PUBLIC AND PRIVATE SECTORS: Contrasting styles
30 November 2010
What can the public and private sector fleet industries learn from each other? Rachel Burgess speaks to industry figures on the respective sectors' best practices
With the public sector being squeezed thanks to Budget cuts, many local authorities and Government departments should be wising up to improving fleet operations.
Meanwhile, private firms are constantly under pressure from shareholders and bosses alike to improve business car management. So what lessons can each sector learn from each other?
The private sector used the recession as an opportunity to review and increase the efficiency of its fleet management, according to Stuart Walker, brand director of Automotive Leasing, Leaseplan's public sector fleet service provider. "Government spending cuts represent an opportunity for the public sector to do the same," he says. "Many public sector fleets already operate under best-practice guidelines and there are numerous examples of them winning awards in national competitions, so good fleet management is by no means restricted to private sector companies." (See 'A trio of private initiatives on trial', below).
"Public sector fleets are often better at regulatory matters like safety and environmental issues," says Neville Briggs, MD at fleet software firm CFC Solutions, "while private sector fleets have traditionally been stronger when it comes to concentrating on cost control and overall operational efficiency.
"Private sector fleets have led the way in extending replacement cycles to four years and beyond in an effort to bring down operating costs, although, especially following the Government spending review, we expect this practice to become much more widespread in public sector fleets."
Briggs adds that some interesting trends have emerged recently: "For example, private sector fleets don't always realise that having properly thought out risk management and environmental policies will help them keep costs to a minimum through factors such as reduced accident rates and lower fuel consumption; likewise, public sector fleets have sometimes been slow to recognise that keeping costs low is something that can be very closely allied to their safety and environmental strategies - for example, cars with good fuel consumption almost always have lower CO2 figures."
Briggs says: "What is intriguing is that, for these reasons, public and private sector fleets frequently arrive at broadly similar policies even though their priorities are different."
Leading fleet body ACFO also acknowledges there are "no real differences in fleet management practices between the two sectors although the make-up of car parques may be different, generally with grey fleet likely to be more prevalent than company cars within the public sector".
Chairman Julie Jenner says that, despite the different processes and constraints, the same principles apply to all fleets, and best practice would include cost management, duty of care, procurement and taxation.
The difficulties of generalising about fleet performance in the public and private sectors is echoed by John Pout, head of public sector at Arval, who sees many examples of practice within both sectors.
"However," he says, "a long-established trend that we have seen from the public sector is the desire to effectively manage fleet fuel using fuel cards. In this respect the proportion of fleets using fuel cards is even higher within certain parts of the public sector than it is in the private."
But James Richmond, public sector account manager for the Fuelcard Company, disagrees: "Public sector processes are fine for buying commodity products, where price is all that matters. They are all right for some services, if you can say that X hours per month are contracted. Something like a fuel card, which does not fit the standard procurement model, causes problems for a public body. Worse still, it means changing the way it buys fuel. The public sector would love to cut fuel costs, but very wary of changing the way it does things."
He adds: "Decisions [in the public sector] take forever, usually by committees and rarely involving anyone with knowledge of fleet management. If a private sector customer needs anything to be explained, they make a call and get a fast answer. We have never had such a clarification request from the public sector."
Indeed, Vincent St Claire, MD at Alliance Asset Management, says the private sector can usually make swift decisions and respond very quickly to take advantage of marketplace changes.
"This may apply to movement in supplier terms such as changes to monthly lease rentals or changes in legislation and tax, or alterations to vehicle choice lists as new, low-emission models are introduced. The net result is an improvement in buying ability, which will deliver cost benefits. The effect of not acting is that costs will at best stay unchanged but will in almost all probability rise."
St Claire continues: "While the private sector is able to react quickly and take advantage of changes, the public sector is less able to and therefore proportionately sees costs rise."
The Fuelcard Company's Richmond says gaining new clients is a different process in the public sector: "If you can find the right person to call, if you can complete the tender forms correctly, if you can meet criteria which may not be obvious, you could gain a customer. This is one area where a public sector customer outscores the private sector, as far as suppliers are concerned."
He adds: "Because the public sector hates change, it will not be in any hurry to review suppliers and repeat the procurement process. Provided that you do your job properly and work at continuing to deliver exactly what the customer requires, it should not need to consider changing suppliers. Once you win a customer in the public sector, if you keep your delivery promises, you can look forward to a long relationship."
St Claire says the private sector is generally looking to leverage added value from key suppliers while the public sector too often only looks to buy a product or service on price and fails to look beyond the headline cost.
"For example, in relation to short-term car hire the private sector will be far more demanding on price, related services and management information. Additionally, the private sector will ensure vehicles come off hire as soon as possible to avoid any additional 'next day' charges, while the public sector is less focused on such costs.
"In short, the public sector Pound note is less well managed than in the private sector. Additionally, the SME Pound note is even more strictly managed than the large corporate Pound note. As a result, the public sector in some quarters does not have a good reputation when tendering. Too often procurement staff only focus on price and do not look at the overall package available. Due to this some suppliers don't even respond to tender documents," he says.
"While buying on price and stripping out added-value services maybe perceived as obtaining best value, the reality is that in a cost-benefit analysis best value has not been achieved. The failure to buy a complete package may in many cases trigger additional charges and administration and driver hassle, with the result that the service/product supplied ultimately costs more.
St Claire concludes: "Generally, the notion of best practice is not shared between the public and private sectors. Particularly in the public sector, procurement staff do not have the in-depth product and supplier knowledge that can result in gaining added value for little if any extra charge."