with the agencies so that the benefit of fleet does not elude them.  Attachment 4 shows the reported mileage agencies and departments reimbursed at the blended federal rate of $0.452 in FY 2006.

What Happened To On Site Oil

During 2005, FMS initiated a pilot project with the company “On Site Oil.”  The intent was to coordinate vehicle maintenance such as oil changes, tire changes, vehicle cleaning and vehicle assessments in the most cost-effective and customer-convenient way.  FMS wanted to avoid the vehicle and employee down time that occurred while vehicles were idle in the shop.  On Site Oil serviced vehicles outside in agency parking lots on weekends and evenings when vehicles were not in use.  This pilot was successful in eliminating losses in productivity associated with for routine maintenance.  Every vehicle the company serviced was touched at least once a month to make sure that all equipment was in good working order.  The customers liked the service.  When the contract ended, we were not able to find a vendor who would provide the service at a cost we could afford.  Consequently, we are working to set up vendors around the state and procedures to support agencies/departments in establishing alternatives to the On Site Oil service. 

The Fleet’s maintenance needs are coordinated by three FMS Service Technicians.  Each agency/department has a Service Technician assigned to oversee the maintenance of their vehicles.  The Service Technicians are in regular contact with each vehicle’s contact person to keep the vehicle in good working order.  FMS Service Technicians work closely with their customers to schedule appointments, and offer support and technical assistance when a vehicle needs repair.  It is important to maintain the vehicles in order to protect the value of the state’s asset.

Current Fleet Rates

Current Fleet rates for assigned vehicles are based on the cost of the vehicle, the projected mileage and fuel cost, repair and maintenance cost, and the insurance and administration cost of the program. 

State Bulletin Governing Fleet Management Services

The state fleet operates under the authority of Administrative Bulletin 2.3.  (See Attachment 5)

Cost to Run Fleet Management Services

The detail of the Fleet Management Services operating revenues and expenses for FY 2006 can be viewed in Attachment 6.

Looking To the Future

The future of fleet to a large degree depends on how well we listen and communicate with our customers and respond to the customers’ needs.  Becoming entrenched will not work, nor serve our customers well.  Continually challenging the assumptions under which the program operates and looking for ways to be more efficient and responsive will be critical to our mission success.

In Fiscal Year 2007, we will tell you more about:

1. Communication with Customers -- A newsletter is being prepared for distribution.  This tool will help with communication between FMS and the users.  FMS will also establish and utilize an e-mail distribution list that will touch each agency we do business with.  This will provide a quick, paperless method of getting information to our customers.
2. Rates and Financial Status -- We will strive to keep our rates stable for FY 2007 and FY 2008 while also meeting our financial goals.  Our financial goal is to maintain a balanced budget for FMS.  A concomitant financial goal is to assist state agencies/departments to save money by reducing their travel costs.

Assisting Customers to Keep Vehicles Clean & Maintained – With the loss of the On Site Oil contract, we are continually striving to assist our customers to find vendors who can provide services in a timeframe that is convenient for the state employee and consistent with protecting the value of the vehicles. 

Attachments