From Measurement to Management: A Performance-Based Approach to Improving Municipal Fleet Operations in Burlington, North Carolina

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1 From Measurement to Management: A Performance-Based Approach to Improving Municipal Fleet Operations in Burlington, North Carolina By Erik Brandon Osborne A paper submitted to the faculty of The University of North Carolina at Chapel Hill in partial fulfillment of the requirements for the degree Master of Public Administration April 1, 2012 This paper represents work done by a UNC-Chapel Hill Master of Public Administration student. It is not a formal report of the Institute of Government, nor is it the work of School of Government faculty. Executive Summary A comparison of data from the North Carolina Benchmarking Project reveals potential performance deficiencies in the Equipment Services Division in Burlington, North Carolina, relative to peer cities. Using a simplified variation of corporate-style benchmarking, the Equipment Services Division s work processes were compared with best-in-class peers (benchmarking partners) to identify policy and operational differences that could improve fleet services performance. This report recommends procedural changes in vehicle replacement policies, personnel management, and equipment usage that will improve operations, while cutting overall fleet costs.

2 BACKGROUND Equipment Services, which includes the maintenance of city vehicles and management of vehicle acquisition and assignment policies, is a service area critical to the success of any local government. When fleets are effectively managed, front-line service provision is supported, unnecessary costs are avoided, and internal customer satisfaction is high. Most municipalities choose to provide fleet services in-house. However, in recent decades, the quest for cost savings has led some municipalities to outsource fleet services when city departments were not able to match the efficiencies of the private sector. A comparison of data from the North Carolina Benchmarking Project shows that the City of Burlington, North Carolina, maintains an older fleet than most of its counterparts and has a mechanic workforce with a relatively low workload. 1 Reliable and timely performance data, such as that of the benchmarking project, can be used as a catalyst for service improvement. Using performance measures for evaluation of core services can help managers understand the strengths and weaknesses of their departments and can spur the type of managerial thinking that yields strategies to improve performance. 2 METHODOLOGY Modeled after the report, Development Review in Local Government: Benchmarking Best Practices, 3 this analysis entails three steps that are major components characteristic of corporate-style benchmarking initiatives. Following a literature review of best practices in fleet maintenance, fleet operations in Burlington were examined to detect any performance deficiencies. Three areas of fleet management were identified for further study: vehicle replacement, mechanic efficiency, and vehicle use. Noteworthy performers of these functions were identified through researching trade publications and professional associations. Interviews were conducted with these benchmarking partners to identify specific process differences that might account for performance superiority. The experience of these partners was helpful in devising implementation strategies and estimating the monetary benefits that would accrue from narrowing the performance gap. FINDINGS Problem with Equipment Replacement The process of establishing an appropriate schedule or strategy for replacing vehicles begins by forecasting the point at which vehicles are likely to become a liability to maintain. One professional standard calls for holding maintenance expenses per year below the cost of annual depreciation for any given vehicle. 4 Using vehicle history data from the fleet information system, including the cost of mechanic labor, this analysis found 39 vehicles in Burlington s fleet where annual maintenance costs exceeded the annual cost of replacing the vehicle. Together, maintenance costs for these vehicles exceeded annualized replacement cost by a total of $137,000 in Fiscal Year 2011 (see Appendix A for a listing of individual vehicle costs). This finding raises the possibility that the city might benefit from developing criteria to help make informed decisions about the true cost associated with repairs. Burlington currently uses FASTER s 15-point replacement module as its primary management tool for making replacement decisions. Under the 15-point system, vehicles are assigned points based on weighted criteria for vehicle age, mileage, and life-to-date maintenance costs (see Appendix C for calculation methods). When a vehicle reaches 15 points, it is deemed unfit for continued use due to its likelihood of incurring high repair costs. However, evidence suggests that the FASTER system was unable to accurately predict which vehicles would incur the highest costs in FY Of the 39 vehicles identified as high-cost vehicles, only 17 were identified for replacement in FASTER s module. (The city did not follow FASTER s advice to replace these 17 vehicles.) Further, regression analysis shows that most of the variation in cost incurred in 2011 could not be accounted for by the FASTER criteria (R 2 =0.0503). The fact that Burlington s current system is not reliably identifying the most-costly-to-maintain vehicles is strong evidence that Equipment Services would benefit from a more datadriven policy for making replacement decisions. 1

3 Solution: Replacement Decisions in King County, Washington King County has established an alternative method for assessing vehicle risk that appears promising. Fleet administration established its replacement criteria using a computerized lifecycle cost model called the Mean Annual Cost Equivalent (MACE). The MACE Model uses data from the fleet management database to compute a detailed lifecycle cost analysis and then recommends an optimal replacement criterion that minimizes the ownership costs for each class of vehicles. MACE not only calculates an optimal replacement point but also provides information about the cost of keeping a vehicle longer than the optimal point, allowing the administration to tie a dollar amount to deferment decisions. While conducting a lifecycle cost analysis is ideal, many organizations without the internal analytical capabilities may simply adopt the replacement criteria from an organization with comparable equipment that does a lifecycle cost analysis, such as King County. 5 The vehicle replacement criteria or life expectancy is then used to justify replacement decisions by calculating the cost per mile of repairs and comparing it against the expected cost per mile of replacement. The following formula is used to evaluate replacement decisions: Acquisition Costs / Estimated Life in Miles = Cost Per Mile of Replacement Cost of Repair / Remaining Miles in Estimated Life = Cost Per Mile of Repair Decision For instance a police car has an expected life of 110,000 miles according to the King County lifecycle cost analysis. In FY 11, a Burlington police car, (vehicle 00837) incurred repair costs of $6, at 87,000 miles. According to the equation, the cost of replacement would be $25,000 / 110,000 miles =.23 cents per mile. On the other hand, the cost of repair would be $6, / 23,000 miles =.28 cents per expected remaining mile. Based on a per mileage cost estimate, the choice to achieve the full expected life of this police car cost Burlington more than its replacement would have cost. Accounting for the value of remaining useful life of a vehicle seems to be a simple yet effective method for making educated replacement decisions. The method above depends on accurate lifecycle cost analysis and accurate estimates of the full cost of repairs. By factoring labor costs into the repair estimates it becomes possible to calculate a true break-even point. If Burlington were to adopt the method described above using an accurate, full cost estimate for repair, the Equipment Services Division could calculate the expected cost per mile of repair decisions, more easily identify expensive repairs, and make repair decisions based on financial ramifications. The result is that Burlington could save a portion of the $137,000 of maintenance cost spent in excess of replacement cost. It is estimated that adopting a more data-driven replacement policy could reduce the amount of maintenance cost incurred in excess of replacement cost ($137,000) by 10% to 25%, simply by calculating the cost per mile for both repair and replacement options, saving the city between $13,700 and $34,250 per year. Problem with Mechanic Productivity Results from the 2010 North Carolina Benchmarking Project indicated that fleet technicians in Burlington were carrying a significantly smaller workload than technicians in other cities. The benchmarking project measures workload using vehicle equivalent units or VEUs. A VEU is a relative measure of the annual maintenance burden of various classes of vehicles. Technicians in Burlington maintain an average of 145 VEUs apiece, whereas technicians in other cities maintain an average of 238 VEUs per mechanic. Similarly, the number of work orders each Burlington technician completed was low compared with technicians in other sampled cities. Burlington technicians each completed an average of 395 work orders in 2010, while the average mechanic in other cities completed 537. To assess the adequacy of productivity levels in Burlington, direct service or wrench turning hours were examined to determine the percentage of employee time spent on direct labor. Although Burlington does not bill 2

4 departments directly for labor, productive labor hours were compared to billable hours reported in the North Carolina study and to industry standards for direct wrench turning hours. Burlington s direct labor hours in FY 11 were 45% 6 of the 2080 hours paid to each employee (2080 paid hours includes 242 paid hours associated with vacation, sick leave, and holiday time 7 ). Burlington s productivity rate is 25 percentage points lower than the industry standard of 70% direct labor hours (which also includes estimates for vacation, sick leave, and holiday), and 30 percentage points lower than the benchmarking participant city average of 76% billable hours. The productivity rates of individual mechanics varied dramatically, ranging from a high of 68% to a low of 22% of total labor hours (Figure 1). The rate of inefficiency not only raises questions of workplace equity but also increases the real cost of service by effectively increasing the cost of labor per man hour worked. Even though charges for labor may not be billed to departments, the real cost of labor is borne by the city as a whole. Since the city is paying each mechanic a set salary, fuller utilization i.e., more repair jobs per day lowers the effective cost per hour for mechanic labor. Labor costs are calculated by dividing the cost of operations by the anticipated units of service (i.e., number of billable hours). At the current productivity percentages, the city would have to charge $71.06 for an hour of labor to recover the cost of operations. If the Equipment Services Division could achieve a 70% percent productivity rate by increasing the number of direct hours per each mechanic to 1456 per year, the cost of labor would decrease to $ , which represents a $29.56 reduction in labor cost for every hour of vehicle repair and maintenance (see Appendix D). Solution: Workforce Analysis in Winston-Salem, North Carolina In 2000, city officials in Winston-Salem opened up fleet operations to a managed competition bidding process. To remain competitive with for-profit shops, the Fleet Division had to look closely at staffing levels and productivity to control cost. Fleet administration conducted a staffing analysis by calculating the number of hours of direct maintenance labor that was required to maintain current service levels and matching the hours demanded to the labor supply at 70% productivity or 1456 annual direct hour per mechanic. The administrators determined that the Fleet Division could reduce staff from 50 to 39 persons over a 2-year period, which included a reduction of mechanic positions by eight. As a result of the internal audit and restructuring, the Fleet Division was able to underbid each of its private competitors. The example from Winston-Salem shows that conducting an analysis of labor hours is a best practice for determining the amount of labor demanded for fleet maintenance. Burlington s labor data shows direct service hours of 10,274 for FY 2011 (Table 1). 9 Industry standards suggest that productive workers can be Table 1. Labor Demand Calculation for FY 11 Direct Labor Hours 10,274 Divided Annual Direct Labor 70% Productivity 1456 Equals Mechanic Demand at 70% Productivity 7.05 expected to work 70% of 2,080 hours or 1,456 hours on wrench turning jobs per year. At 70% productivity per employee, Burlington could complete the same level of vehicle service with 7 mechanics, which would have saved the city $175,500 in staff salaries and benefits costs in FY

5 Increasing Productivity in Fort Myers, Florida Reducing staff without simultaneously improving individual productivity is a recipe for failure. For Burlington to realize productivity gains in the midst of staff reduction, individual productivity levels must increase to fill the gap created by staff reductions. In 2008, the City of Fort Myers improved its productivity 10 to 20 percentage points after experiencing a 30% reduction in staff due to a city-wide buyout for early retirement. 10 After the staff reduction, Division Superintendent Ken Sibley responded by increasing his attention to technician accountability. When jobs began to back up, Sibley closely monitored individual job times using FASTER to track the progress of ongoing work orders. When a job began taking too long, Sibley would intervene by sending support to the struggling mechanic to help complete the job on time. Further, Sibley initiated a monthly review of productivity rates with the mechanics. In addition, when the shop was pressed with growing workloads, mechanics were assigned to jobs based on the type of work in which they excelled or had expertise. Mechanics increased their efficiency by specializing in job functions, and began working together on difficult jobs, leveraging their individual expertise to complete jobs faster. This active management of internal efficiency led the organization to increase individual productivity percentage points, filling the gap created by staff reductions. 11 If Burlington could achieve a 20% productivity increase by actively managing its workforce, the equipment services division could realize most of the productivity gains needed to achieve a 70% productive workforce. Problem with Vehicle Utilization A critical step in developing usage policies is to determine what level of use justifies ownership of a vehicle. Durham, Greensboro, and Winston Salem, North Carolina, have usage standards of 3,000, 3,600 and 4, miles per year, respectively. Using the benchmark standard of 3,000 miles per year or 11.5 miles per business day to justify ownership, this study found that 39 of the 467 vehicles (8.3%) in Burlington s fleet are underutilized and 20 vehicles (4.2%) are driven less than 5 miles per day. The cost to operate those vehicles driven less than 5 miles a day in FY was $27,000 in maintenance and repair costs (see Appendix F). Solution: Fleet Right-Sizing in Durham, North Carolina Best business practice is to own the fewest vehicles needed to do the job, thereby avoiding insurance, inspection, maintenance, and eventually replacement cost for under-used equipment. The City of Durham actively manages the use of its fleet by enforcing a vehicle usage policy and by conducting annual vehicle usage studies. Durham s vehicle policy established an annual minimum usage standard for justifying city vehicles at 3,000 miles per year for on-road vehicles or 300 hours for off-road equipment. Each year Durham s fleet manager runs a report to determine which vehicles or equipment are not meeting the usage criteria. Then the manager meets with the departments having low mileage vehicles to better understand their needs and use of the vehicles in question, before making a recommendation to keep or dispose of an underused vehicle. Removing underused vehicles and transferring their miles to higher usage vehicles would eliminate those vehicles maintenance service cost and decrease the cost per mile of those vehicles to which the miles are transferred. The result would be the elimination of maintenance cost for underutilized vehicles and a modest increase in maintenance cost for those vehicles to which the miles are transferred. Therefore, it is estimated that annual saving associated with removing underutilized vehicles will be one-half of the $27,000 of maintenance associated with underused vehicles or $13,500. Replacing underused vehicles not only reduces maintenance and repair cost but also reduces future replacement costs. If retained in the fleet, these 20 underused vehicles will be replaced over the next 10 years, costing the city an additional $829,

6 RECOMMENDATIONS Based on the findings contained in this report the following recommendations are offered to improve service provision in Burlington s Equipment Services division. 1. Use full-cost estimates, including parts and labor, when deciding whether to repair or replace a vehicle. Following the King County, WA, model will produce an estimate of the cost per mile of continuing the service of a damaged vehicle and allow that estimate to be compared to the cost per mile associated with purchasing new vehicles. This simple calculation will allow replacement decisions to be made on actual cost projections and will reduce the instances where annual maintenance greatly exceeds depreciation costs. 2. Rather than appropriating funds for vehicle maintenance and repair directly to Equipment Services, appropriate these funds to the budgets of user departments and establish maintenance charges from Equipment Services. Direct billing is a best business practice that promotes more accurate record keeping and better internal decision making by accounting for the full cost of doing business. Further, switching to direct billing puts downward pressure on the fleet to become more efficient and cost competitive by making the cost of labor known to the departments. 3. Promote a more active role for the fleet superintendent in the management of fleet assets. Since Equipment Services has access to vehicle data unavailable to departments, the division Superintendent could provide great leadership in justifying replacement decisions from a financial perspective. This is the natural role of a fleet manager to provide third party leadership and technical assistance in the overall management of a city s vehicle assets. 4. Conduct a staffing analysis to match the workforce to labor demand at a 70 % productive standard through attrition or employee transfer. Further, a culture of accountability should be implemented in the fleet division where expectations are to meet a labor standard of at least 70% productive hours. Technician productivity should be a part of each employee s annual performance evaluation and should be reviewed by the Superintendent on a Table 2. Operational Impacts of Policy Changes Policy Annual savings 10- yr. savings Adopting King county vehicle replacement guidelines $24,000 $240,000 Aligning workforce to labor demand at 70% productivity $175,000 $1,750,000 Adopting fleet utilization practices $13,500 $135,000 Not replacing underused vehicles in the future $829,000 Total $212,500 $2,954,000 quarterly basis. A percentage of efficiency savings should be reallocated to making the fleet compensation and training packages match the market rate for North Carolina fleet services shops. As vacancies occur, more competitive wages will allow for the recruitment of mechanics with greater skills and experience, which can lead to in-sourcing more jobs and greater efficiency. 5. Decommission underused vehicles that are driven less than 3,000 miles per year and pool selected vehicles within departments to increase usage above 3,000 miles. Adopt a reimbursement policy that compensates employees for the use of own their vehicle when annual travel is less than 3,000 miles per year and pool cars are unavailable or impractical. CONCLUSION Over the last twenty-five years, performance measurement has become an increasingly important tool to local government managers in strategic planning, budgeting, and core services analysis. The real value of benchmarks lies in their ability to notify management when performance gaps exist, and to catalyze the type of managerial thinking and problem-solving that seeks explanations for underperformance and devises strategies for improvement. 14 This research shows that when used for core services analysis, benchmarking performance measures can be used to drive service improvements. The analysis identifies procedural changes that could save the City of Burlington nearly $3 million over the next 10 years by adopting the efficiency and utilization recommendations described in this report. 5

7 1 Dale Roenigk. (2011). Final Report on City Services for Fiscal Year : Performance and Cost Data, University of North Carolina School of Government. 2 Ammons, D.N. (2002). Performance Measurement and Managerial Thinking. Public Performance and Management Review. Vol. 25 No. 4. June Ammons, D., Davidson, R., & Ewalt, R. (2008). Development Review in Local Government: Benchmarking Best Practices. Institute of Government. The University of North Carolina at Chapel Hill. 4 Interview with Clayton Hearne. Fleet Manager. City of Durham Fleet Services Division. 5 King County Auditor s Office. Performance Audit County Vehicle Replacement. Report No hours of direct labor for the year were divided by (2080 *11employees) = 44.9% 7 City of Burlington Internal Publication. Employee Handbook. 8 American Public Works Association. (2002). Top Ten Performance Measures for Fleet Managers. 9 FASTER Fleet Management System. Report 301- Technician Accountability. 11/11/2011 9:00 am. 10 Interview with Ken Sibley. Superintendent of Equipment Services Division. Fort Myers, FL. 11 Interview with Kenneth Sibley. Superintendent of Equipment Services Division. Fort Myers, FL. 12 City of Durham Audit Services Department. Fleet Utilization Performance Audit. October Based on current purchase order prices from recent acquisitions in Burlington, NC. 13 Ammons, D.N. (2002). Performance Measurement and Managerial Thinking. Public Performance and Management Review.Vol. 25 No. 4. June

8 Appendix A: Vehicle Replacement Cost Compared to Maintenance Costs at Real Cost of Labor Vehicle Identification Estimated Replacement Cost Expected life in Years Year 1 Maintenance Costs New Vehicle (2% of acquisition) 7 Annual Replacement Cost (Depreciation + Year 1 Maint) FY 11 Maintenance $70 Labor Rate Difference $255, $5,100 $30,600 $58,410 -$27, $58, $1,160 $6,960 $26,208 -$19, $255, $5,100 $30,600 $43,619 -$13, $255, $5,100 $30,600 $43,355 -$12, $255, $5,100 $30,600 $42,182 -$11, $58, $1,160 $6,960 $12,036 -$5, $58, $1,160 $6,960 $10,713 -$3, $16, $320 $1,920 $6,081 -$4, $58, $1,160 $6,960 $10,103 -$3, $255, $5,100 $30,600 $29,405 $1, $16, $320 $1,920 $4,837 -$2, $21, $420 $2,520 $5,307 -$2, $21, $420 $2,520 $5,223 -$2, $58, $1,160 $6,960 $8,864 -$1, $16, $320 $1,920 $4,409 -$2, $25,000 5 $500 $5,500 $7,802 -$2, $21, $420 $2,520 $4,737 -$2, $16, $320 $1,920 $3,913 -$1, $25,000 5 $500 $5,500 $7,256 -$1, $16, $320 $1,920 $3,780 -$1, $20,000 7 $400 $3,257 $5,033 -$1, $25,000 5 $500 $5,500 $7,135 -$1, $21, $420 $2,520 $4,058 -$1, $58, $1,160 $6,960 $7,673 -$ $58, $1,160 $6,960 $7,666 -$ $21, $420 $2,520 $3,872 -$1, $255, $5,100 $30,600 $27,791 $2, $21, $420 $2,520 $3,670 -$1, $16, $320 $1,920 $3,124 -$1, $21,000 7 $420 $3,420 $4,466 -$1, $20,000 7 $400 $3,257 $4,308 -$1, $58, $1,160 $6,960 $7,314 -$ $25,000 5 $500 $5,500 $6,403 -$ $21, $420 $2,520 $3,485 -$ $25,000 5 $500 $5,500 $6,367 -$ $21, $420 $2,520 $3,357 -$ $21, $420 $2,520 $3,317 -$ $21, $420 $2,520 $3,229 -$ $16, $320 $1,920 $2,640 -$720 Total $2,502,000 $50,040 $315,354 $453,147 -$137,793

9 Notes Real Labor rate is estimated at $70 based on calculation cited in Appendix E. Maintenance costs assume a labor rate determination that seeks to recover full cost of operations ($71 per hour). Estimated replacement costs are based on recent purchase orders for similar vehicle class. Expected life is based on interview with Burlington's Fleet Superintendent, Todd Gilliam. Year 1 Maintenance costs are estimated at 2% of purchase price. Annual depreciation equals replacement cost divided by expected life. Appendix B: Vehicle Replacement Cost Compared to Maintenance Costs at $50 per Hour Labor Rate Vehicle Identification Estimated Replacement Cost Expected life in Years Year 1 Maintenance Costs New Vehicle 8 Annual Replacement Costs FY 11 Maintenance $50 Labor Rate Difference $255, $5,100 $30,600 $52,503 -$21, $58, $1,160 $6,960 $22,513 -$15, $255, $5,100 $30,600 $39,244 -$8, $255, $5,100 $30,600 $38,831 -$8, $255, $5,100 $30,600 $37,340 -$6, $58, $1,160 $6,960 $14,104 -$7, $58, $1,160 $6,960 $10,578 -$3, $16, $320 $1,920 $5,388 -$3, $58, $1,160 $6,960 $9,487 -$2, $58, $1,160 $6,960 $8,856 -$1, $21, $420 $2,520 $4,894 -$2, $21, $420 $2,520 $4,700 -$2, $16, $320 $1,920 $4,171 -$2, $16, $320 $1,920 $3,905 -$1, $25,000 5 $500 $5,500 $7,152 -$1, $58, $1,160 $6,960 $8,019 -$1, $21, $420 $2,520 $4,195 -$1, $16, $320 $1,920 $3,656 -$1, $16, $320 $1,920 $3,304 -$1, $20,000 7 $400 $3,257 $4,341 -$1, $25,000 5 $500 $5,500 $6,493 -$ $25,000 5 $500 $5,500 $6,428 -$ $21, $420 $2,520 $3,458 -$ $21, $420 $2,520 $3,429 -$ $21, $420 $2,520 $3,250 -$ $16, $320 $1,920 $2,712 -$792 Total $1,685,000 $33,700 $210,557 $312,949 -$102,392

10 Notes Labor rate is estimated at $50 based on market rates. Estimated replacement costs are based on recent purchase orders for similar vehicle class. Expected life is based on interview with Burlington's Fleet Superintendent, Todd Gilliam. Year 1 Maintenance costs are estimated at 2% of purchase price. Annual depreciation equals replacement cost divided by expected life. 9

11 Appendix C: Explanation of FASTER 15-Point Rating System The 15-Point Rating System was developed for Collier County, Florida using the American Public Works Association Managing Public Equipment, Special Report 55 as a guide. This program of rating vehicles and equipment won the 1992 NACO (National Association of Counties) Achievement award for Equipment Replacement Program. Although this method may be less complicated than some, it reliably identifies equipment analysis utilized in the industry. There are three factors that are evaluated in determining total points assigned to any piece of equipment: 1. Maintenance Costs Life-to-Date (LTD): Maintenance Costs LTD are weighted double, on a scale of 0-10, and hit its highest level (10) when the maintenance costs LTD equal the original purchase price. The points are determined by the percentage of the current LTD maintenance divided by the original purchase price. (Maintenance Dollars life to date / Acquire Cost) * 10 ($10, / $20,000.00)10 = (0.5)10 = 5 2. Life-to-Date Mileage or Hours: LTD miles or hours are rated on a scale of 0-5. The points are determined by the percentage of the current LTD meter divided by the expected meter life. Meter reading = (Actual meter reading / Life Expectancy) * 5.00 (50,000 miles / 100,000 miles expected)(5) = (0.5)(5) = Expended Life In Months: Life in months is rated on a scale of 0-5. The points are determined by the percentage of the current life in months divided by the expected life in months. Age = (Current Life Months/ Expected Life Months) * 5.0 (50 months / 100 months) = (0.5)5 = 2.5 Things to Note: Although a combination of all three factors can total 20 points, the optimum standard for replacement consideration is 15 points. Well maintained assets will extend the life of the vehicle and provide a larger return on investment at the time of disposal. The user does not relinquish their control by using FASTER s 15 point system. Using our adjustment points, the fleet can fine tune the system by retaining equipment still in good shape while accelerating the disposal of select equipment. 10

12 Appendix D: Labor Rate Calculation Inputs FY 2010 Mechanics Employed 11 Paid Hours per Year per Mechanic 2080 Total Paid Mechanic Hours Per Division Outputs Direct Service or "Wrench Turning" Hours 9391 % of Total Paid Hours Spent Doing Direct Labor 41.04% Costs Full Cost of Equipment Services Division $1,237,865 Minus Purchases for resale $516,852 Minus Sublet Work $53,682 Total Operating Cost Deductions $570,534 Operating Cost, Not Paid by Departments $667,331 Charge Back Rate at 46% Productive Hours ($667,331/9391 hours) $71 Charge Back Rate at 70% Productive Hours or 1560 Direct Hour per Mechanic ($667,331/16017) $42 11

13 Maintenance and R epair cost per Mile Driven in $ Dollars Appendix E: Vehicles Cost Per Mile and Annual Miles Driven y = ln(x) R² = ,000 10,000 15,000 20,000 25,000 30,000 Annual Miles Driven 12

14 Appendix F: Underutilization Report Fiscal Year 2011 Vehicle ID Class Replacement Cost 13 Annual Miles Total Operating Cost Labor & Parts Costs Maint. Cost Per Mile CLASS: 08 - Dump Truck $58,000 4 $ $ CLASS: 08 - Dump Truck $58, $ $ CLASS: 06 - Heavy Duty $24, $1, $ CLASS: 07 - Van $21, $ $ CLASS: 07 - Van $21, $ $ CLASS: 06 - Heavy Duty $24, $1, , $ CLASS: 04 - Light Duty $21, $2, , $ CLASS: 08 - Dump Truck $58, $1, , $ CLASS: 04 - Light Duty $21, $2, , $ CLASS: 05 - Medium Duty $21, $2, , $ CLASS: 07 - Van $21, $1, $ CLASS: 01 - Administrative $20, $1, $1.15 Car CLASS: 06 - Heavy Duty $24, $2, , $ CLASS: 07 - Van $21, $1, $ CLASS: 08 - Dump Truck $58, $1, $ CLASS: 68 - Refuse Side $255, $10, , $9.90 Loader CLASS: 10 - Police Unmarked $24,000 1,057 $2, , $ CLASS: 07 - Van $21,000 1,136 $2, $ CLASS: 08 - Dump Truck $58,000 1,286 $4, , $ CLASS: 08 - Dump Truck $58,000 1,414 $7, , $ CLASS: 04 - Light Duty $21,000 1,433 $6, , $ CLASS: 06 - Heavy Duty $24,000 1,508 $14, , $ CLASS: 06 - Heavy Duty $24,000 1,530 $2, $ CLASS: 08 - Dump Truck $58,000 1,628 $5, , $ CLASS: 07 - Van $21,000 1,754 $4, , $ CLASS: 68 - Refuse Side $255,000 1,836 $6, , $2.32 Loader CLASS: 04 - Light Duty $21,000 2,028 $2, $ CLASS: 03 - Compact Truck $16,000 2,143 $2, $ CLASS: 04 - Light Duty $21,000 2,205 $2, $ CLASS: 04 - Light Duty $21,000 2,336 $2, $ CLASS: 08 - Dump Truck $58,000 2,394 $3, $ CLASS: 43 - Sport Utility $20,000 2,504 $5, , $ CLASS: 08 - Dump Truck $58,000 2,538 $2, $ CLASS: 08 - Dump Truck $58,000 2,615 $7, , $ CLASS: 03 - Compact Truck $16,000 2,739 $4, , $ CLASS: 01 - Administrative $20,000 2,779 $2, $0.01 Car CLASS: 01 - Administrative $20,000 2,994 $3, $0.09 Car Total $1,619,000 $49,530 $124,827 $75,297