During NASPO’s Fleet Procurement Roundtable, guests and experts discussed the issues impacting fleet vehicle procurement, the challenges governments are facing, and the strategies they are exploring to meet their most pressing needs and keep their fleets on the road. Pulse is back with part two of our exploration of vehicle procurement and to share these strategies with you.
Strategies for Meeting Fleet Needs
Cost-Plus Price Agreements
Most frequently associated with services and construction procurements, cost-plus pricing models commit the purchaser to cover the supplier’s expenses plus an additional sum as an incentive. Typically, the “plus” in cost-plus is either a fixed fee or a percentage of the total purchase cost. No one gets excited about paying more for something than they used to, and cost-plus price agreements inject some volatility, making it difficult to project the final price. However, switching from a contract with a negotiated fixed price to a cost-plus model remains a viable option for some offices.
For an example, see this state term contract from the Florida Dept. of Management Services.
Price Adjustment Clauses
Price adjustment clauses can inject flexibility into multi-year/multi-term contracts by establishing regularly scheduled windows for fixed prices to be adjusted or negotiated. These are common among contracts for other categories, like construction, but can also be strategically applied to vehicle procurement. One example might be a clause allowing for price adjustments in the final quarter of the calendar year that allows dealers to submit new prices for the following year’s models or discounted prices for models currently in liquidation.
For an example of a price adjustment clause for vehicles, see this statewide contract from the California Dept. of General Services. (See “User Instructions” Section 6. Contract Items)
Consolidating and Sharing Fleet Vehicles
Sure, getting two or more agencies to agree to coordinate the sharing of fleet vehicles is a tall task, but you know what they say about desperate times. Consolidating state fleets requires research on how and when vehicles are used to identify patterns and anticipate demand. This information is typically collected in a fleet management system. Underused assets can be reallocated to needy departments or liquidated. Doing more with less is not a foreign concept to state government officials. This approach is more convenient in areas where state agencies are concentrated, such as office complexes in capital cities.
Here’s an example from Arizona and a look at two other cases in Louisville, Ky., and Springfield, Ill.
Auctioning Non-Essential Assets
This strategy can pair neatly with the previous one but may also be effective in its own right. The pandemic severely impacted the used car market, with used car prices peaking at 125% of their pre-2020 levels just two years ago. While the spike has passed, used car prices remain elevated, at more than 10% higher than pre-pandemic values.[1]1 Governments can use this market to retire and sell older and underused vehicles. The sale of non-essential assets provides revenues to close budget gaps and mitigate cost increases for priority purchases and must-have vehicles. There are multiple online auction service providers for government property.
For more, check out this article from [2]Government Fleet.
Using Telematic Technology
Telematics systems use vehicle monitoring devices that collect operational information, including location and speed. That data is collected, stored, and analyzed to provide a comprehensive view of vehicle and total fleet usage. Procurement and implementation of telematic services involve significant upfront costs and resource investment but can provide impactful cost-saving benefits. Meaningfully measuring and tracking vehicle usage can help optimize fleet size and usage, allowing managers to reallocate or sell underused vehicles. Telematic monitoring also helps to lower fuel usage and maintenance costs and deters abuse of fleet vehicles. Increasing fleet efficiency will extend the useful life of current and new vehicles.
Fleets have already adopted these systems in various government entities, including the [3]U.S. Forest Service, [4]U.S. Air Force, Colorado State Fleet Management, California Dept. of General Services, and many other state and municipal governments. Partner with your state’s fleet administrator and IT authority to discuss whether this technology could help your fleet needs.
For more on how governments are using telematics:
- GSA Fleet’s Telematics Program – Driving Innovation in Federal Fleet Management
- Snapshot: DHS, DOT Partner on Government Vehicle Telematics Cybersecurity Primer
- Ohio Department of Administrative Services Administrative Policy – Fleet Telematics
Remember, the first step towards implementing these strategies is establishing a collaborative relationship with your fleet administrator and gathering input from your customer agencies and stakeholders.
NASPO plans to hold more fleet procurement-focused discussions in 2024, so keep an eye out for more information on future opportunities to get involved. In the meantime, NASPO’s Quarterly Inflation Reports, powered by Procurement IQ, provide market forecasts for passenger vehicles and several other common commodities based on the most recent factors impacting costs and supply. You can read the latest report and check out past reports in our Content Library.
For those exploring alternatives to conventional fleet options, check out our Tech Next: Electric Vehicles and Hybrid Vehicles and Tech Next: EV Charging Infrastructure publications.
References
| ↑1 | 1 |
|---|---|
| ↑2 | Government Fleet |
| ↑3 | U.S. Forest Service |
| ↑4 | U.S. Air Force |