Running a fleet tender can be a difficult task. Many people drive but don’t fully understand how best to buy fleet management services. We take a look at what you need to consider.
1. Procurement Strategy
What objectives are you trying to achieve from the fleet tender? How does this procurement process link into the overall objectives of the organisation in the medium to long term?
Are you genuinely looking to change suppliers or are you wanting to check your lease rates are competitive?
Approaches to the market will vary according to your own specific strategic requirements so don’t short-change this part of the process. You need to start the process with the end goal in mind rather than deciding on this midway through.
2. Market Research
Put in the hours to research what suppliers are available in the marketplace. A good place to start is the FN50.
There is a good mix of different providers in the fleet management supply chain. The market is typically broken down into three types of ownership; bank/financial institution; manufacturer and private equity backed. Most of the suppliers can cover all the services you are likely to need but some specialise or focus on certain segments or vehicle types such as commercial vehicles for example.
Once you have initially reviewed the market, invite suppliers for informal meetings to discover what they have to offer and how they may fit your culture. If you have any non-negotiables, then be sure to check these with potential suppliers.
Issue a short PQQ to get more information with some specific questions to cover any gaps you may have in knowledge.
3. Procurement Plan
Create a fleet tender plan with realistic objectives and timescales. Share the plan with those stakeholders involved in the procurement process so they can validate it prior to the process commencing. Make sure your stakeholders have the capacity to participate in the procurement within the timescales you have planned.
As part of the plan you should give suppliers enough time to produce a quality response especially if you wish to get detailed responses. Create milestones so you can stop and check progress at regular intervals with your stakeholder group.
Technology is increasingly being used to run the procurement process. The technology helps structure the process and ensure all communications are handled through a single platform. This is especially important in regulated environments where there are strict rules about fairness and transparency covering the process.
Getting the specification correct is most important part of the procurement. Be very clear in the specification of what you are looking to buy and the services which you want to receive. Provide the suppliers with details of how it works now and what the future vision is. If appropriate, offer enough latitude within the specification for the suppliers to innovate in service delivery and introduce additional digital solutions.
Be very clear about what is a core objective and what are optional “nice to haves”.
The pricing schedules should include specific vehicles as well as ancillary services such as breakdown cover, daily rental and accident management. This is important to give the bidders a clear indication of the revenue they can expect from the contract and allows them to tailor their response accordingly.
Allow suppliers to ask questions as part of the process but be sure to share the responses with all participants to maintain a level playing field.
Create and share your evaluation criteria for the fleet tender with potential suppliers and stick to them. Be sure that you weight the scoring towards those elements which will impact your strategic objectives the most and less weight to the optional services.
Changing criteria mid-process can lead you to move away from your objectives and is unfair to those taking the time to bid for your business. Clear evaluation criteria allow your bidders to put their best foot forward.
Have a broad section of the stakeholder group score the responses. Once all the scores are completed, consolidate then remove any outliers from the scoring. Then re-group as a team to calibrate the responses. This will provide a clear picture to create a viable shortlist. The length of the shortlist will depend on how close the scores are but will always be more than one supplier to provide competition.
Once the shortlist has been established suppliers should be invited to make a final presentation. This should follow a set agenda which outlines the key remaining questions you have with each supplier. It provides an opportunity to meet the team who will be responsible for the service delivery which helps provide some insight as to how the contract would operate in the future. Allow time for questions at the end for any queries which crop up during the presentation.
Following the presentation phase it may be advisable to have a site visit to the suppliers offices to further understand the culture of the business and meet more of the people who would service the account.
Solicit and follow up on references for shortlisted suppliers to get a feel for how they can deliver in practice. In many cases references can be “friendlies” so it is worthwhile asking your LinkedIn network for a less biased view of a bidders capabilities and service delivery experience.
References should be relevant to your organisation with a similar size and makeup of fleet. Is there any point speaking to a fleet manager of a commercial fleet when all of your vehicles are company cars for example.
Save your negotiation phase for your final shortlisted suppliers.
Allow suppliers to submit a final best and final offer (BAFO) before entering negotiations. If the negotiation is to be done face to face, then assign roles to each individual, as often points can be missed during the process.
Have a negotiation plan and be clear about what you want to achieve from the process. Are there areas you can trade to your mutual advantage? Seperate needs from “nice to haves”. Areas which hold little value to you may still hold value to the supplier so try to incorporate this into your plan as well as a tradeable.
It is important to create walk away points where you call the negotiation to a stop. The supplier needs to be made aware that you have other options and you are prepared to enter alternative negotiations.
8. Final Selection
Consult your stakeholder group and come to a consensus decision on the preferred supplier.
This sounds easy but you may have competing requirements or wishes to work through. Be clear on who has the final say. Get the group to sign off on the decision.
For those suppliers who are unsuccessful then give them detailed feedback on where they could improve if they bid for work in the future.
Ensure all your negotiated benefits are reflected in the contract. Due to the specific nature of fleet agreements it is likely you will be asked to agree to the suppliers’ contract. Some of the clauses in these agreements can be challenging to agree. Watch out for GDPR and Cyber Security clauses. In our experience these can cause significant issues between legal teams and need addressing early to keep the project on track. Bank owned fleet suppliers are especially challenging due to the compliance rigour required following heavy fines for malpractice.
Specify commercial elements within the contract. Although there are many pricing elements which are variable in vehicle lease pricing, you can identify areas such as interest rate, residual values and administration fees which you can track over the course of the contract. It is also advisable to put in a benchmarking clause whereby periodically you have the opportunity to compare pricing on a selection of core vehicles against the market.
Performance measures such as KPI’s and SLA’s need to be fully scoped and will be important to manage the contract effectively. However, this needs to reflect your strategic objectives. Many measures put forward by the fleet management companies will be related to what they can easily measure, rather than what is important to you. Make sure key measures have some teeth and failure to perform adequately has appropriate consequences.
New supply agreements need to be implemented effectively to realise the benefits of changing provider.
The Implementation should be planned correctly to ensure there is enough internal resource available to support the supplier team. Failure to provide enough resource risks failure of implementation and create issues which may be beyond the control of the supplier.
The implementation should be run by the customer. Many suppliers will want to control this, but it is worthwhile dedicating resource to own the process. The customer can then drive key milestone dates and liaise effectively with the outgoing supply chain
The implementation also needs cover the setup of ongoing governance processes once the contract has gone live. This should include regular meetings which follow a set agenda with agreed stakeholders from the customer and from the supplier. A broader communications plan should support the governance keeping the wider stakeholder group appraised of the market, any changes and influences.