Reengineer State Vehicle Management

Consolidate the increasingly complex job of fleet management to allow state agencies to focus on their primar y missions. Charge the General Services Commission, as state business manager, with operating the fleet as a coordinated business effort to produce efficiency and cost savings.


Background
Both public- and private-sector entities face the same hurdle with fleet management; it is usually viewed as a support function, not a major factor affecting the primary mission of an agency or business. According to Ernst & Young s Fleet Management Study of Alberquerque, New Mexico: Owning, managing, operating and mai ntaining a large fleet of vehicles and equipment is an inherently complex undertaking. It is resource intensive, typically involving the expenditure of millions of dollars per year, and it is multidimensional in nature, requiring many different types of an alysis, planning and decision making. Such complexity makes it difficult to consistently manage and operate a fleet well. 1

State fleet management efforts tend to receive little attention from the executive branch, leaving effective management, analysis and planning tools absent in this area. A Breaking the Mold proposal recommending consolidation of the state s fleet highlighted substantial opportunities discovered by other states and the federal government; however, the state has not begun to maximize efficiencies in this area.

The Fleet Management Division (FMD) of the General Services Commission (GSC) was created and authorized by statute to: Develop and maintain a Statewide Vehicle Fleet Management System to provide detailed data on fleet use, to identify potential vehicle pooling or alternative fuel use opportunities, and efficient maintenance. 2 As of December 1992, 9,000 of the estimated 26,000 state vehicles have been entered into the newly created database. The FMD expects to have data entry complete by the end of July 1993, however, basic information such as scheduled maintenance and fuel pu rchases is not readily available. The root of the problem is limited authority by GSC concerning fleet management. As the Sunset Advisory Commission noted:

A report by the Texas Performance Review indicated that the state s vehicle fleet contains a wide variety of vehicles many of which continue to be operated long after the end of their economic life has been reached. Under the current system, vehicles are used primarily, if not exclusively, by the state agency or university that owns the vehicle. Little opportunity exists for these vehicles to be shared by other agencies when the vehicle is not being used. 3

Texas agencies are in the process of transf erring their own fleet management records onto the new database through efforts coordinated by GSC. State fleet records had been managed independently and inconsistently in various accounting systems.

With expanded authority, the FMD could monitor the cost of in-house, contract and personal vehicle use to develop statewide travel cost efficiency guidelines. As stated elsewhere in this report, it is currently cheaper to rent a car under state contract fo r same-day business trips that exceed 165 miles rather than pay mileage reimbursements to employees for the use of personal vehicles.

Economies of scale are possible on vehicle purchases, fuel and maintenance, however, the current decentralized system hinders large scale purchase discounts. GSC currently offers to handle vehicle-related purchases for agencies, but most prefer to handle t heir own business.

Specialized vehicles such as highway equipment are usually not suitable or necessary for centralized management on a statewide basis.

Other large public- and private-sector fleet managers have successfully mastered the fleet management monster. Massachusetts, Michigan, Oklahoma, Ohio, Utah and California have established centralized fleet management programs for at least part of their fleets. In most cases, light-duty vehicles, including sedans, vans, station wagons and up to three-quarter ton pickups, constitute the fleet.

Ohio saved $323,000 in 1990 using the technical assistance of vehicle purchase review and approval, and break-even analysis. 4 Colorado s savings, due to a 10.3 percent reduction in their fleet, were $68,148 per year in reduced lease costs and $484,400 in the sale of 560 vehicles. The fleet reduction was achieved by adopting more efficient and standardized policies.

Colorado, which had the same root problem as Texas (too decentralized, not enough coordinated support), enacted legislation June 1, 1992, to accelerate their program. The Colorado Department of Administration, Central Services Division noted the scenario surrounding the legislation:

Prior to the passage of (Colorado s) SB 92-30 only a portion of state vehicles were managed by the Department of Administration, Division of Central Services. Our records show that on July 1, 1992, there were 5,443 vehicles, cars, vans and 3/4 ton and sma ller trucks, in the state fleet. The Division of Central Services managed approximately 2,000 of that number, with the remaining portion being managed by the Department of Transportation, Department of Public Safety, Division of Wildlife and institutions of Higher Education. The Division of Central Services did collect data centrally on all 5,443 vehicles, but because those agencies were not in our program the data were not current, and due to different accounting systems, the data were no t consistent.

An audit conducted by the State Auditor s Office in 1988 and a follow-up audit in 1992 recommended that the Division of Central Services do a better job of coordinating all state vehicles. However, in our opinion, authority to accomplish all the Auditor requested was lacking.

The passage of SB 92-30 provided the necessary authorization for the Division of Central Services to provide motor vehicle support to all state agencies. 5

Colorado s fleet management legisla tion directed the Division of Central Services to conduct a study prior to January 1, 1993, to determine the appropriate fleet size and achieve a 10 percent reduction in overall fleet size. The study cost between $5,000 and $7,500 and was done with existin g staff. The utilization standards were primarily in four areas: age, mileage, mechanical condition and alternatives to using each vehicle. Many agencies provided the necessary information about their fleets to expedite the study.

Fleet management is currently in its infancy in Texas. A real opportunity exists to jumpstart the program, resulting in substantial benefits in a short time, six months or less.


Recommendations
A. The General Services Commission (GSC), as state business manager, should have oversight for the operation, coordination, consolidation and management of the state s vehicle fleet.

The Legislature should require all state entities to go through the GSC regarding all fleet management decisions. In particular, GSC would be authorized to request information from state agencies and make decisions concerning vehicle purchases, transfers or any other significant fleet management decisions. In order to achieve cost savings, the Legislature should authorize the Comptroller of Public Accounts to reduce agencies appropriations by the amount of the fleet cost savings. GSC should be required to determine if more cost effective opportunities exist for agencies to accomplish fleet travel needs (i.e., purchase vehicles, rent vehicles, or share with other agencies).

The Texas Legislature should adopt legislation (similar to Colorado s Senate Bill 92-30), requiring a short term study to determine the appropriate fleet size. GSC should be charged with completing the fleet assessment in-house or contract, and report the results and recommendations to the Legislative Budget Board and Governor s Budget Office no later than January 1, 1994. The new database should provide a good basis for the study, and additional information could be solicited from agencies by survey. The fleet size will form the basis for future decision making and centralized motor pools.

B. GSC should develop a strategic plan to define utilization issues and adopt uniform standards to be followed by all agencies.

In developing this plan, GSC sho uld seek input from affected agencies and experts in the field. In-depth studies of selected agencies should be included in future years to continue the evaluation process and incorporate other vehicle quality and cost considerations, such as maintenance and fuel impacts.


Implications
State agencies that do not currently own vehicles would benefit from a centralized motor pool. Uniform standards for vehicle purchase, operations and disposal would reduce operating costs and increase disposal proceeds by maximizing resale value and minimizing costly repairs in older cars. Vehicle use would improve with a centralized pool and reduce the number of state-owned vehicles for further cost savings.


Fiscal Impact
Texas should be able to generate at least as much savings as Colorado did through a cursory fleet study. Since the Texas light-duty fleet is almost four times larger than Colorado s, the savings could easily reach over $2 million (based on Colorado s $500,000 savings with 5,443 light-duty vehicles).

T o ensure recovery of the cost savings, GSC should provide the Comptroller with the cost savings by agency. The Comptroller would reduce the appropriate budgets for the biennium using the proportions designated in the method of finance for each agency, for each year savings are achieved. No additional staff would be required to document the cost recovery.

The cost savings are allocated based on the way major fleet expenses are split between the General Revenue Fund (GRF) and All Other Funds all funds excl uding trust funds and GRF: 38 percent to General Revenue Fund, 62 percent to All Other funds.

Savings to the Savings to All
Fiscal General Revenue Other Dedicated Change in
Year Fund 001 Accounts or Funds* FTEs

1994 $ 114,000 $ 186,000 0
1995 646,000 1,054,000 0
1996 0 0 0
1997 0 0 0
1998 0 0 0

*All other funds excludes General Revenue Fund (001) and Trust Funds.

The current objective of the Statewide Vehicle Fleet Management System is to achieve a 10 percent overall cost reduction in s tate fleet maintenance and operations by 1998. As demonstrated by other states, innovations in fleet management efficiency can result in near-term cost savings. Texas can benefit from short- and long-term cost savings through effective vehicle management p ractices.

Endnotes

1 Ernst & Young Management Consultants, Ernst & Young Fleet Management Study: City of Alberquerque (Alberquerque, New Mexico, January 1992), p. i.
2 Texas General Services Commission, Legislative Appropriations Request for Fiscal 1994 and 1995 (Austin, Texas, September, 1992), p. 29.
3 Texas Sunset Advisory Commission, New Issue 15 From Testimony , Decision Book, December 10, 1992, p. 71.
4 Ohio Department of Administrative Services, 1990 Annual Report (Columbus, Ohio, 1991), p. 17.
5 Colorado Department of Administration, Division of Central Services, Fleet Size and Reduction Study (Denver, Colorado, December 1, 1992), p. 2.