Some Aspects of GSA’s Leasing Rates, Terms, and Services Support Agency Efforts to Reduce Fleet Costs, While Others Do Not

GSA’s leasing rates, terms, and services help agencies keep fleet costs  down in a variety of ways. For example, GSA procures the vehicles it  leases at a discount and passes those savings on to its customers,  provides agencies with data analyses that can be used to eliminate  unnecessary vehicles, and identifies fraud, waste, and abuse related to  leased vehicles. However, we identified two areas where GSA’s rates and  terms have not encouraged agency efforts to reduce fleet costs. First,  GSA’s monthly mileage rate, which covers agency fuel costs, does not  provide incentives for agencies to reduce some fuel costs, such as costs  associated with idling. Second, lack of clear GSA guidance on what  constitutes excessive wear and tear of leased vehicles can limit the ability  of agencies to determine whether it is less expensive to lease or own  vehicles. Principles for designing government fees suggest that having each  agency pay for the fuel it actually uses could foster greater efficiency by  increasing 1) awareness of the costs of fuel and 2) incentives to reduce  fuel costs not reflected in miles traveled. Telematics Use Might, in Some Cases, Result in Cost Savings to Vehicle Fleets Leased from GSA

The experts we consulted agreed that in some cases, telematics could  facilitate cost savings by providing fleet managers with information  needed to reduce fleet size, fuel use, misuse of vehicles, and  unnecessary maintenance. GSA is taking  steps to reduce telematics’ costs, but does not currently collect and share  information about agencies’ experiences with telematics. 1). Federal Fleet Managers Agreed That Telematics Can Reduce Costs and Suggested GSA Do More to Support Use of This Technology

The federal fleet managers on our two panels agreed that the use of  telematics has the potential to reduce costs in the federally leased fleet.While GSA currently provides leasing customers with various types of  information, such as information on fuel use and potential fraud, based  on data collected through its fleet payment card, fleet managers told us  that telematics can provide information that is more detailed. at Idaho National Laboratory reported that telematics data have  helped inform decisions to eliminate 65 vehicles since fiscal year  2011, with an estimated average annual savings of approximately  $390,000 (including the cost of telematics on the remaining vehicles). Lower the cost of telematic devices: Both panels of federal fleet  managers proposed that GSA lower the cost of telematic devices to  improve the likelihood of achieving a cost-effective solution and to help  allay management concerns about cost and return on investment. Provide information on federal agencies’ experiences with telematics:  Both panels noted that it would be helpful if GSA were to collect  information on federal agencies’ experiences in using telematics in their  fleets and share this information. One such objective is for GSA to enhance relationships with its  customers, in part by improving customer knowledge, and sharing  information that drives improved decision-making and performance in the  fleet policy area. Without an examination of the trade-offs of changing this rate  structure so that agencies pay for the fuel they actually consume, GSA  may be missing an opportunity to encourage agencies to minimize fuel  costs and save taxpayer dollars or ensure that its leasing rate structure is  the most appropriate one. Recommendations for Executive Action

To help reduce costs associated with vehicles leased from GSA, we  recommend that the Administrator of GSA take the following two actions:  1. examine and document the trade-offs of changing GSA’s vehicle  leasing rate structure so that each agency pays for the fuel that it actually  uses, and  2. request information from agencies on their experiences with telematics  in their fleets, such as studies or estimates of cost savings achieved, and  share this information with agencies through GSA’s website or other  methods. In addition, GSA provides  various services to its leasing customers, including:  support of fleet service representatives, located in regional offices,  throughout the vehicle leasing process, including the selection of  vehicles, maintenance, and disposal; provision and management of fleet cards to purchase fuel and  maintenance and repair services; tracking of fuel, maintenance, and  repair expenses; and identification of fraud, waste, and abuse; access to GSA’s Fleet Drive-thru system, which contains automated  information on agencies’ fleets, including mileage, inventory, fuel  consumption, and agency incurred expenses (such as bills for  damage to leased vehicles); analyses of fleet data that, among other things, may identify  underutilized vehicles to be eliminated or shared through examination  of mileage and usage data; management of accident-related needs and maintenance, including  authorizing and tracking repairs, working with third parties and  insurance company officials to collect payments (for accidents in  which a third party is at fault) and an automated vehicle recall  program with major manufacturers; and access to GSA Fleet Solutions, which provides additional services  such as a short-term rental program and telematics. Overhead expenses accounted for  about 0.4 percent of total expenses in fiscal year 2012. Appendix III: Objectives, Scope, and Methodology

The objectives of this report were to determine (1) whether and how  GSA’s leasing rates, terms, and services support or encourage agency  efforts to reduce fleet costs and (2) the views of selected experts  regarding the cost savings potential of telematics for fleets and the  possible implications for GSA’s leasing program.
Why GAO Did This Study

Agencies (excluding the U.S. Postal Service) spent about $1.1 billion in fiscal year 2012 to lease about 190,000 vehicles from GSA. Recent legislative proposals have called for reductions in the cost and size of federal agencies' fleets. Agencies may choose to have telematic devices installed in leased vehicles; the data these devices provide can be used to manage fleets.
GAO was asked to review GSA's vehicle-leasing program. This report addresses (1) whether and how GSA's leasing rates, terms, and services support agency efforts to reduce fleet costs and (2) the views of selected experts regarding the cost-savings potential of telematics for fleets and the possible implications for GSA's leasing program. GAO reviewed program policies; interviewed GSA officials; held two panel discussions with fleet managers from 10 agencies representing 80 percent of the leased fleet in fiscal year 2011; and interviewed 19 experts with knowledge about telematics or fleet management, as demonstrated by recommendations from fleet management associations, among other considerations. Responses from the panelists and experts are not generalizable.

What GAO Found

Some aspects of the General Service Administration's (GSA) leasing rates, terms, and services support agency efforts to reduce fleet costs, while others do not. For example, GSA procures the vehicles it leases at a discount and passes those savings on to its customers, provides agencies with data analyses that can be used to eliminate unnecessary vehicles, and identifies fraud, waste, and abuse related to leased vehicles. However, GAO identified two areas where GSA's rates and terms have not encouraged agency efforts to reduce fleet costs. First, under GSA's leasing-rate structure, fuel costs are covered by a monthly fee based on miles traveled, among other things, but not on actual fuel used. This rate structure does not provide incentives for agencies to reduce some fuel costs that may not be fully reflected by miles travelled, such as costs associated with idling or speeding. Principles for designing government fees suggest that having each agency pay for the fuel it actually uses could increase incentives to reduce fuel costs. GAO has previously found that government fee decisions also involve considering trade-offs and that other considerations, such as administrative burden, are important. Without examining the trade-offs of changing GSA's rate structure so that agencies pay for the fuel they actually consume, GSA may be missing an opportunity to encourage agencies to minimize fuel costs and save taxpayer dollars. Second, lack of clear GSA guidance on what constitutes excessive wear and tear of leased vehicles can limit the ability of agencies to determine whether it is less expensive to lease or own vehicles. GSA just developed this guidance and is taking steps to implement it.
The experts and federal fleet managers GAO consulted agreed that the use of telematics can facilitate cost savings for some fleets by providing fleet managers with information—such as data on vehicle location, speed, or condition—that they can use to reduce fleet size, fuel use, misuse of vehicles, and unnecessary maintenance. For example, a fleet manager at the Department of Energy's Idaho National Laboratory reported that since fiscal year 2011, telematics data have helped officials at that facility decide to eliminate 65 leased vehicles for an estimated annual savings of approximately $390,000. However, various factors—such as telematics' cost, characteristics of the fleet, and the level of management support—influence the potential of telematics to facilitate cost savings for a given fleet. The federal fleet managers on GAO's panels suggested that GSA lower the costs of telematic devices to improve the likelihood of achieving cost savings and to help allay management's concerns about return on investment. They also suggested that GSA provide information on agencies' experiences with telematics, such as studies or estimates of cost savings, to further support telematics' adoption in the federal fleet. GSA officials noted that they are currently engaged in efforts to obtain lower prices on telematic devices, and while officials do not currently collect information on agencies' experiences with telematics, they would be able to request it and share any information agencies voluntarily provide. One of GSA's strategic objectives is to enhance relationships with its customers, in part by sharing information that drives improved decision-making. By not collecting and sharing information on federal agencies' experiences with telematics, GSA may be missing an opportunity to help agencies determine whether to adopt telematics in their fleets and identify which devices or approaches have the greatest potential to facilitate cost savings.

What GAO Recommends

GAO recommends that GSA (1) examine the trade-offs of changing GSA's lease-rate structure so that agencies pay for their actual fuel use and (2) request information on agencies' experiences with telematics in their fleets and share this information with agencies. GSA agreed with GAO's findings and recommendations.