Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance (2011)

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S U M M A R Y Outsourcing is a key component of the state department of transportation’s (DOT’s) strat- egy for delivering services. NCHRP Synthesis of Highway Practice 313: State DOT Outsourcing and Private-Sector Utilization documented that either the legislative or executive branches of state government can mandate outsourcing directly, although more commonly they act to limit or reduce the number of state employees, resulting in a de facto mandate to outsource. Not surprisingly, the most common reasons cited for outsourcing were lack of sufficient staff or improper combination of skills. These reasons were followed by cost cutting and/or improved service quality. The decision to outsource is not an easy one, and how the outsourcing decisions are made is of great interest to state DOTs. While several best-practice outsourcing models are available in the private sector, caution should be exercised while translating those models directly for use in the public sector. The profit and business development considerations in the private sector should be balanced against the legal, economic, public service, and political mandates of government. Also, a variety of factors should be considered in the decision process, such as the criticality of the outsourcing candidates to the organization’s mission and goals, avail- ability of third-party vendors, cost, and service quality. Outsourcing public-sector fleet and equipment maintenance offers certain unique challenges that require such decisions to address additional and more complicated considerations. This report presents a practical, logical, and transparent framework for conducting system- atic analysis and making decisions on outsourcing and privatization of vehicle and equipment fleet maintenance. The framework was designed to be flexible and scalable to address a full range of outsourcing decision alternatives, from outsourcing a single type of service for single vehicles on case-by-case and day-to-day bases at specific locations to outsourcing some or all maintenance services at some or all locations, for some or all fleet segments in the enterprise. A commonly adaptable typology of equipment and maintenance types was defined to ensure that the framework is widely acceptable and adaptable across diverse fleet assets and maintenance services. A core three-dimensional decision variable was also defined to serve as a common basis to evaluate virtually all possible outsourcing alternatives. Commonly used performance indicators or metrics in the fleet management industry are suggested herein to assist in consistent evaluation of insourced and outsourced service performance. The core process model is presented as a step-by-step (structured) logic process that focuses on the unique needs of the state DOT’s fleet maintenance and business environment. There are five processes in the model (see Figure 1). The process steps and their sequences repre- sent key checkpoints and logical information and decision flows in arriving at the final out- sourcing and insourcing decisions. The actual execution of the process model is highly flexible, depending on the context of the outsourcing decisions such as the scopes of the outsourcing decisions and how often the outsourcing decisions need to be reviewed and updated. This Decision Making for Outsourcing and Privatization of Vehicle and Equipment Fleet Maintenance 1

2report also presents two case study examples that demonstrate the practical application of the decision framework. The report details each step in the high-level logic model via processes and discussions of the rationale and suggested typologies that can be applied or tailored to the user. The decision logic model detailed in this report is intended to help ensure a thorough and considered decision-making approach. Fleet management agencies may at any time have already thoroughly addressed or leap-frogged certain steps in the logic and may want to adapt the decision process to existing knowledge or policy. The logic model is not intended to be overly prescriptive; rather, it is meant to assist in comprehensive and balanced evaluation of outsourcing decisions. Figure 1. High-level outsourcing decision process.