Service Delivery and Performance Commission Page 17 4 Current Model Analysis 4.1 Introduction Chapter 3 provided an overview of fleet management operations in the Queensland Government including identifying the scope of QFleet s operations. Also included in chapter 3 is a comparison of interstate approaches to fleet management. This chapter analyses the key components of centralised fleet management, leasing and ownership issues and addresses QFleet s current fleet management model including policy, systems and processes. 4.2 Centralised fleet management 4.2.1 Introduction The BDO Kendalls report concluded the centralised model was the preferred model for fleet management as it enabled better focus on efficiency and cost savings. BDO Kendalls noted the effectiveness of the centralised model would be dependent on the efficient operation of the fleet management organisation [7]. 4.2.2 Stakeholder perspective Stakeholder consultation during the Review indicated agencies place value on the centralised management model. It is perceived the QFleet model generates better value for government than other models through control of the fleet mix, belief that QFleet obtains better contractual prices from manufacturers, and control through whole-of-government reporting allowing for informed decision making. There is considerable support from stakeholders for the continuation of the centralised model for procurement and management of the Queensland Government fleet. Manufacturers, motor vehicle dealers and repairers confirmed the centralised model is the most efficient to service. It is not their preference to deal with individual government agencies. Centralised management ensures costs to government are negotiated and managed based on industry standards. In considering the implications for a decentralised model for the management of the fleet, it is anticipated additional costs to government would be incurred for the purchase and maintenance of motor vehicles. For example, additional costs are to be expected through disaggregated forecasting, duplication of processes and systems across agencies and additional costs for manufacturers and suppliers to service the government. 4.2.3 Findings BDO Kendalls identified QFleet s centralised approach to fleet management to be the most effective approach. The centralisation of the management of vehicles as a specialist function, allows a better focus on efficiency and cost savings. With the concentration of skills, knowledge and experience, best practice procedures can be developed and implemented [7]. All other government jurisdictions operate some form of centralised fleet management to manage the risks associated with a large fleet.
Page 18 Service Delivery and Performance Commission The Queensland Government s centralised fleet management model is operating effectively, with QFleet as the whole-of-government fleet manager for its leased assets. 4.3 Leasing and ownership 4.3.1 Overview The establishment of QFleet and the transfer of vehicles from agency ownership to QFleet ownership took three years from QFleet s inception in 1991. The transfer was made on the basis of agencies receiving equity in QFleet at the time that owned assets were surrendered for leased assets [6]. Prior to QFleet s establishment, each agency controlled its own fleet and the decision to lease or own the fleet. The SDPC has not been able to ascertain if any agencies elected to lease their fleets prior to the establishment of QFleet. Government benefits from ownership The Queensland Government receives the following benefits from fleet ownership: control over assets; risk minimisation through fleet mix and disposal management; client responsiveness; control over fleet management reporting data; ability to respond to emergencies and disasters; and access to funding at lowest rates. 4.3.2 Leasing versus ownership analysis Government agencies consulted during the review had strong opinions in relation to QFleet s lease price. Government agencies were not satisfied with receiving leasing costs without the components of the lease charge being transparent. Stakeholders consulted during the Review raised the issue that leasing companies often offer reduced costs in the first few years of a leasing agreement to secure the contract. To validate this information, the Review conducted an analysis of a GOC fleet leasing arrangement to provide a reasonable comparison of actual leasing costs. Data provided by leasing companies during the Review revealed that QFleet s internal leasing methodology and cost structure was competitive with the private sector in most vehicle segments. GOC case study The GOC analysed utilises services from two private leasing companies in addition to QFleet. GOCs are not tied specifically to using QFleet for acquisition of vehicles. Information provided by the GOC on its lease costs with the two private leasing companies and QFleet is provided in Figure 2. The information within Figure 2 reveals that QFleet s average lease cost provided to the GOC is $23,900.24. This is August 2007 Report on Review of QFleet in the Department of Public Works
Service Delivery and Performance Commission Page 19 $3,086.58 less than Leasing Company A, and $11,869.18 less than Leasing Company B. Figure 2: Comparison of lease prices 40,000.00 Full-term lease price 35,000.00 30,000.00 25,000.00 20,000.00 15,000.00 10,000.00 26,986.82 35,769.42 23,900.24 5,000.00 0.00 Leasing Company A Leasing Company B QFleet Source: SDPC QFleet Review Team This analysis is premised by a sample of approximately 200 vehicles distributed across the two leasing companies and QFleet with a sample of vehicles and lease terms that are comparable, but with different average kilometres. Analysing the same set of data based on an average cents per kilometre cost, QFleet is marginally more expensive than the private leasing companies. Figure 3 provides this comparison. Figure 3: Cents per kilometre comparison 0.03000 0.02900 0.02800 0.02700 0.02600 0.02500 0.02400 Leasing Company A Leasing Company B QFleet Source: SDPC QFleet Review Team The trend in the other state jurisdictions was to move towards a leasing model. NSW is an example where this occurred, however NSW is now reverting to an owned model. The decision for the NSW government to own its fleet was based on: the lending rate through NSW Treasury being more economical than rates available through the private sector; ownership being easier to manage centrally than a leased fleet; each agency not being required to maintain asset registers, as this is done centrally; and
Page 20 Service Delivery and Performance Commission a 2002/03 review recommended a centralised ownership model (based on some of the above factors). If the Queensland Government was to move to a leasing model, it would be extremely difficult to revert to an ownership model. The capital investment required to purchase 14,000 vehicles would be approximately $312 million. Ability to respond to emergency/disaster situations If QFleet was to enter into a leasing arrangement for its current fleet requirements, it may reduce government s ability to respond promptly to disasters and emergencies, and may increase costs. These events normally require an immediate supply of additional vehicles to support the response effort. If the fleet was leased, not owned, vehicles would need to be sought from the lessor. Leases with private companies are time and kilometre based, with cash flows from the lease ceasing as the lease ends. An external provider will recover the asset and liquidate it as soon as possible. If the provider did agree to re-lease the vehicle, the following risks would need to be assessed and managed accordingly: a secondary lease on a vehicle may be very expensive when the lessor is not quoting in a competitive market; and emergency/disaster situations do not have identifiable start and end dates and these are the basis of the lease. It is likely an additional cost for retention or early surrender of vehicles will arise. These costs are not able to be quantified but they would not be insignificant. Under a leasing model, another option for responding to emergency/disaster situations would be for agencies to increase their fleet numbers across the state with the surplus being surrendered for deployment to the affected areas. This would be costly and an over-commitment of resources. The government s responsiveness for the provision of vehicles was demonstrated by the response to Cyclone Larry, Fire Ants and Citrus Canker outbreaks. QFleet worked in cooperation with agencies to deploy vehicles to enable agencies to meet their objectives. Approximately 250 vehicles were removed from auction lots and end-of-lease processes for deployment [6]. 4.3.3 Findings The current centralised model for fleet management is working effectively and offers the best value for government through aggregation of services and activities. The ownership of the fleet enables the Queensland Government to ensure control of associated risks. If the Queensland Government was to move to a leasing model, it would be extremely difficult to revert to an ownership model. The capital investment required to purchase 14,000 vehicles would be approximately $312 million. QFleet s internal leasing methodology and cost structure is competitive with the private sector, but is not transparent to clients resulting in criticism from agencies. QFleet should actively market their services to GOCs and other government organisations. August 2007 Report on Review of QFleet in the Department of Public Works
Service Delivery and Performance Commission Page 21 The ownership arrangement should be reviewed on a regular basis to ensure it remains the best model for government. Recommendation 1 It is recommended that the Director-General of the Department of Public Works: i. continues to provide an ownership model for fleet management in the Queensland Government through QFleet; ii. continues the tied arrangements, whereby all Departments of the Queensland Government, except where exempted by Cabinet, are tied to QFleet s vehicle leasing and fleet management services and the continuation of its operations as a broker of fleet leasing; iii. arranges an independent review of the ownership model, occurring every three years to ensure it remains the optimal model for the management of the Queensland Government fleet; iv. ensures the lease price components are transparent to government agencies by 31 December 2007; and v. commences active marketing of fleet services to government owned corporations by 31 December 2007. 4.4 Whole-of-government fleet policy 4.4.1 Introduction This section outlines the governance processes in place for whole-of-government fleet management policy. The application of policy relates not only to QFleet owned vehicles but also the additional agency owned vehicles. 4.4.2 Whole-of-government policy overview Historically fleet management policy within the Queensland Government has been developed and implemented at two levels: whole-of-government policy endorsed through Cabinet and at Ministerial level; and individual agency creation and application (operational policy). Whole-of-government policy ensures consistent application of processes and enables the discharge of reform. Fleet management policy development and monitoring enhances the operational effectiveness of the Queensland Government fleet by: management of fleet mix; ensuring vehicles are fit-for-purpose; vehicle utilisation; ensuring vehicle accessories are fit-for-purpose; and future vehicle requirements are known in advance.
Page 22 Service Delivery and Performance Commission 4.4.3 Whole-of-government reporting Historically, for reporting purposes the whole-of-government fleet has encapsulated the 14,000 vehicles owned by QFleet. The Review identified additional vehicles owned by government agencies that are not included for reporting purposes. Without a central body collating whole-of-government fleet information there is the potential to mislead government on policy development, review and compliance. 4.4.4 QFleet s policy role QFleet has assumed the whole-of-government policy role to progress the government s priorities and objectives in the absence of a central owner. QFleet assumed this role to control the Queensland Government s risk exposure with the fleet mix profile. QFleet has demonstrated that it has the fleet management expertise and systems to undertake this activity. 4.4.5 Policy Advisory Group The Whole-of-Government Fleet Management Review (WOGFMR) undertaken by DPW with QFleet as the lead agency in 2005, identified savings of $8.5 million per annum to be maximised across the Queensland Government fleet by mid-2008. WOGFMR recommended the establishment of the Policy Advisory Group (PAG), comprising agency and SSP representatives to address the lack of a fleet policy group in Queensland Government. The PAG was formed in October 2005 to develop and review government fleet management policies for fleet composition, safety, environment and to monitor the resulting whole-of-government fleet savings. PAG members expressed a number of concerns to the Review regarding fleet policy: a central organisation within government should be responsible for establishing fleet policy a central organisation needs to be given the mandate to develop policies; there is no governance structure above PAG; PAG is an information sharing forum only; PAG sub-committees are ineffective as there have been no outcomes; and some policies are made without the input of QFleet or PAG that have had significant impacts on QFleet s operational performance. PAG has existed for 18 months without a policy being forwarded to the Director- General of the Department of Public Works for endorsement. 4.4.6 Findings There is no coordinated control over the development, implementation and monitoring of whole-of-government fleet policy. The PAG was established to undertake this activity on behalf of the Queensland Government, but has been ineffective due to lack of governance. August 2007 Report on Review of QFleet in the Department of Public Works
Service Delivery and Performance Commission Page 23 As the Queensland Government s fleet manager, QFleet has the capability and systems to perform a fleet policy and reporting role on behalf of government. A whole-of-government approach is reliant upon collaboration with government agencies with owned vehicles. Recommendation 2 It is recommended that the Director-General of the Department of Public Works establishes a policy capacity within QFleet by 31 March 2008 to: i. develop, implement and monitor policy across the sector; and ii. extend the role of the policy unit to encompass the 19,000 vehicles owned by the Queensland Government. Recommendation 3 It is recommended that the Director-General of the Department of Public Works: i. disbands the Policy Advisory Group by 31 December 2007; ii. creates a steering committee to monitor the development and implementation of whole-of-government policy by 31 December 2007; iii. enhances QFleet management systems to include reporting for all the Queensland Government vehicles by 30 June 2008; and iv. be responsible for whole-of-government fleet reporting by 30 July 2008. Recommendation 4 It is recommended that the Director-General of the Department of Public Works provides strategic advice to agencies in framing agency based fleet policies that are aligned with the whole-of-government policy requirements by 31 March 2008. This will include: i. fleet planning, profiling and modelling; and ii. strategic, tactical and operating performance reporting. 4.5 Environmental initiatives and policy 4.5.1 Introduction Protecting the environment for a sustainable future is a key government priority. The Queensland Government has provided leadership for a number of years in reducing the environmental impact of its motor vehicle fleet. Outlined in this section are QFleet s environmental initiatives implemented on behalf of government and the future plans to reduce the effects of emissions. 4.5.2 Fleet environmental management QFleet acknowledges its responsibility to the government s environmental priorities and actively seeks to minimise the environmental impact of the fleet through the following strategies: reducing the number of vehicles in the fleet by promoting greater utilisation; maximising the environmental efficiency of vehicles in use;
Page 24 Service Delivery and Performance Commission neutralising greenhouse emissions of the fleet; promoting the selection of fit-for-purpose vehicles with the best environmental performance; and subscribing to a greening organisation for the planting of trees to reduce carbon in the atmosphere. In 2000, QFleet appointed a full-time Environmental Manager to develop and coordinate fleet-oriented environmental obligations and initiatives. QFleet has improved environmental practices during this period including partnering with vehicle manufacturers and suppliers in trialling alternate technologies and fuels. QFleet gained the recognition of its peers in the fleet management industry when awarded the Australasian Fleet Managers Association s National Fleet Environmental Award for 2002. 4.5.3 Environmental future for QFleet QFleet is providing fuel consumption figures online for all new vehicles enabling agencies to consider fuel consumption and CO 2 emissions when making vehicle selection decisions. This will soon be augmented by the inclusion of the environmental star-rating system developed by the Commonwealth Department of Transport and Regional Services. The intention is to promote environmental issues as an additional factor in the client vehicle selection process. Recent government policy directions have positive linkages to environmental management. Two of these policy directions were the banning of eight cylinder vehicles and the move from six to four cylinders. While it is generally accepted that smaller engines produce fewer emissions, this is not always true. Developments in engine technology and improvements in fuel quality standards are narrowing the environmental performance gap between some six and four cylinder vehicles. QFleet s focus in terms of vehicle selection policy is shifting from the broad application of cylinder number criteria to scientifically derived, vehicle specific emissions data. Despite QFleet encouraging agencies to move to smaller, more fuel efficient vehicles, agencies presently determine the composition of their fleets. QFleet and government agencies could further reduce greenhouse emissions and demonstrate leadership by: rationalising the government fleet; pooling government owned vehicles to maximise their utilisation; considering new alternative technologies; ceasing unnecessary home garaging; using taxi vouchers when attending nearby events such as conferences and training courses as opposed to taking a vehicle for the day; better utilisation of teleconferencing and video conferencing; continuing high level whole-of-government reporting on the government fleet in relation to environmental management; and ensuring vehicles are being maintained e.g., tyre pressure to improve economy. August 2007 Report on Review of QFleet in the Department of Public Works
Service Delivery and Performance Commission Page 25 Recommendation 5 It is recommended that the Director-General of the Department of Public Works: iv. continues to invest in environmental fleet management strategies; v. extends environmental fleet management strategies to all government owned vehicles by 30 June 2008; and vi. through development and implementation of policy further reduces the government s fleet greenhouse emissions by December 2009. 4.6 Fleet Management Information Systems 4.6.1 Introduction This section explores the information technology solutions used by QFleet and agencies to facilitate fleet management and reporting of the Queensland Government fleet. QFleet relies heavily on information to manage and inform government on fleet issues. With its new policy role, this will become increasingly important. The information that QFleet requires will need to be extended to include the agency owned vehicle fleet. 4.6.2 Overview of QFleet fleet management information systems QFleet s core fleet management system, Kerridge, was implemented in 1999. The systems design is aged and proprietary technologies used in Kerridge make it difficult to integrate with external systems. Such inter-operability is an increasingly important requirement for business systems. QFleet is participating in a large and growing number of business-to-business processes that need to be facilitated by system-tosystem integration. While the system does provide adequate functionality to support core fleet processes, the identified deficiencies and risks associated with its continued operation within QFleet confirm it is now technically obsolete and at the end of its effective life. The tender process for the replacement of Kerridge is well advanced and is expected to allow the preferred solution to be successfully implemented by early-2008. This aligns with the current planned rollout of the Shared Services Solutions for finance and human resources (HR) within DPW. QFleet has two client interfacing systems running in parallel. These systems are the Client Access System (CAS) and Fleetscape, and are explained in more detail below. Both systems use Kerridge to draw data to provide fleet reporting and perform fleet functions.
Page 26 Service Delivery and Performance Commission 4.6.3 Client Access System Developed by QFleet in 1996, CAS was one of the first online fleet reporting systems available to the Queensland Government. CAS reporting functionality includes: details of active vehicles leases; returned vehicle data; electronic invoice downloads; insurance reporting; vehicle utilisation; accident management; electronic acceptance of lease agreements; fines management; lease rate calculator; online vehicle auction; and fringe benefit entry, reporting and calculation. Reports can be extracted from CAS at the agency and regional level. QFleet is in the process of decommissioning CAS and arranging the transfer of its functionality into Fleetscape to enable one whole-of-government fleet management system. 4.6.4 Fleetscape On 6 July 2006, Cabinet endorsed that QFleet develop a single fleet system, Fleetscape to provide a consistent approach to fleet management across government to support the outcomes of WOGFMR. Fleetscape s technical environment (including programming language and database) allows the system to be scalable, secure, and exchange and use information from a variety of sources. This is suitable for large-scale deployments such as online ordering. Fleetscape is supported by an integrated protocol to enable incorporation with external systems running in disparate environments and on disparate platforms. It also supports a range of other integration techniques that can be used to develop efficient business to business processes. To date 83% of agencies are connected to Fleetscape [6]. QFleet s implementation plan includes quarterly regional training, weekly training in Brisbane and ongoing telephone support. The current functionality of Fleetscape is facilitated by the following modules: policy module: allows QFleet to embed whole-of-government and agency policy into the system. This governance process ensures agencies order only those vehicles that comply with policy; online ordering module: allows agencies to compare vehicles and whole-of-life costs, approve and order a vehicle online via workflow; FBT module (previously in CAS): will enhance data integrity, improved probity of process via exposure of home garaging and private use of government motor vehicles and provides FBT entry, reporting and calculation; August 2007 Report on Review of QFleet in the Department of Public Works
Service Delivery and Performance Commission Page 27 business activity monitor module: allows QFleet to monitor turnaround times at various stages of processes, it reports against the key performance indicators for clients and QFleet staff. QFleet s intention is to incorporate this tool across a majority of operational processes; and return vehicle inspection module: in use by QFleet return agents across the state, allows return agents to print Return Vehicle Inspection forms with vehicle and accessory details (for inspection) and notifies QFleet staff to terminate a lease. The future functionality of Fleetscape is depicted in Figure 4. The following modules will be developed: reporting; maintenance management; accident management; pooling and parking; and interfacing with SAP finance. QFleet identified the commercial potential for Fleetscape when introducing the system into government agencies. DPW has identified an industry partner with both the interest and capability to progress the product commercially. This led to the commercialisation of the system and subsequent selling to private sector fleet managers. Figure 4: Future functionality of Fleetscape Source: QFleet
Page 28 Service Delivery and Performance Commission 4.6.5 Stakeholder feedback regarding CAS and Fleetscape Throughout the consultation phase of the Review both QFleet staff and clients identified the following issues: QFleet staff are required to update rate tables in both CAS and Fleetscape creating inefficiencies through duplication of data entry; data inaccuracy such as incorrect operating locations and odometer readings being recorded in CAS; delays in loading vehicle pricing into both systems by QFleet for client viewing which causes delays to clients ordering vehicles; vehicle quotations are no longer valid within Fleetscape after 14 days, resulting in lost data for the users; and available training manuals or procedures are inadequate. 4.6.6 Findings QFleet s core fleet management system, Kerridge, does not provide a cost effective or functional platform to support QFleet s business. QFleet is operating parallel client interfacing systems. There is duplication of effort and increases possibilities for inconsistent information. Fleetscape will provide government with enhanced governance and reporting capability when developed to its full potential however there are outstanding functionality issues that must be resolved. Recommendation 6 It is recommended that the Director-General of the Department of Public Works: i. removes the duplication of effort by converting the Client Access System s reporting capability to Fleetscape by 31 January 2008; ii. corrects the functionality issues within Fleetscape by 31 March 2008; and iii. reviews its internal processes and key performance indicators for loading vehicle data into Fleetscape by 30 November 2007. 4.7 SSPs and Fleet Management 4.7.1 Introduction Across the sector there are 129 FTE staff engaged in fleet management activities. These activities are undertaken by approximately 550 QFleet, agency or SSP staff. 4.7.2 SSP role in fleet management Stakeholders consulted during the Review raised the issue of role clarity between QFleet, agencies and SSPs. Stakeholders perceive the pressure on SSPs to return dividends to government has led to fragmented and inconsistent operating level agreements for fleet functions across government. The Review noted that prior to the August 2007 Report on Review of QFleet in the Department of Public Works
Service Delivery and Performance Commission Page 29 Shared Service Initiative (SSI) QFleet was providing many of these services directly to agencies. Under the SSI, some agencies transitioned staff to SSPs to provide fleet administration activities. There is duplication between some SSPs and agencies, where transitioned services are also being undertaken in the agency. In considering roles and responsibilities the Review identified two main areas of fleet administration duplication: vehicle selection and ordering; and pooling and parking. Both of these areas of fleet administration involve duplication of fleet information systems or processes. 4.7.3 Vehicle selection and ordering Some agencies order their vehicles through their SSP. The SSP then utilises Fleetscape and/or liaises and negotiates directly with QFleet. The SSP then provides information to the agency for approval prior to placing the order with QFleet. A diagram of this process is provided in Figure 5. Figure 5: Current model for vehicle ordering QFLEET FLEETSCAPE FLEETSCAPE SSP Various methods AGENCY Source: SDPC QFleet Review Team CorporateLink, as a Queensland Government SSP, sources vehicles through QFleet for agencies and adds a management fee per month onto each vehicle lease. This charge recovers administration costs and an FBT liability estimate. For CorporateLink clients, the final charge the agency receives from the SSP is greater than QFleet s lease charge, but is representative of fleet management resources transitioned to CorporateLink. Conclusions identified in the WOGFMR and approved by the Cabinet Budget Review Committee regarding vehicle selection will lead to: a standard approach to streamlining the process resulting in efficiencies; an electronic system to support and capture the requirements of all clients; whole-of-government standardisation of the principles and approaches to vehicle selection policies; and improvement in vehicle utilisation delivering savings by reducing fleet size across whole-of-government, which in turn will reduce the effort required in ordering vehicles.
Page 30 Service Delivery and Performance Commission 4.7.4 Pooling and parking Within the Queensland Government, agencies and SSPs operate parking and pooling services. A.T. Kearney identified approximately 2,070 passenger vehicles that are currently underutilised. It is estimated approximately 1,000 of these vehicles could be pooled. Although more difficult to implement, additional opportunities exist within the commercial range. Preliminary estimates indicate savings to government of between $2.2 million and $5.3 million [8]. CorporateLink provides a pooling and parking facility for some of their client agencies, both in the CBD and in regional Queensland through the Asset Management Information System (AMIS). The main functionality of AMIS is facility and telecommunications management. AMIS also provides some fleet management activities. AMIS interfaces to SAP downloading cost allocations to cost centres in the general ledger. A project has been established to look at the integration points between Fleetscape and the AMIS pooling and parking module. The purpose of this review is to ascertain the best whole-of-government solution for pooling and parking. This initial review is expected to by completed by August 2007. 4.7.5 Findings There is some duplication of activities between QFleet and SSPs. There are agencies that deal directly with QFleet for the provision of motor vehicles, and others that source this service through their SSP. There are opportunities for additional savings to government for the pooling of motor vehicles. The issues surrounding the implementation of the pooling and parking solution in the Queensland Government is currently being investigated by QFleet and the Shared Services Agency. The use of a single common system to order vehicles will allow a seamless, consistent and efficient process for ordering vehicles directly with QFleet. Recommendation 7 It is recommended that Directors-General ensure: i. their agencies use Fleetscape, particularly the online vehicle ordering module, to support QFleet in the procurement process by 31 December 2007; and ii. that where the agency has transitioned fleet administration activities to the Shared Service Providers, there will not be a fleet coordinator or equivalent in that agency. Vehicle drivers will deal directly with the SSP for vehicle specification requirements. Recommendation 8 It is recommended that the Director-General of the Department of Public Works ensures Fleetscape is the fleet management system and QFleet is the information owner for all QFleet leased vehicles. August 2007 Report on Review of QFleet in the Department of Public Works
Service Delivery and Performance Commission Page 31 Recommendation 9 It is recommended that the Director-General of the Department of Public Works and the Managing Director of the Shared Service Agency establish a protocol to ensure there is a single parking and pooling solution for the Queensland Government by 31 December 2007. 4.8 Human resources 4.8.1 Introduction The General Manager of QFleet reports to the Deputy Director-General (Services) within the Department of Public Works. The workforce falls into three main categories being Fleet Operations, Business Strategy and Development, and Leasing and Procurement Services. Figure 6 shows QFleet s current position allocation. Figure 6: QFleet organisational chart Office of the General Manager 5 Director, Fleet Operations 1 Business Strategy and Development Branch 13 Leasing and Procurement Services Branch 12 Fleet Client Services Branch Business Support Branch 25 16 Vehicle Remarketing Branch (Workshops) 73 = Number of positions in Branch Source: SDPC QFleet Review Team QFleet has 145 positions. Of these, 114 are FTE occupied positions; 10 positions are occupied by apprentices hired through an external arrangement; five positions are occupied by contractors employed for labour activities, and 16 are vacant positions. There are a further 22 occupied positions provided through the DPW Corporate (11) and Shared Services Agency (11) for which QFleet pay a fee to manage finance, human resources and information technology. The Review has undertaken a fleet management industry comparison of QFleet s current staff numbers. To facilitate the comparison, QFleet s staffing numbers have been adjusted to account for the differing service model to the private sector (i.e., workshop and positions directly attributable to achieving government priorities). DPW Corporate and CSQ service provision has been included in the adjusted workforce number. QFleet s adjusted workforce of 75 confirms one FTE equates to 186 vehicles managed per person (based on approximately 14,000 vehicles). This compares unfavourably to information collected through consultation with the private sector suggesting one FTE equates to 225 vehicles managed per person.
Page 32 Service Delivery and Performance Commission 4.8.2 Findings In order for QFleet to meet industry comparisons of one FTE per 225 vehicles, it needs to reduce staffing numbers by 13 FTEs. The reduction in FTEs is to include a review of the services provided by DPW Corporate and the Shared Services Agency. In view of the additional initiatives stemming from the implementation of this report particularly in relation to leading various reforms, progressing information systems implementation, and establishing performance management arrangements, the additional 13 FTE positions could be utilised to assist QFleet in the short to medium term. Once these initiatives are implemented QFleet would need to adjust its staffing profile consistent with industry comparisons for the number of vehicles managed at that time. Based on current estimates this could realise recurrent savings of $0.8 million per annum. Recommendation 10 It is recommended that the Director-General of the Department of Public Works adjusts the staffing numbers within QFleet, and those agencies supporting QFleet, to ensure one Full Time Equivalent per 225 vehicles by 30 June 2009. August 2007 Report on Review of QFleet in the Department of Public Works
Service Delivery and Performance Commission Page 33 5 Fleet Operations 5.1 Introduction The focus of previous chapters was to profile the Australian Automotive Industry, identify the Queensland Government s fleet management model, and provide an overview of the current model. QFleet s new policy role recommended in chapter 4 will have a direct impact on the future strategic procurement of the fleet. This aspect of QFleet s future operations, as well as in-service fleet management, and end-of-lease processes are the three key components analysed in this chapter. Later chapters focus on QFleet s financial position and assessment of these services against the CBU principles. 5.1 Fleet acquisition 5.1.1 Strategic procurement of fleet Whole-of-government purchasing enables the government to achieve discounts on recommended retail pricing for its motor vehicles. Discounts can be a reduction from the recommended retail price depending on the manufacturer, type of vehicle, and whether that vehicle is locally manufactured or imported. QFleet s mandate is to purchase passenger and light commercial vehicles for the Queensland Government excluding QPS. Agency owned vehicles are currently purchased through contracts separate to the QFleet arrangement. This is potentially impacting on the Queensland Government s ability to negotiate bulk buy savings in the procurement of the whole-of-government vehicle fleet. A bulk buy is a commitment by QFleet to the manufacturer to purchase a certain volume of vehicles over a pre-determined period. From 2001 to 2007, QFleet negotiated vehicle bulk buys that reduced government s motor vehicle spend by $5.4 million compared to the government contract price negotiated for these vehicles. When negotiating bulk buy arrangements QFleet forecasts the government s forward requirements over a period of time, usually three months. QFleet does this by reviewing vehicles due for return and assuming that agencies will replace like for like. This exposes QFleet to a risk as there is no certainty agencies will take the lease on these vehicles. This is a reactive approach to purchasing, confirming QFleet does not have sufficient control over the procurement process. During this Review, the SDPC in conjunction with Queensland Purchasing, commissioned a private consulting firm (A.T. Kearney) to undertake analysis on potential savings on strategic fleet procurement. A fleet sourcing strategy developed by A.T. Kearney is provided in Appendix 4. The preliminary findings from A.T. Kearney for the passenger fleet are an estimated: 1 to 2% economic benefit through providing volume guarantees to suppliers (approximately $1.1 to $2.2 million per annum);
Page 34 Service Delivery and Performance Commission 1 to 2% economic benefit through providing a consolidated supplier base and increasing individual supplier volumes (approximately $1.1 to $2.2 million per annum); and 10% cost benefit on options (equivalent to 0.5 to 1% of total cost) with rationalised specifications and forward orders [8] (approximately $500,000 to $1.1 million per annum). These preliminary findings indicate potential savings for government through a consolidated approach to vehicle and accessory procurement. The commercial fleet was excluded from initial analysis, but is scheduled to be considered by the end of 2007. As the commercial fleet is approximately 43% of the total QFleet owned vehicle, it is likely greater savings will be achieved through the strategic procurement of the commercial fleet. Strategic procurement also has an environmental benefit. The reduction in the large vehicle segment, and assuming the fleet size remains constant over the next three years, the Queensland Government can expect to save approximately 7% in emissions by 2010. A.T. Kearney s preliminary findings indicate optimisation and procurement initiatives could boost the expected 7% emissions reduction by a further 7%. This estimate is based on kilo-tonnes of CO 2 per annum [8]. A summary of procurement benefits identified by A.T. Kearney is provided in Appendix 5. QFleet is currently consulting with the QGCPO of the Department of Public Works to establish a new Standing Offer Arrangement (SOA) with manufacturers. 5.1.2 Fleet mix When considering the fleet profile there are a number of elements to consider, including: make, model, and badge (i.e., Ford, Falcon, XT, Sedan) segment (i.e., large passenger vehicle) cylinders (six or four cylinder - encompasses commercial and passenger vehicles); vehicle configuration (i.e., new technology) fuel type (i.e., diesel, LPG, petrol or hybrid), and average age of fleet and kilometres travelled. Appendix 6 outlines the current fleet mix profile for the Queensland Government fleet. In October 2005, there was considerable concern and media attention regarding QFleet s stock holding, particularly with the large passenger six cylinder segment which represented 36.8% of QFleet s vehicles. The large proportion of large passenger six cylinder vehicles in the fleet was of concern to QFleet given the drop in the sales in the new car market and the subsequent impact on the used car market. Figure 1 in section 2.3 depicts the steady decline in this segment from mid-2003. August 2007 Report on Review of QFleet in the Department of Public Works
Service Delivery and Performance Commission Page 35 Recognising the issues in relation to the shift in the used car market for the large passenger six cylinder segment and luxury vehicles, QFleet set reduction targets for the composition of the fleet from 36.8% to 27.5% by 30 June 2009 (Appendix 7). QFleet recommended a policy change to support this transition which included the four cylinder preference policy and the broadening of the Senior Executive Services (SES) Officers range of vehicles. This range now includes lifestyle type vehicles such as four cylinder Subaru Foresters that were not previously available to SES. To date, government is ahead of expectations in meeting the 2009 target of 27.5% with the large passenger fleet currently at 29.74%. QFleet believes that its four cylinder preference policy has demonstrated by exceeding the change targets, that agencies allowed a user-chooser approach to determine which vehicles were acquired. This process affects the government s fleet mix profile. Agencies do not provide QFleet with planned forecasts. Fleet mix is mainly determined by local decisions made through discussions with vehicle drivers regarding their personal and fit-for-purpose requirements on a vehicle-by-vehicle basis. This approach is commonly known as user-chooser and does not support QFleet in accurately predicting the future vehicle requirements, monitor fleet mix at a point in time or forecast the government s future fleet mix profile with certainty. Information provided by QFleet shows that in 2005 QFleet purchased approximately 3% of all the new passenger and light commercials sold in Queensland. Being one of the biggest owners of vehicles in Queensland [9], QFleet has volume risk exposure that can affect the used car market. The user-chooser model in government agencies conflicts with QFleet s risk management responsibility on behalf of government. Product Risk Committee The Product Risk Committee (PRC) is the management forum within QFleet used to manage the composition of the fleet and set residual values. The PRC calculates the cost of maintenance for vehicles over ownership periods. These costs are calculated based on manufacturer s recommended servicing schedules, with QFleet negotiating the labour rate at a benefit to government. The PRC has limited decision making authority but is responsible for making recommendations to QFleet s Executive Management Team. When the Review met with the PRC there was recognition of the importance to manage the exposure to risk. QFleet believe government has a leadership role and social responsibility to ensure that vehicles are both environmentally sound and safe. QFleet reviews the safety specifications of vehicles and may elect to choose safety packs. 5.1.3 Findings The Queensland Government procures a significant number of vehicles. For the strategic procurement of fleet there are opportunities to further increase government discounts through volume by including vehicles owned by agencies.
Page 36 Service Delivery and Performance Commission To facilitate these savings QFleet must be responsible for the centralised vehicle selection decisions on behalf of government for the QFleet owned fleet. This strategy will improve the potential sourcing benefits by providing improved predictability for manufacturers and suppliers. The Queensland Government has a major impact on vehicle manufacturer s market share. As a result of this market share, government could potentially impact on the used vehicle market. The Queensland Government requires improved practices for managing the fleet mix to minimise the risk to the market. QFleet s ability to manage the fleet mix is affected by agencies user-chooser approach to vehicle selection. Current behaviours indicate government agencies do not consider the impact of their vehicle purchases on the market or the fleet mix. The SOA QFleet is currently negotiating with manufacturers is for three years, with a further three year extension. Recommendation 11 It is recommended that the Director-General of the Department of Public Works ensures: i. vehicle procurement processes are integrated between the Queensland Government Chief Procurement Office and QFleet to maximise savings for government by 30 June 2008; and ii. consolidation of the vehicle contract negotiation for all agencies, including owned fleets, be conducted through the Queensland Government Chief Procurement Office in accordance with the principles of the Service Delivery and Performance Commission Review of Purchasing and Logistics in the Queensland Government by 30 June 2008. Recommendation 12 It is recommended that Directors-General of agencies with owned vehicle fleets negotiate fleet contracts in conjunction with QGCPO and QFleet, in accordance with the principles of the Service Delivery and Performance Commission Review of Purchasing and Logistics in the Queensland Government by 30 June 2008. Recommendation 13 It is recommended that the Director-General of the Department of Public Works ensures QFleet manages the fleet mix profile through the selection of vehicles to meet the fit-for-purpose requirements for vehicles managed by QFleet by 30 June 2008. Recommendation 14 It is recommended that agency Directors-General collaborate with QFleet regarding their fit-for-purpose requirements for all specification requirements for vehicles managed by QFleet and not base decisions on make, model or badge by 30 June 2008. August 2007 Report on Review of QFleet in the Department of Public Works
Service Delivery and Performance Commission Page 37 5.2 In-service fleet management 5.2.1 Overview of in-service fleet management In-service fleet management includes those activities between vehicle acquisition and vehicle disposal. Predominantly, those activities are: leasing; accident management; environmental management; statutory renewal of the government fleet; strategic fleet management advice and reporting; maintenance and repairer network management; and operational and technical fleet management advice. 5.2.2 Accident management Jardine Lloyd Thompson manages the risk of accident damage to the Queensland Government s fleet and arranges comprehensive motor vehicle insurance on behalf of government. QFleet s current model of managing insurance related issues through a broker for the approximate 14,000 vehicles in the fleet is effective and has resulted in significant savings to government. The current arrangements are exclusive of the remaining estimated 5,000 vehicles owned by the Queensland Government. An aggregation of all 19,000 vehicles into the one insurance policy has the potential to result in considerable savings to government. Recommendation 15 It is recommended that the Director-General of the Department of Public Works: i. continues to arrange the brokering of insurance arrangement for QFleet vehicles through QFleet; and ii. engages Jardine Lloyd Thompson to undertake an analysis of the benefits of aggregating all 19,000 Queensland Government vehicles into the one insurance policy by 31 December 2007. 5.2.3 Short-term vehicle hire QFleet s Vehicle Hire Service (VHS) is the Queensland Government s short-term hire facility and also provides booking services on behalf of the Queensland Government with AVIS for short-term rentals. VHS has six vehicle hire outlets across Queensland with a total of 159 vehicles. These vehicles are leased by VHS from QFleet. VHS agency locations are: Brisbane - 83 vehicles; Toowoomba - 2 vehicles;
Page 38 Service Delivery and Performance Commission Maryborough - 2 vehicles; Bundaberg - 5 vehicles; Townsville - 7 vehicles; and Cairns - 60 vehicles. The additional vehicles in Cairns are due to the supply of vehicles for the Cyclone Larry relief effort, and the supply of four-wheel drive vehicles for the Far North Queensland region. These outlets offer short-term hire vehicles to agencies for a period of one day to two years. Vehicles offered range from small four cylinder sedans to large four wheel drive vehicles to support government agencies in their service delivery. The Brisbane VHS office provides a number of management services to Queensland Government departments including car pooling and parking, visitor car park, fuel card management and vehicle servicing. The agency plays a role in deployment of vehicles for emergencies/disasters where vehicles need to be deployed quickly and managed. VHS remains profitable at the utilisation rate of 80%. QFleet is currently exceeding this key performance indicator. Recommendation 16 It is recommended that the Director-General of the Department of Public Works ensures: i. QFleet operates the Vehicle Hire Service on a full cost recovery basis, maintaining a utilisation rate above 80%; and ii. the Vehicle Hire Service remains in QFleet. 5.2.4 Maintenance QFleet undertakes an outsourcing model for maintenance and repair of vehicles throughout Queensland. Scheduled maintenance and repairs occurs through dealerships and a state-wide repair network. Maintenance fees are charged to clients in accordance with the manufacturers recommended price schedule. Vehicle repair fees are negotiated on a case-by-case basis. Recommendation 17 It is recommended that the Director-General of the Department of Public Works ensures QFleet, in collaboration with the Queensland Government Chief Procurement Office, develop Standing Offer Arrangements with vehicle maintenance and repair suppliers for those activities inside and outside of warranty by 30 June 2008. August 2007 Report on Review of QFleet in the Department of Public Works