Reduce the cost of ownership through a well-written policy
By Mark Boada, Executive Editor
Fleets are under constant pressure find new ways to cut operating costs and increasingly looking for the latest in technological solutions to find them. But one in five fleets would do well to look first to much older technology: pen and paper.
That’s the view of Donlen Corporation, one of the largest fleet management companies, that points out that non-existent, poorly written or out of date fleet policies can cost a fleet tens of thousands dollars or more every year by leaving holes through which money leaks from a dizzying variety of driver behaviors. Updating your policy every year to reflect changes in the law, technology and new forms of driver behavior that contribute to higher expenses is essential to plugging those leaks and reducing the total cost of vehicle ownership.
According to John Wuich, Donlen’s vice president of strategic consulting services, some 20 percent of the company’s fleet customers either lack a policy altogether or have one that hasn’t been reviewed or updated in years. Compared to fleets that do have a current policy, on average it cost fleets without one an extra 4.5 cents per mile traveled.
Avoidable expenses add up
While that may seem small, consider that when multiplied by 20,000 miles of driving, for a light-duty vehicle fleet, it amounts to additional spending of $880 per vehicle per year. That comes to $88,000 for a 100-vehicle fleet, $880,000 for a 1,000-vehicle fleet, and a million dollars or more for even bigger fleets.
Wuich said Donlen’s data shows that fleets without current and fully up-to-date polices have lower compliance rates for accurate odometer reporting, completing scheduled preventive maintenance and use of in-network accident repair shops. They also experience lower average fuel economy, a higher accident rate and higher maintenance costs, he said.
“My team uses data to identify opportunities to drive savings and compliance,” Wuich said. “From my perspective, an effective policy can be the difference between simply identifying opportunity for savings and realizing savings.”
Wuich made the comments during a recent NAFA Fleet Management Association webinar entitled, “Driver Policies: The Good, the Bad and the Ugly.” He was joined in the webinar by Elizabeth Wills, Donlen’s vice president for customer experience, and Sonya Girard, fleet manager for IDEXX Laboratories. A recording is available to NAFA members on the organization’s website.
Annual reviews a necessity
The panel made the case that to have a current policy, fleets need to review it every year to be sure that it clearly sets standards for every possible kind of driver behavior that results in higher expenditure; that it incorporates language that enables the fleet to take action against non-compliant drivers, and that also enables them to recover money from those same drivers. It’s also necessary, they indicated, for fleets to treat driver policies like contracts that clearly spell out drivers’ responsibilities and that they secure drivers’ signatures on them.
The panel acknowledged that while advanced digital technology can make it possible for fleets to monitor some kinds of driver behavior – like fuel type purchased and price paid, excessive idling, maintenance and repair spending, miles traveled, speeding and electronic MVR reports – policies have to expressly state the kinds of recourse that fleets have. But not every behavior can be monitored by technology.
For example, Girard pointed to driver neglect of a vehicle’s condition that only becomes apparent once a driver leaves the company. Neglect – like unreported accident damage, tobacco odors or pet hairs and stains – can result in in reduced remarketing revenue or higher expenses to restore the vehicle.
“In regard to this,” she noted, “I’m adding to my policy this year, because we have had transport condition reports of damage to a vehicle that was never reported to us, and when I talked to my HR and legal business partners, they wouldn’t let me go after the former employee to reimburse us because we didn’t have it clearly stated in our policy.” She added that the same kind of policy provisions should be added to recover unpaid traffic tickets and tolls.
Girard remarked that the gig economy also presents another risk to fleets their policies may not yet have addressed and may not be detected by digital technology: the use of fleet vehicles to generate supplemental income. She said fleets should consider adding to their policies provisions that ban the use of company vehicles to drive for a ride-sharing company, a taxi or delivery service, or part-time sales, all of which can add to additional operating expenses and risk of accidents and lawsuits.
Other policy essentials
Wills said it’s essential that policies define the hours of the day and days of the week fleet vehicles can be used, whether authorized driver’s household members can use them, who’s responsible for the expenses associated with that use, and the kinds of equipment drivers can add, like trailer hitches, computer platforms and window tinting.
She said it’s also vital that policies be made readily available to drivers, especially when they’ve been revised. In addition, it can be useful to insert language that the latest written policy will be in effect, and that the policy can be changed with or without prior notice to drivers.
Girard added that policies should be consistently enforced and “be carefully written so that you reduce the risk of employee discrimination cases.” To be sure that employees read and understand key policy provisions, she said her company distributes and slide presentation that explains proper procedures and has created an online educational module that tests driver comprehension with multiple choice questions.