Sustainable fleet management seeks to deliver the best service with a standard of service defined by state regulatory bodies by utilizing and managing large fleets of vehicles in the most efficient, productive, and cost-effective way. Public transport service providers thus seek alternative ways to minimize cost as well as air pollution and carbon emissions from the transportation sector. This study develops a total cost of ownership (TCO) framework for evaluation of different alternative fuel options (diesel, compressed natural gas [CNG], and electric) for bus public transportation based on real-world driving conditions. Electric, CNG, and diesel buses are compared from the life cycle perspective by quantifying a set of sustainability indicators including global warming potential, particulate matter formation, human health impacts, and TCO. According to the results, it was found that TCO of electric buses is less than that of diesel and CNG buses. Specifically, TCO of electric buses is 15% less than that of diesel buses, and compared with CNG it is 5% less over a period of 10 years of use. The proposed framework provides a quantitative basis for a sustainable fleet management approach for public bus service providers.