The City of Phoenix, Arizona owns and operates a fleet of more than 7,300 vehicles, ranging from small electric cars to fire trucks and D9 bulldozers. Developing budgets and charge-back models for this large and diverse fleet is the job of Gregg Duckett, Public Works Operations Manager, who also oversees the purchase and distribution of a wide variety of fuels, parts and a multitude of other items essential to fleet operations. Over the past six years, Mercury Associates has become a trusted partner in this endeavor. In this case study, Duckett shares how Mercury helps his fleet stay on the right path.
The First Challenge: Create a Charge-Back Model with Transparency and Ownership
Mercury’s relationship with the City of Phoenix began in 2012, when the company was selected to conduct a fleet cost charge-back rate review for the Department of Public Works Equipment Management Division.
“We wanted to develop a charge-back model as well as a plan to reduce the age of our fleet,” Duckett said. “We needed to take all fleet-related costs – fuel, labor, parts, maintenance – and develop a repeatable method to determine a cost per hour that would help us allocate costs to the appropriate departments and budget more accurately.”
Almost immediately after project start-up, the City decided to expand the scope of Mercury’s services to include the development and implementation of the new rate model and rates, which were implemented in 2013.
“Mercury consultants are very professional, and their findings are frank and to the point,” Duckett said. “After we introduced the charge-back model, we asked Mercury to come back to review our implementation. They conducted follow-up training in the use of the rate model that kept us on the right track. What’s impressive is that each of their reports has a long shelf life; it becomes a reference guide that we refer to long after the consultants leave our offices.”
The Second Challenge: Analyze Vehicle Replacement, Expand the Fleet of Electric Vehicles
“In 2015, we again selected Mercury to do an alternative fuel vehicle feasibility study focusing on the City’s fleet of 5,000 light and medium-duty vehicles,” said Duckett. “The study identified the incremental costs and environmental impacts of replacing gasoline-powered vehicles with E-85 vehicles, electric vehicles and plug-in hybrid electric vehicles. Mercury was awarded each contract through an open bid process in which their expertise, experience and understanding of the government fleet business made them stand out.
“They worked with the City to tailor the scope of each study to meet our budget, including options and costs to expand each study if budget allowed. Whenever we reach out to their consultants, they get right back to us, no matter how busy they are.”
In 2017, the City further expanded the scope of Mercury’s project, asking consultants to develop a detailed fleet replacement analysis and a business case for modernizing the light-duty component of the City’s fleet. This analysis involved determining the total cost of ownership of these vehicles under current and recommended replacement funding levels.
Strong proponents of cost transparency and ownership control, Mercury consultants believe that fleet managers cannot effectively manage costs that they cannot see or understand, and for which there is a lack of accountability.
The Solution: Understand Total Cost of Ownership and Demand Accountability
“Mercury broke the project down into manageable stages, beginning with a vehicle replacement plan that would produce the greatest savings in operating and maintenance costs, while reducing emissions,” Duckett explained. “They also outlined a number of options for acquiring new equipment, including leasing, which makes a great deal of sense when you’re looking at things like fire trucks.
“They understand how government works,” he continued. “In the private sector, a business can go out and take loans to purchase new vehicles, but our funding is dictated by our tax base. Even if our city is growing, it can take a couple of years before we see increases in our budgets. Mercury understands that.
“Mercury consultants also assisted us in developing the kind of high level, government-oriented presentations that helped us educate our top officials. Their study helped us tell our story and justify the need for fleet replacement funding to begin to lower the age of our fleet. We need electric vehicles, but we would begin with a pilot project to study their use while we develop our charging infrastructure and watch for new developments in the market.”
The Result: A Fourfold Increase in Fleet Replacement Funding
Mercury’s analysis demonstrated that more frequent replacement of vehicles would save money by reducing
fleet operating and maintenance costs and increasing used vehicle residual values. The study resulted in the City’s Finance Director agreeing to implement a plan for increasing fleet replacement funding levels fourfold over the next decade.
Mercury consultants compared their findings with that of other governmental agencies and offered multiple solutions to each area of concern. One example is the alternative fuel project.
“Electric cars have generated a great deal of buzz and we originally looked at purchasing more electric vehicles,” Duckett explained. “What the Mercury study showed us, is that while electric cars are great, we have a fleet of older vehicles and a more frequent replacement schedule would produce the greatest benefits. They showed us that the best way to proceed was to break down what fuels are best for each class of vehicle and match the fuel with the application and duty cycle of each.
“With Mercury, you know what you can expect. They provided our organization with the data we needed to justify our budget requests and move forward on these important projects.”