Fleet Report Chatham

REPORT ON

FLEET OPERATIONS STUDY

OF

FLEET SERVICES DIVISION

CITY OF SEATTLE

WASHINGTON

JUNE 2008

9 Southward Court Tel: (973) 966-9262Chatham, NJ 07928 Fax: (973) 822-1467 Web Site: www.chathamconsulting.com

June 16, 2008 Mr. Ken Bailey, Project Manager Fleet Services Division Fleets and Facilities Department 700 5th Avenue, Suite 5200 PO Box 94689 Seattle, WA 98124-4689 RE: Fleet Operations Study, Final Report Dear Mr. Bailey: Chatham Consulting, Inc. is pleased to submit this Final Report on the Fleet Operations Study that we conducted for the City of Seattle’s Fleet Services Division. Among our findings, conclusions and recommendations are:

• Fleet customers are generally satisfied with the work performed by Fleet Services, but desire more transparency, especially with regard to costs.

• That the City has codified a dedicated fleet fund is a best practice since it provides

the foundation for recovery of costs directly associated with fleet operating ex-penses and capital expenditures.

• Seattle’s maintenance and repair expenditures per maintenance and repair unit are

comparable to those of the other cities benchmarked.

• In general, we found that regulation compliance in all shops met the intent and spirit of OSHA and WAC regulations for the types of workplaces operated by the City.

• Fleet Services should adopt a vehicle replacement program similar in concept to

the VERP program described in this report.

• Fleet Services should revisit its vehicle specification process to increase the stan-dardization of the fleet. Insufficient standardization adversely affects mechanic productivity, parts warehousing and vehicle acquisition costs.

9 Southward Court E-mail: [email protected] Tel: (973) 966-9262 Chatham, NJ 07928 Web Site: www.chathamconsulting.com Fax: (973) 822-1467

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• The Fleet Services maintenance and repair staff is shorthanded by about four to five mechanics.

o More attention is needed in completing preventive maintenance in-spections on time.

o The City of Seattle should increase the amount of time allowed for formalized technical training for mechanics and other technicians.

• Fleet Services should establish a mechanic incentive and training program, whe-

reby future compensation is tied in with certification.

• We did find some facility capacity deficits at the Fire Shop, SeaPark and South Service Center facilities. Capacity can be added without constructing new facili-ties by shifting some of the workload from one facility to another, adding a work shift to the Fire Shop, reallocating space, and making some modest physical im-provements.

• Warehousing operations need to be improved through such tactics as: o Analyzing turnover and purpose of warehouse stock to set ordering

and stocking levels, o Parts kitting, and o Planning PM and other definable work in advance and giving the

schedule to Warehousing to prepare parts.

• Fleet Services should improve customer relations and outreach by: o Providing better performance reports and improved customer bills, o Establishing service level agreements, o Establishing an advisory committee of fleet coordinators to discuss on

a regular basis the tactical issues as opposed to the strategic issues that the Fleets Advisory Board discusses, and

o Other outreach methods described in the report.

• Major improvements are needed in fleet fund structure, rate computation, capital recovery analysis and transparency. For example,

o Rates should be designed to recover full costs; i.e., direct, indirect and overhead.

o Capital and operating costs and revenues should be accounted for in separate “funds”.

o The capital “funds” should be divided among individual major de-partment and consolidated smaller departments.

• Fleet Services should select and monitor more measures of performance in order

to improve efficiency.

• Mechanic technical training should be increased to industry standards of 40-80 hour per year in order to keep up with changing vehicle technology and diagnostic tools.

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We thank you for the opportunity to conduct this study, and the excellent cooperation provided by the City of Seattle, in particular the Fleet Services Division. Should you have any questions on the results of this study, please give me a call. Very truly yours, Sal Bibona President

Chatham Consulting, Inc. i City of Seattle - Fleet Operations Study

EXECUTIVE SUMMARY

INTRODUCTION

The City of Seattle, Washington engaged Chatham Consulting, Inc. to conduct a comprehensive

review of the Fleet Services Division (Fleet Services) of the Fleets and Facilities Department

(FFD). The purpose was to obtain expert assistance to: evaluate current practices, equipment and

facilities; identify and propose appropriate best practices; and, develop an implementation plan

for the resulting recommendations.

Our approach consisted of: personal interviews; physical inspections and work observations;

compilation and analysis of extensive qualitative and quantitative data; MRU vehicle equivalen-

cy analysis; benchmarking survey and analysis; surveys of Fleet Services customers, mechanics,

and other employees; application of study team experience; and the documenting of the findings,

conclusions and recommendations in this report.

OVERALL ASSESSMENT

The City of Seattle has a large and diversified fleet operation involving 4,365 vehicles, equip-

ment and trailer units. Fleet management in Seattle is complicated and sometimes conflicted,

since fleet specification, replacement, and maintenance rests with multiple organizations in the

City.

Nevertheless, we found fully burdened labor rates to be competitive with local vendors and

maintenance and repair expenses comparable to other municipalities which we benchmarked.

Also, Seattle compares favorably to most maintenance and repair service indicators except

downtime and the proportion of work that is scheduled, which we believe are being adversely

affected by a shortage of maintenance and repair personnel and the advanced age of some of the

specialty fleet units. We estimate this shortage to be about four to five (4 to 5) mechanics.

Chatham Consulting, Inc. ii City of Seattle - Fleet Operations Study

Customers seem to be satisfied with the technical competence of the Fleet Services mechanic

workforce. However, they are less satisfied with Fleet Services management and its processes

related to billing, providing spare vehicles, and budgeting.

Despite their concerns about pay, Seattle mechanics were still, as a whole, more satisfied with

their working environment and the supervisors they work for than the mechanics we surveyed

recently from other cities.

RESULTS

Overview of Fleet Operations

The City of Seattle has a large and diversified fleet operation of 4,365 vehicles, equipment and

trailer units, (including 41 vehicles it services from outside agencies). Annual costs are $54.1

million.

Fleet Services is responsible for maintaining all motorized vehicles and equipment used by City

departments. It also manages, specifies, finances and replaces the vehicles of all departments

except the City’s utilities, which manage, finance and replace many of their own vehicles under

Memoranda of Understanding (MOU). As a result, fleet management in Seattle is complicated

and sometimes conflicted, because fleet specification, replacement, and maintenance rest with

multiple organizations.

Fleet Services has a staff of 136 employees and operates five primary maintenance facilities.

FSD also manages a parts warehouse and provides motor pool and refueling services.

Fleet Services operates as an internal service fund and bills customer departments to recover its

expenses. The principal funding mechanism for Fleet Services is its vehicle leasing program,

whereby those customers leasing vehicles from Fleet Services are charged a monthly rate calcu-

lated to recover vehicle depreciation, replacement inflation, routine maintenance, and overhead.

Chatham Consulting, Inc. iii City of Seattle - Fleet Operations Study

Utilities are not charged for replacement of the vehicles they own, but may be charged for certain

overheads depending on the MOU with the utility.

Customer Survey

The customer satisfaction survey we conducted produced responses from 21 employees from 13

departments, including all major fleet users. The customers seemed to be satisfied with the tech-

nical competence of the Fleet Services mechanic workforce. However, they are less satisfied

with Fleet Services management and its processes related to billing, providing spare vehicles,

and budgeting. Also, customers give low marks on the user friendliness of the fleet information

system. While most customers rated chargeback rates as “reasonable,” they tended to not readily

understand the system or how rates were developed. Nor did they feel that the rates were devoid

of cross subsidization. The most frequently cited area of dissatisfaction or needing improvement

was communications by an overwhelming amount. In particular, much of this was focused on

customer relations and communications between Fleet Services management and the depart-

ments.

Supervisor and Crew Chief Survey

Thirteen shop operations supervisors and crew chiefs responded to our survey and represented

each of the Fleet Services’ shops. Some of the findings are:

• The supervisors were nearly unanimous in their opinion that the proper amount of stan-dardization does not exist for the City fleet.

• Supervisors rated the Warehouse between poor and average on how well the Warehouse adds parts to inventory for new in-service equipment or controls of inventory to reduce stockouts of parts.

• While nearly all indicated that they had a good understanding of their customers’ expec-tations, nearly all also indicated that were barriers to effective communications with cus-tomers.

• While most supervisors indicated that the fleet information system provided them with the proper information to manage their operation and work load, they cited improvement was needed in the consistency, accuracy, and timeliness of the data.

• While all of the respondents stated that they use “Performance Measures” to monitor and manage the performance of their shop operation, most of these measures are qualitative in nature and may vary by supervisor.

Chatham Consulting, Inc. iv City of Seattle - Fleet Operations Study

• Sixty percent (60%) of the respondents thought there were areas where work standards could be used to plan and evaluate shop performance.

• Most supervisors responded that they could plan as far as needed for preventive mainten-ance services and capitalization work, but only day-to-day for repair work.

• Eighty two percent (82%) reported that they periodically compared the costs of their op-erations to those available from an outside commercial supplier

• The respondents were split sixty percent (60%) “Yes” and forty percent (40%) “No” on whether employees received the proper amount of training. They felt that more training is needed on using the laptop and scan tools to diagnose repair needs.

• Only one half of the respondents believed that mechanic certification would be beneficial to their organization. This tepid reaction seems due to the belief that certification also needs to be coupled with pay increases for certifications.

• Nearly eighty percent of the supervisors believed that they needed more mechanics for their respective shops. Collectively, this need totaled between 8 and 11 mechanics.

Mechanic Survey

We received an excellent response rate to our survey of Fleet Services mechanics. Seventy-three

mechanics submitted completed questionnaires containing over 150 comments and suggestions

for improvement.



recently from other cities. Nevertheless, Seattle mechanics had lower satisfaction levels with

their compensation and benefits than mechanics of other government fleets we have surveyed.

The mechanics gave their highest scores to working for a supervisor that they respected, work

area safety, job security, treating employees with respect as individuals. These ratings are higher

than those of other public service fleets we have surveyed. On the other hand, pay, parts availa-

bility, opportunity for advancement, and having enough qualified people in their area to do the

work received the lowest scores.

When asked to describe what changes they would make to improve overall fleet operations, the

mechanics cited: Facilities & Equipment, Parts Operation, and Pay & Benefits most frequently.

Chatham Consulting, Inc. v City of Seattle - Fleet Operations Study

These areas accounted for over one-half of the responses made. Some mechanics were receptive

to incentive pay and certifications.

Warehouser Survey

At the request of Fleet Services, we extended our employee surveys to include the parts Ware-

house. We received six responses, which included all but one Warehouse location.

The warehousers seem to be more positive about their job opportunities than the mechanics did.

The greatest differences were the solving of technical problems, physical work conditions, and

cooperation between employees that the warehousers rated lower than the mechanics did. Con-

versely, the warehousers seemed to have less concerns than the mechanics did about pay. The

most frequently cited area to improve overall fleet operations dealt with management issues.

This was followed by: Communications, Staffing, and Standardization.

Maintenance Shops: Workload and Productivity

MRU analysis measures mechanic demand through maintenance and repair units (MRUs).

These units normalize simple and complex vehicles into a standard measure of workload. From

the data used to calibrate the MRU analysis, we found that Seattle averages fewer or about the

same number of mechanic hours compared to industry averages for about one-half of its vehicle

classes. On the other hand, Seattle appears to average significantly more hours per year for spe-

cialty units like aerial devices and some construction units, which in Seattle tend to be consider-

ably older than the industry average.

Fleet Services targets 1,500 billable hours per mechanic per year, which equate to a 72% utiliza-

tion rate. While Fleet Services mechanics and service personnel average a 74% billable rate, this

rate includes mechanic break times which tends to increase the apparent utilization rate. If the

Fleet Services target of 1,500 hours per year is used, the estimated staff needed would be 70,

which equals the existing staffing level, excluding Metal/Machine, Paint & Body and Capitaliza-

tion shops. In contrast, we customarily assume 65 percent mechanic utilization or 1,352 hours

per year. At this rate, the number of maintenance and repair staff needed would be 78 or about 8

Chatham Consulting, Inc. vi City of Seattle - Fleet Operations Study

more than the existing shop floor staff, excluding Metal/Machine, Paint & Body and Capitaliza-

tion shops.

Benchmarking Results

We benchmarked Seattle to five other municipal fleets in the West. These were comparable in

population size to the City of Seattle, and included: Albuquerque, El Paso, Fort Worth, Long

Beach, and Sacramento. We analyzed comparative information on fleet statistics, management

and operations and other data. In addition, we used MRU analysis to make comparisons among

the fleets of different size and composition. From our survey, we found:

• The respondents had:

o Fleets ranging in size from 3,000 to 4,400 units,

o Fleet departments ranging in size from 41 to 136 employees,

o Performed from 60 percent to 96 percent of work in-house.

• Seattle’s overall fleet department size is about seven (7) percent smaller than the other respondents, when taking into account the size and composition of its fleet in MRU ve-hicle equivalents.

• Seattle’s total maintenance and repair expenses per MRU were close to or below the me-dian values.

• Seattle is unique with its Metal/Machine and Aerial Rebuilding Shops - none of the other cities reported having such operations.

• Given the size of its operation and the diversity of services it performs, the composition of the Fleet Services organization is not unusual.

• Seattle seems to have more in common with the two other west coast cities of Long Beach and Sacramento in performing nearly all capital work in-house.

• Seattle was among the fleets that have a fleet replacement funding mechanism in place – not all cities surveyed have one.

• Nevertheless, Seattle was the only fleet that does not separately account for fleet re-placement and fleet operating funds.

• Seattle’s markups for parts, tires, and fuel are within industry averages.

• Seattle’s markup of vendor repair is higher than average, but is not the highest.

• Seattle’s technical training hours per year were among the lowest.

• All but Seattle have some incentives for mechanics to obtain certification.

• Seattle and Albuquerque were the only two fleets that reported not having service level agreements in place with customers.

Chatham Consulting, Inc. vii City of Seattle - Fleet Operations Study

Performance Analysis

Seattle’s maintenance and repair expenditures per MRU vehicle equivalent are comparable to

other cities benchmarked. Fleet Services also compares favorably to most maintenance and re-

pair service indicators except downtime and the proportion of work that is scheduled. This indi-

cates to us that that more attention is needed in completing preventive maintenance inspections

on time and having sufficient staff to do so.

Fleet age is another factor that influences this outcome since breakdown repairs tend to increase

with the age of the vehicle. This is particularly noticeable for aerial trucks, some cranes and con-

struction equipment, where the Seattle vehicles are generally older and taking more time to

maintain and repair than industry averages.

CONCLUSIONS AND RECOMMENDATIONS

Rate Setting and Replacement Funding

Conclusions

The City has followed best practices by implementing a dedicated fleet fund to track costs direct-

ly associated with fleet operating expenses and capital expenditures. However, major improve-

ments are needed in fund structure, rate computation, capital recovery analysis and transparency.

Exacerbating the situation are the following factors:

• Fleet Services is a large and complex organization that provides a multitude of services for a very large city fleet.

• Its customers have diverse needs, expectations and relationships with the Division.

• The existing methodologies for computing chargebacks are quite complex and not clearly understood by the customer base.

• Replacement funds are comingled with operating funds making it more difficult to easily determine how much money is actually available to meet future replacement needs.

• Existing rates are under recovering current fleet maintenance expenses, and may be under recovering projected capital requirements.

• A lack of transparency, although unintended, in rate development and funding creates:

o Doubt among customers on whether there are sufficient funds to replace their ve-hicles when due; and,

Chatham Consulting, Inc. viii City of Seattle - Fleet Operations Study

o Suspicion that their payments may be cross subsidizing other fleet operations.

• Furthermore, this lack unnecessarily increases the challenge for Fleet Services (or any fleet department for that matter) to justify the size of its fund balance and allay concerns of the fund being “raided” to serve other City, albeit, worthy needs.

These challenges can be mitigated by adopting the rate setting and fund management strategies

described below.

Recommendations

• Fleet Services should adopt activity based concepts in estimating future charge back rates.

• Rates should be designed to recover full costs; i.e., direct, indirect and overhead.

• Maintenance and repair rates should not be used to lower cash reserves in the Fleet sub fund account.

• The org cost accounts should be used to establish separate “funds” for capital and operat-ing costs.

• The capital “funds” should be divided among individual major department and consoli-dated smaller departments.

• An annual status report should be provided to the fleet customers on the amount of reve-nues collected, expenditures made, and reserves on hand in their respective accounts.

• Fleet Services should adopt a vehicle replacement program similar in concept to the VERP program described in this report.

• Also, the planning horizon to compute replacement rates should be extended to ten years from the five years presently used, except for fire tucks which should use a fifteen year forecast period.

Staffing

Conclusions

Compared to other large city fleet operations, the overall size of the Fleet Services fleet organiza-

tion is slightly smaller per MRU vehicle equivalent. However, the amount of personnel and fa-

cility resources that Fleet Services has in specialty shop operations like Paint & Body, Met-

al/Machine and Capitalization are significantly greater than other fleets surveyed for this study.

Furthermore, none of the other city fleets surveyed performs aerial device rebuilding in-house

like Fleet Services does. Detailed MRU analysis revealed that Fleet Services is shorthanded by

four to five (4 to 5) mechanics for maintenance and repair work.

Chatham Consulting, Inc. ix City of Seattle - Fleet Operations Study

Recommendations

• Fleet Services needs to reconsider the 1,500 hours per year it uses as a target to estimate mechanic requirements. This rate may be unrealistic. Instead, a more realistic target would be 1,350 hours (65 percent) or possibly 1,450 hours (70 percent productivity).

• Fleet Services should increase its maintenance and repair staff by four to five (4 to 5) me-chanics.

• Also, Fleet Services should apply the results of the MRU and origin/destination analysis of this study to insure that staffing remains balanced to workload by shop.

Work Priority and Scheduling

Conclusions

Work scheduling practices need to be improved. Challenging factors include: many facilities per-

forming work on vehicles based at other shops; and, significant amounts of capitalization work

are done at facilities other than the Capitalization shop. Templates have been proved in this re-

port to assist Fleet Services in improving work scheduling.

Recommendations

• Fleet Services should improve its work scheduling practices, using the templates included in this report as a guide.

• Closer attention should be paid to the amount of a facility’s work that is generated from vehicles assigned to other Fleet Services shops in the system.

Performance Measurement

Conclusions

While Fleet Services collects some fleet performance data, these data need to be to tracked and

plotted periodically so that any changes in performance levels can be spotted more easily. We

suggest additional performance measures to track. Furthermore, we note from the supervisor sur-

vey that improvement was needed in the consistency, accuracy, and timeliness of the data being

used in existing performance measurement efforts.

Chatham Consulting, Inc. x City of Seattle - Fleet Operations Study

Recommendations

• Fleet Services should increase the number of performance indicators its measures, espe-cially the numbers of preventive maintenance no shows and the amount of turn-around time by vehicle class, shop and department.

• Fleet Services should also consider developing a quarterly profit and loss statement by shop.

• Performance reports should be prepared for each shop and the division as a whole to faci-litate trending through time.

Vehicle Specification

Conclusions

Based on our field observations and results from our surveys of customers, shop supervisors and

mechanics, we conclude that vehicle specifications should be reviewed and standardization of

the fleet should be increased.

Recommendations

• Fleet Services should revisit its vehicle specification process to increase the standardiza-tion of the fleet. Insufficient standardization adversely affects mechanic productivity, parts warehousing and vehicle acquisition costs.

• Similarly, vehicle specifications should be written to provide a more cost efficient unit.

Specialty Unit Life Cycle Analysis

Conclusions

Seattle averages significantly more hours to maintain and repair specialty equipment like aerial

devices and digger derrick trucks, when compared to industry averages. However, the ages of

these units are significantly greater than average as well.

Recommendations

• Fleet Services needs to update the life cycle cost analysis of specialty equipment like bucket trucks, digger derricks and cranes.

• The results should be shared with City Light so that they can reevaluate their vehicle re-placement and funding practices. Aged units adversely affect not only Fleet Services’ mechanic productivity, but also City’s Light’s cost for maintenance, repair and down-time.

Chatham Consulting, Inc. xi City of Seattle - Fleet Operations Study

Cost of Service Analysis

Conclusions

We conducted a detailed analysis of the major labor, materials, facilities and support costs for

Fleet Services business processes. We also provided templates for evaluating when to use over-

time, rely on outside vendors and/or expand capacity.

From our analyses we found most, if not all, of the aerial rebuild activity is not cost effective

when taking into account the total costs to perform this work, including that of vehicle down-

time. While we recognize that the Metal/Machine Shop services not only vehicles but facility

machinery, it is only fair to question the cost effectiveness of this shop activity. Similarly, ve-

hicle upfitting costs should be compared to obtaining vehicles already upfitted by automotive

dealers. In particular, the cost of outfitting patrol cars and time needed to place them in service

should be compared to what can be obtained by competitive bids.

Recommendations

• Fleet Services should issue request-for-quotations for the following services:

o Aerial device rebuilding,

o Vehicle capitalization/upfitting work,

o Metal/Machine work, and

o Tire service.

• The quotations should include not only pricing but process times as well.

• Furthermore, alternative procurement strategies should be pursued such as acquiring ve-hicles on a turnkey basis, whereby the vendor supplies the vehicle already upfitted.

Outsourcing versus Overtime

Conclusions

Paying overtime and outsourcing certain tasks can be used as an effective management tool to

meet peak or specialty work needs in the short run. Meeting longer term needs requires addition-

al economic analysis.

Chatham Consulting, Inc. xii City of Seattle - Fleet Operations Study

Recommendations

• We suggest that Fleet Services adapt the templates in this report to assist in making deci-sions regarding the use of overtime and outsourcing to meet peak or specialty needs.

• Long term considerations, such as constructing a new maintenance facility to provide ad-ditional capacity or take on additional work, should be evaluated using internal rate of re-turn analysis (or equivalent), as described in this report.

Facilities Assessment

Conclusions

In general, we found that regulation compliance in all shops met the intent and spirit of OSHA

and WAC regulations for the types of workplaces operated by the City. Shop cleanliness and

housekeeping in general are commendable. We did find some capacity deficits at the Fire Shop,

SeaPark and South Service Center facilities. Capacity can be added without constructing new

facilities by shifting some of the workload from one facility to another, adding a work shift to the

Fire Shop, reallocating space and making some modest physical improvements.

Recommendations

• There appears to be some capacity deficits at the Fire Shop, SeaPark and South Service Center facilities.

• Capacity can be added without constructing new facilities by:

o Shifting some of the workload from one facility to another,

o Adding a work shift to the Fire Shop, and

o Reallocating existing space,

• Also, capacity and efficiency can be improved by adding some additional resources, such as:

o A heavy-duty lift for the Cedar Falls shop,

o Several computers for the Charles Street Truck Shop,

o Up-to-date scanning tools for vehicle and equipment diagnosis,

o Up-to-date subscriptions for on-line service manuals,

o Improved lighting at the Fire Garage,

o Sun screen shades for the west side of the Charles Street Shop, and

o Security fencing at the Haller Lake shop.

Chatham Consulting, Inc. xiii City of Seattle - Fleet Operations Study

• To accommodate future changes in fleet size and their impact on facility requirements, Fleet Services should develop a strategic facility plan.

Warehousing Operations

Conclusions

Some Fleet Services warehouses (Haller Lake, Fire Shop and South Service Center) lack space

to increase the number of parts in stock if there is a significant increase in size or mix of the

fleet. While each of these locations was generally clean, we observed at several locations evi-

dence of clutter and parts in the aisle ways. Also, we found:

• Most of the warehouses lack any area for expansion, but material flow is consistent with industry practice, except at Haller Lake were receiving and issuing are from the same counter location.

• The City inventory carrying cost falls within the range found at other maintenance and repair warehouses.

• More than 16 percent of parts had an inaccurate count, which is outside typical levels.

• The inventory variance rate of 10 percent is also higher than typical levels.

• The Warehousing function lacks defined performance measures.

• The help function in the FleetAnywhere system cannot be activated by Warehouse per-sonnel when they are using the program.

• Fleet Services lacks any planning on the parts needed for stock for preventive or predic-tive maintenance.

• Warehousers have good understanding of warehousing philosophies, but some lack actual parts knowledge.

• Fuel control is a very time consuming part of the warehousing duties, and takes away from their core duties.

• The large tire and wheel inventory in the Tire and adjacent Fire shop could be larger than necessary. It could be more cost effective to rely on inventories of local tire suppliers.

Recommendations

• Develop and use the ABC analysis technique of stock items to segregate low moving (emergency) parts so a true inventory turnover rate can be identified.

• Begin kitting parts for preventive maintenance and other scheduled work where it is feas-ible.

• Review existing inventory to ensure that the correct parts and quantities are being stocked, to increase the turns per year and reduce the total inventory on hand.

Chatham Consulting, Inc. xiv City of Seattle - Fleet Operations Study

• Identify parts that are needed for predictive maintenance and establish a timeline for add-ing these to stock.

• Start planning PM and other definable work in advance and give the schedule to Ware-housing for part kitting.

• Collect additional data for performance measures such as inventory accuracy rate, inven-tory variance rate and inventory stockout rate.

• Identify parts for stock at the time of new vehicle delivery. This should include items immediately needed, and items for predictive maintenance in the future.

• Make the help screens for Fleet Anywhere available while in the system.

• Have Warehousers take the ASE Parts Specialist series to improve their knowledge of parts to compliment their knowledge of warehousing procedures.

• The duties and reporting structure for the fuels control personnel should be clarified.

• A study should be done to determine the number and sizes of tires and wheels to be stored by the City. It may be possible to cost-effectively reduce tire inventory in the Tire Shop to a level that would provide tires for immediate use and rely on inventory main-tained at tire suppliers.

Employee Relations and Development

Conclusions

Despite their concerns about pay, Seattle mechanics were still, as a whole, were more satisfied

with their working environment and the supervisors they work for than the mechanics we sur-

veyed recently from other cities. Nevertheless, Seattle mechanics had lower satisfaction levels

with their compensation and benefits than mechanics of other government fleets surveyed. The

mechanics and their supervisors seemed receptive to certification provided it was tied into incen-

tives compensation.

Recommendations

• Establish a mechanic incentive and training program, whereby future compensation is tied in with certification. We recommend the sequence of testing and progression devel-oped by the Institute for Automotive Service Excellence (ASE). Other recognized indus-try standards can also be required in addition to ASE certification.

• Individual functions within the Fleet Services Division may elect certain series of certifi-cations relevant to their particular needs, but should at a minimum require basic entry level competence or certification completion.

• We recommend that the City of Seattle dedicate about two weeks of formalized techni-cian training per year, in line with industry standards.

Chatham Consulting, Inc. xv City of Seattle - Fleet Operations Study

• Finally, management leadership is the key to the success of any incentive or performance improvement program. Accordingly, the committee that is searching for a replacement to the recently retired Fleet Services Director should look for candidates possessing leader-ship qualities such as:

o A clear vision for Fleet Services,

o Being unequivocally committed to that vision,

o Ability to communicate that vision effectively to all employees,

o Commitment to and total rapport with people that serve in the division, and

o Basic management skills.

Customer Relations and Outreach

Conclusions

Customer relations and communications need to be improved. While most customers seem to be

satisfied with the technical competence of the Fleet Services mechanic workforce, they are less

so regarding Fleet Services management and its processes related to: billing, rate systems, fund

balances, spare vehicles, and budgeting. Furthermore, customers cited communications most fre-

quently as the area needing improvement, not only between them and Fleet Services manage-

ment, but also within the administrative levels of Fleet Services itself. This was corroborated

when nearly all of the shop supervisors and crew chiefs we surveyed indicated that that were bar-

riers to effective communications with customers.

Recommendations

Fleet Services should also improve customer relations and outreach by:

• Periodically reporting to them certain performance data involving:

o Number of preventative maintenance (PM) appointments scheduled and com-pleted.

o Number of PM no shows.

o Number and percent of work orders completed on time.

o Vehicle turn-around time report showing number of repairs completed within 24 hours, 24 to 48 hours and more than 48 hours.

o Vehicle downtime report showing percentage of time vehicles and equipment are available to the user.

o Number of road calls per month.

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• Summarizing charges per cost center each month, distinguishing between Fleet Adminis-trative fees, maintenance and repair, vehicle replacements, fuel charges, accidents, and capitalization charges.

• Distributing newsletters.

• Holding annual open house events.

• Sponsoring Customer Appreciation Days.

• Sponsoring contests and recognition programs for vehicle operators that best take care of their equipment.

• Increasing vehicle operator training through qualified vendor representatives.

• Conducting periodic customer satisfaction surveys.

• Establishing service level agreements with major customers, using the guidelines de-scribed in this report.

• Establishing an advisory committee of fleet coordinators to discuss on a regular basis the tactical issues as opposed to the strategic issues that the Fleets Advisory Board discusses.

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CONTENTS

LETTER OF TRANSMITTAL………………………………………………………………. 1 EXECUTIVE SUMMARY Introduction………….………………………………………………………………... i Overall Assessment…………………………………………………………………… i Results....………………..………….…………………………………………………. ii Conclusions and Recommendations………….………………………………………. vii CONTENTS…………………………………………………………………………………... xvii I. INTRODUCTION Background……………….………………………………………………………….. 1 Objectives…………………………………………………………………………….. 2 Approach……………………………………………………………………………… 2 Organization of Report……………………………………………………………...... 3 II. FLEET OPERATIONS OVERVIEW The Fleet. …………………………………………………………………………….. 6 Fleet Responsibilities and Organization………………………...……………………. 7 Funding Fleet Services………………………………………………………………... 13 Information Technology....…….……………………………………………………... 17 III. CUSTOMER SURVEY Background………………………….………………………………………………. 18 Ratings of Fleet Services Division and Shops………………………………………... 19 Comparisons To Outside Vendors……………………………………………………. 21 Comments On Ratings and Comparisons…………………………………………….. 21 Vehicle Suitability and Condition Rating…………………………………………….. 22 Fleet Information System Rating……………………………………………………... 22 Chargeback System Rating…………………………………………………………… 23 Any Significant Changes Noted……………………………………………………… 24 Suggestions for Improvement……………………………………………………........ 25 IV. SUPERVISORS AND CREW CHIEFS SURVEY Background………………………….………………………………………………. 26 Warehouse Ratings…………………………………………………………………… 26 Customer Relations……………………………………………………………............ 27 Performance Measurement…………………………………………………………… 28 Mechanic Training and Development………………………………………………… 30 Organizational Issues…………………………………………………………………. 31 Standardization…………………………………………………………….................. 33 Additional Comments……………………………………………………………….... 34

Chatham Consulting, Inc. xviii City of Seattle - Fleet Operations Study

V. MECHANIC SURVEY Background………………………….………………………………………………. 35 Ratings………………………………………………………………………………... 35 Suggestions For Improvement………………………………………………………... 37 Other Comments and Opinions……………………………………………………….. 39 VI. WAREHOUSER SURVEY Background………………………….………………………………………………... 41 Ratings………………………………………………………………………………... 41 Suggestions For Improvement and Other Comments………………………………... 42 VII. MRU AND WORKLOAD ANALYSIS MRU Concepts……………………………………………………………………….. 43 Work Order Analysis and Comparisons……………………………………………… 46 MRU Results For Seattle……………………………………………………………... 47 Resource Requirements………………………………………………………………. 49 VIII. BENCHMARKING SURVEY RESULTS Approach……………………………………………………………………………… 55 Fleet Operations……………………………………………………………………..... 56 Maintenance and Repair Expenses…………………………………………………… 61 Asset Management…………………………………………………………………… 62 Financial Management……………………………………………………………….. 63 Parts Management…………………………………………………………………….. 69 Employee Development………………………………………………………………. 70 Performance Measures and Targets………………………………………………….. 71 Customer Communications and Outreach……………………………………………. 72 Improvement Areas…………………………………………………………………… 74 IX. FACILITIES ASSESSMENT Introduction…………………………………………………………………………… 75 Findings………………………………………………………………………………. 75 Recommendations…………………………………………………………………….. 77 Prioritization and Cost Considerations ………………………………………………. 81 Long Term Considerations and Planning…………………………………………….. 81 Detailed Inspection Results By Facility………………………………………………. 82 X. WAREHOUSING OPERATIONS Approach…..……….…………………………………………………………...…….. 102 Existing Operations………………………………………………….……………….. 103 Warehousing and Materials Management Considerations…………………………… 103 Warehouse Layout Efficiency………………………………………………………... 104 Inventory Carrying Costs…………………………………………….………………. 106 On Hand Stocking Levels……….……………………………………………………. 108 Performance Measures and Benchmarking…………………………………………... 111 Policies and Procedures………………………………………..................................... 115

Chatham Consulting, Inc. xix City of Seattle - Fleet Operations Study

Findings………………………………………............................................................. 116 Recommendations……………………………………….............................................. 117 XI. RATE SETTING AND REPLACEMENT FUNDING Background…………………………………................................................................ 119 Fleet Services Sub Fund …………………………………............................................ 120 Establishing Replacement Rates ……...………..………………….............................. 124 Establishing Operating Rates……………...………………………………….............. 127 Template For Rate Development…………………………………............................... 132 Illustrative Rate Computations………………………………….................................. 136 VII. COSTS OF SERVICE ANALYSES Estimated Service Costs………………………………................................................. 139 Aerial Rebuild Activity……………………………….................................................. 141 Tanker Service…………………………....................................................................... 143 Other Activities………………………………............................................................. 143 Outsourcing Versus Overtime Template………………………………....................... 144 Investment Analysis………………………………....................................................... 146 Real World Considerations………………………………............................................ 150 Insourcing Considerations………………………………............................................. 152 XIII. PERFORMANCE MEASURMENT AND REPORTING General Concepts………………………………........................................................... 155 Measuring Fleet Performance………………………………........................................ 157 Performance Definitions and Targets………………………………............................ 161 Assessment of Current Performance and Productivity…..………............................... 163 Periodic Performance Reporting……………………………….................................... 164 XIV. WORK PRIORITY AND SCHEDULNG SYSTEM Establishing Priorities…………………….................................................................... 167 Workload Forecasting………………………................................................................ 168 Workload Units……...……………………………....................................................... 171 XV. EMPLOYEE EDUCATION AND INCENTIVES Mechanic and Supervisor Input………………………………..................................... 172 Seattle Multi-Step System……………………………….............................................. 173 Recent Trends………………………………................................................................ 173 Employee Education Considerations………………………………............................. 176 Incentive Training Program………………………………........................................... 177 Other Considerations………………………………..................................................... 179 XVI. CUSTOMER RELATIONS AND OUTREACH Input From Surveys………………………………........................................................ 180 Fleet Services Policy Manual………………………………......................................... 181 Service Level Agreements………………………………............................................. 183 Customer Performance Metrics………………………………..................................... 185

Chatham Consulting, Inc. xx City of Seattle - Fleet Operations Study

Customer Awareness Program………………………………....................................... 186 Other Outreach Programs……………………………….............................................. 187 XVII. FINDINGS, CONCLUSIONS AND RECOMMENDATIONS Overall Assessment........................................................................................................ 188 Findings………………….............................................................................................. 189 Conclusions and Recommendations………………….................................................. 190 EXHIBITS

1 Organization Chart: Fleet Services Division 2 Table Of Organization: Fleet Services Division 3 Tabulations Of Customer Survey Results 4 Summary of Supervisor and Crew Chief Survey Responses 5 Summary Of Mechanic Survey Responses 6 Summary Of Warehouser Survey Responses 7 Average Hours Per Vehicle Class For 2006 8 Comparison Of Average Hours Per Vehicle Class For 2006 9 Comparison Of Average Ages 10 Comparison Of Annual M&R Hours Versus Age 11 Distribution Of Labor Hours By Shop And Reason 12 Origin Destination Matrix Of Labor Hours: Assigned Location Versus Service Loca-

tion

13 Employee Utilization By Classification For 2006 14 Employee Utilization By Shop And Classification For 2006 15 Estimated MRUs By Assigned Facility Location 16 Capacity Analysis By Facility Location 17 High Level MRU Computations 18 Fleet Department Size By City 19 Maintenance & Repair Cost Ratios 20 Parts Management Data By City 21 Performance Measures Reported Used By City And Fleet Function 22 Areas Most Important To Improve 23 Best Practices Implemented 24 Sample Inventory Carrying Cost Computation At 20% Of Personnel Costs For Ma-

terial Handling

25 Sample Inventory Performance Computations 26 Illustrative Procedure: Parts Kitting, Issuing And Return To Stock 27 Statement Of Revenues, Expenses And Cash Flows 28 Graphs Of Revenues, Net Income And Cash Flows By Department 29 Graphs Of Coefficients Of Variation By Department And Total Fleet 30 Illustrative VERP Input And Output Form 31 Illustrative VERP Graph Of Cash Flows 32 Chargeable Hours And Rates Estimated By FSD For 2004 33 Revenues And Expenditures: Fleet Services Fund A50320: 2006 Year To Date 34 Summary Of Revenues And Expenditures: Fleet Services Fund A50320: 2006 Year

To Date

Chatham Consulting, Inc. xxi City of Seattle - Fleet Operations Study

35 Illustrative Allocations Of Overhead Costs 36 Cost Of Service Allocations 37 Fringe Benefit Rate: 2006 38 Allocation Of A2221 Vehicle Maintenance Expenses Into Activities: 2006 39 Cost Driver Shares 40 Costs Of Aerial Unit Overhauls 41 Estimated Tanker Refueling Costs 42 Data Sheet (Illustrative) 43 Repair Analysis Worksheet (Illustrative) 44 Scheduled Versus Unscheduled Labor Hours For 2006 45 Percent Of Seattle Fleet Work Orders That Are Breakdowns Versus Vehicle Age 46 Monthly Planner 47 Daily Planner 48 ASE Certification Training Programs 49 Illustrative Mechanic Development Program 50 Illustrative Policy & Procedures: Employee Responsibilities For City-Owned Ve-

hicles

Appendix: Sample Service Level Agreements

Fleet Operations Study

Chatham Consulting, Inc. 1

I. INTRODUCTION

BACKGROUND

The City of Seattle, Washington engaged Chatham Consulting, Inc. to conduct a comprehensive

review of the Fleet Services Division (Fleets Services) of the Fleets and Facilities Department.

The purpose was to obtain expert assistance to: evaluate current practices, equipment and

facilities; identify and propose appropriate best practices; and develop an implementation plan

for the resulting recommendations.

Currently, the City has a fleet operation consisting over 4,365 vehicle and mobile equipment

units (including 41 vehicles it services from outside agencies). The fleet is used by various City

departments, its two utilities (Seattle City Light and Seattle Public Utilities), as well as a few

outside government agencies. The Fleet Services Division provides centralized fleet

management, specification, acquisition, fueling and maintenance services for this $54.1 million

per year operation. Fleet Services uses the Maximus FleetFocus/FA software to manage its fleet

maintenance and parts management functions.

Fleet Services has a staff of 136 employees and operates five primary maintenance facilities. It

also manages a warehouse inventory of repair parts and supplies and provides a motor pool

service for the City. The City has partnerships with several bargaining unit organizations

representing Fleet employees.

A 2005 fleet consulting study of some aspects of Fleet Services operations found that service

quality but not service costs were competitive at that time. While challenging the accuracy of

some of the study’s findings, Fleet Services nevertheless reduced the size of its organization in

an attempt to reduce costs. Meanwhile, the City also recognized that performance improvement

is a continuous process and that to move forward it would be helpful to obtain professional

consulting assistance.



OBJECTIVES

The City commissioned this study to not only optimize current fleet operations and customer

service responsibilities, but also provide it with the tools, templates and real world strategies so

that the City could sustain these improvements into the future. Accordingly, the City established

the following scope areas, which formed the objectives of this study.

A. Optimize resource allocation, including the management of routine, peak, and specialty work.

B. Maximize employee productivity, including programs for continued employee education,

incentives and performance.

C. Enhance organizational performance metrics, including key performance indicators, methodologies, data, reporting, and possible peer organizations.

D. Optimize warehouse operations, including policies and procedures, on-hand stock

needed, and methodologies for measuring warehouse performance.

E. Evaluate rate-setting methodology and recommend adjustments to rate setting and replacement planning based upon applicable regulations, City financial policies, and industry and accounting best practices.

F. Propose an approach to negotiating individualized service level agreements with Fleets

customers, including core services, specialized services evaluation, changing conditions.

G. Provide a framework for evaluating the costs and benefits of providing additional or expanded services to existing or new customers.

H. Enhance customer relations and outreach, including customer-driven data, reporting,

surveys, and motivation methods.

I. Conduct a facility space needs assessment, addressing their adequacy and barriers to efficient operations.

APPROACH

Our work plan consisted of:

• Conducting over 36 interviews with:

o Management and supervisory personnel in all aspects of Fleet Services’ operation,

o Major customers including Police, Fire, Transportation, both utilities, Parks, and



o Other key stake holders including the Fleet Advisory Board, Finance, the Fleets and Facilities Department’s Accounting and Information Systems groups.

• Compiling and analyzing extensive statistical, cost and operational data including work orders, parts transactions and much other detailed data.

• Compiling and reviewing existing fleet policies, procedures, and documents.

• Observing work practices and conducting detailed inspections of all vehicle maintenance, parts and tire supply facilities.

• Conducting a satisfaction survey of Fleet Services customers.

• Conducting employee attitudinal surveys of Fleet Services supervisors, crew chiefs, mechanics, and Warehouse personnel.

• Conducting a benchmarking survey of the fleet operations of other comparable municipalities in the region to develop performance data and information on relevant issues and best practices.

• Analyzing a database of completed work orders from Cascor, Inc. an automated warranty recovery service used by the City and many other utility and government fleets throughout the nation, to support our Maintenance and Repair Unit (MRU) and benchmarking analyses.

• Applying the study team’s subject matter expertise and their collective knowledge of best fleet and general management practices to develop the study’s findings, conclusions and recommendations.

• Documenting the study’s results in this written report.

ORGANIZATION OF REPORT This report is divided into the following chapters: Executive Summary - Summarizes this study's major findings, conclusions and recommendations.

I. Introduction - Outlines the background, objectives and approach of the study and the organization of this report.

II. Fleet Operations Overview - Provides background information on the City fleet operations including their size, composition, administration, facilities, funding and other areas.

III. Customer Survey - Summarizes the results of the customer satisfaction survey of major fleet users, including service quality ratings, comments and suggestions for improvement.



IV. Supervisors and Crew Chief Survey - Summarizes the results of our survey of Fleet Services supervisory staff, including their ratings of fleet service delivery, suggestions for improving warehouse operations, customer relations, performance measurement, mechanic training, organization and other areas.

V. Mechanic Survey - Summarizes the results of our attitudinal survey of Fleet Services mechanics, including job and working environment ratings, and their suggestions for improvement.

VI. Warehouser Survey – Summarizes the results of our attitudinal survey of Fleet Services Warehouse personnel, job and working environment ratings and their suggestions for improvement.

VII. MRU and Workload Analysis – Provides a comprehensive explanation and analysis of the MRU (Maintenance and Repair Unit) vehicle equivalency approach and its specific application to Seattle. Also, analyzes workloads in detail, compare Seattle’s performance to industry average, estimates staffing needs and facility capacities for maintenance and repair of the fleet.

VIII. Benchmarking Survey – Provides comparative statistical information on and insights into various fleet management, organizational, financial, performance and customer related issues of other comparable sized municipal fleet operations compared to Seattle. Also, describes improvement areas of concern and recent best practices implemented.

IX. Facilities Assessment – Describes the detailed results of our facility inspections, including their adequacy, layout and equipment lives. Also, identifies barriers to efficiency, mitigation strategies, possible costs, and long term planning considerations.

X. Warehouse Operations – Reviews warehousing facilities, operations, stocking levels, performance, policies and procedures and develops recommendations for improved control and efficiency.

XI. Rate Setting and Replacement Funding – Provides a detailed assessment of the current chargeback approach, recommends updated rate models to recover operating and capital costs and provides best practice information and improved models for fund management.

VII. Cost of Service Analyses – Presents cost of service analyses for key business processes for comparing to outside vendor quotes. Also develops templates and strategies for evaluating options of overtime, outsourcing, insourcing, and expanding capacity.



VIII. Performance Measurement and Reporting – Reviews current performance levels; identifies and explains differences from standards; and proposes strategies and specific recommendations to improve shop maintenance operations and work practices.

XIV. Work Priority and Scheduling System – Provides guidance and templates in planning and scheduling work.

XV. Employee Education and Incentives – Presents training and incentive and programs tied in with certification to support staff in achieving performance goals.

XVI. Customer Relations and Outreach - Provides strategies for improving customer communication, motivation and reporting. Also, provides guidance and supporting information in conducting customer surveys and developing service level agreements. XVII. Conclusions and Recommendations - Provides our overall assessment of the Fleet Services Division and develops specific recommendations for areas in need of improvement.



II. FLEET OPERATIONS OVERVIEW

THE FLEET

The City of Seattle has a large and diversified fleet operation of 4,365 vehicles, equipment and

trailer units (including 41 vehicles it services from outside agencies). This fleet services not only

the City’s emergency departments like Police and Fire, but also two utilities (Seattle Public

Utilities (SPU) and Seattle City Light), as well as numerous City agencies like Transportation,

Parks and Recreation, and many others. Nine agencies have over 100 vehicles each and account

for more than 95% of the total fleet, as tabulated in Chart 1 below. The two utilities account for

nearly 40 percent of the total fleet inventory.

Chart 1: Fleet Count By Organization (a) Dept Count % of Total Cumulative City Light 927 21.2% 21.2% Seattle Public Utilities 675 15.5% 36.7% Parks & Recreation 640 14.7% 51.4% Police 620 14.2% 65.6% Department of Transportation 459 10.5% 76.1% Health 264 6.0% 82.1% Fleets and Facilities 261 6.0% 88.1% Fire 216 4.9% 93.1% Planning & Development 102 2.3% 95.4% Seattle Center 41 0.9% 96.3% Human Services 35 0.8% 97.1% Executive Administration 27 0.6% 97.8% Library 22 0.5% 98.3% Information Technology 19 0.4% 98.7% Office of Housing 8 0.2% 98.9% SMALL 8 0.2% 99.1%

Subtotal 4,324 99.1% 99.1% Outside Agencies 41 0.9% 100.0%

Total 4,365 100.0% Note: (a) Includes 130 tools and vehicle/equipment attachments.



Light vehicles are the largest vehicle group and account for nearly one-half of the fleet, as

illustrated in Chart 2 below.

FLEET RESPONSIBILITIES AND ORGANIZATIONS

The responsibility to manage, replace, and maintain all motorized vehicles and equipment used

by City departments rests with the Fleet Services Division of the Fleets and Facilities

Department, with the exception of the Utilities which have separate Memoranda of

Understanding with Fleet Services. While the utilities continue in all other respects to be part of

the consolidated City fleet, they have the authority to finance and manage the replacement of

their own fleet. Furthermore, Fleet Services has co-management responsibilities for the entire

fleet of the utilities. As a result, fleet management in Seattle is complicated and sometimes

conflicted, when fleet specification, replacement, and maintenance rest with multiple

organizations in the same City.

Chart 3 on the next page provides a high-level summary of the various services provided by the

Fleet Services Division to the different organizations within and outside the City of Seattle. The

paragraphs in the subsequent section provide further detail.

Chart 2: Fleet Composition

Light Vehicles, <10,000 lb gvw

(2,031)46%

Motorized Equipment (642)

15%

Tools & V/E Attachments

(130)3% Emergency

Vehicles: All PD & FD vehicles

(438)10%

Trailers (390)9%

Trucks (734)17%



Chart 3: Summary of Services Provided by Fleet Services to City Departments and Outside Agencies

Service Provided by Fleet Services

Non-Utility City

Departments

Utility Departments Outside

Agencies SPU City

Light Solid WasteDivision

Water and Waste Water Divisions

Light Equipment (under 14,000 GVWR) Specify (with customer input) and order equipment x x x x

Finance acquisition x x x

Maintain equipment x x x x x

Heavy Equipment (equal to or greater than 14,000 GVWR) Specify (with customer input) and order equipment x x

Finance acquisition x

Maintain equipment x x x x

Fueling x x x x x

Memorandums of Understanding

Fleet Services has Memoranda of Understanding (MOU) with both Seattle Public Utilities (SPU)

and Seattle City Light (SCL). These memoranda impact several areas of fleet responsibility,

management, financing and cost accounting.

Also, the memoranda make a distinction between light fleet and heavy fleet units. Light fleet

vehicles are those under 14,000 pounds GVWR (Gross Vehicle Weight Rating), and which

typically include sedans, pickups, SUVs, minivans and ¾ ton vans. The heavy fleet includes all

vehicles and equipment at or over 14,000 pounds (GVWR) such as construction equipment,

landscape equipment and solid waste handling equipment.

Seattle Public Utilities MOU

The MOU with SPU makes distinctions between the Solid Waste, Water, and Drainage &

Wastewater Divisions regarding maintenance, financing and management. The MOU reflects

some historical differences dating from the time each division was in fact a separate utility

department.



The Solid Waste Division has sole responsibility for the acquisition, financing and maintenance

its heavy vehicles and equipment. Meanwhile, the Water and the Drainage & Wastewater

divisions rely on Fleet Services to maintain their heavy vehicle fleets. Nevertheless, the light

vehicles for all SPU divisions are maintained by Fleet Services and are managed exactly like any

other City department.

Fleet Services also provides fleet administration services to the heavy equipment fleet of the

Water and Drainage & Wastewater divisions. It is responsible for ordering but no longer the

financing of replacement and new additions for these heavy units. Fleet Services, upon receipt

and verification to specifications, passes the invoices for such units on to SPU to directly pay the

vendor.

All SPU heavy vehicles purchased before 1999 remain on the books of the Fleets and Facilities

Department until they become fully depreciated. Then, SPU becomes only responsible for

maintenance expenses and overhead charges associated with those vehicles. All heavy vehicles

purchased after December 31, 1998 are paid for, owned, financed and depreciated by SPU.

However, Fleet Services continues to write the specifications for the SPU heavy duty fleet.

For those SPU heavy vehicles purchased before 1999 but which remain on the books of the

Fleets and Facilities Department because they have not been fully depreciated, SPU continues to

pay depreciation but no inflation component. (Maintenance expenses and overhead charges

continue to be paid.) When SPU took over financing of its heavy fleet, it was agreed that SPU

would continue to pay depreciation in lieu of purchase so that Fleet Services would be made

whole on its original investment in the equipment. However, there is no rationale to collect

inflation when Fleet Services no longer has a financial obligation for the replacement unit.

Seattle City Light MOU

The MOU with City Light is similar to one with SPU except for the financing of the light duty

vehicles. All City Light vehicles purchased after December 31, 1998 are paid for, owned,

financed and depreciated by City Light.



All light vehicles purchased before 1999 remain on the books of the Fleets and Facilities

Department until they become fully depreciated. Then, City Light becomes only responsible for

maintenance expenses and overhead charges associated with those vehicles.

For those City Light vehicles purchased before 1999 but which remain on the books of the Fleets

and Facilities Department because they have not been fully depreciated, City Light continues to

pay depreciation but no inflation component. There is no rationale to collect inflation when Fleet

Services no longer has a financial obligation for the replacement unit.

All light vehicles purchased after 1999 are procured by Fleet Services on behalf of City Light.

Fleet Services passes the vehicle invoices on to City Light to directly pay the vendor.

Timely Replacement of Vehicles

Both MOUs also stipulate that the Fleets and Facilities Department and the respective utilities

shall work together to replace vehicles in a timely manner. This effort includes:

• Guidelines for determining when SPU or City Light vehicles need replacement,

• Vehicle replacement schedules based on those guidelines,

• Exceptions to the replacement schedule where specific vehicles are determined to have an extended lifecycle based on mutually agreeable criteria, and

• Recognition that not following prescribed vehicle replacement schedules may increase maintenance costs, and therefore the rates that Fleet Services charges for vehicle maintenance.

As a practical matter, this last item became moot when Fleet Services switched to direct billing

of maintenance expense for the SPU and City Light fleets.

Fleets and Facilities Department

The Fleets and Facilities Department was created on January 1, 2001, as part of a reorganization

of City government. The Fleets and Facilities Department has four major operating functions:

Fleet Services, Real Estate Services, Capital Programs, and Facilities Operations. Fleet Services

purchases, maintains, and repairs the City’s vehicles and specialized equipment units, including



cars, light trucks, fire apparatus, and heavy equipment. Fleet Services also provides fuel for the

fleet.

Fleet Services Division

Fleet Services is organized as shown in Exhibit 1, and has an employee complement of 136 as

tabulated in Exhibit 2. It is divided into three major areas that parallel the broad array of services

that it provides:

• Shop Operations

• Fleet Administration

• Warehousing

Shop Operations provides not only vehicle maintenance and repair services, but also

capitalization work, aerial device rebuilding and refueling services. In addition, Fleet Services

operates several specialty shops including Paint & Body, Metal & Machine, and Capitalization.

Shop Operations has five primary locations.

• Charles Street Complex – 805 South Charles Street, 814 8th Avenue South, and 815 South Dearborn Street

• South Service Center Facilities – 4th Avenue South at Spokane Street

• Haller Lake Facilities – 128th Street North at Stone Avenue North

• SeaPark garage – 609 6th Avenue at James Street

• Watershed Facilities – Approximately 30 miles east and southeast of Seattle

Fleet Administration provides vehicle specification, procurement, and registration and other

administrative services. These services include: managing the vehicle and motor pool programs;

budgeting and accounting; overseeing the fleet information system; coordinating fleet

environmental issues; and, conducting technical studies.

Warehousing manages the spare parts inventory and procures services from outside vendors.

Warehousing also manages the fueling program. Warehousing operates parts rooms at the Fire

Garage and Main Vehicle Garage at Charles Street, South Service Center and Haller Lake.



Charles Street Complex

This complex is a multi-building, multi-use compound just south of the central business district,

used by multiple City departments. Fleet Services operates three vehicle maintenance buildings

here plus a fuel facility. The buildings include the:

• Fire Garage that services fire apparatus, emergency medical vans and small equipment.

• Tire Shop that includes a drive-through vehicle wash bay, vehicle service bays and a large storage area for tires.

• The Main Vehicle Garage that houses the primary maintenance operations of the car shop and truck shops and the capitalization program. Also housed in this facility are the specialty shop operations: Paint & Body, Capitalization (Cap), and Metal/Machine. There is a large parts warehouse located within this facility.

This complex is also the base for one of two diesel tanker trucks providing on-site fuel service

for the fleet.

SeaPark Garage

This facility is in the downtown civic center complex and uses space in a City owned parking

garage. The garage houses the City’s motor pool operations and provides parking for other City

vehicles, City employees and the public. Fleet Services has a small vehicle maintenance

operation that consists of two service bays, a wash area, warehouse, oil storage room, locker

room and restroom.

South Service Center

This facility is within a complex owned and operated by Seattle City Light. The main customer

is City Light and much of the equipment serviced is aerial-lift trucks. All aerial work platform

vehicles have inspections and overhauls conducted at this shop by the specially trained team of

mechanics. Fleet Services’ portion of the facility includes a service area, parts warehouse,

storage, wash/steam room, lathe/workstation and fueling station.



Haller Lake

The Haller Lake Complex is located approximately 9 miles north of the central business district.

The compound is shared with Seattle Department of Transportation and Seattle Public Utilities.

The complex includes a fuel station and is the base for the second diesel tanker truck, which

services vehicles in the north end of the City. Haller Lake provides primarily vehicle

maintenance services as well as crane inspection services.

Watershed Facilities

The City has small one to two bay vehicle maintenance shops at the SPU Watershed operations

of: Cedar Falls, Lake Youngs, Duvall and Tolt River. These operations are located from 20 to

more than 30 miles away from Seattle, and services vehicles domiciled in the Watershed areas.

There are two to three traveling mechanics that periodically circuit these facilities.

FUNDING FLEET SERVICES

The Fleet Services Division, as previously noted, provides a wide variety of services to many

clients. As an internal service fund, Fleet Services must bill customer departments to recover its

expenses. The principal funding mechanism for Fleet Services is its vehicle leasing program,

whereby those customers leasing vehicles from Fleet Services are charged a monthly rate

calculated to recover vehicle depreciation, replacement inflation, routine maintenance, and

overhead. (See the Chapter XI: Rate Setting and Replacement Funding for more detailed

information on the funding process.) Fleet Services also charges for other services like motor

pool and fuel supply services, as highlighted Chart 4 on the next page.



Please note that there are distinctions in the billing parameters for vehicle leasing and vehicle

maintenance that depend on whether the vehicles are owned directly by the Utility departments.

The utilities are not charged for replacement of the vehicles purchased under the MOU, but they

pay overhead for fleet administration services just like all other customers of the Fleet Services

Division.

Maintenance charges are calculated on a class average basis for each department separately.

Departments under the lease program are billed directly for repairs due to: accident, damage,

special maintenance (special work done at customer’s request), theft/vandalism and

emergency/storm related work.

Chart 4: Fleet Services Billing Methodologies Service Provider Org Service Provided Billing Methodology (a)

Vehicle Leasing A2212

Vehicles owned by, and leased from, Fleet Services

Calculated rate per month based on lease rate components for vehicle depreciation, replacement inflation, routine maintenance, and overhead.

Vehicles owned directly by Utility Departments.

Calculated rate per month based on lease rate components but charged for overhead only as outlined in MOU with Utility.

Motor Pool A2213 As needed daily or hourly rental of City Motor Pool vehicle

Actual Motor Pool vehicle usage based on published rates. Rates differ for car vs. van/truck and have hourly or mileage minimum and maximum rates.

Vehicle Maintenance A2221 Vehicle Maintenance Labor

Actual maintenance hours used for vehicle maintenance services. Normal maintenance on leased vehicles is charged to A2212. All other maintenance charged to using department. Billed at $74 per hour for all maintenance labor.

Warehousing A2231 Vehicle Parts, Supplies and Commercial services

Actual vehicle parts, supplies and commercial services billed at cost plus 14% for tires and capitalization; 25% for other maintenance parts and supplies; and, 22% for commercial services.

Fueling Services A2232 Vehicle fuel from City-operated fuel sites

Actual price per gallon of fuel consumed plus 19 cents per gallon mark-up at unattended sites and 44 cents per gallon mark-up for tanker fuel service.

Note: (a) Per 2007 Adopted and 2008 Endorsed Budget



Appropriations and Revenue Requirements

For 2006 the Official Budget for the Fleets and Facilities Department was $110.3 million, of

which $39.1 million were appropriated for the Fleet Services Division. The $39.1 million is

intended to provide enough budget authority to cover all Fleets and Facilities expenditures,

except intra-department expenditures among various Fleets and Facilities Department divisions

(such as payment of facility rent).

As an internal services organization, the Fleet Services Division tracks not only its consumption

of its appropriated budget authority, but also its annual revenues and expenses. The revenues

required to make Fleet Services whole (or breakeven) by the end of the year to pay its expenses

are known as “revenue requirements.” Revenue requirements are sometimes also referred to as

the “operating” or “management budget”. They are the most meaningful from a managerial and

financial performance (profit and loss) standpoint.

Revenue requirements differ from the appropriated budget in three significant ways. First,

Revenue Requirements reflect all intra-fund costs; whereas, appropriations are reflect only

payments made to parties outside of the Fleets and Facilities Department. As a result, the

revenue requirements for the Fleet Services Division are greater than those of the appropriations

budget.

Second, appropriations are geared to the Fleet Services Division’s anticipated expenditures for

inventory items. In contrast, the corresponding expense item in the revenue requirement reflects

the cost of goods sold (also known as resale).

Third, appropriations reflect the Department’s anticipated expenditures for capital items. In

contrast, the corresponding expense item in the Revenue Requirement reflects the depreciation of

current assets. (Capital items are defined as items costing more than $5,000 and that have an

anticipated useful life of three years or longer.)



Financial Control Systems

Management uses a financial control system known as “Summit” to monitor and control

expenditures and encumbrances for this purpose. (Summit is the City’s implementation of the

PeopleSoft financial accounting system.)

To track annual revenues and expenses, the Fleets and Facilities Department uses a financial

reporting system known as the Operating Statement and Expense and Revenue System or

OSERS. OSERS generates balance sheets, income statements, and cash flow statements for the

various subfunds that make up the Department. The Fleets and Facilities Department accounts

for its assets and liabilities in an internal services fund, known as the Fleets and Facilities Fund,

which has separate subfunds for Fleet Services, Facilities Services, and Administrative Services.

The subfund (#50320) for Fleet Services is a unified fleets fund that does not distinguish

between capital activities (e.g., purchasing and up fitting vehicles) and operating activities (e.g.,

maintenance and fueling). As of December 2006, this subfund had current assets of $18.8

million, of which $13.1 million were in cash.

Budget Control and ORGs

Both the Summit and OSERS financial reporting systems track expenditures at the “org” level.

The orgs are low level entities within each Department and which have been established for cost

accounting purposes. The Fleet Services Division uses seven orgs to control expenses for its

three major programs:

• Program: Vehicle Leasing

o Org A2201 Division Administration

o Org A2211 Leasing Administration

o Org A2212 Vehicle Leasing

o Org A2213 Motor Pool

• Program: Vehicle Maintenance

o Org A2221 Vehicle Maintenance

o Org A2231 Warehousing

• Program: Vehicle Fueling



o Org A2232 Fueling

INFORMATION TECHNOLOGY

The Fleet Services Division uses the Maximus’ Fleet-Focus FA (version 5.8.4) system to manage

its work orders, asset listings, fueling services, and other fleet data. Fleet Services is also rolling

out a web based version that will be enhancing system functionality and customer access.

Customers will be able to use their web browsers to: view equipment unit detail and location,

make service requests, enter meter readings, and, view work orders status.

There is a separate database that keeps billing detail reports that are distributed electronically to

allow customers to see the details of what they are paying for. Customers have the option of

printing a report formatted as a Microsoft Word™ document, or exporting the data to a

spreadsheet for analysis. Fleet Services Division is in the process of updating the report utility.

This utility will move to the web and eliminate connectivity problems that some customers have

had. While current reports only have one month of data available at a time, the updated version

will allow customers to select a range of dates to create year to date reports.



III. CUSTOMER SURVEY

BACKGROUND

To provide additional insight into how well customer needs are being met by Fleet Services and

where its services may need to be improved, we conducted a confidential survey of fleet

customers. We received 21 employee responses from the following 13 departments, comprised

all of the major fleet users and some with only a few vehicles.

• Arts and Cultural Affairs • City Light • Executive Administration Consumer Affairs/Weights and Measures Unit • Fire Department • Law Department • Municipal Courts Marshals • Parks & Recreation • PS Clean Air • Public Health • Seattle Department Of Transportation • Seattle Police Department • Seattle Public Library • Seattle Public Utilities

The survey was divided into:

• Questions requesting customers to rate the following areas: o Fleet Services Division and Shops o Comparisons to Outside Vendors o Vehicle Condition and Suitability o Fleet Information System o Chargeback System

• Open-ended questions for customers to comments on:

o Areas of Dissatisfaction o Any Significant Changes Noted (during past 18 months) o Suggestions for Improvement

As will be described in more detail in the following paragraphs, customers seem to be satisfied

with the technical competence of the Fleet Services Division mechanic workforce. However,



they are less satisfied with Fleet Services management and its processes related to billing,

providing spare vehicles, and budgeting.

Customers rated Fleet Services repair service better than that of vendors regarding repeat repairs

and repair quality. Cost effectiveness and repair timeliness were rated similar to those of

vendors, but less so regarding timeliness. Vehicle condition and suitability were rated as “fair.”

The fleet information received a mixed rating. Customers seemed to be satisfied with technical

support, but gave the system low marks regarding its user friendliness.

While most customers rated chargeback rates as “reasonable,” they tended to not readily

understand the system or how rates were developed. Nor did they feel that the rates were devoid

of cross subsidization.

The majority of customers indicated that there had been no significant change (positive or

negative) in services during the past 18 months. Of those that did, positive changes outnumbered

negative ones by a ratio of nearly two to one.

Based on the comments provided, the most frequently cited area of dissatisfaction or needing

improvement was communications by an overwhelming amount. In particular, much of this was

focused on customer relations and communications between Fleet Services management and the

departments.

RATINGS OF FLEET SERVICES DIVISION AND SHOPS

Customers were asked to rate Fleet Services and its shops regarding 16 different attributes. The

ratings ranged from “very satisfied to very dissatisfied” and “don’t know or non-applicable.”

We in turn assigned a numeric score to each response and then computed the average score

obtained for each attribute. (The scoring assigned a 4 for very satisfied, 3 for satisfied, 2 for



dissatisfied, 1 for very dissatisfied and 0 for don’t know or non-applicable.) Exhibit 3 provides a

complete tabulation of the individual scores for each attribute.

Chart 5 below graphically illustrates the average scores by attribute area. The three highest rated

attribute areas were:

• Technical Skills and Expertise of the mechanics

• Maintenance and Repair Turn-Around Time

• Communications with Fleet Services

Conversely, the three lowest scoring areas were:

• Billing Accuracy

• Obtaining Spare or Replacement Vehicles

• Vehicle Budgeting Process

Attribute Score: Very Satisfied = 4, Satisfied = 3, Dissatisfied = 2, Very Dissatisfied = 1, Don’t Know or Not Applicable = 0

Chart 5: Rating of Fleet Services Division and Shops

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Billing Accuracy

Obtaining Spares or Replacement Vehicles

Budgeting Process

Number of Mechanics

Specification Process

Shop Lines of Authority

Cost Effectiveness

Fueling

Adequacy of Resources

Repair Scheduling

M&R Quality

Courtesy

Responsiveness

Communications

M&R Turnaround Time

Technical Skills & Expertise



COMPARISONS TO OUTSIDE VENDORS

The survey asked the respondents to compare the quality and cost effectiveness of the Fleet

Services Division to outside vendors. As illustrated in Chart 6, Fleet Services was rated as being

“similar” in most areas, and scoring better in repeat repairs and quality of repairs when compared

to outside vendors. Timeliness was the lowest rated area.

Chart 6: Comparison of FSD To Outside Vendors

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Timeliness

Customer Service

Cost-Effectiveness

Quality

Repeats

COMMENTS ON RATINGS AND COMPARISONS

The customers were asked to describe any areas of dissatisfaction noted in their ratings of Fleet

Services and the comparisons made to outside vendors. The area most frequently cited was

communications.

In the communications area, customers felt that:

• Communications need to be improved when changes are being considered after mutual resolution of an issue has been agreed to between customer and Fleet Services.

• Information should be shared on fund balances that each department has available for replacement of vehicles.

• While the technical staff was competent, it was felt by some customers that the administrative staff was less cognizant of the Division’s needs and providing timely assistance.

• Information on when new vehicles are available for pickup by the customer needs to be communicated more consistently.

FSD is: Better = 3, Similar = 2, Worse = 1



• Lines of authority between the Fleet Services Division Director's Office and middle managers needed to be made clearer.

In other areas customers noted that the following was needed:

• Greater transparency in customer billing.

• More operator training on the basic preventive maintenance steps that the operator should be doing on a daily basis.

• Greater and timelier accuracy of fleet inventory listings at the low org level.

• Better understanding of customer department priorities in vehicle servicing.

• Improved availability for fuel keys for new cars – some would like to have at least three sets of keys.

• Lower costs.

• Increased Fleet Services staff size.

• More spare vehicles.

VEHICLE CONDITION AND SUITABILITY RATING

Overall, the fleet customers rated the working condition and suitability of the vehicles they use

as only “fair”. None rated their fleet vehicles as “poor”.

Chart 7: Overall Vehicle Condiition and Suitability Scores

1.0 2.0 3.0 4.0

Suita

bilit

y

FLEET INFORMATION SYSTEM RATING

The survey also asked the fleet customers to rate various characteristics of the fleet information

system. Most of the responses ranged between satisfied and dissatisfied. However, fleet

Vehicle Rating: Excellent = 4, Good = 3, Fair = 2, Poor = 1.



technical support had the highest rating, while user friendliness had the lowest rating. (See Chart

8 below.)

Chart 8: Rating of Fleet Information System

0.0 1.0 2.0 3.0 4.0

User Friendliness

Sufficiency

Accuracy

Timeliness

Report Ease

Support

Furthermore, when asked if the fleet information system provides them with the proper

information to enable them to manage their vehicle fleet, the vast majority of respondents (57%)

reported “yes.” Nevertheless, several suggestions were made on improving the system, mostly in

the areas of user access, friendliness and greater flexibility to conduct ad hoc queries.

CHARGEBACK SYSTEM RATING

Next, fleet customers were requested to provide their opinion on the chargeback system by

indicating the extent to which they agreed or disagreed with four statements regarding their

understanding and the fairness of the system. While about evenly split between “Tend to Agree”

versus “Hard to Decide,” there were significantly more indications of disagreement than

agreement with the statements. This means that the respondents tend to view the system as being

not readily understood or devoid of cross subsidization. (See Chart 9 on next page.)

Attribute Score: Very Satisfied = 4, Satisfied = 3, Dissatisfied = 2, Very Dissatisfied = 1, Don’t Know or Not Applicable = 0



Chart 9: Rating of Chargeback System

0.0 1.0 2.0 3.0 4.0 5.0

Understand Rate Development

Understand System

No Cross-Subsization Involved

Rates are Reasonable

ANY SIGNIFICANT CHANGES NOTED

When asked if they had noticed any significant changes (positive or negative) in fleet service

quality, communications, cost, etc. during the past 18 months, the vast majority of respondents

(57%) answered no. Of the nine respondents that offered specific comments on change, the

positive comments outnumbered the negative by a ratio of nearly two to one.

In a positive vein, the customers complimented the Fleet Services Division on the:

• Friendliness and helpfulness of the new staff that has been added. • Work ethic of fleet staff to meet customer needs.

On the other hand, some customers cited need for:

• More streamlining.

• Being more proactive in bringing in outside work as an overhead cost offset.

• Improved communications between the upper and middle level Fleet Services Division management regarding decisions that can be made by City Departments and decisions that Fleet Services should be making.

Scale: Strongly Agree = 5, Tend To Agree = 4, Hard To Decide = 3, Disagree = 2, Strongly Disagree = 1, Don’t Know or Not Applicable = 0

Greater Agreement



SUGGESTIONS FOR IMPROVEMENT

When asked to provide any other comments on how the City and Fleet Services could better

serve its vehicle users and/or make better use of existing vehicles and equipment, the customers

again cited communications more frequently than any other area needing improvement.

In the communications area, they suggested:

• Better understanding of service priority order: i.e., first come, first served or other protocol.

• More collaboration to resolve and solve issues. • Clearly defined roles and related decisions that can be made by the departments vs. Fleet

Services regarding operational needs. • Improved communication between those coordinating with a vendor and the end users to

speed up the process.

Other suggestions they made were:

• Additional training on how to best utilize the fleet information system to produce reports. • Additional spare vehicles. • Faster delivery of parts. • Consolidating the radio communications technicians, installers, and handling facility into

the Capitalization shop.



IV. SHOP SUPERVISORS AND CREW CHIEFS SURVEY

BACKGROUND

To obtain additional insight on existing fleet operations and suggested areas for improvement,

we surveyed the Shop Operations Supervisors and Crew Chiefs to obtain information on the

following topics.

• Warehouse Ratings

• Customer Relations

• Performance Measurement

• Mechanic Training and Development

• Organization

• Standardization

• General Comments

We received a total of 13 responses that represented each of the Fleet Services Division’s shops.

WAREHOUSE RATINGS

Chart 10 on the next page illustrates the ranking of warehouse services by the supervisors in five

areas. (The scoring assigned a 5 for very good, 4 for good, 3 for average, 2 for poor, and 1 for

very poor.) While the overall scoring was slightly above average, the specific scoring regarding

how well the Warehouse adds parts to inventory for new in-service equipment or controls of

inventory to reduce stockouts of parts was between poor and average. In fact, as detailed in

Exhibit 4, about one-half of the respondents rated the warehouse poor regarding this attribute.



CUSTOMER RELATIONS

Ninety-one percent (91%) of the respondents indicated that they had a good understanding of

their customers’ expectations. However, ninety-one percent (91%) also indicated that were

barriers to effective communications with customers. The supervisors were asked to list those

barriers and what remedies they would suggest to correct them.

Chart 11: Communications Barriers and Remedies Barrier Suggested Remedy On some occasions the customers will send complaint to management instead of going to the supervisors of the shop.

Management encouraging the customers to talk with supervisor.

Communications between day and night shift workers.

Getting current customer contact/user information into our Fleet Focus system, so that email becomes more usable.

Customers believing that their equipment is a number one priority and that the shop has unlimited manpower to drop whatever they are doing to address theirs.

Educating customers that it's impossible to have immediate turnaround time on everything all the time.

Customers not familiar with or not knowing what procedures they should follow when requesting additional accessories.

Improve the consistency of the accessory approval process to avoid the customer misperception that they can have anything they want because they have been allowed so in the past.

Continued on next page

Attribute Score: Very Good = 5, Good = 4, Average = 3, Poor = 2, Very Poor = 1

Chart 10: Rating The Warehouse

0.0 1.0 2.0 3.0 4.0 5.0

Respond to the needs of the maintenancedepartment?

Control inventory to reduce stockouts of parts?

Control inventory to remove out of serviceequipment parts from inventory?

Add parts to inventory for new in serviceequipment?

Respond to the needs of the maintenancedepartment?



Some fleet coordinators who are very non responsive to our requests about equipment builds, damage repairs and special maintenance requests

Fleet Services Division setting a minimum standard of qualifications for fleet coordinators, and being involved in the hiring process.

The crew chiefs for the other departments are moved so frequently that it is hard to keep track of who is in charge of the equipment.

Contact information in Fleet Anywhere should be updated more often, preferably with direct number.

There is always mentioning of service level agreements.

Improve explanation and availability of service level agreements for referrals.

PERFORMANCE MEASURMENT

Fleet Information System Needs

Two thirds of the supervisors indicated that the fleet information system provided them with the

proper information to enable them to manage their operation and work load. Still, they noted

improvement was needed in the consistency, accuracy, and timeliness of the data in the system.

Use of Performance Measures

All of the respondents (100%) stated that they use “Performance Measures” to monitor and

manage the performance of their shop operation. Most of these measures are qualitative in nature

and may vary by supervisor. The performance measures can be summarized as follows:

• Comparisons to flat rate guides and vendor pricing. • Annual employee evaluations. • Quarterly evaluations of new employees. • Weekly check of PMs due list. • Downtime/Uptime percentage monitored every 6 months • Review of completed work and work order data.

Applicability of Work Standards

Sixty percent (60%) of the respondents thought there were areas where work standards could be used to plan and evaluate shop performance. These areas were:

• Benchmarks for labor hours on similar jobs/equipment.

• Scheduled PM service.

• Labor charges or rates from other municipalities or tire vendors.

• Customer satisfaction surveys



• Downtime percentage by shop/department/vehicle type.

Forecasting Shop Workload

When asked how far in advance they were able to forecast shop workload, most supervisors

responded that they could forecast as far as needed for preventive maintenance services and

capitalization work, but only day-to-day for repair work. Unpredictable break downs, employee

absences, and a short crew can impact what can be completed for scheduled work. Unscheduled

work such as breakdowns may and often do take priority.

A few supervisors felt they could not forecast their shop’s workload, because all of it was

unscheduled demand work or that their shop continuously had a heavy workload. One noted that

if more loaner vehicles were available and if a better system were in place for getting customers

to bring in their vehicles for PM's, he could forecast farther than to three to five days, as he does

now. The supervisor added that customers have just enough equipment to get the job done and

no spare equipment when their equipment needs service or repair.

Comparisons to Outside Shops

Eighty two percent (82%) reported that they periodically compared the costs of their operations

to those available from an outside commercial supplier. When asked further on how often and

what were the results of these comparisons, the respondents provided a variety of responses, as

outlined in the following paragraphs.

Some reported that they made comparisons on an on-going basis and when the opportunity

presented itself for a level comparison, which they felt did not occur often. Others noted that

many of the repairs sent out come back costing more than anticipated for a variety of reasons.

Still others reported that they normally do not make such comparisons, unless they are obtaining

three competitive estimates for work not normally done in-house.

Others stated that they regularly check the invoices and amount of downtime associated with

repairs made by vendors. In their opinion, the quality of vendor repairs is inadequate compared

to the repairs done in-house. Vehicles are most often sent out when: there are not enough



mechanics available; there is a heavy workload; or, the shop lacks specialized equipment for

heavy truck engine work.

MECHANIC TRAINING AND DEVELOPMENT

Training

When asked whether they or their employees received the proper amount of training to perform

their job functions, the respondents were split sixty percent (60%) “Yes” and forty percent (40%)

“No.” The respondents felt that they did not have sufficient training on using the laptop or scan

tools to diagnose repair needs. Also, they noted the following:

• A larger tool budget may be needed.

• More factory rather than generic training is needed.

• Ongoing refresher training in Hazmat for tanker operations.

• More supervisory and human resources training.

• More heavy equipment engines and running gear diagnosis and repair training.

Certification

Only one half of the respondents believed that mechanic certification would be beneficial to their

organization. This tepid reaction seems due to the belief that certification also needs to be

coupled with pay increases for certifications. Nevertheless, certification was felt by some to have

benefits such as:

• A training tool,

• Increasing general competence,

• Keeping skills up to date,

• Giving the organization a certain “clout”,

• Justifying better wages to retain keep quality people, and

• Promoting pride in work quality.

One respondent noted that City needs to hire competent mechanics to start with rather than hiring

far down on the hiring list. The respondent felt that hiring at a lower level creates problems in the



future by increasing training needs and adversely affecting equipment downtime and mechanic

productivity. Instead, the respondent believed it would be better for the City to raise its

standards in mechanic hiring and pay better wages to attract better quality mechanics.

Still, some are not convinced that certifications which are usually by written test really provide a

true measure of what a person knows.

ORGANIZATIONAL ISSUES

Rewarding Exemplary Performance

Eighty two percent (82%) said that individual employees can be recognized for exemplary work.

They noted that while employees could be recognized, there really were not any financial

incentives. Recognition is done through memos of appreciation, plaques, thank you letters, e-

mails, shop celebrations, notation in their Annual Evaluations, or being provided with the

opportunity to temporarily fill in during the absence of a supervisor. This opportunity provides

the individual practical experience to enhance their ability for promotion should they desire that.

However, they added that the collective bargaining agreement holds the City to pretty strict

standards for equal treatment.

Disciplining Poor Performance

Conversely, when we asked if employees can be disciplined for poor performance, all of the

respondents said yes. They next were asked to describe the various remediation tools that can be

used before actionable disciple is undertaken.

They explained that a performance improvement plan or agreement could be used. Special needs

or needed training can be sought. An Employee Assistance Program could be suggested.

They explained that the specific tool used depends on the severity or nature of the poor

performance. If poor performance were caused by a home life problem, an Employee Assistance

Program is available to address the issue. If not adhering to safety policies or a lack of specific



job knowledge are the issues, a Performance Improvement Plan that will include appropriate

counseling and training can be used. If there is no improvement over an allotted time frame,

Progressive Discipline would be implemented. Normally, before any “real" action takes place

the employee will receive a verbal warning and/or a corrective action plan to help them with the

job inefficiencies. The Progressive Discipline program is a multi-step process involving:

communicating clear expectations, verbal warnings, written reprimand, suspension and demotion

or discharge.

Fitting Within Fleet Services Division Organization

Eighty percent (80%) viewed their particular shop as a good fit in the overall Fleet Services

organization. Some differences were noted regarding the South Service Center and the Fire

Shop. The supervisors claimed that the job duties, core competencies, body of work, and skill

sets required for technicians are significantly different from those at the other shops. Even so

they point out that all fleet mechanics are paid and classified the same.

Proper Number of Mechanics

Only eighteen percent (18%) of the supervisors believed that they had a sufficient number of

mechanics for their shops. Only the Fire Shop and South Service Center did not report any

shortages. Generally, each of the other shops reported needing from one to two mechanics each.

As listed in Chart 12 below, the total shortage estimated by the supervisors is between 8 and 11

mechanics. Chart 12: Supervisor Estimates Of

Mechanic Shortages Shop ShortageCapitalization Shop 1 Car Shop 1 to 2 Haller Lake 1 Metal/Machine 2 Paint & Body: 1 to 2 Tire Shop 1 Truck shop 2

Total 8 to 11



Concerns were expressed in the:

• Hiring process taking months or longer to put a mechanic on the floor,

• Steady flow of breakdown work,

• Days or weeks of delays in starting jobs due shortage of personnel,

• Customer complaints regarding turnaround time

• Increases in fleet size, without increases in staff.

STANDARDIZATION

The respondents were nearly unanimous, at ninety percent (90%), in their opinion that the proper

amount of standardization does not exist for the City fleet. The supervisors cited the following

benefits of standardization affecting their departments.

• Less training needed for the mechanic,

• Improved parts availability from the warehouse,

• Less diagnostic tools and software needed,

• Increased proficiency in repairs, and

• Less vehicle downtime.

Currently, they feel that the City offers too many choices to its customers. All this costs the City

money in parts inventory, training, tools or down times. They would like departments (fleet

coordinators, supervisors and operators) to agree on standardization of pickups, trailers of the

same classes and heavy equipment in order to make outfitting the fleet more cost efficient. They

spend a lot of time and resources customizing equipment for operators.

As a cited example, the City seldom purchases the same make of fire apparatus twice. As a

result, the City has fire apparatus from 11 different manufacturers. This means many more parts

need to be stocked in the warehouse, additional training provided, and that it becomes far more

difficult to master all of the unique aspects of particular manufacturer offerings. Hugely

significant savings could be realized by the City if it were to standardize on just one or two

apparatus manufacturers.



ADDITIONAL COMMENTS

Finally, when asked to provide any additional comments or opinions, most of the respondents

expressed pride in their workers and the quality of services that they deliver. They also cited

their great familiarity with the City’s fleet and customer needs. Still, they noted that while the

Warehouse has made some improvements during the last year, additional improvement was

needed.



V. MECHANIC SURVEY

BACKGROUND

We conducted a confidential attitudinal survey of the mechanic workforce at each Fleet Services

shop to obtain their input on how to improve the services provided by the Fleet Services

Division. The survey questionnaire requested the mechanics to rate their present job, working

conditions, working environment and their immediate supervisor. The questionnaire also

provided the mechanics an opportunity to list their suggestions for improving operations, and

describe any other comments or opinions they might have. We received an excellent response

rate with 73 mechanics submitting completed questionnaires that contained over 150 comments

and suggestions for improvement.

RATINGS

Exhibit 5 provides a numerical and graphical comparison of the ratings given by Seattle

mechanics, as well as lists the average rating given by other public fleets for the same areas.

Despite their concerns about pay, Seattle mechanics still, as a whole, were more satisfied with



their compensation and benefits than mechanics of other government fleets surveyed.

Feelings About Current Job

The mechanics rated their jobs slightly less than average for having their ideas adopted and or

the authority to make decisions about how to do their job. Their scores are slightly higher than

those of other public service fleets which we had surveyed regarding these attributes.

Comparing scores by shop location, we found that the employees of Metal and Fire Shops had

the highest rating, while those of the Truck and Paint & Body shops had the lowest, as illustrated

in Chart 13 on the next page.



Rating of the City

The mechanics gave their highest scores to working for a supervisor that they respected, work

area safety, job security, treating employees with respect as individuals. These ratings are higher

than those of other public service fleets we have surveyed.

On the other hand, pay, parts availability, opportunity for advancement, and having enough

qualified people in their area to do the work received the lowest scores. Interestingly, the

attitudes toward pay were lower than those averaged by other public service fleets we have

surveyed. The Metal Shop again provided the highest rankings, while the Cap Shop the lowest as

plotted in Chart 14 below.

Working Environment

The mechanics have a very good understanding of their job responsibilities and how they impact

the work of others in the City. These understandings are slightly higher than typically found in

other cities that we have surveyed. Even the organization of workflow, which received a

middling rating, was rated higher than the other fleets did. Being sufficiently aware of things

Chart 14: Average City Rating By Shop

3.9 3.6 3.5 3.5 3.3 3.2 3.1 3.1 3.1 2.9

0.00.51.01.52.02.53.03.54.04.55.0

Metal S

hop

SeaPark

Fire Shop

Tire Shop

Car Shop

Haller L

ake

Paint &

Body

South SC

Truck

Shop

Cap Shop

Attribute Score: Very Good = 5, Good = 4, Average = 3, Poor = 2, Very Poor= 1.



happen in other parts of the City that might affect the way they do their job and the reluctance of

employees to reveal were rated closer to “harder to decide” than the other statements.

Immediate Supervisor Rating

The highest scores in this category were for the supervisors solving technical problems, dealing

fairly with employees, and supporting employees when the employee believes they were right.

These supervisor ratings were much higher than awarded by mechanics of other fleets. Even the

scores for rating supervisors were much higher than those rated in other fleets.

The Fire Shop and SeaPark provided the highest supervisor ratings, while the Paint & Body the

lowest, as shown in Chart 15.

SUGGESTIONS FOR IMPROVEMENT

When asked to describe what changes they would make to improve overall fleet operations, the

mechanics cited Facilities & Equipment, Parts Operation, and Pay & Benefits most frequently

and which accounted for over one-half of the comments made as illustrated in Chart 16 on the

next page.

Attribute Score: Very Good = 5, Good = 4, Average = 3, Poor = 2, Very Poor= 1.

Chart 15: Supervisor Ratings By Shop

4.5 4.54.0 3.9 3.9 3.9

3.4 3.3 3.2 2.9

0.00.51.01.52.02.53.03.54.04.55.0

Fire Shop

SeaPark

Metal S

hop

Car Shop

Tire Shop

Haller L

ake

Cap Shop

South SC

Truck

Shop

Paint &

Body



The following lists provide a representative cross section of the suggestions for improvement by

issue area.

Facilities and Equipment

• Better diagnostic tools for newer equipment.

• Improved hoists, lighting, and floor equipment.

• More work space and less congestion.

Parts Management

• Increased attention to stocking common serviceable items.

• Better inventory control i.e., stock more parts for current/upcoming vehicles and delete obsolete parts.

• Reduced time for parts procurement.

Pay and Benefits

• More attractive pay and benefits package.

• Mechanic positions reclassified based on job skills required.

Chart 16: Frequency of Reponses By Issue Area

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Wo rking H o urs

In-H o use

P aperwo rk

Other

Standardizat io n

C usto mer R elat io ns

P ro mo tio n

T raining

M anagement

Staf f Size

Supervisio n

C o mmunicat io ns

P ay & B enef its

P arts

F acilit ies & Equipment



Other Areas

• More factory-based and technical training that is up to date for new equipment.

• Improved listening skills of supervisors.

• More open communication from management to employees.

• Additional qualified technicians.

• Standardize the fleet to reduce the number of different makes and models.

• Standardize vehicle outfitting package.

• Re-arrange the order of the checklist items on the PM services to be more in tune with the actual order of items performed during the service in order to establish a smooth routine.

• Place burden on our customers to either bring in their vehicle for servicing or contact the shop regarding the vehicle’s location.

• Eliminate redundant paperwork.

OTHER COMMENTS AND OPINIONS

Finally, the mechanics were

given opportunity to express

any additional comments or

opinions. Forty four (44)

comments were made, a few of

which have been listed below.

Improved pay and benefits

dominated the responses and

accounted for over 40 percent

of the comments, as illustrated

in Chart 17.

The mechanics reiterated some of the same concerns they had when they made their suggestions

for improvement. It should be noted that there were several positive comments as well. The

following summarizes comments by topic area.

Chart 17: Frequency of Other Comments By Issue Area

0% 10% 20% 30% 40% 50%

Future

Communications

Facilities & Equipment

Supervision

Management

Other

Pay & Benefits



Pay & Benefits

• Increased pay and benefits. • Increased tool allowance. • Introduction of incentive pay, wages, and compensation for certifications

Other Areas

• Up-to-date subscriptions to manufacturers’ on-line service manuals.

• Less duplication in work effort.

• Improved people management skills of management.

• Increased shop staff.

• Empowerment of front line supervision.

• Improved communication between management and front line supervision.



VI. WAREHOUSER SURVEY

BACKGROUND

At the request of the Fleet Services Department, we extended our employee surveys to include

those employees in the Warehouse section. The survey we used included the same set of

questions contained in the mechanic survey and requested the warehousers to rate job, working

conditions, working environment and their immediate supervisor. Consequently, we were able

to compare and contrast the responses from both groups of employees. The questionnaire also

provided the warehousers an opportunity to list their suggestions for improving operations, and

describe any other comments or opinions they might have. We received six responses, which

included all but one Warehouse location.

RATINGS

Exhibit 6 provides a numerical and graphical comparison of the ratings given by the

warehousers, as well as lists the corresponding ratings given by the mechanics for the same

questions. The warehousers seem to be more positive about their job opportunities than the

mechanics are. The greatest differences were the solving of technical problems, physical work

conditions, and cooperation between employees that the warehousers rated lower than the

mechanics did. Conversely, the warehousers seemed to have less concerns than the mechanics

did about pay.

Also, the warehousers indicated that they had a better understanding of their job responsibilities

and how it affects the work of others in the City than the mechanics did. Yet, warehousers were

more reluctant to reveal problems or errors to management than their counterpoints in the

mechanic workforce.



Warehousers gave slight lower rankings to their supervisors than the mechanics did. This was

more noticeable in the areas of problem solving and fairness.

SUGGESTIONS FOR IMPROVEMENT AND OTHER COMMENTS

The Warehousers were then given the opportunity to make suggestions for improvement and

provide other additional comments or opinions. Most dealt with management, staffing, and

standardization, as represented by the following list.

Management

• Greater sensitivity by management of the impact of their decisions on day-to-day operations.

Staff Size

• Reduce paperwork or add data entry help.

Standardization

• Greater fleet standardization is needed.



VII. MRU AND WORKLOAD ANALYSIS

This Chapter explains the application of the Maintenance and Repair Unit (MRU) analysis to the

City’s fleet operations for benchmarking and resource analysis purposes. It begins with a

general discussion of what MRU analysis is and how it is applied. This is followed by an

analysis of how to take into account the City’s unique circumstances. It then derives appropriate

MRU factors for the City’s fleet are and reviews how these factors compare to industry averages.

The Chapter concludes by applying MRU analysis to estimate workload, staffing and facility

capacities. As will be explained in the subsequent paragraphs, the MRU analysis indicated that

Fleet Services is understaffed by four to five (4 to 5) mechanics for its maintenance and repair

work. (Staffing for capital work such as upfitting, modifying, and aerial device rebuilding is

treated separately.)

MRU CONCEPTS

Maintenance and Repair Unit (MRU) is a vehicle equivalency technique that is used to estimate

staffing and other resource requirements in a fleet operation as well as to perform benchmarking

comparisons. This technique weights the number of vehicles and equipment units in a fleet

operation in proportion to their relative maintenance and repair requirements. By this we mean

the amount of mechanic time needed for normal maintenance and repair activity of a fleet, but

generally excluding such work as:

• Capital improvements including: modifications or customizations or aerial device rebuilding,

• Vehicle upfitting or make-ready work, and

• Accident repairs.

These types of work need to be separately accounted for in making comparisons or estimating

resource requirements.



To apply MRU analysis the fleet inventory is first categorized into various vehicle and

equipment classes. Then, the number of vehicles in each class is multiplied by the respective

maintenance and repair weighting factor to produce the number of MRUs by class of vehicle.

These class MRUs are summed to provide the total MRU size for the fleet. Next, the proportion

of work that is performed in house is taken into account to yield the number of in-house MRUs.

This last adjustment is particularly important when benchmarking fleet staff size among from

different cities.

Weighting Factors

The weighting factors used in MRU analysis can be derived in several ways. One way is to

survey fleet managers to obtain their best estimates of the annual amounts of mechanic hours

needed to maintain a particular class of vehicle. The median values of their responses are

calculated for each vehicle class. Then, the passenger car is set as the base unit by dividing its

mechanic hour requirement into the mechanic hour requirements for each of the other vehicle

and equipment classes. This division yields the respective weighting factors by vehicle and

equipment class including the passenger car which has a factor of unity (1.0).

Another approach is to study the maintenance histories of specific vehicle classes. Sometimes

these studies will take into account other factors such as vehicle utilization or age. Much depends

of the availability of data and the degree of precision desired.

Sometimes for convenience, we have used 20 hours per year as the base MRU unit. This

facilitates making comparisons among different years of benchmarking data where the number of

hours to maintain a passenger car changes (generally downward) from year to year. It also avoids

having to divide by an odd number of passenger car maintenance hours. If 20 hours per MRU

were used as the base unit, then it is possible for the MRU factor for a passenger car to be less

than or greater than 1.0. For example, a passenger car averaging 18 hours per year would have a

MRU factor of 0.9. Alternately, if the passenger car requires 24 hours per year, it would have a

factor of 1.2. This is why it is important to know what the base unit hours are when trying to

compare benchmarking results from one year to the next or from one fleet to the next.



Workload Estimating

In essence, MRUs are a proxy for workload and thus serve as the common denominator in

comparing resource requirements among fleets of different size and composition. These

comparisons can be made on either a macro or micro basis.

A macro comparison examines such indicators as the cost of maintenance and repair expenses

per MRU or fleet organization size per in-house MRU. This type was used in analyzing the

results of the benchmarking survey of comparable cities described in Chapter VIII.

A micro comparison first converts the MRU size into annual mechanic hours by multiplying the

number of in-house MRUs for the fleet times the average number of mechanic hours per MRU;

i.e. the number of hours required to maintain a passenger car. Then, these mechanic hours are

divided by the direct hours available per mechanic or other “wrench turning” personnel to yield

the amount of “wrench turning” staff needed by location or the entire fleet operation as well.

This was used in the analyses of this chapter.

Classifying Vehicles and Equipment

Similarly, data availability and the level of precision desired affect the approach to use in

classifying the fleet. Sometimes a high level approach will be used in order to obtain the

maximum degree of participation from fleet operations that are potentially interested in

participating in a benchmarking survey. In other situations, where data availability, time and

financial resources are less of a consideration, a more detailed list of vehicle and equipment

classes can be used. Both approaches were used in this study and will be explained in a

subsequent paragraph.

Cautionary Word

A word of caution needs to be introduced before examining the results of any MRU analysis.

While MRU analysis is a proven technique than enables managers to make resource comparisons

of fleets of different size and composition, it should not be alone used to evaluate a particular's

fleet operation. Instead, consideration should also be given to the operating environment, level

of service requirements, geography and other factors. Furthermore, it must be remembered that



MRU analysis is not a work standard analysis where very detailed increments of work are

studied. Rather MRU is a high level management tool that is used in conjunction with and not as

a substitute for good judgment.

WORKORDER ANALYSIS AND COMPARISONS MRU Classes and Factors Used In This Study For this study we used both high level and detailed vehicle classification systems in comparing

to Seattle to other fleet operations. The high level system was used to make comparisons of the

municipal fleets surveyed made, while the detailed system was used to make comparisons based

on work order analysis.

High Level Classifications

We used a high level classification system in collecting benchmarking data on other comparable

municipal fleets. The MRU computations involving these classes and factors are provided in

Chapter VII. We used 30 vehicle classes in this system and developed their MRU factors largely

from data contained in the “Fleet Maintenance Staffing Guide”, published in 2002 by the

National Association of Fleet Administrators. We supplemented these NAFA factors, which

were derived principally from municipal fleet operations, with additional factors for utility

vehicles like aerial trucks and digger derricks. These additional factors were derived from our

“2004 Utility Fleet Management and Benchmarking Survey.” These factors were based on one

MRU equaling 13 hours per year.

Detailed Classifications

We used a detailed classification system in analyzing workloads and resource requirements for

Seattle’s fleet operation and making comparisons with work order data we obtained from

CASCOR for public services fleets in the United States. This classification system is based on

vehicle type and weight and consists of over 50 classes. The factors were derived from

analyzing 535,000 work orders from 19 public service fleets across the country. One MRU for

these factors equates to 14.6 hours of work per year. We also supplemented the CASCOR data



with NAFA data in those instances where only a limited number of data points of vehicle were

available for a particular class.

Future MRU Planning

To assist Fleet Services in maintaining and developing an MRU classification system for the

future, we have developed an electronic file of the City’s fleet inventory that identifies both the

high and detailed classification for each vehicle and equipment unit. This was submitted under

separate cover and also includes the corresponding vehicles classes that the City used and two

suggested simplifications of that system for MRU analysis.

We found it necessary to simplify the existing class system since it contained 284 classes, which

are too numerous for adopting as MRU classes. The first simplification eliminated age

descriptors that were attached to nearly all of the classes and reduced their number to 174. The

second simplification eliminated size distinctions among similar vehicle classes and reduced the

number of classes to 124. For example, small, medium and full-size 4x4 utility vehicles were

consolidated into a single 4x4 utility vehicle class.

The Fleet Services Division may want to pursue other simplifications by analyzing work order

data to consolidate vehicle classes into fewer and fewer classes. The tradeoff is between

simplicity and ease of use versus greater precision. As noted before, it must be remembered that

MRU analysis is a high level management tool and not a detailed work standard system, and the

MRU classes we used to analyze the City and which are contained in the attached file have

worked very well.

MRU RESULTS FOR SEATTLE

Maintenance and Repair Hours By Vehicle Class

We analyzed Seattle work order data to compute the average number of hours per vehicle by

class as detailed in Exhibit 7. The first page of Exhibit 7 categorizes the total hours expended

during the year by vehicle class and reason for repair, while the second page divides these hours



by the numbers of vehicles serviced by class. Please note that there are only nominal numbers of

vehicle and equipment units assigned to the following shops and include such units as:

• Metal/machine shop: vehicle hoists and fuel station items;

• Capitalization shop: motorcycles; and,

• Tire shop: a few trucks.

The work order data were provided directly to us from the Fleet Services Division. When we

originally analyzed the work order data that Fleet Services submitted directly to CASCOR, we

found some records and repair reason information was missing. Therefore, we requested from

Fleet Services a complete set of work orders for 2006 for us to analyze.

Before we made any comparisons to other fleets, we separated out the amount of time that Fleet

Services mechanics spend in capital activities such as rebuilding, scheduled overhauls and

capitalization work. We did so since MRUs represent the amount of time or workload that is

needed for normal maintenance and repair activity and not capital work as previously noted.

As detailed indicated in Exhibit 7, the capital work accounts for 10 percent of the total hours

charged, while this percentage varies significantly by vehicle class. For most vehicle classes,

capital work is not a significant share the vehicle workload; but for about one-quarter of the

classes, capital work accounts for well over 10 percent of work load. For some classes, like

cranes and some aerial devices, scheduled overhauls accounted for over one-half of their

workload.

Industry Averages

Exhibit 8 compares by vehicle class what Seattle averages for maintenance and repair work to

those average by the public service industry. As indicated in the far right column, Seattle

averages fewer or about the same number of mechanic hours than the industry does in about one-

half of the vehicle classes. On the other hand, for specialty units like aerial devices and some

construction units, Seattle appears to average significantly more hours per year, even after

capitalization and overhaul times have been excluded. This can be attributable to the higher than

average age of such units.



The industry averages were also used to develop MRU factors by vehicle class. These were

found to range from 0.3 for a welder to 11.4 for a fire truck and were obtained by dividing

passenger car hours into total hours for each vehicle class. We then used these factors to forecast

maintenance and repair workload by location to estimate fleet staffing requirements.

Maintenance Versus Age Comparisons

We next compared the average vehicle class age of the Seattle fleet to the industry since age can

affect maintenance hours and costs for a vehicle. As tabulated in Exhibit 9, Seattle has a younger

fleet than the industry average in about one-half of the vehicle classes. However, for aerial

trucks, some cranes and construction equipment, the Seattle fleet is considerably older than the

industry. As a consequence, maintenance and repair hours can be expected to be higher than

average.

This effect can be seen in the graphs of Exhibit 10 which plot annual maintenance and repair

hours versus age for aerial trucks of Seattle and industry. What is most striking is that many of

Seattle’s aerial trucks are at the high end of the age range where the difference in mechanic hours

are most pronounced. At the extreme end, most of the other fleets begin to taper off their use of

older units and thus require less maintenance than otherwise. Interestingly, in the mid range of

the age spectrum, there seems to be less difference between Seattle and the other fleets regarding

maintenance and repair hours.

RESOURCE REQUIREMENTS

The MRU process can be used to estimate staffing and facility resources needed to maintain and

repair the fleet. This is usually a straight forward process of either: comparing staffing ratios per

in-house MRU; or, converting MRUs into mechanic hours and then dividing by number of direct

hours averaged by mechanics per year. This can be done for the entire fleet or on a specific

facility basis. Then, once the numbers of mechanics have been estimated, the number of work

bays needed can be estimated by applying mechanic to work-bays ratios.



Seattle’s situation is somewhat more complicated than the conventional MRU process allows.

First, there are significant amounts of capital work that are being done in-house. This work is

over and above what is typical for most public service fleets and should be excluded from the

MRU factors. Furthermore, this capital work is not limited to only one or two shops.

Apparently, it is distributed throughout most of the other shop facilities in the Fleet Services

Division organization as demonstrated in Exhibit 11.

In addition, even though a

vehicle may be assigned to

a specific shop for

maintenance, it is often

serviced at more than one

facility as detailed in the

origin destination tables of

Exhibit 12 and illustrated

in Chart 18. For most

locations, significant

proportions of work are

done at locations other than

the original assigned

maintenance location of the vehicle. This is true not only for all work orders, but also for work

orders that exclude capital work.

As a result, work force scheduling becomes more challenging since workload forecasts at a

facility need to account for significant amounts of potential work being generated from other

facilities.

Direct Hours Available Per Mechanic

The number of direct hours available per year per mechanic and other “wrench turners” is an

important factor in using MRU analysis to estimate the number of mechanics needed. We

customarily use a 65 percent mechanic utilization rate in MRU studies. We consider this an

Chart 18: Percent of M&R HoursDone At Assigned MTC

0%10%20%30%40%50%60%70%80%90%

100%

SeaPark

Haller L

ake

Fire G

arage

Metal/M

achine S

hop

Truck

Shop

Car Shop

Tire Shop

SSC

Cap Shop

Watersh

ed



“average rate” which converts to 1,352 hours per year (0.65 x 2,080 hours in year). In our

opinion, a “high-end rate” is about 70 percent (1,456 hours per year).

On the other hand, Fleet Services targets 1,500 hours per year, which equates to a 72%

utilization rate. (1,500 divided by 2,080). While this is a high rate, Fleet Services mechanics and

other service personnel averaged a 74 percent billable rate, as demonstrated in Exhibit 13 by

employee classification and in Exhibit 14 by shop location. Percent billable ranges from a high

of 92 percent at the Watershed shops to a low of 62 percent at the Metal/Machine shop. It should

be noted, however, that Fleet Services practice is to include mechanic break times in computing

billable rates. This practice tends to increase the apparent utilization rate by about 5 percent.

Projected Workloads And Staffing Needs

Exhibit 15 details the number of MRUs calculated per vehicle class by assigned maintenance

location. The MRU factors were based on the results of our analysis of the public service work

order data described earlier. As indicated in Exhibit 15, the total number of MRUs is 7,719.

Multiplying these MRUs times an estimated 94 percent work done in-house produces 7,256 in-

house MRUs. These in-house MRUs equate to 105,938 direct hours of work for maintenance

and repair at 14.6 hours per MRU.

To convert these hours into mechanic requirements, we divided them by the direct hours

estimated to be available per mechanic. We used a mechanic productivity rate of 69 percent,

which is based on the existing utilization rate of 74 percent less 5 percent for break time. The 69

percent rate produces 1,435 hours per year.

On a fleet wide basis, we estimate that 74 mechanics would be needed for maintenance and

repair work, as indicated in Chart 19 below. This excludes capitalization, rebuild and overhaul

activities.

Chart 19: Estimated Number Of Mechanics Needed For M&R Work Total MRUs 7,719 In-House MRUs @ 94% In-House 7,256 In-house Hours @ 14.6 hours per MRU 105,938 Mechanics Needed @ 69% utilization (1,435 hrs/yr) 74



Compared to the existing work force level of 70.5 in the maintenance and repair shops (see Chart

20), four to five (4 to 5) additional mechanics are estimated to be needed.

Capacity Analysis

To estimate the capacity of Fleet Services’ existing vehicle maintenance facilities, we took the

current inventory of work bays and converted them into the equivalent number of mechanics and

in turn that the amount of workload that the facility could support. In effect, this reverses the

process that we use to estimate the number of mechanics and work bays that a fleet operation

needs for normal maintenance and repair work.

The number of work bays needed at or the capacity of a shop facility are affected by such factors

as:

• Number of work shifts operated at the facility

• Number of work bays needed per mechanic

• Employee utilization

• Amount and type of maintenance work done in-house

For example, if mechanic productivity increases or the number of work shifts increase, then

fewer work bays would be needed than otherwise and the capacity of the facility increases.

Conversely, more bays would be needed and facility capacity would be reduced if the fleet was

to age significantly or a greater share of work were attempted to be done in-house. Also, if work

bay functions were to change, i.e. bays were switched from capitalization work to maintenance

Chart 20: Comparisons of Existing Versus Estimated Staffing Needed

At M&R Shops Position M&R Shops (a)Mechanics 60.5Servicers 10

Existing Total 70.5Estimated Needed 74.0

Difference 4.5Note:

(a) Excludes Metal/Machine, Capitalization and Paint & Body Shops.



and repair work, the facility’s capacity for maintenance and repair work would according be

affected.

Our capacity analysis was based on the existing distribution of work bays and shifts operated by

facility. We also assumed that 1½ work bays would be needed to support a mechanic. This ratio

is based generally on assigning 1-bay per mechanic for preventive maintenance work and 2 bays

per mechanic for repair work. This also assumes that mechanics spend about one-half their time

in maintenance and one-half in repair work. Once the numbers of mechanics a facility can

support are known, the amount of work hours or MRUs that the facility will support can be

estimated.

Exhibit 16 presents our capacity analysis of the existing Fleet Services Division facilities for

regular maintenance and repair work. As indicated in Exhibit 17 and summarized below in Chart

21, there appears to be some capacity deficits at the Fire Shop, SeaPark and South Service Center

facilities.

Chart 21: Estimated Maintenance & Repair Shop Capacities

Shop Work Bays

Shifts Operated

Workload In MRUs Workload As A Percent

Of Capacity Capacity Current

Main Shop (Car & Truck Shop) 20 2 2,621 2,289 87% Tire Shop 5 2 655 421 36% Fire Garage 4.5 1 295 809 274% South Service Center 8 2 1,048 1,067 102% SeaPark 2 2 262 453 173% Haller Lake 14 2 1,835 1,339 73% Watershed Facilities 6 1 393 259 66%

All Shops Excluding P&B and Metal/Machine Shops 60 -- 7,109 6,637 93%

The car and truck shop bays in the main shop have a capacity to support a workload increase of

13 percent, while Haller Lake workload could be increased by 27 percent. On the other hand the

Fire Garage operating with only one shift per day is at more than twice its capacity. SeaPark is

75 percent over capacity. Nevertheless, the grand total of space available in the maintenance and

repair shops (i.e. excluding the Capitalization, Paint & Body and Metal/Machine shops) can

support a workload increase of only 7 percent.



Capacity can be added without constructing new facilities by shifting some of the workload from

one facility to another, adding a work shift to the Fire Shop or freeing up some space in the Fire

Shop as described in Chapter IX, Facilities Assessment.



VIII. BENCHMARKING SURVEY RESULTS

Benchmarking can be a very helpful management tool when properly applied in analyzing the

performance of public service fleet operations. Benchmarking can be used not only to assess

how competitive a fleet operation is, but also provide many valuable insights in specific fleet

management issues and how other fleet operations successfully addressed them. Nevertheless, it

is important to recognize that we used benchmarking as a tool to supplement our direct

observations and analysis of the City fleet operations.

APPROACH

We began by identifying other municipalities in the West that were comparable in population

size to the City of Seattle. We identified 13 cities to survey, and received completed responses

from five of them for a response rate of 38%. The respondents have a wide range of climates

and terrains and consisted of: two cities from Texas (El Paso and Fort Worth); two from

California (Long Beach and Sacramento) and one from New Mexico (Albuquerque). While

none had included a municipal electric operation in their reporting, all had aerial devices and

other vehicles and equipment similar to those of Seattle. Population, fleet size and demographic

data on these respondents and the City of Seattle are listed below in Chart 22.

Chart 22: Benchmarking Respondents

City State Population (a)

Fleet Size (b)

City Employees (c)

Area Sq. Mi.

Pop. Per Sq. Mi.

Pop. Per Employee

Albuquerque NM 504,949 2,951 6,401 180.6 2,796 78.9 El Paso TX 609,415 2,484 5,600 249.1 2,446 108.8 Fort Worth TX 653,320 3,487 5,773 292.5 2,234 113.2 Long Beach CA 472,494 2,095 5,219 50.4 9,375 90.5 Sacramento CA 453,781 2,281 3,933 97.2 4,669 115.4 Seattle WA 582,454 4,365 11,172 83.9 6,942 52.1 Notes

(a) “Annual Estimates of the Population for Incorporated Places Over 100,000.” Population Division, U.S. Census Bureau, Released: June 28, 2007.

(b) Only those units managed by the city’s fleet department. (c) As of 2006 and from www.city-data.com



Next, Seattle’s Fleet Services Division distributed a survey questionnaire, designed by Chatham

Consulting, to request comparative information on fleet statistics, management and operations

and other data. We in turn analyzed these data to produce the comparisons that follow.

MRU Factors

One set of comparisons involved applying MRU analysis to make resource comparisons of

staffing and expenditures. As explained in more detail in the preceding chapter, MRU analysis is

a vehicle equivalency technique that weights the number of vehicles in a fleet operation in

proportion to their relative maintenance and repair requirements.

To compare Seattle to the five other municipal fleets, we utilized a series of “high level

weighting factors” that we derived largely from analysis of the mechanic hour per vehicle data

contained in the “Fleet Maintenance Staffing Guide,” published in 2002 by the National

Association of Fleet Administrators. We also supplemented these factors with factors on aerial

trucks and digger derricks from our 2004 Utility Fleet Management and Benchmarking Survey.

Exhibit 17 details the high level MRU calculations for Seattle and the other survey respondents.

FLEET OPERATIONS

Fleet Size

The fleet sizes of the

respondents ranged from 2,100

to nearly 4,400 units, as

tabulated in Chart 23. Not only

did Seattle have the largest

fleet size among the cities

participating, it also had the

highest percent of work done

in-house among them. Also

Chart 23: Fleet and MRU Size By City

City Fleet Size (a) MRUs (b) % In-House IHMRUs

Albuquerque 2,951 4,836.3 60% 2,892.5 El Paso 2,484 5,468.4 85% 4,642.8 Fort Worth 3,487 6,505.5 89% 5,794.4 Long Beach 2,095 4,682.6 93% 4,375.5 Sacramento 2,281 4,827.0 77% 3,707.8 Seattle 4,365 7,664.7 94% 7,207.8

Notes: (a) Only those units managed by the city’s fleet department. (b) Based on high level MRU equal to 13 hours per year.



shown in Chart 23 are the respective high level MRUs and In-House MRUs that were computed

for each city.

Organization Size

As compared in Exhibit 18 and summarized in Chart 24 below, Seattle’s total staff per 100 in-

house MRUs is less than the median value for this group of cities. This is significant given that

Seattle does more capital work in-house than the others. If Seattle were staffed at the median

MRU ratio, it would have a total staff size of 145 employees or about nine (9) more than it has

now. Thus, as we found in the more detailed MRU and workload analysis of Chapter VII,

Seattle appears to be understaffed regarding its mechanic workforce.

Chart 24 Fleet Organization Size and In-House MRUs

City Fleet Staff IHMRUs Staff Per 100 In-House MRUs

Albuquerque 41 2,892.5 1.42 El Paso 91 4,642.8 1.62 Fort Worth 148 5,794.4 2.55 Long Beach 95 4,375.5 2.17 Sacramento 100 3,707.8 2.70 Seattle 136 7,207.8 1.91

Median 2.04

Organization Composition

Chart 25 on the next page compares the composition of Seattle’s fleet staff to those of the other

cities. While the proportions of Seattle’s staff that are mechanics and parts persons are somewhat

similar to other municipalities, there are some notable differences for other employee categories.

These differences involve the significantly higher proportions of Paint & Body and

Machinists/Metal workers, and significantly lower proportions of equipment servicers compared

to the others.



While shop supervisors make up a higher percentage of staff at Seattle, crew chiefs make up a

lower percentage compared to the other fleets. Thus, the overall percentage of supervisory staff

is only slightly higher than that found in the other fleets. These numbers of course are greatly

influenced by the number of facilities, work shifts and specialty shops operated. As noted below,

Seattle has more shop facilities than the others fleets do.

Chart 26: Fleet Maintenance FacilitiesCity Number Albuquerque 2 El Paso 4 Fort Worth N.A. Long Beach 5 Sacramento N.A.

Seattle 6 plus 3 remote facilities

Chart 25: Comparison Of Fleet Staff Distributions

Category Percent of Total Seattle Others

Fleet Managers 2.2% 3.2% Specification Engineers 2.2% 1.1% Analysts 2.9% 3.7% Clerical/Secretarial 5.1% 3.9% Shop Supervisors 7.4% 5.4% Crew Chiefs 2.9% 4.1% Mechanics 49.3% 50.1% Parts Persons 9.6% 9.9% P&B Workers 4.4% 2.2% Mach./Metal 5.9% 1.5% Servicers & Other Floor Personnel 8.1% 14.9%` Others (a) 0.0% 2.6%

Total 100.0% 100.0% Percent Supervision (b) 10.3% 9.5% Percent Office Staff (c) 12.5% 11.9% Notes:

(a) Includes fuel attendants, service writers, and facility maintenance.

(b) Includes shop supervisors and crew chiefs. (c) Includes positions from fleet manager to clerical/secretarial.



Seattle has a lower percentage of fleet managers and analysts, but a higher percentage of

specification engineers. It should be noted that Seattle the largest fleet size among the

respondents and has an extensive upfitting program and aerial device rebuilding effort that

require engineering staff input. Seattle has a proportionally greater amount of secretarial/clerical

workers than the others. Seattle’s overall “office staff” is only slightly higher than the others.

In general, given the size of its operation and the diversity of services it performs, the

composition of the Fleet Services Division organization is not unusual and actually is

comparable to other fleet organizations, excepting Paint & Body and Metal/Machine work where

other fleets have significantly fewer personnel for this activity, which presumably they

outsource.

Specialty Shops

Seattle is unique with its Metal/Machine and Aerial Rebuilding Shops. None of the other cities

reported having such operations. All but one city reported having a Fabrication & Welding shop,

while one-half reported having a Paint & Body shop and a Vehicle Upfitting shop, as tabulated

in Chart 27 below.

Chart 27: Specialty Shop Information

City Fabrication & Welding Machine Paint &

Body Vehicle

Upfitting Aerial

Rebuilding Albuquerque Yes No No No No El Paso Yes No No No (a) No Fort Worth Yes No Yes No No Long Beach Yes No No Yes No Sacramento No No Yes Yes No Seattle Yes Yes Yes Yes Yes Note:

(a) The only upfitting El Paso does is installation of city decals by service workers. All patrol car upfitting is included with the vehicle. Most, if not all other vehicles, have all of the accessories included in the purchase price/bid or are sent to a private vendor for installation.

Accordingly, Seattle has a significantly greater number of personnel in specialty shop operations,

than any of the others, while Sacramento has the second largest number, as tabulated in Chart 28

on the next page.



Chart 28: Specialty Shop Staff Size

City Fabrication & Welding

Paint & Body

Vehicle Upfitting

Aerial Rebuilding Total

Albuquerque

El Paso 2 2

Fort Worth 2 2 4

Long Beach 2 5 7

Sacramento 5 11 16

Seattle 10 7 7 2 26

Capital Work

Seattle seems to have more in common with the two other west coast cities of Long Beach and

Sacramento than the other cities surveyed regarding outsourcing of capital work.

Chart 29: Outsourced Capital Work

City Outsourced % Albuquerque 100 El Paso 100 Fort Worth N.A. Long Beach 5 Sacramento 0 Seattle 4

Insourcing

About one-half of the cities reported performing work on non-city vehicles, as highlighted in

Chart 30 on the next page.



Chart 30: In-Sourcing

City Non-City Vehicle Servicing Outside Fleets Serviced

Albuquerque None N.A.

El Paso Yes Central Appraisal District, their fleet is 30 sedans.

Fort Worth None

The City of Fort Worth Equipment Services Department does not currently do any maintenance on non-city vehicles. We do provide fuel and car wash services for the University of Texas at Arlington. Also, we are in talks with the City of Southlake, TX and the local branch of the Federal Marshalls for maintenance of their vehicles.

Long Beach Yes Annual safety inspections of private taxi cabs, medical transport vehicles and tow trucks that work in the City of Long Beach

Sacramento Yes Library bookmobile

Seattle Yes

Maintenance services for several outside agencies: WA State Patrol, Woodland Park Zoo, Seattle Housing Authority, Puget Sound Clean Air Agency, Capitalization for City of Lynnwood police motor cycles.

MAINTENANCE AND REPAIR EXPENSES

The fleets were requested to provide information on what they spent to maintain and repair their

respective fleets Exhibit 19 presents these data and compare their respective costs per MRU.

Also, since Albuquerque did not include the maintenance costs of its police and fire fleets, its

costs ratios were not included in computing median values.

When comparing maintenance costs per fleet size in MRUs, we developed two sets of ratios.

The first which we call “direct M&R” consists only of personnel services, parts and commercial

work. This distinction was needed since not all the fleets were able to provide indirect cost data

for such areas as overhead facilities and utilities expenses. Generally, the direct costs accounted

for about 85% of the total costs which included these latter items.

Seattle’s direct as well as total maintenance and repair costs per MRU were are close to or below

the median values, as indicated in Exhibit 19 and summarized in Chart 31 on the following page.



Generally, Seattle’s maintenance and repair expenses are more similar to the West coast cities

than to the in Texas and New Mexico fleets.

Chart 31: Maintenance & Repair Costs Per MRU

City Direct M&R Cost Per MRU (a)

Total M&R Cost Per MRU

Albuquerque $1,104 $1,313 El Paso $1,452 $1,526 Fort Worth $1,766 $2,412 Long Beach $2,510 $3,663 Sacramento $2,402 $2,402 Seattle $2,028 $2,380

Median (a) $2,028 $2,402 Note:

(a) Median excludes Albuquerque, since Fire and Police are not included in expense totals.

(b) Consists of Personnel Services, Parts Costs, and Outside Shop Parts & Labor.

ASSET MANAGEMENT

Fleet Ownership

The participants were

asked which

organization owned

the fleets; by

ownership we meant

which department is

primarily responsible

for purchasing and

budgeting fleet

replacements. Four of

the six fleets, including

Seattle, reported that

the fleet department

owned the fleet, as tabulated in Chart 32.

Chart 32: Fleet Ownership Summary

City Fleet Owned By Comment

Albuquerque Customer

El Paso Fleet

Airport, Water Utility and Mass Transit are City operations that have their own separate maintenance and funding. They are not included in any of the data in this survey.

Fort Worth Customer The customer departments do budget for their vehicles.

Long Beach Fleet

Sacramento Fleet

Seattle Fleet & Customer

Seattle City Light owns its fleet. SPU Solid Waste Utility owns its fleet. SPU Water and Drainage & Wastewater own heavy equipment class vehicles, while units under 14,000 lbs. GVWR are owned by Fleet Services.



Fleet Specification

Similarly, participants were asked if there were any departments other than the fleet department

that specified the vehicles they owned. Only one city, Sacramento, reported that the fleet

department specified all vehicles. Thus, Seattle is not the only operation where customers specify

the vehicles they own.

Chart 33: Fleet Specification Summary: Customer Owned Fleets

City Customer Owned Fleet Specified By Comment

Albuquerque Customer Transit /Solid Waste/Fire/Aviation/Police specify their fleet. El Paso Customer Airport, Water Utility and Mass Transit specify their fleet.

Fort Worth

Equipment Services Department writes the specifications and facilitates the purchasing process. The Golf Division of the Parks and Community Services Department, Fire Department and Police Departments work in conjunction with the Equipment Services Department to specify vehicles.

Long Beach Customer All customers have some say in developing specs. Some departments with heavy duty equipment have more input. (i.e. Fire Department for Fire Pumper Trucks)

Sacramento Fleet

Seattle Customer Seattle City Light specifies heavy class vehicles. Fleet Services Division specifies Seattle Public Utilities heavy class vehicles.

FINANCIAL MANAGEMENT

Fleet Funding

Only one half of the fleets surveyed reported that they have a revolving fleet replacement fund,

whereby users are charged in

advance periodically to set aside

funds for vehicle replacement. At

least Seattle was among the fleets

that have a fleet replacement

funding mechanism in place. Not

all cities surveyed have one.

However, Seattle was the only fleet that does not separately account for fleet replacement and

fleet operating funds.

Chart 34: Revolving Replacement Funds

City Revolving Fund Separate Operating And Capital Funds

Albuquerque Yes Yes El Paso No Yes Fort Worth No Yes Long Beach Yes Yes Sacramento No Yes Seattle Yes No



When asked how fleet replacements were funded especially if they did not have a revolving

fund, the respondents reported a variety of funding mechanisms.

Chart 35: Funding Fleet Replacements City Response Albuquerque Replacement Fund /Budget request/ 1/4% tax Police

El Paso

The City is moving toward a revolving fund. In 2006, an initial $3 million was deposited to the replacement fund, however we have not begun to charge the departments the monthly rental" fee. Historically we use certificates of obligation or other bond money for vehicle purchases. Some vehicles are purchased with various grant funds."

Fort Worth By budgeting dollars in various funds: internal service funds, enterprise funds that include grants and crime prevention district funds and general funds

Long Beach [not specified] Sacramento Budget Appropriation [not further specified]

Seattle Revolving replacement fund for non-utility department vehicles; and utility financing for utility department vehicles.

When asked how they ensured that there would be sufficient funds available for future fleet

replacements, two fleets (El Paso and Fort Worth) reported that they would not be able to now.

However, Fort Worth indicated that it is working on ways to establish a vehicle replacement

plan, as summarized in Chart 36 below.

Chart 36: Ensuring Sufficient Funds for Future Fleet Replacements

City Response Albuquerque Replacement Fund / budget request El Paso We don’t. We never have sufficient "funds for fleet replacement."

Fort Worth We do not at this time. We are currently working on ways to establish a vehicle replacement plan.

Long Beach 1) Maintaining a multi-year replacement plan; and 2) reviewing life-to-date accumulated replacement funds by vehicle.

Sacramento The City has a 20 year forecaster for replacements. They use it for projections

Seattle Revolving fund and Utility financing. Five year forecast to ensure sufficient funds for future replacements.

Chargeback Rate Systems

All of the cities have a chargeback system to charge users for their services. All review their

charge back rates once per year, except Seattle which reviews them once every two years. (See

Chart 37 on the next page.)



Chart 37: Chargeback Systems

City Chargeback System Rate Review Albuquerque Yes Annual El Paso Yes AnnualFort Worth Yes AnnualLong Beach Yes AnnualSacramento Yes AnnualSeattle Yes Biennium

Chart 38 below provides summary descriptions of the charge back systems in place at each city.

Chart 38: Chargeback Methods City Chargeback Description Albuquerque CPM and actual Maintenance

El Paso We bill the departments on a monthly basis for their actual fuel and maintenance purchases.

Fort Worth Hourly labor rate, parts markup, sublet (outside repair) markup, fuel markup, car wash markup, and an administrative charge.

Long Beach Customers are billed monthly for actual costs of maintenance and repair based on parts, labor hours and commercial services. The labor rate includes an overhead component.

Sacramento All services are accounted for and billed back to customers though M4 (fleet asset management system)

Seattle

All maintenance services are billed on an actual cost basis. A rolling average of maintenance costs is used for non-utility customers, while a direct monthly basis is used for utility fleet customers. Customer caused repairs like accident, damage, theft/vandalism and special maintenance requests are billed directly to the customer.

Chart 39 on the next page summarizes the markups and labor rates for each of the respondent

fleets. As shown, Seattle’s markups for parts, tires, and fuel are within industry averages.

Seattle’s markup of vendor repair is higher than average, but is not the highest. The labor rate

charged by Seattle for its mechanics is slightly higher than average, but lower than all but the

fleets based in Texas.



Chart 39: Summary of Chargeback Rates

City Markups Labor Rate Charged Per

Hour Parts Fuel Per Gallon Vendor Albuquerque 35% 15.5 cents 25% $78

El Paso 20% 5 cents 5%

$49 Billed on flat rate time as listed in Mitchell or other labor guides.

Fort Worth 36% 12 cents (Internally) 3 cents (Gas Card) 10% $51

Long Beach 23%

38.3 cents (Aviation) 40 cents (Unleaded) 38.3 cents (Diesel)

65 cents (LNG)

10%

$78.19 (Standard) $91.05; (Mobile Mechanic) $42.84 (Garage Service Attendant) $83.13 (Helicopter Mechanic)

Sacramento 23% 25 cents 10% max $250 per

work order. $89

Seattle

25% (Parts) 14%

(Tires)

19 cents (Self Serve) 44 cents (Tanker) 22% $74 (2006)

Averages (a) 27% 21.4 cents 14% $70 Note: (a) Shown for standard services.

Capital Versus Operating Expense Distinction

Seattle is like most of the other fleets that make distinctions in their customer invoices regarding

recovery of capital versus operating expenses.

Chart 40: Capital vs. Operating Billing

City Cost Distinction Albuquerque N.A. El Paso Yes Fort Worth Yes Long Beach Yes Sacramento No Seattle Yes

Rate Characteristics

Seattle is among the half of the fleets that reported using both class averages and actual direct

costs billing methods. The other half of the fleets reported using only actual direct billing of

costs. (See Chart 41 on the next page.)



Chart 41: Rate Characteristics City Class Averages Actual Direct Albuquerque Yes Yes El Paso No Yes Fort Worth No Yes Long Beach No Yes Sacramento Yes Yes Seattle Yes Yes

Overhead Recovery Methods

About one-half of the fleets have a fixed charge in place to recover overhead costs. The others

incorporate the overhead as part of their labor costs and/or mark ups of parts, fuel and

commercial expenses. (See Chart 42 below.)

Chart 42: Overhead Recovery Methods

City Monthly Overhead Charge

Method Yes Amount Per Vehicle

Albuquerque No N.A. Built into labor rate.

El Paso No N.A. Overhead is recovered by the parts, fuel and commercial repair markups as well as by the shop labor rate.

Fort Worth Yes $57.50

Long Beach No N.A. An overhead amount is calculated and added to the billed labor rate.

Sacramento Yes $40 Monthly billing

Seattle Yes $20 to $150 $47 average (2006)

Fleet Services sets rates to recover overhead expenses for section in the division. The shop labor rate pays for shop expenses, the parts markup pays for warehouse expenses, and a portion of the monthly lease rate pays for fleet administration expenses.

Incidental Charges

All but one fleet (Albuquerque) reported applying incidental charges besides parts, labor, fuel,

and overhead in their billing, as noted in Chart 43 on the next page.



Chart 43: Incidental Charges City Incidentals Description Albuquerque No N.A.

El Paso Yes Small dollar amounts for vehicle washing, fuel card replacements, and license title registration for new vehicles.

Fort Worth Yes $2.50 car wash and $5 truck wash

Long Beach Yes

1) Commercial charges for outsourced work; and 2) An annual charge for Underground Storage Tank maintenance / compliance costs based on previous annual fuel usage by vehicle. These tanks store the fuel used by City equipment.

Sacramento Yes HazMat fee per work order 5% of work order not to exceed $10

Seattle Yes Environmental fee of about $6 per work order. (2006)

Billing Past Replacement Life

When a vehicle has reached the end of its replacement life but still remains in service, two of the

fleets continue to bill customers for its replacement as long as the unit remains in service, as

tabulated in Chart 44 below. Seattle like most of the respondents does not, although had done so

in the past.

Chart 44: Continued Billing for ReplacementCity Post Life Charges Albuquerque No El Paso Yes Fort Worth Yes Long Beach No Sacramento No Seattle No

(Billing past service life reduces a customer’s incentive to retain a fully depreciated vehicle that

should be taken out of service.)

Work Order Clearing

We next asked the respondents to describe the measures that they use to ensure that work orders

are cleared promptly so that customers are billed promptly and the amount accrued from non-



closed work orders are kept to a minimum. Most of the fleet operations basically encourage

shop supervisors to close work order as promptly possible, summarized in Chart 45. However,

two fleets (El Paso and Fort Worth) bill posted information regardless if the work is open or

closed. Seattle basically accrues the revenue for billing in subsequent months.

PARTS MANAGEMENT

Reporting

Each of the parts operations are part of their respective fleet departments. None are part of their

city’s material management division. At Fort Worth the parts operations report to fleet parts

“department”, while at Albuquerque, El Paso, Long Beach and Sacramento the parts operation

reports to fleet maintenance operations. Seattle’s parts operation reports to the Director of Fleet

Services. (Refer to Chart 46 on the next page.)

Chart 45: Methods Used To Ensure Work Orders Closed Promptly City Method Albuquerque Responsibility of shop supervisor and service writers.

El Paso

We bill on a monthly basis. We have a 7 day period after the last day of the month to post charges in our maintenance management system. Any charges from the month which arrive after the 7day period must be charged to the following month. We manage open work orders without regard to billing cycles. Any charges posted to a work order are billed in the month posted, regardless of whether the work order is open or closed on the last day of the month.

Fort Worth Our fleet management software bills on all posted information in work orders whether the work order is open or closed. We use the FASTER Fleet Management System.

Long Beach 1) Customers are billed monthly; and 2) Outstanding work order reports from our system are reviewed by supervisors and the superintendent monthly.

Sacramento Close work orders monthly and remind shops to close them every month though meeting one on ones.

Seattle

Shop supervisors are encouraged to close work orders promptly. Revenue from open work orders is accrued for billing in subsequent months. All work orders have to be closed at the end of each year for end of year reporting.



Chart 46 Parts Organizational Reporting

City Parts Operation Reports To

Fleet Maintenance/Operations Fleet Parts Department Head of Fleets

Organization Albuquerque x

El Paso x

Fort Worth x

Long Beach x

Sacramento x

Seattle x

Parts Performance Metrics

Exhibit 20 tabulates several parts management metrics for each of the city fleets. We found that

Seattle issues a greater proportion of its parts from non-stock sources than other cities do. We

also found that the City of Seattle had higher averages per MRU of:

• Inventory,

• Non Stock Issues, and

• Total Issues.

Seattle has lower amounts of:

• Turnover, and

• Stock Issues per MRU.

The implications of these differences are described fully in Chapter X Warehousing Operations.

EMPLOYEE DEVELOPMENT

Certification Incentives

All but Seattle have some incentives for mechanics to obtain certification. These incentives range

requiring the mechanics to take the test to incentive pay. Two reported other types of incentives

that include time off for exceeding productivity measures and bonuses for accident free work.

(Refer to Chart 47 on next page.)



Technical Training

Annual hours per mechanic for technical training ranged from a low of 10 at El Paso to a high of

97 at Long Beach. Seattle’s technical training hours per year were among the lowest.

Chart 48: Technical Training City Hours Per Year Albuquerque 40 El Paso 10 Fort Worth 24 Long Beach 97 Sacramento Seattle 13

PERFORMANCE MEASURES AND TARGETS

We requested the respondents to list the various performance measures and targets that they have

instituted at the different levels of thier respective organizations. These are tabulated in Exhibit

21, and represent a good source for consideration to use by Seattle.

Chart 47: Mechanic Incentives

City Certification Incentives Description Other

Incentives? Description

Albuquerque Yes ASE certification; 3 required tests; max 5 up to $500 No

El Paso Yes

We pay for the tests and have recognition ceremonies but we currently do not have a direct increase in salary. Certifications are criteria when awarding merit pay increases.

Yes

Time off for exceeding productivity measures.

Fort Worth Yes $10 bonus per pay period for each ASE certification Yes

If a mechanic has no accidents for 6 consecutive months then they receive a $50 bonus.

Long Beach Yes

1) ASE skill pay ($1.00/hr for one Master and an additional $0.25/hr for second master; 2) and ASE test fee reimbursement.

No

Sacramento Yes No

Seattle No



CUSTOMER COMMUNICATIONS AND OUTREACH

Customer Programs

The survey participants were asked to highlight the programs that they implemented to improve

customer communication and outreach. These are highlighted in Chart 49.

Customer Surveys

About two-thirds of the respondents periodically survey their customers regarding their

satisfaction with the services that the respective fleet organizations provide. Seattle is one of

them with its annual survey, as indicated in Chart 50 below.

Chart 50: Customer Surveys City Survey Customers? Survey Frequency Albuquerque Exploring N.A. El Paso They tell us every day. We don’t send out written surveys.

Fort Worth Yes

A link to an online survey is sent with each email notifying the customer that the vehicle repair has been completed. We receive minimal response from this survey.

Long Beach A hanger survey card is left with all vehicles serviced and which request the response to be returned to Fleet.

Every service

Sacramento After every service we have a mirror hanger. Yearly

Seattle Yes Yearly

Chart 49: Customer Communication and Outreach Programs City Program Albuquerque No formal program - customer liaison position implemented

El Paso Formal monthly customer service meetings, fleet replacement committee meetings, customer financial and usage reports in the Customer" section of the department webpage "

Fort Worth Citywide customer post contact survey, biannual meetings with equipment coordinators from customer departments, annual vehicle cost replacement meetings and customer service meetings with major customer departments

Long Beach

Monthly meetings with key departments PIT meetings (Preventing Interdepartmental Trouble) to address issues as they come up.

Sacramento Developed online reports, customer service agreements

Seattle

Monthly meetings with Seattle DOT. Quarterly meetings with Seattle Public Utilities. Online reports of billing information. Customer read-only access to fleet information system. Fleet Advisory Board of largest customers. Annual meetings with each customer to plan future replacements. Annual survey of maintenance customers.



Customer Motivation

Chart 51 highlights the methods the respondents have found to be successful in motivating

customer compliance with fleet policies.

Chart 51: Customer Motivation Methods

City Method Albuquerque PM's due list, managed by shop supervisors.

El Paso As far as complying with policies, none. But there are other areas where the customers support us.

Fort Worth

Providing reports to departments to manage issues Monthly PM past due list and monthly billing reports with fuel usage information Publishing a Top 10 list of vehicles past due for Preventive Maintenance on the city webpage.

Long Beach Explaining that their maintenance costs will be lower long term; and that we will come and retrieve their vehicle that is scheduled for service if needed.

Sacramento “Most of the time.”

Seattle Fleet Advisory Board of largest customers. Monthly meetings with Seattle DOT. Quarterly meetings with Seattle Public Utilities.

Service Level Agreements

All but two fleets (Albuquerque and Seattle) reported having service level agreements in place

with customers. Seattle does have memorandums of understanding in place with its Utility fleets,

but these deal more with fleet financing and charge backs than performance expectations and

responsibilities. The performance parameters that are included in these agreements are noted in

Chart 52.

Chart 52: Service Level Parameters

City Key Parameters Albuquerque N.A. El Paso Vehicle availability, turnaround times.

Fort Worth Meetings were held with city departments in 2003 to establish the department's performance measures. The goals in the performance measures are our service level agreements. (See KPI response.)

Long Beach Fleet has a detailed agreement regarding the cost to up fit a police B & W vehicle with the Police Department. Part of the agreement commits Fleet maintenance staff and the computer/radio shop to complete the job at an agreed upon cost.

Sacramento Setting up guidelines and rules, along with compliance

Seattle MOUs but not SLAs with Seattle Public Utilities and Seattle City Light.



Customer Data

Chart 53 lists the data and other information that the fleet departments routinely provide to their

customers.

Chart 53: Data Provided Routinely To Customers

City Data Albuquerque PM due list; invoices: repair history upon request.

El Paso Our customers have read only access to our maintenance management software. They can run any report or look at any work order.

Fort Worth Billing, PM's Past Due, and Fuel Usage.

Long Beach

Summarized charges per cost center each month; Detailed billing per vehicle per month by cost category; Annual budget per vehicle by cost category; Annual inventory check Annual vehicle replacement plan document.

Sacramento We have an online reporting tool that provides fleet data at their finger tips.

Seattle Online reports of billing information. Customer read-only access to fleet information system.

IMPROVEMENT AREAS

East of the participants were asked to list the three most important areas that they would like to

see improved in their fleet operation in the next year or so. These have been listed in Exhibit 22.

Training and data management issues seem to dominate the list of concerns. Interestingly, their

issues are similar to those we found in Seattle.

Similarly, they were asked to list the best practices implemented during the past two years that

have brought significant improvement in costs and/or service. These are listed in Exhibit 23 and

vary from basic changes like improved time management and training to major changes like new

facilities and technology as well as other areas.



IX. FACILITIES ASSESSMENT INTRODUCTION

We conducted detailed inspections of the vehicle maintenance facilities used by the City of

Seattle to assess their adequacy, layout, and equipment needs. We then identified barriers to

efficient operations, developed recommendations and priorities for their mitigation, note possible

costs and outline steps for long term facility planning. This chapter initially describes our overall

Findings and Recommendations, and then discusses in detail the results of our assessments on a

specific facility basis. Supporting photographs accompany the discussion. A capacity analysis

of the existing facilities was presented in the Chapter VII - MRU and Workload Analysis.

FINDINGS

Regulation Compliance


and WAC regulations for the types of workplaces operated by the City. Nevertheless, we did

find a few instances where oil barrels had no containment.

Housekeeping

Shop cleanliness and housekeeping in general are commendable. Exceptions to this are the Fire

Shop, some areas of the Charles Street heavy vehicle service bays and the Watershed shops.

Workflow Efficiency Enhancements

Technician productivity at Charles Street, Haller Lake, and South Service Center shops can be

enhanced by re-location of existing resources, and provision of additional resources.



Resources at Cedar Falls will need to be enhanced to accommodate the shifts in workload. It was

reported that vehicle repair activity in Watershed Area is increasing at the Cedar Falls shop and

declining at the Tolt River shop.

Mechanics need greater and easier access to computers. While there are several shop computers

already accessible to technicians, consideration should be given to adding more computers in the

shops to allow technicians to directly input work order information which would reduce the

workload of office administrative personnel. These computers should also be configured to

allow access to on-line repair and maintenance manuals by technicians so most of the printed

copies of manuals now in the shops could be removed.

It appears there is much more activity in the auto body shop than in the welding area, and the

City should consider expanding the body shop preparation area into one bay presently devoted to

welding.

Security Enhancement

Building security at Haller Lake shop should be improved. Presently, City employees from other

departments have access to the shop on nights and weekends because of location of the

emergency fire exits near their offices.

Machine Tool Consolidation

We note that machine tools are taking up valuable space at the Haller Lake and Fire Shop

facilities. Since the City already operates a complete machine shop at Charles Street,

consideration should be given to moving machine tools out of Haller Lake and Fire shops to

provide more space to support the vehicle repair operations at those locations.

Shop Equipment

At the time of our shop inspections, it was determined there was no shop equipment in

immediate need of repair. However, our review of available inventory data on shop hoist

equipment that the average vehicle lift age was 13 years, which is about two-thirds of the 20-year

typical service life expected for this type of equipment. As tabulated in Chart 54 on the next

page, there are eight lifts that exceed the 20 year guideline. Of course, actual life will depend on



the remaining utilization of the equipment, how well it is maintained, how much it costs to

maintain and well it meets future needs.

Chart 54: Shop Lift Ages Vs. Typical Service Lives Year No. Lifts Age No. x Age Age/20 1975 5 32 160 160% 1978 3 29 87 145% 1992 3 15 45 75% 1994 14 13 182 65% 1995 2 12 24 60% 1996 19 11 209 55% 2000 3 7 21 35% 2001 3 6 18 30% 2004 2 3 6 15% 2005 1 2 2 10%

Total/Average 55 13.7 69% Furthermore, we learned from our interviews and surveys of shop personnel that the following

shop items were needed. We agree with these requirements.

• A heavy-duty lift for the Cedar Falls shop,

• Several computers for the Charles Street Truck Shop,

• Up-to-date scanning tools for vehicle and equipment diagnosis,

• Up-to-date subscriptions for on-line service manuals,

• Improved lighting at the Fire Garage

• Sun screen shades for the west side of the Charles Street Shop

RECOMMENDATIONS

Productivity Enhancements

Charles Street Truck Shop

We have developed specific proposals to add workspace and improve worker productivity by

moving special tools out of the storage room and to the bays where they are used. The specifics

are described in the Detailed Inspection Results section.



Charles Street Auto Body Shop

One of the welding bays should be converted into additional space for the auto body shop. It

appears there is much more activity in the auto body shop than in the welding area.

Fire Shop

More useable shop space can be obtained by cleaning and organizing the space to the South and

West of the shop office. Part of this space is presently being used for storage. The far South

area is much cluttered, and the material littering the benches and floor prevent productive use of

this space.

South Service Center Shop

Suggestions are included in the detailed inspection section of this chapter to improve vehicle

traffic flow at this facility by storing oil drums and other items more efficiently.

Haller Lake Shop

There is a problem here with not being able to secure the shop during evenings and weekends.

We describe a proposal in the Detailed Results section to provide necessary security. Also, there

are also suggestions on how to make workflow more efficient and effective by re-arranging and

adding resources. Bench space can be freed up by re-locating five air hose reels.

Cedar Falls Shop

Because of changes in vehicle populations, there will be heavier vehicle work done at Cedar

Falls Shop. For this reason, it would facilitate the work there by equipping this shop with heavy

duty roll-around vehicle well jacks. There is only a light duty lift there now.

Special Tools

Recommendations are made for several of the City shops to move special tools from remote

storage rooms out onto the shop floor to be more readily available to technicians. The Tire Shop

has a roll-around cart that contains many of the required special tools. Consideration should be

given to adding this type of cart to the other locations where tools need to be more accessible.



This could include all special tools or just high-use special tools. If carts are not appropriate,

tools should be located in stationary racks in the work areas.

Shop Computers

Several shops have computers in the work areas that are accessible by technicians. It is

recommended more computers be added to the shops. These computers would be used by

technicians to directly input work order data and to access service and maintenance information.

There is specific information on availability of online service and maintenance information in the

Charles Street Truck Shop section below.

Regulation Compliance

In general, regulation compliance in all shops was excellent. All areas for the most part meet the

intent and spirit of OSHA and WAC regulations for the types of workplaces operated by the

City. All shops are equipped with fire extinguishers, fire blankets, flammable liquid cabinets,

face shields, first aid kits and eye wash equipment that meet existing regulations. All fire

extinguishers inspected had current annual inspection tags attached. All bottles of eyewash had

future expiration dates. There was one fire extinguisher at both South Service Center Shop and

Cedar Falls Shop that was on the floor instead of hanging from a bracket on the wall. All others

were on brackets.

Grinders in shops are securely attached either to benches or to the floor and are equipped with

guards. There is a face shield positioned at each grinder location.

It is common practice to have 55 gallon drums in the shops on roll-around dollies. In most cases,

the dollies consist of just an open steel frame on which the drum rests. There is no provision for

oil containment. These should be replaced with dollies that include containment. There are two

drum dollies of this type with containment in the air compressor room at Haller Lake Shop.



Shop Facility Housekeeping

The City is to be commended on high level of cleanliness maintained at the vehicle maintenance

shops. Floors were clean and clutter was at a minimum in most locations. This philosophy,

displayed in a sign at Charles Street, is certainly the norm of the City’s shops.

There was a notable lack of oil dry on floors. It was obvious that if there were spills, they had

been cleaned up promptly as there was no residual oil dry for the most part. However, the Fire

shop in general, two bays of the Charles Street heavy vehicle shop, and Watershed shops were

exceptions to this rule.

The shops are all equipped with flammable material storage cabinets. For the most part, these

cabinets contained the aerosol cans and flammable liquids used in the shops. It was unusual to

see flammables outside of the cabinets in most shops.

Shops are equipped with reels for lubrication product hoses, air hoses, electrical extension cords,

and drop lights. The use of these reels greatly enhances shop orderliness. The exception to this

was the low mount electrical cord reels in the Fire Shop that allowed cords to lie on the floor.

Shops are well equipped with containers for used shop rags that keep dirty rags from lying

around and causing a housekeeping problem.



PRIORITIZATION AND COST CONSIDERATIONS

The following paragraphs prioritize our recommendations and discuss the cost considerations

involved.

1. Construct security fence at Haller Lake garage to secure this facility. a. Cost would be determined by obtaining bids for this work. A very approximate

estimate is $2,000. 2. Convert one bay of the Central Garage Fabrication Shop into a body repair area.

a. Costs would include moving fabrication equipment, designing and constructing changes to present Fabrication bay, and providing required Body Shop tools and equipment in new area, either existing or new.

3. Purchase and install new computers (about 5 will be needed) in areas that are accessible to the maximum number of technicians.

a. Costs can be provided by City ITS Department, but at $1,000 per computer, the costs will be $5,000.

4. Remove material stored at the end of the one truck bay near the body repair shop of the Central Shop. This will provide for additional workspace and for a drive-through bay.

a. Costs would be technician time required and internal labor rate. b. Also, since this bay has a pit that is non-compliant for safe use, its utility is

limited unless the pit is filled in. This cannot be done until a lift in a neighboring stall is replaced.

5. Move special tools to shop floor at Capitalization and Car Shops, Central Truck Shop, and Haller Lake Garage.

a. Cost will be technician time required and internal labor rate. 6. Move material stored on shop floor at South Service Center that prevents large vehicles

from exiting East overhead door. a. Cost will be technician time required and internal labor rate.

7. Add a heavy duty vehicle lift to the Cedar Falls facility. Approximate cost is $35,000.

LONG TERM CONSIDERATIONS AND PLANNING

Long term recommendations depend on long term projections of fleet size and composition, i.e.

more hybrid and AFV vehicles, projected City annexations requiring more and/or different types

of vehicles, and any other changes that will change either the number or configuration of

vehicles.

These issues are best handled through the development of a long term strategic plan facility plan

that would include such steps as:



• Establishing long-term goals for the Fleet Services Division; • Developing a baseline of existing conditions to help identify current problems and serve

as a base upon which future planning can be built; • Forecasting future fleet size and mix and service level requirements; • Forecasting personnel requirements; • Estimating future space requirements based on industry space standards and

organizational requirements; • Estimating site requirements; • Comparing existing space and site inventory capacities to projected future needs; • Comparing gaps between existing resources and projected needs; • Developing alternative physical and operational plans to meet future needs; • Costing each alternative; • Conducting an economic life cycle analysis to rank each alternative; • After considering externalities, identify best alternative.

DETAILED INSPECTION RESULTS BY FACILITY

Charles Street Complex

Truck Repair Shop

One end of one bay is presently being used to store oil drums, jacks, jack stands, and scrap body

shop materials, which renders it un-useable for vehicle repair. The jacks could be moved to the

area near the new shop office for storage and the oil drums should be moved to the oil storage

room. This would free this bay up to be used as an active repair bay.

Another bay (close to the south end of the shop) had 3 jacks stored in an active bay. A place

should be designated for the storage of these jacks, perhaps near the new heavy shop office.



There were two areas in these bays with used engine oil still in drain pans on the floor. This oil

had not been properly moved to the used oil containers.



And there were two bays that had standing water that had not been cleaned up. These were

exceptions to the normally clean bays seen throughout all shops in the City.

This shop needs to be reorganized because special tools used for truck repair are presently stored

at the very back of the Southwest storage room so are not readily accessible by anyone working

in the shop. Also, there are cabinets with vehicle maintenance manuals at several locations in the

shop. Typically in an operation like this, the special tools are used more frequently than the

maintenance manuals. If the City placed several more computers in various locations around the

shop, most of the manuals now in the shop could be discarded since they would be obsolete.

Even if the hard copy manuals are retained, they should be moved to the southwest storage room,

and the special tools moved out into the shop. With the manuals and cabinets gone, special tools

and racks with common fasteners could be moved to areas just outside the oil storage room

and/or to areas near the offices where the cabinets are now.



It is also possible to locate special tool and

fastener storage between the truck repair

bays in several locations. There is already

fastener storage in rotary bins between

truck bays as shown here.

If additional space is needed in the

southwest storage room, the sweeper

brushes now stored there could be moved

either to the second floor of that room or into the parts warehouse.

Aerial device test weights are at Charles Street shop as well as at South Service Center Shop. If

they are not needed at Charles Street, they should be moved to the South Service Center Shop

where much of the aerial device work is done.

The oil storage room had several small barrels of grease on the floor, not on containment. All

the 55 gallon barrels of oil and anti-freeze were on containment.

There was very good utilization of the heavy vehicle repair bays and paint shop during the time

this inspection, as there were many vehicles in both locations. (There were two trucks in the

three double welding bays of the Machine Shop, at the time of our inspection).



Capitalization and Car Repair Shops

There are cabinets with shelves to the

West of the Car Shop office that

contain vehicle shop service manuals.

These cabinets should be moved into

the southwest storage room to free up

this floor space that should be used for

special tool and fastener storage.

The special tools and fasteners presently stored in the storage room at the southwest corner of the

shop building can be moved to this area to make them more accessible to the technicians on the

floor.

The southwest storage room has roll-around gasoline and diesel fuel tanks stored there. These

should be moved to the oil storage room for safety. Vehicle jacks stored here that should be

moved out into the shop where they will be more accessible to the technicians. The southwest

storage room also includes a bench for make-up of wire harnesses for the Police car light

installations.



The Capitalization shop was not fully utilized as it had only two vehicles being worked on at the

time of the inspection. One was a Go-4 and the other, a Ford van.

Car shop includes an alignment rack and a computer for technician input. There is another

computer between the Capitalization shop and Car shop.

A defibrillator is mounted near the overhead door on the north side of the building.

Auto Body Repair Shop

It was reported that there are plans to widen the overhead door leading to the body repair shop

bay. This is certainly needed to facilitate the entrance of large vehicles. And when the new

office is completed and the old office removed, the shop will also be much more accessible to

large vehicles.

Based on the shop activity observed during this visit, it would be beneficial to convert the bay

used for welding that is closest to the body shop into a body shop preparation bay for large

vehicles. There was considerably more activity in the body shop as compared to the welding

area during this visit. The equipment occupying this welding bay could be re-located rather

easily. Some equipment is on wheels and other equipment could be moved after removing the

attachments to the floor. A wall or even a hanging curtain could be installed to separate the two

areas.



Welding Bay Next To Body Shop

Fire Shop

The fire shop has small a machine shop and welding shop in the northeast corner with a small

supply of steel and aluminum material. This duplicates equipment and material inventory in the

main machine shop. The machine tools and inventory could be moved to the main machine shop

if additional space is needed in the Fire Shop.



Housekeeping is not as good here as it is at the other City shops. Many benches are cluttered

with material and aerosol cans. These conditions exist throughout all the work bays.

The shop is well supplied with electrical cords on reels between work bays. However, because

the reels are mounted at bench height, when cords are extended they lay on the floor in the areas

in which technicians work and equipment is rolled around on the floor. Overhead reels would be

much more effective in keeping cords off the floor. One bay has two, two post lifts.

The shop area just to the south of the center walk-through door has much clutter and appears to

not be used. There is a bench placed just in front of the row of benches along the wall as if it is

stored there. Its placement renders the bench behind it along the wall inaccessible. There are

some wheel jacks stored in this area. If this space was cleaned up and organized, it could be



utilized as additional work space in this shop. Part of this area should be designated as jack

storage.

This same area, near the waste oil tank, has several oil drums that are directly on the floor and

not on containment. These drums need to be placed on containment.

The area of the shop that contains the brake lathe is extremely cluttered. There are books and

binders on the floor, clutter on the workbenches, and clutter on the floor in this entire area. It

appears this is a little utilized and neglected area of the shop. The only activity observed during

the visit was that of turning brake rotors.



The area above the shop office has additional space available for material storage. Furthermore,

there appears to be some material there that the City may be able to be discard. This could free

up some additional storage space. There are three diesel engines stored there that may be surplus

to present needs. Tires are stored here that should be consolidated with the inventory in the Tire

Shop.

The Fire Shop is well designed to service the City fire equipment. The drive-through bays

facilitate getting trucks in and out easily. There are plans to replace a lift to make lifting more

effective. The ladder inspection area is an asset to effective indoor ladder inspection. This is

area has recently been equipped with necessary resources for technician fall protection.

(This shop was fully utilized at the time of this visit with trucks occupying all available bays.)



Tire Shop

This shop is very well equipped to provide prompt tire service to City vehicles. There is a light

duty floor mount lift as well as an adequate quantity of jacks and jack stands for heavy vehicles.

This shop is also equipped with overhead reels with water, engine oil, grease, ATF, air, and

electric cords on overhead reels to facilitate performing PM’s. This shop is equipped with a

computer for technician input of work order information.

This shop had the best storage of special tools. They were contained in a roll-around cart so they

could be moved anywhere in the shop the tools are needed.

There is one drive-through bay with overhead reels with air and droplights to facilitate tire

service for larger vehicles. The second level is devoted completely as new tire and wheel

storage. A small elevator is used to move tires up and down.



There is also a large tire storage area on the first floor of the building. Tires stored here are

mounted on wheels for the most part, ready for quick mounting on vehicles.

(There were no vehicles in the tire shop for tire service at the time of the inspection.)

South Service Center

It appears that this shop was designed to allow vehicles that are serviced to be driven in to the

shop through the overhead door on the north side of the building and out the overhead door on

the east side of the building. However, drums and floor jacks are stored near the east door,

which inhibits effective use of this door as an exit.

This situation could be corrected by moving the drums into the oil storage room and the jacks to

a designated storage location, perhaps into the room currently occupied by special tools and the



shelving units containing vehicle maintenance manuals. Additional space can be obtained in the

storage room by moving out the obsolete test equipment and by arranging the shelf units with the

service manuals in a more compact configuration that would take up less floor space. This

would provide the space for jack storage near so entrance and accessible to the shop.

Two truck bays of this shop are occupied by the aerial device re-build program that is housed at

this location.

There is a fire extinguisher on the floor just inside the door to the oil storage room. This would

be more accessible if it was mounted on the wall.

Haller Lake Garage

There are five locations where air hose reels are mounted on top of workbenches. These should

be re-located in the space beneath the bench to free up the bench top space. One may be able to

be eliminated, as it is right in line with a drop-down air hose.

Bench Air Hose Reel In Line

With Drop-Down Reel

There is a bolt storage rack at the west end of the light duty repair area next to the hydraulic hose

make-up area. Since these bolts are used more on the heavy equipment, this rack should be



moved to the heavy repair area, either between two bays or in the bay next to the crane repair

bay. This would make the bolts more accessible for the heavy equipment technicians.

There are four large cabinets of drawers in a storage room adjacent to the shop area that contains

many small parts used primarily in the light duty repair area. These cabinets have fasteners,

fuses, hose clamps, drain plugs, springs, tie-wraps, etc. in them.

These cabinets should be moved out to the light duty repair area so they are more accessible to

the technicians there. A section of bench could be removed along the back of the work bays to

provide the space for these cabinets.

There is special tool storage in the same storage room with

tools (large socket wrenches, large end wrenches, air guns, etc.)

used in the heavy vehicle repair area.

The tools and cabinets that contain them should be moved out

and into the heavy vehicle repair area. Space could be

provided by re-arranging the bay just to the west of the crane

repair bay, next to the wash bay.



There is one eye-wash bottle mounted on the east wall of the heavy duty repair area that is in-

accessible because of the material placed in front of it. This eye-wash needs to be moved to a

position that is accessible.

This shop is the location that all the City’s new crane trucks are received and prepared for

service. It is also the location to which all crane trucks come for their annual inspections, major

repairs and re-builds. To facilitate this work, there is an area outside the shop on the west side

where cranes are load tested, complete with buried anchor for load testing. This entire area has

never been paved. It would be advantageous to pave this area as hydraulic leaks could be



contained and cleaned up much more effectively. It could mean eliminating the expense of

removing, disposing of, and replacing oil soaked soil in the case of a major spill. It would also

provide a much cleaner work surface in times of inclement weather.

Provision should be made at the shop for the storage of drums of new oil and grease. Presently it

is stored in a building remote from the shop. Technicians must now take time to go to the

storage location with a forklift, load the drums, and bring them to the shop. This non-productive

time could be considerably reduced by having a covered oil storage area adjacent to the shop.

There is space for an enclosure for oil storage near the bulk oil and waste oil storage tanks

outside the east wall of the shop.

There is a security issue at this location as people from other departments have access to the shop

evenings and weekends. There is an office building with people of other departments adjacent to

the shop. There are two emergency fire doors (one first floor and one second floor) that open

into the shop. So the designated fire emergency route for the adjacent offices runs through the

vehicle shop.

There have been instances in the past when people from these departments have gained un-

authorized access to the shop. There was incident when a piece of test equipment was reported

stolen. The doors cannot be secured as they are needed for the emergency fire exits from the

office buildings.



Therefore, we recommend that the shop

be secured by constructing a fence

outside of the walkway adjacent to the

west and north walls of the shop office.

The fence would form an enclosed

walkway extending from the fire exit

door on the first floor, and including the

stairway from the second floor door, and

all the way to the outside exit door on the

east wall of the building.

There is a rather extensive machine shop in this garage. There is a large lathe and small metal

break.

There are similar machines in the Machine Shop at the Charles Street garage. Additional space

could be obtained at the Haller Lake facility if these machines were either relocated to the main

Machine Shop or disposed of.



There is an employee in this shop whose job it is to clean shop floors. Floors are very clean and

neat. There are two oil drum roll-around dollies with containment in the air compressor room of

this shop.

This is the type of dolly that should be used at several other shops that presently don’t have

containment as part of roll-around drum dollies.

Only three of the six light duty bays had vehicles parked in them, but there was activity on only

one of them at the time of this visit. There were five heavy/special vehicles in the heavy vehicle

area at the time of the visit.

SeaPark Garage

There will be no recommendations for changes to be made to this garage. It is organized and

equipped in optimal configuration. It contains necessary safety and regulation compliance

equipment. (There were no vehicles in for service at the time of this visit.)

Watershed Shops

Cedar Falls Shop

Heavy duty portable vehicle wheel lifts should be provided for this shop. There is an increasing

need to service the heavier vehicles at this shop since there is work being done in this shop that

previously was done at the other Watershed shops. The portable lifts will provide greater



versatility in using different areas of the shop as required from time to time. The present 15,000

lb. indoor lift is too small for many larger vehicles and limits the versatility of the shop area.

There is also an outdoor 30,000 lb. lift, but that is not large enough for the largest vehicles in the

area. If these wheel lifts are provided, it would be possible to relocate the small floor mounted

lift now there to another location.

The shop floor of the bay without the lift had oil dry spread in a large area over a spill. Oil dry

should be cleaned up immediately to prevent it from being distributed around the shop by wind

and/or by clinging to technician shoes. The bay with the lift had a liquid spill on the floor that

had not been cleaned up. There were several 55 gallon drums on the floor without containment.

One fire extinguisher bracket was well

identified, but the extinguisher was on

the floor below it.

Tire storage is provided here in a

Conex box on site.

Tolt River Shop

The area technicians work here only



three days per month on average. There is a light duty lift in this shop. This shop supports the

dump trucks and grader that keep the roads in this area clear of snow in the winter. There has

been a trend to move vehicles from this location to the area around the Cedar Falls shop.

Lake Young Shop

This shop is well suited to do PM’s and repairs on light-duty vehicles up to 15,000 lb since there

is a 15,000 lb lift here.



X. WAREHOUSE OPERATIONS

This chapter examines the Warehouse operations of the Fleet Services Division to improve their

efficiency and effectiveness. For this effort, we:

• Reviewed existing warehouse facilities to determine the effectiveness and efficiency of layout and equipment.

• Analyzed the warehouse operations to develop the inventory carrying cost percentage to help manage the inventory.

• Reviewed on-hand stock needed to meet emergency and special operational requirements.

• Developed a methodology for setting, reviewing, and revising warehouse performance measures, tracking the relevant data, and measuring and reporting results and showed show how inventory can be managed through benchmarking.

• Developed policies and procedures that take into account standard and City-specific warehousing and accounting methodologies and internal controls.

We did not examine the fleet fueling operation as part of this study.

APPROACH

We conducted an extensive series of interviews with administrative, management and technical

personnel from the Fleets and Facilities Department, the Fleet Services Division, including the

Maintenance, Fleet Administration and Warehousing sections.

We also conducted a confidential survey of the warehouse personnel, the results of which are

described in the preceding chapter. We made field inspections and observed operations at each of

the Fleet Services Division’s warehouse facilities. We requested and analyzed the following data

on: • List of stock items. • Non-stock item usage and purchases. • Min-Max for stocked items. • Job descriptions for all positions. • Stock item usage. • Policies and procedures. • Purchases by vendor. • Number of new vehicles per year. • Credit card purchases. • Budget versus actual parts usage for last five years. • Inventory turnover rate. • Yearly inventory variance report for the last two years.



EXISTING OPERATIONS The Warehousing section is a support function that has responsibility for the maintaining, issuing

and ordering of inventory, and ordering of any non-stock parts needed for the City’s Fleet

maintenance operation. Warehousing has a complement of 15 employees, and is headed by the

Warehouse Supervisor, who reports to the Director of the Fleet Services Division. The other

staff includes: 1 Chief Warehouser, 8 Senior Warehousers, 3 Warehousers and 1 Maintenance

Aide.

Warehousing currently has five locations that store spare parts. The main storage location is at

the Vehicle Maintenance Building at the Charles Street complex. There are also stockrooms

staffed by Warehouse personnel at the Fire Garage, South Service Center, and Haller Lake

facilities. While the Watershed facilities also stock parts, there are no Warehouse personnel at

these remote locations. Excepting the Fire Garage and Watershed locations, Warehousing

operates two shifts. The Warehousing section uses the FleetAnywhere program to manage the

parts inventory.

WAREHOUSING AND MATERIALS MANAGEMENT CONSIDERATIONS

Understanding how the warehousing and materials management functions and roles work

together harmoniously is the key to have a well run parts supply system. First, the main function

of a Maintenance, Repair and Operation (MRO) warehouse is to provide parts quickly when

needed. This function places the warehouse in the position of a service provider, with the rest of

the maintenance organization as the customers. These customers have a responsibility too, and

that is to communicate their reasonable expectations of service from the warehouse operation.

These expectations involving parts availability should be based on analyzing their impact on

downtime, the likelihood of failure, and the carrying costs of the parts.



If a warehouse is run improperly (such as poor inventory accuracy, parts unavailable when

needed due to poor replenishment and procurement practices, etc), the rest of the maintenance

operation has no chance of achieving high service levels of equipment availability and reliability.

Ideally, the time to decide on whether parts should be stocked is when new equipment is placed

in service. Manufacturing and the parts suppliers can work with maintenance in recommending

the spare parts to stock when the new equipment is being purchased.

Management of the warehouse is a Materials Management function that includes the following

areas:

• Inventory Control

o Maintain stock of items to be issued for operations and maintenance.

o Manage inventories of materials and parts and prepare purchase requisitions when stock reaches the reorder point.

o Maintain records and control to prevent duplication of parts minimize loss from pilferage and spoilage and prevent stockouts.

• Procurement

o Select suppliers and issue part requisitions.

o Expedite delivery from suppliers to meet schedules

o Acts as liaison between departments and suppliers.

• Planning.

o Determining the parts that are needed for new purchase vehicles and equipment.

o Developing parts kits to be used during certain p.m. cycles.

WAREHOUSE LAYOUT EFFICIENCY

Layout Principles for Productive Warehouses

We made field visits to each of the Fleet Services Division warehouses and the tire storage areas

at the Tire Shop and Fire Shop at Charles Street. During these visits we looked at their physical

layout and assessed how well they conformed to certain principles that make for a well organized

and productive warehouse. These principles are:



• The parts storage area:

o Is sized and equipped appropriately for the types and volumes of parts to be handled by maintenance,

o Must be clean free of debris and clutter in the aisles,

o Bin locations must be labeled to reduce the time searching for parts,

o Needs to be divided from the maintenance area to discourage theft and to enforce recording of parts receipts and issues for inventory accuracy purposes, and

o Lighting must be sufficient for parts issue to a work order or for cycle counting.

• The warehouse should attempt to provide:

o A straight-line flow of activity through the warehouse.

o Minimum handling and transportation of materials

o Minimum travel and wasted motion of personnel.

o Effect use of space.

o Flexibility and expansion of layout.

The following diagram illustrates how the second set of principles applies to laying out a

warehouse.

Parts ReceivingArea

Parts Storage Area

MaintenanceWork Area

Parts Delivery

Ad Hoc Parts Request

Par

ts P

utaw

ay

Kitting Planned Work

Findings

We found that the warehouses at Haller Lake, Fire Shop and South Service Center lack the space

to increase the number of parts that are stock if there is a significant increase in size or mix of the



fleet. While each of these locations was generally clean, we observed at several locations

evidence of clutter and parts in the aisle ways.

Presently there is a large tire and wheel inventory in the Tire shop and additional tires stored in

the adjacent Fire shop. This inventory could be larger than necessary. It could be more cost

effective to rely on inventories of local tire suppliers.

The Charles Street warehouse was in the middle of a major rearrangement, but had very little

clutter and no parts in the aisles. The overall condition was average taking into account the

rearrangement effort. Charles Street was locating faster moving parts closer to the issue window

to reduce the warehouser’s travel time.

The South Service Center location was clean but there were parts in the aisles due to the limited

space. The bin locations for parts were clearly identified in the areas that were not in the middle

of rearrangement.

The Haller Lake and Fire Shop locations indicated that they are planning on rearranging parts for

better usage of space. The warehouses are separated from the maintenance area and secured for

limited access. The lighting is adequate to see parts for issuing and inventory counting.

The flow at each warehouse was generally straight-line except at Haller Lake were the intake of

parts for receiving is in the same area as issuing due to the size and layout of the warehouse.

Due to the size and layout of the warehouses, they are set to use the minimal effort and time

stocking or issuing parts. The space is used effectively, but as mentioned previously, most lack

any area for flexibility or expansion.

INVENTORY CARRYING COST

The generally recognized components of inventory carrying cost include inventory financing

charges or the opportunity cost of the inventory investment, insurance, taxes, storage, and

inventory shrink, damage and obsolescence. Below is a brief description of each component:



• Opportunity costs: If this value were not invested in inventory, what return could be expected if it were invested in something else, such as treasuries, mutual funds, or even a money market account.

• Inventory insurance: Cost of insuring the inventory and facilities.

• Taxes: Taxes paid on inventory balance.

• Material handling expenses: These expenses are made up mostly of wages and benefits, but include payments or depreciation on material handling equipment, as well as miscellaneous expenses for supplies.

• Warehouse overhead: Total expenses for rent, utilities, repairs and maintenance, and property taxes.

• Inventory shrinkage, damage and obsolescence: The costs of shrinkage, damage and obsolescence are the value of the write- offs taken.

There are several different philosophies on what components make up overhead for material

handling and warehouse. Some material managers only consider the warehouse overhead,

physical space, fixtures, and equipment and ignore any personnel cost. Another group will

include all personnel cost plus physical space, fixtures and equipment. In our opinion, a more

reasonable approach is to include only the personnel cost associated with stocking and picking of

parts, which is generally 20% of the total personnel cost, along with the physical space, fixture

and equipment. Other personnel costs for requisitioning, receiving and issuing would still be

needed if one did not stock any items. (It should be noted that inventory carrying cost is used to

analyzing Economic Order Quantity or stocking philosophy and not for setting markup rates for

charging customers for parts issues. Refer to Chapter XI for a discussion on how these

chargeback rates are computed.)

Estimated Inventory Carrying Costs

Based on our analysis of data provided to us from Fleet Services, we found that warehouse

carrying costs could range between 10 percent and 50 percent, depending how personnel costs

are treated in the computation, as summarized in Chart 55 on the next page. (The detailed

computations are presented in Exhibit 24.)



Past studies of manufacturing or distributional warehouses have found that inventory carrying

costs are approximately 25 percent per year of average inventory. More recent studies have

found that it can vary between 10 and 35 percent. Very few studies have been conducted on

maintenance, repair and operational warehouses (MRO) such as Seattle. However, our

consulting staff’s experience in reviewing and supervising numerous MRO warehouses have

found that carrying cost can range between 10 to 50 percent. We suggest that Seattle use the

third option, which we have found to be the most reflective of actual carrying cost. Using the

third option Seattle would be in the lower quartile which is reflective of having a good carrying

cost ratio.

ON-HAND STOCKING LEVELS

Importance of Inventory Accuracy

In order to determine if current on-hand stock level is adequate to meet emergency and special

operational requirements, one must first determine the accuracy of the inventory. Inventory

accuracy is important for a number of reasons since inaccurate inventory can lead to the

following adverse conditions.

• If the inventory is lower than the system record, then an out-of-stock condition can occur.

Chart 55: Estimated Warehouse Carrying Cost Based On Different Treatments Of Personnel Costs

Item Inclusion Of Personnel Costs None Full Loaded At 20 %

Option 1 Option 2 Option 3 Opportunity Cost 5% 5% 5% Taxes 0% 0% 0% Insurance 0% 0% 0% Material Handling 0% 40% 8% Inventory shrink, damage and obsolescence 5% 5% 5%

Total Carrying Cost 10% 50% 18%



• If the inventory is higher than the system record, then parts could be re-ordered by the system even if not needed.

• If the inventory is not accurate, then the maintenance technicians will lose confidence in the inventory control system. This leads to a growing bench stock, if technicians do not have confidence in the service levels of the warehouse.

Achieving high levels of inventory accuracy requires:

• Recording all parts receipts against purchase orders or outside repair orders.

• Recording receipts of parts returned to the warehouse that were previously issued to a work order but not actually used.

• Recording parts stocking locations.

• Recording all parts issued to a work order.

• Performing routine and accurate cycle counts.

Inventory Assessment of the Fleet Services Division Warehouse

We analyzed data pertaining to reorder point and quantity, issues for the last 12 months and on-

hand quantities to determine if the warehouse recordkeeping is accurate. During this review we

found that the warehouse inventory count accuracy rate has ranged between 17.7 and 16.6

percent from 2004 to 2006. The current parts list furnished by Fleet Services has a 3 percent

error rate which is derived from records that shows parts issued but no quantities or parts with

issue dates but no quantities. This is a snap shot in time and does not reflect the actual error rate

for the year which is based off of the yearend inventory count.

While the overall trend for the City is downward, the trends at Haller Lake and South Service

Center are trending upward. The inventory variance amount for 2006 was approximately minus

$125,000, which is the difference between the yearend inventory and Summit financial system

records. This variance equates to 10 percent of the total inventory value when matched to the

Summit financial system records. This result is above the average that we have observed for this

index at other fleet supply organizations.

During our interviews it was stated that each stock item on the reorder print is counted to ensure

that it is needed, and that this process allows Warehouse personnel to cycle count most stock

items. With the discrepancies in the count at year end and the parts list provided, just verifying



the items on the reorder print is not sufficient to ensure the accuracy of the inventory. Accuracy

is also hampered by the multiple descriptions in the system for the same part (i.e. Pump Water,

Water Pump). This can cause extended research time when trying to refer to or find a part by a

mechanic or warehouser.

Without accurate inventory data it is difficult to determine the adequacy of stock to handle day-

to-day operations much less emergency or special operational needs.

Template For Establishing On-Hand Quantities Needed

As previously stated, the inventory accuracy rate is too low for a proper determination of on-

hand quantities needed for emergency and special operational requirements. When the inventory

accuracy rate is within acceptable limits (1 to 3 percent), the Warehousing Section can use the

following template to establish on-hand quantities needed.

1. Determine if the inventory accuracy is within acceptable performance levels.

2. Determine the time duration, seasonal period and extent of interrupted outside services for the emergency or special operational needs.

3. Determine individual parts usage for A and B category parts as follows:

a. Take the monthly usage to see if there are any seasonal patterns. If the parts usage is consistent then:

i. Take the last 12 months total usage and divide by 12 to get the yearly monthly average.

ii. Multiply the yearly average monthly usage by the duration of the event.

iii. Match the amount derived to the reorder point and safety stock; if the derived amount is higher than the quantity is not sufficient.

b. If the event is seasonal then:

i. Take the seasonal month’s total usage and divide by number of months of the seasonal period to get the seasonal monthly average.

ii. Multiply the seasonal average monthly usage by the duration of the event.

iii. Match the amount derived to the reorder point and safety stock; if the derived amount is higher than the quantity is not sufficient.



PERFORMANCE MEASURES AND BENCHMARKING

The basic reason for having performance measures is to make sure that the organization being

measured is moving toward a specific long-term goal. Many organizations define too many

measures. In doing so, they sometimes forget the original purpose behind these measures.

While many performance measures exist in materials management, we suggest that four should

be used by an MRO organization. These measures will encourage improvements in the

receiving, storing, and issuing functions in a materials management program. These measures

can also be used to improve inventory security if theft or damage is high. Moreover, by

tightening control on inventory, the potential for stockouts can be reduced and unnecessary

replenishments avoided. The four performance measurements are described below, and are

demonstrated in Exhibit 25 with actual Warehousing data from Fleet Services.

Inventory Accuracy Rate

Inventory accuracy is a measurement between the computer record inventory and the physical

inventory on hand. Inventory accuracy is generally measured through physical count. The

objective is to have on location and in inventory, those items that are being carried on the books.

The inventory accuracy rate indicates how well receipts to and issues from stock locations are

recorded in the computer records. The inventory accuracy rate is determined as follows:

• Inventory Accuracy% = (Number of Accurate Quantities in Bin Locations Inventoried / Total Bin Locations Inventoried) X 100

Inventory Variance Rate

Inventory variances are changes to the inventory balance in the inventory records. Inventory

variances can be made at any time, but are most commonly made after annual physical counts of

stocked items are compared to recorded data. Inventory variances can be either gains or losses,

both of which can indicate problems in inventory management.

• Calculate the sum of the dollar value of inventory gains (IG) and the absolute dollar value of inventory losses (IL) for the period. The result is (IG + IL).

• Calculate the following rate: Inventory Adjustment% = ((IG + IL) / Average Value of Inventory) X 100



Inventory Turnover Rate

The inventory turnover rate indicates the number of times that the average item in stock has been

replenished during the year. A low turnover rate is indicative of either a long procurement lead

time or low usage of stocked items. A higher turnover rate could indicate more efficient use of

available resources, provided customer orders are being filled and the prices of stocks purchases

are acceptable. The inventory turnover rate is determined by the following ratio:

• Dollar Value of Total Inventory Issues / Dollar Value of Average Inventory on Hand

Stockout Rate

A stockout is defined as a zero inventory balance for a stocked item. A stockout condition exists

even if demand for the item does not exist. The stockout rate indicates the effectiveness of the

materials management activity’s reordering processes. The stock out rate is determined by the

following ratio:

• Number of Stocked Items with Zero Balance / Total Number of Stocked Items) X 100

Benchmarking

The Benchmarking Chapter of this report produced comparative ratios data regarding materials

management performance indicators. These will be discussed further below.

Inventory

We found among the cities surveyed that the City of Seattle had a total inventory per in-house

MRU (vehicle equivalency) that was greater than average. This reflects a possible overstock

situation or a large amount of emergency stock. Seattle should try to move closer to the center by

analyzing what items are carried in stock. (See Chart 56 on the next page.)



Chart 56: Total Inventory Per In-house MRU

$0$50

$100$150$200$250$300$350$400

Albuquerque

Long Bea

ch

El Pas

o

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Total Issues

Seattle had the highest total issues per in-house MRU among the respondents, as highlighted in

Chart 57 below. This may be caused by the fleet age or maintenance practices. The City should

determine which of these conditions are causing the high issue amount and take actions to

correct.

Chart 57: Total Issues Per In-House MRU

$0$100$200$300$400$500$600$700$800$900

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Non Stock Issues

Seattle had the highest ratio of non-stock issues. (See Chart 58 on the next page). This is

indicative of incorrect inventory being stocked. A high percentage of non-stock items being



issued could lead to extended downtime or reduced maintenance work performance because the

vehicle is occupying a service area while waiting on parts.

Chart 58 Percent non Stock Issues

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Issues From Stock

Stock issues at Seattle accounted for only 46 percent of the total issues. This was the lowest

percentage among the cities surveyed. We normally expect to see a range of 70 to 75% of total

issues coming from stock. The percentage of issue from stock is also reflective of the stocking

practices. A lower the percentage tends to indicate that there is more dead stock on hand, while a

higher percentage tends to indicate that there is more usable stock is on hand. Generally, a high

percentage of stock issue will increase the inventory turns.

Chart 59: Percent Issues from Stock

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Turnover

Seattle’s turnover rate was slightly less than the average of the cities surveyed. If the stocking

practices are reviewed and the stock issue ratio can be increased, the turnover rate will also

increase. (See Chart 60 below.)

Chart 60: Annual Turnover Rates

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POLICIES AND PROCEDURES

The warehousing functions that we normally see are: Requisitioning, Receiving, Storage, Picking

& Issuing and Inventory Control. Depending on the organization, there other functions can be

added. Most time these functions are placed under warehousing for convenience or the lack of

another group to take the lead. We were provided with procedures that dealt with fuel control;

this function is generally associated with a fuel group that sources, order, approves invoices and

handles any environmental issues.

In response to our data request, Fleet Services provided us the following procedures.

• Ordering Material

• Parts Pickup and Charge

• Outside Work

• Ordering Tires

• Purchasing, Receiving and Invoicing

• Surplus Parts Procedures

• Tire Inventory Control



• Annual Inventory Control

• Laundry Garment Inventory

• Parts – Internal Rebuilds

After reviewing the procedures, we found that most were well written. However, there was no

mention of any purchasing in the Purchasing, Receiving and Invoicing procedure.

The Fleet Services Division will need to add a procedure for kitting parts for preventive

maintenance (PM) and other scheduled work if it begins kitting parts. Also, procedures are

needed for return to stock and issuing. The adding of parts to stock has been reactionary and

leads to parts not being stocked until after they are needed. Instead, Fleet Services should

identify stock parts before they are needed, and develop a procedure to identify those parts and

how they will be added to stock.

FINDINGS

• Most of the warehouses lack any area for expansion, but material flow is consistent with industry practice except at Haller Lake were receiving and issuing are from the same counter location.

• The large tire and wheel inventory in the Tire shop and adjacent Fire shop could be larger than necessary. It could be more cost effective to rely on inventories of local tire suppliers.

• The City inventory carrying cost falls within the range found at other MRO warehouses.

• The inventory accuracy rate of items counts was found to be above the 16 percent, which is outside expectable levels.

• The inventory variance rate of 10% is outside expectable levels.


• The help function in the FleetAnywhere system cannot be activated by Warehouse personnel when they are using the program.

• Fleet Services lacks any planning on the parts needed for stock for preventive or predictive maintenance.





RECOMMENDATIONS

• Develop and use the ABC analysis technique of stock items to segregate low moving parts so a true inventory turnover rate can be identified. The MRO inventory would then be classified into three categories:

o A - Continual-Use Items – These are maintenance items and other products that are continually used.

o B - Specific-Need Inventory – Though not continually used, these items are used on a regularly scheduled basis.

o C - Emergency-Repair Parts – These are parts whose sporadic usage cannot be predicted, and which should be excluded from the inventory turnover computation.

• The warehouse should begin kitting parts for preventive maintenance and other scheduled work where it is feasible. This will level out the warehouse workload and provide better service (higher availability of parts) to the technicians. If the warehouse personnel have access to the preventive maintenance schedule, they can build PM kits in advance of the scheduled PM time.

• Review existing inventory to ensure that the correct parts and quantities are being stocked, to increase the turns per year and reduce the total inventory on hand. Identify parts that are needed for predictive maintenance and timeline for adding to stock.

• Start planning PM and other definable work in advance and give the schedule to Warehousing for part kitting. Please see Exhibit 26 for illustrative procedure.

• The Warehouse should start collecting data to develop additional performance measures such as inventory accuracy rate, inventory variance rate and inventory stockout rate, to better manage the inventory. The following lists recommended performance targets.

o Inventory Accuracy Rate: 1-3%

o Inventory Variance Rate: 2-5%

o Inventory Turnover Rate: 3-4

o Stockout Rate: 10%

• Identify parts for stock at the time of the vehicle delivery. This should include items immediately needed, and items for predictive maintenance in the future.

• Have the help screens for Fleet Anywhere available while in the system.

• Have Warehouser take the ASE Parts Specialist series to improve their knowledge of parts to compliment their knowledge of warehousing procedures.




• A study should be done to determine the number and sizes of tires and wheels to be stored by the City.

• It may be possible to cost-effectively reduce tire inventory in Tire Shop to a level that would provide tires for immediate use and rely on inventory maintained at tire suppliers.



XI. RATE SETTING AND REPLACEMENT FUNDING

BACKGROUND

The Council of the City of Seattle through ordinance codified the establishment not only of the

Fleets and Facilities Department, but also a Fleets and Facilities Fund. This fund functions as an

internal service fund for the deposit of revenues and payment of expenditures for the

Department. The ordinance also authorized creating separate subfunds for Fleet Services,

Facilities Services, and Administrative Services of the Department. In addition, the ordinance

codified certain financial and operating policies regarding the charging back of operating

expenses, setting aside sufficient funds for the recovery of capital fleet replacements, centralizing

fleet management, establishing inter-departmental memoranda of understanding, and other fleet

administrative responsibilities.

On one hand, the fact that the City has codified a dedicated fleet fund is a best practice since it

provides the foundation for recovery of costs directly associated with fleet operating expenses

and capital expenditures. On the other hand, major improvements are needed in fund structure,

rate computation, capital recovery analysis and transparency. Exacerbating the situation are the

following factors:

• The Fleet Services Division is a large and complex organization that provides a multitude of services for a very large city fleet.



• Replacement funds are comingled with operating funds making it more difficult to easily determine how much money is actually available to meet future replacement needs.



o Doubt among customers on whether there are sufficient funds to replace their vehicles when due; and,




• Furthermore, this lack unnecessarily increases the challenge for Fleet Services Division (or any fleet department for that matter) to justify the size of its fund balance and allay concerns of the fund being “raided” to serve other City, albeit, worthy needs.

To rectify this situation, we have developed updated rate models and strategies for Fleet Services

to recover operating expenses and capital costs. The proposed methodologies explain how to

address capital recovery, maintenance shops rates, warehouse rates, and fuel rates. We also

recommend which costs are most appropriately recovered via a lease rate versus surcharges or

standalone billing. Finally, we explain best practice methods for forecasting future rates and

fund balances.

FLEET SERVICES SUBFUND

The Fleet Services Sub Fund (50320) accumulates about $52 million1 per year in revenue and

operating expenses, as tabulated in Chart 61 below. For 2006 net income was a negative

$1,278,300. Chart 61: Revenues and Expenditures Of

Fleet Services Subfund For 2006 Item Amount Revenues Total External Revenue $2,490,565

Total Gain (Loss) Fa Dispo $67,355

Total Interfund_Revenue $32,365,815

Total Internal Revenue $17,906,613

Total Revenue $52,830,348 Expenses

Total Depreciation $10,719,651

Total Internal Charges $8,614,916

Total Other_Svcs_Chrges $1,032,939

Total Overheads $2,792,774

Total Reserve_For_Fa $1,340,918

Total Personal Services $10,697,552

Total Resale Expense $18,728,081

Total Supplies $181,812

Total Expense $54,108,643 Revenue - Expenses -$1,278,294

1 This figure double-counts certain Fleet Services Division revenues and expenses transferred between activity units.



Chart 62 below provides a further breakdown of revenues and expenditures by organizational

unit for 2006. Two-thirds of the revenues are attributed to Vehicle Leasing and Vehicle

Maintenance. The revenues attributed to Fleet Division Management are derived from

investment earnings and reimbursement of overhead expenses charged to other section of the

division.

A closer look at the revenues and expenditures associated with the Division’s largest account,

Vehicle Leasing, is presented in Chart 63 on the next page. Over one-half its expenses are

attributable to depreciation. Fleet maintenance accounts for nearly one-third of the total

expenses, while overheads for the Department and Division account for over 7 percent of the

expenses.

Chart 62: Revenues and Expenditures By Fleet Services Org For 2006

Org Section Revenue Expense Rev. – Exp. Rev % of Total

A2201 Fleet Division Management $1,462,516 $1,005,918 $456,597 2.8%A2211 Fleet Administration $730,658 $714,522 $16,136 1.4%A2212 Vehicle Leasing $19,259,150 $19,977,265 -$718,115 36.5%A2213 Motor Pool $594,107 $571,273 $22,834 1.1%A2221 Vehicle Maintenance $16,856,110 $18,056,157 -$1,200,047 31.9%A2231 Vehicle Warehousing $6,777,928 $6,876,370 -$98,442 12.8%A2232 Vehicle Fuel $7,149,880 $6,907,138 $242,742 13.5%

Total $52,830,348 $54,108,643 -$1,278,294 100.0%



Expenses did not always exceed revenues for this Account as depicted in Exhibit 27; revenues

had exceeded expenditures each year between 1999 and 2004. Then, in 2005 and 2006, revenues

were exceeded by expenditures by about 2.7 and 3.6 percent respectively.

While both revenues and expenses declined during the 1999 to 2006 period, revenues declined at

a faster rate than expenditures did. The factors that contributed to the decline were:

• The City’s two utilities deciding to self-fund their own vehicle replacements; and,

• Fleet Services’ decision to intentionally set chargeback rates to under recover maintenance costs and draw down cash reserves.

Chart 63: Vehicle Leasing Revenues and Expenditures For 2006

Item Amount Percent of Total

Revenue Lease Rates $19,133,820 99.2%Salvage Sales (Gain/Loss) $123,627 0.6%Transferred in From Other Departments $0 0.0%Other Transactions $27,048 0.1%

Total Revenue $19,284,495 100.0%Vehicle Expenses Maintenance $6,225,602 31.2%Vehicle Maintenance Overhead $167,315 0.8%Depreciation $10,502,993 52.6%Contribution to Reserves $1,302,038 6.5%Repay Debt $39,080 0.2%

Subtotal, Vehicle Expenses $18,237,028 91.3%Fleet Administration Expenses Division/Department Overhead $1,476,349 7.4%Debt Service $0 0.0%Other Services and Charges $82,075 0.4%Other Internal Charges $178,300 0.9%Supplies $553 0.0%

Subtotal, Vehicle Administration Expenses $1,737,277 8.7%Total Expense $19,974,305 100.0%

Net Income -$689,811



The lower section of Exhibit 27 tabulates the changes in cash flow during this period. Cash flow

has been not only negative during the past two years but also significantly so. By 2006 the

negative cash flow equated to over 20 percent of revenues and over 30 percent of cash balance

on hand. Fleet Services has forecasted cash flow to decline during 2007 by about $3 million, and

result in a reduced cash balance of $10 million at year end 2007. The continuing decline in cash

balance may have a dampening effect on Fleet Services’ future ability to make normal

replacements of the fleet let alone of the backlog replacements that currently stand at about $6

million.

The true nature of this impact is obscured by the inherent complexity of the multi-component

rates in the Vehicle Lease program, the comingling of capital and operating dollars in the same

fund, and the lack of separate funds for each department’s fleet.

Volatility Among Departments

While Fleet Services does not dedicate funds to specific departments, it does keep track of

payments, expenditures and cash flow on a department basis. As shown in Exhibit 28, there is

considerable volatility among both net incomes and cash flows by department from year to year.

Furthermore, revenues by department vary somewhat from one year to the next. Instead, they

should be relatively stable and increase only slightly each year.

The graphs of Exhibit 29 further demonstrate these volatilities among the departments by

plotting the Coefficient of Variation from year to year. (The Coefficient of Variation is a relative

measure of dispersion computed by dividing the standard deviation by the arithmetic mean.)

While billed operating expenses should increase slightly because of inflation; replacement

charges should be fairly level as replacement reserves are applied to protect against wide swings

in these charges from one year to the next. Fortunately, all these deficiencies can be corrected as

will be explained in the next section of this Chapter.



ESTABLISHING REPLACEMENT RATES

We have developed a four point strategy to establish fleet replacement rates. First, the Fleet

Services Subfund should be split into replacement and operating funds. This can be

accomplished by using the lower level org concept that is already built in the Summit and

OSERS systems and avoids the accounting complexity of establishing a new “fund”.

Second, the replacement fund should be segmented into org funds by major fleet user. The

replacement funds for smaller fleet users could be aggregated into a single org fund, if desired.

These moves will:

• Greatly simplify the accounting of replacement fund balances,

• Increase the transparency of the funds actually available for each customer department,

• Provide justification for retaining fund balances at a given level.

Third, the planning horizon should be increased to ten years for each of the replacement org

funds, except for the Fire Department, which should be increased to fifteen years. From analysis

of replacement programs in other cities, we have found that using too short a replacement

horizon can lead to underfunding of fleet replacement reserves; and, conversely too great a

horizon can to lead to overfunding of these reserves. The Fire Department with apparatus that is

both expensive and kept for at least 15 years should have a planning horizon of at least that

length.

Fourth, the City should adopt a replacement funding analogous to the Vehicle and Equipment

Replacement Program (VERP) used by a Midwestern city and described below. A copy of this

model has been sent under separate cover to Fleet Services.

VERP Model

Seattle can use the VERP model to estimate the funding requirements and replacement rates on a

"smoothed" or “levelized” basis for the designated planning horizon. The model computes

replacement rates based on the projected age and accumulated use of the fleet, as well as

inflation rates and anticipated salvage values. This model enables cities to better plan for the



future and level out significant increases in any one year’s budget; by accumulating a pool of

funds from annual payments to a capital asset replacement fund.

Exhibit 30 illustrates the model’s front section which contains the major input and output data;

while Exhibit 31 illustrates the model’s cash flow output during the forecast period. While the

illustrations shown here use a 15 year horizon, the model can be adjusted to use a shorter

horizon.

The replacement payment for the upcoming year is calculated by factoring in the unit price as

delivered, expected service life, residual value, and anticipated inflation to replace the original

unit. The program is flexible enough to permit the fleet analyst to review each year the following

parameters in the funding computations:

• Salvage Values

• Inflation rate

• Life expectancy

• Fund balances

The analyst sets the “VERP Payment Adjustment Factor” to its lowest level without having the

fund balance go below zero. Otherwise, a warning comment appears and the analyst must

increase the adjustment until the warning disappears indicating there is no negative balance in

the fund. Alternately, the analyst has the option of modifying the assumptions used in the model

or making manual adjustments to the payments in the table set aside for this purpose. The whole

process is repeated for the following year so that the analyst has the benefit of reviewing how

close the model’s assumptions match actual experience.

The VERP process is also a cooperative approach among Fleet Administration, Finance and user

departments. Finance has custody of the funds while Fleet Administration manages the fund

balance for each VERP account to ensure that the payments remain fairly level each year and the

cumulative fund balance remains above a prudent reserve amount. Each user department

representative is consulted annually on the VERP as a part of the budget process. Data used to



compute the replacement payments are the result of the recommendation by the Fleet Manager

and the user department. This approach has the following advantages:

• Reduces the need for large expenditures when replacement equipment needs to be purchased.

• Provides departments with a greater degree of accuracy in forecasting departmental needs.

• Reduces the need for repairs by funding up-to-date reliable equipment.

• Is sufficiently flexible to account for new vehicle additions as well as surplus funds resulting from holding over vehicles for replacement.

Funding Assumptions

The basic funding assumptions in this replacement model are:

• A fixed amount will be set aside each year for each replacement (i.e. individual or equipment unit).

• The amount set aside grows by a certain percentage each year until the accumulated fund balance approximates the amount needed in the year for the replacement.

• New expansion equipment is not to be funded until the initial purchase is funded by the user fund department.

• Surplus funds are not be used for expansion items, but will adjust the VERP payments in subsequent years.

• The salvage value for the vehicle or equipment is credited to the appropriate department’s VERP account.

• If a department enterprise fund does not have adequate funding for replacement of a like item (such as when the replacement cost exceeds the inflationary rate established in the formula) or the salvage value falls below the estimated amount, the vehicle/equipment cannot be replaced unless approved by Finance.

• If a vehicle or piece of equipment exceeds the estimated salvage value, the individual department VERP fund balance will be credited with the amount in the following fiscal year.

• Vehicles/equipment will not be upgraded without Fleet Administration approval. An upgrade is a change in equipment or vehicles to a higher classification, which is generally more expensive.

Comparison of VERP to Existing Fleet Services Division Lease Program

The VERP formula used to compute replacement rates is not too different from the capital

recovery rate used by Fleet Services. The annual payment is based on: total delivered price less



residual, multiplied by appreciation for each year of the service life (compounding inflation), and

divided by service life. However, there are a few notable exceptions in the way this formula is

applied and the mechanics of the model.

• The VERP program creates a separate spreadsheet (or fund) for each department or groups of departments for every year of the planning horizon.

• The VERP program keeps track of funding balances, payments received and expenditures

made for each year and displays this information on the front page of the model.

• The VERP program has lots of flexibility built into it so that changes can easily be made in any of the forecast parameters and their impacts readily seen in graphs and tables.

• The VERP program can be modified for different planning horizons.

• When a vehicle reaches the end of its life expectancy, the VERP model automatically calculates what the replacement value, salvage value and annual replacement payment should be for the new vehicle.

ESTABLISHING OPERATING RATES

Inherent Under Recovery in Existing Rate Structure

The primary goal of a chargeback system is to fully recover the fleet operating expenses and

replacement needs of the organization. As noted earlier, the current rate structure at Seattle

currently does not fully recover operating expenses. The main reason is that Fleet Services

Division management had intentionally set mechanic labor rates during the past couple of years

lower than needed to fully recover maintenance expenses. The intent was to reduce the Fleet

Subfund balance.

However, our analysis found an additional factor that causes under recovery; i.e., the

assumptions used to estimate rates for revenue collection are not borne out in practice. In

particular, chargeable hours have been overestimated; equipment servicer rates lowered average

rates charged to the customer; and, labor accruals resulted in lower revenue than expected at least

in the short run.



Intentional Under Recovery

Fleet Services estimated the chargeable rate needed for 2006 was $78 per hour. Yet, the

published hourly rates for 2006 were significantly less at $56.00 for equipment servicers and

$71.50 for mechanics, which produced a composite weighted average of $70.22 or about 10

percent less than estimated to be needed. Moreover, Fleet Services actually billed only 138,164

hours of labor during 2006 and earned $9,528,883 in labor revenue. This revenue averaged only

$68.97 per hour or about 11½ percent less than what was estimated to be needed.

Overestimating Chargeable Hours

An important component of estimating what labor rate to be charged is the projecting the number

of billable hours. Fleet Services divides this estimated number into the amount of maintenance

costs forecasted for the year to yield the chargeable labor rate needed, as follows:

• Total Operating Costs/Chargeable Hours = Billing Rate per Hour

The number of Chargeable Hours is obtained by the following formula, and is detailed in

Exhibit 32:

Chargeable Hours = Available Hours – Non-chargeable Hours + Overtime, where

Available Hours = number of revenue producing employees x 2080 hours per year, and

Non-chargeable Hours = holidays, vacation, sick time, working out of class, etc.

As tabulated in Chart 64, Fleet Services has continually overestimated what these hours should

be, which would result in under recovery by a few percentage points a year.

Chart 64: Comparison of Actual

To Estimated Billable Hours Year Estimated Actual Percent Less 2004 142,141 140,514 1.1% 2005 142,141 137,637 3.2% 2006 143,280 138,164 3.6%

Equipment Servicer Rates

Another factor that affected under recovery was the use of lower billing rates for equipment

servicers than for mechanics, as was done in the years prior to 2007. As demonstrated in Chart



65, we estimated this lowering effect to be about 2 percent, based on equipment servicers

accounting for 8 to 9 percent of total billed hours and being charged out at 22 percent less than

mechanics.

Chart 65: Effect of Equipment Servicers Rates On Labor Rates

Year Percent Of Billed Hours

Hourly Rate Percent Less Servicer Mechanic Weighted

Average 2004 9.7% $54.00 $69.75 $68.23 2.2% 2005 8.8% $56.00 $71.50 $70.14 1.9% 2006 8.3% $56.00 $71.50 $70.22 1.8%

If Fleet Services should ever decide to revert to a practice of multiple labor rates, it should basis

its revenue recovery on the weighted average of the composite rate, and not just simply on the

mechanic rate.

Labor Accrual Complications

Further complicating the cost recovery process, at least on a temporary basis, occurs when

revenues are understated due to the labor accrual process. While labor on closed work orders are

booked as revenue, labor on open work orders are accrued for the month and for reversing the

following month or at which time they are closed which can be the end of the year. This

condition is not fully understood, but is very significant and can amount to $300,000, or about 10

percent of the revenue in a given quarter. The labor accrual issue can create a temporary

appearance of loss, but does not represent a real loss since it is ultimately reversed by the end of

the year.

Using Activity Based Rates

One of the best ways to establish charge back rates is to use an activity-based costing approach,

where the expenses for procurement, maintenance, repair, and management of the fleet are

balanced against revenues generated from user fees to produce a net zero balance. Essentially,

Fleet Services is already attempting to this approach to recover the costs of the services it

provides. Notwithstanding some of the under-recovery issues described above, Fleet Services has



the financial and technical tools already available to it in the City’s Summit and OSERS

financial reporting systems and Fleet Services’ FleetAnywhere fleet information system.

The financial systems have numerous account codes and lower level Org codes to facilitate the

assignment of costs to services. Similarly, the fleet information system has many direct and

indirect codes to separate these labor costs.

Where it becomes challenging is determining:

• How simple or complicated the chargeback rate structure should be?

• Whether costs should be averaged by vehicle class or passed directly through to individual vehicle account?

• How to fairly and properly allocate different overhead costs?

• How much to mark up labor and other operating expenses to collect sufficient revenue?

• How to insure that there is sufficient working capital so that the fleet organization has enough money to operate every month of the year?

There is no one answer to these questions, other than that revenues should be sufficient to meet

expenses. As noted in Chapter VIII - Benchmarking Survey Results, other cities use a variety of

approaches to recover their costs. Each fleet organization needs to determine how best to

distribute its overhead. What we will explain below will be how to adapt best practices to

Seattle’s specific situation.

Classifying Fleet Expenses for Rate Making

The American Public Works Association (APWA) has a simple but excellent framework to

classify fleet expenses into meaningful categories for computing fleet rates. These categories are:

fuel, parts, direct and indirect labor, contract work, operating fees, direct and indirect overhead.

• Fuel consists of the costs of fuel and the fuel distribution system for those fleets that manage their own fuel system.

• Parts include shop supplies, inventory parts and non-inventory parts.

• Direct labor includes the cost of wages and benefits of shop personnel who spend most of their time working on vehicles and equipment



• Indirect labor includes management and administrative personnel whose time is not easily charged to specific vehicles and consists of their salaries and benefits. In some cases an employee may some of their time as a supervisor and some in direct activities.

• Contract work includes the costs of private-sector vendors engaged in vehicle maintenance and repairs and other support activities.

• Operating fees consists of such expenses as title, license tags and vehicle inspection fees charged by various jurisdictions for the ownership and operation of the vehicle.

• Direct overhead consists of all other expenses associated with fleet operations and under the budgetary control of the fleet division. This includes all expenses associated with administrative work, minor investment capital (tools and equipment), utilities, and service fees. Any fleet division expense that cannot be assigned to a specific vehicle is accounted for as direct overhead

• Indirect Overhead expenses are those expenses assessed by another department or agency. This includes expenses for human resources, financial services, city/county administrator's salaries. These expenses are not under the control of the fleet manager.

Seattle’s financial system basically follows a framework analogous to this by classifying

expenses into such categories like personnel services, supplies, etc. and assigning them to lower

level Orgs aligned with the services provided such as vehicle maintenance, warehousing, etc. In

addition, the financial system distinguishes between direct overhead expenses like Fleet Division

management and Fleet Services Administration, and indirect overhead expense like those from

the Fleets and Facilities Department and the revenues attributable to the main activity centers of

the Fleet Services Division. Exhibit 35 provides a detailed listing of these various direct and

indirect expenses by activity center and the corresponding revenues for the activity.

Other Considerations

Once all the direct and overhead costs associated with a particular activity have been assigned, it

just becomes a matter of dividing the activity’s cost by an appropriate transaction volume to

yield the necessary rate. Where it becomes interesting is deciding on which transactions are most

appropriate to use, how difficult are they to measure, how simple or complicated they should be

and what level of accuracy is needed. There is a tradeoff between accuracy and the costs of

measurement.



When dealing with direct services like maintenance and repair, warehousing operations, and

vehicle fueling the transactions to use are fairly self-evident like mechanic hours consumed, parts

volume issued or gallons of fuel consumed. When dealing with overhead functions, there are

many ways to allocate these costs such as the following parameters.

• Costs • Labor hours

• Staff size • Repair orders, and

• Fleet size • Other transaction volumes. Furthermore, there are two additional considerations to be kept in mind. First, the direct

overhead costs of the function providing the service such as shop supervision or warehouse

supervision should be assigned directly to their respective services.

Second, when assigning indirect overhead costs it is important to consider if any of the indirect

costs would remain if the direct function were outsourced. For example, if maintenance services

or warehouse services were totally outsourced, there still would remain some management and

supervisory oversight needed in the fleet organization. These costs should be segregated from the

costs of maintenance or warehouse service delivery. This segregation is essential in making fair

comparisons when considering whether to outsource or not, and insuring that customers as well

as mechanics have an accurate representation of what their true costs are. Unfortunately, not all

fleets are either able or willing to make such a distinction. Seattle is fortunate, though, to have

the accounting tools to make this distinction.

TEMPLATE FOR RATE DEVELOPMENT

The following discussion provides a template for developing chargeback rates, while the next

section applies this template in computing example rates for the various services provided by

Fleet Services. This template has been divided into three parts: Overhead Allocations; Vehicle

Leasing Charges; and, Operating Rates.



Overhead Allocations

Department Overhead Allocations

• The Fleet Services Division’s share of FS&D Department overhead costs should be divided into two segments.

• The first segment would be included as part of an indirect overhead cost that is recovered as part of the chargeback rates developed for each of the following Activity Centers:

o Fleet Administration,

o Vehicle Maintenance,

o Warehousing,

o Fuel Supply, and

o Motor Pools.

• The second segment treats these costs as part of a monthly “fleet management” fee that is paid by customers that lease vehicles from Fleet Services or use Fleet Services’ fleet maintenance services.

Division Overhead Allocations

• The overhead costs of Fleet Services’ management costs should also be divided into two segments.

• One segment treats these costs as an indirect overhead cost to be recovered as part of the Activity Center.

• The second segment treats these costs as part of a monthly “fleet management” fee that is paid by customers that lease vehicles from Fleet Services or use Fleet Services’ fleet maintenance services.

Fleet Administration Section Overhead Allocations

• The costs of the Fleet Administration Section should also be divided into the two overhead segments:

o Organizational support of an activity that is recovered by the activity’s chargeout rates, and a

o Monthly “fleet management” fee that is paid by customers that lease vehicles from Fleet Services or use Fleet Services’ fleet maintenance or specification services.

• The results from the activity survey we conducted of the Fleet Administration Section can be used as guidance, and will be described in the section on Illustrative Rate Computations.



Overhead Proxies

• One or more of the following proxies for activity volumes can be used in computing the distribution of overhead costs. (These too will be explained in the next section.)

o Budget Costs (properly adjusted to exclude resale or pass through costs and depreciation)

o In Service Vehicle Costs

o Personnel Costs

o Number of FTEs

o Transaction volumes (e.g. number of work orders)

o Maintenance and Repair Expense

Vehicle Leasing Charges

Vehicle Replacement Charge

• Per VERP formulas or equivalent, calculate the annual vehicle replacement charge for each vehicle and equipment unit under the lease program.

• Identify this charge as a separate amount on the monthly invoice sent to customer.

Fleet Management Fees

• This fee is to recover overheads cost of the Department and Division, and is to be added to the vehicle charges as a fixed rate per vehicle.

• Because of the different customer agreements in place with the utilities fleet, this fee needs to be differentiated among:

o Vehicles owned and maintained by Fleet Services

o Vehicles owned by the Utility but maintained by Fleet Services.

o Vehicles owned and maintained by Utility and specified by the Utility.

o Vehicles owned and maintained by Utility and specified by Fleet Services.

Operating Rates

Common Considerations

As will become clear, the common threads amongst all the operating rate protocols are:

• All costs for the Activity Center should be identified, including

o Labor

o Facilities



o Supplies and Materials

o Utilities

o Overheads and incidentals.

• Each Activity Center should recover its costs.

Repair Labor Rates

• Rates should be fully burdened.

• Hourly Labor Rate = (Total Direct + Overhead Costs)/ (Billable Hours per period).

• Billable Hours should be based on actual experience and not targeted goal.

• Targets are fine for performance measurement, but not for rate setting.

• Billable hours actually charged have averaged 137,900 and not the 143,000plus hours used in recent rate estimates.

• Billable hours need to be carefully monitored and compared annually to the amount assumed in the rate computation.

• The assumed amount should be adjusted annually, if needed based on this comparison and any significant changes in staffing levels anticipated for the upcoming year.

Parts Surcharges

• These charges should recover the full costs of parts stocking and distribution.

• The markup can be a fixed amount or percentage markup.

• Percentage markup is recommended since it is the easiest and most resembles commercial practice.

• Percentage Markup per Part = (Total Direct + Overhead Costs of Warehouse Operation per Period)/ (Total Costs of Parts Issued Per Period) X 100.

Commercial Repair Surcharges

• This surcharge is designed to recover the administration costs associated with outsourced work.

• This surcharge can be a fixed or percentage markup. Either approach is acceptable.

• Percentage markup per part = (Total Direct + Overhead Costs of Warehouse Operation per Period)/ (Total Costs of Parts Issued per Period) X 100.

• Fixed Markup Cost per Commercial Work Order = (Total Direct + Overhead Costs of Managing Outside Work per Period / (Number of Commercial Work Orders per Period).



• Percentage Markup Cost per Commercial Work Order = (Total Direct + Overhead Costs of Managing Outside Work per Period / (Total Costs of Commercial Work Orders per Period) X 100.

Environmental & Incidental Surcharges

• This surcharge is designed to recover environment fees and costs assigned to the vehicle maintenance function.

• The surcharges can be either a fixed fee or percentage markup per repair. Either approach is acceptable.

• Seattle is using the fixed fee approach of approximately $7.50 per work order.

• This fee is acceptable provided that:

o The environmental costs have been properly identified, and

o The reason and amount of the surcharge are identified on the monthly invoice sent to customer.

Motor Pool Rates

• These rates should recover the total cost of Ownership and Operation of the vehicles.

• The rates can be based on time, use or combination of time and use vary by type of vehicle rented. Commercial practice for light vehicles is daily or weekly rental charge, while commercial practice for equipment is or weekly rental charge plus hourly rate.

• Time Unit Rate = Total Annual Cost of Operation and Ownership/ (Annual Rate Time Units X Estimated Percent of Time Units Utilized).

• Use Unit Rate = Total Annual Cost of Operation and Ownership/ (Estimated Annual Miles Utilized).

• Combination Rate = Total Annual Cost of Ownership/ (Annual Rate Time Units X Estimated Percent of Time Units Utilized) plus Total Annual Cost of Operation / (Estimated Annual Miles Utilized).

ILLUSTRATIVE RATE COMPUTATIONS

Basics

We applied the principals of the template described above to develop a series of sample rate

computations based on year end data of 2006. This process consisted of the following steps:

• Isolating Department, Division and Section Overhead expenses,



• Allocating these indirect overhead expenses to activity centers based on one or more of the following proxies

o Personnel Costs

o Transaction volumes (e.g. number of work orders)

o Vehicle Counts

• Distinguishing overhead costs used to support and be recovered by a Fleet Services organization versus overhead costs to be directly billed as part of a fleet management fee or work order surcharge to customers.

• Combining the assigned overhead costs with the direct and other indirect costs of the activity center to produce the total costs of the activity center to be recovered.

• Dividing the total activity center costs by one of the following cost drivers:

o Billable hours

o Parts costs

o Fuel consumption in gallons

Overhead Allocations

We first converted the detailed revenue and cost data of Exhibit 35 into the summary table of

Exhibit 34. We then isolated the three indirect overheads of the Department, Division and

Section for reallocation. Similarly, we isolated personnel expenses for computing percentages to

distribute overheads associated with the support of human resources activities. An acceptable

alternative would be to use FTE employee counts to distribute this overhead.

We computed a “net expense” by subtracting overheads, depreciation and resale expenses from

total expenses. We added allocated overhead costs to the net expenses to compute markups for

the respective activity.

Exhibit 36 demonstrates the overhead allocation process. To allocate Department overhead costs,

we divided the Fleet Services share ($1,149,084) of this overhead into five segments that match

in proportion to the Department wide Finance and Administration Program (A1000’s orgs)

source of this overhead. Then depending on the particular segment, we allocated the Department

overhead either as a support cost to Fleet Services orgs or as part of a customer bill as a work

order surcharge or monthly fee. Similarly, we allocated Division overhead costs to Fleet Services

orgs or as part of a customer bill as a work order surcharge or monthly fee.



Likewise, we segmented the overhead costs associated with the Fleet Administration section into

key functions based on the results of an activity survey we conducted of the Section’s

employees. Then, depending on the nature of the segment, these costs are allocated either to

Fleet Services orgs or as a monthly fee or repair order surcharge to the customer.

Vehicle Leasing Rates

The vehicle leasing rates will consists of two components: an amount needed to fund

replacement of the vehicle; and a fleet management fee to cover certain Department and Division

overheads. We have provided under separate cover a copy of the VERP model that Fleet

Services can use to compute annual amounts needed to replace the vehicles and equipment units

under the leasing program. Dividing these amounts by 12 will yield the monthly charge for

vehicle replacement. The monthly fleet management fee is based on the sum of overhead costs

that have been allocated to this account, as described above. As detailed in Exhibit 35, the

monthly Fleet Management Fee was estimated to be $20.66.

Operating Rates

The operating rates are based on the total costs to perform the operating activity divided by the

respective cost drivers for the activity, such as labor hours, work order counts, gallons of fuel,

parts costs, etc. The total costs of the activity equal the sum of the overhead costs allocated to the

activity plus the direct and indirect expenses of the activity. The lower right quadrant of Exhibit

37 details these computations, while Chart 66 tabulates the results. In conclusion, the rates

developed here are not that different from what Fleet Services has already developed.

Chart 66: Estimated Chargeback RatesRate per billed hour $84.06 Parts markup 20.60% Fuel gallon markup $0.20 WO Surcharge $15.06



XII. COST OF SERVICE ANALYSES

This section provides a cost of service analysis for the following key products and services

offered by the Fleet Services Division.

• Metal/Machine Shop

• Capitalization Shop

• Paint & Body Shop

• Aerial Device Overhaul Shop

• Tanker Refueling Service

This analysis documents the major labor, materials, facilities and support costs for these business

processes. It also develops a fully burdened labor rate for comparison to outside vendors and

results obtained from outside quotations for service. This Chapter then provides templates for

evaluating when to use overtime, rely on outside vendors and/or expand capacity. The Chapter

concludes with discussions of real world strategies regarding the outsourcing and insourcing of

work.

ESTIMATED SERVICE COSTS

Exhibit 36 tabulates the allocation of direct and indirect costs by major shop category. These

consist of: direct and supervisory shop labor, associated fringe benefits expense, plus support

costs for operations, facilities, personnel and overhead. These costs are then combined and

divided by the function’s billable hours to yield the fully burdened costs of labor for comparing

to outside services.

Labor Costs and Fringe Benefits

Labor costs were estimated by multiplying the number of direct and support employees

providing the service times the average salary for the position and then factoring in the cost of

fringe benefits. Average salary was computed by multiplying the position’s average hourly wage

rate times 2080 hours per year. The fringe benefit rate was estimated to be 36.1 percent of



salaries, as computed in Exhibit 37, and was derived from 2006 Personnel Services Expenses for

the A2221 Vehicle Maintenance Org.

Support Costs

Next, we based support costs on the following expenses from the Vehicle Maintenance Org

account:

• Depreciation

• Internal Charges

• Other Service Charges

• Supplies, and

• Overhead.

The allocations were based on cost drivers associated with the nature of the activity. First costs

were divided into four major activities as detailed in Exhibit 38 and summarized in Chart 67

below.

Next the proportionate shares of the cost driver associated with the activity were computed, as

detailed in Exhibit 39. The resulting percentages were then multiplied times the $2.6 million of

activity costs to be distributed in Exhibit 36. The sum of labor and support costs was divided by

the billable hours to yield the fully burden labor rate for the shop. These rates have been

summarized in Chart 68 on the next page, and indicate that the Cap Shop appears to have the

highest burdened labor rate and the Paint & Body Shop the lowest.

Chart 67: Summary of Activities and Cost Drivers Activities Amount Cost Drivers Operations $208,760 Shop Work Orders Facilities $1,223,856 Shop Square Footage Personnel $607,974 Number of Shop Employees Overhead $632,465 Number of Shop Employees

Total $2,673,055



Chart 68: Summary of Costs of Service Shop Burdened Labor Rate Materials Commercial Costs Metal/Machine $87 $240,800 $17,600 Tire Shop $74 $588,813 $30,399 Paint & Body $67 $373,413 $38,325 Cap Shop $98 $644,118 $14,139 South Service Center (Rebuild Shop) $86 $720,135 $385,161

Also added in and shown in Exhibit 39 are the Materials and Commercial costs by shop and

which were derived from analysis of the work orders performed at that respective shop.

AERIAL REBUILD ACTIVITY

In our opinion, most, if not all, of the aerial rebuild activity is not cost effective when taking into

account the total costs to perform this work, including that of vehicle downtime.

Based on data provided by the Fleet Services Division, there were ten (10) aerial device trucks

involving major overhaul and rebuilding efforts during 2006. (Some of this work activity

extended from 2005 and some extended into 2007. Also, one involved rebuilding of the aerial

boom only.) Exhibit 40 details this activity and tabulates the costs for labor, parts, commercial

work and downtime by unit as well as estimated labor hours. Chart 69 below summarizes the

costs by in-house and outsourced segments.

Chart 69: Average Aerial Rebuild Costs For 2006

Source Units Labor Cost

Parts Cost

Commercial Cost

Downtime Cost (a) Total

Mostly In-House 6 $52,932 $39,460 $782 $9,297 $102,470

Mostly Outsourced 4 $3,575 $9,226 $31,270 $5,505 $49,576

Note: (a) Estimated at $19 per hour.

Downtime hours and costs are shown as well in Exhibit 40. Downtime costs were estimated by

equating these costs to the rental value of an aerial truck. This rental value was assumed to be



$3,000 per month. Dividing this amount by 160 hours per month yields the rental rate average of

$19 per hour. We multiplied this rate times the number of user downtime hours to produce the

estimated cost of downtime for the vehicle being rebuilt.

Of the six units rebuilt in-house, the costs of rebuilding ranged between $72,000 and $116,000

before downtime costs are taken into account. Including downtime, the cost range increases to

$80,000 to $108,000. Average in-house labor hours were 740 per unit. The remaining four units were largely outsourced and only involved nominal amounts of in-

house labor, as detailed in Exhibit 40. Total work order costs ranged between $40,000 and

$50,000, before downtime costs are taken into account. Including overtime, the range increases

to $50,000 to $56,000.

After reviewing these costs, we found that:

• Overhaul work that is primarily outsourced work costs less than that done primarily in house.

• The amount of in-house hours to perform this work appears excessive.

o In previous benchmarking surveys that we have conducted for the utility industry, we have found that the average number of work hours reported to rebuild the aerial device was 150, and to rebuild the cab and chassis unit was 100.

• Furthermore, the costs of some of the in-house overhauls plus downtime appear to be greater than the industry average costs of new units.

• Also, acquisition costs for Seattle’s aerial device trucks appear to be higher than industry averages:

o Best practice utility fleets spent about $115,000 to $120,000 for new medium duty (about 33,000 GVW) aerial trucks in 2006, in contrast to the $230,000 plus that Seattle pays.

o Heavier units (about 54,000 GVW) cost about average about $150,000 to $170,000 on average, in contrast to the in contrast to the $270,000 plus that Seattle pays. Based on our field observations, we attribute this large discrepancy in costs to over-specifying of equipment



TANKER SERVICE

Fleet Services provides a refueling service with a markup of 44 cents per gallon. As developed

in Exhibit 41, we estimate that the markup should be significantly higher at 70 cents per gallon.

The markup was based on amortization of the costs of the two tanker trucks used in this service,

their annual maintenance expense, and labor costs involved. Dividing these costs by the amount

of gallons pumped produced the estimated 70 cents markup per gallon.

OTHER ACTIVITIES

There are other activities where further analysis is needed. These consist of the Metal/Machine

Shop and the Capitalization shop. As noted in the benchmarking analysis, Seattle has an

extraordinary amount of personnel in its specialty shops.

While we recognize that the Metal/Machine Shop services not only vehicles but facility

machinery, it is only fair to question the cost effectiveness of this shop activity. We have

completed the first step in estimating in the fully burdened labor rate for this shop. But Fleet

Services will need to complete the remaining steps by not only comparing these rates to outside

machine shop rates, but also comparing the costs of selected work products to what can be

purchased on the outside. This is the so-called “Yellow Pages” test and will necessitate Fleet

Services auditing what products have been manufactured by the Metal/Machine shop - such as

brackets, tampers and other items – and that can be procured readily from outside automotive

supply sources.

Similarly, vehicle upfitting costs should be compared to obtaining vehicles already upfitted by

automotive dealers. In particular, the costs of outfitting patrol cars should be compared to what

can be obtained by competitive bids. In 2006, there were 52 patrol sedans that were upfitted by

Fleet Services. The average costs reported of this activity are summarized in Chart 70 on the

next page. While the $29,100 total price may be competitive to commercial sources, the overall



time to place these vehicles into service needs to be reviewed to see if these costs still remain

competitive. Chart 70: Upfitting Costs For Patrol Cars in 2006

Item AveragePurchase Price $23,390Upfitting $5,739

Total $29,129

OUTSOURCING VERSUS OVERTIME TEMPLATE

To assist Fleet Services Division management and supervisors in answering whether commercial

or in-house maintenance is more economical, we have provided the template illustrated in

Exhibits 42 and 43. This template can be used for those situations when an in-house

maintenance facility is near capacity, and the line supervisor needs to quickly determine whether

a repair should be given to a commercial garage or be accomplished in-house with normal or

overtime labor. Long term considerations such as constructing a new maintenance facility to

provide additional capacity are described in the subsequent section on Investment Analysis.

The template consists of two parts:

• A Data Sheet that is updated quarterly, and

• A Repair Analysis Worksheet for the supervisor to add repair specific data to compare whether it is more economical to do the work in-house on a straight time or overtime basis or pay a commercial vendor.

The data sheet consists of a spreadsheet that is revised quarterly by management and contains the

following information (see Exhibit 42):

FACILITY Name of facility or facilities for which the analysis report is applicable.

VEHICLE CLASS A column of vehicle classification codes.

A Shop labor rates corresponding to the class of vehicles. (Values are in $/hour.)

B A column of overtime shop labor rates corresponding to the class of vehicles. If in-direct labor is paid overtime, it must be included in this figure. (Values are in $/hour.)



C Commercial labor rates corresponding to the class of vehicle. (Values are in $/hour.)

D Pickup and delivery costs corresponding to the class of vehicle. (Values are in $/mile.)

Q Average parts discounts corresponding to the class of vehicle. (Values are expressed as 1-discount.)

R Vehicle costs corresponding to the vehicle classification and life. This value is used to determine the cost of the vehicle being out of service and equals monthly rental divided by available hours per month. (Values are in $/hour.)

The supervisor would transfer the appropriate data from the data sheet to upper line of the Repair

Analysis Worksheet (Exhibit 43) and then provide the following information that is specific to

the repair under consideration.

Line T The estimated direct hours of labor necessary to complete the repair. Line U The total dollar cost (list price) of the parts needed to affect the repair. Line V The number of hours the unit is estimated to be out of service if the repair is fit in the shop work schedule (in hours). Line W The number of hours the unit is estimated to be out of service if the repair is accomplished by working over time (in hours). Line X The number of hours the unit is estimated to be out of service if the repair is performed by a commercial contractor (in hours). Line Y The vehicle need factor. This should be determined by the using agency. The need factors are:

2.0: The vehicle is needed for immediate service. A replacement must be rented or system degradation will result. 1.5: The vehicle is required but status quo can be maintained during repair. 1.0: Normal need factor for equipment. 0.5: Vehicle is not needed immediately for service.



With this information, the supervisor through a process of simple multiplication and addition

estimates the following costs under each of the three alternatives: Normal (Straight Time),

Overtime and Commercial.

1. Repair Costs

2. Parts Costs

3. Pickup & Delivery

4. Out Of Service Costs

Then the totals appearing at the bottom of the page express the relative differences in costs

among the three options. The lowest amount indicates the most economical solution. The

difference between the lowest and each alternative is the added expense of choosing other than

the lowest. It must be remembered that the totals do not represent the total cost of the repair.

These values are relative indicators to allow selecting among the three alternatives; costs

common to all three are not included in the totals.

INVESTMENT ANALYSIS

For those situations where maintenance facilities are non-existent, in-adequate, or falling behind

on a regular basis the alternatives consist of:

1. Increased use of commercial vendors, or

2. Investment in expanded facilities and/or equipment.

If commercial maintenance is less than in-house maintenance, then there would be no economic

justification for investing in facilities. On the other hand, if commercial maintenance were more

expensive, the investment in expanded facilities and/or equipment requiring a long-term analysis

of investment and return factors. In order for the investment to make economic sense, the

savings must be greater than the investment, or at worst, equal to the investment.



Internal-Rate-of-Return

The analysis of a proposed investment to reduce costs is a classical engineering economy

problem. Its solution involves projecting cash flows through the life of the asset and then

computing an “internal rate of return” based on present worth analysis. This rate of return is

compared the threshold or hurdle rate that management has set for evaluating capital projects. If

the rate of return equals or exceeds the hurdle rate, the project makes economic sense. The hurdle

rate at a minimum should be set at to equal the organization’s long-term costs for capital. It can

be set higher to account for the degree of risk associated with the project.

The cash flows consist of the cost of the initial investment made in year “0” followed by the

projected net cash flows for each year of the project. The net cash flows reflect the differences

in annual savings and costs for the project. These net cash flows are discounted to their present

worth values. The interest rate that results in the sum of the present worth values of cash flows

equaling zero is considered the internal rate of return. This rate is usually estimated via an

iterative process by initially guessing what the rate should be and then gradually changing it until

the present worth sums reach zero balance.

The financial factors needed for this analysis are as follows:

• Investment required for the new or expanded facility or equipment,

• Anticipated service life of the new asset,

• Salvage value of the new asset,

• Financial hurdle rate, and

• Inflation rate.

Projected Savings

The primary sources of savings resulting from the investment are:

• Increased In-house Repair Capabilities

• Reduced Parts Costs

• Reduced Pickup and Delivery Costs

• Reduced Downtime



Estimating these savings closely parallels the techniques described in the Overtime versus

Commercial repair framework described in the previous section.

Increased In-house Repair Capabilities

Since the purpose of investing in facilities or tools is to increase in-house repair

capabilities, the most direct measure of this capability is the number of additional direct

labor hours that become available. For a maintenance shop, this equates to the additional

number of mechanic hours the additional work bays will be utilized during the year.

Similarly, if the decision involves procurement of a machine such as a brake rotor

grinder, the number of hours spent in commercial maintenance per year for this operation

would be estimated; and, the portion of those hours to be transferred to in-house work

would be determined. Savings would be estimated by multiplying repair hours times the

difference in commercial and in-house labor rates, inclusive of taxes. If these labor rates

vary significantly by repair type or vehicle classification, then weighted averages of labor

rate should be used.

Reduced Parts Costs

The fourth factor is the potential savings associated with parts. On one hand, there are

savings associated with purchasing parts at a discount greater than what a commercial

vendor would charge for the part when making a repair. These savings are estimated by

multiplying the discount rate times the value of parts purchased. However, these savings

need to be reduced by the cost of procuring the part and carrying it as inventory.

Purchasing costs include determination of needed parts, freight and delivery charges, and

costs of inspection and acceptance. Inventory carrying costs include the tie-up of money

in parts on the shelf, inventory control, and losses due to parts obsolescence. (These are

explained in more detail in Chapter X on Warehousing.) Depending on the degree of

precision needed for the analysis, a simplifying assumption could be made that the cost of

buying and inventorying parts would offset the savings of purchasing at a lower price.

Making this assumption would remove part costs from the analysis.



Reduced Pickup and Delivery Costs

The third factor gained by increasing in-house capabilities is the reduction in pickup and

delivery costs. This gain is estimated by multiplying the number of pick up and delivery

trips saved times the miles saved per trip times the cost per trip mile.

Reduced Downtime

The next major factor is the predicted reduction in downtime. This value is obtained by

multiplying the total out-of-service time saved from in-house maintenance times the

value of the vehicles to the operation. This is computed for each class of vehicles to be

serviced by a new facility or added piece of equipment.

Projected Costs

These costs will consist of projected changes in maintenance, operations and overhead costs for

each year of the project’s life.

Maintenance and Operating Costs

Adding facility and tool capacity may result in increases in maintenance and operating

expenses of the facility or equipment being considered. Increased operation and

maintenance costs will needed to be estimated for each year of the project. Since these

costs typically increase with time, the rate of inflation must be taken into account as well.

Overhead Costs

If an increase in capacity necessitates an increase in supervision, then the costs for this

additional overhead will need to be added. It may however be possible to add some

capacity without adding supervision. In such cases, there are no added costs. In fact it

may be argued that this situation increases the utilization of existing overhead and results

in a slightly lower cost of overhead per unit of work. Still, since the comparison is being

made on the basis of changes in overall costs and not unit costs per se, then the benefits

of increased overhead utilization can be ignored.



Resulting Cash Flow

For an internal rate of return analysis, the investment costs are treated as a negative values for the

“0” year of the project. Annual savings are treated as positive numbers, while added costs are

treated as negative numbers. Salvage value is treated as a positive number and is added to the last

year of the project life. Adding the costs and savings for each year produces the net cash flow for

the year. Then, standard financial tables or worksheet functions can be used to compute present-

worth values and internal rates of return to complete the analysis.

REAL WORLD CONSIDERATIONS

The decision to “outsource” is often a difficult and arduous process which impacts many areas of

the business and should take into account the many aspects and implications of the decision. The

following “tool” provides some “real-world” questions and/or issues to consider during the

outsourcing evaluation process. These questions were derived from a recent publication entitled

“Insourcing vs. Outsourcing: Guide Factors to Consider,” produced by the Distribution

Construction and Maintenance (DC&M) Committee of the American Gas Association. Their

impacts must be considered and fully understood before a decision to move forward is

implemented, and have been organized into the following areas.

• Core Competency • Safety and Training • Customer Contact • Employee Engagement/Morale • Labor/Union issues

Since the issue of core competency of the business must be identified as part of the outsourcing,

there are several questions to assist in real world discussions of that issue.

Core Competency

• Does our process provide us a competitive advantage?

• Are we really good at this process?

• Is this process an area of strength or weakness?



• Is this a function that we should be focusing resources on?

• Does this function tie to the Division’s primary mission?

• Does any external company have the capability and knowledge to perform this function?

• What is the impact on the organization if someone else performs this function?

• What is the impact on employees if someone else performs this function?

• Do we truly understand the costs and critical process that interface with function?

• Will the outsourcing of this work allow Division personnel to focus more on core competencies?

Safety & Training

• Does the contractor have experience in the work being outsourced?

• Does the contractor have experienced crew leaders and forepersons?

• Does the contractor have the specialized equipment necessary to do the work?

• To what degree is ‘local’ operating knowledge critical in performing the work being performed?

• What internal and external regulations and procedures will the contractor need to be aware of to perform the desired work?

• What impacts will the outsourcing have on emergency response times considering reduced internal staffing?

• Can the contractor respond to off-hour emergencies if needed?

• Does the contractor have ‘local’ qualified resources available?

• Does the contractor have a documented safety compliance program or procedures?

• Does the contractor perform internal and documented safety inspections?

• Does the contractor have a poor performance record with OSHA?

• Does the contractor promote safety throughout the organization from the top down?

• Does the contractor have an internal training department?

• Are training records readily accessible if needed to comply with DOT or regulatory requirements?

• Are contractor employees experienced with and/or trained using similarly approved equipment and materials?

• What is the typical turnover rate for the contractor?



Customer Contact

• What level of customer contact is the contractor required to have?

• What additional training is required with the desired customer contact?

• Are there political or legal concerns with contractors performing customer contact?

• What process changes will need to be implemented for outsourcing customer contact work (i.e. paperwork, scheduling, and posting notifications)?

• Does the contractor perform background checks on new hires?

• Does the contractor have a complaint resolution process or procedure?

• What impact will the contractor’s activities have on established performance metrics?

• Does the contractor have an acceptable reputation in the area?

• Does contractor’s management structure support customer service work?

• What impact will the contractor’s efforts have on Division image?

Employee Engagement/Morale

• What is the impact of contracting with a union verses non-union workforce?

• Are concessions required for work being transferred to an outside workforce?

• Does outsourcing create the possibility of union action/activities?

• Will insource and outsource workforce be held to the same standards?

• Do our employees feel their jobs are at risk?

Labor/Union Issues

• Is the activity currently a union activity?

• Is outsourcing prohibited by the labor contract?

• How is your union contract structured relative to contracting jobs?

• What is the labor cost difference?

• Will contractor personnel and bargaining unit personnel be required to work together?

INSOURCING CONSIDERATIONS

Similarly, there are a number of considerations when evaluating insourcing opportunities.

Insourcing is the opposite of outsourcing. While outsourcing involves a fleet removing



unprofitable operations from its facilities and contracting out these tasks to other parties,

insourcing involves a fleet identifying potentially profitable operations and accepting contracts to

do work for outside parties.

Typically, a larger fleet will accept contracts from smaller fleets to maintain and service their

vehicles in the larger fleet's maintenance facilities. The smaller fleet obtains access to

experienced labor; parts purchased through economies of scale; and advanced maintenance skills

capabilities that they may not be able to afford with their own in-house operation. The larger

fleet benefits from generating a profit from facilities it was already maintaining. This can reduce

overhead and make more efficient use of the existing maintenance facility infrastructure.

When considering whether to insource work, management must take a careful look at the

specific conditions within its fleet and its intended service area. It needs to realize that the heart

of what the operation is selling is their expertise and talent.

Management will need to examine the market place and answer such questions as:

• How large is the potential market?

• How much competition would the proposed operation face from other outside maintenance contractors?

• Is there an adequate supply of trained technicians to expand existing staff to take on new business?

• Can you deliver a superior product?

• Can it be provided at a competitive price?

• What type of warranty will you provide on your work?

• How many claims can you afford before it becomes a drag on your business?

In addition, management will need to have a well thought out business plan that examines the

potential costs, revenues and risks of taking on additional work. The plan should address how

growth will be managed so that facilities could be expanded without adding too much overhead.

Thought must also be given to the types of customers to seek and not seek. For example,

customers that won't authorize critical safety repairs are not desirable to have.



The business plan should factor in the cost of increased insurance to account for the additional

liability associated with in-sourced work.

The fleet operation will also need a well-constructed support process for billing and collection.

Who will send the bill, and who will do the collection. These processes may be separate from

fleet management and an arrangement will need to be worked without the billing and collections

department.

Excellent customer service skills will be needed. On one hand, the quality of service to internal

customers cannot be sacrificed to take of the external customers. On the other hand, the external

customers will not want to hear excuses either. Both sets of customers will need to be kept

happy, even though there will always be the suspicion that you are favoring one over the other.



XIII. PERFORMANCE MEASUREMENT AND REPORTING

This Chapter reviews the current state of performance measurement at Fleet Services, explains

how to develop key performance measures and standards, analyzes current productivity levels

and maintenance performance against industry standards, and proposes strategies and specific

recommendations to improve shop maintenance operations and work practices. It begins with a

discussion of performance measurement in general, how it apples to fleet management and then

examines Seattle’s specific situation.

GENERAL CONCEPTS

Performance measurement is a management tool that quantifies performance or productivity in

an organization. It enables management to document and assess the progress an organization is

making toward reaching goals and assess how competitive it is in using resources.

Performance measurement quantifies two major areas: effectiveness and efficiency.

Effectiveness relates to how well a set of results is achieved, while efficiency relates to how

many resources were needed to achieve the results. Thus, by measuring and comparing the ratio

of output achieved (effectiveness) over input resources consumed (efficiency), within a specified

period of time, we have a means to quantify performance to assess whether it is improving or

not. For most organizations, resources consist of capital, labor, material and energy or some

combination thereof.

There are several important factors that need to be considered when using this management tool

in general and especially when applied to a fleet operation. First, performance measurement

should be considered as means to an end – improved performance – and not an end unto itself.

This tool like any management tool has the potential of making an operation more effective if

applied correctly and kept in perspective.



Second, we must be certain of what we are measuring. The selection of goals and definitions of

the tasks needed to reach those goals are of critical importance. Unlike a simple manufacturing

or assembly process where measuring the number of acceptable versus unacceptable products

may suffice as a productivity indicator, the management of automotive and construction

equipment is not a simple process. Measuring the wrong elements can cause just the opposite

result you are trying to achieve through measurement.

Similarly, it is important to measure more than one indicator. For example, measuring the

percentage of preventive maintenance inspections is important and achieving a high completion

rate is a worthy goal. But unless the number of breakdowns and amount of vehicle downtime are

also measured, we do not know how effective the preventive maintenance program actually is.

Finally, best practice fleet operations recognize that performance improvement is a continuing

process whereby management is involved in an ongoing effort to utilize resources more

effectively to achieve quality results. The best organizations always measure against themselves

through time as well as periodically check their performance to other similar organizations and

commercial operations.

FleetAnywhere™ and Performance Measurement

The Fleet Services Division utilizes the Maximus’ FleetFocus FA (FleetAnywhere ™) system to

manage its work order, asset, fueling services, and other fleet data. This is a well known and

robust fleet management information system with full capabilities to manage fleet operations and

measure performance. As applied by Fleet Services, the system contains basically all the data

needed to measure performance such data as the following:

• Downtime

• Direct and indirect labor activity

• Work order class, cause and location

• Work description

Nevertheless, what do appear to be needed are summary reports and charts where management

and supervisors can see at a glance how well their performance compares to pre-determined



standards regardless if the standards were developed in-house or are based on outside industry

practice.

The next few paragraphs will explain how to aggregate the myriad of data that is being produced

or is capable of being produced from the FA system to provide meaningful information to

improve shop maintenance operations and work practices.

MEASURING FLEET PERFORMANCE

Desirable Traits

The best measurements compare actual performance against a predetermined target of

performance. The measurements should:

• Accurately track all resources utilized in the process,

• Aid in decision making by identifying problem areas,

• Provide also a customer’s perspective of effectiveness of doing the right things,

• Be cost effective,

• Be easily understood, managed and simple to accomplish,

• Capable of comparing performance levels among different locations,

• Compatible with existing information system,

• Easily monitored and displayed at all times,

• Limited in number, with more than 15 indicators subject to justification,

• Provide a historical perspective so that changes in productivity can be emphasized.

Establishing Standards Generally, there are several sources and methods establishing for standards.

• Those that are established by reviewing an organization’s goals and objectives.

• Those that are based upon records of past performance and can be used to compare performance levels.

• Those from external sources (sometimes referred to as industry averages or standards) and be used:

o To compare or benchmark performance among “similar” organizations



o To compare internal performance commercial benchmarks for cost-effectiveness evaluations.

Internally developed standards have some inherent advantages over externally derived standards.

Internal standards can be targeted to very specific goals of the organization, such as:

• Meeting budgetary or financial goals,

• Achieving a certain percentage of alternative fueled vehicles in the fleet,

• Mechanics meeting certification or training goals,

• Achieving a certain customer satisfaction grade, etc.

Internal standards can be measured consistently across the organization, such as:

• Preventive maintenance completion rates

• Percent of time that is billable, etc.

On the other hand, in order to identify gaps in performance and learn best practices from outside

organizations, it is necessary to compare performance to outsider “similar” organizations as best

possible. Also, to test competitiveness it is necessary to make comparisons to commercial

vendors and/or industry publications like Chilton’s, or Motors, etc.

There are even limitations with the outside comparisons approach. First, no two operations are

exactly alike even if they are in the same industry. This is why it is important not to focus too

much on minor difference in performance, especially if it regards only a single indicator.

Instead, it is much better to examine multiple indicators and see if there are major differences in

performance levels.

Second, there may be significant differences in the cost accounting among fleets from different

organizations. This can in turn lead to identification of practices that may appear cost effective in

the comparative mode but in actual practice are not. Two of the most glaring examples are the

methods used to account for the cost of a maintenance and repair labor hour and the manner in

which overhead costs may or may not be allocated.



In like regard, the “rolling up” of internal costs for a basic “performance metric” can be

challenging for some public service fleet managers. Their cost accounting systems may not fully

account for all costs associated with a particular activity to benchmark. While it may be possible

to track and identify these additional costs that reside outside of the measured entity, there may

be unwillingness on the part of the internal manager to be evaluated based on costs which he/she

may legitimately feel are out of their control.

This is why using “commercial benchmarks” for the development of “Performance Metrics”

should be considered as well. In addition to avoiding some of the difficulties in benchmarking

against peer organizations, commercial benchmarks have the following advantages over inter-

organizational comparisons.

• Commercial benchmarks allow the true comparison of the “business alternative” to the performance of the activity “in house.” In other words, the commercial benchmark can establish for the company the actual cost of having this task done for the company, if in fact, this work were to be contracted to a third party.

• Commercial benchmarks typically represent the most effective cost of performing this activity as the firms who produce this “advertised cost” must compete in the market place for this business and as a result have constant pressure to be more efficient at the service.

• The commercial benchmark must also represent the “high end” of the comparative cost as the outside firms must support a profit margin not applicable to the internal costing of the service or activity.

• Commercial benchmarks also allow the identification of costing structures for the different commercial infrastructures that support a mixed fleet of light vehicles, medium trucks, heavy trucks and equipment makeup. In other words, there is typically is a difference in the labor rate charged for work done on an automobile as opposed to work done on a heavy truck.

Commercial rates have their set issues to consider when making comparisons. Flat rate manuals

are designed for dealers to earn a profit and may include an extra allotment time for the dealer

and mechanic to share in the revenue. Also, dealer mechanics are continuously working on the

same make of vehicle. This situation is unlike that of the typical government or utility mechanic



who has to work on a very broad range of makes, models and equipment types which vary from

one day to the next for servicing. Also, there may not be a readily available commercial standard

for the particular work to be done. This is generally more of the case with heavy trucks equipped

with very specialized equipment than it is with light vehicles.

Standardization

An integral part of any performance measurement process is the development and adherence to

commercially available vehicle and equipment standards. Economical, reliable vehicle and

equipment performance cannot exist in a culture that allows individual users to select equipment

based on their opinion of needs. Standardization must take place at four (4) levels.

A. Vehicle Configuration – Such as Compact Sedan, Light Duty Pickup, Medium Duty

Backhoe, 50-55 ft. Class Material Handling Aerial, etc.

B. Vehicle Make – This may change but should not happen on an annual basis as the reliance of long term, strategic alliance with key suppliers is an essential. This contract should be the result of a comprehensive bidding process where the expectation of the alliance is clearly articulated in the RFP.

C. Component Configuration – This level of standardization entails the specifying of upfitting and auxiliary hydraulic and other powered equipment. Standards at this level would include service body length and compartment configuration, pintle hook arrangements, auxiliary lighting requirements, auxiliary power generation, DOT lighting, vehicle marking (decaling), etc.

D. Component Make – This is similar to the standardization of the manufacturer of the vehicle or piece of equipment but entails the selection of a supplier for individual vehicle components as described in “C” above. This includes the selection of a single, strategically aligned and RFP awarded supplier for service and utility bodies, van interiors, pickup truck accessories, lighting components, etc.

Performance Monitored

While all of the shop supervisors that participated in our survey indicated that they used

“Performance Measures” to monitor and manage the performance of their shop operation, most

of these measures were qualitative in nature and varied by supervisor. While some stated that

they compared basic tasks among mechanics, others made comparisons to flat rate manuals and



outside vendors. Just about everyone mentioned the annual performance appraisal as a tool for

measuring performance. Furthermore, eighty two percent (82%) reported that they periodically

compared the costs of their operations to those available from an outside commercial supplier.

PERFORMANCE DEFINITIONS AND TARGETS

We list below key performance measures and goals for consideration by Fleet Services. These

measures are well known in the industry and much has been written on suggested targets for

these indicators.

• Fully Burdened Labor Rate The fully burdened labor rate is analogous to the dealer labor rate. It is computed by dividing the sum of all direct and indirect costs associated with fleet maintenance and repair by the total number of billable hours charged by the mechanic workforce. This metric measures the efficiency of maintenance and repair services performed against other providers of these services. It makes fleet management aware of its costs and encourages fleet users to hold fleet management accountable for the cost and value of the service.

o Target: Local vendor labor rates typical for vehicle class involved.

• Turn-Around Time Turn-around time is the amount of clock time it takes for a vehicle to be returned to service after it has been put in the shop for repair. A high turn-around rate can signify that mechanics are not doing a good job of preventive maintenance so that unresolved minor repairs turn into major repairs that require more time in the shop. It could mean that vehicle repairs have been delayed because: repair parts are not available when they are needed; work priorities are not managed; and, the equipment that is in for more extensive repairs is receiving priority over those in for minor repairs.

o Targets:

Less than 24 hours: At least 70 percent

24 to 48 hours: 20 percent

Longer than 48 hours: Not to exceed 10 percent

• Preventive vs. Corrective Repairs, Scheduled vs. Unscheduled Work Work in the shop can be scheduled or unscheduled. Scheduled work consists of PM plus the work that results from the PM and which has been scheduled to be performed at a later date. Also, scheduled work includes annual DOT inspections. All preventive maintenance work is scheduled. The operation should strive for a greater percentage of its work as scheduled and preventive maintenance. If the shop is engaged in excessive unscheduled repair work, overall maintenance and repair costs will be higher and fleet reliability lower. Furthermore, scheduling of the workforce becomes more challenging when most vehicle work is unscheduled as opposed to predictive.

o Target for Scheduled Work: (As a percentage of total work) 50 to 70 percent



o Target for Preventive Maintenance: (As a percentage of total work) about 50 percent

o Target for Corrective Repairs: (As a percentage of total work) 30 to 40 percent

• Repeat Work Repeat work is maintenance work that has to be redone, because it was not done correctly in the first attempt. It is a clear indication of poor workmanship or misdiagnosis.

o Target for Repeat/Rework: Less than 2.5 percent

• Downtime and Breakdowns These two are very important indicators of the quality of work done by a maintenance operation. Downtime measures the amount of time the equipment is out of service because it needs to be repaired. A high amount of downtime either means that service is disrupted, since a vehicle is not available, or a large number of spare vehicles are required as backups. Break down measures the frequency with which a vehicle must be taken out of service because of repair problems. Both indicators speak to the overall management of the maintenance operation and the quality of repair work done.

o Recommended overall standard for downtime (excluding accidents): Not to exceed 6 percent

o Typical targets by vehicle type:

• Construction Equipment: 3-5 percent

• Administrative vehicles and trucks: 1-2 percent

• Medium/heavy trucks: 2-4 percent

• Specialized equipment: 6-8 percent

• Law enforcement, marked: 2-3 percent

• Law enforcement, unmarked undercover cars: 1-3 percent

• Mechanic Utilization This is a measure of the percentage of available time mechanics spends “turning wrenches”, or working on vehicles rather than doing other things such as running for parts, waiting for work, cleaning up the work area or running errands. The objective is to maximize the amount of time mechanics spend working on vehicles versus other activities.

o Target: 65 percent to 70 percent

• Preventive Maintenance This indicator measures all preventive maintenance inspections and required annual state emissions performed as compared to the total number scheduled in a given period of time.

o Target for PM inspections: 95 percent

o Target for Emission inspections: 100 percent

• Inventory Turn Ratio Measures the total number of parts used annually divided by average number of parts on hand. This measure is an indicator of too much or too little stock levels and also shows slow moving or obsolete stock. For a further discussion of



this and other spare parts management performance metrics, please refer to Chapter X on Warehousing Operations.

o Target ratio: 4 to 5

ASSESSMENT OF CURRENT PERFORMANCE AND PRODUCTIVITY

Fleet Services compares favorably to most of the indictors listed above where data were

available.

Fully Burdened Labor Rate

As estimated in Chapter XI, we estimated that the fully burdened labor rate of Fleet Services

shop personnel is $84 per hour. This is competitive to the average vendor labor rates of $102 per

hour for heavy truck work and $92 per hour for light vehicle work, as indicated in a recent

market survey conducted by Fleet Services Division.

Mechanic Utilization

Fleet Services mechanic utilization exceeds the 65 percent to 70 percent target for this indicator.

Overall Downtime

Based on downtime data provided to us by Fleet Services, we found that that the overall

downtime averaged 6.3 percent for the full year of 2005; and 7.1 percent for the first eight

months of 2006. These rates are slightly greater than the downtime target of 6 percent.

Turnaround Time Data on turnaround time were not provided to us, but should be collected and monitored in the future.

Preventive Versus Corrective Repairs As developed in Exhibit 44, we estimated that the percentage of labor hours for scheduled work

is only 52 percent, and for preventive maintenance only 28 percent. Both of these are on the



lower side and indicate that more attention is needed in completing preventive maintenance

inspections on time and having sufficient staff to do so.

Also, fleet age is another factor that influences this outcome. As illustrated in Exhibit 45, the

percentage of work that is breakdown repairs tends to increase with the age of the vehicle.

PERIODIC PERFORMANCE REPORTING

Just collecting performance data is not enough. It is important to track and plot data periodically

so that any changes in performance levels can be spotted more easily. That is why we

recommend the development of weekly, monthly and annual performance reporting utilizing

most if not all of the indicators listed above on a shop basis. These can be supplemented by

additional indicators such as the ones listed below. They are only limited by the availability of

data and resources to produce them.

Maintenance Management

• Amount of backlog work

• Average repair length

• Downtime due to unavailability of parts

• Fleet availability

• Fully burdened labor rate by shop

• Annual maintenance cost per by vehicle and by vehicle class

• Maintenance cost per mile or per hour

• Miles between road calls

• MRUs to mechanic ratio

• Number of PM no shows

• Number of vehicles awaiting parts

• Out of Service Ratio

• Summary listings of vehicles remaining out-of-service



Fleet Usage and Size

• Miles per vehicle

• Engine hours per vehicle

• Employees per vehicle

Fuel Economy

• Fuel cost per mile

• Fleet wide miles per gallon

• Percent of fleet vehicles that are alternate fuel vehicles (AFV)

Other

• Procurement cycle times

• Upfitting cycle times

• Average fleet age

• Percent of fleet beyond replacement age/mileage guideline

Shop Profit and Loss Statement

To encourage each of the shops to operate as a business, we recommend that a quarterly “profit

and loss” statement be created for each one. “Revenues” would consist of the amount of work

earned or billed by the mechanics during a given month plus parts charged to customers. The

cost of goods sold (i.e. parts) would be subtracted to yield Gross Margin. This would be

compared to the total operating expenses of the garage such as labor, rents, utilities, and other

garage overheads to assess whether a garage were profitable and whether mechanics were fully

utilized.

Borrowing From Outsourcing Contracts

Another set of performance indicators to consider are those associated with maintenance

performed by outside contractors. Increasingly, public service fleet organizations have been

adding metrics such as the following to provide rewards and penalties regarding the maintenance

and repair of their fleet. Chart 71 on the following page lists some of the typical ones used.



Chart 71: Performance Requirements

Required Service Standard Maximum Allowable Degree of Deviation From Requirement

(AQL)

Deductions from monthly Invoice Price Exceeding

the AQL No. Of Work Orders completed on time

Contractor must process 96% of all Work Orders on time. 4% 5.2%

No. Of Scheduled PMs completed

Contractor must complete and maintain a 97% completion rate of all scheduled PMs. 3% 10.4%

Total number of Labor Hours Expended

Contractor must not exceed Number of Total Labor Hours expended unless, authorized by the Fleet Director.

5% 3.8%

Percentage of Available Vehicles and Equipment

Contractor must maintain an availability rate of 96.5% for all vehicle and equipment. 3.5% 7%

Turn Around Time on Directed Work

Contractor must perform Directed Work and other duties as assigned with minimal impact to daily operations.

2% 1%

Total Number of re-repairs

Contractor must limit repeat repairs for all vehicles and equipment to 4%. 2% 7%



XIV. WORK PRIORITY AND SCHEDULING SYSTEM

This Chapter describes templates to facilitate the scheduling of work at Fleet Services shops. As

previously noted, work scheduling at these shops must not only take into account normal

maintenance and repair, but also some capital work and work that originates at other

maintenance facilities in Fleet Services. The templates described herein are designed to be

simple, effective and flexible.

ESTABLISHING PRIORITIES

Priorities for scheduling work should be documented in a single page to provide guidance but not

dictum to the garage staff. The number of priorities should be kept to a minimum and based on a

consensus obtained from a Fleet Services and User Group Committee. A three-level priority

system, as outlined below, should meet most of Fleet Service’s daily work load scheduling.

• Priority A is immediate action work. Priority A is exclusively reserved for emergency work, or work that must be done the day it is requested even if overtime is required. Whenever possible, Priority A work should be done after regularly scheduled work is completed. Typically, it is only necessary to complete the Priority A work before the next day.

• Priority B is for jobs that are to be placed on the schedule for the next workday.

• Priority C is for jobs that can wait and be placed on future schedules according to dates required for completion.

As a guide, the fleet operation should consider the following factors in formulating priorities:

• Vehicle related

o Vehicle classification

o Intended vehicle use

o Availability of spare unit

• Repair related

o Safety



o Severity of repair

o Condition, if left uncorrected, would damage equipment

• Shop related

o Work load of mechanics

o Availability of parts

WORKLOAD FORECASTING

To apply this system, workloads should be forecasted using the forms in Exhibits 46 and 47 as

guides.

Monthly Planner

Exhibit 46 presents an illustrative planning form that can be used to plan the overall work load at

a garage one month in advance. The form can be set up as a spreadsheet or manual document and

can be modified, as the fleet organization deems necessary.

The shop supervisor uses the form to anticipate potential overload or under load situations for a

given garage. The information in the form is used as a basis to plan priorities, work schedules,

overtime or contract maintenance needs in advance. The document is divided into three sections:

• Available time,

• Work load and backlog estimate, and

• Comparison of work with time.

In the "Available Time" section, the service writer estimates the net mechanic hours available in

the month. This estimate is based on both known and unknown factors. Known factors include

the number of mechanics in the month, workday, holiday and vacation days. The time spent in

"other" activities will consist of both known and unknown components. Time for coffee breaks,

cleanup, etc. will remain generally constant each month. Time for parts chasing, training and

other indirect activities may not be known precisely in advance but can be estimated from past

data as a percent of mechanics' time.



In the "Work load and Backlog Estimate" section, the amounts of time to perform scheduled,

unscheduled and other work in the garage are estimated. Scheduled maintenance time should be

developed from averages of past activities. Information regarding the number of PM's due per

month by vehicle classification and the number of state inspections required should be used for

estimating scheduled maintenance activities. Other planned maintenance activities would be

included in the "other" category.

Next, the supervisor estimates from past experience the number of road calls and turn-ins to be

anticipated and then multiplies these instances times the average expected time for each. Any

other type of unplanned repairs or other activity is estimated from past experience and is

included in line "o" through “q” for other". For example, the time required for fueling vehicles

could be estimated here. Or the amount of work to be generated from vehicles based at other

facilities could be estimated by examining past patterns of work. Alternately, this time does not

have to be identified separately. Instead, it could be included as part of the percentage for "other"

activities listed in line "f". In either case, this form provides flexibility to the fleet staff to

accommodate either as much detail or as much aggregation as needed.

Finally, the estimate of workload for the forecast month is added to the backlog of the previous

months to yield total work for the forecast month. This sum (shown in line "u") is compared to

the net mechanic hours available (shown in line "h") to estimate either a potential under load or

overload situation. The service writer can then use this information to alter the scheduled work

plan, plan for overtime and/or contract out work.

Daily Planner

Exhibit 47 illustrates another document to aid the scheduling of daily workload and backlog.

This document lists all scheduled maintenance, demand activated repairs and fill-in activities.

For each item are also listed:

• Priority of work,

• Estimated completion time, and

• Mechanic responsible for activity.



To schedule work with this document, the shop supervisor performs the following steps:

1. Determines the work force available for each shift taking into account known absences due to illness, injury or meetings.

2. Applies a factor for indirect labor activities.

3. Prior to each shift identifies all known work in advance.

4. Lists all known work on the daily workload planner according to category.

5. Lists expected completion time for all work on the schedule.

6. Assigns priorities to all work on the schedule, taking into account the following categories of work.

a) Category I: Scheduled Maintenance (SM)-fixed workload and the preventative maintenance workload. Subtracting the hours for this first category from total hours available, the supervisor next determines the amount of time available for:

b) Category II: Demand Activated Repairs (DAR) - The service writer then pre-

schedules a portion of that remaining time with items from the DAR work orders. Depending on the location and section, approximately 40% to 60% of the DAR time is pre-scheduled from existing work orders. It is assumed that the remaining unscheduled time will be filled with work from DAR that cannot be deferred, high priority work requested during the shift, or from the third category of work:

c) Category III: Fill-in Maintenance (FIM) - This group includes repairs, which do

not significantly affect vehicle safety or operation.

7. Once the schedule has been completed, the service writer determines if the vehicle, skills, equipment, parts, or tools are available. If the decision is "no," reschedule. If the decision is "yes,” the service writer assigns the first two hours of work based on priorities. The remaining work is assigned later or as other work order requests are submitted.

8. Next, the service writer decides if a sublet contractor or Fleet staff should be utilized to complete necessary work.

a) Sublet Contractor: If the decision is made to use an outside contractor, the service

writer makes appropriate arrangements.

b) Fleet Staff: If the decision is made to use internal staff, the supervisor decides whether the work should (or can) be performed on the regular shift, overtime is required, or the work can be delayed to other shifts or the next day.

9. During the first two hours of the shift, the service writer evaluates the schedule and make adjustments based on late-arriving priority work and unknown absences. Previously scheduled work may have to be deferred or DAR work orders added.



10. This whole process is repeated prior to the start of the next shift. It should be noted that the best time for mechanics to work on vehicles and equipment is during the time when the equipment is not in use. For most pieces of equipment, such as utility trucks and construction equipment, this period is the evening shift. This is referred to as non-conflicting scheduling and will result in fewer pieces of equipment being out of service for maintenance, and less need for spare equipment to be loaned. For passenger cars, where inspections and repairs may be less time-consuming than those for heavy equipment, work is often scheduled during the day shift. In summary, scheduled maintenance work should be kept to a minimum during the day shift and attention should be instead directed to handling emergency or turn-in work.

WORKLOAD UNITS

Expected completion times will be needed in order for the shop supervisor to quantify workload

and backlog. Initially, the supervisor should use his or her independent estimates of the time

required to do certain tasks. This will enable the supervisor to focus on development of

scheduling skills rather than the ability to retrieve detailed standard data from a large manual.

Next, certain work activities that are repetitive, well defined and readily standardized should be

identified. For these work tasks, expected completion time should be developed by a

combination of work sampling, flat rate manual and supervisor opinion polling, and analysis of

work order histories.

This analysis should identify those 20 percent of the repair activities that account for 80 percent

of the work done. Using this information as a database average expected completion times and

variances can be estimated for selected types of work. These in turn should later be verified and

adjusted, if needed.



XV. EMPLOYEE EDUCATION AND INCENTIVES

Employees represent the most valuable resource that an organization can have. In this Chapter

we present ways to enhance this resource through education and incentives and discuss methods

to support staff in achieving performance goals. The programs described here were derived from

best practice fleet operations and take into account what we learned from the input we received

from shop supervisory and mechanic personnel.

MECHANIC AND SUPERVISOR INPUT

We learned from the attitudinal survey we took of the mechanic workforce that pay and benefits

were one of the top areas of concern where they felt improvement is needed. Most of the

mechanics noted that the City needed to raise its compensation package not only to retain

qualified mechanics, but also attract new ones. What was most interesting were the ideas that

that compensation should be based on job skills, and that the current stepped pay scale system

should be eliminated at least for new hires.

Similarly, they also expressed need for more specialized (factory-based) and certification

training and less policy or safety training that they are receiving now. They also seek incentive

pay for certifications like ASE and EVT.

The Supervisors echoed many of the same concerns that the mechanics made, although the

supervisors had placed a caveat on certification. They stated that certification alone is not

enough. Instead, certification needed to be coupled with pay increases. As previously noted in

the Supervisor Survey Results, they felt that certification would provide the following benefits:

• A training tool,

• Increasing general competence,

• Keeping skills up to date,

• Giving the organization a certain “clout,”



• Justifying better wages to retain keep quality people, and

• Promoting pride in work quality.

In addition, they believed that more specialized training, especially factory-based, would be

more beneficial than the broad training provided by vendors to mechanics. In particular, they

cited more training was needed on the diagnosis and repair of heavy equipment engines and

running gear. Also needed was more updated training on automotive diagnostic equipment.

SEATTLE MULTI-STEP SYSTEM

The mechanic job classification and pay system at Seattle is a multi-pay grade approach that is

generally similar to those used by most other government fleet operations. The successively

higher pay scales provide the mechanic some incentive to stay and move up through the ranks.

At other fleets the entry level position is the mechanic helper position. In contrast, at Seattle the

entry level position is Automotive Mechanic Apprentice, which is followed by Auto Mechanic,

Auto Mechanic, Senior and Auto Maintenance Crew Chief. The Equipment Servicer position is

a standalone or terminal position and not part of the mechanic group progression series.

Whereas the Automotive Mechanic Apprentice is expected to attend formal classes to

supplement on-the-job training, the Equipment Servicer is not.

RECENT TRENDS

Recently, some government fleet operations have introduced the concept of incentive pay for

certification. Their goal is to empower employees to determine their salaries while improving

skill levels. These programs often involve certification through the National Institute of

Automotive Service Excellence (ASE). By passing at least one ASE exam and providing proof

of two years of relevant work experience, a technician becomes ASE-certified.



Fleets that have introduced these programs report that the increased technical knowledge

improves mechanic productivity and results in faster turn-around times. They also use these

programs to not only improve mechanic morale and the professionalism of their shop operations,

but also retain qualified existing staff and recruit new personnel.

Multiple Approaches Used

Government fleets have used a variety of ways to implement an incentive program. For example,

at Chesterfield County VA, eligible employees take one or more of the ASE examinations and

the EPA Section 605 air conditioning certification. The County’s incentive program allows

successful technicians to earn an additional 15-percent professional incentive pay increase in

their annual salary. However, those employees can earn only one professional incentive increase

within a two-year period.

At the Town of Greenwich, CT a program called “Project Blue Seal” was created that converted

the shift foreman position into a shift supervisor position, provided the shift foreman obtained a

Master ASE certification. The shift supervisors would have to maintain their ASE Master

certifications and recertify as a job requirement. Also, heavy duty “mechanics” who obtain four

ASE certifications, from courses selected by the fleet manager, would move up a pay grade to

heavy duty “vehicle technician” status. Those technicians who do not recertify drop back a

grade. Also, the technicians pay for the ASE testing and study and take the test on their own

time. Since it is a union shop, those mechanics who did not want to certify are allowed to remain

at the lower pay rate and grade. However, new hires have to commit to take the ASE

certifications to become a heavy duty technician.

Similarly, our benchmarking survey reflected the wide variety of approaches being used

regarding compensation and certification. With the exception of Seattle, each of the survey

respondents had an incentive program in place involving mechanic training and certification

beyond just paying for the tests. In some cases, there were financial incentives. In one case

there were non-financial incentives such as recognition ceremonies and consideration for

awarding merit pay increases.



Range of Incentives

As reported in a recent article in Automotive Fleet magazine, there are no industry standards for

certification incentive pay. Incentive pay is often negotiated as part of a union agreement. The

range of additional pay for master-level ASE mechanics is an additional $1 to $2 per hour. Some

other examples of incentive pay are described below:

• Los Angeles County pays its mechanics $0.25 per hour bonus for each of eleven ASE certifications.

• At the City of Oxnard, CA promotion to Mechanic II, a 5 percent raise, is dependent on the mechanic attaining ASE Master Technician status.

• At Orange County, CA, the employee and supervisors agree on a goal such as obtaining up to three ASE certifications.

• At Sacramento County, CA, an employee is allowed up to 4 percent of their base for ASE certification. They are awarded a 0.5 percent per category for a maximum of 3.5 percent. For master certification, they are awarded a total of 4 percent. For welding certification, the employee gets a 2 percent incentive. Thus, the total incentive for having both sets of certifications is 6 percent.

• The City of Riverside, CA requires as a condition of probation four ASE certifications, but chose different certifications depending on the position. For example, Mechanic II would be based on the “T” series or heavy-duty, whereas Mechanic I or II would be the “A” series. The only pay increase in any of these classifications was 5 percent once a Master ASE certification was acquired. This Master certification had to be maintained or the incentive pay would decrease to zero.

• At Bloomington, IL a new union contract was negotiated where the City will pay a 10 cents per hour bonus for each ASE and EVT certification. Management had looked at having different levels of technicians, but felt that offering bonus pay would work better.

• The City of Honolulu has the following requirements:

o Apprentice I: Completion of an Associates Degree in Diesel Technology two year program. The apprentice program is for heavy vehicle mechanics only because local market conditions make it difficult to attract qualified heavy vehicle mechanics.

o Fleet Mechanic I: Associate degree in diesel or automotive technology with two years of experience.



o Fleet Mechanic II: Automotive Journeyman mechanic and lower level heavy vehicle mechanic. No certifications required.

o Fleet Mechanic III: Journeyman heavy mechanic includes construction equipment class. This class receives a Recruitment-Retention-Incentive of $430 per month or $2.50 per hour based on actual hours worked in addition to their regular pay. Rate also applies to any overtime hours worked.

o Fleet Technician I: Auto mechanic with master certification.

o Fleet Technician II: Heavy vehicle with master certification. Also receives incentive pay of $430 per month.

• Metro Nashville, TN uses a step increase model with associated pay increases after six months, two years, four years and six years. For Automotive Mechanics, certification adds about $0.785 per hour and Master Technician status adds another $1.46 per hour. For Equipment Mechanics (which are paid about $1,600 more per year than Automotive Mechanics), certification adds about $0.745 per hour and Master Technician status adds another $0.714 per hour. At Master Technician status, Automotive and Equipment mechanics pay are the same.

• At the Metropolitan Washington Airports Authority, the ASE Certified Master Automobile Technician and the ASE Certified Master Heavy Truck Technician are paid $2,600 per year more. The Authority does not pay premiums for individual ASE Certifications, but will reimburse an employee (with proof of registration and certification) for any passed ASE tests.

EMPLOYEE EDUCATION CONSIDERATIONS

The development of a progressive, incentive based training program for in-house vehicle and

equipment maintenance and repair is essential for the development of a cost effective fleet

operation. A basic program should provide incentives for qualified personnel to progress through

a series of industry recognized certifications in order to maintain inclusion in the fleet

department. In commercial settings this usually means “up or out” as potential candidates must

either have the required certifications or be motivated by profession to make a long term

commitment to the department and the training requirements. In public agency settings, this

would mean that an employee would need to progress through the series to qualify for



compensation increases. Also, in a public setting existing employees would be “grandfathered”

but new hires would have to meet the certification requirements.

A basic set of Technician Qualification guidelines should involve a progression through the

Institute for Automotive Service Excellence (ASE) sequence of testing and progression.

Individual functions within the Fleet Services Division may elect certain series of certifications

relevant to their particular needs, but should at a minimum require basic entry level competence

or certification completion. Exhibit 48 is a copy of the certifications and relevant tests that may

be required for progression through the fleet garage mechanic series.

In addition to the ASE test there are other recognized industry standards that can be required.

These may be hydraulic certification, vehicle inspection licensing, emergency vehicle technician

and other industry or manufacturer certified programs.

INCENTIVE TRAINING PROGRAM

We present in this section how an incentive pay system could work. The program establishes a

base requirement for entrance into the Fleet Management Technician Series and sets forward a

progression within the series based on an individual’s documented experience or certification

achievements specific to the job within a specified period of time. Exhibit 49 illustrates the steps

in the progression/training program.

Technicians entering the job series will have to possess job specific skills.

• ASE Certifications

• A Technical Degree in Automotive Technology

• Job related experience prior to entering job series.

Promotion would not be automatic, but will be dependent on successful testing and personal

initiative.



Technicians possessing job skills will have the opportunity to use those skills without the

restrictions of waiting for a specified amount of time. They will have the opportunity to certify

in the categories that will advance them to the next step.

Technicians can fully qualify in twelve (12) months if so motivated. Technicians entering the

Fleet Management Technician Series will be more inclined to stay longer because of personal

interest and lower frequency of personnel change. Also tied to this progression will be a steadily

incremental pay schedule so that Technicians on whom the City of Seattle expends resources for

certification will be motivated to stay and not use the City to finance their education and then go

off to better-paying jobs on the outside.

Employees interested in entering the Fleet Management Technician Series will need to satisfy

the following requirements in order to be considered qualified.

1. High School Diploma or GED.

2. Two (2) years formal education in the automotive repair field and two (2) years experience working in an automotive repair facility or five (5) years working in an automotive repair facility.

3. Must possess a basic set of personal tools (list to be developed).

4. Successful completion of written technical test (pass/fail within a specified time).

5. Successful completion of hands-on technical test that will be administered at a central location.

Progression

When items (1) through (5) are satisfied, the technicians may enter the job series at a Level 1.

They may remain in Level 1 (Garage Mechanic A) for a maximum of two (2) years. During that

period the technicians must prepare themselves to advance to Level 2 (Garage Mechanic B).

Failure to do so will require them to leave the job series. Based on qualification and

demonstrated job performance the Level 2 technician can than progress to a Level 3 (Garage

Mechanic C). Failing to demonstrate the performance associated with obtaining the

qualifications would require the Technician to leave the series.



Minimum Training Hours

We are recommending that the City of Seattle dedicate between two to four weeks of formalized

technician training per year. This is consistent with the utility industry and to somewhat less than

that required by the motor companies for their representatives at local dealerships. This training

requirement should also be tied to the technician certification process and involve incentives for

the Technician to obtain the certifications on their own and that the City of Seattle provide more

specific training on particular equipment based on their maintenance demands

Suggested Compensation Amounts

We would suggest a pay increase of $0.25 for the obtaining of each set (Automobile and Light

Truck, Medium and Heavy Duty Truck, etc.) of ASE Certifications.

OTHER CONSIDERATIONS

We believe that the key to any incentive or performance improvement program is management

leadership. The director of any successful fleet organization needs to have a clear vision of what

they want for the organization. The successful leader needs to be unequivocally committed to

that vision. That vision needs to be communicated repeatedly to all employees so they surely

know the direction of where the division is headed.

The successful director also needs to have basic management skills, but more importantly must

have a commitment to and total rapport with people that serve in the Division. Without that

commitment as well as a focus on customer service it becomes more difficult to succeed.



XVI. CUSTOMER RELATIONS AND OUTREACH

Focusing on and reaching out to customers are some of the key ingredients in a successful fleet

management organization. As a service organization, fleet operations would not exist unless they

had customers to serve. In this chapter, we develop recommendations for:

• Improving customer communications,

• Motivating customer compliance with Fleet policies, and

• Improved customer-driven data and reporting.

We also provide guidance and supporting templates in conducting customer surveys and

developing service level agreements with fleet customers. Our recommendations were based on:

what we learned from the interviews and surveys we conducted of Fleet Services personnel and

its customers, a review of the Fleet Policies and Procedures manual, and our knowledge of best

fleet management practices in other successful organizations.

INPUT FROM SURVEYS

From the customer survey, we learned of their lack of understanding of the rate system and their

potential concerns that cross subsidies may exist. Customers also want to know what their fund

balances and complain that Fleet Services does not share such information with them.

Most notable were the many comments we received from the customers that communication

needed to be improved not only between them and Fleet Services management, but also they

believed within the administrative levels within the Fleet Services Division itself. They would

like Fleet Services to be more proactive in explaining changes in decisions regarding vehicle that

may have been previously agreed to. They seek more collaboration, cooperation and trust and

want to be treated with respect.



From the mechanics survey, we learned of their frustration in getting customers to bring in their

vehicles to the shop when due for preventive maintenance inspection. We also learned that some

felt that customers need to be better as “customers” instead of being “bullies.”

From the supervisor’s perspective, the City offers too many choices to its customers. All this

costs the City money in parts inventory, training, tools or down times. The supervisors would

like departments (fleet coordinators, supervisors and operators) to agree on standardization of

pickups, trailers of the same classes and heavy equipment in order to make outfitting the fleet

more cost efficient.

The supervisors were also asked to identify any barriers to communication and suggest possible

remedies. We found that many of these “barriers” can be attributed to customers avoiding or not

knowing what the proper communications channels are and/or not fully understanding Fleet

Services’ responsibilities and priorities. Some of these barriers can be remedied by properly

structured service level agreements that will clearly identify the roles and responsibilities of the

parties involved. But some will require greater customer attention, awareness and information-

sharing on the part of the Fleet Services Division.

FLEET SERVICES POLICY MANUAL

We reviewed the Fleet Services policy manual and did not find any content dealing with

customer responsibilities and relationships. We recommend that a section be added to the

existing manual that details what customer responsibilities are. Some of the topics that should be

added are:

• Vehicle operator qualifications, including the distinction between those operators that need to have a valid Commercial Drivers License (CDL).

• The responsibility of the vehicle operator to inspect their vehicle equipment daily and report any problems.

• The responsibility of the operator of those units requiring a CDL to conduct a pre- and post-trip inspection in accordance with a specific driver checklist that meets the requirements of the Federal Motor Carrier Safety Act.



• The need to comply with the preventive maintenance program that has been prescribed by the Fleet Services for the particular class of vehicle.

• The need to maintain the cleanliness of the vehicle operated.

• Subjecting employees who violate the provisions of the policy to disciplinary action.

It would be beneficial to codify the vehicle operator responsibilities in municipal ordinance to

enhance the compliance process.

To provide guidance to Seattle, we have provided an illustrative policy and procedures document

in Exhibit 50 on customer responsibilities concerning operation of City-owned vehicles.

Additional examples are shown in the text boxes below.

Preventive Maintenance The department/property and driver are responsible for making the vehicle/equipment available for Preventive Maintenance (PM) and repairs. The operations manager and staff shall coordinate through Fleet Services’ personnel, a contact person that will provide assistance in ensuring that all vehicles/equipment are properly maintained, as required, and are made available for all maintenance.

Cleanliness of Motor Vehicles

Employees using [comment: make the following word generic?]County motor vehicles shall remove all garbage from the vehicle after each use. The Department of General Services is responsible for general cleaning of shared and priority County motor vehicles on a periodic basis. Cleaning of dedicated vehicles is primarily the responsibility of the department, Office or agency to which the vehicle is assigned. A shared or priority vehicle that is particularly dirty (either interior or exterior) should be reported to the General Services Manager as soon as possible.

Operator Responsibilities An operator has a responsibility for his/her particular piece of equipment and is expected to inspect this equipment daily, checking tire pressure, checking for fluid leaks, lubricant levels, belt conditions, battery connection and cleanliness, lights, signals and horn, windshield wipers, and wiper fluids and reporting any problems. For equipment which requires a Commercial Driver’s License, federal law dictates a specific driver checklist. Vehicle Service Technicians need to know the details of daily operations and defects.



SERVICE LEVEL AGREEMENTS

A tool that best practice organizations use to manage their fleets is the service level agreement.

These are formal, intra-agency service agreements with fleet customers that set out fleet services,

charges, and responsibilities of the parties, and levels of services including priorities, policies

and standards. These agreements are often used in conjunction with chargeback systems.

Vehicle/Equipment Operators Shall:

• Maintain the proper operator license • Comply with all Federal, State and local laws relating to the

operation of assigned vehicle equipment. • Inspect assigned vehicle/equipment prior to operation. • The inspection will include, but not be limited to the following

safety items depending upon vehicle/equipment type: o Water and oil levels o Foot and emergency brake o Head, tail and brake lights o Turn signals o Tire pressure and tire condition o Windshield wipers o Mirrors o Visual damage (dents, large scratches, cracked windows,

etc.) • Report deficiencies discovered through operator’s inspection,

which are beyond the operators capability, to the immediate supervisor for referral to the Fleet Management Office for repairs.

• Not put vehicle/equipment in motion until all occupants are restrained by seat belts.

• Not install, nor allow being installed, any additional electrical or electronic equipment such as stereo, CB’s, light, light chargers and radio chargers in any county vehicle/equipment.

• Equipment of this type will be installed by the Office of Fleet Management or an approved county vendor.

• Radar detectors are strictly prohibited in county vehicles. • Report all accidents in accordance with the County Safety Policy.



The main reason fleet organizations enter into service level agreements is to improve the

effectiveness and efficiency of their service delivery. Such agreements provide the following

benefits to both the fleet service provider and the customer groups:

• Establish clear performance expectations for the customer and service provider.

• Clarify the roles and responsibilities of both parties.

• Focus attention on the customer’s priority needs.

• Encourage a service quality culture, and continuous improvement.

• Provide a mechanism for both parties to plan for the future.

• Provide a useful tool for the customer to monitor performance.

• Place service providers in a better position to plan their delivery functions.

Key Features

The main features of a service level agreement include:

• Purpose statement: This states the general scope, the parties to the agreement and its duration.

• Business assumptions: This would include accountabilities, business processes, policies and definitions.

• Services to be provided: This should describe the services, what is included and excluded, costing principles and costs, etc.

• Service levels: This should deal with response time, resolution time and quality indicators.

• Performance measures: The quantitative indicators to measure how well the service provider is meeting its goals.

• Responsibilities of the service provider: This should set out reporting practices, prioritization, competencies, training and cost control.

• Responsibilities of the service user: This should include planning, lead times and effective communication with the provider.

Negotiating Approach

We list below some of the key steps involved in developing and negotiating a service level

agreement with Fleet Services customers.

1. Obtain general guidance from senior level management. 2. Meet with customer business unit to obtain detailed guidance on what they need. 3. Identify the services to be provided, their protocols, and priorities. 4. Identify the performance indicators to be measured.



5. Most importantly, identify the responsibilities of the customer as well. 6. Draft a preliminary agreement for review with customer. 7. Evaluate impact on existing fleet services operations. 8. Develop plan for meeting new operational requirements. 9. Refine plan and service level agreement. 10. Finalize agreement. 11. Obtain senior management approval. 12. Jointly publicize agreement with customer and Fleet Services staff. 13. Implement plan to deliver customer service. 14. Provide performance data to customer.

Service Level Templates

The Appendix contains two sample service level agreements for consideration by Fleet Services.

One has been drawn from the public sector while the second is from the private sector.

CUSTOMER PERFORMANCE METRICS

We suggest the following monthly set of performance metrics for Fleet Services to provide its customers:

• Number of PMs scheduled and completed.

• Number of PM no shows.

• Number and percent of work orders completed on time.

• Vehicle downtime report showing number of repairs completed within 24 hours, 24 to 48 hours and more than 48 hours.

• Percentage of vehicles and equipment available.

• Number of road calls per month.

• Summarized charges per cost center each month distinguishing between Fleet Administrative fees, maintenance and repair, vehicle replacements, fuel charges, accidents, capitalization charges.

On an annual basis, a replacement fund status report should be provided that tabulates year-to-

date and life to-date VERP (or equivalent) payments into the customer designated fund,

expenditures made from the fund and balance on hand. Also it should note any holdovers of

vehicles that were scheduled for replacement during the year, but are being deferred and the

reason they are being deferred, and the impact of the deferral.



Finally, Fleet Services should provide an online reporting tool available to its customers based

on the new FleetAnywhere web reporting tool that is being rolled out.

CUSTOMER AWARENESS PROGRAM

Fleet employees and customers need to be educated about each other. This can be accomplished

through the establishment of a Customer Awareness Program that is dedicated to education,

communication and understanding of the respective operations and needs of both groups.

Initially, Fleet Services employees should be educated about the operations of customer

departments by requesting customer departments develop a communications program about their

department, and then present that program to fleet employees at scheduled meetings. The

presentations should be geared toward informing fleet staff about the work functions each group

performs, explaining how their vehicles/equipment are used, and the conditions and terrain in

which they must work. Each group should also discuss how the garage operations impacted

their ability to do their work in both a positive and negative way.

After educating fleet personnel, the next step is to educate customers about the Fleet Services

Division and its operations. One technique that can be successful is to establish a speaker's

bureau for Fleet Services. This group should include personnel from the Division office as well

as field locations. These personnel should be available to speak to any user groups at staff

meetings, safety meetings, communication councils, or any other gatherings where a speaker is

requested. The purpose of this bureau is to tell the user groups about the organization of the

Fleets Services Division, its purpose in the City, and the services that are available.

.

In addition to the speaker's bureau, regular schedules for visiting counterparts in the major user

departments should be established. User departments should be visited to discuss problems,

concerns, or to exchange information that is relevant to both work groups such as the quality and

timeliness of the service provided. These meetings provide the opportunity for ongoing contact

with the users and help establish better working relationships and friendships between work



groups. They also make the gathering of feedback from the departments much easier since

communications channels are opened.

OTHER OUTREACH PROGRAMS

We list below a number of outreach programs that we recommend that Fleet Services pursue.

• Create a monthly or bi-monthly newsletter for distribution to Fleet Services staff and major customers.

• Provide an open house event to be held yearly. The event should have contests, games and refreshments.

• Sponsor a joint Customer – Fleet Services picnic (Customer Appreciation Days) to further improve communications and relations among the organizations.

• Similarly, sponsor contests and recognition programs for vehicle operators that best take care of their equipment.

• Increase vehicle operator training through qualified vendor representatives.

• Establish a Fleet Coordinator advisory group that deals with the multitude of fleet/customer related issues at the operational level and not just at the upper management level as is done now with the current Fleet Advisory Board. The coordinator group should meet every two months or at a minimum on a quarterly basis.

• Conduct periodic customer satisfaction surveys.

o These can range from the detailed survey used in this study to a simple survey illustrated in the text box below.

Simple Satisfaction Survey

1. Promptness: I was able to get my business done promptly

2. Courtesy: Staff was courteous to me. 3. Efficiency: The staff helped me accomplish my

goal 4. Knowledge: The staff were knowledgeable

about products and services 5. Friendliness: The staff were friendly in working

with me 6. How well did we meet your needs? 7. How well did we fulfill your expectations? 8. Was today's service typical of the service

you've received here? 9. Comments and suggestions: (please write

inside the rectangle below)



XVII. FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

OVERALL ASSESSMENT

The City of Seattle has a large and diversified fleet operation involving 4,365 vehicles,

equipment and trailer units. Fleet management in Seattle is complicated and sometimes

conflicted, since fleet specification, replacement, and maintenance rests with multiple

organizations in the City.

Nevertheless, we found fully burdened labor rates to be competitive with local vendors and

maintenance and repair expenses comparable to other municipalities which we benchmarked.

Also, Seattle compares favorably to most maintenance and repair service indicators except

downtime and the proportion of work that is scheduled, which we believe are being adversely

affected by a shortage of maintenance and repair personnel and the advanced age of some of the

specialty fleet units. We estimate this shortage to be about four to five (4 to 5) mechanics.

Customers seem to be satisfied with the technical competence of the Fleet Services Division

mechanic workforce. However, they are less satisfied with Fleet Services Division management

and its processes related to billing, providing spare vehicles, and budgeting.

Despite their concerns about pay, Seattle mechanics still, as a whole, were more satisfied with


recently from other cities.



FINDINGS

Benchmarking Results

We benchmarked Seattle to five other municipal fleets in the West. These were comparable in

population size to the City of Seattle, and included: Albuquerque, El Paso, Fort Worth, Long

Beach, and Sacramento. From our comparisons survey, we found:

• Seattle’s overall fleet department size is about seven (7) percent smaller than the other respondents, when taking into account the size and composition of its fleet in MRU vehicle equivalents.

• Seattle’s total maintenance and repair expenses per MRU were close to or below the median values.

• Seattle is unique with its Metal/Machine and Aerial Rebuilding Shops - none of the other cities reported having such operations.

• Given the size of its operation and the diversity of services it performs, the composition of the Fleet Services Division organization is not unusual.

• Seattle seems to have more in common with the two other West Coast cities of Long Beach and Sacramento in performing nearly all capital work in-house.

• Seattle was among the fleets that have a fleet replacement funding mechanism in place – not all cities surveyed have one.

• Nevertheless, Seattle was the only fleet that does not separately account for fleet replacement and fleet operating funds.

• Seattle’s markups for parts, tires, and fuel are within industry averages.

• Seattle’s markup of vendor repair is higher than average, but is not the highest.

• Seattle’s technical training hours per year were among the lowest.

• All but Seattle have some incentives for mechanics to obtain certification.

• Seattle, besides Albuquerque, was one of only two fleets that reported not having service level agreements in place with customers.

Performance Analysis

Seattle’s maintenance and repair expenditures per MRU vehicle equivalent are comparable to

other cities benchmarked. The Fleet Services Division also compares favorably to most

maintenance and repair service indicators except downtime and the proportion of work that is

scheduled. This indicates to us that more attention is needed in completing preventive

maintenance inspections on time and having sufficient staff to do so.



Fleet age is another factor that influences this outcome since breakdown repairs tend to increase

with the age of the vehicle. This is particularly noticeable for aerial trucks, some cranes and

construction equipment, where the Seattle vehicles are generally older and taking more time to

maintain and repair than industry averages.

CONCLUSIONS AND RECOMMENDATIONS

Rate Setting and Fund Management

Conclusions

On one hand, the fact that the City has codified a dedicated fleet fund is a best practice since it

provides the foundation for recovery of costs directly associated with fleet operating expenses

and capital expenditures. On the other hand, major improvements are needed in fund structure,

rate computation, capital recovery analysis and transparency. Exacerbating the situation are the

following factors:

• The Fleet Services Division is a large and complex organization that provides a multitude of services for a very large city fleet.



• Replacement funds are commingled with operating funds making it more difficult to easily determine how much money is actually available to meet future replacement needs.



o Doubt among customers on whether there are sufficient funds to replace their vehicles when due; and,


• Furthermore, this lack unnecessarily increases the challenge for Fleet Services (or any fleet department for that matter) to justify the size of its fund balance and allay concerns of the fund being “raided” to serve other City, albeit, worthy needs.



These challenges can be mitigated by adopting the rate setting and fund management strategies

described in the Recommendations section.

Recommendations

Fleet Services should adopt activity-based concepts in estimating future charge back rates. This

report explains how this process works. Most importantly, rates should be designed to recover

full costs; i.e., direct, indirect and overhead. Maintenance and repair rates should not be used to

lower cash reserves in the Fleet sub fund.

The org cost accounts should be used to establish separate “funds” for capital and operating

costs. The capital “funds” should be divided among individual major department and

consolidated smaller departments. An annual status report should be provided to the fleet

customers on the amount of revenues collected, expenditures made, and reserves on hand in their

respective accounts.

Fleet Services should adopt a vehicle replacement program similar in concept to the VERP

program described in this report. The VERP model, which was submitted under separate cover

to Fleet Services, computes the annual replacement charges by vehicle by department. Also, the

planning horizon to compute replacement rates should be extended to ten years from the five

years presently used, except for fire tucks which should use a fifteen year forecast period.

Staffing

Conclusions

Compared to other large city fleet operations, the overall size of the Fleet Services organization

is slightly smaller per MRU vehicle equivalent. However, the amount of personnel and facility

resources that Fleet Services has in specialty shop operations like Paint & Body, Metal/Machine

and Capitalization are significantly greater. Furthermore, none of the other city fleets surveyed

for this study performs aerial device rebuilding in-house like the Fleet Services Division does.

Furthermore, detailed MRU analysis revealed that Fleet Services is shorthanded by four to five

(4 to 5) mechanics for maintenance and repair work.



Recommendations

Fleet Services needs to reconsider the 1,500 hours per year it uses as a target to estimate

mechanic requirements. This rate is unrealistic. Instead, a more realistic target would be 65 or

possibly 70 percent. Fleet Services should increase its maintenance and repair staff by four to

five (4 to 5) mechanics. Also, Fleet Services should apply the results of the MRU and

origin/destination analysis of this study to ensure that staffing remains balanced to workload by

shop.

Work Scheduling

Conclusions

Work scheduling practices need to be improved. Challenging factors include: many facilities

performing work on vehicles based at other shops; and significant amounts of capitalization

work are done at facilities other than the Capitalization shop.

Recommendations

Fleet Services should improve its work scheduling practices, using the templates included in this

report as a guide. Closer attention should be paid to the amount of a facility’s work that is

generated from vehicles assigned to other Fleet Services shops in the system. This inter-facility

workload can be significant and affects a facility’s scheduling process and staffing requirements.

Performance Measurement

Conclusions

Just collecting performance data is not enough. It is important to track and plot data periodically

so that any changes in performance levels can be spotted more easily. While most supervisors

indicated that the fleet information system provided them with the proper information to manage

their operation and work load, they cited improvement was needed in the consistency, accuracy,

and timeliness of the data.

Recommendations

Fleet Services should increase the number of performance indicators it measures, especially the

numbers of preventive maintenance no shows and the amount of turn-around time by vehicle



class, shop and department. The turn-around times, as described in this report, should be the

number of work orders completed within 24 hours, 48 hours, and more than 48 hours. Fleet

Services should also consider developing a monthly profit and loss statement by shop. Also, the

performance reports should be aggregated for each shop and the division as a whole to facilitate

trending through time.

Vehicle Specification

Conclusions

Based on our field observations and results from our surveys of customers, shop supervisors and

mechanics, we conclude that vehicle specification and standardization should be increased.

Recommendations

Fleet Services should revisit its vehicle specification process to increase the standardization of

the fleet. Insufficient standardization adversely affects mechanic productivity, and parts

warehousing and vehicle acquisition costs. Similarly, vehicle specifications should be written to

provide a more cost efficient unit.

Specialty Unit Life Cycle Analysis

Conclusions

Seattle averages significantly more hours to maintain and repair specialty equipment like aerial

devices and digger derrick trucks, when compared to industry averages. However, the ages of

these units are significantly greater than average as well.

Recommendations

Fleet Services needs to update the life cycle cost analysis of its specialty equipment like aerial

trucks, digger derricks and cranes. The results should be shared with City Light so that they can

reevaluate their vehicle replacement and funding practices. Aged units adversely affect not only

Fleet Services’ mechanics’ productivity, but also City Light’s cost for maintenance, repair and

downtime.



Cost of Service Analysis

Conclusions

In our opinion, most, if not all, of the aerial rebuild activity is not cost effective when taking into

account the total costs to perform this work, including that of vehicle downtime.

While we recognize that the Metal/Machine Shop services not only vehicles but facility

machinery, it is only fair to question the cost effectiveness of this shop activity. Similarly,

vehicle upfitting costs should be compared to obtaining vehicles already upfitted by automotive

dealers. In particular, the cost of outfitting patrol cars and time needed to place them in service

should be compared to what can be obtained by competitive bids.

Recommendations

Fleet Services should issue requests-for-quotation for the following services:

• Aerial device rebuilding,

• Vehicle capitalization/upfitting work,

• Metal/Machine work, and

• Tire service.

The quotations should include not only pricing but process times as well. We have provided

templates to assist Fleet Services in comparing these quotations to the costs of performing this

work in house. Furthermore, alternative procurement strategies should be pursued such as

acquiring vehicles on a turnkey basis, whereby the vendor supplies the vehicle already upfitted.

Outsourcing Versus Overtime

Conclusions

Overtime and outsourcing certain tasks on occasion can be used as an effective management tool

to meet peak or specialty work needs in the short run. Meeting longer term needs requires

additional economic analysis.



Recommendations

We recommend that Fleet Services adapt the templates in this report to assist in making

decisions regarding the use of overtime or outsourcing to meet peak or specialty needs. These

templates can be used for those situations when an in-house maintenance facility is near

capacity, and the line supervisor needs to quickly determine whether a repair should be given to

a commercial garage or be accomplished in-house with normal or overtime labor. Long term

considerations, such as constructing a new maintenance facility to provide additional capacity or

take on additional work, should be evaluated using internal rate of return analysis (or equivalent),

as described in this report.

Facilities

Conclusions


and WAC regulations for the types of workplaces operated by the City. Shop cleanliness and

housekeeping in general are commendable. We did find some capacity deficits at the Fire Shop,

SeaPark and South Service Center facilities. Capacity can be added without constructing new

facilities by shifting some of the workload from one facility to another, adding a work shift to the

Fire Shop, reallocating space and making some modest physical improvements.

Recommendations

There appear to be some capacity deficits at the Fire Shop, SeaPark and South Service Center

facilities. Capacity can be added without constructing new facilities by shifting some of the

workload from one facility to another, adding a work shift to the Fire Shop, and

• Reallocating existing space, such as:

o Moving machine tools out of Haller Lake and Fire shops to Charles Street to provide more space to support the vehicle repair operations.

o Expanding the body shop preparation area into one bay presently devoted to welding area.

o Conducting a study to determine the number and sizes of tires and wheels stored at the Tire shop.

• Adding some additional resources, such as:

o A heavy-duty lift for the Cedar Falls shop,



o Several computers for the Charles Street Truck Shop,

o Up-to-date scanning tools for vehicle and equipment diagnosis,

o Up-to-date subscriptions for on-line service manuals,

o Improved lighting at the Fire Garage,

o Sun screen shades for the west side of the Charles Street Shop, and

o Security fencing at the Haller Lake shop.

To accommodate future change in fleet size and its impact on facility requirements, Fleet

Services should develop a long term strategic plan and facility planning process.

Warehousing

Conclusions

Some of the Fleet Services Division’s warehouses (Haller Lake, Fire Shop and South Service

Center) lack the space to increase the number of parts that are stock if there is a significant

increase in size or mix of the fleet. While each of these locations was generally clean, we

observed at several locations evidence of clutter and parts in the aisle ways. Also, we found:

• The City inventory carrying cost falls within the range found at other MRO warehouses.

• The inventory accuracy rate of items counts exceeded 16 percent, which is outside expectable levels.

• The inventory variance rate of 10 percent is also outside expected levels.


• The help function in the FleetAnywhere system cannot be activated by Warehouse personnel when they are using the program.

• Fleet Services lacks any planning on the parts needed for stock for preventive or predictive maintenance.



• The large tire and wheel inventory in the Tire and adjacent Fire Shops could be larger than necessary. It could be more cost effective to rely on inventories of local tire suppliers.



Recommendations

• Develop and use the ABC analysis technique of stock items to segregate low moving parts so a true inventory turnover rate can be identified.

• Begin kitting parts for preventive maintenance and other scheduled work where it is feasible.

• Review existing inventory to ensure that the correct parts and quantities are being stocked, to increase the turns per year and reduce the total inventory on hand.

• Identify parts that are needed for predictive maintenance and timeline for adding to stock.

• Start planning PM and other definable work in advance and give the schedule to Warehousing for part kitting.

• Collect additional data for performance measures such as inventory accuracy rate, inventory variance rate and inventory stockout rate.

• Identify parts for stock at the time of the vehicle delivery. This should include items immediately needed, and items for predictive maintenance in the future.

• Make the help screens for Fleet Anywhere available while in the system.

• Have Warehousers take the ASE Parts Specialist series to improve their knowledge of parts to complement their knowledge of warehousing procedures.


• A study should be done to determine the number and sizes of tires and wheels to be stored by the City.

o It may be possible to cost-effectively reduce tire inventory in the Tire Shop to a level that would provide tires for immediate use and rely on inventory maintained at tire suppliers.

Employee Relations and Development

Conclusions




their compensation and benefits than mechanics of other government fleets surveyed. The

mechanics and their supervisors seemed receptive to certification provided it was tied into

incentive compensation.



Recommendations

Establish a mechanic incentive and training program, whereby future compensation is tied in

with certification. The Institute for Automotive Service Excellence (ASE) has a sequence of

testing and progression that we recommend. Individual functions within the Fleet Services

Division may elect certain series of certifications relevant to their particular needs, but should at

a minimum require basic entry level competence or certification completion.

In addition to the ASE tests there are other recognized industry standards that can also be

required. These may be hydraulic certification, vehicle inspection licensing, emergency vehicle

technician and other industry or manufacturer certified programs.

We are recommending that the City of Seattle dedicate about two weeks of formalized technician

training per year.

Finally, management leadership is the key to the success of any incentive or performance

improvement program. Accordingly, the committee that is searching for a replacement to the

recently retired Fleet Services Director should look for candidates possessing certain leadership

qualities like:

• Having a clear vision for the Division,

• Being unequivocally committed to that vision

• Capable of communicating that vision effectively to all its employees,

• Committed to and total rapport with people that serve in the division, and

• Have basic management skills.

Customer Relations and Outreach

Conclusions

Customer relations and communications need to be improved. While most customers seem to be

satisfied with the technical competence of the Fleet Services Division’s mechanic workforce,

they are less so regarding Fleet Services’ management and its processes related to: billing, rate

systems, fund balances, spare vehicles, and budgeting. Furthermore, customers cited

communications most frequently as the area needing improvement, not only between them and



Fleet Services’ management, but also within the administrative levels of the Fleet Services

Division itself. This was corroborated when nearly all of the shop supervisors and crew chiefs

we surveyed indicated the same barriers to effective communications with customers.

Recommendations

Fleet Services should also improve customer relations and outreach by:

• Periodically reporting to them:

o Number of PMs scheduled and completed.

o Number of PM no shows.

o Number and percent of Work Orders completed on time.

o Vehicle downtime report showing number of repairs completed within 24 hours, 24 to 48 hours and more than 48 hours.

o Percentage of vehicles and equipment available.

o Number of road calls per month.

o Summarized charges per cost center each month distinguishing between fleet administrative fees, maintenance and repair, vehicle replacements, fuel charges, accidents, capitalization charges.

• Distributing newsletters to them.

• Holding annual open house events.

• Sponsoring Customer Appreciation Days.

• Sponsoring contests and recognition programs for vehicle operators that best take care of their equipment.

• Increasing vehicle operator training through qualified vendor representatives.

• Conducting periodic customer satisfaction surveys.

• Establishing service level agreements with major customers, using the guidelines described in this report.

• Establishing an advisory committee of fleet coordinators to discuss on a regular basis the tactical issues as opposed to the strategic issues that the FAB discusses.

Documents

Fleet Report Chatham