Report 2004-113 Summary - July 2005

Department of General Services:

Opportunities Exist Within the Office of Fleet Administration to Reduce Costs

HIGHLIGHTS

Our review of the Office of Fleet Administration (Fleet) within the Department of General Services found that:

  • Fleet's analyses, indicating that its vehicle rental rates are competitive with those of commercial rental car companies, do not fully demonstrate its cost-effectiveness because Fleet lacks assurance that the commercial rates it used are similar to what state agencies typically pay.
  • The terms of the current contracts that Fleet has with commercial rental companies and the noncompetitive method it uses to select companies may not be in the State's best interest.
  • Fleet currently lacks a minimum-use requirement for vehicles that state agencies rent on a long-term basis as well as standards related to the idleness of its short-term rental vehicles, both of which could identify opportunities to reduce the number of vehicles in its motor pool.
  • Fleet is responsible for overseeing the vehicle purchases made by state agencies, but its policy defining minimum usage, which Fleet is supposed to consider when assessing a state agency's need to purchase vehicles, may be set too low.
  • Fleet's actions contributed to a $1.4 million deficit at June 30, 2004, in the fund that Fleet uses to operate and maintain parking lots for state employees.

RESULTS IN BRIEF

The Office of Fleet Administration (Fleet), within the Department of General Services (General Services), reported that it owned approximately 6,400 vehicles as of May 2005. From this motor pool, state agencies can rent Fleet's vehicles on a short- or long-term basis. Fleet also oversees vehicle purchases for most state agencies and sets policy for the proper use of state vehicles. In addition, Fleet operates parking lots for state employees.

Fleet has performed analyses indicating that its vehicle rental rates are competitive with those of commercial rental companies. However, although useful to some extent, these analyses do not fully demonstrate Fleet's cost-effectiveness because Fleet lacks assurance that the rates it used for comparison are similar to what state agencies typically pay under Fleet's contracts with commercial rental companies. A more comprehensive method of determining its cost-effectiveness would involve comparing the cost of operating its motor pool to the actual amount that the State would pay commercial rental companies—information that Fleet does not currently have.

Additionally, the terms of the current contracts Fleet has with commercial rental companies and the noncompetitive method it uses to select companies may not be in the State's best interest. In May 2005, Fleet's chief told us that Fleet is exploring new options related to contracting with commercial rental companies. These changes could secure lower rates for state agencies.

To enhance its competitiveness, Fleet might draw on opportunities that exist to reduce its costs and pass the savings on to the state agencies that use its vehicle rental services. Specifically, to ensure that the State does not own unnecessary vehicles, Fleet could establish a minimum-use requirement for the vehicles that state agencies rent on a long-term basis. Fleet could also set standards related to the idleness of its short-term rental vehicles, such as an acceptable number of days that vehicles can be idle, and assess its progress in meeting those standards. Currently, Fleet lacks such requirements and standards related to vehicle use.

Opportunities to further reduce costs may exist in Fleet's garage operations. Fleet has closed one of its garages and plans to close another. Before Fleet can make decisions about other garage closures, which could result in cost savings, it needs to begin gathering data to understand whether the repair and maintenance services that it provides are cost-effective. Currently, Fleet does not adequately track its garage employees' time to understand the cost of the services it provides.

According to its chief, Fleet is taking steps to establish standards that could identify opportunities to reduce the number of vehicles in its motor pool, such as a minimum-use requirement and standards for better assessing vehicle utilization and idle time. She also told us that Fleet is making an effort to better track the costs of performing repairs and maintenance on its vehicles and that by September 2005, she anticipates Fleet will implement a timekeeping system that will allow it to track the amount of time staff spend performing certain tasks.

Fleet's other responsibilities include overseeing the vehicle purchases made by most state agencies, setting policies for agencies' vehicle utilization, and operating parking lots that state employees use. Fleet is required to verify the need for vehicle purchases made by state agencies. Before it implemented a new process for approving vehicle purchases in 2003, Fleet sometimes approved purchase requests with no documented justification of need for the vehicles, and it still does not require agencies to explain in writing why any underutilized vehicles they might have cannot be used instead of the requested vehicles. Fleet's policy defining what constitutes an underutilized vehicle is the same as it was 20 years ago and may set a minimum-use standard that is too low. Because usage of current vehicles is one factor Fleet is supposed to consider when assessing the need to purchase more, setting a low expectation may cause Fleet to allow more purchases than are necessary. Fleet's chief has indicated that as of May 2005, Fleet was reviewing nationwide guidelines for public-sector fleet utilization and will revise the policy in the near future.

Fleet manages approximately 30 parking lots owned or leased by General Services and is responsible for administering state parking policies. As of June 30, 2004, the fund Fleet uses to operate and maintain the lots had a deficit balance of $1.4 million. Although various factors contributed to the deficit, we focused on two that were within Fleet's control. First, Fleet decided to enter into a costly agreement to purchase transit passes to shuttle parking clients to and from peripheral lots in Sacramento; and second, Fleet did not collect parking fees from more than 400 parking clients. As part of its efforts to address the fund deficit, Fleet plans to no longer pay the total cost of the shuttle service, but as of May 2005 it did not plan to collect lost revenue from the nonpaying parking clients.

RECOMMENDATIONS

In addition to rate comparisons, Fleet should compare the actual cost of operating its motor pool to the amount that the State would pay commercial rental companies. In doing so, Fleet should use the actual motor pool rental activity, such as the number of days or months that it rents vehicles by each vehicle type, and apply it to rates that the companies actually charge state agencies. Additionally, it should continue its efforts to obtain lower rates for commercial vehicle rental services by pursuing options for a more competitive contracting process.

To ensure that the vehicles in its motor pool are being used productively, Fleet should continue its efforts to establish a minimum-use requirement for the vehicles it rents to state agencies on a long-term basis. Additionally, for its short-term pool, it should continue to develop performance standards to better assess vehicle utilization and idle time.

Fleet should examine individual garages to determine whether it is cost-effective to continue operating them. Fleet should also continue with its plan to track the time of garage employees by task.

Fleet should continue with its plan to revisit its minimum-use requirement for agency-owned vehicles to determine if the minimum number of miles or days that state agencies must drive their vehicles should be higher. In addition, Fleet should require state agencies to explain in writing why any underutilized vehicles they might have could not be used instead of new vehicles they request.

Fleet should continue with its plan to stop paying the full cost of shuttling parking clients to and from peripheral lots. Additionally, Fleet should, to the extent possible, seek reimbursement from parking clients who have not paid for their parking spaces.

AGENCY COMMENTS

General Services agrees with our recommendations and intends to take appropriate actions to address them.


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