Northampton-based Specialist Fleet Services Ltd (SFS) was established in 1992 and has built up a reputation as a competitive and flexible contract hire and fleet management company
When austerity measures mandated by government spending cuts were first introduced, the public sector saw significant delays in the procurement of new fleets as local authorities became more and more anxious to part with funds. As financial pressures continue, effective methods of cutting costs without damaging frontline services continue to be sought.
Features Editor Joe Wyatt spoke to Bob Sweetland, Managing Director of SFS, about his experience of working with local councils under austerity and what SFS can offer cash-strapped fleet managers, particularly regarding the tendering process and the purchase versus contract hire conundrum.
What effect has austerity had on you and your public sector clients?
Procurement delays were very noticeable and we certainly saw existing fleets being relied on for significantly longer periods than usual. We have also seen a rationalisation in the management of local authorities; jobs have gone, layers of management have been cut out. I think a lot of the old guard, those with extensive vehicle expertise, have taken early retirement and consequently I think there can be less expertise at a senior level within local authorities nowadays. We are also seeing managers wanting to work vehicles harder, making more use of what is a very expensive asset.
This is one of the reasons councils come to firms like SFS; to be able to cut down on the number of vehicles they operate. In the past, a council may have looked for a fleet of 15-20 refuse vehicles with two or three replacements on standby. Now, a council will only request the 15-20 vehicles, with no room for excess. SFS can work with them to fulfil their exact order and provide replacements. Within our business, we have Collett Transport Services, a municipal vehicle spot hire company that has around 200 vehicles on its fleet. With a total of around 80 staff, nine workshops and 2000 vehicles, we are well placed and have the resources to provide excellent service and swiftly supply additional vehicles if our clients get into trouble.”
Do you have any advice for councils entering the procurement process?
We are finding that councils are purchasing vehicles with the aim of cutting costs whereas in the past they may have leased or contract hired them. They may think that because they can borrow cheaply from the Public Works Loan Board that it must be cheaper to buy the vehicles, rather than use a company like SFS which has a higher cost of borrowing, albeit only one or two percent higher.
But what some councils are failing to look at are the whole-life costs. If you take a municipal fleet of 100 vehicles, the saving of perhaps 1-1.5% on the interest rate used to fund those vehicles pales into insignificance compared with the maintenance and operational costs of running a fleet of that size.
How else can local councils approach procurement?
They can go out directly and issue a tender through procurement legislation, each with a purchase option, a lease only option, and a contract hire option.
For example, we are currently working with a council in England who are looking for a fleet of 25 refuse vehicles. They have issued a tender document which has a purchase option, so some manufacturers will tender to sell them the vehicles. It also has a lease-only option, so finance and leasing companies will tender them a lease option. And finally, it will have a full maintenance contract hire option which SFS will tender for. After evaluating all the offers from potential suppliers, the council can then make an informed decision about which is the right route for them, as opposed to automatically going for the first purchase option and potentially getting a bad deal.
Do you have a final, take-home message for our readers?
Our message to customers is that during the procurement process, go to the market and test all the options. Do not make an assumption that is untested; go to the market, get the best prices for purchasing, leasing, and contract hiring respectively, and then examine your options. Only then should local councils and authorities make a final decision.
Specialist Fleet Services recently secured a 10-year contract with Epsom & Ewell Borough Council (EEBC) to provide 75 vehicles for its refuse collection services. Bob Sweetland explained how the deal happened.
“Before we tendered to EEBC earlier this year, they had dealt with a consultant who carried out an appraisal and determined that it would be cheaper for them to buy their vehicles and tender for a separate maintenance contract. We discussed this with the team at EEBC, asking how that assumption could be made without going to the market first. We suggested that they go to the market to find the best purchase price and then calculate all the additional costs as well, including a third-party maintenance contract. They would then be able to compare that figure with a contract hire alternative provided by SFS and find out which is best.
“So they did exactly that; put together a tender and then evaluated all the responses. What they found was the contract hire option was cheaper and SFS were awarded the contract.”
Cllr Beckett, Chair of Environment Committee, Epsom & Ewell Borough Council, said: “We are delighted with our new vehicles, which are supporting our new kerbside collections service, Simply Weekly Recycling. As we have come to expect, Specialist Fleet Services have paid great attention to our needs during the handover process.”