The government’s open tender to companies to manage its fleet of vehicles has attracted the attention of Malaysia’s most prominent automotive groups, The Star reports. This is after the end of Spanco’s 25-year concession in December last year, although the company has been given an extension to continue managing the fleet until the end of 2019.

However, the company is seeking a new concession from the government, which made a request for proposal earlier in February this year for a 15-year contract. While the size of the concession has yet to be finalised, estimates based on the current fleet of 12,500 vehicles suggest the contract could be worth RM300 million a year from the fifth year onwards.

“The size of the contract varies from year to year, depending on the government’s fleet requirement and the number of new vehicles to be purchased as replacement,” explained one industry source.

The contract, which includes national and non-national brands, will cover official vehicles used by ministers and high-ranking government officials, department cars, as well as vehicles used by the police force.

Among the vehicles that are part of the contract include 32 Toyota Vellfire MPVs, which will need to be replaced every four years, along with around 3,000 Honda Accord sedans. Meanwhile, 1,300 police patrol vehicles and 8,000 units of the Proton Saga and Persona models for other departments will need replacing over the next five years.

Under the terms of the contract, the government will pay a monthly rental for each new vehicle it requires, and this fee excludes a fixed monthly bill for maintenance, repairs and management of each vehicle.

Given the lucrative long-term contract up for grabs, Spanco faces plenty of competition to retain its concession, with no less than seven bids reportedly submitted. The Naza Group, Berjaya Group, Sime Darby, DRB-Hicom, Samling Group, Comos and Go Auto are among those that have expressed strong interest in securing the contract.

“Each bidder is offering their unique capability, strength and value propositions for the government to consider, ” said another source who is familiar with the bidding process.

“You are looking at an investment of around RM1.5 billion over the next five years to purchase the new vehicles for the government’s fleet, ” an industry source said. And then, there is the cost of repairs, maintenance as well as management of the whole fleet. So, the investment outlay required is huge, ” he added.

Spanco will be banking on its experience and track record to hopefully beat out the competition as the original concession holder, having first secured the contract to manage the government’s fleet of cars back in 1994.

The company leases each car to the government on a five-year term, before it is replaced with a new car. The five-year replacement cycle is to ensure the fleet remains current, and the maintenance cost of each of vehicle is capped at pre-determined limits.

In the report, Spanco CEO Datuk Hamzah Mohd Salleh said the company provides “unlimited repair and maintenance services for the fleet to ensure that a maximum number of cars are always on the road.”

“Basically, what we do is take over all the risk associated with owning the car and go a step further by offering a replacement vehicle in the event the car requires major service, or is involved in an accident,” he said, adding that Spanco has consistently achieved a target of having 98% of the fleet on the road at any given time over the years.

Hamzah also explained that Spanco buys on average, between 2,000 and 3,000 vehicles a year to maintain the fleet size, with over RM2.5 billion spent on new car purchases during its contract period.