Contractors often search for ways to cut costs in the wrong places. Many immediately eliminate positions, but laying off staff usually means stifling the company’s ability to perform more work.
Another typical cost-cutting move is to charge overhead to projects or to require jobsite offices to do work previously performed in the home office. While this may make the home office look more profitable temporarily, it rarely saves money in the end.
Instead of taking these short-term steps to cut costs, a prudent contractor should systematically examine expenses in the office and in the field, starting with tangible costs such as company automobiles and trucks.
One option is to downsize a company-owned fleet in favor of a mileage reimbursement program in which employees use their own vehicles. Areas that must be taken into consideration when devising a mileage reimbursement or flat monthly allowance formula include liability, insurance, maintenance, tags, taxes and personal use versus company use.
Contractors will have to sell their employees on this new approach when the use of company vehicles is part of their perceived compensation. Emphasize how employees will not have to worry anymore about questionable driving habits or using the vehicle on weekends or for personal errands. Plus, they can choose to drive an older or newer model, or drive a hybrid or fuel-efficient model and keep the savings from a mileage reimbursement (plus any environmental incentives).
However, some standards must be set to project the right image. For instance, having a business development manager drive a 20-year-old clunker or an expensive sports car may not be the smartest idea. Naturally, some employees—particularly field workers, technicians, mechanics and other craft professionals who work with mobile tools and materials—should drive a company vehicle. Many contractors now require these employees to park their vehicles at the office overnight and drive their personal ones to and from home. Only on-call employees or those who live far from the office, but close to the jobsite, should be allowed to take a company vehicle home.
Some contractors have partnered with a supplier or another contractor to negotiate a larger fleet deal with combined vehicles. Make sure a written agreement exists so both parties can access the details of the deal, which should be renegotiated every year. Even if the fleet management company offers an attractive multi-year deal, it never hurts to push for a new deal. Everything is negotiable these days.
Cost-Cutting Tips
Outsourcing scheduled vehicle maintenance may be a cost-cutting option. Fast-lube retailers and full-service dealers all offer fleet deals on maintenance so contractors can eliminate related staff and facilities. But, many independent mechanics—some mobile, some with a shop—operate with much lower overhead and can make an excellent part-time or contract mechanic for a company’s remaining vehicles.
Materials and tools often constitute a major portion of what is hauled from job to job in a company truck. Rather than investing in a larger truck or van, some contractors are switching to trailers. They are cheaper than trucks, as well as interchangeable among employees, trucks and jobs. These are not the large containers that often store materials and tools onsite, but rather smaller, highly mobile units. It may make sense to leave a trailer parked on the job, as relatively low-cost security devices can protect them when unattended.
Evidence shows that GPS devices earn their value many times over by encouraging better driving habits and identifying and measuring underutilized vehicles. Dispatch and control also becomes more responsive and efficient, and insurance premiums—both liability and property and casualty—often are discounted for enabled fleets. Don’t make employees feel like they’re being watched; instead, emphasize how they will be recognized for doing things the right way.
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Friday, September 3, 2010