Toby Poston of the British Vehicle Rental and Leasing Association looks at contract hire and leasing as a way to cut costs in public sector fleet procurement and management
Cutting costs is the main focus for all fleet managers, especially those operating in the public sector, where the government’s austerity measures have resulted in some major budget cuts.
Some departments and agencies have been hit harder than others, but it is fair to say that finding more cost-effective ways of providing and operating fleet vehicles will be high up the agenda for them all.
With an estimated 260,000 vehicles, including 80,000 commercial vehicles, there are significant opportunities for saving government money. One of the best ways of cutting costs is to buy in fleet services, by leasing vehicles and getting outside specialists to run them for you. This approach has been taken by many private sector companies over the last ten years, and the range of fleet services on offer has grown.
As well as the traditional contract hire deal where a leasing company provides finance and takes responsibility for servicing and maintaining it, modern providers will also offer services including roadside assistance, relief vehicles, daily vehicle rental and accident management. They can also provide driver services, helping people to book MOTs and repairs, arrange tyre and windscreen replacements and even order their next car.
Many will provide expert consultancy advice to help organisations to meet their fleet duty of care requirements (vehicle audits, driving licence checks, etc) or environmental targets.
Although there have been a number of major exceptions, up until recently the public sector has been perceived as reluctant to consider outsourcing their fleet finance or management. In the past this may have been down to the hugely bureaucratic and expensive process of preparing and running government tenders. It is estimated that some fleet tender processes cost upwards of £25,000 and can take over six months to complete.
Things have recently become a lot easier, thanks to the introduction of a number of government procurement frameworks that enable organisations to leverage the bulk purchasing power of the public sector while using a simpler and standardised approach. Typically these deals last three to four years, they include pre-agreed terms and conditions and have six to eight pre-vetted suppliers listed. By simplifying the procurement of fleet services, the government has also made it easier for leasing and fleet management companies to enter the market.
There are a variety of frameworks covering fleet management, vehicle funding, vehicle leasing and rental. Since May 2010, all central government departments, non-departmental public bodies, agencies and arms-length bodies have been required to buy from centrally-sourced contracts and framework agreements.
The Environment Agency claims to be saving nearly £300,000 over the four years to 2015 after adopting a single agreement for the provision of lease cars; the servicing, maintenance and repair of vans; and incident management and insurance services. It now has much better management information and reporting, updated driver packs and improved online communications.
The Yorkshire Purchasing Organisation, the UK’s largest public sector buying organisation, uses vehicle leasing and purchasing frameworks to provide vehicles to a range of local authorities, schools, colleges, universities and emergency services. It provides a fleet portal which pulls live pricing information from each of the vehicle leasing companies based on specific search criteria and returns quotes within five seconds. Compared to the traditional method of contacting each supplier individually by telephone or email for a quote, the portal reduces the time taken to gather, compare and select quotes from days to seconds.
The grey fleet, where employees use their own vehicles for work purposes, is one of the greatest challenges facing public sector fleet managers at the moment. Grey fleet drivers do an estimated 1.4 billion miles a year at an average of 40-50p per mile.
Reducing this reliance on the grey fleet has risen up the agenda as employers become more aware of the duty of care owed to their employees driving at work. Around one in three road accidents involve a vehicle being driven for work. In financial terms this is costing UK industry over £2.5 billion each year, but it is the human cost that is most frightening – around 200 work-related deaths or serious injuries every week.
The arrival of new corporate manslaughter legislation and a tighter focus on the application of health and safety regulations has shown that the government is also cracking down in this area. Its Fleet Management framework suggests that public sector employers should use fleet vehicles instead of grey fleet to minimise duty of car risks and monitor carbon emissions more closely.
The vehicle leasing industry also takes its duty of care to its customers seriously. All BVRLA members are quality assured and operate under a code of conduct. This reassures potential customers that they are dealing with a reputable company that will offer the highest levels of service, backed up by the association’s conciliation service.
About the BVRLA
Established in 1967, the British Vehicle Rental and Leasing Association is the trade body for the leasing and rental of cars and commercial vehicles. For further information visit www.bvrla.co.uk