Texas Exploring Privatization for Vehicle Fleet and Fuel Management Services

The Texas Council on Competitive Government has issued a Request for Information (RFI) to solicit input from private firms regarding current best practices and opportunities for performance-based contracting in vehicle fleet and fuel management services.

Translated into plain English: the state is opening the door to creative ideas from the private sector on how to better manage the state vehicle fleet and fuel services. Nothing obligates the state to act upon any of the submissions it receives—consider it just an exploratory look at the potential for privatization—but this is a positive first step towards potentially getting state government out of the business of maintaining vehicles.

Vehicle fleet operations, maintenance and management are well-established areas of competitive service delivery within state and local government. Managing a government vehicle fleet is a highly commercial activity (two words: Jiffy Lube) and one well suited for privatization. It’s also beneficial in terms of keeping government focused on its core competencies: the private sector can focus on the fleet itself, while government can focus on the services that fleet provides.

Approaches to outsourcing vehicle fleet operations can vary depending on the policy objectives of the government partner. The most common are:

  • Long-term operational savings: competitive sourcing lets government select the most cost-effective service provider on a continual basis as contracts come up for renewal; cost savings through privatization typically range from 10-25 percent; with contracting, wage levels generally remain similar, but the number of operating and overhead employees is reduced because of greater productivity.
  • Structural changes: government can consolidate its inventory, sell its fleet, or change to some other management system utilizing the private sector.
  • Risk transfer: contracting out can shift the capital and long-term operations and maintenance exposure of the government.

Governments have a variety of privatization techniques at their disposal, including contracting out for specific services such as maintenance and repairs (most common); selling the fleet and then leasing vehicles from a private company; renting vehicles from a private company as needed; or giving state employees vouchers in exchange for using personal vehicles for state business.

Virginia offers a useful example of how a state can package a variety of vehicle fleet privatization strategies together:

  • In the late 1990s, the Virginia General Assembly transferred vehicle fleet maintenance from the Department of Transportation to the Department of General Services (DGS). DGS opened automobile maintenance to competitive sourcing and began saving approximately 25 percent through competition.
  • In 2005, DGS contracted out for a maintenance information management system called Vehicle Maintenance Control Center (VMCC). The VMCC system provides 24-hour on-call service and networks hundreds of maintenance facilities to provide repairs. The management system reduced preventative maintenance costs 16 percent, reduced average brake service costs from $228 to $81, and significantly reduced vehicle downtime.
  • In 2006, DGS contracted with Enterprise Rent-A-Car to provide short-term rentals as needed to state employees, transferring capital and maintenance risks away from the taxpayers.

For more details on Virginia’s initiatives, see this DGS presentation (warning: 6Mb file download) to the state’s Commonwealth Competition Council. Given experiences like Virginia’s (among many others), I wouldn’t be surprised if Texas solicits a number of interesting privatization proposals worthy of further consideration.

Reason’s Privatization Research and Commentary