Central Unit on Purchasing

HM Treasury

This is one of a series of guidances prepared by CUP on purchasing and supply procedures and practices. The guidance is not a legal document but a statement of good 1. INTRODUCTION 1.1 This guidance provides advice to departments that are operating, or considering the introduction of, car contract hire or lease schemes, whether vehicles are for departmental use only or also for private use by employees. 1.2 Departments should be aware that a contract hire scheme will not in all cases provide the best value for money for the provision of vehicles. A cost assessment model has therefore been issued as guidance no. 24b which will assist departments when assessing the costs of possible alternatives. This model can also be used to assess the performance of existing schemes. 1.3 Although contract hire is a service, the procurement of goods and equipment, in this way, above certain thresholds is covered by the EC Supplies Directive and the GATT Agreement on Government Procurement (GPA). In particular, there are specific rules covering advertising, tendering procedures, technical specifications, the selection of tenderers and the award of contracts. Departments should ensure that they comply with these rules and should refer to Guidance Notes on Public Sector Purchasing: International Obligations Supplies Contracts issued by PSP Division, HM Treasury. 2. SCOPE 2.1 This guidance is intended as a practical guide to assist departments in the evaluation and implementation of contract hire and lease schemes for the provision of vehicles used either as official cars or supplied to users under an employee participation lease scheme. It also covers, where appropriate, the provision of commercial vehicles. 2.2 In view of the wide variety of vehicles required and the varying operational requirements, this

professional practice. Departments should consider incorporating this guidance into their internal purchasing and supply manuals. guidance can only provide general advice on evaluating, introducing and managing such schemes, It does not represent a comprehensive guide to fleet management requirements. 2.3 This guidance gives advice on the general principles of the task of managing a scheme (see section 6); but it does not cover the in-house management of departmental car fleets. It also provides advice on the management of contract hire schemes which are in operation. This is an important area, often neglected, which is essential if a scheme is to be managed properly against the stated objectives in performance and cost terms. 2.4 It is also designed to explain the model documents in the companion guidances (nos. 24b-e) and to indicate the scope for alteration that departments will need to consider. However, the model documents are inter-linked and therefore if departments make changes to the provisions of any of the individual documents, they must ensure that they make the necessary changes to other related documents. 2.5 It is recommended that departments award at least three separate contracts to competing suppliers and as these do not guarantee any individual supplier a minimum amount of business, competitive pressures should limit price levels for new vehicles, However, once a vehicle is on contract, increases in rental are only permitted under specific circumstances. 3. DEFINING FLEET REQUIREMENTS

0fficial cars 3.1 Where there is an existing fleet of official cars (defined as those provided exclusively for business use), this should provide sufficient definition of the

fleet size and composition. The principal considerations for the use of contract hire will then be the financial savings which may result from leasing as an alternative method of funding and the potential for improved fleet management. 3.2 Where departments are considering establishing a fleet, whether by outright purchase or contract hire, the number of vehicles will be determined by the estimated usage of each vehicle compared with the alternatives (eg spot-hire, public transport etc).
Employee Schemes 3.3 The introduction of employee schemes requires

the hired vehicles are not considered as assets of the company using them; - restrictions on cash available for purchase; - the need to realise cash currently tied up in vehicle assets. However, many of these factors are not directly relevant to the public sector, where leasing should be seen as a means of improving the efficiency of fleet management, and not as a source of additional finance. 3. 7 The principal methods of commercial acquisition are outlined below.
Outright Purchase

careful research in order to establish the potential fleet size. Any proposed scheme must first be defined in some detail before it becomes possible to determine how many cars are likely to be required, a checklist is attached at Annex A. 3.4 Having established how many employees are likely to be eligible, it may be necessary to conduct research on historical mileage claims to establish how many of these will in fact qualify within the defined minimum criteria. A further exercise should then be undertaken to assess the potential employee take-up amongst those who are eligible and likely to qualify for participation, perhaps by questionnaire. Once these factors are established then an indication of the likely fleet size can be obtained. This will be a significant factor in determining the necessary management resources required.
Objectives 3.5 Departments should determine and record

Acquisition confers an immediate right of ownership and all risks associated with ultimate residual value are borne by the owner. Hire Purchase Regular payments of capital plus interest ultimately give ownership of the vehicle, with similar risks and benefits to outright purchase.
Lease Purchase

Similar to Hire Purchase, save that a forecasted residual value (balloon) is calculated, reducing the regular repayments of capital until the end of the contract when there is a final amount consisting of a balloon payment usually derived from the sale proceeds. Initial cash flow is improved compared with Hire Purchase.
Finance Lease

clearly the objectives of any scheme for the provision of leased or contract hired vehicles, whether official vehicles or cars to be provided to staff under an employee participation scheme. Typical objectives might include: - reducing the cost of paying standard rate MMA; - improving staff recruitment and retention; - reducing vehicle service, repair and maintenance costs; - providing more effective vehicle fleet management; - reducing the cost of funding and acquiring vehicles; - improving control over the provision and replacement of vehicles; - improving staff productivity. Types of Lease/Hire Agreement 3.6 There are a wide variety of agreements currently available, many of them designed to meet particular requirements in the private sector. The attraction of each depends upon the specific requirements of the hirer, eg - whether VAT registered or not; - the value of vehicles to be purchased; - the need for off balance sheet funding ie where

The principal difference between a Finance Lease and an Operating Lease (see below) is that in a Finance Lease the lessee participates in the residual value risk and may have the option to acquire ultimate ownership.
Operating Leases

These are defined as agreements where the hiring company takes the substantial part of the depreciation risk. In practice the ownership of the vehicle remains with the hiring company throughout its life and the hirer merely pays rentals, having no ultimate claim to ownership nor participation in the residual value risk. Other forms of agreement are less attractive to government departments as the rentals are higher, with the ultimate ownership transferring to the hirer.

(i) Contract Purchase

This method of acquisition has merits for businesses that are not VAT registered, or who are unable to recover the VAT on rentals. A further attraction is the more favourable taxation treatment when cars costing in excess of 8,000 are acquired. For these agreements to be considered true Operating Leases, the contract must clearly state that the hire company is

taking the residual value risk and not the hirer, However, they are likely to be of little benefit to departments. (ii) Contract Hire Contract Hire is a form of Operating Lease. It may or may not include provision for maintenance costs, licences and associated operating costs. All contract hire rentals attract VAT. The costs to a hirer upon premature termination can be high, particularly in the early stages of a contract. Conclusions on Methods of Acquisition 3.8 Other than outright purchase, an Operating Lease arrangement, such as contract hire, is likely to be the most advantageous. This is because it is likely to offer the best value for money and can provide an inclusive charge for maintenance, road fund licence and associated running costs of the vehicles. In addition, all risks associated with the sale of the vehicles are borne by the hiring company. Public Expenditure Definitions 3.9 The terms operating and finance lease are used in this guidance as these are terms which are understood by the hiring companies. However, departments should be aware that similar terminology is used for the purposes of PES. The Treasury recognises two types of lease: financial and operational. For a lease to be operational its period would usually be short in relation to the useful economic life of the asset and undertaken for operational reasons rather than as a source of extra income. A lease which does not fulfil the criteria of an operational lease is a financial lease. In practice leases defined in private sector usage as operating leases are nearly always also operational leases. Vehicle Specifications 3.10 As a general principle, better value is obtained where vehicle requirements are kept in line with the manufacturers standard specifications eg fitted sun roof, car radio etc. Where an enhanced specification is required it is preferable to choose a model equipped to the required standard by the manufacturer, rather than attempt to enhance the specification through the inclusion of optional extras. This is because optional extras and accessories have only a very small effect on ultimate residual value. In practice, the extra cost of all such items will be fully amortised over the vehicles contract life and consequently increase the true depreciation. Higher specification models from manufacturers do, on the other hand, generally obtain better residuals upon disposal. Budget Preparation 3.11 Full provision for all anticipated expenditure and income should be made in annual budgets. Attention should be paid to the timing of payments 3

and receipts. Where a department chooses an annual payment profile, it may still be possible to vary the payment periods without additional cost so that balanced payments occur in each financial year. For example, on a new 3-year contract commencing in month six it should be possible to profile the payments to obtain four payments instead of three: the first would be for six months, followed by two annual payments and finally one six monthly payment. This will result in much more realistic budgeting than permitting a full 12 months payment in month 6 of the first year. Drafting Tender Documents 3.12 Exercising care in the preparation of Tender Documents is essential, Having identified the precise services required, these should be detailed in a clear and unambiguous manner within the specification of the tender. The almost inevitable tendency for tenders to become verbose and unintelligible should be resisted. Where potential suppliers are unable to understand the intent of the document, then its purpose is destroyed. At worst suppliers will withdraw and not respond. At best they will respond, but ineffectively, thus eliminating the true purpose of a competitive tender. 3.13 Provide all the information that potential suppliers are likely to require, but at the same time give them the opportunity to demonstrate their initiative in the provision of services. As an example, when requesting quotations for contract hire be sure to specify the appropriate levels of utilisation and type of vehicles required. However, leave it to the supplier to determine which makes/models they offer and also the optimum term for the period of hire. These may well vary according to the type of vehicle and the degree of utilisation demanded. 3.14 In addition to simply obtaining rates for comparison, it is also important to ensure that a potential supplier reveals details of how the service will be provided and maintained. To aid the process of evaluating tenders, provide a standard format for the submission of quotations containing all the essential requirements. Guidance on tendering procedures is contained in guidance no. 2 4 c Advertising Requirements (Initial Invitation to Tender) 3.15 Effective advertising requires careful selection of the appropriate medium. For contract hire on a national basis advertising should also be on a national scale within the appropriate trade journals or magazines. Advertisements should reflect the intentions of the tender and the details of the specification as far as is practicable. Carefully stated requirements will eliminate time wasted in processing applications from those companies that have misinterpreted the requirements and at the same time attract the attention of those companies able to provide precisely the service required.

Evaluation of Tenders 3.16 Departments should refer to guidance nos. 1 & 19 on Post Tender Negotiation. In this context, it is essential to follow up references and obtain first hand experience of companies that are shortlisted as suppliers. Also, detailed investigation of suppliers financial health is critical. Contract hire and leasing are effectively funding operations requiring substantial financial backing and efficient management. Awarding a contract to a supplier who subsequently goes into receivership or bankruptcy runs a high risk of financial losses (see also paragraph 4.37).

most practical method of resolving this dilemma. A model agreement (the Master Hiring Agreement) and schedule (for each vehicle hired under the agreement) which departments can use has been issued as guidance no. 24d. This agreement should cover all the services that departments are likely to require and at the same time afford the contract hire company reasonable security and protection. However, it is not weighted as heavily in favour of the Hire Company as are many such agreements and contains no clauses that are unreasonable to either party. 4.5 Furthermore, the associated model Employee Agreement (issued as guidance no. 24e) reflects the terms contracted with the hire company and thus reduces the departments exposure to any unforeseen or additional charges. The use of a standard agreement between contract hire companies and a department will greatly simplify administration, permit the use of a standard employee agreement, and allow proper cost control. Collection & Delivery Costs 4.6 Whilst these are not always charged, it is quite common to find that if suppliers are charged for any reason, such costs are suddenly imposed for the collection of vehicles coming off contract and can amount to a significant figure. It is preferable to eliminate these charges through clear delegation of responsibility in the contract or at least to insist that they are included in the contract price at the outset. Purchases by Staff 4.7 A feature often offered by contract hire companies is the opportunity for the employee to buy the vehicle at the end of the agreement. It may therefore be useful to have a maximum value for the purchase of the vehicle declared in the agreement at the outset. This would indicate to employees the maximum amount they will be expected to pay if they wish to purchase their vehicles, Term of the Agreement 4.8 Contract hire companies will provide vehicles over terms ranging from 6 months to 5 years. Most of their customers usually opt for a term such as 2 or 3 years linked to the anticipated utilisation. However, it is better to ask contract hire companies to indicate what they would consider to be their minimum rental for any projected rate of annual utilisation. This may produce a hire agreement period different to that originally planned but could produce useful savings. For example, where the total utilisation does not exceed 12,000 miles per annum, a term of 4 or even 5 years may provide a lower monthly rental than the standard 3 years. Conversely, where utilisation exceeds 20,000 miles per annum, a term of 2 or 2% years may be more appropriate to achieve a lower monthly rental. Actual costs will also vary with individual makes/models of vehicle.

4.

VEHICLE LEASE/HIRE CONTRACTS

Contract Terms 4.1 Vehicle hire contracts can vary considerably from company to company and there are very few standard types. However, the British Vehicle Rental and Leasing Association (BVRLA) does provide a standard form of contract and this is used by some smaller companies. Most of the larger national companies have their own forms of contract which may be varied according to the needs of the customer. All contracts need to be very carefully checked to ensure that no unreasonable or unfair clauses are included and therefore it is imperative that sufficient time is provided for all clauses to be read in detail well in advance of entering into such a contract. 4.2 Conventional practice is for both parties to sign a Master Contract of a specified duration - normally in the range of 1 - 3 years. This contract will contain all the essential terms and is likely to modify the standard terms of the Hire Agreement, one of which will be completed for each vehicle hired. It is important to note that the Master Contract should not contain a commitment to hire any specific number of vehicles nor confer any exclusivity that would preclude the use of alternative suppliers (see also paragraph 4.18). 4.3 Where contracts are entered into with a number of suppliers, each utilising a separate agreement, practical difficulties can arise. For example, employee agreements need to reflect the terms of the Master Contract. Where these vary it is either necessary to produce a number of separate employee agreements (increasing confusion to both employees and management) or the employee agreement cannot be sufficiently precise. Confusion is likely to result and errors made when the terms of the various contracts are invoked. Furthermore, the greater the differences in the terms of different contracts, the greater the difficulty in comparing them in order to determine which offers the best value for money. 4.4 The adoption of a standard form of contract, to which suppliers give their assent, is potentially the 4

reflectors etc from the maintenance agreement. Damage to such items is therefore chargeable to the supply of a particular vehicle there should generally client. In the case of glass and windscreens, costs are usually recoverable under insurance without loss of be no increase in the rental during the term of the no claims bonus. However, items such as broken agreement with the exception of the road fund headlamps or rear lamps can be expensive and are licence, where this is included. The only other possible exceptions are any changes in taxation laws frequently recharged to clients. Where commercial (eg entitlement to capital allowances) or allowances vehicles are hired, the list of exemptions can be much longer and frequently includes items such as that may be beyond the control of the contract hire batteries, maintenance or repair to any of the company but nevertheless could affect the rentals bodywork on the vehicle and any items or paid. With these exceptions the risk of all other equipment mounted or fitted by the client. All these variables rests with the contract hire company. exceptions need to be studied in great detail and 4.10 Where schedules of rates are provided for new only accepted once they are fully understood and vehicles these will be increased at regular intervals considered reasonable within the terms appropriate to the use of the vehicle. by the contract hire company to reflect increases in interest charges, vehicle purchase costs and Payment Profile maintenance. These should be challenged and whenever interest rates reduce or vehicles are 4.15 Many suppliers providing contract hire or available at preferential prices (with rebates, leasing facilities to departments offer the benefit of additional discounts, bonuses etc), the hire company reduced rentals in return for annual rental payments should be requested to reflect these in the rentals in advance. Compared with the more traditional 3 being quoted. months advance payments followed by 33 monthly payments, there is a significant cash flow advantage Fixed Penalty Notices (eg Parking Fines etc) to suppliers, A reduced payment frequency also implies a saving in administration costs. However, 4.11 The procedure that should be followed if the before assuming that the reduction in rentals offers a employee does not pay such penalties and they are subsequently recharged by the hire company should real cost saving to the department, an assessment of the impact on the departments cash flow should be be clearly defined. The recharge may attract an administration fee and in any case will attract VAT on made, using the guidance in guidance no. 24b. the original fine. Ensure, where fines or penalties are issued in error, that these are not paid automatically Vehicle Agreements (Hire Agreements) and that there is the right of redress against the hire 4.16 Under many supplier agreements, when each company where it pays the fine without checking vehicle is hired under an overall master contract, an whether or not it had been correctly imposed. individual agreement is completed and signed by an authorised person. These agreements contain a large number of terms and conditions which may or 4.12 Many suppliers limit the maximum number of may not be varied by the terms of the overriding tyres that can be fitted during the vehicle agreement. Master Contract. Whilst the terms of such Quite often this is only 4 or 5 replacement tyres in a 3 agreements should not vary during the currency of a year contract. Such clauses are unnecessary and, if a contract, it is essential to understand fully the supplier contract is used, should be deleted as all implications of these terms and their application contracts are negotiated on the basis of defined either during or at the termination of a hire period. mileage and the supplier must make cost allocations Simplified administration will result from the use of appropriately. the standard form of contract/agreement in guidance no. 24d.
Fair Wear & Tear

Variations in Rental 4.9 Once an agreement has been signed for the

4.13 This clause is often inserted into supplier contracts to give suppliers the opportunity to recharge certain repair and maintenance items which they consider are not fair wear and tear and have not been included in their maintenance budget. Examples are prematurely worn tyres, clutches, brakes etc. Such clauses should be deleted, where possible, due to the difficulty of applying them on an equitable basis, These terms are effectively redundant where the definition of abuse, neglect or misuse is included.
Miscellaneous Items

Premature Termination 4.17 It is quite normal for the terms of premature

4.14 It is common for suppliers own agreements to exclude items such as glass headlamps, lenses,
5

termination to be very expensive for the client with charges to be paid ranging from a minimum of 6 months rental to the balance of all outstanding payments for the duration of the agreement. This is a clause that needs particularly careful attention. Where possible, departments should try to agree a charge for premature termination that diminishes as the contract ages. Terms that rely on the supplier to dispose of the vehicle and obtain a value to offset the amount owed by the client should also be viewed with caution as this value could vary considerably depending on the efforts made by the supplying company to achieve a reasonable sale price

Premature termination should only be considered as a last resort where the contract cannot be rescheduled or the vehicle re-allocated. Limitation of Price Increases 4.18 Fixing the costs of future agreements to provide cars under contract hire is extremely difficult. As the cost is calculated on a combination of factors including interest charges, original cost of the vehicle, residual value etc., it is not practicable to link movements of rentals to indices or even, for example, to the purchase cost of the vehicle. It is essential therefore to have a number of suppliers, at least three, each offering comparable models. The use of competitive services is the only effective way to limit increases in rentals for future hiring. Limitation of Excess Mileage Charges 4.19 This somewhat innocuous figure is generally ignored at the start of an agreement as the user will optimistically consider that the vehicle will be returned within the anticipated mileage limit, However, terms are often included which permit these excess mileages to be charged on an annual basis in the currency of the agreement. Therefore a vehicle which had utilisation even in its first year in excess of the contracted norm could attract an excess mileage charge. Such charges can vary from around 4p to as much as 30 or 4Op per mile depending on the vehicle. As this figure is intended to cover only the additional maintenance and depreciation costs of a vehicle which runs beyond its contracted mileage every attempt should be made to negotiate these to the minimum acceptable level. 4.20 Ensure in any existing contracts that there is provision for aggregating the mileage on all vehicles returned within a specified period, say a calendar quarter, All vehicles below contract mileage should be included and all those with not more than say 2530% above should also be (see also paragraph 6.12). Due to the inherent complexities of administering the aggregation it is proposed in the Master Hiring Agreement (guidance no. 24d) that a charge or credit will be calculated on each contract as it is terminated and these can then be netted quarterly.

vehicle is going to be available when it is needed. Typically they are not available for at least 24 or 48 hours after the vehicle is taken out of service. 4.23 There may also be an upper limit on the total number of days hire permitted on any one occasion or in the course of a year or the duration of the agreement. These limits should be deleted where possible. A clause may also be inserted allowing additional hire charges over and above the limits imposed to be recharged to the department. This should be resisted or at least negotiated so that the charges are known in advance. Where a replacement vehicle of the appropriate category is not available and the supplier substitutes an alternative or a higher specification it should be ensured that any charges made as a result of a difference in daily rental are not the responsibility of the department. Fleet Insurance 4.24 Vehicles acquired for official use will be covered by Crown Indemnity, which may be extended to the official use only of lease cars provided to employees. Under these circumstances hire companies may require a suitable indemnification clause to be included in the contract so that they can recover the full costs of any subsequent accident damage or total loss not attributable to a third party. 4.25 Where a department obtains a warrant in respect of its employees liability for insurance for private use, a similar indemnity may be required. Note: Under the Motor Vehicle (Third Party Risks Deposits) Regulations of 1967 any person may make application to the Secretary of State for Transport for a warrant to enable a deposit of 215,000 to be made with the Accountant General of the Supreme Court. This may be done as an alternative to providing an insurance policy.

4.26 Where comprehensive cover is provided by an insurance company, departments should ensure that the insurers are aware that the vehicle is hired to the department and made available to an employee for Replacement Vehicles business and, if appropriate, private use, in return for a contribution towards the cost of hire. Departments 4.2 1 In the case of schemes for official cars, should also ensure that the full cost of replacement departments may well consider it good value for with a new car will be provided in the event of a total money to include the provision of a replacement loss occurring within the first six months of a vehicle vehicle. However, it is important to remember that entering service to offset any claims resulting from the full costs of this provision are included in the initial contract price and therefore this option should premature termination received from the contract hire company. Fleet insurance rates can vary only be taken where there is a justifiable reason. considerably and departments are recommended to obtain alternative quotations prior to every renewal. 4.22 Whilst a replacement vehicle is not generally Premiums are determined largely by the value of the appropriate for employee schemes, where fleet and its previous claims experience. Where a employees participate and are required to provide fleet is being acquired for the first time and no their own insurance cover, it should include the cost of a replacement vehicle under the policy if required previous claims experience is available, insurers can take very different views on the degree of risk and as a result of an accident. Look carefully at the consequently the premiums required. qualifying period to ensure that a replacement 6

Employee Participation Schemes 4.21 Where employees are to be provided with a hired vehicle and reimbursed for its business use, further options are available if it is decided to insure for the official use element. One option is to require employees to provide their own private comprehensive cover with the inclusion of business use on the policy. Employees can then be reimbursed either by annual lump sum or in relation to their business mileage. 4.28 As civil servants are able to participate in a number of unique insurance schemes devised especially to meet their own requirements at competitive premiums that reflect the low risks traditionally associated with this employment, many employees may favour this option. 4.29 Another option is to extend any cover currently provided for the departments own vehicles to cover the business use only of cars provided to employees under a lease scheme. Separate cover could then be provided (either by the department or by the user) to insure the private use element separately. Where this is provided by the department the cost would need to be recovered in full. 4.30 A major disadvantage of departments providing insurance cover is the level of additional administration required, not only to provide and renew cover, but also to obtain, process and progress accident claims, including the recovery of uninsured losses from third parties. Where this responsibility is transferred to the employee there is a useful saving in administrative cost plus an added incentive to employees to take every care of their vehicles and thus avoid any claims under their insurance. Premature Termination Cover 4.3 1 For a fee, departments can obtain cover to protect them against the financial penalties associated with premature termination of a hire agreement. Terminations can occur in situations beyond the control of departments, where it would not be reasonable to require the employee to make a contribution, but would nevertheless expose departments to a possible financial liability. Vehicle Renewals 4.32 Renewal of specific vehicle agreements requires considerable forward planning if it is to be achieved without cost penalty, and can take a disproportionate amount of administrative time. The process of renewal needs to start at least six months before a new vehicle is required, possibly longer in the case of a commercial vehicle. In the case of vehicles operated by the department, replacement types and specification should be easy to identify, thus enabling an order to be placed with the appropriate supplier in good time.

4.33 Where a vehicle is subject to an employee agreement it is necessary to determine at the earliest opportunity: - whether the employee wishes to enter into a further agreement; - the type of vehicle required; - the cost and employee contribution; - the specification, colour, extras etc required. 4.34 Timely progressing of the order with the supplier is then essential to ensure that delivery occurs when the vehicle is required. Any delay may result in penalty charges, such as excess mileage charges on the return of the old vehicle, particularly where an alternative supplier is being used. 4.35 Vehicles being returned to suppliers on termination must be inspected by departments on return by employees. Any damage, defects or missing equipment must be listed and agreed with both the employee and the collecting hire company before control of the vehicle is relinquished. Without this check, charges that cannot be disputed may arise for defects or damage. Due to the amount of staff time that vehicle changeovers absorb, renewals should be phased as far as practicable, avoiding peaks of simultaneous replacements. Contract Termination 4.36 When a Master Contract terminates, the department may opt to retain existing vehicles until the natural termination of the individual agreements. It is not necessary to return vehicles prematurely and to do so would generally be considered a premature termination by the hirer, with all the implications for the associated penalties provided in the contract. At the end of each vehicle agreement, particular care should be taken to ensure that supplementary charges for vehicle collection, incidental damage, excess mileage, cleaning etc are not invoiced by the hire company unless previously agreed. 4.31 Where a contract hire company or lease company ceases trading, becomes bankrupt or is placed in the hands of a receiver, departments are vulnerable. Any vehicles supplied remain the property of the hire company and it is possible that the receiver may re-possess them in order to realise the assets of the company. If a department has made payments in advance they will be difficult, if not impossible to recover, In addition, departments may also face costs in respect of - the immediate loss of the hired vehicle; - the provision of a temporary hire car for the user; - obtaining a further lease/contract hire vehicle as a replacement, Expert Determination 4.38 The Master Contract should provide that any matter or dispute to be determined by an expert shall be referred for determination to a person suitably qualified. The department and the supplier should each have the obligation to supply all such assistance, documents and information as the expert

may require. Such experts should be deemed to act inadequate, confusing or need to be supplemented by additional instructions, the department should as an expert and not as an arbitrator and this consider issuing its own Employee Handbook. determination shall be conclusive and binding on both parties. The costs of the expert should be borne Suppliers may be prepared to co-operate in the equally by the parties unless directed otherwise by preparation and/or printing of such a document, to be provided in each hire car supplied. Reference the expert. information can then be included on such matters as: 5. EMPLOYEE AGREEMENTS l drivers maintenance responsibilities, 0 procedure at the scene of an accident, 5.1 Where a vehicle is to be supplied to an 0 accident reporting procedure, employee for private use in addition to business 0 fitting of accessories, travel it is essential to have a formal agreement drafted to regulate this situation in detail. The model 0 overseas travel, employee agreement, issued as guidance no. 24e, is 0 submission of mileage returns, 0 reporting vehicle defects, suitable for use by Crown bodies. However, if the 0 user identification to maintenance agents, etc, employer is not a Crown body it may need to be 0 authorisation procedure for repairs, licensed, and the employee agreement made to 0 replacement vehicle procedure. conform with the requirements of the Consumer Credit Act 1914. 5.5 Where reference is made to matters such as Agreement Terms personal taxation, road safety and overseas travel arrangements, care should be taken to ensure that 5.2 The employee agreement should reflect any information provided will not readily become precisely the terms which the department has agreed with its vehicle suppliers. More specifically - outdated, necessitating a reprint. As a general rule, it is not necessary to reproduce information that is any liability on the part of the department under the available from the vehicle manufacturers handbook, Master Contract for additional charges or penalties, the Highway Code or other readily available excess mileage charges, termination charges, publications. vehicle condition on termination, replacement windscreens and glass, replacement headlamps and Foreign Travel lamp lenses, lamp bulbs, incidental damage, 5.6 Instructions to employees on the procedure to damage through neglect or abuse, abnormal tyre be followed before using a hire vehicle abroad wear etc is accurately reflected in the employee should reflect the terms of the Master agreement, thus ensuring that the department Contract/Agreement. In many cases this will require manages any liability for these charges. that the hire company is notified in writing of the 5.3 Similarly the terms of any insurance policy, intent to use the vehicle outside the UK and may including any excess, must be detailed for the contain a limit on the number of days travel that is benefit of the employee. Any intention to recover permitted. Whilst the existing insurance will be excess or charges made by the insurers for acceptable for travel in other Member States, the betterment (ie reinstatement to better than prelevel of cover may be reduced. To eliminate this accident condition) must be clearly indicated. The possibility, all employees should be required to conditions attached to premature termination, obtain a green card prior to travel. Registration particularly when cessation of employment is documents for the vehicle, together with a letter of involved, should be clear and unambiguous, authority from the Hire Company (whose name will including those circumstances under which a cost appear in the Registration Book) should also be contribution will be required from the employee. obtained by the employee before travelling. If there The document should be written in plain english, is no insurance cover, for example if Crown resisting the temptation to couch it in legal jargon, Indemnity is used, the department should ensure that and contain provision for employees to state that they such arrangements are acceptable in the countries to have read and fully understood all the terms. For the be visited. sake of clarity and to reassure employees that the 5.1 Although not required by the hire company, as agreement is not weighted entirely in favour of the its responsibility for repairs, breakdowns etc is department, it will assist if the responsibilities of both usually still limited to the UK even when it gives parties are identified separately. permission for a car to be used abroad, mechanical Car User Handbook - Advice to Drivers breakdown insurance from a reputable company 5.4 All contract hire companies will provide drivers must be provided. It is important to note that this is with a simple instruction book or similar document quite separate and independent from the accident that provides essential information on how to obtain insurance referred to previously. Without the basic services such as maintenance, repairs, protection of mechanical breakdown insurance, the breakdown assistance and tyre/windscreen department could be liable for the repair costs or replacements. Such documents should be examined recovery charges incurred in returning a broken in detail to ensure that they are suitable for the down vehicle to the UK. Responsibility for ensuring purpose and do not contain any instructions that may that the vehicle fully complies in all respects with local regulations related to its use in the countries conflict with the Master Contract or the intentions of the department. Where the instructions provided are visited should be clearly described to the employee. 8

6. FLEET MANAGEMENT 6.1 Fleet management in the context of this guidance is limited to the management of lease and contract hire arrangements where maintenance management is included within the contracted services. In assessing the number of staff required to administer and manage a fleet, full consideration needs to be given to the range of tasks required. Is accident claim administration or fuel cost control included? Is the fleet comprised entirely of cars or are there commercial vehicles included? When the precise nature of the task to be undertaken has been clearly defined, the efficiency of the fleet manager and the supporting resources will also influence the size of fleet that can be controlled. As a general guide, one person (given suitable training and experience) can effectively administer a fleet of 200 cars, including accident claim/insurance management and control of fuel cards. This assumes that the typical replacement cycle will be in the scale of 2 to 4 years. 6.2 However, as there is a need to provide continuity of service to users, it is unlikely that a single employee can be effective. An assistant or deputy will need to be appointed in order to ensure that the service is maintained through periods of holiday, sickness or other absence. This effectively creates an efficiency threshold in terms of fleet size of between 300 and 400 cars. 6.3 Provided that appropriate support in the form of computer hardware and suitable software is provided, together with secretarial facilities, payroll administration and purchase ledger functions, two experienced fleet management staff can manage a contract hire fleet of up to 1000 cars, For larger fleets economies of scale help to reduce the average man hours spent per car in administration and thus the thresholds at which additional staff can be justified are raised proportionately. 6.4 It is very important to recognise that where lease and contract hire companies offer to provide an administration and management service on behalf of departments, this cannot totally replace the need for this function to be performed by a member of the departments own staff either on a part time or full time basis, When the duties of a fleet manager/administrator are studied in detail providing advice and guidance to users, interpreting the departments own policies, pursuing accident claims and authorising departmental expenditure - it becomes apparent that this should never be managed solely by the lease or contract hire company. Where commercial vehicles are included, the administration and management tasks involved tend to escalate. 6.5 As a general rule most departments using vehicles over 3.5 tonnes will be exempt from the need to obtain an Operators Licence. However, departments are expected to apply and maintain
9

equivalent standards and it is therefore worth noting that where maintenance is included within the contract, it does not absolve the holder of an Operators Licence from the statutory obligations related to vehicle condition and maintenance implicit in the grant of a licence. Administration 6.6 In the general sense the fleet manager will be responsible for applying the scheme as agreed and defined by the department. Users will therefore look to the fleet manager for assistance in interpreting the provisions of the scheme and for providing regular information related to current costs and factors influencing the performance of the scheme. Close liaison with personnel and finance sections is essential and it must remain the fleet managers duty to ensure that both of these sections fully understand the scheme being used and support its function effectively. 6.7 A good fleet manager will have sufficient experience to be able to predict necessary actions and take appropriate measures, thereby influencing the course that any scheme may take, rather than reacting only to events as they occur. Tasks may include the negotiation of supplier terms, advertising and evaluating tenders, negotiating insurance renewal terms, providing cost information updates, monitoring expenditure, recovering non-budget expenditure and providing regular management reports. Monitoring Contract Performance 6.8 It is recommended that the following aspects of all lease or contract hire agreements are monitored on an on-going basis: - details of all vehicles on hire, including make, type, registration number, contract cost, contracted period, contracted mileage, services included (or excluded), commencement date and allocated user. It is also useful to record such data as the road fund licence expiry date and date of annual MOT/DTp test; - utilisation rate of all vehicles on hire, based upon regular cumulative (not just business mileage) odometer readings. These should be projected to the normal termination date, based upon the average to date, to predict any utilisation over or under the contracted distance; - expenditure - including all regular contracted payments and any other expenses incurred - on an individual vehicle basis. Any expenditure incurred on behalf of the user should also be readily identifiable; - where any sums are recovered from the lease/hire companies, employees or third parties, these require to be fully accounted for, credited to the individual vehicle account and readily identified when outstanding or overdue; - replacement programme - determined by the agreement expiry dates, a schedule identifying all vehicles that need to be returned/replaced

within the next six months should be available and regularly updated; - suppliers prices for new vehicles should be regularly compared. A league table showing comparable vehicles and utilisation periods over a range of suppliers will reveal fluctuations in quoted costs. Such an analysis is a prerequisite of selecting the correct supplier; - termination costs - for all vehicles returned at the completion of an agreement, any termination charges or excess mileage charges should be added to the total expenditure incurred during the currency of the agreement for the purpose of determining the true cost of operating the contract; - supplier performance - in addition to the criteria defined above, a file should be maintained on each supplier to record any shortcomings arising from late delivery user complaints regarding repairs/maintenance, late or non-arrival of essential documents (eg RF licence discs), efficiency of administration and the level of response to requests for assistance, rescheduling, premature termination etc. 6.9 Many of the above monitoring tasks can be facilitated through the use of a simple computer programme and there are a wide variety of programmes readily available commercially for the purpose of fleet management. These may contain a number of non-essential items, but their basic data capture and analysis features will provide all the necessary reports. A typical system designed to operate on an IBM compatible PC will currently retail for between 52,500 and 4,000. Such programmes can usually accommodate a fleet of 1,000 cars or more without difficulty. On a practical level, fleets of this size generally dictate multiple access and therefore the potential for multiple screens or networking should be ascertained where the fleet is likely to be large. As with all computer systems, a precise operating specification should be determined before attempting to compare the products available. 6.10 For smaller fleets (up to 500 cars) a PC with a 20 mb hard disk drive will suffice. Where the fleet is larger, a hard disk drive of 40 mb should be considered the minimum. For many departments, hardware already acquired for local use will prove perfectly acceptable for the operation of a fleet management package. Due to the need for ready access and regular analysis reports, it is not generally recommended that mainframe computer capacity is used for this particular function.
Monitoring Vehicle Utilisation

check on utilisation to date, plus a projection of likely mileage at contract termination is essential. 6.12 Where vehicles are identified as having varied their utilisation pattern and are likely to achieve a very different mileage than that contracted, departments should approach the supplier and request that the contract be re- scheduled. Whilst this may increase the hire charges, it is likely that the overall cost will be less than incurring excess mileage charges and in any case the Master Hire Agreement will define a maximum mileage limit. Reallocation of vehicles between employees should also be considered in this situation. 6.13 Employee agreements permitting private use and requiring a contribution towards the cost, generate a need to monitor the business and private use elements of the total mileage separately because of the implications of excess mileage charges etc. This can be achieved through requiring employees to submit the vehicle odometer reading at the end of each month, together with their business mileage claim. 6.14 Vehicle cumulative mileages can also be obtained from fuel cards, although this method is not totally reliable as many filling stations do not request the figure from the user or ensure that it is completed on the voucher. Suppliers or maintenance contractors will also receive information on vehicle utilisation direct from the garages carrying out repairs or maintenance. They will usually ask for the figure prior to authorising any work and will also expect to see it declared on all invoices. Where vehicle entitlement is related to business usage, a monthly record will need to be maintained and compared on a regular basis. 6.15 Where a large number of vehicles require to be monitored, the use of a suitable fleet management package will greatly assist the recording and analysis of utilisation data, including the projection of termination mileages, Such systems can also accumulate business mileages by individual users on a number of different vehicles. Such a feature will be particularly useful when completing employers Pl 1D returns - a further function of fleet management.

6.11 To maintain effective control over contracted vehicles their utilisation should be regularly monitored, generally on a monthly basis. It is also a condition of all contract hire agreements that the vehicle utilisation is declared at regular intervals. To ensure that vehicles do not exceed or significantly under-run their contracted mileages, a regular 10

Accident Management 6.16 Where departments are providing the insurance cover, in whatever form, it becomes departments responsibility to: - provide to the insurance company a comprehensive schedule of vehicles, including their registration numbers, values and locations; - provide regular updates of this list as required by the insurers; - keep a list of drivers, including details of their driving licences and endorsements, current at all times.

6.17 All employees should be provided with blank accident report forms for retention in the vehicle. The procedure for completing these should be explained in the drivers hand book/agreement. Departments are responsible for ensuring that accident claim forms are completed accurately in all respects and then forwarded without delay to the insurers. 6.18 Where a vehicle requires repair in excess of an agreed limit, an engineer assessor will be requested to authorise the repairs. For minor repairs, the department will need to obtain one (or more) written quotations for the repair and then authorise the work to proceed. A replacement hire car may also need to be arranged for the employee. 6.19 When repairs are completed, the repair cost will normally be charged direct to the insurers. However, charges for any excess and VAT may be payable. Where a third party is responsible, further claims against that partys insurers for recovery of excess, car hire, or any other incidental costs incurred by the employee or the department may need to be pursued. Accident management is a very specialised task, making further demands on the fleet manager. Very often it is neglected, resulting in significant losses to the insured. The use of brokers and specialists in recovering uninsured losses can reduce the time spent on administering and progressing accident claims. There is a cost for such services and each department must determine which option offers the best value for money.

charges on accounts of this type may deter departments from using them for fuel purchases. 6.22 Fuel credit cards are available that restrict purchases to fuel or lubricating oil only. These may be of the restricted type issued by many fuel companies that provide a fuel purchase credit facility only at appropriately franchised filling stations - or the unrestricted card which is more widely accepted. In each of these cases additional data such as mileage readings may be obtained and included in regular reports/invoices. The price paid for fuel is that charged by the retailer. A further type of fuel card is the Agency Card, usually restricted to DERV purchases and giving the benefit of credit for fuel supplied from authorised outlets at a nationally advised price - usually lower than normal pump prices, but appreciably higher than bulk fuel purchase rates.

Fuel Reimbursement 6.23 Where vehicles are utilised for both private and business use, this method is to be preferred. Employees remain responsible for all their fuel purchases, for obtaining fuel at the most beneficial cost and maintaining the consumption rate of their vehicle. As an example, a fixed rate of reimbursing fuel costs can be obtained by: - selecting a typical vehicle in each engine capacity range; - determining the average consumption using the manufacturers published fuel consumption figures for urban, 56 mph and 75 mph driving. As a general example: (2 x urban mpg) + (1 x 56 mph) + (1 x 75 mph) Fuel Management 4 Bulk Fuel = average consumption in mpg - by dividing this average mpg figure into the 6.20 Fuel may be provided in a number of ways; by average cost of fuel as published in the Petroleum issues from bulk stocks, by the provision of fuel cards Times - a cost per mile in pence (ppm) will be or by employee reimbursement of business mileage. obtained; Issue of fuel from bulk stocks is only appropriate for official vehicles as no fuel is provided for private use. - to this may be added a maximum of 0.2ppm for top-up lubricating oil, antifreeze and other Apart from the conventional routines of checking essential fluids provided by the driver between stock levels against drawings and deliveries with full services. accountability for any variations, all issues should be related to individual vehicles in terms of With fuel prices of 1.89 per gallon (incl VAT) and a consumption. A target mpg should be set for each typical average consumption of 32 mpg an vehicle type and any variations should be appropriate reimbursement rate would be investigated, including abnormally low consumption 5.9p + 0.2p = 6.1 pence per mile. A separate rate -which will usually reveal that some issues have not will need to be calculated for each capacity band, been recorded. Fuel usage can also be monitored as typically pence per mile (ppm) where fuel cost is also taken up to 1400 cc into account. For such calculations, the average price 1400 - 2000 cc of fuel purchased in a given period (perhaps a over 2000 cc month) will be used. plus a further rate for diesel engined vehicles. Fuel Cards 6.2 1 Fuel cards can take many forms. It is possible to purchase fuel using conventional credit cards such as Visa or Master Card. However, the vouchers are not sufficient evidence that only fuel has been purchased - these cards being available for the purchase of goods of any type. The high interest 11 6.24 Where a policy of using unleaded fuel is adopted, the reimbursement rate may be calculated using the appropriate fuel cost. Revisions to these rates need not be carried out each time there is a variation in fuel prices, but only when the average published price in the Petroleum Times varies by, say, 10% from the previous rate.

General 6.25 All the above methods of providing fuel are potentially open to abuse or fraud. Due to the high value of fuel and the high rewards that are associated with the improper supply of fuel, great care should be taken in monitoring and auditing fuel supplies/reimbursement. All fuel used should be related ultimately to defined standards of fuel consumption (mpg) or fuel cost (ppm) as a means of confirming all issues made are charged for. Maintenance Management 6.26 The principal task of maintenance management under a contract hire agreement will remain with the hire company. This guidance relates only to such an arrangement and does not attempt to define the total task of maintenance management where this is provided in-house or separate to the hire terms.

6.30 A well planned replacement programme will permit expired vehicles to be collected and new vehicles delivered without incurring supplementary charges or excess mileage costs, All new vehicles supplied should be thoroughly inspected upon delivery to ensure that the required specification is fully met in all respects, Any defects or omissions should be remedied prior to acceptance. Only when the department is satisfied should the vehicle be handed to the ultimate user and an acceptance note obtained.

6.31 All vehicles should also be inspected by the department prior to allocation or return for disposal. A note should be made of any defects and in the case of a returned vehicle, the employee required to confirm their existence. Where defects are in evidence it is usually more cost effective for the department to have these repaired before returning the vehicle, rather than have the hire company 6.21 Under contract hire, departments remain responsible for ensuring that all reported defects are execute the repairs and charge the resulting costs. promptly rectified and that preventive maintenance Records should be retained of all vehicles returned, including the final odometer reading, for at least 12 is carried out at the appropriate intervals. Failure to do so may invalidate any subsequent warranty claims months after disposal. This will be of assistance should any subsequent enquiries be made. as well as making the vehicle potentially unreliable. The standard of repair/ maintenance provided is Limiting Exposure to Non-Budgeted Costs controlled by the employee who will sign a satisfaction notice on behalf of both the hirer (the 6.32 By advising all employees of their department) and the owner (the hire company). This responsibilities and liabilities in the employee responsibility should be drawn to the attention of the agreement or similar document, much of the risk of employee in the agreement between the subsequent damage may be eliminated. Employees department and the employee. Responsibility for should understand in particular the extent of any planning any statutory vehicle test also rests with the liability for accidental damage, for insurance cover department. excess, or any items not covered by insurance. Any exposure to the department within the Master 6.28 Departments are advised to ensure that all Contract or Vehicle Agreement to additional costs vehicles undergo an inspection to identify any should be fully covered by related clauses in the defects one month prior to the expiry of the normal employee agreement, transferring liability wherever warranty period. This will avoid any risk of possible. Master Contracts should be couched in unexpected repair costs occurring just outside the terms that give sufficient protection to the Hirer (the warranty period. Departments are also advised that department) should there be any negligence or in law they may remain responsible for the omission on the part of the Owner (the Hire mechanical condition of any vehicle used by an Company). employee where it can be shown that they caused or permitted a vehicle to be used in a defective Recovery of Non-Budgeted Costs condition. 6.33 Non-budgeted costs for the department may Vehicle Acquisition/Renewal/Disposal arise in any or all of the following areas: - incidental damage, neglect, abuse, non fair wear Procedures and tear items that are clearly the result of some 6.29 Much of the procurement and disposal function, action or negligence by the employee; including delivery and collection, may be arranged - accidental damage, not the responsibility of the by the hire company. However, departments will employee and within any policy excess; need to establish their own and employee - premature termination or penalty costs arising requirements well in advance of any replacements from decisions or actions by the department and being required. Formal procedures should be not recoverable in full or part from an employee; outlined for the methodical and sequenced approach to identifying requirements in terms of make, model, - excess mileage charges levied as a result of overutilisation (compared to contracted mileage) or specification, colour, date, number etc. Employees extending the usage beyond the contracted term, must be advised of the options open to them at least 6 where this is defined as resulting from decisions months prior to a vehicle being returned, replaced or actions by the department; or renewed. Where an option exists for the - any charges for betterment charged by an employee to acquire the vehicle, values need to be insurance company, where this cannot obtained from the hire company and the employee legitimately be recovered from the employee; informed. 12

any shortfall in the cost of acquiring a new replacement vehicle where the contracted vehicle is subject to a total loss claim, is more than six months old and the valuation by the insurers is less than the cost of the replacement; costs of providing a replacement vehicle where: - no replacement provision is included in the contract; the replacement provisions in the contract are exceeded; - the insurance cover does not extend to a replacement vehicle; - the employee is not responsible for the loss of use of the contract vehicle; - there is no opportunity to pursue a third party in respect of uninsured losses; - no manufacturer support, either warranty or policy, is available to fund a replacement vehicle; - no local dealer support is available to reduce the cost of a replacement vehicle; Road Fund Licence rate increases where the cost is passed on to the hirer; modifications or improvements to the vehicle required by legislation which result in a cost being transferred to the hirer; provision of a temporary hire car where delivery of a new contract vehicle is delayed or not immediately available. Full consideration should be given to the level of exposure that the department may experience to these or any other areas contained in the contract/agreement with suppliers, 6.34 By formulating a vehicle policy and an employee agreement that recognises these risks, provision can be made for recovery of costs in specified circumstances. Cost exposure resulting from premature termination where staff are transferred, promoted, resign or take extended absence may be mitigated through the provision of appropriate insurance cover. Previous experience in this area will dictate whether the premiums can be justified. Many of the remaining costs cannot be effectively recovered and therefore budget provision should be made, having regard to the likely level of exposure under each heading within a financial year. Attribution of Car Provision Costs 6.35 Where official vehicles are acquired via contract hire or leasing arrangements, the full costs will be accepted by the department and allocated to the appropriate user budget. VAT is usually charged on rentals (see paragraph 3.1). Where vehicles are acquired for use by staff on a contributory basis, departments will have determined the method of calculating such contributions. 6.36 AS an operational starting point, the net cost to the department, after deducting the employees contribution and the cost of administration and 13

insurance, should not exceed the calculated cost of reimbursing the employee at the appropriate motor mileage allowance rate. Annual administration costs are not likely to be less than l00 per vehicle agreement, typically for three years; at current cost levels and volumes they could be considerably higher. 6.31 The formula used to calculate employee contributions should be flexible enough to cater for variations in the rentals of new vehicles, movements in fuel prices or Road Fund Licence, changes in motor mileage allowances, increases in administration costs and variations in the projected ratio of business/private use. As an example of how such a calculation may be achieved: = R Annual Rental Cost = A Administration Cost RF licence cost (if not included in rental) = EL Contribution to Non-Budget Costs = E Total Annual Cost to Department = ER+EA+%L+gE p.a. Where the contribution made by the department is limited to the current cost of Motor Mileage Allowance -then this can be calculated as follows:Motor Mileage Allowance (pence per mile) = MMA Fuel Cost Reimbursement (pence per mile) = FCR Annual Business Miles (miles) =BM Department Contribution = BM (zo- FCR) pa 6.38 The Employee Contribution must therefore be the difference between the Total Annual Cost and the departments contribution. This may then be divided into twelve monthly payments for the purposes of salary deduction. VAT must be added to the employee contribution figure at the appropriate rate, after calculation. 6.39 Whilst departments may opt for variations on the precise method of calculating the employee contribution, the basic principles outlined above should be followed so that the ultimate cost of contributing to the cost of vehicles provided for business and private use is no greater than would have resulted from the payment of MMA. 6.40 From the above calculation it is possible to ascertain the actual mileage break-even point for any particular model of vehicle where the maximum contribution ceiling has been previously defined by the department. The aim should be to demonstrate a cost saving through the provision of such schemes. The departmental contribution as calculated above could for instance be reduced through the introduction of a Cost Saving Factor. For employees with very high mileages, the MMA rate to be utilised will vary according to the total claimed. In such cases, a separate departmental contribution calculation should be made for the appropriate mileage claimed at each rate.

6.41 There is no requirement to limit the level of private use permitted, as any increase above the business mileage will be contributed in full by the employee. Employee agreements should contain some provision for employee contributions to be amended should the need arise.
1.

REFERENCES ISBN 0 946559 023 Croner Publications Ltd Croner Publications Ltd Croner Publications Ltd

1.1 Useful Bibliography (a> Car Fleet Administration and Finance (Peter Cooke) @I Croners - Road Transport Operation cc> Croners - Operational Costings for Transport Management (d) Croners - Elements of Road Transport Management 69 Freight Transport Association Yearbook 0-I Transport and Distribution Managers Guide (David Lowe)

if.2 Staff Qualifications A number of professional institutes provide a full training syllabus and cater for the needs of fleet managers including: _ The Institute of Road Transport Engineers (IRTE) - The Institute of the Motor Industry (IMI) - The Institute of Traffic Administration (IOTA) - The Chartered Institute of Transport (CIT) - The Institute of Municipal Transport (IMT) - National Guild of Transport Managers Ltd Examinations and courses of study are provided at most Colleges of Further Education and Technical Colleges leading to the award of certificates by: (CGLI) - City and Guilds of London Institute - National Council for Vocational Qualifications (NCVQ) - British Technician and Engineering Council (BTEC) - Royal Society of Arts (RSA) Other trade bodies: - Association of Car Fleet Operators (ACFO) - Automobile Association (AA) - British Vehicle Rental and (BVRLA) Leasing Association - Freight Transport Association (FTA) - Institute of Logistics and (ILDM) Distribution Management - Motor Agents Association (MAA) - National Association of Training Groups Road Transport Industry Training Board (RTITB) - Royal Automobile Club (RAC) - Society of Motor Manufacturers and Traders (SMMT) November 1990

ISBN 0 90299 132 9

Kogan Page Ltd

(9) Workshop Standards Handbook (Institute of Road Transport Engineers) 0-d Glasss Guide to Car Values (0 Glasss Guide to Commercial Vehicle Values CAP Black Book (Guide to Car Values) (k) CAP Red Book (Guide to Commercial Vehicle Values) (1) Tolleys Company Car Tax Guide

ISBN 0 95 1362 1 19

Glasss Guide Service Ltd Glasss Guide Service Ltd Proctor Nolan & Partners Ltd Proctor Nolan & Partners Ltd ISBN 0 85459 304 7

ANNEX A PRIVATE USE OF OFFICIAL VEHICLES (EMPLOYEE CAR LEASE SCHEME) In drafting a scheme, it will help departments if the following essentials are defined in a clear and unambiguous manner. (i) Aims and Objectives What are the purposes of an Employee Car Lease Scheme? What are the potential benefits? Are there any potential disadvantages? (ii) Funding How is the scheme to be funded? What are the forecasted costs? What level of contribution will be required from both the department and employees? What is the forecast level of non-budgeted expenditure? (iii) Staff Demand What is the attitude of staff to such a scheme? Who will qualify to participate? What is the likely level of cost to employees? What is the potential level of takeup amongst eligible participants? (iv) Administration What additional administration resources will be required and at what cost? Are there suitably qualified and trained staff available to do this task? What burdens will be imposed upon accounting, payroll and personnel sections? What investments will be required in data processing equipment? (v) Introduction/Withdrawal What is needed to introduce the scheme successfully and at what cost? What would be the implications should it be decided subsequently to withdraw such a scheme? For those departments producing or drafting an employee car lease scheme the following is provided as a checklist of items that should be included. This list is not exhaustive and should be used as a framework for constructing a scheme that will meet departmental objectives. A. Eligibility Who qualifies to participate in the scheme and on what basis? What happens when a participating member no longer remains eligible? When will the rules for eligibility be reviewed? B. Vehicles What range of vehicles are to be provided? Are any limitations to be imposed and if so, how will these be defined? What additional or supplementary services are to be provided? How will the period of hire be determined? C. Insurance What levels of insurance cover are to be provided and who will be responsible for obtaining them? Will employees provide their own insurance for private use or make a contribution towards cover provided by departments? D. F u e l How is fuel to be provided for business use? What method of reimbursement will be applied? How will reimbursement rates be maintained in relation to actual fuel costs? E. Employee Contribution How is the employee contribution to be calculated? Will the contribution be fixed or variable? How will the employee contribution be related to the level of private use? What additional charges may be incurred by an employee? Under what circumstances will the rental vary from the original calculation? What are the accounting arrangements for VAT? What is the procedure for re-scheduling an Agreement? How are employee contributions re-calculated subsequent to re-scheduling? What penalties may be incurred by an employee upon premature termination? When are rental payments due to be paid? Procedure for recovering arrears of rentals, What is the employees income tax liability? How is excess mileage charged? F. E x p e n s e s Procedure for submitting/authorising expenses related to the use of a leased vehicle. G. Personnel New staff - procedure for transferring in an existing leased vehicle.

Staff departures options available for vehicle transfer or premature termination. Internal transfers procedure for meeting the employees liability where internal transfer causes loss of eligibility. Maternity leave procedure to be adopted when maternity leave is taken and the employee gives notice of an intention to return to work. Loss of driving licence agreed procedure for employees who become disqualified from driving. Motoring offences - recovery of fixed penalty fines, administration costs and any other costs from an employee. Foreign travel requirements to be fulfilled by employees using cars overseas for private use. Temporary transfer - rates of travel reimbursement to be paid to lease car users when required temporarily to travel longer distances to/from work, eg additional private mileage.

H. Administration Define internal procedures for the submission of - car hire application (by employee) - car hire authorisation - advising salary deductions - employee mileage returns - employee accident report - vehicle condition report - foreign travel application - request for premature termination - application to purchase vehicle (at expiry of hire period). The information required in some of the above examples can be interpreted from the model Employee Agreement. However there are many other aspects which are purely a matter of departmental policy or procedure which need to be clearly defined. Care should be taken to ensure that these do not conflict with the terms of either the model Master Hiring Agreement or the Employee Agreement,

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