In the age of austerity, providing a high quality and good value service to clients is essential
Since 1993, Specialist Fleet Services (SFS) has provided local authorities with the vehicles necessary to perform their services. After buying Collet Transport Services (CTS) in 2013, SFS was able to complete its offering of cost-effective, nationwide, municipal vehicle hire and maintenance services for both short to medium term (CTS) and long-term contract hire (SFS). Under SFS, CTS Hire as it is now known has grown into a highly respected municipal vehicle hire company, offering a wide range of vehicles including 7.5t-26t refuse collection vehicles, specialist recycling vehicles, top loaders, caged tippers, as well as hook & skip loaders.
SFS Managing Director Bob Sweetland spoke to FACTS about what makes the company unique, the challenges facing contract hire and how the company manages these.
When it comes to keeping its clients, Bob pointed out honesty and reliability as being crucial. “We’ve shown that if you deliver what you say you’re going to then they’ll stick with you. And customer retention is incredibly high.”
It is testament to the quality of service offered by SFS that it retains customers for so long. Bob pointed to one of SFS’s earliest contracts, with Kettering Borough Council, which it won in 2002. “We still hold that contract today and have just had it extended to 2027,” he said. “By the time that goes out to tender, we will have worked with the council for 25 years.
SFS also won a contract with Teignbridge Council in 2002, which it still holds, and in 2005 it took over contracts with Epsom and Hinckley. “We won Hinckley again a year ago and a 10-years plus 10-year contract with Epsom, three years ago.” Bob noted.
With the backing of a major banking group, SFS has the financial muscle to find and offer the best deals to its clients. “One of the USPs we have over some of our competitors is that we’re owned by a bank,” Bob noted “They have to go to market to fund their vehicles through third parties, whereas we own our vehicles. They’re on our balance sheet and we don’t have any third-party borrowing.” This financial backing and security also gives customers confidence that we will be supported over the long term to deliver our contractual commitments.
Changes and challenges
Just as technology, legislation and the economy have evolved over the last 15 years, so too have the contractual arrangements that SFS offers. Bob noted that contracts have become more complicated and, as budgets become squeezed, SFS needs to offer greater value for money. SFS can use its purchasing power, in-depth market knowledge, technical expertise and financial resources to tailor a solution for each customer which meets their operational needs in the most cost-effective way.
Commented Bob: “The fact that we are totally focused on the municipal market rather than being a more generalist contract hire company enables us to invest the time and effort into each contract to ensure it is a success for our customers.“
Tightened budgets also mean that contracts are harder to bid for. Councils are looking closely into their accounts and trying to work out the most cost-efficient ways of doing business. In this environment, it is a case of survival of the best value. “One of our biggest competitors at the moment is local authorities purchasing because they think it’s cheaper,” Bob noted.
“Because councils can borrow cheaply, they think it must be cheaper to buy a vehicle rather than procure it on contract hire. However, the funding cost of a vehicle is just a fraction of the cost of running it over a period of five to seven years. When you look at the whole life cost of purchasing, operating and maintaining a vehicle then a small saving in borrowing costs becomes insignificant, not to mention the benefit of transferring the risk of maintaining the vehicle to the contract hire provider. How else can a council fix the cost of labour, parts, tyres and oils for up to 10 years, as well as the residual value risk.”
The introduction of austerity was a blow to local government and, in turn, the companies that supply them. SFS has endured by focusing on its strengths. It is one of the few companies in the sector that exclusively provides municipal vehicles. “We could go to town with the financial resources we’ve got behind us. We could try to compete in other markets but that’s not where we want to be.
“We want to grow, and we are growing. At the moment we’ve got a really strong pipeline of opportunities in the local government sector where we can build on recent contract wins with Mid Devon District Council and Exeter City Council. Over the next year or two we can see some really good prospects, which will enable us to continue the level of growth we’ve sustained over the last few years.
“At the same time, we are looking at more niche markets where we can use our expertise. What we won’t do is try to compete with people buying white vans and tractor units because too many people come unstuck there.”
The personal touch
Part of SFS’s advantage is that the company, and Bob himself, have a long-established relationship with clients. This means they can discuss any issues and help guide each other to a mutually beneficial solution. “When we rebid Epsom and then Hinkley, both of them had had external consultants who told them it’s cheaper to buy their new fleet rather than continue with contract hire,” Bob said.
“Because they’re existing customers, we were able to have that discussion with them and encourage them to look at all the options, including lease only, maintenance only, contract hire and direct purchase.
“Once they were equipped with the information on all the options available to them, they did an evaluation and said you’re right, contract hire is the best value. If you don’t have a relationship with the authority, this might not happen.”
Bob explains it can be difficult to convince a client of the benefits of contract hire before they go out to tender unless a working relationship has been established, especially as decisions are being made by people across different departments.
“Some people just will not consider contract hire because they want to keep control of their vehicles. But others will look at it. For the ones that are open to talking about it, we can tell them exactly what we could do for them, what the benefits are and what the costs are going to be. Then they can make an informed decision as to which way they’re going to go. But you don’t always get the chance.”
Clients differ in their needs and demands. Some will have generic specifications for the vehicles they want, leaving SFS to decide on what best meets their needs and find the best value option. This is where SFS’ relationships with clients are essential, as they provide them with the insight to make the best possible decision.
“At the end of the day, we’ll only bid if we can find a solution that delivers what the customer wants in a sensible way.”
One request that Bob has seen grow in popularity in recent years is for electric and alternative fuel vehicles. “Most tenders we see nowadays request an element of electric or alternative fuel vehicles,” he said. “We have already supplied small numbers of electric vans.”
An example of this was in September when SFS supplied Hambleton District Council two brand-new Nissan eNV200 vehicles to replace the council’s conventional fuel vans. The council aims to move to a 100% electric fleet in the future.
SFS is also in the process of providing Exeter City Council with a number of electric vans this year, as part of its seven-year fleet contract hire agreement, bringing the council’s electric fleet to over a dozen vehicles.
However, Bob noted that progress will be slow: “Until manufacturers launch their eRCVs, we can’t properly evaluate the cost and efficiency of an electric refuse vehicle fleet.
“Once vehicles are available we predict that councils will start by trialling one or two vehicles at first and see how it goes. There is still some way to go to make sure the proper infrastructure exists to support electric refuse vehicle fleets. From our perspective we are getting prepared by making sure our engineers are fully trained to maintain electric vehicles.”
Keep on rolling
Providing the vehicles is only a small part of SFS’s service, and keeping their fleets moving, either with its own workshops or subcontracting maintenance out to third parties is an integral part of the SFS skillset
“We’ve got a number of our own workshops at the moment within local authorities,” Bob said. “Epsom, Spelthorne, Kettering, Hinckley and Lichfield are all local authority workshops we’ve taken over, but we will also subcontract maintenance back to the council’s own workshop if that is their preferred option.
“Since we won the contract in 2002 Teignbridge wanted to keep their own workshop, so we subcontract the maintenance back to them. We effectively give the council a fixed price for their vehicles, but we buy parts and labour from the workshop, so it takes the risk away but enables the workshops to stay under council control.
Ultimately though, our ideal solution is to deliver the maintenance with our own staff. This has been proven to be the way in which we can make a really positive improvement in service delivery and the control of costs.