Utilizing Technology to Reduce Municipal Fleet Size
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Annual Project Savings
Region : North America
National GDP Per Capita (USD) : 62,517 (IMF, 2018)
City Population: 2.7 million
Year Implemented : 2011
National Gini Index : 41.5 (World Bank, 2016)
Tags : GOVERNANCE ENVIRONMENT MOBILITY DATA
Technologies Utilized : Online vehicle registration software, AVL, Secure Keyless vehicle access, remote monitoring
Funding Source : 100% municipal government
Project Cost : $125,000 annually
Project Savings : $220,769 annually
Planned Project Duration : planned 6 year duration; new contract has an expected duration of 5~8 years
KPIs : Cost per mile traveled and fleet inventory analysis
Project Context and Overview
With a population of 2.7 million and GDP per capita of $57,624, Chicago is the third largest metropolitan area in the United States.
In 2017, the Chicago Department of Fleet and Facility Management (“FFM”) and the city’s overall corporate budget was $3.8 billion. According to Chicago’s 2017 budget, FFM is, “responsible for maintaining and repairing the inventory of City owned vehicles and the operation, maintenance and repair of City buildings and properties\". The FFM is also responsible for custodial services, security coverage, graphic services, mail service, relocation services, and document storage and management.” The department employs close to 1,000 staff and oversees over 10,000 vehicles. These include vehicles used for waste management, water management, snow removal, street sweeping, police, the fire department, and for Chicago’s O’Hare International Airport. Other less heavy-duty vehicles include sedans which personnel use regularly or intermittently to carry out tasks.
As with any developed city of its size, greater efficiencies in operating processes can result in huge budget savings when applied to scale, and the government has strong leverage in negotiating procurement. In the case of Chicago FFM, a full review of vehicle purchase and maintenance records, fuel reports, and parking expenses revealed under-utilized vehicles. This resulted in the city exploring how sharing economy can be used to drive down costs. Following a review of proposals from two sharing economy contractors, the city has been able to effectively replace under-utilized vehicles with ride-sharing vehicles. This has led to a 25% reduction in per mile costs, while the non-emergency light vehicle fleet was reduced by 15%. Additionally, employees now benefit from a more diverse range of vehicle options.
Project Planning and Implementation
FFM initiated the project in cooperation with the Chicago Budget Office and conducted a review of the purchase, maintenance, fuel reports, and parking expenses. Vehicles with under 50% average utilization were targeted to be retired or switched out. Once under-utilized vehicles were identified, a method to replace them was developed using pre-existing solutions from two sharing economy contractors: Zipcar and Flexfleet. Four city staff were involved in the implementation: two senior automotive equipment analysts, a staff assistant, and a budget analyst.
Under-utilized vehicles were replaced using two methods. In geographic areas which are served by Zipcar (see diagram 1), city employees are able to utilize the service, and the city pays a negotiated rate. This rate is a combination of the city’s ability to negotiate coupled with publicity and exposure the company gains through the contract. In addition, the contract increased usage of the cars as they were utilized during off-peak hours (see diagram 2). Car reservations can be made online and with mobile apps, and vehicles are locked and returned with a key card system which also logs hours.
In areas not served by Zipcar, the city utilized another contractor, Flexfleet, for vehicle pooling. Like Zipcar, Flexfleet provides an online reservation system for ride-sharing vehicles and employees are issued key cards to unlock the cars via readers on the driver’s side window. In this manner, multiple employees are able to safely and efficiently use the same vehicle. A target usage rate of 70% was set for these ride-share vehicles, and vehicles can be shifted from one vehicle storage lot to another to achieve the optimal usage rate. This would mean that at any given time, 70% of the FlexFleet vehicles are in use.
Chicago considers two key performance indicators in evaluating the success of the project: the cost per mile and its inventory of the fleet. Under the program, city employees were able to travel by Zipcar at an average of $1.27 per mile ($.76 per kilometer) cost to the city. Previously, with city-owned vehicles, this cost was $1.59 per mile ($.99 per kilometer). Since the program implementation in 2011, this has resulted in $78,886 in savings to date. The size of the fleet itself was reduced by 15%, resulting in a total of $334,500 annually in avoided capital expenditures when combined with the per mile savings. Subtracting the annual project cost of $125,000 from this as well as the lost resale value of vehicles that the city would have owned, leaves a net of $220,769 in annual savings for the city.
The city attempts a 70% usage rate for the ride-share vehicles to optimize budget savings, for example (See diagram 3). The fleet consistently approaches this number on weekdays.
A less quantitative output of the project is the more diverse selection of vehicles available for city employees. This could lead to added convenience and higher levels of satisfaction, although no study was conducted to assess this. With a reduction in the size of the fleet, the city also saves budget on parking spaces, which can be quite high, and this was considered in the cost calculations.
Recommendations for Transfer
In terms of transferability, this project relies on the presence of contractors able to provide ride-sharing services. While these businesses are becoming increasingly common in developed cities, other contexts may exist in smaller cities to attract such companies. One example would be smaller towns with large universities, as such services are popular and practical for students. Ideally, if more than one such company exists, it can keep pricing and services competitive. Over-reliance on any one contractor often has adverse long-term effects on a program.
Medium to large-sized cities could benefit from such a program, especially in densely-populated cities where parking fees are high or where traffic congestion is a large issue. Parking fees were not calculated into the per mile cost savings for this project as employees parked at city facilities previously. In cities where the government pays for parking space, this could be an area to realize even higher savings.
The project relies on high participation rates in ride-sharing, and so internal policies to support high participation rates are necessary. An expansive outreach campaign is recommended as well as an aggressive reduction in the size of the city-owned fleet to make car sharing more essential.
Chicago strongly recommends that startup and operational costs must be included in the budget of the implementing department prior to launch, and costs such as signup and usage fees should not be passed to other departments or employees using the car sharing services. This should encourage higher participation rates and reduce potential friction between departments. As an update, in spring 2018, Chicago awarded another vendor the car pooling program, and expects 5-10% in additional savings for this contract.
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