A nationwide framework agreement for procuring vehicle
fleets for the public sector already exists. Andy Thompson asks whether a similar
scheme could also work for equipment procurement

In the UK, public sector agencies –
especially local authorities and NHS trusts – make extensive use of
equipment leasing. They often look for ways to make the process
simpler.

European competitive tendering rules for
public sector contracts generally involve costly and cumbersome
tender invitations for each contract through notices in the
Official Journal of the European Union (OJEU).

Within vehicle leasing, central government has
now developed framework agreements to simplify the process. These
agreements are available to both central and local government
lessees. Lessors pre-tender on standardised terms held for a period
of years, eliminating OJEU notices for each new contract. However,
these centralised frameworks have yet to extend beyond
vehicles.

The frameworks operate much like price
comparison web sites. Lessees obtain quotes based on the lessors’
pre-tendered bids for specified vehicle types, hire periods and
service packages where required.

Frameworks started first with car fleets,
including car-derived vans. Though available to all public sector
lessees, the pan-government car leasing framework was developed by
the NHS Purchasing and Supply Agency (PASA) with hospital trusts
principally in mind. In its current version it has been running for
an initial three-year period since August 2007, with an option for
a further year's extension before the next review.

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By GlobalData

For larger commercial vehicles (CVs), the
first central scheme started in July this year. The new fleet
management framework agreement for CVs was developed by the Buying
Solutions arm of the Office of Government Commerce, a division of
HM Treasury. It runs initially for two years, with an option to
extend for a further two years.

Some local authorities would like to see
central framework leasing agreements extend to other sectors. This
could include reprographic equipment, an area in which some local
authority schools have had unsatisfactory experiences with
point-of-sale lease contracts introduced by certain dealers.

However, variations in such factors as
service-inclusive packaging and residual value profiles, and in
trading relationships between lessors and suppliers, always need to
be addressed. These could complicate any wider moves towards
central frameworks.

Some practitioners doubt whether frameworks
could extend further. Some are even critical of the vehicle
schemes, suggesting that lessees find them more suitable for small
contract hire deals rather than operating leases more analogous to
other equipment types.

James Russell, partner at advisory group
Sector Treasury Services, said: “Local authorities need
professional help and advice, rather than just being directed to a
web site. We are setting up our own lease framework arrangements
with individual clients. We are currently developing one for
Walsall District Council that will involve a good spread of
competing lessors.”

Russell added: “The national frameworks have a
very costly signing up process for lessors, engaging a lot of
scarce staffing resources. This results in patchy participation. In
the CV scheme there are five contract hire players, and only two
leasing companies that cover the whole field.

“Though many local authorities use the car
fleet framework, the CV one is not used by many key target lessees,
including most NHS ambulance trusts.”

Even the longer established car fleet
framework has its critics.

Colin Tourick, director of the consultancy
Colin Tourick & Associates, said: “It offers lower costs for
the public sector, at a very high cost to suppliers – extremely low
margins that can be wiped out by very small reductions in used car
prices.”

Data obtained by Leasing Life under the
Freedom of Information Act shows that over two years to the end of
September this year, 21,704 vehicles were leased under the car
fleet framework. This seems well below initial expectations (see
table above).

Those lessors who have taken the plunge into
the existing schemes nevertheless tend to be enthusiastic.

Rob Kerridge, head of business development for
BNP Paribas’s Artegy arm, said: “We are delighted to have been
appointed as a supplier for both operating leases and full service
contract hire in the CV framework.

“This allows public authorities to fund and
support vehicle renewals, taking advantage of the competitive rates
and high-quality standards that come through national
competition.”

 

FOI response for fleet orders placed
through framework agreement

Lessor

NHS

Non-NHS

Total

%

Arnold Clark Finance

4,196

86

4,282

20

Arval UK

1,737

142

1,879

9

Automotive Leasing

4,335

213

4,548

21

GE Commercial Finance Fleet Services

21

 

21

0

ING Car Lease UK

2,902

83

2,985

14

Lex

72

1

73

0

Lloyds TSB Autolease

4,487

717

5,204

24

Lombard Vehicle Management

386

38

424

2

Masterlease

1,802

27

1,829

8

TC Harrison Group

408

51

459

2

Source: Motor Finance, Buying
Solutions