The discipline and practice of municipal fleet management for optimum life-cycle costing.
The selection of vehicles in the public the public arena is largely driven by tender pricing (least cost).
Frequently this does not give recognition to criteria such as total cost of ownership, fit for purpose and option replacement timing. Yet these are the very issues that enable a municipality to maximise service delivery and reduce costs.
Assuming that our municipality has an old fleet and a range of vehicles that do not fully satisfy service delivery needs, what process should be applied?
Guiding the process
First, a quality fleet register for wheeled vehicles, specialised, earthming and static equipment needs to be created. A fleet audit will enable you to identify active vehicles, their mechanical and body condition, current age, last known and monthly kilometre usage, and “fit for purpose” status. This will also identify out-of-service vehicles that should be disposed of at the first opportunity.
Thereafter, the balance of their useful life needs to be determined. To do this, you require a policy that will guide you on the recommended placement timing for each category of vehicle. This will usually be based on age, kilometres and/or hours.
Importantly, it will not be based on the municipality’s current financial capability and should be used as a guide only, because the final replacement decision will be based on budget, condition, historical cost and the benefits of transfer within departments.
The replacement policy should be used to identify the suggested replacement timing for each and every vehicle. By analysing current age/kilometres and recommended replacement timing, it is possible to calculate the balance of useful life for each vehicle.
Second, the ideal replacement vehicle needs to be identified.
It may not necessarily be a “like for like” replacement. As an example, how many 4×4 LDVs are really needed; can a 4×2 be used or even a 0.5 tonne pickup?
In instance where vehicles are in adequate, there will be a need to upgrade. Importantly, this replacement plan will also identify the correct quantities of vehicles. The selected finance method, specifically rentals, may enable you to increase your new vehicle purchased, but remember that they have strict condition and usage requirements, exposure to future termination penalties.
A conservative new vehicle cost estimate should be used and inflation applied to identify the future capex requirement for each point of replacement and consolidate annually. No doubt this will exceed the available budget, which results in the need to prioritise.
Although price will be the main selection criterion, the following should be considered:
- Vehicles and equipment available from dealers within your municipality
- Fuel consumption comparisons
- Maintenance and/or service plan costs
- Expected future resale value
- Fit for purpose
Operational expenditure budgets
This replacement plan will also facilitate the development of an apex forecast for the fleet. You will be replacing a number of vehicles, so your maintenance and fuel costs should decrease. Furthermore, new vehicles have to be serviced at dealers to validate warranties, which will test the viability of current workshop facilities.
Your opex budget should be developed around fuel and maintenance costs, and fuel consumption and maintenance CPK (cents per kilometre) benchmark need to be developed for each category of vehicle, with adjustments for new and old. Monthly usage projections will identify a cost.
This methodology is certainly more accurate than a flat increasing on last year’s cost. The calculations are only complex because of volumes, but they are enormously beneficial.