Buying Municipal Vehicles with Guaranteed Maintenance
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BY A. G. DAVIES
FAPH I, M Inst T, PC
A different concept of public purchase AST year Chicago's public administration adopted A method of purchasing refuse collection vehicles which has been considered in this country but concerning which there seems so far to have been litile real action. The basis of the Chicago plan—which lies somewhere between outright purchase and contract hire—is the combination of the initial vehicle cost and an agreed maintenance cost.
. Chicago placed an order for 100 new vehicles together with manufacturerguaranteed maintenance for 75 of them for six years. The key to the process of tendering is that the Council buys a piece of capital equipment on a*life basis, with the manufacturer providing full maintenance for life. Chicago Council puts the life of a refuse truck at Six years.
This system is believed to interest many manufacturers who have -been claiming that their product is the better but can't bid so low as other manufacturers because they themselves sell quality merchandise. The so-Called quality manufacturers are now able to tender on the basis of equipment which. they claim requires a lower maintenance cost. Apart from this point of quality ;bade by the Chicago administration, there is also the question of operational efficiency, so that the manufacturer whose vehicle -cuts working time or reduces the number of operators, or has some other advantage, is similarly able to bring this directly into his tender figure just as well as the company whose vehicle lasts for a longer or shorter time, or needs a greater or less amount of attention.
Under the plan the quotation is accepted not only on the original cost of the equipment, but also on the maintenance cost on which the contractor bids, the sum total of the two being the basis of the award. The fringe benefit of this system ii that councils eliminate the necessity for keeping inventories, stores and servicing space, and special employees, and the necessity of maintaining their own equipment; they can leave it to professionals associated with the manufacturer.
Although it is true that the method does enable a shelving of responsibility, one has also to remember that, in farming out any particular job, it will usually cost a little more than it would have done to do it direct, if only because someone is interested in making a profit. One can take the comparison of insurance, where the cost of the premiums must provide for emergencies and be rather on the high side statistically, whereas if a local authority is sufficiently wealthy to afford running its own insurance the actual costs are, statistically, likely to be lower.
The proposition is an interesting one, tOti and many English manufacturers have been giving some thought to schemes of this nature, but it would appear that most of them see hazards which represent rather severe hurdles to overcome. Perhaps the greatest of these is the maintenance problem itself.
It may be no problem, for example, for a manufacturer to provide a scheme of quick and efficient maintenance for refuse vehicles in the county within which the factory is situated. On the ther hand, how could this company provide either quick or adequately efficient repairs to vehicles operating several hundred miles away? The ready answer, of course, may well be main agencies in large cities and towns in various parts of the country, but even here the problem is not ouite so simple as it may at first appear.
Many councils, particularly the smaller ones, have very little by way of reserve vehicles and often the necessity is to get a vehicle back onto the road the same day that it breaks down. One can hardly imagine this happening under the proposed Chicago scheme.
The Chicago concept may also enable manufacturers to hide the cost of their spares, as they are going to furnish all these in the cost of the monthly maintenance payment.
The city, by reason of the fact that it is paying for the units outright, takes title, It is cheaper to pay for the vehicles outright, as the, city can obtain money at a lower interest rate than if it took them on a lease-purchase basis through the manufacturer. In the United States the cost of borrowing through industry would appear to be almost double the rate at which the city itself is able to borrow money.
The British manufacturer interested in putting forward a scheme of this nature faces other difficulties. At the outset, he has in the main only slight information available to him about the maintenance cost of his vehicles: by no means all local authorities keep adequate records of vehicle maintenance, servicing and costs, and probably very few make these records available to the manufacturer, even in a very limited way. Initial contracts must include a fairly high rate if the exact insurance rates are not known.
Where local servicing engineers are employed, the question of timing arises, since direct labour in a local authority does enable some degree of speedand urgency to be put into every job whereas, to be systematic, service engineers' time is arranged beforehand and does not provide for the immediate dropping of one particular job to turn attention to other urgent matters. Thus one can well imagine that the speed element could become secondary, at least if men were engaged in servicing a number of such contracts.
Where there is enough work to keep a full-time staff operating, economics would surely show that direct labour is preferable to putting the job out. The inference from this is that, for large urban authorities, direct labour (unless the circumstances are very special) could be warranted, whereas for the smaller authority the handing over of maintenance to somebody else (if such person can be found) is rather more understandable. It is the next best thing, or the next thing, to putting the whole job out to contract.
If specialist vehicles are used, one might ask: who better than the specialist manufacturer to cope with the work of keeping, these in service? This brings us to consideration of how much of the work is really specialized, Much of it is day-to-day routine, where one might find that the expensive specialist labour was being employed on jobs which any fitters could readily have done locally at lower costs. Cleaning, greasing, simple replacements and such jobs do not justify travelling time or warrant the use of undue skills.
In Britain, local authorities cannot escape the responsibility of providing public services in a satisfactory fashion, and if the Chicago concept were tried over here, it would be of great interest to follow the type of contract which was drawn up.
Certainly one would hope that it would be such as tO make sure that hygiene, timenit,y, punctuality, regularity of service, and many other factors were taken care of even at the expense of higher premiums than could be put in for a simpler contract.
We need, to feel that the lowest cost alone is not weighing so heavily with us that the safety, appearance, hygiene and so on so essential to a cleansing service are pushed into the background.