2014 APWA NATIONAL TORONTO 8/17/2014

Transcription

1 The True Cost of Your Maintenance Activities Consulting, Inc. Mary Joyce Ivers, CPFP, PWLF City of Ventura Kurt B. Lind Mesa Water District Billy Wright LA Consulting APWA National Toronto August 17, 2014 Session #9308 Objectives Sponsored by APWA's Fleet Management Committee Every agency needs to know the cost to do their work, whether it s patching a pothole, repairing a guardrail, or cleaning a sewer line or maintaining fleet and equipment. Agencies often bill others for their services. Assuring total compensation for reimbursable services performed is imperative so that those receiving the service are fairly charged. It is also crucial to know how overhead is determined. Learning Objectives: 1. Identify the different types of overhead and methods used to calculate the rates. 2. Discuss the methodology for applying overhead for activity costing. 3. Apply rates to identify opportunities for savings. Definitions DIRECT, AVOIDABLE costs that are directly charged to work efforts and would be avoided if function was no longer performed. (e.g. billable wages, materials) INDIRECT, AVOIDABLE costs that are not directly charged to work efforts, but would otherwise be avoided if effort was no longer performed. (e.g. supervision, admin support, uniforms, small tools) FIXED costs that are not significantly affected by service delivery. (e.g. manager salary, rent). Not considered in avoidable overhead. VARIABLE costs that may vary according to resource utilization, productivity, and/or efficiency. May be direct (e.g. materials) or indirect (e.g. fuel, small tools) CMMS Computerized Maintenance Management System is a combination of technology and business processes used by managers for planning, organizing, scheduling and improving operations. Session #9308 1

2 Why Is This Important? True cost of business How CMMS costing relates to overall budget Understand unit cost Allows for comparison in an agency with 50 maintenance workers averaging $15 per hour, an overhead rate offset by just 10% can result in a $132,000 annual shortfall. Full External Cost for Full Recovery Avoidable Internal Cost of Operations Overhead Types Used by Finance groups for invoices, billing, etc. Captures direct and indirect costs May be flat hourly rate or unit cost for service Used by management and analysts for contract feasibility, benchmarking, etc. When applied, regular hours will account for all operational costs (direct and indirect) that would be avoided if work was no longer performed. Overtime captures only some costs (medi, soc sec, work comp) CMMS Avoidable Overhead Individual Employee Salary (A) Full Time Annual Availability 2,080 hours Direct Labor Hours (B) varies by each employee Direct Labor Cost (C) = (A) * (B/2,080) Avoidable Indirect Costs (D) includes leave, benefits, meetings, training, support, small tools, uniforms, etc. Avoidable Overhead = (D) / (C) Example: Employee salary of $50,000 (A) with direct labor charges of 1,800 hours (B) Direct labor cost (C) = $50,000 * (1,800/2,080) = $43,269 Avoidable indirect costs (D) = $75,000 Avoidable overhead = $75,000 / $43,269 = 173% (2.73 multiplier) Session #9308 2

3 Direct vs. Indirect Programs Prog Code Program Description 01 HYDRANTS 02 VALVES 03 METERS 04 MAIN LINES 05 SERVICE LINES 06 CAPITAL 07 WELLS & RESERVOIRS 08 CWTF MAINTENANCE 09 FACILITY MAINTENANCE 10 VEHICLE & EQUIPMENT PM 11 VEHICLE & EQUIPMENT REPAIR 12 WATER QUALITY Prog Code Program Description 13 MISCELLANEOUS 14 ADMINISTRATION 15 WATER SYSTEM OPERATION 16 WATER SYSTEM INSPECTIONS 17 WATER SYSTEM PM 18 WATER SYSTEM REPAIR/REPLACE 19 CWTF OPERATION 20 CWTF INSPECTIONS 21 CWTF PM 22 CWTF REPAIR/REPLACE 88 CROSS CONNECTION 99 METER SERVICES Position Determine Direct Labor Direct Hours Direct Pct (2,080) Indirect Pct Wages/Salary Direct Labor Manager 0 0% 0% $90,000 $0 Superintendent 5 0% 50% $70,000 $0 Supervisor % 57% $60,000 $25,961 Supervisor2 1,000 48% 52% $60,000 $28,846 MW 1,700 82% 18% $40,000 $32,692 MW 1,600 77% 23% $38,000 $29,231 MW 1,750 84% 16% $41,000 $34,495 Admin Clerk 0 0% 100% $25,000 $0 Total Direct Labor is calculated at $151,495 This becomes the denominator in our equation That s $165,281 Canadian dollars! Position Determine Avoidable Labor Costs Direct Pct (2,080) Indirect Pct Total Avoidable Wages/Salary Benefits Manager 0% 0% 0% $90,000 $40,500 Superintendent 0% 50% 50% $70,000 $31,500 Supervisor1 43% 57% 100% $60,000 $25,200 Supervisor2 48% 52% 100% $60,000 $25,800 MW 82% 18% 100% $40,000 $17,600 MW 77% 23% 100% $38,000 $16,340 MW 84% 16% 100% $41,000 $17,630 Admin Clerk 0% 100% 100% $25,000 $10,750 This includes all avoidable labor and benefits for both direct and indirect Session #9308 3

4 Determine All Costs Avoidable & Full Account Description Budget Full% Full$ Avoid% Avoid$ Staff development & conference expense 29, % 29, % 29, District membership and subscriptions 2, % 2, % 2, Certifications 5, % 5, % 5, Department administration expense 26, % 26, % 26, General Office Supplies/ Minor Equipment 6, % 6, % 6, Management Consultants 519, % 519, Noncapital Software Applications 16, % 16, Special legal counsel/advocate 10, % 10, Damages 5, % 5, Parts & Materials 253, % 253, Tools & Equipment 55, % 55, % 55, Facilities improvements 105, % 105, Fuel 105, % 105, Facilities Utilities 64, % 64, Regulatory Compliance & Permits 506, % 506, Well and leases 76, % 76, Damages 10, % 10, Leasing/ Equipment Rental 35, % 35, % 35,000 As well as other budget items such as supplies, uniforms, training, leave, etc. Calculate Overhead Using CMMS and Budget Using actual CMMS work reporting data: Full Overhead = 355% (4.55 multiplier) Avoidable Overhead = % ( multiplier) $20 wage X 4.55 = $91.00/hour (Full) $20 wage X = $56.11/hour (Avoidable) This is the TRUE cost of business! City of Ventura Public Works Mary Joyce Ivers, CPFP, PWLF Session #9308 4

5 City of Ventura Public Works Fleet Services At A Glance 393 Vehicles and Equipment 200 Small Equipment $20M Fleet Value 27 Green Vehicles $3M Annual Replacement Budget $2.8M Operating Budget 228K Gallons of Fuel Annually 10 FTE s (6.5 Mechanics) # 1 Small Fleet Fully Burdened Labor Rate Actuals Forecast Account FY12-13 FY Salaries Full Time $ 492,919 $ 492, Salaries Overtime $ 3,275 $ 4, Employee Benefits $ 295,206 $ 295, Workers Comp $ 2,890 $ 8,675 Personnel Services $ 794,290 $ 801,373 Step 1 Add all labor and benefits. Fully Burdened Labor Rate Actuals Forecast Account FY12-13 FY Office Supplies $ 2,642 $ 3, Periodical, Maps & Pamphlets $ - $ 1, Opr Supplies - Uniform/Clothes $ 2,233 $ 2, Opr Supplies - Sm. Tools & Equip $ 24,419 $ 25, Opr Supplies - Waste Disposal $ 3,191 $ 3, Prof Svcs - Management Consult $ - $ 2, Prof Svcs - Temp Agencies $ 20,000 $ 5, Prof Svcs - Computer Software $ 26,239 $ 30, Communications - Telephone $ 6,959 $ 3, Communications - Mobile $ 1,274 $ 1, Communications - Postage $ 224 $ Trnspt - Travel, Conf, Meeting $ 2,816 $ 6, R&M - Bldg Struv Impr $ 4,075 $ 5, Rentals - Machinery & Equipment $ 1,062 $ 1, Rentals - Other $ 6,992 $ 5, Other - Dues, Subscpt, Membership $ 1,457 $ 1, Other - Awards $ - $ Other - Training $ 2,228 $ 7, Other - Safety $ 801 $ 1, Other - Computer Software $ 7,329 $ 7,500 Operational Expenses for Allocation $ 113,941 $ 111,100 Step 2 Add all supplies and services. Session #9308 5

6 Fully Burdened Labor Rate Actuals Forecast Account FY12-13 FY Intl Ser - Motorpool $ 101 $ Intl Ser - IS Computer Replc $ 3,098 $ 3, Intl Ser - Digital Publishing $ 147 $ Intl Ser - Bldg Maint Area Chg $ 80,414 $ 96, Intl Ser - Technology Support $ 10,488 $ 21, Intl Ser - Telecommunications $ 6,273 $ 6, Intl Ser - I-Net Support $ 544 $ Intl Ser - Council Techno Eq $ 1,187 $ Intl Ser - MIS System Development $ 3,799 $ 13, Intl Ser - GIS Support $ 3,814 $ 5, Intl Ser - (INS) Fleet Maintenance $ 689 $ 689 Internal Services $ 110,554 $ 148,755 Step 3 Add all allocations and transfers. Fully Burdened Labor Rate Actuals Forecast Account FY12-13 FY Personnel Services $ 794,290 $ 801,373 Operational Expenses for Allocation $ 113,941 $ 111,100 Internal Services $ 110,554 $ 148,755 Total Fleet Budget $ 1,018,785 $ 1,061,228 Annual Worker Hours: 2,080 2,080 Sick, Vacation & Training: Billable Hours per Mechanic: 1,679 1,679 Full Time Equivalent: Total Billable Hrs for Mechanics: 10,914 10,914 Fully Burdened Labor Rate: $93 $97 Finally, combine labor, supplies & services, and transfers to determine the total budget. Then divide by the total billable hours for all mechanics. Example above shows $97 for FY How It Is Applied West Coast Municipal Public Fleets Labor $85 to $102 Average $97 Heavy Duty Labor Average $113 Light Duty Labor/Dealerships Average $109 Construction Equipment Average $103 Jiffy Lube $24.99 / 15 Mins $99.96 / Hour Session #9308 6

7 Mesa Water District Kurt B. Lind Mesa Water District Strategic Plan: 7 Goals Reliability Water Supply & Water Infrastructure Financial Responsibility Water Awareness Human Resources Customer Service Water Issues & Policies WISG January 29, Session #9308 7

8 WISG January 29, 2014 $700 $600 $500 $400 $300 $200 $100 $0 Efficient Cost Per Capita Benchmark $230 Mesa Water Mesa Water s Water System 23,500 metered accounts Mesa Water Reliability Facility 8 wells 2 reservoirs 350 miles of pipeline 5,157 valves 3,471 hydrants Manage 124 maintenance activities 23 Results 28% Less 30% Less 30% Less Period 1 Period 2 August 23, 2011 Board Meeting 24 Session #9308 8

9 25% Improvement 25% Improvement August 23, 2011 Board Meeting Mesa Consolidated Water District CMMS Presentation 25 Questions? Mary Joyce Ivers, CPFP, PWLF City of Ventura Kurt B. Lind Mesa Water District Billy Wright LA Consulting Consulting, Inc. Session #9308 9