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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

May 2014: 

Federal Vehicle Fleets: 

GSA Has Opportunities to Further Encourage Cost Savings for Leased 
Vehicles: 

GAO-14-443: 

GAO Highlights: 

Highlights of GAO-14-443, a report to congressional requesters. 

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 traveled, 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. 

View [hyperlink, http://www.gao.gov/products/GAO-14-443]. For more 
information, contact Lori Rectanus at (202) 512-2834 or 
rectanusl@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

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

Telematics Use Might, in Some Cases, Result in Cost Savings to Vehicle 
Fleets Leased from GSA: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: GSA's Vehicle-Leasing Program Services, Structure, and 
Costs: 

Appendix II: GSA's Vehicle-Purchasing Program Services, Structure, and 
Costs: 

Appendix III: Objectives, Scope, and Methodology: 

Appendix IV: Fleet Characteristics That Experts Reported Could 
Influence Telematics' Cost-Saving Potential: 

Appendix V: Comments from the U.S. General Services Administration: 

Appendix VI: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Number of Vehicles Leased by GSA, by Vehicle Type, Fiscal 
Years 2008-2012: 

Table 2: GSA Leasing Program Revenue and Costs, in Thousands, Fiscal 
Years 2008-2012: 

Table 3: GSA's Purchasing Program Revenue and Costs, in Thousands, 
Fiscal Years 2008-2012: 

Figures: 

Figure 1: Examples of Cost Savings That Can Be Achieved with 
Telematics: 

Figure 2: Location and Number of Staff Responsible for GSA's Leasing 
Program: 

Abbreviations list: 

AFLA: Automotive Fleet and Leasing Association: 

AFV: alternative fuel vehicles: 

CBP: Customs and Border Patrol: 

FTE: full-time equivalent: 

GPS: Global Positioning System: 

GSA: General Services Administration: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

May 7, 2014: 

The Honorable Darrell Issa: 
Chairman: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The Honorable John L. Mica: 
Chairman: 
Subcommittee on Government Operations: 
Committee on Oversight and Government Reform: 
House of Representatives: 

Federal agencies rely on a variety of vehicles--including passenger 
cars and trucks, and special purpose vehicles (e.g., ambulances and 
buses)--to accomplish their missions and may lease or purchase these 
vehicles from the General Services Administration (GSA). Reported 
total costs associated with the federal fleet in fiscal year 2012, 
including both leased and owned vehicles, were about $2.9 billion for 
civilian and military agencies.[Footnote 1] From fiscal years 2002 
through 2012, the overall number of leased and owned federal civilian 
and non-tactical military vehicles increased 19 percent, from about 
364,000 to 441,000 vehicles. In recent years, Congress and the 
President have raised concerns about the size and cost of the federal 
fleet, and the President has directed agencies to take steps to 
eliminate non-essential vehicles. In addition, recent legislative 
proposals have been aimed at reducing the size and cost of agencies' 
fleets.[Footnote 2] 

GSA's leasing program provides over 40 percent of the vehicles that 
agencies use. In fiscal year 2012, agencies spent over $1.1 billion to 
lease about 190,000 vehicles from GSA. GSA offers various types of 
vehicles for lease and its rates and terms include the costs of fuel, 
maintenance, and various services. When leasing vehicles from GSA, 
agencies may choose to have telematic devices installed.[Footnote 3] 
Such devices, when used in vehicle fleets, provide information--
including data on vehicle location, idling, and speed--that fleet 
managers can use to manage and reduce costs of fleet operations. You 
asked us to review GSA's vehicle-leasing program. This report 
addresses (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. In addition, we are providing requested information on the 
services provided by and structure and costs associated with GSA's 
vehicle-leasing program and its purchasing program. These topics are 
discussed in appendixes I and II, respectively. 

To address both of our objectives, we reviewed applicable federal 
laws, federal fleet management regulations, GSA's strategic and 
performance plans, GSA's fleet guidance and policy, and other 
pertinent GSA documentation, and interviewed GSA officials. To 
determine whether and how GSA's vehicle-leasing rates, terms, and 
services support or encourage agency efforts to reduce fleet costs, we 
convened two panels of federal fleet managers to obtain their views. 
We selected fleet managers who managed federal fleets with over 7,000 
vehicles leased from GSA in fiscal year 2011, the most recent fleet 
data available at the time of our fleet manager selection.[Footnote 4] 
One panel consisted of managers from five civilian agencies: the 
Departments of Agriculture, Energy, Homeland Security, the Interior, 
and Veterans Affairs. The other panel consisted of managers from five 
military agencies: the U.S. Marine Corps, the Army Corps of Engineers, 
and the Departments of the Air Force, Army, and Navy.[Footnote 5] 
While their views should not be used to generalize about the views of 
all federal fleet managers, they do provide the perspective of those 
managing most of the federal leased fleet, as together they managed 
over 80 percent of the vehicles leased from GSA in fiscal year 2011. 
We also analyzed GSA's leasing rate structure in relation to the 
principle of economic efficiency, which has often been used to assess 
the design of government fees.[Footnote 6] To obtain information 
regarding telematics' cost-savings potential, we spoke with 19 experts 
knowledgeable about telematics or fleet management, including 
consultants, representatives of associations, and fleet managers from 
corporations, government entities, and universities. We selected 
experts based on their knowledge of these topics, as demonstrated by 
their publications, participation as experts in prior relevant GAO 
work, or recommendation by other experts. We also sent a questionnaire 
to 15 of these 19 experts who manage fleets regarding the specific 
savings they had achieved through telematics, if any.[Footnote 7] 
Additionally, we reviewed literature on the cost savings associated 
with telematics. To understand the possible implications of the cost-
savings potential of telematics for GSA's leasing program, we obtained 
the views of the federal fleet managers who took part in the panels we 
convened. We also examined GSA's telematics efforts in relation to 
GAO's internal control standards, which include relevant, reliable, 
and timely communications,[Footnote 8] and GSA's 2014-2018 Strategic 
Plan. Further details about our scope and methodology can be found in 
appendix III. 

We conducted this performance audit from July 2013 to May 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

Agencies are responsible for managing their vehicle fleets in a manner 
that allows them to fulfill their missions and meet various federal 
requirements. For example, agencies must determine the number and type 
of vehicles they need and how to acquire them, including whether to 
own or lease them. Various statutes, executive orders, and policy 
initiatives direct federal agencies to, among other things, collect 
and analyze data on costs, reduce fuel consumption, and eliminate non-
essential vehicles. In addition, GSA has issued federal fleet-
management regulations that include requirements regarding agencies' 
fleet-management information systems, vehicle fuel efficiency, and 
vehicle utilization, among other things. GSA has also issued guidance 
to help agencies manage their fleets effectively and meet federal 
requirements, including guidance on assessing vehicle needs, using 
alternative fuel vehicles, and potential cost-saving techniques. 

Federal agencies may approach GSA to lease some or all of the vehicles 
they determine necessary to meet their mission and program needs. 
[Footnote 9] Supported by a network of regional Fleet Management 
Centers, GSA manages the federal government's vehicle-leasing program 
(called GSA Fleet), which leases vehicles to over 75 federal agencies. 
The size of the federal leased fleet ranged from about 195,000 
vehicles in fiscal year 2008 to about 199,000 vehicles in fiscal year 
2011, but declined to about 190,000 vehicles in fiscal year 2012. 
[Footnote 10] See table 1 for additional information on the size of 
the leased fleet. 

Table 1: Number of Vehicles Leased by GSA, by Vehicle Type, Fiscal 
Years 2008-2012: 

Passenger vehicles; 
2008: 118,433; 
2009: 120,907; 
2010: 120,207; 
2011: 120,785; 
2012: 115,203. 

Trucks; 
2008: 71,616; 
2009: 72,335; 
2010: 72,568; 
2011: 73,448; 
2012: 70,140. 

Other; 
2008: 4,818; 
2009: 4,833; 
2010: 4,863; 
2011: 4,978; 
2012: 4,972. 

Total; 
2008: 194,867; 
2009: 198,075; 
2010: 197,638; 
2011: 199,211; 
2012: 190,315. 

Source: 2012 GSA Federal Fleet Report. 

[End of table] 

GSA's leasing rates are designed to recover all costs of its leasing 
program.[Footnote 11] GSA charges leasing fees to agencies monthly, 
based on a fixed rate and mileage rate determined by the type of 
vehicle. For example, a conventionally-fueled compact sedan has a 
fiscal year 2014 fixed rate of $171 per month and mileage rate of 
$0.15 per mile traveled in each month. GSA's fixed rate is designed to 
cover fixed costs such as the vehicle's acquisition cost, 
administrative costs (including staff and facilities), and 
depreciation. The mileage rate is designed to cover variable costs 
such as fuel, maintenance, and repair and is based on mileage data 
collected through fleet cards.[Footnote 12] For each leased vehicle, 
GSA assigns a specific fleet card (a charge card) that is used to pay 
commercial vendors for fuel, maintenance, and repairs. Fleet card 
users enter odometer (mileage) readings at the gas pump at the time of 
purchase.[Footnote 13] 

In addition to the leasing rates, GSA has established lease terms to 
which agencies must adhere. The length of GSA leases varies, but is 
generally between 3 and 7 years for passenger vehicles and 7 to 12 
years for trucks. GSA has established age and mileage thresholds for 
replacing vehicles in regulations and guidance. For example, under 
GSA's regulations, passenger vehicles may not be replaced until they 
have reached 3 years or 60,000 miles of use.[Footnote 14] Decisions to 
replace or retain individual vehicles are made by the agency's local 
fleet service representatives, located in regional Fleet Management 
Centers, who consider age and mileage as well as additional factors 
such as the vehicle's condition and repair history. Agencies must 
return leased GSA vehicles with normal wear and tear and may be 
charged additional fees to cover damage or excessive wear and tear. 

As part of the leasing arrangement, GSA provides various services, 
including vehicle maintenance and accident management; support from 
fleet service representatives; provision of fleet cards; access to and 
analysis of data on agencies' leased fleets, such as data on mileage, 
inventory, and fuel consumption; and identification and management of 
fraud, waste and abuse associated with leased vehicles. For further 
details on the services provided by GSA's leasing program, see 
appendix I. 

GSA also offers agencies the option of having telematic devices 
installed in the vehicles they lease.[Footnote 15] Examples of 
telematics offered by GSA include devices that monitor speed, idle 
time, engine diagnostics, and the vehicle's location. Telematic 
devices installed in fleet vehicles can provide managers of those 
fleets with a variety of information--including aspects of driver 
behavior, how well vehicles are running, their past and present 
locations, and miles traveled--that managers can use to manage their 
fleets. To gather this information, these telematic devices may use 
Global Positioning System (GPS) navigation, in-vehicle video 
recording, or data recorders integrated with the vehicle's internal 
systems, among other technologies. 

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. GSA is currently taking 
steps to develop such guidance. 

Some Aspects of GSA's Rates, Terms, and Services Support Efforts to 
Reduce Fleet Costs: 

GSA's leasing rates, terms, and services help agencies minimize fleet 
costs in various ways, as discussed below. 

Leasing Rates: 

GSA officials and our panels of civilian and military federal fleet 
managers[Footnote 16] told us that GSA's vehicle lease rates are 
lower, for the most part, than the commercial sector and provide a 
more economical choice for federal agencies.[Footnote 17],[Footnote 
18] Although some agencies may choose to lease from commercial 
vendors, only about 3 percent of federally leased vehicles, many of 
which are not offered by GSA--such as utility trucks with cranes and 
luxury executive vehicles--are leased through the commercial sector. 

According to GSA officials, the agency keeps leasing rates low by 
minimizing vehicle acquisition costs, maximizing resale values, and 
not having to make a profit. They pointed out that the agency has the 
ability to buy vehicles at a discount, at prices that average 17 
percent below invoice, because it buys in volume from manufacturers, 
about 50,000 vehicles annually. GSA is then able to pass these savings 
on to its customers and eventually resells the vehicles at a point 
when their resale value is still high. According to GSA officials, the 
agency's vehicle maintenance program also contributes to its low lease 
rates by ensuring that vehicles are maintained in good condition, 
decreasing the need for costly maintenance and repair. 

Leasing Terms: 

GSA's vehicle lease terms can help keep down the cost of leasing to 
agencies. According to GSA officials, its vehicle lease terms, which 
include coverage of routine maintenance and repair, help ensure that 
vehicles receive proper maintenance and repair and encourage agencies 
to take care of their leased vehicles. According to GSA officials, 
ensuring vehicles received proper maintenance would be more difficult 
if GSA left it up to the leasing agencies. GSA officials believe these 
terms maximize the resale value of the vehicles for GSA, which, as 
noted, can help to keep overall leasing costs down.[Footnote 19] In 
addition, GSA offers short-term vehicle rentals for up to 120 days. 
Such leasing arrangements allow agencies to meet short-term vehicle 
needs rather than lease vehicles for longer periods when not needed or 
rent them from commercial vendors, which can be more expensive. Short-
term rentals are commonly used for special events, such as 
conventions, or seasonal needs. 

Leasing Services: 

Federal fleet managers told us that they found GSA's analysis of data 
on their leased fleet, made possible through GSA's fleet card, to be 
helpful in identifying underutilized leased vehicles within their 
fleet that can be disposed of or shared.[Footnote 20] For example, GSA 
officials told us that if the agency identified two underused vehicles 
in the same location traveling 5,000 miles annually, when the 
performance measure for full vehicle usage for each vehicle was 10,000 
miles, it would suggest that the agency consider eliminating one of 
these vehicles. Some federal fleet managers also noted that GSA fleet 
data analysis helps agencies identify when inefficient driving 
practices may be occurring, particularly related to fuel purchases, 
within their fleets. According to GSA officials, GSA's fleet service 
representatives analyze fuel use data to identify when vehicles record 
low miles per gallon, which may indicate that a vehicle idles too much 
or that vehicle has an engine problem, and works with the agency to 
resolve any issues found. According to one fleet manager on our 
military panel, GSA identified excessive idling in the agency's fleet 
and worked collaboratively to curb it. 

GSA also helps agencies reduce costs by identifying fraud, waste, and 
abuse within their fleets. According to GSA, the agency's Loss 
Prevention Team,[Footnote 21] in partnership with GSA's Office of 
Inspector General, has detected fraud on an average of approximately 
300 cards per year over the last 4 fiscal years. For example, in 
fiscal year 2012, the dollar amount of fraud identified and 
prosecutable by GSA was $517,000; in fiscal year 2011, it was 
$981,000. The per-case amount of identified fraud in fiscal years 2009 
to 2012 ranged widely from $66 to $299,000. The larger amount involved 
a case in which an individual was found to have stolen and used 
multiple GSA fleet cards to purchase and then resell gasoline. In 
partnership with the Department of Justice, GSA seeks the prosecution 
of individuals believed to have committed fraud and seeks to recoup 
the money. 

In addition to the identification of fraud, GSA's leasing services can 
help with reducing the costs of accident management, according to some 
federal fleet managers. For example, one federal fleet manager noted 
that GSA's management of the fault resolution process when government 
vehicles are involved in accidents with private vehicles helps reduce 
costs that agencies incur from accidents. GSA seeks to ensure that, 
when government drivers are not at fault, the party responsible for 
the accident reimburses the federal government. GSA's vehicle 
maintenance program also helps reduce agency fleet costs, according to 
federal fleet manager panelists. GSA has national agreements with 
major maintenance and tire companies to provide discounted maintenance 
services and vehicle parts. A GSA automotive technician, who is 
responsible for ensuring that the repairs are necessary and 
appropriately priced, must validate all repairs over $100.[Footnote 22] 

According to GSA officials, its overall management of the leasing 
program--including its approaches for acquiring, maintaining, and 
replacing vehicles and the various services it offers to its customer 
agencies--provides economies of scale and a "unified way of conducting 
business" that ultimately reduces costs. For example, according to 
these officials, their centralized management of the leased fleet 
provides an enhanced ability to detect waste, fraud, and abuse related 
to leased vehicles and helps prevent duplicative fleet management 
operations in federal agencies that can be more costly. 

Some Aspects of GSA's Vehicle Rates and Terms Do Not Encourage Agency 
Efforts to Reduce Certain Fleet Costs: 

Leasing Rate Structure: 

Under GSA's leasing rate structure, the monthly mileage fee charged to 
agencies covers fuel costs, as well as other variable costs, such as 
those for vehicle maintenance. A customer agency's mileage fee, which 
is determined by the miles its leased vehicles travel and GSA's 
mileage rate per category of vehicle leased, may not fully reflect 
some fuel costs not associated with miles traveled. These include 
costs associated with some driver behaviors such as idling, speeding, 
and fast stops and starts. 

GSA bases its mileage rate partly on the average cost of fuel per mile 
across all agencies for each category of vehicle available for 
leasing.[Footnote 23] According to GSA officials, the rate is designed 
to cover the leasing program's overall variable costs, which GSA pays 
for, and is a good approximation of these costs. The fee each agency 
pays does not necessarily reflect the fuel it actually uses, however, 
as the rate is not designed to capture individual agencies' fuel 
costs. Specifically, drivers of vehicles leased by some agencies may 
engage in behaviors such as idling, speeding, and fast stops and 
starts--which increase fuel use--to a greater extent than drivers in 
some other agencies, but all agencies would pay the same rate per mile 
for each category of vehicle leased. For example, according to Air 
Force officials, GSA identified excessive idling in leased vehicles at 
the Dover Air Force base and worked with the Air Force to curb it. In 
addition, vehicles used by DHS's Customs and Border Patrol (CBP) in 
the desert on the southern border of the United States may need to 
idle often to keep the occupants of the vehicle cool during hot days. 
Yet with GSA's monthly mileage rate, CBP generally pays based on the 
number of miles traveled, not the actual amount of fuel consumed by 
idling. According to GSA officials, the agency occasionally adds a 
surcharge to agency monthly mileage rates for excessive idling, which 
GSA evaluates on a month-by-month basis. GSA officials have 
acknowledged that its mileage rate does not capture some fuel costs at 
the customer agency level, such as those associated with each agency's 
idling or speeding. 

The fuel costs of GSA's leasing program are significant; they totaled 
about $431 million in fiscal year 2012. GSA has identified reducing 
the use of resources and environmental impacts as an agency goal, 
[Footnote 24] but its monthly mileage rate structure does not provide 
agencies with incentives to reduce the types of fuel use, cited above, 
that are not reflected in distance traveled. According to economic 
principles, when the price paid for a good does not reflect the full 
costs of that good, consumers will tend to use higher amounts of the 
good than is optimal from a societal standpoint. Therefore, under the 
current leasing rate structure in which some agencies may not bear the 
full cost of their fuel consumption, agencies may seek to have the 
government provide fuel levels that are economically inefficient. 
Also, as discussed later in this report, agencies may lack incentives 
to adopt telematics, which could lead to savings in fuel costs and 
other costs under certain circumstances, since their monthly leasing 
fees may not fully reflect any cost savings they achieve. 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.[Footnote 25] 

Some federal fleet managers on our panels acknowledged that paying for 
their own fuel might provide more of an incentive to reduce fuel use 
in leased vehicles. However, GSA officials and some panelists stated 
that they preferred the current structure. According to GSA officials 
and these panelists, including fuel costs as part of the mileage rate 
aids the customer agency's budgeting because GSA assumes the risk of 
fuel price increases, allowing agencies to reduce uncertainties in 
managing fleet costs. GSA sets its mileage rate at the beginning of 
the year based on what it estimates fuel will cost over the course of 
the year. GSA, not the agencies, generally bears the cost burden of 
the increase in fuel prices. According to GSA officials, the agency 
imposes a surcharge on agencies if fuel prices rise to such an extent 
that GSA believes it cannot absorb the unanticipated level of costs 
and also issues a rate reduction when fuel prices significantly 
decline in a given fiscal year.[Footnote 26] In addition, GSA 
officials noted that its coverage of fuel costs reduces the fleet-
management administrative burden on agencies and prevents duplication 
of management effort on the part of GSA and agencies. 

GSA officials also cited reasons that, in their view, changes in the 
rate structure may not be needed or may not lead to reduced fuel 
costs. According to these officials, improving agency incentives for 
reducing fuel use is not needed because agencies are legally required 
to reduce fuel costs.[Footnote 27] GSA officials also told us that 
they can keep fuel costs down by using data on agency fuel purchases 
to identify when fuel use is well above expected levels and then take 
appropriate actions, including adding a fuel surcharge or determining 
if excessive fuel use is due to fraud, waste, or abuse. These 
officials noted, however, that the addition of a fuel surcharge has 
been an infrequent occurrence. 

GSA officials also pointed out that even if agency incentives to 
reduce fuel use in leased vehicles improve, agencies would have to 
develop the data systems, technology, and fleet expertise to be able 
to reduce activities such as idling and speeding. Furthermore, a fleet 
manager on one of our panels noted that fleet managers in his agency 
lacked control over the driver behaviors that lead to excessive fuel 
use because mission achievement was the focus of his superiors, not 
fleet concerns, so changing the rate structure would not affect fuel 
use. As discussed later in this report, agency use of telematics in 
leased vehicles, under certain conditions, could help agencies 
identify and reduce driver behaviors that cause excessive fuel use, 
but agencies do face some challenges in adopting these technologies. 

We have not fully evaluated the pros and cons of changing GSA's rates 
so that agencies pay for the fuel they actually consume, and according 
to GSA officials, no studies have been performed on its leasing rate 
structure.[Footnote 28] In a May 2008 report, we found that there are 
trade-offs to consider in designing government fees and that every 
design will have pluses and minuses.[Footnote 29] In addition to 
efficiency, which we have discussed, we found that considerations in 
designing fees include equity (meaning that everyone pays a fair 
share), the extent to which collections cover costs, and the 
administrative burden on agencies. While GSA has flexibility in 
administering its rate structure, GSA's current leasing rate structure 
may not be fully equitable, as agencies that are more efficiently 
using fuel are to some extent subsidizing agencies that are less 
efficient because all agencies are charged the same mileage rate per 
category of vehicle. While GSA is required to collect adequate fees to 
cover the costs of its leasing program, the extent of the 
administrative burden for GSA and its customers of the current rate 
structure versus one in which agencies pay for their actual fuel costs 
is unclear and would depend on how any changes were implemented. 
Nevertheless, under the current rate structure, some excessive fuel 
use due to driver behaviors such as idling and speeding may be 
occurring, resulting in higher costs to taxpayers than would be the 
case if agencies paid for actual fuel consumed and therefore had 
increased incentives to minimize fuel use. 

Definition of Excessive: 

Wear and Tear: 

Federal fleet managers on both our civilian and military panels told 
us that they sometimes receive large unexpected charges, as much as 
thousands of dollars, from GSA during vehicle lease terms for damage 
done to vehicles beyond normal wear and tear. In fiscal year 2012, GSA 
issued damage charges for excessive wear and tear to 40,802 federal 
vehicles, or about 21 percent of its leased fleet, totaling about 
$18.5 million. For vehicles charged an excessive damage bill, the 
average bill was about $453 per vehicle. The highest bill was $10,400, 
according to GSA. Fleet managers told us that these charges could 
considerably increase the cost of managing a leased fleet.[Footnote 30] 

According to some of our panelists, lack of a clear GSA policy or 
guidance defining excessive wear and tear limits an agency's ability 
to decide whether it is more economical to lease or own vehicles. 
Without this information, agencies may be hindered in keeping overall 
fleet costs down because it is more difficult to estimate life-cycle 
costs for leased vehicles, estimates that serve as a basis for 
agencies making decisions about whether to lease or own a vehicle. 
Fleet managers told us that had they known that certain wear and tear 
would result in post-lease charges, they would choose to own the 
vehicle rather than lease it through GSA because ownership would have 
had lower life-cycle costs. Our past work has found and GSA's fleet 
management guidance states that life-cycle cost analysis is an 
important practice to help manage fleet costs and determine whether to 
purchase or lease vehicles.[Footnote 31] 

Furthermore, federal fleet managers on both panels told us that what 
constitutes excessive wear and tear is often interpreted differently 
by GSA's local fleet service representatives, who are responsible for 
making these determinations when agencies turn in vehicles. Federal 
fleet managers on the military panel proposed that GSA develop a 
policy that would clarify and standardize the definition of excessive 
wear and tear, making it less subject to interpretation by regional 
fleet service representatives. Appropriate policies are a useful 
internal control for agencies to help ensure that decisions and 
practices are applied consistently.[Footnote 32] 

During most of our review, GSA policies and guidance for its vehicle-
leasing program did not include a definition of excessive wear and 
tear. GSA officials told us that the concept of normal wear and tear 
is discussed internally during ongoing regional and headquarters 
meetings, such as fleet service representative and Federal Fleet 
Policy Council[Footnote 33] meetings, to aid in delivering consistent 
practices. In addition, GSA explained that GSA publications such as 
the Guide to Your GSA Fleet Vehicle serve as reference material for 
agencies as well as fleet service representatives, but a definition of 
excessive wear and tear is not provided in this guide. In March 2014, 
GSA completed development of guidance for fleet service 
representatives containing details on what constitutes normal and 
excessive wear and tear to leased vehicles. According to GSA 
officials, the agency will provide internal training as well as 
guidance to its customers on this issue through the spring and summer 
of 2014. 

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. Federal fleet managers on our two panels 
agreed that telematics can produce cost savings under certain 
circumstances and that GSA should do more to support telematics use, 
including lowering costs of telematic devices and providing 
information on agencies' experiences in using telematics in their 
fleets. GSA is taking steps to reduce telematics' costs, but does not 
currently collect and share information about agencies' experiences 
with telematics. 

Experts Reported That Telematics Can Result in a Variety of Cost 
Savings, under Certain Conditions: 

According to all of the experts we consulted, telematics have the 
potential, under certain circumstances, to provide cost savings to 
vehicle fleets. The experts identified various areas in which fleet 
managers can achieve cost savings, including fleet utilization, fuel 
use, misuse of vehicles, and maintenance (see fig. 1).[Footnote 34] 

Figure 1: Examples of Cost Savings That Can Be Achieved with 
Telematics: 

[Refer to PDF for image: illustrated table] 

Telematics data: Fleet utilization; 
Potential cost savings: Telematics can help determine precise 
utilization rates. Fleet managers can then eliminate underutilized 
vehicles, which reduces overall fleet costs. 

Telematics data: Fuel use; 
Potential cost savings: Telematics can monitor idling, speeding, rapid 
starts and sudden stops, all of which burn excess fuel. Fleet managers 
can use this information to provide drivers with feedback on their 
behavior. 

Telematics data: Vehicle misuse and abuse; 
Potential cost savings: Telematics can provide information on employee 
productivity, improper personal use of a vehicle, and the 
circumstances immediately preceding an accident. Fleet managers can 
use this information to provide feedback to employees and can be used 
to defend employees against fraudulent, third party accident 
accusations. 

Telematics data: Maintenance and repair; 
Potential cost savings: Telematics can provide information such as 
remaining brake pad depth and engine diagnostics. Fleet managers can 
use this information to reduce unnecessary preventive maintenance and 
improve the services performed. 

Source: GAO analysis of interviews. 

[End of figure] 

Fleet managers can achieve savings by analyzing the data provided by 
telematics devices and taking actions to reduce costs based on those 
data. For example, managers can reduce fleet size by eliminating 
vehicles with insufficient use and provide feedback to drivers to 
reduce wasteful, abusive, or dangerous behaviors such as speeding or 
unauthorized personal use. Fleet managers can also tailor vehicle 
maintenance based on improved knowledge of the vehicle's actual 
condition and avoid unnecessary preventative maintenance. One expert, 
who is a fleet manager, reported that telematics helped him reduce his 
fuel costs by 8 to 15 percent among sections of his fleet with almost 
universal telematics installation, though he cautioned that these 
vehicles received telematics because they were the most likely to 
achieve savings. Another expert reported that telematics helped him 
reduce his fleet size by 7 percent over 60 months among the vehicles 
with telematics installed. (See sidebars for additional information on 
the experiences with telematics of selected experts who manage fleets). 

Side bar: 

Case Study 1:
City of St Louis, Missouri: 

Approximate fleet size: 1,300 vehicles. 

Types of vehicles: On-road, non emergency vehicles, such as snow 
plows, dump trucks, and passenger vehicles. 

Percentage of vehicles with telematics: Between 25-50%. 

First year of telematics program: 2007. 

Benefits and cost savings the fleet manager attributed to telematics: 

Fuel savings: 8-15% over 60 months in sections with almost universal 
telematics installation. 

Fleet size savings: 2% of the entire fleet, including some vehicles 
without telematics, over 48 months. 

Maintenance, accident reduction, and worker productivity are areas 
where additional savings are believed to have occurred, but 
quantification of the cost reduction is not readily available. 

Return on investment as reported by the fleet manager: It took between 
12-24 months for the telematics investment to break even. 

Source: GAO analysis of interviews and questionnaire. 

[End of side bar] 

Experts cautioned that it is not always possible to calculate a 
comprehensive return on investment. Experts told us that it can be 
challenging to quantify cost savings when a comparative baseline is 
not available, telematics are part of a larger improvement effort, or 
the type of savings are difficult to quantify financially (such as 
savings associated with safety improvements). For example, one expert 
noted that he was unable to calculate fuel savings because the devices 
had been installed on new plug-in hybrid vehicles; he was unable to 
differentiate between the fuel savings achieved by using plug-in 
hybrids and the fuel savings from actions taken in response to 
telematics data. 

Furthermore, experts also noted that the potential return on 
investment from the adoption of any telematic technology will vary and 
that telematics will not achieve cost savings for every fleet. For 
example, two experts explained that telematics would not provide a 
return on investment for their own fleets because of how their 
vehicles are used. One noted that the vehicles are not used on a daily 
basis, so the benefits would not justify the costs. In addition, two 
experts explained that employees at their respective companies are 
authorized to use the vehicles for personal use, so after-market 
tracking devices would likely face opposition because of privacy 
concerns. Experts also noted that telematics can be a legal liability 
if information is gathered but not acted upon. For example, if 
telematics data shows that a driver regularly speeds but no corrective 
action is taken to stop this behavior, the employer may have a greater 
liability risk in the event that the driver is involved in an 
accident, according to one expert. 

The experts we interviewed highlighted four key factors that influence 
telematics' potential to facilitate cost savings in vehicle fleets: 
[Footnote 35] 

Side bar: 

Case Study 2: 
University of California, Davis: 

Approximate fleet size: 1,200 vehicles. 

Types of vehicles: Passenger vehicles. 

Percentage of vehicles with telematics: Less than 25%. 

First year of telematics program: 2009. 

Benefits and cost savings the fleet manager attributed to telematics: 

Vehicle utilization, asset theft avoidance and worker productivity are 
areas where savings are believed to have occurred, but quantification 
of the cost reduction is not readily available. 

Fuel savings are undetermined. Telematics were installed in new plug-
in hybrid vehicles; therefore, there was no comparable baseline 
against which to compare the fuel usage. 

Cost savings associated with safety benefits have not been determined; 
however, the fleet manager reported that telematics data helped him 
investigate a report of uncontrolled acceleration. 

Return on investment, as reported by the fleet manager: An overall 
return on investment has not been determined. 

Source: GAO analysis of interview and questionnaire. 

[End of side bar] 

Cost of the technology selected: The experts emphasized that the cost 
of any telematics program must be accounted for when considering 
overall cost savings. As a result, costs must be carefully evaluated 
in comparison to projected savings to avoid a net loss. This 
comparison can be challenging because the term "telematics" 
encompasses a broad array of technologies, which results in a wide 
range of associated costs. For example, telematics can include 
original equipment installed by the manufacturer, after-market add-on 
systems, or mobile device applications and programs. Further, data can 
be transmitted via satellite or cellular connections on a regular 
basis or when a vehicle passes a fixed-data download station. Fixed 
download stations pose mostly upfront, fixed costs, whereas the cost 
for a satellite connection is typically levied in ongoing monthly data 
charges. In addition, fleets may rent telematic devices for a short 
period of time to obtain a snapshot of usage data, or may select a 
long-term contract for ongoing monitoring. Various combinations of 
device, data access, and contract type will have different costs, 
which in turn influences the potential return on investment. 

Fleet characteristics: Experts reported that the characteristics of 
the fleet also affect the return on investment. For example, fleets 
that idle frequently will have more opportunity for fuel savings than 
fleets with carefully controlled fuel consumption. In addition, the 
number of miles driven may influence how much fuel can be saved. 
Experts also emphasized that the technology must be aligned with the 
fleet's characteristics, or the likelihood for savings will be reduced 
or eliminated. For example, some kinds of telematic devices depend on 
satellite signals that can be impaired by tall buildings in urban 
areas. Other devices depend on wireless connectivity that may be 
limited in rural locations. Still others rely on all vehicles in a 
fleet returning to or passing by a central location on a regular 
basis. If data are received sporadically, fleet managers will have 
less detailed information on which to act, which reduces the potential 
for cost savings. More information on the fleet characteristics that 
experts noted could influence the cost savings potential of telematics 
can be found in appendix IV. 

Side bar: 

Case Study 3: 
Turlock Irrigation District: 

Approximate fleet size: 300 vehicles. 

Types of vehicles: Varied; includes bucket trucks, passenger vehicles 
and off road equipment. 

Percentage of vehicles with telematics: More than 75%. 

First year of telematics program: 2004. 

Benefits and cost savings the fleet manager attributed to telematics: 

Fleet size savings: 7% over 60 months for the portion of the fleet 
with telematics installed. 

Vehicle utilization, asset theft avoidance and worker productivity are 
areas where savings are believed to have occurred, but quantification 
of the cost reduction is not readily available. 

Return on investment as reported by the fleet manager: An overall 
return on investment has not been determined. 

Source: GAO analysis of interview and questionnaire. 

[End of side bar] 

Management and organizational support: The experts we consulted 
reported that upper management support, fleet managers' buy-in, and 
organizational culture will influence the degree to which telematics 
can facilitate cost savings, since these factors can either support or 
hinder the cost-savings actions taken in response to telematics data. 
The experts said that upper management support is necessary to secure 
funding, change policies in response to problems identified through 
telematics data, and ensure that corrective actions are taken in a 
timely manner. Moreover, a fleet manager will need to have the time, 
ability, and desire to conduct analyses of the data to understand what 
changes are needed, unless the telematic device includes analytical 
support. In addition, some organizations may have cultures and 
structures that either embrace or reject monitoring efforts. For 
example, one expert noted that some unions support monitoring because 
of the safety benefits and liability protection, while other unions 
resist monitoring to prevent disciplinary actions against their 
members. 

Information technology systems: Experts also highlighted the 
importance of information technology systems that can efficiently 
collect and distribute the data provided by telematics devices. They 
noted that cost-saving changes can be more effectively implemented 
when the data gathered by telematics are readily accessible and 
integrated with all relevant information systems. For example, if a 
fleet uses multiple telematic-service providers to address different 
aspects of the fleet, then the overall visibility will be compromised 
without an integrated platform. 

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.[Footnote 36] While GSA currently provides leasing customers 
with various types of information, such as on 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. In addition, telematics may also be able to 
reduce administrative costs, such as the cost of personnel to perform 
manual vehicle data collection. The majority of panelists' fleets had 
at least some experience with telematics, and a few recently initiated 
or completed studies on or estimates of the outcomes of telematics 
use. For example, according to federal fleet managers with whom we 
spoke: 

* The Air Force has installed a telematic device, designed to reduce 
unaccounted-for fuel loss, on approximately 30,000 vehicles at 171 
installations. While the Air Force predicts full system activation is 
one year out, an initial cost savings analysis will be conducted using 
three test sites in the summer of 2014. In addition to improving fuel 
accountability, telematics may also reduce the manpower required to 
conduct periodic vehicle and equipment inventories. 

* The Department of Veterans Affairs regularly uses telematics in some 
vehicles and has realized some cost savings but found the return on 
investment to be better on some types of vehicles than 
others.[Footnote 37] The agency plans to equip most vehicles with 
telematics by the end of 2016. 

* The Department of Energy has used telematics in some of its vehicles 
for approximately 5 years, and this use has led to savings in all of 
the cost categories previously discussed.[Footnote 38] For example, a 
fleet manager 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). 

* Some Marine Corps bases and recruiting districts regularly use 
telematics. In a separate interview from the panel discussions, a 
Marine Corps fleet manager stated that he believed telematics' use at 
seven installations in the southwestern United States improved safety 
and helped defend Marines against fraudulent or erroneous accident 
claims. He stated that he believes telematics has been the single most 
effective tool for reducing vehicle-operating, maintenance, and abuse 
costs, but that no formal analysis has been conducted on the cost 
savings. 

Federal fleet managers also agreed that the previously discussed 
factors (telematics' costs, fleet characteristics, management and 
organizational support, and information technology systems) influence 
telematics' cost-saving potential for the federal fleet.[Footnote 39] 
They noted that cost, in particular, impedes further federal adoption 
of telematic devices. For some fleet managers the initial cost was the 
greatest financial concern, and for others, it was the rate of 
ongoing, monthly charges. A few fleet managers observed that because 
fuel and some other costs are included in GSA's vehicle-leasing rate, 
it is more challenging for an agency to recoup the costs of using 
telematics in leased vehicles under the current rate structure. 
[Footnote 40] As discussed previously, GSA's monthly mileage rate 
covers fuel costs as well as other variable costs of an agency's 
leased fleet, based on the average cost of fuel and maintenance in 
each vehicle category. Therefore, agencies' individual fees would not 
necessarily reflect all of the cost savings they achieve from 
telematics. Fleet managers from two agencies also noted that this 
reduces agencies' incentives to use telematics. 

In addition, federal fleet managers on our panels told us that lack of 
upper management support sometimes poses challenges for federal 
agencies in adopting telematics. They said that the reasons for this 
lack of support include: 

* The potential savings from implementation of telematics can be minor 
in comparison with agency budgets and are not seen as a priority for 
agency leadership. 

* Funds are limited and investments in other areas may be viewed as 
providing a better return. 

* Upper management officials are wary about making an investment in 
telematics if benefits may be challenging to quantify in financial 
terms or if there is no known precedent in other agencies. 

Given the potential of telematics to facilitate cost-saving decisions 
and the concerns about cost and management support, the panels of 
federal fleet managers proposed some changes, discussed below, that 
GSA could make to enhance agencies' abilities to use telematics in 
their federally leased vehicles.[Footnote 41] 

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. 
GSA Fleet offers agencies the option of having selected vendors 
install telematics devices in their leased vehicles. GSA negotiates 
discounts for these devices through an agreement it has established 
with vendors.[Footnote 42] However, federal fleet managers told us 
that the prices are still a barrier to increasing telematics' use in 
federal fleets. The pricing of telematics devices and service plans 
available varies depending on many factors, including the desired 
capabilities, the quantity ordered, and the length of time the 
technology is required. For example, according to a GSA informational 
brochure, monthly costs for basic GPS tracking typically range from 
$22.50 to $32.50 per vehicle, or $810 to $1,170 for a 3-year contract, 
though agencies can negotiate to obtain lower prices.[Footnote 43] 
Because agencies' leased fleets can include thousands of vehicles, the 
total costs of using telematics can be significant. 

One of GSA's priorities, as stated in its 2012 Annual Performance 
Report and reiterated in a 2013 memo from the Administrator to all GSA 
staff, is to use the purchasing power of the federal government to 
drive down prices, deliver better value, and reduce costs to their 
customer agencies. Agency officials explained that GSA has not pursued 
additional discounts for telematics because federal agencies have only 
recently begun to pursue the technology in significant quantity. GSA 
is currently engaged in efforts to secure new contracts for telematics 
devices for customers and hopes to have these available by the end of 
fiscal year 2014. As part of this effort, they are seeking to provide 
these devices at a lower cost to customers.[Footnote 44] 

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. Based on information provided 
by GSA officials, 12 of the 15 executive branch departments as well as 
some independent agencies, such as the Environmental Protection Agency 
and the National Aeronautics and Space Administration, acquired 
telematics for some portion of their fleets (owned or leased) between 
2008 and 2012. GSA's Office of Government-wide Policy published an 
article relating the Marine Corps' experiences with telematics in its 
fleet in 2006. However, GSA has not compiled information on agencies' 
recent telematic efforts and therefore is unable to provide such 
information to agencies. Although GSA has not provided such 
information, it does regularly communicate with agencies regarding 
fleet management topics through various means, including providing 
information on its website and presenting webinars, among other 
approaches. 

Federal fleet managers agreed that knowing more about the experiences 
of other fleets would help them better understand how telematics might 
be applied in their own fleets and could be used to bolster support 
from upper management, program managers, and drivers. Such information 
could include descriptions of federal agencies' efforts as well as 
studies or other information on results of these efforts, including 
estimates of cost savings achieved or nonfinancial benefits, such as 
enhanced program performance or improved safety and liability 
protection for employees. It could also include lessons learned from 
the experiences. One fleet manager on our military panel noted that 
the military services' fleet managers already share their experiences 
with each other, and that such information sharing, facilitated by 
GSA, would also be beneficial for civilian agencies. Another panelist 
suggested that the studies performed by other federal fleets would be 
more credible than the studies provided by telematics vendors. GSA 
officials explained that while they do not currently collect this 
information, GSA's Office of Government-wide Policy would be able to 
request information from agencies and share information that agencies 
voluntarily provided. 

GAO has found that a key factor in helping agencies better achieve 
their missions and program results is through appropriate internal 
controls, which include relevant, reliable, and timely 
communications.[Footnote 45] In addition to internal communications, 
this includes communicating with, and obtaining information from, 
external stakeholders that may have an impact on the agency achieving 
its objectives. GSA is pursuing several strategic objectives that 
would be better supported by obtaining and sharing additional 
information about telematics with other federal agencies. 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.[Footnote 46] Another such objective is to help provide savings 
to federal agencies, including by providing them with information that 
can be useful in reducing fuel use. GSA has noted in strategic 
planning documents and during interviews that it strives to ensure 
that customers receive assistance that meets client needs and strives 
for a culture of continuous improvement. Without information, 
facilitated by GSA, about other agencies' experiences with telematics, 
agencies may expend additional time and resources to find such 
information and identify devices that would best meet their needs and 
may encounter problems that could have been avoided. In addition, they 
may not be able to gather the internal support needed to start or 
increase the use of telematics in their leased fleets. 

Conclusions: 

Given the amount that federal agencies pay GSA to lease vehicles--over 
$1.1 billion in fiscal year 2012--and concerns by Congress and the 
Administration about costs associated with federal agencies' fleets, 
it is important for GSA to ensure that it is operating its leasing 
program in a manner that encourages agencies to minimize costs 
associated with their leased vehicles. While various aspects of GSA's 
leasing rates, structures, and services support agency efforts to keep 
costs down, its current leasing rate structure does not provide 
incentives for agencies to take actions to reduce some types of fuel 
costs associated with poor driving behavior. 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. 

While telematic devices are not cost-effective for every vehicle 
fleet, under certain circumstances they could produce cost savings in 
fleets leased from GSA. GSA, through its existing resources and 
expertise, is well positioned to facilitate agencies' adoption of 
telematics by offering these technologies to agencies at a reduced 
cost and by asking agencies to voluntarily provide information about 
their experiences with telematics that it can share. GSA is currently 
seeking to reduce prices for telematics. By providing information on 
its website or through other methods on federal agencies' experiences 
in using telematics in their fleets, such as information on agencies' 
telematic efforts or studies or estimates of pilot or program results, 
GSA could help agencies better identify the circumstances under which 
devices or approaches might or might not achieve cost savings. Such 
information could also help agencies obtain support from upper 
management for telematics adoption or improve their existing 
telematics programs. 

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. 

Agency Comments: 

We provided a draft of this report to GSA for review and comment. GSA 
agreed with our findings and recommendations and said that it will 
take appropriate action to implement them. GSA reiterated its view 
that its centralized fleet management operations provide 
standardization, economies of scale, and the tools necessary for the 
effective and efficient management of the federal fleet. GSA's 
comments are reprinted in appendix V. GSA also provided technical 
comments for our consideration. We incorporated these as appropriate. 

We are sending copies of this report to interested congressional 
committees and the Administrator of GSA. In addition, this report will 
be available at no charge on GAO's Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-2834 or rectanusl@gao.gov Contact points for 
our Office of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix VI. 

Signed by: 

Lori Rectanus: 
Director, Physical Infrastructure Issues: 

[End of section] 

Appendix I: GSA's Vehicle-Leasing Program Services, Structure, and 
Costs: 

Leasing Program Services: 

The General Services Administration (GSA) manages the vehicle leasing 
program (called GSA Fleet) and offers federal agencies a variety of 
vehicles for lease, including sedans, light and heavy-duty trucks, and 
specialty vehicles such as ambulances.[Footnote 47] 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. 

Leasing Program Structure and Organization: 

GSA Fleet provides support to its leasing customers through the 
following offices: 

* Leasing Operations Division: responsible for monitoring vehicle 
expenses--including expenses associated with GSA's accident and 
maintenance management services--and reviewing regional operations to 
identify opportunities to reduce costs and increase efficiency. 

* Leasing Acquisition & Vehicle Remarketing Division: responsible for 
coordinating the leasing arrangement and delivery and subsequent 
resale of leased vehicles. 

* Regional Offices: provide day-to-day support to local customers. 

* Motor Vehicle Management Team: provides support to GSA's motor 
vehicle department as a whole, including both GSA Fleet and GSA 
Automotive. For more information on GSA Automotive, see appendix II. 

- Systems Support Division: provides general information-systems 
support for the Office of Motor Vehicle Management, including 
information systems used to process and report fleet management data 
for the leased fleet. 

- Business Management Division: provides general analytical support 
for the Office of Motor Vehicle Management. 

Employees in these divisions--27 full-time equivalents (FTE)--are 
assigned to GSA's central office located in Washington, D.C., while 82 
call center employees reporting to the central office are responsible 
for handling accident, maintenance, and repair needs for GSA's leased 
fleet from offices in four GSA regions. There are 384 regional FTEs, 
of which 334 are GSA's fleet service representatives who serve as the 
primary point of contact for agency customers in GSA's 11 regional 
offices. Additionally, 37 FTEs provide support to both GSA Fleet and 
GSA Automotive as part of the motor-vehicle management team. See 
figure 2 for information on the location and staffing levels of GSA's 
central and regional offices. GSA works with third-party vehicle 
dealers, maintenance facilities, and auction houses to deliver, store, 
maintain, and sell leased vehicles.[Footnote 48] As such, GSA does not 
maintain any parking or maintenance facilities for its leased fleet. 

Figure 2: Location and Number of Staff Responsible for GSA's Leasing 
Program: 

[Refer to PDF for image: illustrated U.S. map] 

Central office: 
Call center full time equivalents (FTEs): 0; 
Other full time equivalents: 27. 

New England Region: 
Call center full time equivalents (FTEs): 0; 
Other full time equivalents: 11. 

Northeast & Caribbean Region: 
Call center full time equivalents (FTEs): 0; 
Other full time equivalents: 32.5. 

Mid-Atlantic Region: 
Call center full time equivalents (FTEs): 0; 
Other full time equivalents: 43. 

Southeast Region: 
Call center full time equivalents (FTEs): 36; 
Other full time equivalents: 58. 

Great Lakes Region: 
Call center full time equivalents (FTEs): 0; 
Other full time equivalents: 32. 

The Heartland Region: 
Call center full time equivalents (FTEs): 14; 
Other full time equivalents: 20. 

Greater Southwest Region: 
Call center full time equivalents (FTEs): 12; 
Other full time equivalents: 58. 

Rocky Mountain Region: 
Call center full time equivalents (FTEs): 0; 
Other full time equivalents: 27.5. 

Pacific Rim Region: 
Call center full time equivalents (FTEs): 20; 
Other full time equivalents: 49. 

Northwest/Arctic Region: 
Call center full time equivalents (FTEs): 0; 
Other full time equivalents: 35. 

National Capital Region: 
Call center full time equivalents (FTEs): 0; 
Other full time equivalents: 18. 

Sources: GAO analysis of GSA data; Map Resources (map). 

Note: The term full-time equivalent (FTE) is a standard measure of 
labor that equates to one year of full-time work. 

[End of figure] 

Leasing Program Costs: 

GSA is required by law to recover all costs incurred in providing 
vehicles and services to federal customers.[Footnote 49] Since leasing 
activities operate through the use of a revolving fund that is 
reconciled each year, GSA Fleet does not receive appropriations 
through the annual budget cycle. GSA purchases vehicles through the 
GSA Automotive program (discussed in app. II); these vehicles are 
ultimately used for GSA's centralized leasing program. The funding 
used to purchase these vehicles comes from GSA's revolving fund. GSA 
leases to federal customers and recovers these costs, as well as 
vehicle maintenance and administrative costs through lease fees and 
the resale of vehicles at the end of their life cycle. See table 2 for 
more detailed information on the revenues and expenses of GSA Fleet's 
leasing program.[Footnote 50] From fiscal years 2008 through 2012, the 
difference between the program's revenues and expenses was highest at 
about $70 million in fiscal year 2009 and lowest at about minus $47 
million in fiscal year 2008. In fiscal year 2012, the highest expenses 
were those associated with vehicle depreciation, which accounted for 
about 42 percent of total expenses. The next largest expense in fiscal 
year 2012 was fuel for leased vehicles, which accounted for about 38 
percent of total expenses. Overhead expenses accounted for about 4.9 
percent of total expenses. 

Table 2: GSA Leasing Program Revenue and Costs, in Thousands, Fiscal 
Years 2008-2012: 

Revenue: 

Net Revenue - revenue from fixed monthly leasing fees and variable 
monthly mileage fees; 
2008: $1,160,882; 
2009: $1,171,869; 
2010: $1,214,609; 
2011: $1,237,041; 
2012: $1,237,646. 

Expenses: 

Business Unit Expenses - costs associated with direct management and 
operation of the leasing program; 
2008: $61,919; 
2009: $62,174; 
2010: $66,702; 
2011: $66,074; 
2012: $65,305. 

Overhead Expenses - overhead costs allocated to the Fleet program, such 
as costs of acquisition services, GSA corporate management, and office 
rent; 
2008: $38,478; 
2009: $43,937; 
2010: $41,854; 
2011: $51,912; 
2012: $55,070. 

Fleet Vehicle Related Expenses - costs associated with maintenance and 
operation of leased vehicles, excluding fuel, and gains/losses 
resulting from vehicle sales; 
2008: $189,550; 
2009: $198,292; 
2010: $174,207; 
2011: $108,296; 
2012: $93,964. 

Fuel Costs - costs for fuel associated with leased vehicles; 
2008: $454,186; 
2009: $291,393; 
2010: $344,202; 
2011: $426,841; 
2012: $431,454. 

Depreciation-the cost of leased vehicles less estimated resale value, 
allocated over their estimated useful life; 
2008: $397,389; 
2009: $427,691; 
2010: $464,851; 
2011: $473,627; 
2012: $475,328. 

Total Operating Expenses; 
2008: $1,141,523; 
2009: $1,023,486; 
2010: $1,091,816; 
2011: $1,126,750; 
2012: $1,121,121. 

Operating Results - Net revenue less total operating expenses; 
2008: $19,360; 
2009: $148,383; 
2010: $122,793; 
2011: $110,292; 
2012: $116,525. 

Provisions and Reserves - portion of GSA's revolving vehicle 
acquisition fund reserved for cost increases in vehicle replacements in 
order to stabilize vehicle prices from year to year and to fund the 
incremental cost of alternative fuel vehicles (AFVs)[A]; 
2008: ($66,189); 
2009: ($77,984); 
2010: ($79,363); 
2011: ($85,724); 
2012: ($80,306). 

Net Operating Results - difference between revenue and costs[B]; 
2008: ($46,829); 
2009: $70,399; 
2010: $43,430; 
2011: $24,568; 
2012: $36,219. 

Source: GSA data. 

Notes: Since these data were not material to the findings of this 
report, we have not assessed their reliability. 

Totals may not add due to rounding. 

[A] The incremental costs of alternative fuel vehicles (AFVs) are 
generated from a surcharge by GSA applied to every vehicle in 
agencies' fleets, as required by the Energy Policy Act of 2005.The 
alternative fuel surcharge covers the difference in cost between the 
alternative fuel vehicle and a comparable gasoline-fueled vehicle. 
Surcharges are assessed at the agency level depending on whether an 
agency is required to comply with Energy Policy Act alternative fuel 
mandates. According to GSA, this spreads the cost of higher priced 
alternative fuel vehicles across the entire agency, allowing the 
agency to afford more alternative fuel vehicles each year. 

[B] When expenses are lower than the net revenue, extra funds are put 
back in to the leasing program's revolving fund to account for 
fluctuations in cash flow and to fund capital projects approved by the 
Administrator. 

[End of table] 

[End of section] 

Appendix II: GSA's Vehicle-Purchasing Program Services, Structure, and 
Costs: 

Purchasing Program Services: 

GSA Automotive manages the vehicle purchasing program and offers an 
array of non-tactical vehicle products at a savings from the 
manufacturer's invoice price, including alternative fuel vehicles, 
sedans, light trucks, ambulances, buses, and heavy trucks. In fiscal 
year 2012, federal agencies excluding the postal service owned about 
245,000 vehicles, including 118,000 passenger vehicles and 122,000 
trucks. The number of owned vehicles has increased from about 224,000 
vehicles in fiscal year 2008 to about 245,000 vehicles in fiscal year 
2012. GSA provides various services to customers who purchase 
vehicles, including: 

* access to GSA's online ordering tool, AutoChoice, which provides 
information and pricing on available vehicles; 

* access to GSA's Automotive Express Desk, which handles vehicle 
requirements on an "unusual and compelling urgency" basis; 

* engineering and technical assistance for ordering non-standard 
customized vehicles including design, construction, and project 
management through delivery of the custom vehicle; and: 

* use of the Federal Fleet Management System, a web-based fleet 
management information system that identifies, collects, and analyzes 
vehicle data (including data on costs incurred for the operation, 
maintenance, acquisition, and disposal of agency owned vehicles), 
offered at no additional cost. 

Purchasing Program Structure and Organization: 

GSA Automotive provides support to its purchasing customers through 
the following offices: 

* Vehicle Purchasing Division: provides professional engineering, 
contracting, technical, and vehicle design services. 

* Motor Vehicle Management Team: provides support to GSA's motor 
vehicle department as a whole, including both GSA Fleet and GSA 
Automotive. For more information on the motor vehicle management team, 
see appendix I. 

Employees in these divisions work out of GSA's central office located 
in Washington, D.C., and GSA Automotive currently employs 
approximately 18 FTEs. Purchased vehicles are delivered directly to a 
marshaling location by the manufacturer, where the customer picks up 
the vehicle. As such, GSA does not maintain parking or other 
facilities for vehicle storage at any point in the process. 

Purchasing Program Costs: 

GSA is required by law to recover all costs incurred in providing 
vehicles and services to federal customers.[Footnote 51] Since GSA 
procurement activities operate through the use of a revolving fund 
that is reconciled each year, GSA Automotive does not receive 
appropriations through the annual budget cycle. GSA Automotive awards 
contracts for vehicles, provides information to agencies on pricing 
for evaluation, and places orders against the awarded contracts using 
their revolving fund. Using the previous year's total purchases as a 
baseline, GSA contracts with auto manufacturers and other suppliers to 
procure vehicles for federal customers through "indefinite quantity, 
indefinite delivery" contracts.[Footnote 52] The costs associated with 
this acquisition process are recovered through a surcharge added to 
the vehicle price (which averaged about 1 percent of the price in 
fiscal year 2012). See table 3 for more detailed information on GSA's 
purchasing program revenue and expenses.[Footnote 53] From fiscal 
years 2008 through 2012, the difference between the program's revenue 
and expenses was highest at about $10.5 million in fiscal year 2009 
and lowest at about $4.1 million in fiscal year 2011. The highest 
expenses were those associated with the cost of vehicles sold to 
federal agencies and GSA's leasing program, which accounted for about 
99 percent of total expenses in fiscal year 2012. Overhead expenses 
accounted for about 0.4 percent of total expenses in fiscal year 2012. 

Table 3: GSA's Purchasing Program Revenue and Costs, in Thousands, 
Fiscal Years 2008-2012: 

Net Revenue - Customer agency payments for the cost of vehicles and GSA 
administrative fees; 
2008: $1,535,771; 
2009: $1,757,569; 
2010: $1,465,594; 
2011: $1,373,863; 
2012: $1,334,901. 

Total Cost of Goods and Services Sold - acquisition cost to GSA of 
purchasing vehicles purchased by agencies and GSA's leasing program; 

2008: $1,519,365; 
2009: $1,738,215; 
2010: $1,451,581; 
2011: $1,360,496; 
2012: $1,321,228. 

Gross Margin - total revenue minus total cost of goods and services; 
2008: $16,406; 
2009: $19,354; 
2010: $14,013; 
2011: $13,368; 
2012: $13,673. 

Expenses: 

Business Unit Expense - costs associated with direct management and 
operations of the vehicle purchasing program; 
2008: $4,055; 
2009: $3,919; 
2010: $3,983; 
2011: $4,390; 
2012: $4,114. 

Overhead Expenses - overhead costs allocated to the purchasing program, 
such as costs of acquisition services, GSA corporate management, and 
office rent; 
2008: $4,275; 
2009: $4,946; 
2010: $4,764; 
2011: $4,863; 
2012: $5,118. 

Total Operating Expenses; 
2008: $8,330; 
2009: $8,865; 
2010: $8,747; 
2011: $9,253; 
2012: $9,232. 

Reserves - portion of GSA's revolving acquisition fund reserved for 
strategic business investments; 
2008: $0; 
2009: $0; 
2010: $231; 
2011: $0; 
2012: $59. 

Net Operating results - difference between revenue and costs[A]; 
2008: $8,076; 
2009: $10,489; 
2010: $5,034; 
2011: $4,115; 
2012: $4,382. 

Source: GSA data. 

Note: Since these data were not material to the findings of this 
report, we have not assessed their reliability. Totals may not add due 
to rounding. 

[A] When expenses are lower than the net revenue, extra funds are put 
back in to GSA's revolving fund to account for fluctuations in cash 
flow and to fund capital projects approved by the Administrator. 

[End of table] 

[End of section] 

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. In addition, 
information on the services, structure, and costs associated with 
GSA's vehicle leasing and purchasing programs is provided in 
appendixes I and II, respectively. 

To determine whether and how GSA's vehicle-leasing rates, terms, and 
services support or encourage agency efforts to reduce fleet costs, we 
reviewed applicable federal laws; federal management regulations; 
GSA's fleet guidance, policy, and strategic goals; and other pertinent 
GSA documentation; and interviewed GSA officials. We also convened two 
panels of federal fleet managers who managed federal fleets with over 
7,000 vehicles leased from GSA in fiscal year 2011, the most recent 
data available at the time of our fleet manager selection, to obtain 
their views on this question.[Footnote 54] One panel consisted of one 
or more managers from five civilian agencies (the Departments of 
Agriculture, Energy, Homeland Security, the Interior, and Veterans 
Affairs) and the other consisted of one or more managers from five 
military agencies (the U.S. Marine Corps, the Army Corps of Engineers, 
and the Departments of the Air Force, Army, and Navy).[Footnote 55] 
While their views should not be used to generalize about the views of 
all federal fleet managers, they do provide the perspective of 
managers of most of the federal leased fleet, as they manage over 80 
percent of the vehicles leased from GSA in fiscal year 2011. To answer 
this research objective, we asked each panel an identical set of 
questions about the ways in which GSA's rates, terms, and services 
encourage or support the reduction of fleet costs. We analyzed panel 
responses to our questions, and in reporting the responses, we focused 
on those related to reducing fleet costs to the government as a whole 
rather than to a specific agency. Views attributed to the panels 
reflect key messages or themes derived from these discussions, but we 
did not attempt to quantify exactly how many federal fleet managers 
agreed with each statement or issue under discussion because this was 
not the goal of the panel and we did not poll or survey individuals. 
We then followed up with GSA to get its views on perspectives and 
suggestions provided by agency fleet managers. In assessing GSA's 
efforts to reduce agency fleet costs through its rates, terms, and 
services, we reviewed GSA's fleet policy, guidance, and strategic 
goals to determine the extent to which agency suggestions for 
improvement might be part of the current GSA vehicle-leasing 
framework. Additionally, we conducted interviews with officials from 
GSA's vehicle-leasing program and Chief Financial Office and requested 
documentation of their expenditures, program policies, leasing rate 
structure, and agency-incurred leasing expenses, such as charges to 
agencies for damaged leased vehicles, in order to better understand 
how GSA's vehicle-leasing program operates. We also analyzed GSA's 
leasing rate structure in relation to the principle of economic 
efficiency, which has often been used to assess the design of 
government fees.[Footnote 56] In a May 2008 report, we noted that 
efficiency exists when the fee ensures that the government is 
providing the amount of the service that is economically desirable and 
that efficient fees increase awareness of the costs of government 
services, creating incentives to reduce costs where appropriate. 

To obtain information regarding telematics' cost savings potential, we 
spoke with 19 experts--including consultants, representatives of 
associations, and fleet managers from corporations, government 
entities, and universities. Experts were selected based on their 
knowledge about fleet management or telematics. First, we reviewed the 
publications and conference history of associations and consultants 
that had recently participated in GAO work on fleet management or 
transportation technology to determine if they possessed expert 
knowledge of telematics. These entities included Accenture, Mercury 
Associates, the Intelligent Transportation Society of America, the 
National Association of Fleet Administrators, and the Automotive Fleet 
and Leasing Association. We determined that all five possessed 
expertise in this area. We then solicited nominations from these 
entities for individuals with expertise in fleet management and 
knowledge of telematics, and compared these nominations against 
publications and relevant literature.[Footnote 57] We did not select 
experts in cases where we, in consultation with our methodologist, 
believed the nomination may have been biased by a conflict of 
interest, such as a contract, between the nominating party and the 
nominee, which was likely to involve telematics. This process 
eliminated one nomination. We also reconsidered nominations when a 
company or organization, rather than a specific individual expert, was 
identified. We eliminated three nominations where we were uncertain 
that an individual expert could be reliably identified. After these 
eliminations, a total of 19 experts remained, whose views we obtained 
during group and individual interviews. Because of the interactive 
nature of the group interviews, we collected common themes rather than 
tabulating individual responses. The views represented are not 
generalizable to those of all experts on fleet management or 
telematics; however, we were able to secure the participation of a 
diverse, highly qualified group of experts and believe their views 
provide a balanced and informed perspective on the topics discussed. 
We reviewed literature on the cost savings associated with telematics. 
We searched journals, research papers, and fleet management 
publications from 2007 through 2013.[Footnote 58] 

Of the19 experts we consulted, 15 were current fleet managers. While 
not all of the fleet managers used telematics, they had knowledge of 
the topic. We sent a questionnaire to these 15 fleet managers 
regarding the specific savings, if any, they had achieved through 
telematics as well as information such as the size of their fleets and 
the percentage of their fleet that uses telematics. We received 10 
responses. Two corporate fleet managers indicated that this 
information was proprietary; however, this information was not 
material to our findings, conclusions, or recommendations. 

To understand the possible implications for GSA's leasing program of 
the cost-savings potential of telematics, we also obtained the views 
of the federal fleet managers who participated in the two panels 
previously described. We inquired about their views on the cost-
savings potential of telematics' use by federal agencies and GSA's 
efforts related to encouraging telematics use in leased vehicles. We 
also interviewed GSA officials, requested and reviewed the information 
that GSA provides to federal customers on telematics, reviewed GSA's 
publicly available information on telematics' offerings, examined 
GSA's policies and guidance regarding telematics, and assessed GSA 
telematics efforts in relation to GAO's internal control standards, 
which include relevant, reliable, and timely communications,[Footnote 
59] and GSA's 2014-2018 Strategic Plan. 

To identify the services provided by, and the structure and expenses 
associated with, GSA's vehicle leasing and purchasing programs, we 
interviewed GSA officials and reviewed data and documents regarding 
GSA services, expenses, and revenue. Because this information was not 
material to the findings of this report, we have not assessed the 
reliability of GSA's cost and revenue data. 

We conducted this performance audit from July 2013 to May 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix IV: Fleet Characteristics That Experts Reported Could 
Influence Telematics' Cost-Saving Potential: 

Current driver and asset performance: 
The most problematic fleets will have the greatest potential for cost 
savings, because they can substantially improve. For example, fleets 
that frequently idle may have more opportunities to save on fuel costs. 

Size of the fleet: 
Some telematic solutions involve fixed costs, such as the cost of a 
data download station. Such technology may not be cost effective for 
some smaller fleets. 

Number of miles driven: 
If a vehicle has low usage, ongoing telematics use may not produce a 
good return on investment. However, telematics may serve to determine 
whether the vehicle can be eliminated, which may produce cost savings. 

Type of vehicle: 
Telematics may have a higher return on investment in certain vehicle 
types, such as vehicles with poor fuel efficiency or specialized 
vehicles with higher operational costs. 

Length of time vehicles are in service: 
Vehicles that are turned over quickly may not be able to recover 
upfront capital expenses or ongoing costs during the time the vehicle 
is in service. 

Location of the vehicles (e.g., urban, rural, etc): 
Some telematics require cellular service or a satellite connection to 
acquire and transmit data. Rural areas may not have such services, and 
urban areas can sometimes suffer from "urban canyons", in which tall 
buildings impair signals. Lack of reliable data can affect the 
soundness of cost-saving decisions. 

Physical dispersion of the fleet ( i.e., fleet density): 
Some technology, such as a data download station, may not be viable for 
fleets without a central location to which all vehicles covered by the 
telematic program report. In such cases, the available technology 
choices will be more limited, which may affect cost. 

Source: GAO analysis of interviews with experts. 

[End of table] 

[End of section] 

Appendix V: Comments from the U.S. General Services Administration: 

GSA: 
U.S. General Services Administration: 
The Administrator: 
1800 F Street, NW: 
Washington, DC 20405: 
Telephone: (202) 501-0800: 
Fax: (202) 219-1243: 

April 23, 2014: 

The Honorable Gene L. Dodaro: 
Comptroller General of the United States: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Dodaro: 

The U.S. General Services Administration (GSA) appreciates the 
opportunity to review and comment on the draft report, Federal Vehicle 
Fleets: GSA Has Opportunities to Further Encourage Cost Savings for 
Leased Vehicles (GAO-14-443). The U.S. Government Accountability 
Office (GAO) recommends that the Administrator of General Services: 

* examine and document the trade-offs of changing GSA's lease-rate 
structure so that each agency pays for the fuel that it actually uses; 
and, 

* 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. 

GSA provides Federal customers end-to-end fleet leasing services 
including vehicle acquisition and disposal, maintenance control and 
accident management, fuel, loss prevention services, and a robust 
fleet management system that provides detailed and accurate data - all 
of which are offered in a low all-inclusive rate. The annual Federal 
Fleet Report, which includes fleet cost information submitted by 
Federal agencies, shows that leasing from GSA, on average, costs less 
per mile than agencies that manage and own vehicles themselves. 
Additionally, centralizing Federal fleet management operations to GSA 
provides standardization, economies of scale, and the tools necessary 
for the effective and efficient management of the Federal fleet. By 
leveraging a shared-service model, GSA Fleet eliminates redundant 
operations and programs in the Federal Government and provides a 
unified way of conducting business. 

GSA agrees with the findings and recommendations and will take 
appropriate action to implement them accordingly. If you have any 
additional questions or concerns, please do not hesitate to contact me 
at (202) 501-0800, or Ms. Lisa Austin, Associate Administrator, Office 
of Congressional and Intergovernmental Affairs, at (202) 501-0563. 

Sincerely, 

Signed by: 

Dan Tangherlini: 
Administrator: 

cc: Lori Rectanus, Acting Director, Physical Infrastructure, GAO. 

[End of section] 

Appendix VI: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Lori Rectanus, (202) 512-2834 or rectanusl@gao.gov: 

Staff Acknowledgments: 

In addition to the contact above, Judy Guilliams-Tapia (Assistant 
Director), Russell Burnett, Colin Fallon, Katherine Hamer, Kieran 
McCarthy, Josh Ormond, Alison Snyder, Jack Wang, and Crystal Wesco 
made key contributions to this report. 

[End of section] 

Footnotes: 

[1] The figures on agency leased and owned vehicles used in this 
report exclude vehicles owned or leased by the U.S. Postal Service. We 
have previously reported on the postal fleet. See GAO, United States 
Postal Service: Strategy Needed to Address Aging Delivery Fleet, 
[hyperlink, http://www.gao.gov/products/GAO-11-386] (Washington, D.C.: 
May 5, 2011). 

[2] For example, legislation has been proposed that directs federal 
agencies to coordinate with the Office of Management and Budget to 
reduce vehicle budgets by 20 percent. See H.R. 37, 113th Cong. (2013); 
S. 417, 113th Cong. (2013). 

[3] The term "telematics" refers to a technology that combines 
telecommunications and information processing to send, receive, and 
store information related to remote objects, such as vehicles. 

[4] Those agency fleets with over 7,000 leased vehicles represented 
over 80 percent of the federal fleet leased from GSA in fiscal year 
2011. Additional agency fleets would have marginally increased the 
total number of vehicles under our review. 

[5] Most of the agencies were represented by one fleet manager and 
some were represented by two or three. 

[6] See GAO, Federal User Fees: A Design Guide, [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 29, 
2008). Efficiency exists when the fee ensures that the government is 
providing the amount of the service that is economically desirable. 
Efficient fees increase awareness of the costs of government services, 
creating incentives to reduce costs where possible. GAO developed 
these criteria by reviewing economic and policy literature on federal 
and nonfederal user fees, including prior GAO work, and used case 
examples to illustrate different types of design elements and the 
impacts they may have. 

[7] We received 10 of 15 responses; several corporate fleet managers 
indicated that this information was proprietary. However, this 
information was not material to our findings, conclusions, or 
recommendations. 

[8] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[9] Federal agencies may also lease from commercial vendors in certain 
instances, such as when unique vehicles are not available for leasing 
through GSA. An agency must have specific statutory authority to lease 
passenger motor vehicles. 31 U.S.C. § 1343(b). According to GSA 
officials, only an agency that lacks this specific authority or has 
not been delegated leasing authority is required to participate in the 
GSA centralized leasing program. Examples of when agencies may lease 
from commercial vendors include low speed electric vehicles and buses 
for the handicapped. According to GSA, agencies may elect to use 
commercial sources even when a vehicle is available through GSA. 

[10] In a May 2011 memorandum, the President called on federal 
agencies to determine the optimum size of their fleets and eliminate 
non-essential vehicles. Fiscal year 2012 was the first year that 
agencies were required to report to GSA on their progress as well as 
plans and targets for achieving the optimal inventory by the end of 
2015. 

[11] GSA is required by law to recover all costs it incurs in 
providing vehicles and services to federal customers. See 40 U.S.C. 
§605. For further information on the expenses and revenues of GSA's 
leasing program, see appendix I. 

[12] While the majority of GSA leases include fuel and maintenance, 
GSA has a limited number of leases that do not include fuel or 
maintenance and leases that include only maintenance for agencies with 
specific needs. 

[13] Mileage data can also be collected through Mileage Express or 
File Transfer Protocol. Mileage Express is GSA's web-based mileage 
reporting system. File Transfer Protocol is an electronic method of 
transferring data instantaneously from one database to another. 

[14] 41 C.F.R. 102-34.270. The vehicle replacement criteria in GSA's 
regulations are minimum requirements. GSA's guidance has more 
stringent standards than the replacement criteria in its regulations. 

[15] Telematics in vehicles can be installed by the manufacturer as 
standard equipment, added as an after-market product, or accessed as a 
wireless mobile application. 

[16] Unless otherwise noted, views attributed to our panels reflect 
key messages or themes derived from these group discussions; for more 
information on our methods, see appendix III. 

[17] However, some federal fleet managers we spoke to noted that GSA 
adds a surcharge for the purchase of hybrid and alternative fuel 
vehicles that can be costly. GSA officials explained that the Energy 
Policy Act of 2005 requires GSA to assess a surcharge to all customer 
agencies to recover alternative-fuel vehicle's incremental costs. The 
alternative fuel surcharge covers the difference in cost between the 
alternative fuel vehicle and a comparable gasoline-fueled vehicle. 
Surcharges are assessed at the agency level depending on whether an 
agency is required to comply with Energy Policy Act alternative fuel 
mandates. According to GSA, this spreads the cost of higher priced 
alternative fuel vehicles across the entire federal fleet, allowing 
agencies to afford more alternative fuel vehicles each year. 

[18] GSA has conducted an analysis that supports this same general 
conclusion; it found that GSA's vehicle-leasing rates allowed agencies 
to lease vehicles for about half as much as it would cost them to 
lease from the commercial sector. We did not independently evaluate 
this analysis, as we had evidence from other sources supporting the 
same general conclusion, namely, that GSA's rates were substantially 
lower than those available in the commercial sector. 

[19] In fiscal year 2013, according to GSA officials, GSA received an 
average of 114 percent of automobile black book value for used, 
previously leased vehicles sold through auction. The black book is a 
vehicle value guide issued weekly reflecting the latest prices of 
vehicles directly from automobile dealers. 

[20] Agencies' use of GSA's fleet cards allows GSA to collect various 
types of fleet data, including mileage as well as fuel, maintenance, 
and repair expenses. According to GSA officials, GSA's internal fleet 
management system makes the fleet data gathered from the fleet card 
available to agencies for analysis. GSA's fleet data analysis may 
provide value to agencies beyond fleet cost reduction. For example, 
one federal fleet manager told us that GSA's reports of missed 
opportunities to use alternative fuel at nearby stations were 
valuable. Federal agencies are required to reduce petroleum 
consumption and increase alternative fuel use, so agencies can use 
these data to help meet these requirements. See Pub. L. No. 110-140, § 
142 (Dec. 19, 2007); Exec. Order No. 13514, 72 Fed. Reg. 3919 (Jan. 
26, 2007). 

[21] GSA's Loss Prevention Team is a group within GSA Fleet whose 
mission is to prevent misuse and abuse within GSA's vehicle leasing 
program. The Loss Prevention Team has a memorandum of understanding 
with the GSA Office of Inspector General (OIG) that specifies 
services, such as coordinating the initiation of investigations that 
the OIG is to provide for fleet charge card cases. GSA's OIG is an 
independent unit that is responsible for promoting economy, 
efficiency, and effectiveness and detecting and preventing fraud, 
waste, and mismanagement in GSA's programs and operations. 

[22] These technicians are part of GSA's National Maintenance Control 
Center, which is responsible for the oversight and authorization of 
vehicle maintenance and repair. The center maintains complete 
computerized vehicle history records on all vehicles leased from GSA. 

[23] More specifically, in calculating its mileage rate for each 
vehicle category, GSA divides an estimate of the average fuel price 
per gallon for the upcoming year by the average miles per gallon 
performance of the vehicles in the category, and then adds an estimate 
of the average maintenance and repair costs per mile based on historic 
data. 

[24] GSA's 2013 Annual Performance Report and 2015 Performance Plan 
cites providing savings to federal departments and agencies, including 
reducing resource use and environmental impact, as a strategic goal. 
Strategies identified to achieve this goal include reduced use of 
petroleum based fuel and the expansion of the use of alternative fuel 
vehicles government-wide. 

[25] GAO has previously found that efficiency is a key consideration 
in designing government fees. See [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP]; User Fees: Additional 
Guidance and Documentation Could Further Strengthen IRS's Biennial 
Review of Fees, [hyperlink, http://www.gao.gov/products/GAO-12-193], 
(Washington, D.C.: Nov. 22, 2011); and Agricultural Quarantine 
Inspection Fees: Major Changes Needed to Align Fee Revenues with 
Program Costs, [hyperlink, http://www.gao.gov/products/GAO-13-268], 
(Washington, D.C.: Mar. 1, 2013). 

[26] In the last 5 years, GSA issued a surcharge in April 2008 to 
cover increases in fuel prices and rate reductions in May 2009 and May 
2013 to account for a decline in fuel prices. 

[27] Executive Order 13514, issued in 2009, directs federal agencies 
operating a fleet of at least 20 motor vehicles to reduce petroleum 
consumption by a minimum of 2 percent annually through the end of 
2020, from a 2005 baseline. In addition, the Energy Independence and 
Security Act of 2007 requires federal agencies to achieve at least a 
20 percent reduction in annual petroleum consumption by 2015 based on 
a 2005 baseline. Pub. L. No. 110-140, § 142; Exec. Order No. 13514, 72 
Fed. Reg. 3919. 

[28] However, according to GSA, leasing-program rates are evaluated 
annually to ensure cost recovery and competitive market position. 

[29] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[30] According to GSA officials, many charges that are billed to 
agencies reflect repairs caused by driver behavior or operating 
conditions that would have been borne by the agency whether the 
vehicle was leased or owned. They also noted that most charges for 
excessive wear and tear are less than $250. 

[31] Life-cycle cost analysis captures vehicle costs from acquisition 
to vehicle disposal. We have previously found that life-cycle cost 
analysis is a leading practice for managing fleets. See Federal 
Vehicle Fleets: Adopting Leading Practices Could Improve Management, 
[hyperlink, http://www.gao.gov/products/GAO-13-659] (Washington, DC: 
July 31, 2013). 

[32] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21-3.1] 
(Washington, D.C.: Nov. 1, 1999). 

[33] The Federal Fleet Policy Council consists of representatives from 
agencies operating a federal motor vehicle fleet. The council provides 
a mechanism for coordinating federal vehicle-management programs and 
policies, reviewing new technologies and automated systems, and 
analyzing the impact of current and proposed regulations, laws, 
Executive Orders, and international agreements. 

[34] We also conducted a literature review, which supported the 
experts' views regarding the areas in which cost savings could be 
achieved. We searched for studies that quantified cost savings; 
however, the information in the literature was typically anecdotal and 
could not be used to determine any potential cost savings to the 
federally leased fleet. 

[35] These factors were raised during group discussions and were 
further confirmed during individual interviews with some of the 
participants. 

[36] Unless otherwise noted, views attributed to our panels reflect 
key messages or themes derived from these group discussions; for more 
information on methods, see appendix III. 

[37] The panelist from Veterans Affairs also noted that the department 
found that some volunteers were driving in excess of 90 miles per hour 
when taking veterans to medical appointments and took actions to stop 
such behavior. The panelist also noted that it is challenging to 
quantify the cost savings associated with these changes. 

[38] These categories include fleet utilization, fuel use, vehicle 
misuse and abuse, and vehicle maintenance and repair. 

[39] Regarding information technology systems and their effect on the 
cost savings potential of telematics, GAO has previously found that 
some agencies' fleet management systems do not capture all of the data 
elements recommended by GSA. Also, some of these systems are not 
integrated with other key agency systems. See GAO, Federal Vehicle 
Fleets: Adopting Leading Practices Could Improve Management, 
[hyperlink, http://www.gao.gov/products/GAO-13-659] (Washington D.C.: 
July 31, 2013). 

[40] We asked the 15 experts who were fleet managers which types of 
costs represent the largest expenditures for their fleets. Fuel and 
maintenance were in the three most frequently mentioned expense 
categories among those who responded, along with depreciation. 

[41] In addition, one of the experts we consulted recommended that GSA 
negotiate with auto manufacturers during future vehicle acquisitions 
to obtain access to data collected through manufacturer-installed 
telematic equipment. The expert noted that such telematics are 
increasingly becoming standard equipment. For example, the National 
Highway Traffic Safety Administration estimates that more than 96 
percent of model year 2013 passenger vehicles are equipped with "black 
boxes" that collect data like speed, braking, and seatbelt use. 
Privacy groups and policy makers have noted that there are privacy 
concerns surrounding how the data from manufacturer-installed 
telematics are used, and there is pending legislation regarding data 
ownership. See GAO, In-Car Location-Based Services: Companies Are 
Taking Steps to Protect Privacy, but Some Risks May Not Be Clear to 
Consumers, [hyperlink, http://www.gao.gov/products/GAO-14-81] 
(Washington, DC: Jan. 6, 2014). 

[42] GSA passes on the costs of telematics to customer agencies; it 
does not mark up prices or charge a service fee. 

[43] Agencies also have the option of short-term telematics rentals 
through the GSA Schedule. Renting equipment for a few weeks to measure 
utilization patterns costs approximately $3 per day or $95 per vehicle 
per project, and includes analytic services. 

[44] However, GSA officials noted that they could not guarantee that 
this effort would result in lower prices. 

[45] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[46] GSA 2014-2018 Strategic Plan. 

[47] GSA does not guarantee that it will offer the agency a new 
vehicle; sometimes, vehicles returned from other agencies are used to 
fill another agency's request. However, GSA guarantees that even used 
vehicles will be in good mechanical and cosmetic condition. GSA Fleet 
procures new vehicles using GSA Automotive's on-line procurement 
system. GSA Automotive, which manages GSA's vehicle-purchasing 
program, is discussed in appendix II. 

[48] GSA uses a nationwide network of commercial auction firms to sell 
and dispose of vehicles. GSA uses sale proceeds to help purchase new 
vehicles. 

[49] 40 U.S.C. § 605. 

[50] Because the data on expenses and revenue provided in this section 
were not material to the findings of this report, we did not assess 
the reliability of the data. 

[51] 40 U.S.C. § 605. 

[52] "Indefinite Delivery, Indefinite Quantity" contracts provide for 
an indefinite quantity, within stated limits, of goods or services 
during a fixed period of time. Agencies place separate task or 
delivery orders for individual requirements that specify the quantity 
and delivery terms associated with each order. 

[53] Because the data on expenses and revenue provided in this section 
were not material to the findings of this report, we did not assess 
the reliability of the data. 

[54] Those agency fleets with over 7,000-leased vehicles represented 
over 80 percent of the federal fleet leased from GSA in fiscal year 
2011. Additional agency fleets would have marginally increased the 
total number of vehicles under our review. 

[55] We did not count responses so the number of managers representing 
each agency did not affect our findings. 

[56] See GAO, Federal User Fees: A Design Guide, [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 29, 
2008). GAO identified this principle by reviewing economic and policy 
literature on federal and nonfederal user fees, including prior GAO 
work, and used case examples to illustrate different types of fee 
design elements and the impacts they may have. 

[57] While we identified the Automotive Fleet and Leasing Association 
(AFLA) as a knowledgeable organization, the experts from that 
organization spoke in their capacities as fleet managers for private 
companies; therefore, we did not interview any individuals speaking on 
behalf of AFLA itself. 

[58] Despite a search of multiple databases, including Transportation 
Research International Documentation (TRID), SciSearch and National 
Technical Information Service (NTIS), much of the relevant literature 
was anecdotal in nature. We did not find indications that the views 
provided by our experts substantially differed from the views or 
experiences described in the literature. 

[59] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[End of section] 

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