The initiative to appoint more operators will help Putrajaya to optimise its operating cost, enhance competitiveness

by AFIQ AZIZ / pic by ISMAIL CHE RUS

The government may open the vehicle supply and fleet management contract to more than one company with a shorter concession period as the administration seeks new arrangement to trim its operational expenses.

Presently, a single company provides the vehicles for the use of ministers, deputy ministers and all high-ranking government officers under a 25-year concession agreement.

An industry source told The Malaysian Reserve (TMR) that the new initiative to appoint more operators would help Putrajaya to optimise its operating cost and enhance industry competitiveness.

“Before this they gave the contract to just one party. Hence, it was a monopoly. But that doesn’t mean they didn’t do a good job. They did.

“But it was just expensive. As the government is trying to optimise costs, breaking the monopoly should be the way,” said the industry source.

In a document sighted by TMR, the government is expected to use between 1,600 and 2,730 vehicles for the next six years. Among the vehicles listed are Proton Holdings Bhd’s brands including the X70, Persona and Saga models, as well as the Honda Accord and Toyota Vellfire.

It is believed that the government spends about RM220 million annually on the fleet of cars but wants to see if such expenses can be trimmed further to reduce the country’s financial burden.

Spanco Sdn Bhd’s 25-year concession for fleet management ended last year. Fleet management is a way for customers to remove or minimise the risks involved with vehicle investments.

The government concluded the request for proposal (RFP) on the fleet car concession last February and is expected to announce the result soon.

One of the key changes to the concession is the period, which has been shortened to 15 years. It was reported that DRB-Hicom Bhd, Sime Darby Bhd, Naza Group who partnered Berjaya Group, had submitted bids for the contract.

These companies which are already distributing vehicles and have strong automotive manufacturing or assembling divisions, have the advantage to put lower bids and provide cheaper maintenance costs.

Car rental services companies including Spanco are believed to have participated in the RFP.

The industry source said the automotive sector supports the move to have various companies providing vehicles and fleet management.

“What the industry wants is not a monopolised business,” said the source, adding that such monopoly would make certain costs especially maintenance higher.

The industry player said the government could change the contract awarding either by brands or vehicle type or engine capacity to optimise cost.

“If the government decides to give it to a few parties, they can go by brand because they are planning to use Proton, Honda and Toyota. For Proton, the obvious choice is DRB-Hicom. But for Honda, it can go to other players as well.

“This way, the prices are more competitive and they can expect good services,” the source said.

“Another option is to go by engine capacity, although I think it is easier to go by brand for spare part optimisation.

“Alternatively, they can also go by region — maybe northern region and southern region — like what the Ministry of Health has done for their ambulances,” the source said.

The industry player said what is pivotal though is the selected operator must have a comprehensive network and ecosystem catering from the supply to after-sales services.

“These companies should have their established network to support their after-sales activities by offering 24-hour breakdown services, and have service centres and workshops all over the country.

“For example, if a government vehicle breaks down in Terengganu, they should have a workshop in Terengganu to get it fixed.

“But it is not just repairs, sometimes you need to replace the parts, and there is a key performance index to follow in terms of how long it takes for the replacement to arrive.

“So it’s important to have the support infrastructure in place,” said the industry insider.

However, another industry player disagrees over the breaking of the monopoly, claiming the practice under discussion could jeopardise the fleet operator’s economy of scale.

“It is unlikely to have too many managers. In this sense, the government may receive more expensive quotation as it involves many players doing the same job,” the source said.