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Overcoming the Hurdles of Fleet Procurement
Whatever your problems are with procurement, other fleet managers have likely faced the same issues and overcome them. Here, fleet and procurement professionals discuss how they handle purchasing rules, cooperative agreements, improving vendor relationships, and long lead times for heavy or specialized equipment.
Overcoming ‘Buy Local’ Obstacles
Some fleet organizations are obligated to “buy local,” with local ranging from within the city, to counties in the area, to statewide. Depending on the fleet’s location, however, getting three bids may be difficult.
Douglas Adams, fleet superintendent for the City of Nampa, Idaho, purchases about 30 to 40 vehicles annually and has a solution. When it comes to “informal” bids — purchases costing less than $100,000 — Idaho law says he only has to solicit three bids, not receive them.
“I am very clear with my vendors that if they don’t respond within a few business days, I will consider them ‘non-responsive.’ I am then legally able to purchase from vendors that did provide a quote,” he said. “It is important to note that I document that I had attempted to obtain three quotes and received no response.”
Documentation is important, Adams said. He files e-mails sent to vendors and copies of bid instructions to save them as proof.
The City of Mesa, Ariz., also has a local preference policy. Out of the approximate 8% sales tax, the city gets about 1.75%. When local bids come in for vehicles, “we remove the 1.75% from the total cost, and that is their number for scoring,” said Pete Scarafiotti, CAFM, CEM, CPFP, fleet director & automotive engineer for the city.
The policy has increased the city’s business with local companies. Scarafiotti reported: “1.75% is not going to make a big difference, but on some products that were very competitive to begin with, it did. We boosted our opportunities with the local folks. We’re about 60% now buying locally.”
He believes this local preference policy drove down prices, with vendors bidding lower because they know it’s more competitive.
In Monterey County, Calif., which spends up to $1.5 million a year on fleet purchases, the local preference percentage is 5% for those located in the tri-county area and have been in business for more than three years. But Michael Derr, contracts/purchasing officer, said this rarely has been the deciding factor in which company wins a bid.
“Our local vendors usually come in pretty low compared to outside vendors. The majority of the time, local vendors even beat cooperative pricing,” he said.
Vendors outside the “local” area may not be too happy with a buy-local policy, but Scarafiotti simply tells them to move their business to the city.
Cooperative Purchasing a Quick Solution
“It’s massively cumbersome [to go out to bid]. It takes a lot of manpower,” Adams said. The city doesn’t have a purchasing division, so it’s up to Adams and division heads to get requests for proposal (RFPs) out and award a vendor.
This means he avoids it when legally permitted. If Adams is purchasing a small number of vehicles, he turns to the state contract. If he’s buying heavy equipment — usually not available on the state contract — he turns to a cooperative purchasing contract.
The time difference is significant — at least three months to go out to bid and award a contract versus a couple of weeks by using a state or cooperative contract.
But that doesn’t mean it’s always the best solution. “If the HGACBuy [contract] doesn’t offer what we want or if we feel the price is too high even with HGACBuy, we’ll use a formal RFP,” Adams said.
Mechanic David Gunderson is the lone fleet employee at the City of Saint Peter, Minn. Between managing the shop, handling repairs, and purchasing eight to 12 vehicles annually, he’s trying to save as much time as possible.
Still, he prefers to buy from local dealers because dealers providing vehicles on the state contract are usually located at least an hour away. But Gunderson will check the state contract price or Sourcewell and go with it if bids come back too high.
Scarafiotti is cautious about using cooperative contracts. As an automotive engineer, he prefers to spec vehicles himself.
“You can buy off other bids, as long as you remember that whatever mistakes that guy made [spec’ing], you get them too,” he said.
But he does compare prices and uses the contracts occasionally. At times, he knows he won’t be able to beat the cooperative contract price because “they’re going off the throughput of the entire cooperative to get that price,” Scarafiotti said.
Long Lead Times Frustrate Fleet Managers
Fleet managers have noticed it’s taking longer to get vehicles than it used to and have had to adjust their replacement and purchasing methods to reflect this.
The Bonneville Power Administration, which provides energy — primarily hydropower — to the Pacific Northwest, has an average annual capital fleet budget of $7.5 million. David Tidwell, acting fleet manager, said lead times for heavy equipment can be 18-24 months, up from eight to 12 months a few years ago.
“As fast as they can make it, someone is buying it,” he said. “It takes time to get [through a bid process], and a lot of government fleets are in a bind because that private entity that comes in with a checkbook, they’re going to get their piece of equipment first because they’re spending cash right now.”
Tidwell has a new vehicle replacement strategy that allows him to identify replacement needs and get the procurement process started 12 months ahead of time.
Scarafiotti said the order-to-delivery delay means he must keep vehicles longer than their intended lifecycles while he awaits delivery of the new units, which could result in increased costs. The city’s fleet replacement module takes into consideration long lead times when procuring vehicles.
Inspections Are Important
Tidwell and Scarafiotti stressed the importance of doing inspections. Manufacturers working under the gun are more likely to deliver vehicles that aren’t built to spec.
“We send our equipment specialist to the manufacturer to do an inspection on the piece of equipment before it’s sent to us. We’re doing that with almost everything because we’re finding issues,” Tidwell said.
But Scarafiotti said a spec inspection isn’t the only one his staff performs. He’s finding that vehicles need warranty repairs soon after delivery, and these repairs are often not done correctly by the vendor.
“They’re having problems finding technicians, like we are,” he explained. “They give it a shot and it comes back to us, and we’ll do an inspection of the work and sometimes we find that it’s not right, so we send it back.”
This process can take months, so Scarafiotti keeps the the old vehicle until the new unit is ready for full-time use.
6 Tips for Improving the Purchasing Process
Fleet and procurement managers recommend the following tips to improve the spec’ing and bidding process:
1. When requesting bids…
Adams from the City of Nampa suggested: Don’t divulge any budgetary numbers. Don’t include specifics that might prevent a vendor from bidding, such as a color specification. Don’t spec a brand or proprietary information. And be sure to add “or equivalent” to your spec.
2. Buy the right vehicle for the job.
“If you’ve identified the right tool for a certain agreed-upon service level, try to hold fast on that,” Adams said. “Try not to deviate from that, be it political pressure or budgetary pressure. Because then it’s no longer a budgetary discussion. It’s a level of service discussion.”
For example, the city’s police vehicles have a 10-year frontline life. He makes sure to spec body-on-frame pursuit vehicles because in his experience, these vehicles last the full lifecycle.
3. Standardize vehicle specs.
Purchasing is much easier, especially for large organizations, if there are standards in place for specific vehicle types. At the Bonneville Power Administration, each “craft” owns its vehicle standard and is responsible as a group for updating it, according to Tidwell. For example, electricians may agree on a 60-foot bucket truck, making it easier for fleet staff when the time comes to spec vehicles.
4. Group vehicle purchases together.
When going out to bid, a larger purchase will allow an organization to get a volume purchasing price discount, said Derr from Monterey County.
5. Be the solution.
When vendors complained that they didn’t know who to talk to when they had questions, Scarafiotti said they could contact him directly. At first, he got inundated with calls, but as vendors understood the new purchasing policy better, the number of calls dropped, and vendor relationships have improved.
6. Know how to motivate people.
Scarafiotti wanted to address another vendor complaint: how long it took to get paid. He explained to the Finance Department that, especially during the recession, small vendors would go out of business if they weren’t paid on time.
He told them: “If these guys aren’t satisfied, they’re not going to be able to call you because they don’t know who you are. They’re going to go directly to a city councilperson. That call you get isn’t going to be from me helping you. It’s going to be from them looking for you.”
The warning worked. Payment time went from about 60 days down to 30-45 days.
Follow the Laws
Procurement laws make vehicle purchasing more cumbersome and complicated but breaking them can land fleet and procurement managers on the front page of the local paper — or worse.
Adams, from the City of Nampa, takes this seriously, keeping in contact with state procurement officers to ensure he’s up to date on any rule changes.
“The state purchasing laws are my overall guidance. My general thought is if I violate city policy I could lose my job, but if I violate state law, I could lose my freedom,” he said.
by Thi Dao
Source: https://www.government-fleet.com
I´m a Fleet Management expert, and the manager of Advanced Fleet Management Consulting, that provides Fleet Management Consultancy Services.
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