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

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9Although the concept of outsourcing is not new, the out- sourcing decision-process models vary significantly from industry to industry and organization to organization. The decision-making framework developed under this project takes into consideration both the best practice models of outsourc- ing and the many complicated issues unique to state DOT fleet operations. This section identifies a set of requirements that attempt to define the purpose, scope, and functionalities of this fleet outsourcing decision-making process. These require- ments fall into the following categories: • Purpose and goal, • Scope, • Key considerations, and • Implementation. These requirements are not intended to be prescriptive to the details of the decision-making framework. Their purpose is to provide a high-level understanding of what this outsourcing decision-making process aims to accomplish. 3.1 Purpose and Goal The overall purpose of this outsourcing logic model is to enable a systematic process for evaluation of state DOT fleet and equipment outsourcing and privatization decisions. On a practical level, the logic model should help agencies achieve acceptable levels of service and cost savings by evaluating and making decisions on different outsourcing and privatization alternatives. 3.2 Outsourcing Decision Framework Requirements The following requirements provide a strategic perspective of this framework, along with its essential characteristics: • The framework must be able to address the range of out- sourcing options possible—from completely outsourcing the fleet maintenance function, to outsourcing a single repair location, to outsourcing specific activities—fleet-wide or a single location. • The framework should be built at a high level, by capturing the general characteristics of fleet profile and maintenance, breadth of repair, and replacement options, so that it will be widely applicable and acceptable to most agencies. • The framework should allow practitioners to incorporate strategic, analytical, and operational decision criteria. • The framework should take local, regional, or statewide operating imperatives into consideration. • The framework should recognize, define, and describe process differences between internally and externally driven outsourcing initiatives. The flexibility and scalability of this outsourcing decision- making framework is one of the critical requirements. The framework should be able to address a full range of outsourcing decision alternatives, from outsourcing a single type of repair for a single vehicle on case-by-case and day-to-day bases at a particular location to privatizing a single maintenance function at a particular location to the entire fleet. These potential out- sourcing alternatives clearly reflect the unique and complicated aspects of fleet and equipment outsourcing decision making under a typical state DOT business operational environment. The following requirements attempt to capture specific views on how to make this decision-making framework flexible and scalable. The subsequent section revisits and analyzes this cate- gory of requirements using an abstract mathematical form. 1. The framework should be flexible and scalable to address the full range of decision making, such as: • Outsourcing of decisions on day-to-day and case-by- case bases at state DOT shops, particularly a single type of repair for a single particular vehicle situation, C H A P T E R 3 Scope of the Outsourcing Decision Framework

• Outsourcing of decisions on a particular vehicle or equip- ment class and/or particular types of maintenance and repair activities, • Outsourcing of a single maintenance function, • Outsourcing of a single repair location, • Outsourcing of specific statewide or regional activities, • Fleet-wide and regional combinations of some or all of the activities or fleet segments, and • Privatization of entire fleet maintenance operations. 2. The framework should take into consideration a variety of outsourcing and privatization forms with different levels of agency involvement and responsibilities (i.e., for quality control and assurance). 3. The framework should address selected outsourcing and privatization and be flexible enough to handle different risk and performance expectations (e.g., in managed competi- tion, selected outsourcing, and privatization situations). 3.3 Key Factors to Be Considered Like any decision-making model, this outsourcing model must take into consideration and incorporate various fac- tors to evaluate how agency management weighs in on the final outsourcing decisions. Some of these factors, such as cost and performance, are common to most outsourcing models, and others are unique to state DOT fleet and equipment main- tenance (e.g., fleet composition, regional and statewide con- siderations). The following requirements attempt to identify and capture these factors for consideration in the outsourcing model: 1. The framework should be adaptable to various fleet compositions and sizes (i.e., mix of vehicles and types of equipment). 2. The framework should take into consideration various maintenance activities performed on the fleet [e.g., minor repair, preventive maintenance (PM), overhaul, heavy repair]. 3. The framework should take into consideration how deci- sions for outsourcing and/or privatization are influenced by factors such as: • Workload of in-house shops, • Operations requirements that drive shop priorities (e.g., emergencies, backlog), • Full costs of maintenance activities (e.g., direct and indirect costs), • Performance and quality measures (e.g., preventive main- tenance compliance, response times, down times, relia- bility factors, breakdown rates, repeat repairs), • Management requirements, and • Internal and external capabilities available. 4. The framework should take into consideration fleet and non-fleet activities normally performed by DOT fleet main- tenance personnel as part of the comparative cost analysis. 5. The framework should take into consideration local and regional service markets and be able to evaluate the capa- bilities of available service providers. 6. The framework should incorporate agency-specific pro- curement policy and rules. 7. The framework should take into consideration the long- term implications and risks associated with outsourcing. 3.4 Implementation of the Framework Realizing the importance of developing a decision-making framework that is practical and implementable by state DOTs, the following features were required to ensure that the model is readily implementable: • The decision-making framework must be presented as a step-by-step process flow with description of each decision point, logical sequences, evaluation criteria, and necessary data computations. • The framework must include sample templates in elec- tronic formats to analyze and present the results of each step in clear and concise fashion to assist in the decision- making process. • The framework should include guidance to compute and compare in-house costs and outsourced costs for consid- ered alternatives, including direct, indirect, and other costs. • The framework should be built based on the data that are readily available—or can be reasonably estimated—without requiring significant data collection efforts. 10