[BETA] Fortnightly

To an outsourcing company, offering services to utilities to manage their motor vehicle fleets may seem like a simple economic proposition. "We can do it better and cheaper," the outsourcers say.

But it's not that easy. Thorny issues arise (em in economics, quality, administration, and labor relations. And they must be faced head on.

Few utilities today have avoided outsourcing one function or another in the effort to cut costs. Some utilities have been burned. Others learned, went back to working in house, and became more "data driven," like the outsourcers themselves, to track costs.

Many utilities, because of union contracts, can't consider an outsourcing company. In fact, the issue of union/nonunion shops forms a large part of the outsourcing debate. When contacted for their views, several fleet managers showed a reluctance to discuss outsourcing, because of the corollary union issues.

But three of the five fleet managers interviewed by PUBLIC UTILITIES FORTNIGHTLY offered unique perspectives on outsourcing. One, on the East Coast, counts some 2,700 vehicles in his fleet; another, in the Midwest, runs 1,600 vehicles; a third, on the West Coast, operates 6,000 vehicles.

The most evenhanded comments came from the Midwestern fleet manager, who asked to remain anonymous. His fleet employs about 40 workers; his annual budget reaches $20 million.

This manager's fleet recently ran a six-month outsourcing pilot and discovered that outsourcing wasn't paying its way. Outsourcing fees raised expenses. The projected savings of $350,000 weren't reached. The fleet manager told the outsourcer that it would have to pay its way and reduce costs. But a year and a half later, the two parted, on friendly terms.

The experience helped the fleet manager discover aspects of his own operation. For example, where three or four employees once tracked multiple invoices, the outsourcer would bill with one invoice. However, accounts payable didn't assign the man-hour savings to the fleet. These 'soft dollars' went somewhere else.

The manager learned what many will or have learned: Once costs are unbundled, you know what the true costs are. The fleet manager also learned he could get better prices on items like tires through national accounts, an advantage the outsourcer

didn't have. The utility could buy direct from regional suppliers, too. Most important, the utility fleet realized it needed companywide scheduling of maintenance. With help from a software package, the fleet now provides more maintenance management, expense processing, and service to the utility's internal customers.

The fleet manager says he still talks to outsourcers: "I think the magic is the balance of best cost, best service. I don't think a vertically integrated fleet function is the right thing. And I don't agree that a total outsource situation is the right thing."

The utility fleet may hire a third party to perform warranty recovery. "I think incrementally, outsourcing is a thing we can still evaluate," the manager says.

The future will prove him right or wrong. The fleet will remain a mostly in-house operation as long as it finds the best in-house service methods.

Although the utility remains a union shop, the manager believes