Start your engines! Fleet ORT Report.
April 16, 2007 - Update
This report has been prepared to document the efforts and findings of a group of individuals that comprised the “Fleet Management” operational review team. The team performed a cursory study of the Commonwealth’s management/operational practices related to its Fleet assets. Fleet assets were defined as aircraft, watercraft, passenger and non-passenger vehicles.
The review team included individuals from the Executive and Legislative branches of Government with oversight and direction provided by the following members of the General Assembly:
· Delegate Danny Marshall III
· Delegate Steven Landes
· Senator Nick Rerras
The review team included individuals from:
· Department of General Services (team coordinator)
· Governor's Office For Workforce Development
· Department of Transportation
· Department of Forestry
· Senate Clerk’s Office
· Department of Correctional Education
· Virginia Tech University
· Department of Social Services
· Department of Labor and Industry
· Department of Corrections
To kick-off the review, two meetings were held with General Assembly members in February 2007. Legislators were provided a presentation that included information on the acquisition, maintenance and operation, and safety related to the Commonwealth’s Fleet assets. The information provided was a high level overview of previous studies, current operations, and cost data. Guidance from Legislators to review team:
· Determine study areas where greatest opportunity to achieve benefits from re-engineering may exist
· Consider potential for operational and cost efficiencies
· Identify short- and long-term operational recommendations
· Develop approaches to implement identified recommendations
TOP 3-5 DRAFT RECOMMONDATIONS:
Determine Study Areas with Greatest Opportunity to Achieve Benefits:
On February 26, 2007, the review team began weekly meetings to discuss fleet operations.
- Eliminated aircraft and watercraft from the scope of the study
o only 10% for the $47M in equipment spend
o approximately 600 of the 26,000 motorized vehicles
- Focus on passenger/non-passenger vehicles registered with Department of Motor Vehicles (DMV).
o Dump trucks
o Class 8 tractor/trailer configuration
Consider Potential for Operational and Cost Efficiencies:
The review team targeted four areas to study for registered vehicles only as they have the highest potential for immediate cost and operational efficiencies to be achieved by making changes in current processes. Longer-term, these areas were determined to be ripe for an “enterprise” study by fleet consultants, a study scope approach not previously conducted by the Commonwealth, with the belief that such a study would produce process re-engineering recommendations resulting in future efficiencies for registered vehicles. The four targeted areas are:
1. Vehicle acquisition policies and procedures
o Commonwealth does a good job procuring vehicles. In most cases the Commonwealth leverages its buying power by consolidating purchase volume into statewide contracts.
§ Ex. 2007 Malibu
· State contract price = $13,075
· MSRP = $20,795
§ Ex. 2007 Dodge 1500 pick-up flex fuel
· State contract price = $16,363
· MSRP = $22,139
2. Fleet and equipment maintenance policies and procedures
o DGS maintains the centralized passenger fleet using an outsourced vehicle maintenance model. DGS has seen its preventive maintenance (PM) costs reduced from $44 per vehicle to approximately $28 per vehicle.
o DGS maintains approximately 4,000 vehicles. DGS vehicles average 3 PMs per year. Transitioning to the outsourced model, DGS estimates an annual savings potential of $192,000 (12,000 * $16).
o The Auditor of Public Accounts reported in 2004 that there were 6,649 agency owned passenger vehicles. Vehicle maintenance for agency owned vehicles is managed by agencies, not DGS. If PM cost experience is similar to that experienced by DGS prior to implementing an outsourced model, total costs for PMs are estimated to have been $877,668 (6,649 *3 *$44). Under the DGS outsourced model, PMs for these vehicles are estimated at $319,152 (6,649*3*$28). A potential cost savings of $219,417 under the DGS model.
o It is expected that the outsourced managed model will achieve savings for vehicle routine and non-routine work.
o Recommendation (short-term): transition agency owned passenger vehicles into the DGS vehicle maintenance model starting with those vehicles currently not being actively managed by an automated vehicle management system.
o Recommendation (long-term): Consultant to conduct a right-sizing study of the Commonwealth’s maintenance operations and resources for all fleets (except aircraft and watercraft). An objective would be to determine the right balance of state owned and commercial shops needed to support the Commonwealth’s maintenance needs. Study to be funded from the Council on Virginia’s Future productivity investment fund.
3. Fueling processes and the Commonwealth’s fueling infrastructure
o Fuel expenditure vs. purchase data:
§ The review team discovered that in FY2006 there was a significant discrepancy in expenditure and purchase data for fuel (gasoline and diesel).
§ CARS expenditure data for FY06 = $47,911,449.59.
§ eVA and fuel card purchase data for FY06 = $32,606,613.77
§ Difference between expenditure and purchase data = $15,304,835.82
§ Team believes that the Commonwealth is buying fuel twice. For example, bulk fuel is purchased by an agency operating a bulk fuel site and reports expenditure to CARS. Then, a state vehicle purchases fuel from the bulk fuel site. The vehicle fuel purchase is reported to the same CARS expenditure codes as the bulk fuel purchase.
§ Recommendation (short-term): that the expenditure and purchase data be investigated further to verify the assertion of the review team. If determined to be a double purchase situation, Commonwealth (DOA) to determine appropriate method to report expenditures.
o Fuel purchasing method:
§ Commonwealth purchases approximately 14,670,000 gallons of fuel annually (8,365,800 diesel; 6,305,200 gasoline).
§ Fuel is purchased in bulk and using commercial fuel cards.
§ VDOT currently manages bulk fuel contracts while DGS manages commercial fuel card contract.
§ Recommendation (short-term): Commonwealth to combine the fuel volume from the bulk fuel contract and the commercial contract into a single procurement to leverage the total volume of fuel purchased. If the Commonwealth were to save as little as a penny per gallon from such a consolidation, the estimated savings is: $146,700 (14,670,000 *.01) annually. Procurement to be managed by DGS the Commonwealth’s centralized procurement authority. DGS currently purchase other energy sources for the Commonwealth (i.e. natural gas, electricity, coal).
o Fuel infrastructure
§ Fuel can be purchased from commercial fuel sites at the same cost for the Commonwealth to by bulk fuel.
§ There 400+ state operated bulk fuel sites.
§ There is a cost for the state to operate bulk fuel sites. Costs in dollars and environmental hazards.
§ Does the Commonwealth need all 400 state operated bulk fuel sites?
§ Cost efficiencies may be gained if the Commonwealth could eliminate/close fuel sites.
§ Recommendation (long-term): Hire a consultant to study the Commonwealth’s owned fuel infrastructure considering the availability of commercial fuel sites. Consultant to give consideration to emergency management requirements and special requirements of individual agencies. Study to be funded from productivity investment fund.
4. Vehicle and equipment driver training and monitoring
o In FY2006, DGS reported 300 accidents in DGS centralized fleet vehicles at a cost to repair of approximately $500,000.
o Currently a driver training program is not in place for state employees that operate a DGS owned vehicle.
o Recommendation (short-term): DGS develop a set of training slides to be posted on the Department of Human Resources, Learning Information System. Slides will include basic safety instruction on the use and operation of vehicles and what to do if involved in an accident.
Maintenance of Passenger and Non-Passenger Vehicles Registered with the Department of Motor Vehicles
Transition agency owned vehicles into the DGS vehicle maintenance model starting with those vehicles that are currently not actively managed by an automated vehicle management system.
Consultant to conduct a right-sizing study of the Commonwealth’s maintenance operations and resources for all fleets (except aircraft and watercraft). An objective would be to determine the right balance of state owned and commercial shops needed to support the Commonwealth’s maintenance needs. Study to be funded from the Council on Virginia’s Future productivity investment fund.
Fuel purchase and infrastructure
1) That the expenditure and purchase data be investigated further to determine cause for discrepancy in data. Make adjustments, as necessary, for reporting fuel purchase and expenditure data at the enterprise level.
2) Commonwealth to combine the fuel volume from the bulk fuel contract and the commercial fuel card contract into a single procurement to leverage the total fuel volume purchased by the Commonwealth. If the Commonwealth were to save as little as a penny per gallon from such a consolidation, the estimated savings is: $146,700 (14,670,000 *.01) annually. Procurement to be managed by DGS the Commonwealth’s centralized procurement authority. DGS currently purchase other energy sources for the Commonwealth (i.e. natural gas, electricity, coal).
Hire a consultant to study the Commonwealth’s owned fuel infrastructure considering the availability of commercial fuel sites. Consultant to give consideration to emergency management requirements and special requirements of individual agencies. Study to be funded from productivity investment fund.
Vehicle Operator Training
DGS develop a set of training slides to be posted on the Department of Human Resources, Learning Information System. Slides will include basic safety instruction on the use and operation of vehicles and what to do if involved in an accident.
STATEMENT OF INVENTATION:
The Fleet Operational review team focused its study on the acquisition, maintenance, and operation of passenger and non-passenger vehicles owned by the Commonwealth’s agencies and institutions of higher education.
- The team determined that acquisition practices seem adequate. However, the Commonwealth conducts its vehicle procurements using a procurement methodology that has been in place for years. The model used simply aggregates the needs of agencies and institutions into consolidated procurement actions (based on category and type of vehicle) then negotiates concessions and pricing with manufactures pursuant to the Commonwealth’s procurement policies and procedures. The team would be interested in hearing alternative approaches for the acquisition of vehicles that may result in more favorable pricing?
- The team determined that vehicle maintenance should be actively managed by Commonwealth resources that have maintenance expertise and automated systems to monitor vehicle maintenance activity. In addition, data is available that supports a mix of private sector commercial maintenance shops and state owned shops is likely the most cost efficient manner to maintain vehicles. A short-term recommendation is for Commonwealth vehicles not currently being managed by an agency with maintenance professionals using an automated maintenance management system to track maintenance activity to be transitioned into the Department of General Services Vehicle Management Control Center (DGS, VMCC). Long-term recommendation is to hire a consultant to study, from an enterprise perspective, the private sector commercial maintenance shops and state-owned maintenance shops to determine a proper mix of each to support the Commonwealth’s maintenance needs. What are the benefits/concerns to transition Commonwealth vehicles into the DGS, VMCC? Any thoughts on studying the mix of commercial and state-owned maintenance shops?
- Fuel purchasing approach and infrastructure support. Currently bulk fuel purchases are administered by the Virginia Department of Transportation (VDOT) and commercial fuel purchases are administered by DGS. By aggregating these purchases into a single procurement action, cost efficiencies may be achieved as a result of volume economy purchasing. What other benefits or what concerns are there that need to be considered from the aggregation and consolidation of purchasing fuel? On the infrastructure side there are over 400 state-owned, operated and maintained fueling sites. With the thousands of privately owned and operated sites does the Commonwealth need 400+ sites? Is there a mix of commercial sites and state-owned sites that can meet the Commonwealth’s fueling needs (daily operational and emergency) that would allow for some state sites to be closed? Eliminating some sites from the Commonwealth’s inventory should result in a reduction in facility maintenance and operation costs.
- Safety and operation training for operators of Department of General Services (DGS) vehicles (passenger vehicles used by state employees conducting state business) is not currently provided. DGS will be preparing a set of training slides that will provide basic safety and operation information on the use and operation of DGS vehicles. The training will be offered on the DHRM learning information system. Are there other training opportunities that should be considered?