– By Marc Sibbald –
The NSW Government has followed through on the 2015 announcement to disband Statefleet and outsource the management of its fleet. It has appointed SG Fleet and Smartfleet as fleet managers and a separate list of companies to provide vehicle leasing.
This should excite the management team (who are also major shareholders) of the publicly listed SG Fleet that increased profits in 2015 through industry consolidation and predicted further growth in 2016.
Government fleets are big business. It’s estimated there are over 200,000 vehicles in federal, state and local government fleets. And when you add the potential chance to sell novated leasing and non-vehicles salary packaging to government employees, the government is a substantial revenue opportunity for the listed fleet companies.
The changes in NSW were flagged in October 2014 when a six month trial of car sharing was announced for government agencies. In the August 2015 announcement the Minister for Finance, Services and Property, Dominic Perrottet, announced the NSW Government is moving to a new model to manage the state’s car fleet that will free up around $1 billion in capital over the next four years.
“The Government shouldn’t be competing with the private sector for fleet leasing and management services,” Mr Perrottet said “This arrangement will be more cost effective, increase competition and allow government to access best practice in fleet management.”
In February a spokesperson for the Department of Finance, Services and Innovation (DFSI) confirmed to Fleet Auto News that since the announcement, the DFSI had been conducting negotiations with suppliers and developing an implementation plan for the transition to the new model.
Derrick Bishop, Global Managing Director at Bishop Fleet Optimization (BFO), believes the government will not save any money with this approach. “The advice States are getting from external consultants that claim to be experts is staggering. You need solid data to see the real inner working of a fleet and model the impacts of proposed change” says Bishop.
“CEOs need to be concerned about fleet. Vehicle fleets are a large cost and running them at an optimal level is critical especially when around 80% is a fixed cost. Only 15%-20% of ownership cost is generally related to actually driving the vehicle. Eliminating a surplus vehicle cuts 80% of its cost hence, optimising the number of vehicles you have makes all the difference”.
“Fleet suppliers are paid on a per vehicle basis, so the practice of asking them to tell you how many vehicles you require is crazy” says Bishop. “An independent check and balance is required to protect taxpayer money.”
“The Australian taxpayer needs to be seriously concerned when external consulting company advisors start to inform Ministers with data that does not stack up with what we know” says Bishop.
BFO provided the DFSI with an unsolicited report in March 2015 about car sharing. The unsolicited report was spurred by claims that car sharing would be spread across all NSW government pools.
BFO had already audited 10% of the NSW government fleet and had more than 460,000 trip records that clearly showed that such a change would increase the annual NSW government fleet spend from $250 million to $1.2 billion if current usage patterns remained the same.
Bishop stated “It is disappointing that state governments continue to hire consultants that are amateurs. Obsolete “best practices” that are known to have a high risk of cost escalation or failure are still being promulgated. Investment in serious data collection capability in accordance with the latest best practice is the right path so State CEOs can make quality decisions. Unfortunately, most consulting firms do not want to make that investment”.
“The days of amateur consulting in the fleet sector needs to stop. It wastes massive amounts of money and taxpayers should push back and say no more.”
