Department of Human Services. DHS CSO Fleet Management Solutions Report. Final Report

Transcription

1 Department of Human Services DHS CSO Fleet Management Solutions Report R I Craigen Managing Director 27 January 2005 Victoria, Suite 12, 22 Fitzroy Street St Kilda 3182 Tel: NSW, Level 2, 55 Holt Street Surry Hills, 2010 Tel: ACT, 138 Run-O-Waters Drive, Run-O-Waters 2580 Tel:

2 Report Contents 1 Introduction Project Objectives Project Methodology Report Overview Executive Summary Summary Fleet Resource Centre Fleet Collaboration Models Lead Agency Model Fleet Network Model Major Findings Recommendations Establish a New Fleet Resource Centre Investigate New Fleet Management Models Lead Agency Fleet Manager Model Agency Fleet Network Model Investigate Commercial Fleet Manager Service Agency Fleet Resource Centre Summary Recommendation Description Benefits Implementation Business Case Lead Agency Fleet Management Model Summary Recommendation Description Benefits Implementation Business Case Agency Fleet Network Model Summary Recommendation Description Benefits Implementation Business Case Commercial Fleet Manager Service Summary Recommendation Description Benefits Implementation Business Case CSO Sector Findings & Analysis CSO Sector Fleet Population Page 2 of 50

3 8.1.1 Summary Findings CSO Fleet Requirements Take maximum advantage of Government tax concessions Take maximum advantage of vehicle discount structures Provide a Fleet Manager facility for CSO with smaller fleets Provide a facility to share fleet management information Provide a facility for CSO collaboration CSO Fleet Problems & Issues Fleet Size & Utilisation Fleet Financing & Management Fleet Age & Replacement Cycles Vehicle Specification & Selection Vehicle Acquisition Vehicle Disposal Vehicle Maintenance Fleet Fuel Management Fleet Insurance & Accidents Fleet Accounting & Reporting Taxation (FBT) State Government Fees & Duties Fleet Management Service Providers Appendix Contents Community Sector Organisation Interview List Fleet Resource Centre Information Services Guides Templates Directories Tools Supplier Links Total CSO Sector Estimates Total CSO Vehicle Population Estimates CSO Sector Fleet Size Distribution Estimate Outsource Fleet Management Business Case Introduction Business Situation Business Decisions Business Case for Outsourcing the Management of the Fleet Direct Cost Savings Indirect Cost Savings Arguable Cost Savings Outsource Business Case Worksheet Fleet Management Best Practice Principles FACTeam Outline Fleet Administration Document Page 3 of 50

4 1 Introduction 1.1 Project Objectives The objective of this project was to develop new models and services for the delivery of the fleet management functions for DHS funded CSOs to maximize their efficiency in terms of costs & outcomes. The models and services are designed to deliver a sustainable outcome that increases efficiency, reduces administration and delivers an improved service for CSOs fleet operators. The solutions are designed to address the problems & issues raised by CSOs in the Stakeholder Forums & project interviews. 1.2 Project Methodology Phone & personal interviews, combined with the Forum Report findings, provided information on the problems, issues, requirements and current CSO fleet management practices. The 30 interviews covered a representative cross section and interviewee details are provided in the Appendix. Model development and the recommendations were formulated with members of the Strategic Projects Team, HACC program and DHS Fleet Management personnel. Particular reference was made to a recent survey of DHS funded HACC agencies. The solutions recommended in this report need to be tested and reviewed with CSOs in a number of CSO Fleet Solutions Workshops. Page 4 of 50

5 1.3 Report Overview The report structure is detailed below: Section 2 The Executive Summary briefly covers the main recommendations and findings. Section 3 Recommendations are made for a new Fleet Resource Centre and the investigation of two new proposed CSO Collaboration Fleet Management Models (Agency Lead Manager Model, Agency Fleet Network Model) and a possible Commercial Fleet Management Service tailored for CSOs. Sections 4 to 7 Detailed Recommendations covering model & service descriptions, implementation issues, expected benefits and a high level business case are presented for each of the four recommendations: 1) Agency Fleet Resource Centre 2) Agency Lead Manager Model 3) Agency Fleet Network Model 4) Commercial Fleet Management Service Sections 8 to 9 Details the Research Findings, provides CSO Sector Fleet Estimates, summarizes the CSO Fleet Requirements and details the CSO Fleet Problems & Issues by fleet function used to derive the recommendations. Section 10 The Appendix contains the CSO Interview List, Total CSO Sector Estimates Worksheet, An Outsource Fleet Management Business Case, Fleet Management Outsource Checklist and Fleet Management Best Practice Principles. Page 5 of 50

6 2 Executive Summary 2.1 Summary The two fundamental concepts underlying the recommendations are: CSOs will operate their existing fleets more efficiently if they can be fully informed about best practice and where & how to obtain the best value for fleet services ( Better Practice ). CSOs collaborating together will combine experience and generate economies of scale to collectively generate better & more efficient fleet processes ( Building Scale ). The Fleet Resource Centre provides information & assistance to help CSOs build better fleet practice and reduce the cost of fleet operations. The Internet based Centre could be implemented quickly and be delivered through the Funded Agency Channel. The Fleet Manager and the Agency Fleet Network Models are two new initiatives to facilitate CSO collaboration on fleet operations & management (possibly in conjunction with other business processes raised in the CSO forums). CSO interest in the two new CSO Collaboration Models should be tested further at the proposed Fleet Solutions Workshops. If the initiatives recommended in this report were welcomed by the CSO Sector, and subsequently implemented, a CSO with a small fleet would have the following four alternatives to manage their fleet: 1) Self Manage (DIY) their fleet (with help from the Fleet Resource Centre). 2) Outsource management of the fleet to a fellow Agency (Lead Agency Model). 3) Network with other CSOs to jointly manage their fleets (Fleet Network Model). 4) Outsource management of the fleet to a Commercial Fleet Manager (Pre-agreed Package). These initiatives could be combined with other CSO Collaboration projects. Page 6 of 50

7 2.2 Fleet Resource Centre The Fleet Resource Centre is a recommendation that seeks to provide useful information and advice about strategic & operational fleet issues. This Internet facility will allow DHS funded CSOs to compare their fleet operation to best practice and facilitate access to unique discounts, concessions & exemptions related to their DHS funding & taxation status. The Centre will contain a number of Best Practice Guides and information & assistance on best value purchasing in the fleet sector. A basic Fleet Resource Centre could be implemented within 4 months for an investment estimated at $120,000. This initial set up cost would provide content development, supplier directories & links. (1) 2.3 Fleet Collaboration Models Two new models are presented to facilitate CSO collaboration and to consolidate and concentrate smaller fleets into more efficient & informed larger fleet networks. The suggested models encourage small CSOs to come together to generate critical mass & economies of scale and to concentrate expertise, buying power & systems. The central theme in these approaches is that the overall network (system) has a significantly lower total cost than the sum of costs of the individual fleet operators & operations. It builds on an existing cultural compatibility amongst CSOs and builds expertise and economies within the CSO Sector and on an inter-agency basis. The report cautions that these suggested models require further consultation with interested CSOs in a series of Fleet Solution (Collaboration) Workshops Lead Agency Model The first collaboration is the Lead Agency Model, where a larger agency, Local Government Authority or Health Service provides a fleet management service to smaller fellow CSOs. This allows over 1,000 CSOs running fleets of 25 vehicles or less to outsource their smaller fleet operation to a larger Agency with a Fleet Manager Fleet Network Model The second collaboration is the Fleet Network Model where CSOs with small and medium fleets cluster together to form a fleet network for the management and acquisition of fleet services. This model is expected to be attractive to an estimated 100 CSOs running fleets of vehicles. These medium sized CSO fleets could cluster their fleet operations into larger networks to drive the economics and efficiencies associated with larger fleet operators. Page 7 of 50

8 2.4 Major Findings Our estimates indicate that the 1,154 DHS funded CSOs operate approximately 11,000 vehicles, with consolidated sector vehicle expenditures approaching $100 million per year. It is further estimated that over 77% of the CSOs (890 CSOs) operate small fleets with 10 vehicles or less. (8) Our research investigated the current problems experienced by CSOs. A summary of what CSOs require includes: Take maximum advantage of Government tax concessions (FBT, Registration) Take maximum advantage of vehicle discount structures (Manufacturer, Dealer) Provide a Fleet Manager facility for CSO with smaller fleets Provide a facility to share fleet management information Provide a facility for CSO collaboration The recommendations seek to address all of the requirements discovered during the CSO interviews and forums. Page 8 of 50

9 3 Recommendations 3.1 Establish a New Fleet Resource Centre The principal recommendation is to establish a basic Fleet Resource Centre for CSOs to access useful fleet information quickly allowing CSOs to improve the way they select, finance, manage and operate their fleets. The cost to design, develop and implement the basic (Phase 1) Fleet Resource Centre is initially estimated at $120,000. This cost includes content development and Web site design & implementation, but does not include the cost of hosting & access. The Fleet Resource Centre could be hosted under the umbrella of the existing Funded Agency Channel at a low incremental cost. (1) The Fleet Resource Centre content could be progressively developed & presented in accordance with CSO information priorities. Phase 1 development of the Fleet Resource Centre could be available within 120 days of approval. 3.2 Investigate New Fleet Management Models These recommendations revolve around trying to use collaboration to better use resources and tap the culture within the sector, and to build economies and expertise within the CSO sector. The models are tentative and require the CSOs to embrace, develop and adopt these new business models Lead Agency Fleet Manager Model The recommended approach is: 1) Conduct a Lead Agency Fleet Management Model Workshop with CSOs identified as potential Lead Agency Fleet Managers to access their interest in the Business Model and investigate the business & implementation issues. 2) Consider conducting a CSO Client Recruitment Campaign to determine the level of CSO interest & commitment to an Agency supplied fleet management service. 3) Consider two pilot programs under the announced CSO Collaboration Project. These pilots would be used to determine contract, operational, cultural and commercial issues surrounding the fleet management arrangements Agency Fleet Network Model The recommended approach is: 1) Conduct a small number of Regional Agency Fleet Network Workshops with potential network members to determine their interest in forming an Agency Fleet Page 9 of 50

10 Network and investigate the business & implementation issues with the potential members. 2) Consider two pilot programs under the announced CSO Collaboration Project. These pilots would be used to determine contract, operational, cultural and commercial issues surrounding the fleet management arrangements. 3) Consider development of the Agency Fleet Network Infrastructure Package to provide the necessary contract environment between the parties and between the network and external third parties. 3.3 Investigate Commercial Fleet Manager Service Consider negotiating an Agency Commercial Fleet Manager Package that CSOs could use if they wished to outsource their fleet operations to a professional commercial fleet manager. This pre-agreed CSO Fleet Manager Package would include a standard fleet management agreement and an agreed fee for service arrangement. This option would provide CSOs with a safer commercial environment with a lower fee structure. Page 10 of 50

11 4 Agency Fleet Resource Centre 4.1 Summary The Fleet Resource Centre provides most of the information needed by CSOs to assist in the cost effective operation of their fleet. The purpose is to assist CSOs in migrating towards best fleet management practices ( better practice to best practice ). The Fleet Resource Centre could be delivered through the Funded Agency Channel. The site content will be determined in consultation with the CSO sector. The construction and maintenance of the Fleet Resource Centre will be provided by a third party, possibly the Funded Agency Channel. A basic Fleet Resource Centre could be implemented within 4 months for an investment estimated at $120,000. This would provide CSOs with easy access to fleet information and services. The site will give CSOs access to information on manufacturer discounts, government fuel contracts, FBT concessions, registration exemptions, Best Practice Guides and supplier directories & links. 4.2 Recommendation The principal recommendation is to draw together available modern fleet information systems to establish a Fleet Resource Centre for CSOs to access useful fleet information quickly, so CSOs can improve the way they finance & manage their fleets. The Fleet Resource Centre content could be progressively developed & presented in accordance with CSO information priorities. 4.3 Description The Fleet Resource Centre should provide CSOs with easy access to fleet information, fleet knowledge, market intelligence and a range of tools to assist in the fleet strategy formulation & fleet operations. The facility would ideally allow CSOs to easily compare the costs, strategies & performance against other CSO results & fleet industry best practice. The online content development would be developed to meet CSO information requirements developed further in the CSO Fleet Solution Workshops. It may be possible to develop content cost sharing models with other Victorian Government Departments or Agencies. The Centre could also provide CSOs with a facility to share fleet management information between CSOs and possibly provide a CSOs Online Forum (Web log & IM Chat). The Fleet Resource Centre could provide a range of Internet Information Services to assist CSOs in the management and operation of their fleets. The services provided by the Fleet Resource Centre are detailed in the Appendix 2.0: Fleet Resource Centre Service Specification. Page 11 of 50

12 4.4 Benefits CSOs will be able to determine easily whether they are receiving their full entitlement to vehicle manufacturer discounts & dealer discount entitlements. CSOs will be able to access concise information to take maximum advantage of Federal and State Government tax concessions. This will facilitate CSOs receiving the full benefit of FBT and registration concessions. The initial implementation of the Fleet Resource Centre would be an Internet based service. However, it could be extended to allow phone access to a fleet management professional to get experienced and trusted fleet management advice on operational problems & issues. 4.5 Implementation The Fleet Resource Centre content will be developed by a Fleet Resource Centre Manager in consultation with CSOs in a series of half day Fleet Solution Workshops. A program to increase the awareness and benefits of the Fleet Resource Centre would be conducted to encourage CSOs use. The cost to design, develop and implement the basic Fleet Resource Centre is estimated at $120,000. This cost includes content development and Web site design & implementation, but does not include the cost of hosting & access. The Fleet Resource Centre could be hosted under the umbrella of the existed funded Agency Channel at a low incremental cost. The Phase 1 development of the Fleet Resource Centre could be available within 120 days of approval. (1) A subscription service for advanced tools, software & real time services could be investigated to cover recurring site costs and maintaining a personal fleet support and help line. Demand & CSO interest in the Fleet Resource Centre could be tested in a Fleet Solutions Workshop. The content development priority could also be established in the proposed Fleet Solutions Workshop. Indicative Fleet Resource Centre content could include: Information on Entitlements CSO entitlements to Federal Government FBT concessions. CSO entitlements to State Government Manufacturer Discounts. CSO entitlements to State Government Fuel Contracts. CSO entitlements to State Government Registration concessions. Fleet Management Services CSO Vehicle Cost Benchmarking Service. CSO Vehicle Cost Forecast Service. Page 12 of 50

13 New Vehicle Buyers Information Service. Used Vehicle Sale Price Information Service. Fleet Management Guides How to select the best finance for your fleet. How to decide the best replacement cycle for your fleet. How to minimise the FBT costs in selecting & operating your fleet. 4.6 Business Case The basic Fleet Resource Centre will require an initial investment estimated at $120,000 and could be implemented within 120 days. The cost to maintain and update the content would cost of about $60,000 per year. (1) The Fleet Resource Centre will assist the small CSOs looking for fast access to a comprehensive fleet information service. The Fleet Resource Centre should either save CSOs time or money or hopefully both. The quantification of the time or cost savings of the new information service is difficult. However, if 25% of CSOs (300 CSOs) used the Fleet Resource Centre information to reduce their direct fleet costs by 5% ($400), the Sector savings could be estimated at $120,000 per year. This seems a reasonable return for the Fleet Resource Centre investment costed at an annual average cost (amortised over 4 years) of $90,000 for a fully implemented Fleet Resource Centre. (1) Page 13 of 50

14 5 Lead Agency Fleet Management Model 5.1 Summary Some larger CSOs interviewed (with full time fleet managers) indicated that they might have capacity and would consider acting as a fleet manager for smaller local CSOs. CSOs operating more than 100 vehicles, with a full time fleet manager, could consider adopting the Lead Agency Fleet Management Model. A number of CSOs interviewed expressed their interest in a fleet management service supplied by a fellow Agency. Estimates indicate that there about 900 CSOs with fleets of less than 10 vehicles that might consider outsourcing the management of their fleet to another Agency. (8) CSOs with micro, mini & small fleets (up to 25 vehicles) would probably benefit most from the outsourcing the management of their fleet to a DHS funded Agency Fleet Manager or a Commercial Fleet Manager. Further research is required to determine the level of commitment from the potential providers and clients for a within sector or inter-agency fleet management service. 5.2 Recommendation Conduct a Lead Agency Fleet Management Model Workshop with CSOs identified as potential Lead Agency Fleet Managers to assess their interest in the Business Model and investigate the business and implementation issues. Consider two pilot programs (one in the metropolitan area and one in the rural area) under the announced CSO Collaboration Project. These pilots would be used to determine contract, operational, cultural and commercial issues surrounding the fleet management arrangements. Consider conducting a CSO Client Recruitment Campaign to determine the level of CSO interest & commitment to an Agency supplied fleet management service. 5.3 Description The Lead Agency Fleet Management Model consists of a Lead Agency providing a "commercial" fleet management service to fellow CSOs "clients, probably in a particular region. The Lead Agency would need a full time experienced Fleet Manager with the required fleet management capability to provide an external fleet management service. The Lead Agency would need to recruit sufficient clients to maintain a total fleet size exceeding 200 vehicles, and hopefully closer to, 250 vehicles. The Lead Agency Fleet Manager would need to put in place the necessary Fleet Management Services Agreements and would probably need a Fleet Management System to support the provision of the required fleet management services. (2) Page 14 of 50

15 The Lead Agency would provide an "a la carte menu" of Fleet Management Services that can be selected as required by their CSO Clients. The Lead Agency may also wish to provide a pool (shared) vehicle service to their CSO clients. This will allow selected CSO clients to request, book and hire a pool vehicle for temporary use. 5.4 Benefits The CSO benefits derived from outsourcing their fleet to a Lead Agency Fleet Manager are estimated to be up $1,000 per vehicle per year in direct costs and a time saving of about 1.5 person weeks per year per CSO. This assumes the Lead Agency direct savings are 50% of those expected from a Commercial Fleet Manager Service. (3) A Central Lead Agency Fleet Manager would ensure maximum access & use of manufacturer and dealer vehicle discounts & government fuel contracts, maximise use of government FBT concessions & registration exemptions, ensure competitive rates for maintenance and insurance and maximise the sale price of used vehicles. The Manager would provide improved vehicle cost control & reporting. 5.5 Implementation The requirements to implement a successful Lead Agency Fleet Management model are: Supportive Lead Agency CEO and Board CEO and Board support & sign off a 3 year Fleet Management Business Plan. Agency provides sufficient priority, resources & funds to underwrite Fleet Management Business Unit success. Experienced Lead Agency Fleet Manager The Lead Agency would need a full time experienced Fleet Manager with the required Fleet Management Facilities & Systems. Existing Agency has at least a 3-year contract with the experienced Fleet Manager to manage Agency Service Delivery. Fleet Management System Requires a cost effective Fleet Management System that supports flexible web service delivery to clients. Budget initial investment of $40,000 for a fully implemented Fleet Management System allowing $6,000 per year in software support & ongoing training (2). Viable Business Model & Plan Lead Agency would develop a 3-Year Inter-Agency Fleet Management Business Plan & would need to recruit sufficient clients to maintain a total fleet close to 250 vehicles (100 Agency vehicles plus 150 client vehicles) (4). Page 15 of 50

16 5.6 Business Case The Lead Agency may need to invest up to $40,000 to establish or upgrade existing facilities to a commercial Fleet Management operation. Annual management client fees are estimated at $300 per vehicle annum with a 150-vehicle client fleet should return additional revenue of about $45,000 per year. (2) CSOs would need to pay about $300 per vehicle per annum to have their fleet managed by a larger Agency. A CSO 10 vehicle fleet would pay $3,000 per year for the Agency to manage buying, selling, servicing, registration, insurance, fuel & vehicle replacement management. The CSO benefits derived from outsourcing their fleet to a Lead Agency Fleet Manager are estimated to be up $1,000 per vehicle per year in direct costs and a time saving of about 1.5 person weeks per year per CSO. This assumes that the Lead Agency direct savings are 50% of those expected from a Commercial Fleet Manager Service. (3) Lead agencies would be able to offer CSOs a range of fleet management services. CSOs would then be able to select the particular services they wished to outsource to the lead agency, in accordance with organisational requirements. Page 16 of 50

17 6 Agency Fleet Network Model 6.1 Summary The CSO interviews indicated some CSO interest in the formation of Agency Fleet Networks that could purchase fleet services collectively or where one Agency acts as a purchasing & managing agent for the other network CSOs. A Fleet Network Infrastructure Package could accelerate the development of these Agency Fleet Networks, where a number of CSOs with small to medium fleets in a close geographic area, would benefit from operating as a network. (5) Further research is required to determine the level of interest and commitment to a network model from potential network members. 6.2 Recommendation Conduct a small number of Regional CSO Fleet Network Workshops with potential network members to determine their interest in forming an Agency Fleet Network and investigate the business & implementation issues with the potential members. Consider two pilot programs under the CSO Collaboration Project. These pilots would be used to determine contract, operational, cultural and commercial issues surrounding the fleet management arrangements. Consider development of the Agency Fleet Network Infrastructure Package to provide the necessary contract environment between the parties and between the network and external third parties. (5) 6.3 Description The Agency Fleet Network Model consists of a network of CSOs collaborating to provide a combined fleet management service to network members. One Agency could coordinate fleet management activities for the other network members. The Network may also wish to investigate a Virtual Pool Vehicle Service where idle network member vehicles could be hired to other network members/clients. A web based system would allow them to select, request, book, hire & bill the use of a pool vehicle from the network member s virtual vehicle pool. This service assumes a high proportion of work (rather than allocated) vehicles and no research data exists to determine the non-work vehicle to work vehicles ratio. 6.4 Benefits Shared centralised fleet management & administration should reduce the total CSO direct costs and time involved in fleet management activities from the use of "consolidated" purchasing and improved fleet management practices. Page 17 of 50

18 The CSO benefits derived from the Fleet Network Model could be up $1,000 per vehicle per year in direct costs and a time saving of about 1.0 person weeks per year per CSO. This assumes that the direct savings from operating a Fleet Network are 50% of those expected from a Commercial Fleet Manager Service. (3) A Fleet Network Model will help members gain access to & use of manufacturer and dealer vehicle discounts & government fuel contracts, allow more competitive rates for maintenance and insurance and possibly improve the sale price of used vehicles. An Agency Fleet Network would benefit most from economies of scale where the total network fleet is 250 vehicle or more. CSOs with small to medium fleets operating 25 to 75 vehicles that would probably benefit most from the network model. Estimates indicate there over 100 CSOs operate fleets between 25 to 75 vehicles. (8) 6.5 Implementation One Agency could act as Coordinating Fleet Manager and where the Agency Network fleet membership is over 250 vehicles, a full time Fleet Manager could be justified. The Agency Fleet Network Infrastructure Package could consist of a Fleet Network Membership Agreement, Shared Fleet Management & Pool System and Fleet Network Outsourced Services Agreements. The cost of the Agency Fleet Network Infrastructure Package could be shared amongst network members on a monthly vehicle fee basis. CSOs could use a hosted Fleet Management & Pool System to maintain all network member vehicle details and individual members could access their fleet information online. CSOs could access a hosted Pool Management System that allows all members to request, book, hire & possibly bill, pool vehicle use. This would allow members to maintain a "virtual pool", enabling CSOs to share vehicles & better utilise idle pool vehicle capacity. 6.6 Business Case Fleet Network members may collectively need to invest up to $60,000 to initially establish Fleet Network Infrastructure & Agreements. The CSO benefits derived from the Fleet Network Model could be up $1,000 per vehicle per year in direct costs and a time saving of about 1.0 person weeks per year per CSO. The return is potentially up to $250,000 per year for a network fleet of 250 vehicles, assuming the average of up to $1,000 per vehicle per year plus reduction in the total amount of time involved in fleet administration. (5) & (6) Page 18 of 50

19 7 Commercial Fleet Manager Service 7.1 Summary CSOs can decide whether to self manage their fleet or outsource the management of their fleet to a third party. CSOs could decide to outsource to a fellow agency or contract with a Commercial Fleet Manager. The Commercial Fleet Manager option has already been adopted by a number of CSOs. 7.2 Recommendation This report suggests a CSO Commercial Fleet Manager Service Package is negotiated on behalf of any CSO wishing to use the service. 7.3 Description Details of a Commercial Fleet Manager Service are freely available and not repeated in this report. The cost of a fully managed fleet would typically be around $30 per month per vehicle or $360 per year per year and would normally incorporate the use of a fuel card. The cost to outsource a 12 vehicle fleet would be about $4,300 per year. A number of Commercial Fleet Manager Service Providers have tailored their services to more closely meet the needs of the CSO sector. 7.4 Benefits The umbrella contract will save CSOs needing to individually negotiate contracts, fees, services and performance measures (KPI s) with fleet managers and provide a more competitive standard and fairer contract environment. Some commercial Fleet Managers could also assist in providing fleet finance facilities and a comprehensive vehicle insurance facility. An analysis of the Outsource Fleet Management Business Case is provided in the Appendix. In summary this analysis suggests net direct and indirect savings after fees of about $7,750 on a fleet of 10 vehicles. (3) 7.5 Implementation DHS could consider the possibility of negotiating an umbrella CSO Fleet Management Service Package. DHS could negotiate an Agency Fleet Management Contract, Service & Fee Package with Professional Fleet Managers that provides services suitable to the CSO Sector. Page 19 of 50

20 CSOs could use the CSO Fleet Management Contract Service & Fee Package if, and when, they wish. 7.6 Business Case The CSO benefits derived from outsourcing their fleet to a Commercial Fleet Manager are estimated to be up $2,000 per vehicle per year in direct costs and a time saving of about 1.5 person weeks per year per CSO based on a fleet of 12 vehicles. (3) A generic Outsource Fleet Management Business Case has been developed and presented in the Appendix. This shows that CSOs could expect to reduce their total direct costs by up to $2,000 per vehicle per year or an annual average savings of 15% of pre managed costs. Page 20 of 50

21 8 CSO Sector Findings & Analysis 8.1 CSO Sector Fleet Population Summary Our estimates indicate that the 1,200 DHS funded CSOs operate approximately 11,000 vehicles, with consolidated sector vehicle expenditures approaching $100 million per year. It is further estimated that over 77% of the CSOs (890 CSOs) operate small fleets with 10 vehicles or less. (8) Findings Estimates based on Activity to Vehicle ratios and FTE to Vehicles ratios combined with DHS estimates suggest that DHS funded CSOs operate in total about 11,000 vehicles (with estimates ranging from 10,400 to 11,500 vehicles). (8) Assuming a CSO fleet population of 11,000 vehicles and using an average annual vehicle operating cost of $8,600, it appears that the sector s aggregate vehicle expenditure is in the region of $100 million per year. These estimates suggest that the CSO Sector purchases about 5,000 vehicles per year based on a relatively short average changeover cycles of 2.5 years. (8) Estimates based on the ratios above suggest about 890 (77%) CSOs operate 10 vehicles or less, about 260 (20%) operate between 10 and up to 100 vehicles and 4 or more CSOs operate 100 vehicles or more. (8) In general, the CSO Sector operate a large number of small fleets with the expected constraints of insufficient time, expertise or funding to acquire or operate the most cost effective fleet. Smaller fleets typically have very little power in any fleet negotiation and little time or incentive for process improvement or innovation. CSO fleets are often dispersed over a significant number of locations and CSO fleets seem to operate on relatively short replacement cycles between 18 and 36 months. Micro, mini & most small CSO Fleets (25 vehicles or less) want help with a range of fleet issues. Larger CSO fleets and Local Government operated fleets are reasonably self sufficient and may have some excess fleet management capacity. Some large CSOs (with professional fleet managers) seem willing to offer small CSOs an inter-agency fleet management service. Most CSOs believe they do a good job on fleet operations, but lack knowledge & a strategic approach on the bigger fleet issues. Many require assistance with certain fleet management issues detailed below. A recent HACC vehicle survey, reported that 129 Agencies operate between them 120 buses, 235 cars and 19 other type vehicles; average vehicle size per Agency is just less than three units.(9) Page 21 of 50

22 8.2 CSO Fleet Requirements Take maximum advantage of Government tax concessions Facility to assist CSOs to receive the full benefit of FBT concessions for exempt organisations. Facility to help CSO to receive the full benefit of registration concessions. (7) Take maximum advantage of vehicle discount structures Facility to ensure CSOs receive the maximum manufacturer & dealer discount entitlements. (7) Facility to simplify CSO access to manufacturer & dealer discount entitlements. (7) Provide a Fleet Manager facility for CSO with smaller fleets Facility to give CSOs access to experienced & trusted fleet management advice. Facility to easily contact a fleet management professional to get quick answers on operational problems & issues. Facility to enable CSO access to experienced & trusted Fleet Manager Provide a facility to share fleet management information Facilitate a regular CSO information interchange, perhaps a Fleet Manager Forum chaired by a Fleet Manager Professional. Facility to easily access the fleet information, fleet knowledge, market intelligence and a range of tools to assist in the fleet strategy formulation & fleet operations. Facility to easily compare the costs, strategies & performance against other CSOs results & fleet industry best practice Provide a facility for CSO collaboration System to encourage small CSOs to come together to generate critical mass & economies of scale to concentrate expertise, buying power & systems. A fleet network aimed at significantly reducing the total time and costs involved in the buying, operating and disposal of vehicles. Page 22 of 50

23 8.3 CSO Fleet Problems & Issues Fleet Size & Utilisation Significant idle vehicle capacity exists in CSOs collectively that could be liberated to meet temporary demand for vehicles for other CSOs and reduce total CSO fleet sizes Fleet Financing & Management CSOs fund their vehicles mostly using outright purchase. There is a significant variation in funding methods, funding length & funding costs & rates. CSOs generally seek external funding due to insufficient internal capital. CSOs experience problems selecting the appropriate external vehicle financiers, finance type and funding period. CSOs want flexibility in fleet finance periods as programs change in length & nature (and so, vehicle requirements). Smaller CSOs are not generally aware of the benefits & drawbacks of the different funding options available and the funding decision is based primarily on available capital or DHS program funding. A mismatch between the DHS funding period & vehicle finance period sometimes occurs when programs change. Introduction of the GST in 2000, and the decline in used car values, has created a significant funding gap to be financed on vehicle changeover. The vehicle replacement funding gap was generally reported to be between $4,000 and $7,000 (depending on age & kilometres) on typical fleet vehicle changeover. Most small CSOs did not know off the top what it was costing to operate a vehicle for a year, indicating poor information systems or lack of interest. Most CSOs expressed a strong interest in having a relative measure of their fleet performance against their fellow CSOs or other industry benchmark to determine how well (or not so well) they are performing Fleet Age & Replacement Cycles CSOs report significant uncertainty about determining the distance travelled & kilometre limits at the time of new vehicle acquisition, reflected in significant variation in vehicle changeover periods within CSOs and between CSOs. Most CSOs have no apparent basis or framework for making vehicle changeover decisions and deciding future replacement cycles. Most decisions seem based on intuition, or following other agency practices (VicFleet, DHS) or the used car market movements or new vehicle releases Vehicle Specification & Selection Some CSOs interviewed expressed the need for data & research to help decide the best vehicle to purchase for their particular transport requirement. Page 23 of 50

24 8.3.5 Vehicle Acquisition Nearly all CSOs experience considerable difficulty in accessing State Government manufacturer discounts. The problems include authorisation letters for every vehicle purchase, confusion at manufacturer & dealer levels on CSO entitlements to various discounts and difficulty in accessing and enforcing discount entitlements Vehicle Disposal Nearly all CSOs expressed their difficulty in understanding ( reading ) the current used vehicle market, pricing used vehicles & determining the best method of disposal. Some CSOs use a Fleet Manager for vehicle disposal, but complain of high fees & costs Vehicle Maintenance Some CSOs have experimented with manufacturer scheduled service schemes and most now take the (low) maintenance risk themselves. Maintenance costs are not seen as a major issue for most CSOs as most CSOs vehicles do not operate high kilometre vehicles Fleet Fuel Management CSOs have experienced considerable difficulty & delay in accessing the State Government Fuel Contract. CSOs in regional & remote areas often need to carry multiple (up to 3) fuel cards to purchase fuel in remote locations Fleet Insurance & Accidents Most CSOs used brokers to obtain (and sometimes manage) their comprehensive vehicle insurance policies, premiums & claims Fleet Accounting & Reporting Most small CSOs do not generate, or use, vehicle budgets and most CSOs do not report vehicle actual costs or vehicle performance against budgets. Most CSOs do not generate or use cash budgets & forecasts for vehicle acquisition or replacements and do not generate or use cash budgets or a sinking fund for vehicle replacements. Page 24 of 50

25 Taxation (FBT) Most CSOs appear to understand and use the FBT concessions to reduce or eliminate the FBT liability arising from the private use of vehicles. Most CSOs (understandably) complain about the administration involving in logbook completion & processing, kilometre tracking and completing FBT Returns & reporting FBT Reportable Fringe Benefits Returns State Government Fees & Duties Most CSOs interviewed mentioned problems with registration fee exemption administration & conditions Fleet Management Service Providers CSOs occasionally mentioned they would like to access the State Government or DHS service providers. The service providers included car dealers (vehicles & maintenance), windscreen suppliers, tyre outlets and possibly professional fleet lessors. Notes (1) Initial Basic Fleet Resource Set Up & Operating Cost: Modern fleet information systems are available to meet the needs of A future Fleet Resource Centre. It will only be necessary to draw the systems together to meet the requirements of the CSO s. These cost estimates are made to identify the steps required to bring together the systems required. The FRC cost estimates are based on content research ($10,000), content authoring & development ($70,000), content formatting & presentation ($20,000) and content integration ($10,000) and initial server download hosting & configuration ($10,000). Ongoing content refresh & updating including some online assistance is estimated a 1 Contract Fleet Manager FTE at $60,000. The initial set-up cost amortised over 4 years ($30,000 per year) combined with a running cost of $60,000 per year results in an annual average running cost of $90,000 per year. (2) Lead Agency Business Infrastructure Costs: These are estimated at a minimum of $40,000 consisting of software licence fees $20,000, software implementation & consultancy $7,500, data conversion & interfaces $7,500, training & other $5,000. Software support fees & some limited ongoing training would cost about $6,000 per year recurring. (3) Fleet Managed Client Business Case: This commercial outsource business case needs to adapted for a 5, 10, 15, 25 & 50 vehicle CSO fleets to move to a Lead Agency Fleet Manager Service. A case study of 3 existing CSOs fleets would more accurately estimate the actual time & cost savings possible using an external fleet manager. A Best Practice Cost Matrix available on the Fleet Resource Centre would allow CSO to determine how close their fleet costs are to best practice. The Appendix contains an Outsourced Fleet Management Model that provides indicative savings. (4) Lead Agency Fleet Management Business Case: This needs to be developed with an existing Agency to understand the actual (incremental) costs & revenues involved in their role as an external fleet manager. However, the minimum economic fleet size to justify a full time fleet manager is generally considered to be about 250 vehicles. Page 25 of 50

26 (5) An Agency Fleet Network Infrastructure Package: The components are a Fleet Network Membership Agreement, Outsourced Fleet Services Agreement, Fleet Management & Vehicle Pool System. Agreement preparation costs are estimated at $20,000 and Fleet Management Systems costing $40,000. No allowance is made for Process Facilitation costs. Ongoing costs for consultancy & software support & training fees would cost about $10,000 per year recurring. (6) An Agency Fleet Network Business Case needs to be developed to with an existing informal Fleet Network(s) to understand the structure, time & cost savings available to network members under this model. Prepare the Network Member Business Case for CSOs with 25, 35, 50 & 75 vehicles to move to a Fleet Network Manager Service. A Best Practice Cost Matrix available on the Fleet Resource Centre would allow CSO to determine how close their fleet costs are to best practice. (7) Maximum CSO Benefit Analysis: For example, access to State Government vehicles discount (compared to the general fleet discount available to fleets of more than 10 vehicles) would reduce the average annual finance costs by 17% and result in a 12% annual operating cost reduction on a $30,000 fleet vehicle. Access to the registration concession could save $150 per year. Use of the FBT concession could be worth $3,300 to $7,800 per vehicle per year depending on FBT calculation method and distance travelled. (8) The CSO Total Fleet Size Estimates are provided in the Appendix. (9) Summary from HACC Fleet Survey conducted in July, DHS funds roughly 500 HACC Agencies and a recent survey revealed that 300 HACC CSOs operate about a total fleet of 500 vehicles, with 60% of CSOs running micro fleets (<6 vehicles). The survey also indicated that about 25% of these agencies obtain Government Vehicle Discounts, 50% use local dealers, 15% external fleet management & 12% use external (lease) finance. 5% of HACC CSOs use a Government fuel card and over 80% of the fleet is replaced at less than 80,000 kms & 3 years old with a normal manufacturer distribution. Page 26 of 50

27 9 Appendix Contents The Appendix consists of the following sections: 1. Contents Community Sector Organisation Interview List Fleet Resource Centre Information Services Guides Templates Directories Tools Supplier Links Total CSO Sector Estimates Total CSO Vehicle Population Estimates CSO Sector Fleet Size Distribution Estimate Outsource Fleet Management Business Case Introduction Business Situation Business Decisions Business Case for Outsourcing the Management of the Fleet Direct Cost Savings Indirect Cost Savings Arguable Cost Savings Outsource Business Case Worksheet Fleet Management Best Practice Principles...41 Page 27 of 50

28 10 Community Sector Organisation Interview List The following CSOs were interviewed as a representative sample of the type and size of organisations, based on the number of Service Plans by type and the spread of DHS funding. Table 1 List of Agencies Interviewed Interviewed Agency Indicated fleet size Rural City of Mildura Turning Point Alcohol Drug Centre 8 St Vincent de Paul 40 Royal District Nursing Service 30 Frankston City Council 14 Eastern Volunteer Resource Centre 6 Bendigo City Council 10 City of Boroondara 14 City of Monash 9 The Salvation Army 355 City of Geelong 9 Ballarat District Nursing 26 Child & Community Service Ballarat 33 HomeGround Services 25 Mallacoota District Health 6 Quantum Support Services 50 Ramahyuck District Aboriginal Service 12 Wimmera Volunteers 4 Wesley Mission 120 Berry Street 180 City of Kingston 30 Community Connections South West Alliance 10 United Care 100 plus Aspire 15 Australian Home Care Services Scope Vic Page 28 of 50

29 11 Fleet Resource Centre Introduction This section details the types of services that could be available on the Fleet Resource Centre. The site content, detailed by fleet management subject area s are detailed below. The purpose of this facility is to move CSOs, who self manage or outsource management, to an improved level of fleet performance as measured by lower costs per kilometre per vehicle and less CSO time in fleet management functions. The FRC will allow CSOs to compare their fleet performance against best practice vehicle cost management. CSOs could determine their performance gap and decide their strategy to reduce the gap. These service definitions are still work in progress and can be further refined during the CSO Fleet Workshops. Below is a comprehensive list of information services, practice guides, templates, templates, tools, directories and supplier links Information Services New Vehicle Specification Information Service New Vehicle Performance Review Service New Vehicle Manufacturer Discount Information Service New Vehicle Fleet Intelligence Service Used Vehicle Market Intelligence Service Vehicle Warranty & Recall Programs Service Salary Packaged Vehicle Information Service Page 29 of 50

30 11.2 Guides Vehicle Selection: How to select & specify the right vehicle for your requirements. Vehicle Discounts: How to determine your eligibility and get access to government new vehicle manufacturer discounts. Vehicle Sale: How to sell used vehicles to maximise the resale value. Vehicle Insurance: How to arrange the best comprehensive vehicle insurance policies for your vehicles & fleet. Vehicle Registration: How to access the Victorian Registration fee exemption. Fleet Reporting: How to account & report on your fleet operations. Fleet FBT: How to minimise FBT & access FBT concessions. Fleet Manager Selection: How to select & manage a Fleet Manager. Fleet Replacement Cycle: How to decide the best replacement cycle for your vehicles. Vehicle Packaging: How to use salary packaged vehicles to hire and retain the best employees. Vehicle Maintenance: How to select the best vehicle maintenance plan for your fleet Templates CSO Vehicle Accounting & Reporting Templates. CSO Fleet Management Best Policies & Practice Templates Directories New Vehicle Dealer Directory Comprehensive Vehicle Insurance Broking Services Directory. Novated Lease Service Provider Directory. Professional Fleet Lease Service Provider Directory. Commercial Fleet Management Service Provider Directory. Page 30 of 50