New Century Colorado Project

Fleet Management
Start Report
This study examines the opportunity for cost savings resulting from more efficient use
and disposal of the State of Colorados fleet, managed by the General Support
Services Fleet Management (SFM !rogram" The study revie#ed only those
vehicles #hich are managed by SFM and are under three$%uarter ton si&e (light
truc's and sedans" SFM managed (,)** vehicles during fiscal year +,,-$,,"
Summary of Savings
The summary of savings for fiscal year .///$/+ is0
1reas of 2pportunity Cost Savings
3ehicle disposal 4 +,)+5,///
3ehicle utili&ation +,6-(,///
3ehicle preparation time +,+*5,///
Total Savings 4*,(*+,///
2f these total savings, an estimated 4+", million #ill be from the General Fund"
Summary of Changes
+" VEHICLE SALES
The State should retain the net proceeds from the disposal of vehicles in SFM to
reduce the monthly fixed costs, rather than returning the proceeds to the leasing state
agencies"
." VEHICLE UTILIZATION
The State currently has +,//( nonexempt, lo# annual mileage vehicles"
7ecommendations include0
a" 7educing the SFM managed fleet si&e by selling (+- vehicles, classified as
nonexempt #ith lo# annual mileage averaging 6,55/ miles per year"
b" Moving other nonexempt and lo# annual mileage vehicles into local area motor
pools to increase vehicle use and to reduce the number of individually assigned or
similar vehicles" SFM, in cooperation #ith the 8e# Century Colorado pro9ect,
should investigate the development of local motor pools to effectively reduce the
remaining number of nonexempt, lo# annual mileage vehicles in the fleet"
5" VEHICLE PREPARATION TIME
The State should restructure Colorado State !atrols police pac'age vehicle order
process to reduce excess inventory and to provide for multiple deliveries throughout
the fiscal year"
Fleet Management
Start Report, continued
*" IMPLEMENTATION PLAN
8e# Century Colorado #ill continue to investigate fleet management processes" 1
detailed implementation plan #ill be developed to assist departments in ta'ing
advantage of these recommendations"
Summary of Assumptions
:ey definitions used in this study follo#"
+" There are t#o types of costs associated #ith State Fleet Management (SFM0
a" Fixed costs, #hich represent the follo#ing0
i. Financing Costs of Veic!es
1ll ne# vehicles in the fleet are financed from t#o to seven years #ith
a third party" SFM pays principal and interest on a monthly basis to
the third party" The department using a specific vehicle is charged the
vehicles financing costs of principal and interest"
ii. Manage"ent Fee
The costs of operating SFM or SFMs overhead are charged to all SFM
users through the management fee"
b" Va#ia$!e costs, #hich represent the follo#ing0
i. F%e! Cost Pe# Mi!e
The average cost of fuel as allocated to all vehicles
ii. Maintenance Cost Pe# Mi!e
This is specific to each vehicle based on actual #or' performed to
maintain the vehicle
iii. Ins%#ance
The average cost of insurance as allocated to all vehicles, #hich
e%uates to 4/"//- per mile
;ased on intervie#s #ith SFM and vehicle record revie#s, the average fixed cost for
the entire fleet #as 4/"+, per mile for fiscal year +,,-$,," The average variable cost
for fiscal year +,,, #as 4 /"++ per mile" The variable cost fluctuates from year to
year primarily due to the fluctuation of fuel prices" Fuel prices have risen, since the
fiscal year +,,-$,,, 4/"++ per mile variable calculated cost"
." 1ll vehicles in the state fleet are o#ned by SFM and leased to individual state
agencies"
5" A&e#age net t#ansfe# 'e# &eic!e is the portion of the sales proceeds, #hich SFM
sends to the state agencies leasing the vehicles" For cars purchased after +,,*, SFM
sells vehicles at auction and uses the net auction proceeds to pay off the vehicles
financing agreement" For cars purchased prior to +,,*, SFM retains a portion of the
proceeds e%ual to +( percent of the original value" The remaining proceeds are then
transferred to the state agencies leasing the vehicles"
.
Fleet Management
Start Report, continued
*" Uti!i(ation refers to annual average mileage of a vehicle" SFM considers lo# annual
mileage to be less than +.,)// miles per year, determined by dividing the total
mileage of 6),)// (set in state statute .*$5/$++/* C"7"S" by six years, the typical
replacement life of a vehicle" SFM<s average current motor pool mileage is +,,.//
per vehicle, per year"
(" Exe"'t and nonexe"'t refers to SFM vehicle designations" =xempt vehicles have a
special purpose such as maintenance or public safety, 9ustifying a lo#er annual
mileage use and the associated higher cost per mile" This determination is
reevaluated each year based on the previous years actual use"
)" This study #as based on SFM data as of >une 5/, +,,,"
VEHICLE SALES
?hen vehicle mileage is over +//,///, or #hen other criteria are met, centrally$located
State vehicles are typically sold at %uarterly auctions conducted by State Surplus, a
division of Correctional @ndustries" The leasing state agency can sell remotely$located
vehicles directly to local agencies, or at auction"
1fter the sale, SFM uses the net auction proceeds to pay off the vehicle financing
agreement for cars purchased after +,,*" SFM retains proceeds e%ual to +( percent of the
original value for cars purchased prior to +,,*" The remaining sales proceeds are then
transferred to the leasing state agency" These net proceeds are called the average net
transfer per vehicle" The state agency usually transfers the net proceeds into a cash
revenue account, #hich re%uires spending authority" 1 revie# of all of these transfers for
the last fiscal year confirmed that these funds #ere placed into cash accounts"
Supporting Data:
The average net transfer per vehicle is 4.,/(*, based on the most recent three fiscal years
of %uarterly auctions as detailed in the follo#ing table"
5
Fleet Management
Start Report, continued
Net Proceeds from Sae of !eet Vehices
!isca
"ear
#ota Proceed
#r
an
sfe
rs
Num$er of
Veh
ice
s
So
d
Average Net #ransfer
Per Vehice
+,,- 4 ((5,((- 5+, 4 +,65(
+,,, )*+,.5* .(- .,*-(
./// *6+,5)- .5* .,/+*
#hree%year average:
4 +,))),+)/ -++ & '()*+
Note: The source #as accounting documents for internal transfers
provided by General Support Services"
Issue Description:
;y returning the fleet net sales proceeds to the various state agencies, the costs of
managing the fleet program are overstated"
Soution Description:
SFM should retain the fleet sales proceeds and reduce the management fee charged to the
agencies" SFM plans to sell and replace 6-( vehicles in fiscal year .///$/+" @f SFM
retains the average sales proceeds from those 6-( vehicles, historically transferred to
state agencies, this #ould result in savings of approximately 4+,)+5,/// (represented by
6-( planned disposals at the average net transfer of 4.,/(*" The SFM management fee
for fiscal year +,,,$// is 45/ per vehicle per month" ;y retaining the disposal proceeds,
#e estimate SFM could reduce the management fee charged to agencies by an estimated
-/ percent" These savings represent a reallocation of retained funds, #hich drives a net
reduction in appropriations"
Further, it is recommended that SFM provide an annual report to all state agencies, listing
the cost components of the management fee including a detailed brea'do#n of all
personal services, operating expenses and overheads, and the proceeds from vehicle sales"
VEHICLE ,#ILI-A#I.N
*
Fleet Management
Start Report, continued
State Fleet Management uses a custom$built fleet management system, called Colorado
1utomotive 7eporting System (C17S, #hich trac's vehicle use as #ell as performs
other critical functions" SFM uses a fixed mileage of +.,)// miles per year as the limit
for determining lo# annual mileage.
Supporting Data:
2f the (,)** vehicles in the state fleet during fiscal year +,,-$,,, .,(-( or *("- percent
fell belo# the +.,)// annual mileage criteria" This is consistent #ith the 2ffice of the
State 1uditors +,,( audit report #hich states *- percent of the fleet fell belo# the annual
mileage criteria and recommended increased monitoring of the criteria"
2f these lo# annual mileage vehicles, +,(/+ are designated by SFM as exempt" =xempt
vehicles are those #ith special purpose use such as maintenance, security patrol or la#
enforcement" SFM, #ith input from the Motor 3ehicle 1dvisory Council, #hich includes
vehicle coordinators from each state agency, determines the exempt status of vehicles"
The remaining +,/-* lo# annual mileage, nonexempt vehicles are being used as
individually assigned for office or on$call duties, shared assigned duties, seasonal usage,
special programs (such as grants and departmental motor pools"
1fter deducting vehicles that have been sold, or are pending sale, there are +,//( vehicles
in the States fleet inventory #hich are the focus of this analysis" These vehicles are
designated as nonexempt and lo# annual mileage, #ith an average of only 6,55/ miles
per year"
SFMs database (C17S #as examined to identify pro9ected costs for these +,//(
vehicles" 1 ma9or factor in this analysis is the !ersonal 3ehicle 7eimbursement (!37 of
4/".- per mile that #ould be paid if a state vehicle #ere not available for employees" 2f
the +,//( vehicles, (+- #ere identified #ith total costs (fixed and variable greater than
the !37"
Issue Description:
The cost of the state fleet is effectively increased through the o#nership of vehicles #ith
operating costs above the current !37 rate"
Soution Description:
The follo#ing table summari&es the states fleet inventory and the related
issuesAsolutions"
(
Fleet Management
Start Report, continued
Summary of !eet ,tii/ation
Current ,sage
Num$er of
Vehices
0ecom%
mendation
Estimated
Savings
1de%uately utili&ed 5,/(, 8A1
Bo# annual mileage and exempt +,(/+ 8A1
Bo# annual mileage and nonexempt
3ehicles pending sale 6, 8A1
3ehicles #ith costs greater than the
!37 (+-
8os" +
and .
4 6.+,///
+,/)*,///
3ehicles #ith costs less than !37 *-6 8A1 CCCCCCCC
Total (,)** 4 +,6-(,///
Note: Source of number and current usage of vehicles #as SFM, specifically the
C17S database as of >une 5/, +,,,"
The follo#ing recommendations should be implemented to reduce the costs associated
#ith lo# annual mileage and nonexempt vehicles"

+" 7educe the total state fleet si&e by eliminating the (+- vehicles identified as lo#
annual mileage, nonexempt vehicles #ith costs greater than the !37" Some of these
(+- vehicles are ne#er vehicles, therefore, an agency could choose to sell an alternate
vehicle #ith high mileage" 1s a result, the cost savings for this reduction in fleet si&e
are based on the average fixed cost for the entire fleet, #hich is 4/"+, per mile" SFM
is in the process of revie#ing all nonexempt vehicles #ith lo# annual mileage, as
#ell as some exempt, lo# annual mileage vehicles in an effort to identify vehicles
that could be eliminated"
The annual mileage incurred on these vehicles #ill be transferred to the local motor
pool vehicles discussed under 8o" 5 belo#, #hich have only the variable costs of
4/"++ per mile" Thus, this recommendation should result in fixed cost savings of
approximately 46.+,/// ((+- vehicles #ith total annual mileage of approximately
5,6,6,/// at 4/"+, per mile"
." =liminate these (+- vehicles or suitable replacements from the fleet inventory"
Disposition of (+- vehicles at the historical average net transfer of 4.,/(* should
result in revenue of approximately 4+,/)*,///"
5" 7etain the balance of lo# annual mileage vehicles and place a portion of them in
local motor pools" These vehicles have variable operating costs e%ual to the standard
average variable cost of state fleet vehicles averaging 4/"++ per mile" Further, these
vehicles can accommodate the annual mileage associated #ith the +,//( lo# annual
mileage vehicles to be reduced from the fleet" This #ould re%uire an average of
+,,.// miles per year for the remaining vehicles"
)
Fleet Management
Start Report, continued
C17S appears to effectively maintain state fleet vehicle utili&ation dataE ho#ever, it
currently does not have functionality to help manage motor pools, a component of the
above recommendation"
VEHICLE P0EPA0A#I.N #I1E
1n analysis of C17S data revealed that a significant number of Colorado State !atrol
(CS! vehicles remain in storage an average of +. months before they brought into
service" This number has been as high as +.* in >uly +,,, and is presently ++) (based on
a physical inventory performed in December +,,," This time lag is the result of the
follo#ing t#o factors0
+" 1uto manufacturers historically produced police pac'age vehicles only once a year"
This practice mandated that State Fleet Management ma'e an annual purchase of the
CS! police pac'age vehicles for delivery in the last %uarter of the fiscal year"
Contacts #ith both General Motors and Ford confirmed that the manufacturers no#
produce police pac'age vehicles throughout the model year #ith the exception of
approximately ) to - #ee's in >une and >uly during model change" The ordering
process can be modified to fit both the manufacturers and the States needs"
." !atrol cars re%uire extensive modification once they are received from SFM" 1ll
units re%uire additional #iring and fuse pac'ages to accommodate radios, ruggedi&ed
laptops, sirens and light bars" !ush$bumpers, cages and gun rac's must also be
added" 1s a result, CS! reported that only ) to - patrol cars could typically be ready
in a #ee', #ith their current staff"
The one$time delivery of patrol cars results in unused cars for the ma9ority of the year"
The State is currently paying finance costs of over 4)// per month per vehicle" For fiscal
year .///$/+, SFM estimates finance costs to be 46*( per month"
Supporting Data:
1 revie# of the CS! fleet in C17S revealed a total of *5- police pac'age vehicles
currently on the road, 6/ of #hich have reached the -/,/// mile replacement benchmar'
as of >une 5/, +,,," @n addition, another 6, vehicles are expected to reach -/,/// miles
by >une 5/, .///" They plan to buy +*, and +/. patrol vehicles in March ./// and
.//+, respectively" They #ill finance these vehicles over a three$year period #ith an
estimated ) percent interest rate" ;ased on intervie#s #ith CS!, an assumption #as made
for the purpose of this study that at any point in time, a minimum of ( percent of the total
patrol fleet, or ./ vehicles, are available for emergency replacement of patrol vehicles"
Issue Description:
6
Fleet Management
Start Report, continued
The current annual procurement and delivery system of patrol cars significantly increases
fleet program costs by forcing the State to pay financing costs prior to the vehicles being
placed into operations"
Soution Description:
To eliminate unnecessary financing costs, the police pac'age vehicle procurement
process should be changed to ta'e advantage of the recent changes in the auto
manufacturing industry" SFM should re%uire multiple deliveries throughout the fiscal
year that coincide #ith the needs of CS!" @t is recommended that !urchasing, SFM and
CS! #or' #ith both General Motors and Ford to develop a delivery plan that meets the
needs of the State" This plan may re%uire ordering vehicles over a model year change"
Funding for these vehicles also should be changed to meet the ne# delivery schedule"
;ased on a physical count of vehicles, CS! currently has ++) vehicles on the CS! lot, in
process or a#aiting preparation for service" ;ased on intervie#s #ith CS!, this inventory
of patrol vehicles #ill be in service no later than February ./// (#hich appears to be
possible under their normal preparation schedule" These ++) vehicles #ill more than
replace the 6/ vehicles currently identified at the -/,/// mile benchmar'"
Conse%uently, a revised vehicle delivery schedule #ould ma'e the first delivery of +/
vehicles per month occurring in 1ugust .///" This schedule accommodates GM and
Ford<s model change during >une and >ulyE ho#ever, SFM and !urchasing need to
negotiate the exact timing" 1ny resulting variation is not anticipated to have significant
impact on the proposed savings"
The delivery change #ould result in savings of 4**+,/// and 4+,+*5,/// for fiscal years
./// and .//+, respectively" There #ould be ongoing annual savings of no less than
4+,///,///"
For purchases in fiscal year .//. and all subse%uent years, the State could purchase
patrol pac'age vehicles on an incremental basis, as the cars are needed (approximately +/
per month" This practice #ill avoid future monthly financing charges that are
unnecessary" C17S can provide data to effectively manage and pro9ect timing of future
patrol car purchases"
@n addition, the %uestion of #hether State !atrol vehicles should be included in the state
fleet #ill be considered during the development of an implementation plan for the above
recommendations"
-
Fleet Management
Start Report, continued
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