Chicago rents: How the Windy City took control of its equipment rental costs

When you have 40 different departments that use rental equipment from more than 40 different vendors, it soon becomes clear that rental is a process that must be managed. “It was getting to the point that our relationships with rental suppliers had become confrontational,” says Matt Quinn, who has served as Chicago’s rental manager since 2000. “The first thing we wanted to do was eliminate that.”

Quinn investigated what other large cities were doing in this area and didn’t find a lot of activity. And so the city came up with its own solution. In October 2000 it established the Vehicle/Equipment Rental Division under the Department of Fleet Management. This division then put the city’s entire rental needs (excluding those of the aviation, police and fire departments) out to bid in a series of contracts covering 90 different types of equipment. “We also pushed for newer equipment, two-hour service response time and lower prices,” Quinn says. In return, the vendors get paid within 60 days.

As part of this bidding process, the city did not specify certain brands of equipment since it would limit the number of vendors who could vie for the bid packages. Since one of the three overall contracts was targeted to minority- and women-owned rental firms, their total participation came to 55 percent of all rental contracts. There were two national vendors who won contracts, United Rentals and Hertz. The rest were local independent rental firms.

Each three-year contract requires the vendor to cover all maintenance, including tires. The contracts are divided into separate groups of similar equipment and each group has a No. 1, 2 and 3 designated vendor. The second and third rental vendors are used when the primary vendor doesn’t have the equipment available, or the type of equipment they’re offering is unacceptable to the city because of past performance. “Our new down-vehicle report allows us to keep track of what units are causing us trouble,” Quinn says. “If we can’t get them replaced with a more efficient unit, we can go on to the next vendor in line.”

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The results have been amazing: The Department of Fleet Management, under the direction of Commissioner Michael Picardi, estimates it has reduced rental costs by 32 percent. In addition, since a greater emphasis has been placed on using city-owned equipment first, the number of rentals has been reduced by 13 percent. “We’ve saved at least $4 million dollars per year going this route,” Quinn comments.

Currently three people in the city’s Department of Fleet Management handle rentals, a significant reduction from when each city department handled its own rentals. These three synchronize rentals with each department’s vehicle coordinator. “This efficiency has also increased our cost savings,” Quinn says.

Each department is required to plan its rental needs since it must file a form with the city rental division two weeks prior to the start of the rental and indicate on this form the anticipated rental return date. Different procedures are in place for emergency situations.

This coordination can sometimes be challenging. For example, in a three-day period this past fall, the city rented a 30-ton truck crane, a 25-ton truck crane, a wheel loader, an 80-foot boom, a variety of compact excavators and skid steers, plus asphalt pavers. At that time the city had four asphalt pavers on rent doing street resurfacing jobs.

“One of the benefits of this consolidated process is that we can develop an inventory of what we rent as a city,” Quinn says. For instance, the city found it rented about 40 backhoes annually for its water and sewer departments and 20 aerial lifts for its electrical division. “We’re now looking at when it’s cheaper to keep renting,” he says, “or whether we should lease or buy, especially with the number of backhoes we rent.”

Managing the city’s rental fleet now includes inventory reports, expense reports on what’s being spent with each rental vendor under contract, fuel use reports (these are compared with city-owned equipment) and checking for billing errors. “Our process has basically eliminated any double billing,” Quinn says.