SubscribeThe 10 year, £600 million White Fleet contract is an excellent example of how PFIs can result in both a first class service and significant cost savings.
Chris Higgins, Commercial Director, Lex Defence White Fleet tells us more:
Firstly Chris, can you tell us more about the Lex Defence White Fleet?
Lex Defence White Fleet manages the MoD's 14,000 strong 'White Fleet' of non-combat vehicles for the Royal Navy, Army and Royal Air Force. Vehicles range from motorcycles to cars, vans to coaches and trucks - many are specially built for military use.
In April 2004 we reached a key milestone when the 10,000th new vehicle was delivered. The Land Rover 130 will be used at the Royal Navy Armaments Depot at Coulport carrying out essential maintenance works around the base.
This vehicle highlights the fact that since the contract began in 2001, over 71% of the total fleet has been replaced by brand new vehicles - that's an impressive 15 new vehicle deliveries by Lex Defence to MoD customers on every single working day since the contract began!
Tell us more about PFIs
PFI is one of the options available to the MoD for funding new capital projects. MoD policy is that PFIs will be used in preference to public funds, unless the PFI is proven to be inappropriate, unworkable or uneconomical.
PFI involves the private sector in creating or buying new assets and then selling a range of services based on those assets to the MoD for an agreed cost over an agreed period of time - this is exactly how the White Fleet contract works.
How does Lex Defence approach the PFI?
Our approach to PFI is multi-faceted, but to give you a quick overview our overall vision for the PFI is to enable end users to manage their vehicle activity more effectively, whilst providing better value for money.
This is achieved by using White Fleet's management information system allowing the MoD to place on-line hire bookings, manage maintenance appointments, check and pay invoices, monitor KPIs and view the vehicle delivery schedule - all from a PC.
How does the White Fleet PFI benefit the MoD?
Every element of the White Fleet contract is developed with service and cost benefits in mind. The benefits are numerous, but let me outline some of the benefits that focus on three key areas - vehicle management, cost and risk:
Before we began working with the MoD, it couldn't easily quantify the cost of their transport service. Thanks to the fixed prices that have been built into the White Fleet contract, the MoD can now accurately forecast future costs. In addition, the availability of vehicles nation-wide wasn't measured before the contract started. Now that we manage the entire fleet of non-combat vehicles, availability is no longer an issue.
We can also save money, for both parties, by operating a gain-share system. For example, following a period of evaluating the efficiency of the permanent 'White Fleet' we recommended reducing its size by 200 vehicles. This change has resulted in increased availability, innovation and ultimately in cost savings that were shared between both parties.
One of the key objectives behind the PFI is risk transfer. To reduce the potential impact on the MoD, the majority of risks associated in running the White Fleet contract are transferred to Lex Defence. To define risk in this instance, this includes potential increased maintenance and breakdown costs, residual values and fluctuations in interest rates.
Key Performance Indicators (KPIs) are set for each element of the contract. This enables both Lex Defence and the MoD to measure success by continually assessing our performance against the KPIs.
But by far the greatest secret of our success is the true partnership relationship we have forged with both the MoD's contract management team and the end-user customers. This enables all parties to talk about matters frankly and openly and deal with any issues effectively and at an early stage.
