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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance. Washington, DC: The National Academies Press. doi: 10.17226/22869.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance. Washington, DC: The National Academies Press. doi: 10.17226/22869.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance. Washington, DC: The National Academies Press. doi: 10.17226/22869.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance. Washington, DC: The National Academies Press. doi: 10.17226/22869.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance. Washington, DC: The National Academies Press. doi: 10.17226/22869.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance. Washington, DC: The National Academies Press. doi: 10.17226/22869.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance. Washington, DC: The National Academies Press. doi: 10.17226/22869.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance. Washington, DC: The National Academies Press. doi: 10.17226/22869.
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TRANSPORTAT ION RESEARCH BOARD WASHINGTON, D.C. 2011 www.TRB.org N A T I O N A L C O O P E R A T I V E H I G H W A Y R E S E A R C H P R O G R A M NCHRP REPORT 692 Subscriber Categories Maintenance and Preservation • Vehicles and Equipment Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance John Wiegmann Ashok Sundararajan BOOZ ALLEN HAMILTON McLean, VA W I T H Zongwei Tao WERIS, INC. Reston, VA Research sponsored by the American Association of State Highway and Transportation Officials in cooperation with the Federal Highway Administration

NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM Systematic, well-designed research provides the most effective approach to the solution of many problems facing highway administrators and engineers. Often, highway problems are of local interest and can best be studied by highway departments individually or in cooperation with their state universities and others. However, the accelerating growth of highway transportation develops increasingly complex problems of wide interest to highway authorities. These problems are best studied through a coordinated program of cooperative research. In recognition of these needs, the highway administrators of the American Association of State Highway and Transportation Officials initiated in 1962 an objective national highway research program employing modern scientific techniques. This program is supported on a continuing basis by funds from participating member states of the Association and it receives the full cooperation and support of the Federal Highway Administration, United States Department of Transportation. The Transportation Research Board of the National Academies was requested by the Association to administer the research program because of the Board’s recognized objectivity and understanding of modern research practices. The Board is uniquely suited for this purpose as it maintains an extensive committee structure from which authorities on any highway transportation subject may be drawn; it possesses avenues of communications and cooperation with federal, state and local governmental agencies, universities, and industry; its relationship to the National Research Council is an insurance of objectivity; it maintains a full-time research correlation staff of specialists in highway transportation matters to bring the findings of research directly to those who are in a position to use them. The program is developed on the basis of research needs identified by chief administrators of the highway and transportation departments and by committees of AASHTO. Each year, specific areas of research needs to be included in the program are proposed to the National Research Council and the Board by the American Association of State Highway and Transportation Officials. Research projects to fulfill these needs are defined by the Board, and qualified research agencies are selected from those that have submitted proposals. Administration and surveillance of research contracts are the responsibilities of the National Research Council and the Transportation Research Board. The needs for highway research are many, and the National Cooperative Highway Research Program can make significant contributions to the solution of highway transportation problems of mutual concern to many responsible groups. The program, however, is intended to complement rather than to substitute for or duplicate other highway research programs. Published reports of the NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM are available from: Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet at: http://www.national-academies.org/trb/bookstore Printed in the United States of America NCHRP REPORT 692 Project 13-03A ISSN 0077-5614 ISBN 978-0-309-21327-1 Library of Congress Control Number 2011930332 © 2011 National Academy of Sciences. All rights reserved. COPYRIGHT INFORMATION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB, AASHTO, FAA, FHWA, FMCSA, FTA, or Transit Development Corporation endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not-for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. NOTICE The project that is the subject of this report was a part of the National Cooperative Highway Research Program, conducted by the Transportation Research Board with the approval of the Governing Board of the National Research Council. The members of the technical panel selected to monitor this project and to review this report were chosen for their special competencies and with regard for appropriate balance. The report was reviewed by the technical panel and accepted for publication according to procedures established and overseen by the Transportation Research Board and approved by the Governing Board of the National Research Council. The opinions and conclusions expressed or implied in this report are those of the researchers who performed the research and are not necessarily those of the Transportation Research Board, the National Research Council, or the program sponsors. The Transportation Research Board of the National Academies, the National Research Council, and the sponsors of the National Cooperative Highway Research Program do not endorse products or manufacturers. Trade or manufacturers’ names appear herein solely because they are considered essential to the object of the report.

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Charles M. Vest is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, on its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council. The Transportation Research Board is one of six major divisions of the National Research Council. The mission of the Transporta- tion Research Board is to provide leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdisciplinary, and multimodal. The Board’s varied activities annually engage about 7,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individu- als interested in the development of transportation. www.TRB.org www.national-academies.org

CRP STAFF FOR NCHRP REPORT 692 Christopher W. Jenks, Director, Cooperative Research Programs Crawford F. Jencks, Deputy Director, Cooperative Research Programs Amir N. Hanna, Senior Program Officer Eileen P. Delaney, Director of Publications Doug English, Editor NCHRP PROJECT 13-03A PANEL Field of Maintenance—Area of Equipment Erle Potter, Virginia DOT, Richmond, VA (Chair) Joseph L. Darling, Niskayuna, NY (formerly with New York State DOT) Dan Guy, Maryland State Highway Administration, Hanover, MD Sharon E. Holmes, Centurion Consultant Group, Inc., Tallahassee, FL Donald J. Lewis, Texas DOT, Austin, TX Steven McCarthy, Utah DOT, Salt Lake City, UT John F. White, South Carolina DOT, Columbia, SC Celso Gatchalian, FHWA Liaison Frank N. Lisle, TRB Liaison C O O P E R A T I V E R E S E A R C H P R O G R A M S

This report presents a practical, logical, and transparent framework for conducting sys- tematic analysis and making decisions on outsourcing and privatization of vehicle and equipment fleet maintenance. The framework defines a decision process model that can be applied to a wide range of outsourcing decision alternatives. The process is presented as a step-by-step logic process that focuses on the unique features of state department of trans- portation (DOT) fleet maintenance. The process is supplemented by case studies to illus- trate the practical application of the framework for two scenarios commonly encountered by maintenance departments. In addition, forms and templates are included for use in con- ducting and documenting the outsourcing analysis and organizing the results. The infor- mation contained in the report will be of immediate interest to state maintenance engineers, fleet and equipment managers, and others involved in the maintenance of vehicle and equipment fleets. Because of growing demands and resource limitations on vehicle and equipment fleet maintenance, DOTs often consider outsourcing and/or privatization of these services. How- ever, the decision for outsourcing and/or privatization depends on fleet size, mix of vehi- cles, and type of equipment, and is influenced by such factors as cost effectiveness, timeli- ness, and quality of service. Also, outsourcing and privatization can be implemented in a variety of forms with different levels of agency involvement, such as outsourcing statewide or regional activities and selected outsourcing of specific activities, and with different levels of responsibility for quality control and assurance. However, there is no widely accepted process for evaluating the different forms of outsourcing vehicle and equipment fleet main- tenance. Thus research was needed to review relevant information and recommend a ratio- nal process for making decisions on outsourcing and privatization of these activities with consideration given to maintenance requirements, basis of measurement, costs, perfor- mance, and other related items. Under NCHRP Project 13-03A, “Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance,” Booz Allen Hamilton, Inc., of McLean, Vir- ginia, worked with the objective of recommending a process for making decisions on out- sourcing and privatization of vehicle and equipment fleet maintenance. It was required that the process be flexible enough that it can be applied to the full range of decision making, from outsourcing a single activity or function to outsourcing all maintenance functions of the entire fleet maintenance operations at a particular location or at all operating centers of the state DOT. To accomplish this objective, the research identified typical characteristics of state DOT fleets and equipment and the specific requirements of the outsourcing decision-making F O R E W O R D By Amir N. Hanna Staff Officer Transportation Research Board

process. Based on this information, the research team recommended a three-dimensional outsourcing decision framework that takes into consideration a particular equipment class or type of equipment, maintenance service type, and organizational unit. The framework defines a decision process model for key process activities, decision points, and evaluation criteria. In addition, the research identified performance indicators or metrics commonly used in the fleet industry that should be used in the analysis to provide a consistent platform for evaluating the insourcing and outsourcing performance. The outsourcing decision framework is supplemented by (1) two case studies that illustrate use of the process for two scenarios representing the range of situations commonly encountered within state DOT maintenance departments and (2) tables and templates for use in conducting and docu- menting the outsourcing analysis and organizing the results. The case studies address out- sourcing decisions: (1) a statewide strategic outsourcing decision and (2) day-to-day out- sourcing to manage peak workload. The framework for conducting systematic analysis and making decisions on outsourcing and privatization of vehicle and equipment fleet maintenance will be particularly useful to highway agencies because it provides a practical, logical, and transparent approach and helps highway agencies in evaluating outsourcing and privatization options and making decisions that would achieve acceptable levels of service and cost savings.

C O N T E N T S 1 Summary 3 Chapter 1 Introduction 3 1.1. Study Context 4 1.2. Study Scope and Objectives 4 1.3. Purpose and Organization of This Report 5 Chapter 2 Background 5 2.1. Characteristics of State DOT Vehicle and Equipment Fleets 5 2.2. Challenges for Outsourcing Fleet Maintenance Operations 7 2.3. Applicable Forms of Fleet Maintenance Outsourcing 9 Chapter 3 Scope of the Outsourcing Decision Framework 9 3.1. Purpose and Goal 9 3.2. Outsourcing Decision Framework Requirements 10 3.3. Key Factors to Be Considered 10 3.4. Implementation of the Framework 11 Chapter 4 Fleet Outsourcing Decision Framework 11 4.1. Equipment Class 12 4.2. Maintenance Types 12 4.3. Outsourcing Decision Variables 13 4.4. Performance Measurement 13 4.4.1. Data or Information to Manage Fleet and Equipment Maintenance Performance 13 4.4.2. Key Performance Indicators or Metrics to Monitor Performance 13 4.4.3. Benchmarking To Gauge Performance 14 4.5. Modeling a Full Range of Outsourcing Alternatives 15 4.6. High-Level Decision-Making Process 16 4.7. Outsourcing Decision Subprocesses 16 4.7.1. Process 1: Identify Critical Internal and External Conditions 18 4.7.2. Process 2: Analyze Internal Demand and Capabilities 21 4.7.3. Process 3: Evaluate External Service Providers 22 4.7.4. Process 4: Analyze Cost and Performance Trade-Offs 27 4.7.5. Process 5: Synthesize and Finalize Outsourcing Decisions 29 Chapter 5 Case Studies 29 5.1. Case Study Context 30 5.2. Case Study A – Strategic Outsourcing Decision 30 5.2.1. Process 1: Identify Critical Internal and External Conditions 33 5.2.2. Process 2: Analyze Internal Demand and Capabilities 35 5.2.3. Process 3: Evaluate External Service Providers 36 5.2.4. Process 4: Analyze Cost and Performance Trade-Offs 38 5.2.5. Process 5: Synthesize and Finalize Outsourcing Decisions

38 5.3. Case Study B – Day-to-Day Outsourcing Scenario 39 5.3.1. Process 1: Identify Critical Internal and External Conditions 41 5.3.2. Process 2: Analyze Internal Demand and Capabilities 41 5.3.3. Process 3: Evaluate External Service Providers 42 5.3.4. Process 4: Analyze Cost and Performance Trade-Offs 42 5.3.5. Process 5: Synthesize and Finalize Outsourcing Decisions 43 Chapter 6 Summary 45 References 46 Appendix A Summary of Outsourcing Model and Process Steps 50 Appendix B Forms and Templates

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TRB’s National Cooperative Highway Research Program (NCHRP) Report 692: Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance presents a framework for conducting systematic analysis and making decisions on outsourcing and privatization of vehicle and equipment fleet maintenance.

The framework defines a decision process model that can be applied to a wide range of outsourcing decision alternatives. The report focuses on the unique features of state department of transportation fleet maintenance.

The report includes case studies designed to help illustrate the practical application of the framework, and forms and templates for use in conducting and documenting the outsourcing analysis and organizing the results.

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