Issue Briefs

Following are excerpts from a GAO report on the challenges federal agencies will face in switching the federal fleet to "green" vehicles.

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Once plug-ins become commercially available, agencies will face challenges related to cost, availability, planning, and federal requirements. Agencies may have difficulty making the decision to invest in these vehicles instead of less expensive gasoline vehicles, given that they have limited information to help them take the longer-term costs into account using life-cycle analysis. Agencies also have not formulated plans for incorporating plug-ins into their fleets, largely because information they would need is not yet available. Finally, agencies may have difficulty meeting the federal goal of acquiring plug-in hybrids, as it conflicts with some federal requirements and agencies lack guidance on how to negotiate this situation.

Just as the high initial cost of plug-ins may hinder consumer adoption of these vehicles, it will also limit agencies ability to acquire them. Plug-ins are likely to cost significantly more than comparably sized gasoline-powered vehicles, and because the upfront cost of a vehicle is a key factor when agencies select a vehicle, federal customers will likely not be able to purchase or lease many of these vehicles without additional funding to help cover costs. Thus, as a practical matter, agencies’ budgets will determine the extent to which they can integrate plug-in hybrids and all-electric vehicles into their fleets. GSA typically negotiates with auto manufacturers for significantly discounted prices for the vehicles it purchases and leases for federal agencies—typically more than 40 percent below the manufacturer’s suggested retail price. (See app. II for more information on GSA procurement processes.) For example, GSA offers agencies a Ford F-150 pickup truck for $15,111 (about an $11,000 discount to the suggested retail price), a Chevrolet Cobalt for $12,600 (about a $2,400 discount), and a 4-cylinder Pontiac G6 for $14,000 (about a $6,000 discount). GSA officials did not think they would be able to obtain the usual discount for early plug-ins since auto manufacturers are often reluctant to offer the same discounts for new model lines because they can better recover their start-up costs in the retail market. Therefore, since discounted plug-in hybrids will not likely be offered to the government, the cost differential between plug-ins and comparable vehicles—including other alternative fuel vehicles such as flex-fuel vehicles—could be even greater for the government than it would be for an individual consumer.

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The additional expense of plug-in hybrids and all-electric vehicles could also make it more difficult to incorporate leased plug-ins into the fleet. GSA officials said that their authorization limits the agency’s ability to replace existing vehicles with plug-ins in its leasing program, at least initially. Because the high cost of plug-ins will stretch thin GSA’s revolving fund’s ability to absorb costs over the life of the lease, GSA would need additional funding upfront to cover the higher costs of plug-ins. It could subsequently recover some of these costs by setting the lease rates for agencies at a level that would replenish these funds. However, this additional cost would cause lease rates for plug-ins to not be competitive with lease rates for similarly sized vehicles. In addition, GSA determines its lease rates for vehicles not just based on the initial price but also the price they can get for the vehicle in the used car market. However, uncertainties regarding the resale value of plug-ins will make it difficult for GSA to lower the lease rate based on the amount of money it could recoup through resale.

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Executive Order 13423 directs agencies to begin purchasing plug-in hybrids once they are reasonably comparable on a life-cycle cost basis with conventional vehicles. A life-cycle cost analysis includes factors such as the expected total fuel and maintenance costs of a vehicle over the years that the agency would operate it.32 This helps the purchaser determine the best long-term value for the investment. The Federal Acquisition Regulation does not explicitly require agencies to perform life-cycle cost analysis for their acquisitions, including vehicles they acquire, although agencies are free to do so.

Among the agencies we reviewed, the use of life-cycle cost analysis varied, and according to FEDFLEET, an organization representing federal fleet managers, most agencies do not use life-cycle costing when evaluating which vehicles to purchase. When selecting vehicles, fleet managers with whom we spoke said they primarily consider mission needs, upfront costs, and federal goals and requirements, rather than long-term savings. However, of the agencies we reviewed, only agencies within DOD—the Air Force, Navy, and Marine Corps—reported that they evaluate life-cycle costs to differentiate between multiple vehicles that met the agencies’ needs.

In order to conduct analysis of life-cycle costs, agencies need access to information that would enable such an analysis, such as estimates of lifetime fuel economy, and ongoing maintenance and repair data for specific vehicles. GSA officials told us that some information on life-cycle costs of vehicles is available though a database that houses information on fuel consumption reported by agencies, and that GSA Fleet would have some information on lifetime maintenance costs of some vehicles. In addition, life-cycle cost estimates for existing vehicles are available from public sources of automotive information.33 However, such information for specific vehicles is not readily available from GSA. For example, AutoChoice, a Web site developed by GSA to provide information to agencies on vehicles available for purchase, includes information about upfront costs and vehicle performance characteristics (such as engine size and fuel economy) but does not include information on total cost of ownership, such as estimated lifetime fuel or maintenance costs.

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For comparable conventional gasoline vehicles in the same class, differences in life-cycle costs may not be significant, but differences could arise when comparing a conventional gasoline-powered vehicle to a plug-in hybrid or all-electric vehicle, depending on a number of factors. However, since plug-in hybrids are not currently available in the marketplace, much of the information about their lifetime ownership costs is unknown. First, the fuel economy of planned plug-in hybrids has not been announced and will vary greatly depending on how agencies plan to use them. For example, plug-in hybrids used only within the all-electric range will use no gasoline at all, while plug-in hybrids used for long-distance driving may not offer fuel economy much better than a conventional hybrid or highly fuel-efficient gasoline-powered vehicle. Secondly, their maintenance costs could be significantly more or less than conventional technology. For example, failure of vehicle batteries––which will likely be the vehicles’ most expensive component––after warranties expire could entail significant costs for agencies. In addition, some maintenance issues may involve proprietary considerations or require additional specialized training for maintenance staff among agencies that service their own vehicles. Conversely, to the extent that plug-in vehicles will have fewer moving parts, they may offer significantly lower maintenance costs over the life of the vehicle. Finally, another important factor in determining vehicle life-cycle costs is resale value, which is also uncertain in the case of plug-ins. GSA officials said that past experience with advanced technology vehicles underscored the risk federal agencies might face when trying to resell the vehicles. For example, when GSA attempted to resell some of its compressed natural gas vehicles in the 1990s, there was no market for them and the resale value was essentially zero. By comparison, information from public sources of automotive data suggests that the projected value of a Toyota Prius, a conventional hybrid, will hold up well over time compared with similarly sized gasoline vehicles.

We believe these uncertainties make it difficult for fleet managers to plan for the integration of plug-in hybrids in the early years of their commercialization and pose challenges for agencies in complying with the executive order. In addition, to compare plug-in hybrids with other vehicles available to them, agencies will need to make certain assumptions that can materially affect the estimation of whether the vehicles are comparable on a life-cycle cost basis. For example, factors such as agency policies about when and how often vehicles are charged, driving behavior and the types of trips plug-in hybrids are predominantly used for, and the potential for training needed to service the vehicles all can influence the costs of the vehicle to the agency over its lifetime. Currently there is no guidance on how to deal with these uncertainties and no further information about the performance of the vehicles.

GSA and DOD have started to explore options that would allow the agencies to acquire and use neighborhood electric vehicles while minimizing some of the risk associated with the uncertainties described above. Specifically, GSA, on behalf of the Department of the Army, is currently negotiating "pass-through lease agreements" in which it would lease neighborhood electric vehicles directly from manufacturers and pass the leases on to the customer. In its effort to reduce petroleum consumption, the Army would like to order 4,000 neighborhood electric vehicles over a 3-year period beginning in 2009 and replace gas-powered vehicles, where appropriate, on a one-for-one basis. Leasing, rather than purchasing, the neighborhood electric vehicles will help mitigate risks associated with their maintenance and their minimal resale value, according to GSA and DOD officials. The cost of the leases could be higher if manufacturers adjust the rate to account for risk associated with expected costs and performance of plug-in vehicles. However, if the government leased these vehicles, it would avoid liability of ownership, especially with regard to the maintenance and resale challenges GSA and federal agencies would otherwise face. GSA has not yet explored the possibility of leasing other plug-ins directly from manufacturers; however, GSA officials thought this option would be worth exploring.

Auto manufacturers may not make a high volume or wide range of plug-in vehicle models available to the federal government. The vehicles GSA is able to provide to its customers are limited to the models automakers are willing to sell to the government. Those offered have generally been limited to models that have been on the market for several years and are no longer at the peak of their retail sales. In addition, foreign manufacturers historically have not entered into procurement contracts with GSA. GSA officials informed us that although they have regularly pursued discussions with Toyota and Honda, both manufacturers have declined to submit proposals because of franchising and licensing agreements with their dealers in the United States. Of the large manufacturers that have announced plans to market plug-in hybrids in the next several years, only GM has said it would make these available to the government, but it has not indicated the quantities it would provide. The availability of plug-ins through smaller start-up manufacturers is also uncertain. For example, Phoenix Motorcars is marketing its all-electric pickup truck and SUV to fleets, and its first production run is scheduled to begin in 2009. GSA officials noted, however, that the Phoenix vehicles were not yet in production when it met with auto manufacturers to plan for fiscal year 2010.

Almost all of the agency officials we interviewed stated they have not developed plans for incorporating plug-ins into their fleets, in some cases because of the uncertainties surrounding plug-ins. The Government Performance and Results Act of 1993 (GPRA) requires executive branch agencies to clearly establish their missions and goals. 34 In guidance GAO developed to assist agencies implement GPRA, we stated that plans can help clarify organizational priorities and unify agency staff in pursuit of shared goals, like integrating plug-ins into the federal fleet. As we have mentioned in previous reports, plans can help clarify organizational priorities and unify agency staff in pursuit of shared goals, like integrating plug-ins into the federal fleet. These plans also must be updated to reflect changing circumstances and should include a number of key elements, such as (1) approaches for achieving long-term goals; (2) linkages to goals; (3) frameworks for aligning agency activities, processes, and resources to attain goals; (4) consideration of external factors; and (5) reliable performance data needed to set goals, evaluate results, and improve performance.35

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Agency officials told us that the uncertainties surrounding plug-ins, as discussed throughout this report, prevent them from developing plans for integrating plug-ins into their fleets. For example, agency officials reported that the performance characteristics of plug-ins—such as fuel economy, length of time to charge, and range—are still in question. While there is some preliminary information on performance characteristics and potential benefits, agencies cannot determine with certainty whether the vehicles will meet their mission, which is one of the most important criteria in purchasing vehicles. In addition, according to FEDFLEET, plug-in hybrids are a suitable option for agencies located in metropolitan areas, on military bases, and federal centers, but agency fleet managers noted that plug-in hybrids may not be appropriate for agency missions located in remote areas or that require long-distance driving without assurance that charging infrastructure will be accessible. Finally, the compact size of the first plug-in hybrids expected on the market may be problematic. For example, USPS officials stated that they are unlikely to acquire plug-in hybrids with limited cargo capacity, such as the Chevy Volt, but viewed plug-in vans with larger cargo space as an option.

Agencies are also uncertain how to plan for the integration of plug-ins because they have not determined whether additional charging infrastructure would be needed at federal facilities to accommodate the use of plug-ins. The first generation of plug-ins is expected to use ordinary plugs and outlets to recharge the vehicles, and agency officials expected that small numbers of plug-ins would not pose considerable infrastructure challenges. However, many agency officials we interviewed stated that they had yet to conduct any assessment of their current facilities to determine the extent to which they could support plug-ins and, thus, what modifications might be necessary. For example, according to several agency officials, federal agencies located in a commercially leased space may not have access to additional electrical infrastructure necessary to support vehicle charging, or the building owner may not be willing to provide it. Also, as the number of plug-ins used by federal agencies increases, it will likely become necessary to upgrade the facility’s electrical service to accommodate the growing demand. In addition, some agencies with their own charging facilities may need to collaborate with the local utility to ensure transformers serving the building can manage additional load. Agencies may also need to collaborate with local power companies and be prepared to install smart charging capability to ensure that electrical power is being used in the most efficient manner possible. Finally, some officials emphasized that they may need funding for additional infrastructure, such as charging stations. Because of these uncertainties, agency officials informed us that it would be extremely difficult to develop a plan that successfully incorporates plug-ins into their mission and uses these vehicles as effectively as possible.

Agencies also face a challenge posed by the patchwork of existing federal requirements that covers energy use and vehicle acquisitions. In deciding whether to acquire plug-in hybrids and all-electric vehicles, agencies must also consider how this decision will affect their ability to meet these other requirements, some of which conflict with one another. These requirements are intended to further several important objectives, including reducing petroleum consumption and encouraging the use of alternative fuel vehicles and alternative fuel in the federal fleet. However, the current set of requirements does not provide agencies with a means to set priorities for these objectives and make complex decisions such as what vehicles to acquire under what circumstances.

Using plug-in vehicles could create several challenges related to meeting energy reduction and fuel consumption goals.

Consumption of electricity by plug-ins could conflict with energy reduction requirements for facilities:

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subtracting vehicle usage from facility usage to track their progress in meeting the facility requirement.

Without means to measure electricity used to "fuel" plug-ins, agencies may underestimate progress toward alternative fuel consumption requirements: EISA requires agencies to increase alternative fuel use by 10 percent annually. The electricity used to charge plug-in hybrids and all-electric vehicles, except neighborhood electric vehicles, can count toward this requirement. But according to agency officials, facilities are generally not equipped with dedicated meters or other means of measuring the amount of electricity used by vehicles. According to the DOE official responsible for federal fleet policy, electricity used by plug-in hybrids and all-electric vehicles could be estimated, but there is currently no guidance for how to do this.

The lack of guidance regarding alternative fuel use for plug-in hybrids could hamper agencies’ ability to meet the 100-percent alternative fueling requirement: EPAct 2005 requires that alternative fuel vehicles be fueled with alternative fuel 100 percent of the time, unless they qualify for a waiver. In the case of flex-fuel vehicles that are fueled by ethanol (E85) and gasoline, agencies can qualify for a waiver to use gasoline in flex-fuel vehicles if E85 is not readily available or costs too much. DOE guidance allows exceptions under certain conditions—for example, agencies may use gasoline, instead of E85, to complete the mission at hand if E85 is unavailable. According to DOE officials, similar guidance will be necessary to address conditions when alternative fuel, specifically electricity, is unavailable for plug-in hybrids.

The lack of guidance regarding the electricity used by neighborhood electric vehicles could lead to inaccuracies in alternative fuel consumption reporting: According to DOE, neighborhood electric vehicles do not qualify as alternative fuel vehicles under EPAct 1992. However, because neighborhood electric vehicles are fueled with electricity, without a means of accounting for their electricity use separately from that of plug-in hybrids and other all-electric vehicles, agencies could be improperly counting the electricity used by neighborhood electric vehicles as alternative fuel. Neighborhood electric vehicles can, however, help agencies meet their petroleum reduction targets, and DOD and GSA plan to put more of these vehicles into use. DOE has not provided guidance to agencies on this subject. DOE’s official responsible for fleet policy noted that because so few neighborhood electric vehicles have been used to date, the lack of policy has not been a problem. Now that neighborhood electric vehicles are becoming more popular, he said, DOE has begun developing guidance specifying how to account for the electricity used in neighborhood electric vehicles.

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In addition, the various federal requirements that pertain to energy use and vehicle acquisitions do not provide agencies with a clear way to set priorities and effectively address conflicts between these requirements.

Until they are more affordable, plug-ins are unlikely to be the most cost-effective type of AFV for reducing petroleum consumption: EPAct 1992 requires that at least 75 percent of all new vehicle acquisitions by agencies for EPAct-covered fleets be alternative fuel vehicles.37 In addition, EISA requires agencies to reduce petroleum consumption. Acquiring plug-ins would be helpful in meeting both requirements. However, agencies would be able to replace more of their older, less-efficient vehicles by acquiring either less costly AFVs or fuel-efficient gasoline-powered vehicles. Depending on the circumstances, acquiring plug-ins could limit an agency’s ability to meet the requirement to reduce petroleum consumption.

The new requirement to acquire low-emission vehicles creates an additional priority that agencies must manage: EISA directs agencies to procure only low-emission greenhouse gas vehicles, and EPA is in the process of developing a definition for these vehicles. DOE officials noted that the EISA requirement may be at odds with the AFV acquisition requirement because most AFVs in use today, particularly flex-fuel vehicles, meet the EISA emissions requirement only if they are fueled with alternative fuel, not gasoline. In addition, the amount of emissions produced by a plug-in hybrid depends in part on the source of energy used to generate electricity, as well as how much gasoline it consumes. Once agencies have guidance defining low-emission vehicles, they may face similar conflicts in trying to meet the various vehicle acquisition requirements and goals.

Finally, in our 2008 report, which addressed the extent to which agencies were making progress toward meeting federal fleet energy objectives, we found several additional conflicts agencies experienced in trying to meet all of the current regulations. For example, we found that while agencies were able to meet the alternative fuel vehicle acquisition requirement, they were highly unlikely be able to meet the alternative fuel use requirement because of a limited supply of alternative fuel and an inadequate alternative fuel infrastructure. These issues were also factors in some agencies’ inability to meet the petroleum requirements for fiscal year 2007. Accordingly, we suggested that Congress consider aligning the federal fleet AFV acquisition and fueling requirement with current alternative fuel availability and revising those requirements as appropriate.

 

Under Executive Order 13423 agencies are expected to reduce energy intensity in federal facilities by 3 percent per year through the end of fiscal year 2015; further, EISA requires a reduction in energy intensity in facilities by 30 percent by the end of fiscal year 2015, relative to the baseline of their energy use in fiscal year 2003. Energy intensity is defined as energy consumed per gross square foot of facilities. Because plug-ins are expected to rely on electricity from federal facilities while charging, they could increase energy consumption, particularly if plug-ins are used in large numbers. Such an increase could create a conflict with the requirement in EISA for federal facilities to reduce energy consumption of facilities.36 If agencies do not have a means to determine the electricity used by plug-ins, they will have no way of Although costs associated with greenhouse gas emissions are not considered in the life-