[BETA] Fortnightly

As utilities refocus resources on their core business, they are developing strategic partners to manage day-to-day support services more efficiently. Operational functions that received scant notice in the past are now identified as areas for big savings.

Transportation services mark one such area. Activities like vehicle acquisition, resale, maintenance, fueling, and routine administration are now widely viewed as outsourcing opportunities (em to reduce costs and enhance productivity. But outsourcers can offer other services, too, such as: benchmarking, licensing and permitting, warranty management, emergency roadside assistance, bodywork, or resale of used vehicles. After all, fleet vehicles represent a large corporate asset. The average bucket truck costs $60,000 plus $200 in monthly maintenance.

Today's fleet management companies provide comprehensive service. Sophisticated computer systems integrate vehicle, driver, and expense information to manage vehicle maintenance, increase operational efficiency, and improve quality of service to fleet drivers. What's more, since most outsource companies offer services à la carte, you can choose to outsource only those services your company really needs (em one component, or the entire fleet management.

Central Illinois Public Service (CIPS), for example, has used fleet outsourcing to trim expenses by 27 percent for annual invoice processing. The company formerly processed over 1,200 invoices from automotive service centers and oil companies. By outsourcing, it streamlined its fuel and maintenance operation and increased efficiency. According to Joe Kindernay, CIPS fleet supervisor: "We were able to save $37,000 and 3,600 clerical hours

annually in invoice processing, increase our expense control, significantly reduce the possibility of credit card fraud, and more productively redeploy clerical support."

Some outsourcing arrangements also involve more than one provider serving a single company. For example, NYNEX recently concluded a five-year fleet management and maintenance contract with a variety of suppliers to service its 18,000 vehicle fleet in New York and New England. NYNEX expects to reduce fleet costs by 13 percent, for a cumulative total of $58 million.

American utilities are not alone in squeezing big savings from their fleets. TransCo, the gas pipeline and storage specialist, recently signed the largest vehicle maintenance contract in Europe. The company expects a 35-percent reduction in vehicle and plant maintenance expenses on its 8,000 commercial vehicles and 11,000 pieces of equipment. Other major British utility fleets have also signed on for outsourcing, including South West Water (maintenance for 1,000 vehicles), Severn Trent Water (fuel for 1,400 vehicles), and Seeboard (total management service for 750 vehicles).

Before beginning what may prove a long-term relationship with an outsourcing vendor, utilities should carefully evaluate potential candidates:

s Financial strength. Company equipment that must last 7 to 10 years is a long-term capital expenditure. Will the outsourcer stay around for the long haul?

s High-volume Strategies. Volume acquisition of vehicles with the same parts and equipment lowers life-cycle costs. Has the outsourcer worked with utilities before?

s Clout with suppliers. Depreciation and fuel expenses make up more than two-thirds of a fleet's operating costs. Look for discounts.

s Favorable financing. Financing can account for 10 percent or more of annual fleet costs. Look for flexible programs.

s Experience with alternate