By Mark Boada, Executive Editor
A “perfect storm” is forcing government fleets to outsource an activity that the overwhelming majority still complete in-house: routine vehicle maintenance.
That’s the outlook from Steve Saltzgiver, a 30-year-plus fleet management executive who for the past six years has been a consultant with Mercury Associates, in an hour-long interview with Fleet Management Weekly. Mr. Saltzgiver had previously been the fleet manager for one city, two states and two corporations, executive director of the National Conference of State Fleet Administrators and is currently a member of the NAFA Board of Directors.
The interview came on the heels of the release last week of a report by OmniGov IQ, a fleet market intelligence company, stating that RFPs and bids for government outsourcing of routine maintenance increased by 40 percent in 2017, from 2,227 to 3,181. The report explained that as vehicles have become more technologically advanced “the work of maintaining government fleet vehicles has become more high-tech and specialized, and many government agencies don’t have specialists on their staffs that can do this work.”
FMW: Steve, how does that report square with what you’ve been seeing over the last six years?
Saltzgiver: We actually agree with that. We’ve been saying that for a number of years now, our President Paul Lauria and I and most of our team. We call it the “Brain Drain Convergence.” Yesterday’s mechanics are now becoming highly skilled technicians who must understand how to diagnose and repair complex vehicle systems. What is happening is that we’re having the biggest exit from the mechanics’ space ever in history with the Baby Boomers retiring, requiring more skilled technicians, which is converging simultaneously with increased complexity of vehicles. Those two factors are driving these kinds of changes, because people simply don’t have the resources to train people – the increased complexity requires an intense amount of training to keep technicians up to date.
The other thing that’s happening simultaneously is that people aren’t going into mechanics any more. There are all types of incentive programs, new entrant programs, and recently President Trump even brought back apprentice programs. There is a lot of focus right now going into this because those of us who own cars are going to be in a world of hurt in the next five to 10 years because there are just not enough resources.
What percentage of government fleets do you believe do outsource routine and preventive maintenance and what percentage don’t?
I would say 15 to 20 percent may outsource routine maintenance.
So, 80 to 85 percent of all government fleets, you believe, do their own routine maintenance.
That’s what I believe. I have no way to substantiate that, but from my experience, that’s what I believe. The required tools, training and infrastructure involved to perform the routine vehicle diagnostics and trouble-shooting are becoming much more complex than in the past. There are now more than a dozen independent computer systems required to operate today’s modern vehicles with over 100 million lines of computer code on some models, which is about 14 times more than a Boeing 787 Dreamliner jet .
Do you find that auto technicians who work for government fleets tend to stay with them for a long time?
They do. The tenure of those technicians is definitely longer than the private sector. The private sector has done a lot of things to entice people to come out. The biggest draw for government fleet technicians is that they all have a pension in the public sector, and that is kind of insurmountable for a private repair shop to pay somebody to leave a government fleet. But what’s happening is that people who have accumulated enough time to draw on their pension can afford to leave their government fleet jobs and find one in the private sector, which offers sign-on bonuses, better benefits and wages, and probably the most important thing is they have a better shift – they work pretty much straight day shifts.
But government fleets are probably facing the same rate of retirement that the private sector is facing, no?
Yes. It’s a problem industry-wide. But it’s probably more so in government because the private sector is a little bit more aggressive using the technical schools to sign future technicians on before they graduate. They have sign-on bonuses that compensate them for their tools. The government sector doesn’t have the kinds of funds to do those things to be competitive with the private sector.
You’ve also said that when these younger people come in they tend to job-hop, so the employment base is less stable than in the past.
I would say that’s true. The Millennial workforce, they seldom stay anywhere for more than two years. They’re upwardly mobile, trying to find that sweet spot to make more money, get more benefits. They’re nothing like the Baby Boomers who stayed for dozens of years with a single employer.
Have you seen this level of increase in outsourcing of government fleet maintenance that this OmniGov IQ outfit is seeing?
I haven’t done any analytics on it, but it rings true with what I believe has happened or will happen. At Mercury Associates, we’re getting requests to embed fleet personnel with different clients. This is more for analytical positions, but the same thing is true for technicians and management level staff. There’s also a company in the San Francisco area with local technicians who are working on a 1099; they’re independent contractors. They get paid by the hour, they get paid for their trucks, they travel from site to site to whoever needs them, they fill out work orders, they have iPhones for a mobile work station. They have to keep their qualifications up, their ASE certifications. It’s definitely coming down the pike.
What will be the consequences as fleets find they have fewer and fewer qualified technicians and haven’t resorted to outsourcing their maintenance?
As their workforce decreases in size, they’re going to see excessive costs, increased downtime, the need to increase the fleet size to make up for more downtime and increased costs for training and tools. Every government at some point is going to be affected by the Baby Boomers’ retirement. I suspect many fleets won’t react to it or do anything about it until it is a crisis. I asked a question at a government fleet conference about how they’ve been having trouble getting technicians. And from what they said, it’s already becoming a crisis.
And fleet managers will get the blame, right?
Right. They always seem to bear this burden. They’re always the scapegoat for most everything fleet.
So, the way to avoid getting blamed for the inevitable here is for fleet managers to start now to consider outsourcing routine maintenance, right?
That’s right. The ones who don’t are setting themselves up for some very difficult times somewhere down the road, and they’re not very far away. Of course, the other option is to review their current operations and determine what investments will need to be made to build up the infrastructure necessary to perform quality repairs to increasingly complex assets.