Running a fleet tender can be a difficult task. Many people drive but don’t fully understand how best to buy fleet management services. So 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 organisation’s overall goals in the medium to long term?
Are you looking to change suppliers, or do you want to check your lease rates are competitive?
Approaches to the market will vary according to your specific strategic requirements, so don’t short-change this part of the process. Therefore, 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. For instance, the FN50 is a good place to start.
There is a good mix of different providers in the fleet management supply chain. You can divide the market 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 specific segments, or vehicle types such as commercial vehicles, for example.
Once you have the initial market review, 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.
Lastly, issue a short PQQ to get more information with some specific questions to cover any gaps in knowledge.
3. Procurement Plan
Create a fleet tender plan with realistic objectives and timescales. Next, share the plan with those stakeholders involved in the procurement process to validate it before it occurs. Next, ensure your stakeholders can 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 answers. Create milestones so you can stop and check progress at regular intervals with your stakeholder group.
The role of technology in procurement is constantly increasing. The technology helps structure the process and ensure all communications go via a single platform. Plus, this is especially important in regulated environments where strict rules about fairness and transparency cover the process.
Getting the specification correct is the most important part of procurement. Be very clear in the specification of what you are looking to buy and the services 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 and 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 tailor their response accordingly.
Allow suppliers to ask questions as part of the process, but 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 weigh 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 complete, 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.
Next, establish a shortlist and invite suppliers to make a final presentation. This should follow a set plan which outlines the critical remaining questions you have with each supplier. It provides an opportunity to meet the team responsible for the service delivery, which helps give some insight into 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 visit the supplier’s offices to understand the business’s culture further. Also, it gives you a chance to meet more of the people who would service the account.
Solicit and follow up on references for shortlisted suppliers to get a feel for delivering in practice. In many cases, references can be “friendlies”, so it is worthwhile to ask your LinkedIn network for a less biased view of a bidder’s capabilities and service delivery experience.
References should be relevant to your organisation with a similar size and makeup of fleet. Is there any point in 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 you are undertaking the negotiations face to face, then assign roles to each individual, as one person can miss points 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? Separate needs from “nice to haves”. Areas that hold little value to you may still have value to the supplier, so try to incorporate this into your plan and a tradeable.
It is essential to create walk away points where you call the negotiation to a stop. The supplier needs to be aware that you have other options and 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 unsuccessful suppliers, then give them detailed feedback on where they could improve if they bid for work in the future.
Ensure all your negotiated benefits reflect in the contract. Due to the specific nature of fleet agreements, supplier’s will likely ask you to agree to their contract. Some of the clauses in these agreements can be challenging to agree on. For example, 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 variable pricing elements in vehicle lease pricing, you can identify areas such as interest rate, residual values, and administration fees that you can track throughout 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 essential 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.
Implement new supply agreements effectively to realise the benefits of changing providers.
Plan the implementation correctly to ensure there are enough internal resources available to support the supplier team. Failure to provide enough resource risks failure of implementation and create issues that may be beyond the supplier’s control.
The customer should run the implementation. Of course, many suppliers will want to control this, but it is worthwhile dedicating resources to own the process. Consequently, the customer can then drive key milestone dates and liaise effectively with the outgoing supply chain.
The implementation also needs to cover the setup of ongoing governance processes once the contract has gone live. For example, this should include regular meetings which follow a set agenda with agreed stakeholders from the customer and the supplier. In addition, a broader communications plan should support the governance keeping the wider stakeholder group appraised of the market, any changes and influences.
In conclusion, any robust fleet procurement process must utilise these 10 steps. Likewise, not following this advice will lead to gaps in your service provision.