HomeMy WebLinkAboutStudy Session 2016-17 Fleet Attachment 2012 Fleet Management Plan
May 2012
City of Seal Beach
Review of Vehicle Replacement and
Maintenance Practices
May 22, 2012
Ms. Jill Ingram
City Manager
City of Seal Beach
211 8th Street
Seal Beach, CA 90740
Dear Ms. Ingram:
Management Partners is pleased to transmit this report summarizing the results of our analysis
of the City of Seal Beach’s vehicle replacement and maintenance practices. The City has been
prudent in establishing a vehicle replacement fund. However the lack of annual contributions
puts the fund at risk of being depleted by FY 2014‐15.
This report contains recommendations for a long‐term replacement plan that includes a
replacement schedule as well as funding options for financing future purchases. The report also
identifies opportunities for improving fleet maintenance operations in several areas, including
overall management, staffing, and fleet facility organization and equipment.
The 35 recommendations in this report are designed to help the City improve the functionality
and effectiveness of fleet maintenance services, while funding the replacement vehicles that will
be required over the next 15 years to support essential public services.
We appreciate the assistance of the City staff members who gave their time, insight and
expertise that was critical to our analysis. It has been a pleasure to work with you and your
staff on this project.
Sincerely,
Gerald E. Newfarmer
President and CEO
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Table of Contents Management Partners
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Table of Contents
Executive Summary .................................................................................................................................. 1
Background ................................................................................................................................................ 3
Project Methodology ................................................................................................................................ 5
Document Review ............................................................................................................................ 5
Interviews .......................................................................................................................................... 5
Fleet Maintenance Site Visit ............................................................................................................ 5
Best Practices ..................................................................................................................................... 5
Vehicle Replacement Practices ............................................................................................................... 6
Replacement Planning ..................................................................................................................... 6
Replacement Schedule ..................................................................................................................... 8
Evaluating the Need for Vehicle Replacement ............................................................................ 9
Replacement Funding Options ..................................................................................................... 11
Approaches to Replacement Funding ....................................................................................... 11
Adequacy of the Vehicle Replacement Fund ............................................................................. 14
Vehicle Maintenance Practices ............................................................................................................. 18
Fleet Policies and Procedures ....................................................................................................... 18
Staffing and Workload .................................................................................................................. 20
Mechanic Staffing Levels .......................................................................................................... 20
Vehicle Maintenance Facility ........................................................................................................ 22
Organization ............................................................................................................................. 22
Shop Equipment ........................................................................................................................ 23
Performance Measurement and Cost Analysis .......................................................................... 24
Customer Service ............................................................................................................................ 27
Preventive Maintenance Practices ............................................................................................... 29
Parts Inventory and Management ............................................................................................... 31
Fuel Monitoring and Management .............................................................................................. 32
Sublet Program ............................................................................................................................... 34
Effective Management and Oversight ......................................................................................... 35
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Recordkeeping and Information Systems .................................................................................. 36
Conclusion ................................................................................................................................................ 38
Attachment A – List of Recommendations ......................................................................................... 39
Attachment B – Annual Purchases (FY 2012‐13 to FY 2027‐28) ....................................................... 41
Attachment C – Sample Performance Measures ............................................................................... 42
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Tables
Table 1. Current Vehicle and Equipment Replacement Intervals .............................................. 6
Table 2. Current and Recommended Vehicle and Equipment Replacement Intervals .......... 7
Table 3. Projected Annual Replacement Costs for Seal Beach Units from FY 2012‐13 to FY
2027‐28 ..................................................................................................................................... 8
Table 4. Scoring System for Evaluating Vehicle Condition and Replacement Need ........... 11
Table 5. Vehicle Replacement Fund Balance Based on Recommended Replacement
Schedule ................................................................................................................................ 14
Table 6. Vehicle Replacement Fund Balance with Annual General Fund Contribution ..... 16
Table 7. Fuel Quantities and Costs by Type in FY 2010‐11 ......................................................... 33
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Executive Summary Management Partners
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Executive Summary
The City of Seal Beach, like many municipalities in California, is
committed to achieving operational efficiencies to maintain service levels,
despite the constrained financial environment. Management Partners
was retained to review the City’s vehicle replacement and maintenance
practices and to develop best practice tools to assist in managing fleet
assets.
Establishing an internal service fund (ISF) and setting aside funds for
current and future vehicle replacement and maintenance needs is
considered a prudent business practice for local governments. The use of
an ISF allows an agency to establish reserve funding for future vehicle
replacement costs as well as pay expenses as they occur. Consequently,
there are sufficient funds available with which to pay expenses, even
when there may be higher than average costs in a given year.
In 2008 Seal Beach established a vehicle replacement fund (Fund 021)
with an initial general fund allocation of approximately $2 million.
However, no additional contributions have been made to support future
purchases from the fund since its establishment and there is
approximately $1.85 million remaining. Based on the existing condition
and lifespan of the City’s fleet inventory, Management Partners projects
that the vehicle replacement fund will be insufficient to support
replacement needs past Fiscal Year 2014‐15 unless additional
contributions are made. This is because the City has not been following
its established replacement schedule for vehicles and equipment,
resulting in the retention of some vehicles past their useful life. Our
analysis indicates there are approximately 20 such vehicles that could
warrant immediate replacement.
To ensure adequate resources for vehicle replacement over the next 15
years, $310,000 should be allocated to the vehicle replacement fund each
year. Such allocations could be made either by direct general fund
transfer, or by establishing a cost allocation plan and charging the
departments their fair share of replacement costs associated with the
vehicles and equipment they utilize.
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Alternative service delivery options for fleet maintenance operations such
as outsourcing or sharing services with another government entity is
limited by Seal Beach’s lack of geographic proximity to convenient
alternatives. The size and complexity of the City’s fleet is too large to be
adequately handled by repair shops within the City, and Seal Beach is too
far away from the fleet maintenance facilities of other cities such as
Westminster, Huntington Beach or Long Beach. Consequently,
adequately staffing and equipping the City’s existing vehicle maintenance
facility appears to offer the most efficient approach.
The workload associated with the existing fleet requires 1.5 full‐time
equivalent (FTE) staff to provide responsive customer service. Currently
fleet maintenance is performed by a 32‐hour per week mechanic hired
through a temporary agency, which limits customer service and
responsiveness to internal customers such as the Police and Marine Safety
Departments after hours and on weekends.
An investment of approximately $35,000 in basic diagnostic and repair
equipment as well as minor reorganization of the work space will enable
the fleet maintenance operation to provide fast, efficient service to
internal department customers. Overall fleet management would be
improved by establishing policies and procedures, instituting
performance measurement, and implementing systems and tools to
improve recordkeeping and service request processing.
This report contains 35 recommendations to improve Seal Beach’s vehicle
replacement and maintenance practices to ensure that quality service
continues to be provided to the community. Attachment A provides a
summary of the recommendations.
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Background Management Partners
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Background
A jurisdiction’s fleet is an often overlooked but important resource to
keeping a city running smoothly. In the course of conducting daily
business, Seal Beach’s police officers, lifeguards, public works employees
and City Hall staff utilize approximately 76 vehicles, including 27 light‐
duty sedans, pickups, vans and sport utility vehicles (SUVs); 27 police
units; 12 medium‐ and heavy‐duty trucks; and 10 pieces of motor‐driven
construction equipment. The fleet inventory also includes 20 pieces of
non‐self‐propelled small equipment, such as trailers, compressors and
pumps. The current replacement value of these assets is approximately
$3.4 million.
In 2008 the City established a vehicle replacement fund (Fund 021) with
an initial general fund allocation of $2 million. The intent is to finance the
future purchases of general fund fleet assets. However, the fund has not
been supported by a long‐term replacement plan. Several vehicles have
been purchased since 2008 leaving the vehicle replacement fund with a
balance of $1.85 million as of April 2012. This balance reflects the most
recent purchases of two new patrol vehicles and one new pick‐up truck
earlier this calendar year.
In the absence of a well‐defined vehicle replacement policy and multi‐
year schedule, it has been difficult for the City to project and plan for
replacement funding needs. Given the City’s financial constraints, policy
makers have been looking for options to reallocate funds to preserve
critical services. Of particular interest was whether the current balance in
the vehicle replacement fund is adequate or could be reduced.
Maintenance of assigned vehicles and equipment is provided by the Fleet
Maintenance Division of the Public Works Department. Fleet
maintenance operations are entirely funded by the general fund and there
is no cost allocation mechanism to charge departments utilizing vehicles
their fair share of costs. As a result, the departments are not aware of the
actual costs to provide and maintain their assigned vehicles.
The City’s full‐time mechanic retired in December 2010. Currently
maintenance services are performed by a part‐time mechanic hired
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Background Management Partners
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through a temporary agency. The mechanic works 32 hours per week
and is not available on Fridays or weekends for emergency repairs. This
negatively impacts customer service for departments such as Police and
Marine Safety, who operate vehicles and equipment seven days per week,
and also has impacted the ability to keep up with preventive maintenance
needs.
Management Partners was retained to develop a long‐term replacement
schedule that incorporates best practices for the estimated useful life of
vehicles in the City’s fleet, to make recommendations for a vehicle and
equipment replacement policy to guide decision making, and to identify
funding mechanisms to adequately support future replacement costs. In
addition, we were asked to evaluate the fleet maintenance workload
given the current inventory, assess staffing levels, and review existing
tools and equipment to identify whether additional investment is needed
to effectively meet current and future fleet maintenance needs.
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Project Methodology Management Partners
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Project Methodology
Management Partners used a variety of analytical and management
techniques in completing this study. They included document review,
interviews with City staff and internal customers, a site visit of the fleet
maintenance facility, and the application of best fleet management
practices. Each is briefly described below.
Document Review
During the project, Management Partners reviewed numerous
documents, including inventory records, budgets, maintenance contracts,
and policies and procedures. We also obtained and reviewed
performance and workload indicators to the extent they were available.
Interviews
Management Partners conducted a total of five interviews with the
assistant city manager/public works director, maintenance service
manager, finance director, police chief, and marine safety chief. The
purpose of the interviews was to hear individual perspectives on the
strengths of the City’s vehicle maintenance and replacement practices as
well as opportunities for improvement.
Fleet Maintenance Site Visit
A site visit of the fleet maintenance facility was conducted to observe
day‐to‐day operations, gather information from the part‐time mechanic
and assess existing equipment and tools.
Best Practices
Management Partners applied its knowledge of best practices for fleet
management to Seal Beach’s fleet inventory to develop a recommended
replacement policy and 15‐year schedule. We also applied best practices
associated with highly efficient and effective fleet maintenance operations
to identify improvements relevant for the City.
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Vehicle Replacement Practices Management Partners
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Vehicle Replacement Practices
An effective fleet replacement program has the following three
components:
1. A replacement planning process that projects when each
vehicle and piece of equipment should be replaced;
2. A financing and funding process that ensures that money is
available to purchase a replacement asset when the desired
replacement date is reached; and
3. Development of procedures to identify the “optimum point”
at which to replace a fleet unit with available resources.
Each of these components is discussed below.
Replacement Planning
Seal Beach has established general guidelines for replacing vehicles and
equipment based primarily on the number of years each is owned by the
City. Table 1 below shows the established vehicle replacement intervals.
Table 1. Current Vehicle and Equipment Replacement Intervals
Vehicle/Equipment Type Years Miles
Sedans 10 n/a
Police Patrol Units 4 75,000 miles
Light‐Duty Trucks 5 n/a
Medium‐ to Heavy‐Duty Trucks 10 n/a
Heavy Equipment 10 n/a
Trailers 10
The replacement intervals being used by the City are lower than what we
have observed in other government agencies. However, based on a
review of the City’s fleet inventory records, it appears that Seal Beach has
not been following its own guidelines and is keeping units longer. In
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some cases, vehicles are being kept well beyond their expected
usefulness. This is likely due to the significant financial constraints the
City has experienced during the past few years.
Keeping vehicles and equipment beyond their optimum economic life can
lead to expensive repairs, more time out of service and increased
workload for maintenance staff. Furthermore, by prolonging
replacements, fleet customers do not experience the benefits of new
technology such as greater fuel efficiency and improved safety features.
Management Partners applied best practice replacement criteria for
vehicles of various classes and types to develop recommended
replacement intervals for Seal Beach. Table 2 below compares current
and recommended replacement intervals, where applicable, for each class
of vehicle and equipment class, or groups of vehicles that share a
common use.
Table 2. Current and Recommended Vehicle and Equipment Replacement Intervals
Current Replacement
Intervals
Recommended Replacement
Intervals
Vehicle/Equipment Type Years Miles/Hours of Use Years Miles/Hours of Use
Sedans 10 n/a 10 100,000 miles
Police Patrol Units 4 75,000 miles 4 100,000 miles
Light‐Duty Pickup Trucks* 5 n/a 10 100,000 miles
Medium/Heavy Duty‐Trucks** 10 n/a 12 80,000 miles
Heavy Equipment 10 n/a 8‐15 5,000 to 6,000 hours
Trailers 10 n/a 15 n/a
*Lifeguard pickup trucks should be considered for replacement every five years due to their exposure to salt air.
**Non‐diesel vehicles
Recommendation 1. Adopt a formal methodology and
criteria for the replacement of vehicles and equipment.
Applying the recommended replacement intervals shown in Table 2 to
the City’s fleet inventory resulted in the identification of 20 units that
currently exceed the recommended criteria. This represents 24% of the
City’s fleet of rolling stock. Seventeen of these units are assigned to
general fund (i.e., non‐enterprise) departments.
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Replacement Schedule
Management Partners developed a long‐range replacement schedule
based on the recommended intervals presented in Table 2 above. The
Seal Beach Fleet Replacement Schedule (“Schedule”), which Management
Partners provided as an electronic Excel spreadsheet file, is an interactive
tool to assist the City in planning for the replacement of its vehicles and
equipment over a 15‐year period from FY 2012‐13 through FY 2027‐28.
The spreadsheet contains replacement planning parameters including
each unit’s original cost, recommended replacement intervals, current
replacement cost estimates and future projected replacement costs that
incorporate an inflation factor, auction costs and salvage costs for each
fleet unit. At the City’s direction, the Schedule includes vehicles and
equipment belonging to the sewer and water enterprises for planning
purposes in addition to units supported by the general fund.
The Schedule reflects the current cost to replace each unit in the fleet and
becomes the basis for calculating future replacement costs. The future
purchase price for each unit is computed based on the estimated net cost
of each unit and its planned retention period. The net replacement cost
reflects the estimated capital outlay in a future year. It is calculated by
determining the current (FY 2012‐13) purchase price for each unit and
applying a 3% inflation rate to this cost for each year remaining in the
planned retention period to arrive at an estimated future replacement
cost. From this cost we subtracted the estimated salvage value of 10%
based on the unit’s original purchase price and an auction fee of 6% based
on the unit’s salvage value.
Table 3 below shows annual projected replacement costs for all units in
the City’s fleet for each of the next 15 years. Costs for water and sewer
units have been included in Table 3 however; they are not reflected in
subsequent exhibits regarding the vehicle replacement fund.
Table 3. Projected Annual Replacement Costs for Seal Beach Units from FY 2012‐13 to FY 2027‐28
Fiscal Year General Fund Sewer Fund Water Fund
2012‐13 $962,600 $79,900 $199,100
2013‐14 $367,300 $0 $0
2014‐15 $80,100 $45,500 $22,400
2015‐16 $796,500 $25,500 $79,200
2016‐17 $519,300 $0 $23,100
2017‐18 $322,400 $0 $87,700
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Fiscal Year General Fund Sewer Fund Water Fund
2018‐19 $110,500 $0 $0
2019‐20 $134,200 $0 $0
2020‐21 $566,200 $103,100 $132,200
2021‐22 $274,600 $0 $0
2022‐23 $292,700 $0 $0
2023‐24 $235,200 $33,300 $103,700
2024‐25 $927,600 $0 $115,500
2025‐26 $363,900 $0 $0
2026‐27 $195,000 $0 $0
2027‐28 $411,700 $0 $90,700
Table 3 demonstrates there will be peaks and valleys in future spending
requirements. Initially, there are considerable replacement costs
identified in FY 2012‐13 totaling almost $1 million. This is primarily due
to a backlog of 17 general fund units that exceed the replacement criteria.
The large amount of investment required in FY 2015‐16 is due to the
scheduled replacement of the City’s lifeguard rescue boat (Unit 5160) at
an estimated cost of $500,000. Other spikes in the replacement schedule
occur approximately every four years and are the ripple effect of needing
to replace so many backlogged units, including patrol vehicles, in FY
2012‐13. Attachment B provides details about the specific vehicles
recommended for replacement over the next 15 years based on the
Schedule.
Evaluating the Need for Vehicle Replacement
Although the Seal Beach Fleet Replacement Schedule utilizes specific
criteria to make financial projections for replacement costs over multiple
years, each unit should be evaluated periodically to confirm the timing
for replacement as identified by the Schedule.
When it is time to replace a vehicle or piece of equipment most public
agencies typically rely on age, mileage, hours of operation, condition or a
combination of one or more of these criteria. However, other elements
can also play a significant role in determining whether vehicles require
replacement. These include quality of the preventive maintenance
program, safety, fuel usage, driver skills (or lack of), components used,
parts availability and new technology.
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Many fleet agencies use a weighted point system that takes into account a
variety of factors to help establish potential candidates for replacement.
This “replacement scoring system” typically apples to light‐duty vehicles
and takes into account a unit’s age, mileage, maintenance and repair
costs, overall condition, reliability and downtime. Points are assigned to
each set of criteria as illustrated below.
Age – One point for each year of chronological age, based on in‐service
date.
Miles/Hours – One point for each 10,000 miles or 750 hours of service.
Maintenance/Repair Costs – One to five points based on total life‐to‐date
maintenance and repair costs (not including accident damage repairs) as
a percentage of the vehicle’s original purchase price. For example, a
vehicle whose total maintenance and repair costs equal the unit’s original
purchase price would receive a score of 5 while a unit whose maintenance
and repair costs equal 20% of the vehicle’s original purchase price would
receive a score of 1.
Condition – This category takes into account a unit’s body condition,
interior condition, accident history, rust, and anticipated repairs. A scale
of one to five points is used, with 5 being poor condition.
Reliability – Operators assigned to the vehicle are typically asked to assess
the reliability of the various components, systems and equipment of each
vehicle. A scale of one to five points is used with 1 being excellent and 5
being poor. Another means to measure reliability is to assign one, three,
or five points depending on the frequency the unit is in for repair. A
rating of 5 would be assigned to a vehicle that is in the shop two or more
times per month on average, while 1 point would be assigned to a vehicle
in the shop an average of once every three months or less.
Downtime – Typically this category would take into consideration the
amount of time that a unit is out of service. A scale of one to five points
would be used with 5 indicating excessive downtime (20% or more) and a
score of 1 indicating little downtime (6% or less). In cases where
downtime is not tracked, the average number of repair work orders per
month for each unit can be substituted. Those units with two or more
work orders per month would be assigned a score of 5 while units with
less than 1 work order per month would be assigned a score of 1.
Points for all six criteria are then totaled for each unit and compared with
the point ranges found in Table 4 below.
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Table 4. Scoring System for Evaluating Vehicle Condition and Replacement Need
Point Range Condition
Under 18 points Excellent condition
18 to 22 points Good condition
23 to 27 points Qualifies for replacement
28 or more points Needs immediate consideration for replacement
Replacing all 17 backlogged vehicles and equipment at one time may be
unrealistic and logistically difficult. As mentioned above, it will create a
ripple effect in subsequent years. Consequently, it is recommended that
the Fleet Maintenance Division further evaluate these units and
determine which could potentially be deferred to smooth the annual
replacement costs.
Recommendation 2. Evaluate the condition and
replacement need of vehicles currently exceeding
recommended replacement criteria to determine if
replacement of some units may be deferred.
Replacement Funding Options
Management Partners estimates the replacement value of the entire Seal
Beach fleet to be approximately $3.4 million. This represents the cost if the
City were to replace all of its primary fleet assets (i.e., sedans, police
patrol units, light pickup trucks, trucks and heavy equipment) today.
The 69 general fund units have a present‐day value of approximately
$2.87 million.
Approaches to Replacement Funding
Three basic options exist for financing the replacement of essential
vehicles and equipment. They are 1) an ad hoc or “pay‐as‐you‐go” budget
allocation, 2) utilization of a vehicle replacement reserve in the form of an
internal service fund, and 3) debt or lease purchasing. Each is described
below.
Ad Hoc Budget Appropriation
Many organizations attempt to buy vehicles and equipment with cash
from available budget appropriations. This “pay as you go” approach
does not provide for an accumulation of funds to pay future liabilities. It
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can also significantly impact the general fund from year to year,
particularly if there are higher than average replacement needs, such as
those caused by vehicle accidents or unanticipated major failures. Cities
may employ this method when resources are constrained, or if
transferring funds for vehicle replacement costs from departmental
budgets could compromise their ability to provide basic services.
In addition, this approach puts essential equipment needing replacement
in competition with other requests for equipment and/or capital projects
during the budget process. Consequently, organizations that try to use
cash to finance their fleet replacement program may find themselves with
older and less reliable vehicles if the money is not appropriated as
planned.
Prior to 2008 the City of Seal Beach used the “pay as you go” approach to
finance most of its fleet replacements from year to year. The
establishment of the vehicle replacement fund was intended to protect the
general fund from the negative impacts of peak replacement costs.
Internal Service Fund
A second option is to establish an internal service fund to accumulate the
dollars necessary to cover anticipated vehicle replacement costs. With
this approach, a fixed amount of money is contributed to the ISF each
year based on the projected replacement costs over a multi‐year period.
These contributions, along with proceeds from the sale of used vehicles
and equipment and any interest earned by the fund, provide sufficient
dollars to replace fleet units in future years.
The use of an ISF allows an agency to establish reserve funding for future
costs as well as pay out actual expenses as they occur. Consequently,
there are sufficient funds available with which to pay vehicle replacement
expenses, even when there may be higher than average costs in a given
year. Establishing an ISF and setting aside funds for current and future
vehicle and equipment needs is considered a prudent business practice
for local governments.
Though not mandatory, it is advisable that fleet customers be responsible
for regularly contributing money to the ISF. This helps departments
become aware of the “ownership costs” for having assigned vehicles,
which in turn tends to decrease demands for additional, unnecessary
vehicles and improve the utilization of existing units. Costs are typically
allocated to city departments and their associated funds are based on a
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formula that takes into account the number and type of vehicles assigned
to them.
One reason some agencies do not use an ISF for vehicle replacement is
because of the capital investment typically required to start one. If a
municipality has a backlog of vehicles and equipment due for
replacement, establishing an ISF can be expensive. Another challenge is
the temptation to borrow from this type of reserve fund, which can
accumulate large funds from year to year.
Seal Beach should be commended for having the vision to establish a
vehicle replacement fund and the discipline to use allocated funds for
their intended purpose. This is an excellent first step in assuring that
vehicles are replaced on a timely basis.
Debt or Lease Purchasing
Several types of debt financing instruments are available to purchase
vehicles or equipment. These include borrowing money through
revolving lines of credit or fixed‐term loans offered by banks and other
financial institutions. Leasing vehicles and equipment from the
manufacturer or other leasing companies is another option. Although it is
possible to issue bonds or certificates of participation for large equipment
purchases, doing so may require a vote of the public and may impact a
city’s overall credit rating.
Because government agencies can borrow at tax‐exempt rates, lease/
purchase financing may be less expensive than saving and paying with
cash because of the time‐value of money. Generally speaking, as long as
the inflation and increased cost factors are greater than the rate of interest
being paid on the loan, buying equipment today and financing it is
cheaper than saving over time and paying cash. Seal Beach does not use
debt or lease purchasing to finance any units in its fleet, but may wish to
explore doing so in the future.
It is not unusual for a government agency to use more than one of these
options. For example, including the enormous costs of fire apparatus and
certain construction equipment in a fleet replacement reserve fund can
cause annual fund balances to reach high proportions. As a result, some
agencies choose not to include these units in the vehicle replacement fund
and treat them as capital expenditures when they are due for
replacement. This ensures that reserve fund balances are scaled to cover
normal replacement costs for all units other than those that are
significantly more expensive.
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For example, the City could consider leasing the lifeguard rescue boat,
with an option to buy. Eliminating this boat from the schedule will help
smooth the replacement cost requirements from year to year. However, it
means that funding for the rescue boat would have to be prioritized
against other capital items. To the extent that resources are constrained in
the year in which the boat needs to be replaced, the City may not have
sufficient funds to purchase it when that time comes.
Adequacy of the Vehicle Replacement Fund
As discussed above, the City is interested in determining if the current
vehicle replacement fund balance is sufficient to support a long‐range
replacement plan. Table 5 below shows the impact on the vehicle
replacement fund from replacing the general fund units in the
recommended 15‐year replacement schedule, as presented in Table 2
above. Assuming the current fund balance and no additional
contributions, Table 5 shows that the City’s vehicle replacement fund is
sufficient to cover replacement costs only through FY 2014‐15.
Table 5. Vehicle Replacement Fund Balance Based on Recommended Replacement Schedule
Fiscal Year
Beginning
Fund Balance1
Cost for
Recommended
Replacements2
Remaining
Fund Balance
2012‐13 $1,846,897 ‐$962,600 $884,297
2013‐14 $884,297 ‐$367,300 $516,997
2014‐15 $516,997 ‐$80,100 $436,897
2015‐16 $436,897 ‐$796,500 ‐$359,603
2016‐17 ‐$359,603 ‐$519,300 ‐$878,903
2017‐18 ‐$878,903 ‐$322,400 ‐$1,201,303
2018‐19 ‐$1,201,303 ‐$110,500 ‐$1,311,803
2019‐20 ‐$1,311,803 ‐$134,200 ‐$1,446,003
2020‐21 ‐$1,446,003 ‐$566,200 ‐$2,012,203
2021‐22 ‐$2,012,203 ‐$274,600 ‐$2,286,803
2022‐23 ‐$2,286,803 ‐$292,700 ‐$2,579,503
2023‐24 ‐$2,579,503 ‐$235,200 ‐$2,814,703
2024‐25 ‐$2,814,703 ‐$927,600 ‐$3,742,303
2025‐26 ‐$3,742,303 ‐$363,900 ‐$4,106,203
2026‐27 ‐$4,106,203 ‐$195,000 ‐$4,301,203
2027‐28 ‐$4,301,203 ‐$411,700 ‐$4,712,903
1Balance as of April 2012
2Assumes replacement of general fund units only
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In fact, the City will need to invest more than $4.7 million to fund
recommended purchases and retain a positive fund balance through FY
2027‐28.
One alternative is to transfer money each year from the general fund into
the vehicle replacement fund. To facilitate budget planning and avoid
fluctuations associated with replacement needs that are significantly
higher in some years than in others, the transfers can be established at a
fixed amount that does not fluctuate from year to year.
As discussed previously, Management Partners developed a model to
determine the amount of annual general fund transfer that would be
required to avoid a negative fund balance and cover the replacement
needs identified in the Schedule. In quantifying an appropriate annual
transfer, we used two parameters. First, we assumed that the ending
fund balance should not drop below $100,000 to provide sufficient
contingency funding for public safety units needing replacement as a
result of accidents. Second, because fleet maintenance recommendations
presented later in this report would require funding if implemented, we
assumed a beginning vehicle replacement fund balance of $1.75 million.
Using these parameters, Table 6 below illustrates that an annual general
fund transfer of $310,000 is sufficient to maintain a positive replacement
fund balance of at least $100,000 over the next 15 years.
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Table 6. Vehicle Replacement Fund Balance with Annual General Fund Contribution
Fiscal Year
Beginning
Fund Balance
Annual
Replacement
Contribution
Annual
Purchases
Remaining
Balance
2012‐13 $1,750,000 $310,000 ‐$962,600 $1,097,400
2013‐14 $1,097,400 $310,000 ‐$367,300 $1,040,100
2014‐15 $1,040,100 $310,000 ‐$80,100 $1,270,000
2015‐16 $1,270,000 $310,000 ‐$796,500 $783,500
2016‐17 $783,500 $310,000 ‐$519,300 $574,200
2017‐18 $574,200 $310,000 ‐$322,400 $561,800
2018‐19 $561,800 $310,000 ‐$110,500 $761,300
2019‐20 $761,300 $310,000 ‐$134,200 $937,100
2020‐21 $937,100 $310,000 ‐$566,200 $680,900
2021‐22 $680,900 $310,000 ‐$274,600 $716,300
2022‐23 $716,300 $310,000 ‐$292,700 $733,600
2023‐24 $733,600 $310,000 ‐$235,200 $808,400
2024‐25 $808,400 $310,000 ‐$927,600 $190,800
2025‐26 $190,800 $310,000 ‐$363,900 $136,900
2026‐27 $136,900 $310,000 ‐$195,000 $251,900
2027‐28 $251,900 $310,000 ‐$411,700 $150,200
One of the characteristics of this funding alternative is that larger fund
balances will be maintained during the first 12 years, resulting in more
accumulated interest. After that, the fund balance begins to taper off.
However, this approach does little to help make departments aware of
and accountable for the ownership costs of their assigned vehicles.
An alternative option is to develop a vehicle replacement cost allocation
plan requiring departments to make annual contributions to the vehicle
replacement fund for the vehicles and equipment they operate. Under
this arrangement departments would be charged a replacement cost rate
reflecting the depreciated costs of each assigned unit over its expected
life, as well as salvage costs, auction fees, and inflation costs. All of these
factors could be incorporated into a fixed monthly rate to which
departments would contribute for each assigned unit. Interest earned by
the vehicle replacement fund could be used to help reduce the rates
departments pay.
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This alternative methodology would also have a general fund impact
because most of the departments utilizing vehicles receive general fund
allocations for the programs and services they provide. Implementation
of a cost allocation methodology without some transitional funding also
could result in reductions in programs and services as departments try to
absorb vehicle and equipment costs into their existing budget.
Development of a departmental cost allocation methodology was beyond
the scope of this project, but could be considered by the City in the future.
Either of these financing alternatives will ensure that the vehicle
replacement fund has sufficient resources to pay for needed purchases
through FY 2027‐28, while minimizing fluctuations to the general fund
associated with a “pay as you go” or ad hoc budget allocation.
Recommendation 3. Transfer at least $310,000 annually
from the general fund to the vehicle replacement fund to
ensure sufficient resources are available to replace units
when they have reached the end of their useful life.
Recommendation 4. Develop a cost allocation plan and
chargeback system to enable departments to contribute
to the replacement costs of assigned units on an annual
basis.
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Vehicle Maintenance Practices
In addition to reviewing the City’s current vehicle maintenance practices,
Management Partners conducted a high‐level feasibility assessment of
alternative service delivery options. As public agencies look for ways to
achieve economies of scale, outsourcing services to private vendors or
sharing services with neighboring communities are gaining interest. For
example, in Orange County, the City of Buena Park provides vehicle
maintenance services to the City of La Palma.
Unfortunately, alternative service delivery options for Seal Beach’s
vehicle maintenance operations are limited by its relatively isolated
geography and the lack of available resources nearby. The size and
complexity of the fleet is too large to be adequately handled by the
limited number of repair shops located within or near the City. The fleet
maintenance facilities of the closest cities that may have the capacity to
provide services to Seal Beach (the cities of Westminster, Huntington
Beach and Long Beach) are 10 or more miles away.
Consequently, adequately staffing and equipping the City’s existing
vehicle maintenance facility appears to offer the most efficient approach.
Our review of the Seal Beach vehicle maintenance program identified a
number of best practices that, if implemented, could improve the
functionality of the operation and enhance efficiency and customer
service.
Fleet Policies and Procedures
Having a set of policies to govern how vehicles are assigned and how
they are to be utilized and cared for is a common practice in local
government agencies. In Seal Beach, however, there are no defined fleet
maintenance policies to guide and direct the management of the City’s
vehicle and equipment assets. Consequently, fleet transportation goals
and objectives are vague and the responsibility for implementing them
unclear.
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The City needs to establish an overall policy on fleet transportation for
officials and employees in the conduct of official business. This should
include developing performance measures that effectively monitor and
manage the fleet services function. The policy should also establish
guidelines relating to vehicle assignment criteria, standby and take‐home
usage and use of personal vehicles.
The most critical policy management functions for any successful fleet
organization should include:
• Fleet Policy and Financial Management
• Customer Services Management
• Fleet Cost Control and Charge‐back Management
• Assignment and Fleet Size Management
• Fleet Replacement (Cycling) Management
• Fleet Service Delivery Management
One way to develop such fleet management policies is through the
creation of a Vehicle and Equipment Committee. A committee chair,
preferably a manager from the City Manager’s Office or Administrative
Services, should lead the group, which should include the Public Works
Department maintenance service manager and representatives from the
various departments utilizing fleet services. Its purpose should be to
address fleet‐related issues such as developing policy and guidelines
relating to vehicle assignment criteria, standby and take‐home use of
personal vehicles.
Furthermore, the committee could act as a platform by which fleet
maintenance and its customers communicate ongoing fleet service‐related
issues and act as a review board to evaluate all requests for additions to
the fleet.
Recommendation 5. Establish a Vehicle and Equipment
Committee whose main task is to develop a
comprehensive administrative policy pertaining to
vehicles and equipment.
To facilitate the development of comprehensive fleet policies and
procedures, the City should request samples from other agencies, which
could then be customized to meet Seal Beach’s specific needs.
Recommendation 6. Obtain samples of fleet policies
and procedures from other municipalities to assist the
Vehicle and Equipment Committee in developing
appropriate policies for Seal Beach.
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Staffing and Workload
Fleet maintenance is a division of the Public Works/Engineering
Department. Included in the fleet maintenance budget is the percentage
of time and corresponding salary and benefits the assistant city
manager/public works director, the maintenance service manager and an
executive assistant devote to the division.
The public works director spends approximately 5% of his time directing
and managing the City’s fleet programs and policies. The maintenance
service manager spends about 5% of his time managing the Fleet
Maintenance Division. His responsibilities include supervising a part‐
time mechanic, procuring vehicles and equipment, contracting for
maintenance and assuring that the fleet is in compliance with state and
federal regulations. The executive assistant spends about 10% of her time
maintaining inventory and repair records, preparing documents for
purchases and repairs, and administering the fueling program.
As discussed previously, a full‐time mechanic retired last year and the
City has hired a part‐time mechanic from a temporary agency to take his
place. He works four, eight‐hour days Monday through Thursday. This
means that the maintenance shop is only open 32 hours per week and is
closed on Fridays. The part‐time mechanic holds three National Institute
for Automotive Service Excellence (ASE) certifications but lacks the
knowledge to perform work on diesel units and hydraulic systems. The
City’s inventory includes two diesel units and several pieces of hydraulic
equipment.
Mechanic Staffing Levels
The number of mechanics required to support maintenance and repair
operations is primarily driven by the size, condition and composition of
the fleet it supports. Because most public fleet operations maintain a wide
variety of vehicles and equipment, it is necessary to establish a relative
measure that allows for the evaluation and comparison of staffing needs.
In evaluating the staffing requirements of the City’s fleet operation, we
used an analytical technique based on the Vehicle Statistical Referencing
System (VSRS). This concept was originally developed by the United
States Air Force’s Transportation Bureau to determine necessary staffing
levels for Fleet Maintenance. It is used to equate the level of effort
required to maintain dissimilar types of vehicles and equipment to a
passenger car, which is given a baseline value of 1.0.
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In our experience, a vehicle equivalency unit (VEU) of 1.0 is equal to
between 10 and 15 annual maintenance hours depending on a variety of
factors unique to each agency. All other types of vehicles are allocated a
value relative to the value of the passenger car. For example, a patrol car
requires 2.5 times the annual maintenance and repair of a passenger car,
or between 25 and 37.5 hours per year.
Management Partners performed a VEU calculation of the City’s fleet by
assigning a VEU value to each unit. This results in a total of 158.5 VEUs.
Multiplying this total by the benchmark annual maintenance requirement
of 10 to 15 hours per unit equals annual hours of required maintenance
ranging between 1,585 and 2,377.5.
To determine the appropriate mechanic staffing level, we divided the
range of total required annual maintenance hours (1,585 to 2,377.5) by a
productivity standard for wrenching hours. A shop’s staffing
requirement is greatly impacted by the productivity of its mechanics.
A typical maintenance shop has a productivity level of about 70% (1,456
hours). However, in small shops like Seal Beach where the mechanic must
assume a variety of tasks (such as picking up parts, service writing tasks,
cleaning up, delivering and/or picking up vehicles and equipment
to/from vendors) a productivity of 1,300 hours per year may be more
accurate.
Dividing the range of required annual maintenance hours by 1,300
productive hours results in a staffing requirement between 1.22 and 1.83
FTE mechanics. We estimate the staffing workload to be at the middle of
the range based on the age, condition and composition of the fleet.
Consequently, based on this data, fleet maintenance appears to be under‐
staffed by at least 0.75 FTE, which means that current mechanic staffing
levels are not sufficient to support the number and type of units that fleet
maintenance maintains.
Recommendation 7. Hire a full‐time mechanic.
Recommendation 8. Retain the part‐time mechanic and
adjust his hours from 32 hours per week to 20 hours per
week.
Increasing the staffing level would also allow the fleet maintenance
facility to be open five days per week instead of four. This would
enhance customer service and responsiveness, particularly to public
safety departments.
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Recommendation 9. Increase the number of days the
fleet maintenance shop is open from four to five days per
week.
Vehicle Maintenance Facility
The majority of fleet maintenance and repair work is performed at the
City’s Public Works Yard located at 1776 Adolfo Lopez Drive. As
reported above, the maintenance shop operates only four days per week,
and is open Monday through Thursday from 7:30 a.m. to 4:00 p.m.
Organization
The facility is approximately 40 years old and consists of five bays. Two
bays are primarily used for servicing and one bay is used for welding and
fabrication work. The remaining two bays are used to store the
maintenance shop truck and an aerial truck. A room at the south end of
the facility serves as an office and parts room. Above the office is a
mezzanine used to store slow‐moving parts and a few tires.
Each of the two bays used for servicing is equipped with in‐ground two‐
post lifts. One lift has the capacity of lifting 16,500 pounds and the other
can lift 8,000 pounds. There is no exhaust system in place to extract
exhaust fumes from the tailpipes of vehicles and equipment being
serviced.
There are no drive‐through bays. Consequently, vehicles and equipment
must be backed out of the shop when maintenance has been completed.
Signage could be improved to warn other Public Works Yard employees
of vehicles and equipment entering and exiting the shop.
There is a tire repair area adjacent to the office/parts room. This area is
also used to store tires, but is not secured. During the day of our visit
there were no tires mounted on rims, which can expedite the replacement
of flat or worn tires on police patrol or other sedan units. Wheel
alignments are performed by an outside vendor.
The service and repair area is adequate to maintain all vehicles and heavy
equipment and the entire area is kept clean and orderly, but could be
better organized to accommodate a more efficient workflow. For
example, the office/parts room (which also contains oil products) and the
tire repair area are located at one end of the shop while the two service
bays with lifts are located at the other end of the shop. This means that
the mechanic must walk from where maintenance is typically performed
around two bays containing parked trucks to answer phones,
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accommodate customers, accept parts deliveries, access any parts or
lubricants or repair tires.
A more efficient arrangement would be for the mechanic do most of the
servicing in the bays adjacent to the office/parts room and the tire repair
area. Purchasing an above‐ground, two‐post lift and placing it in the bay
adjacent to the office/parts room and tire area would improve the
efficiency of the service and repair area. The maintenance shop truck
could be parked either in one of the bays used for servicing or the
welding/equipment bay. The estimated cost for an above‐ground lift is
approximately $6,000.
Recommendation 10. Purchase and install a rotary 18,000‐
pound capacity, four‐post, above‐ground lift and install
it in one of the bays adjacent to the office/parts room and
tire repair area.
Shop Equipment
The maintenance shop lacks certain equipment typically found in most
maintenance facilities. Additionally, some equipment is inoperative or
outdated and should be replaced. Ensuring the mechanics have proper
equipment will improve turnaround times for routine types of service
and improve customer response.
The fleet maintenance facility contains one tire‐changing machine and a
“bubble” wheel balancer. Both are outdated and should be replaced. The
“bubble” wheel balancer should be replaced with a modern wheel
balancer machine that utilizes a computerized spin‐balancing method.
The estimated cost for this equipment is $4,500.
Recommendation 11. Purchase a wheel balancer machine
that performs computerized spin balancing.
The facility’s overhead oil and lubricant reels are old and are not being
used. Consequently, the mechanic must retrieve oil and transmission
fluid from plastic containers or from 50‐gallon drums on the shop floor.
The estimated cost for new overhead pumps, reels, guns and dispensing
equipment is $12,000.
Recommendation 12. Purchase new overhead pumps,
reels, guns and dispensing equipment for oil and
lubricants.
During our site visit we did not see any automotive diagnostic equipment
in the maintenance shop. This equipment is typically used to diagnose
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problems with air conditioning, battery charging systems, fuel systems,
electrical, engine timing, and other standard repairs. The estimated cost
for such a diagnostic system is $5,000.
Recommendation 13. Purchase an automotive diagnostic
system and scanner.
We were advised by staff that the City’s practice is to replace rotors when
patrol units require new brake pads rather than turn the rotors. This is an
expensive policy that is not commonly practiced by other government
fleet operations. The cost to turn brake rotors ranges from $15 to $25 per
wheel, while replacement costs range between $35 and $75 per rotor.
Purchasing a brake lathe at an estimated cost of $7,000 would allow the
mechanic to turn the rotors instead of replacing them. Alternatively, the
City’s practice should be changed so that rotors are sent out to be turned
on any vehicle in the fleet until it becomes absolutely necessary to replace
them.
Recommendation 14. Purchase a brake lathe and institute
a policy of turning rotors at the time of brake pad
replacement until they have served their useful life.
A self‐cleaning pressure washer is located between the Police
Headquarters and the Public Works Yard and is used by various
departments to clean their vehicles. However there is no vacuum
available. Purchasing a vacuum and installing it near the wash rack
would enable staff to clean the interior of the vehicles more effectively.
Recommendation 15. Purchase a vacuum and install it
next to the wash rack.
Purchasing all of the shop equipment identified in this section, including
an above‐ground lift, would require an investment of approximately
$35,000, but would improve the efficiency and overall effectiveness of the
maintenance shop.
Performance Measurement and Cost Analysis
It is difficult to gauge the efficiency of the City’s fleet operation without
tracking performance measures. There is no evidence that the Fleet
Maintenance Division has established or is using any fleet performance
measures to evaluate its fleet operation. To some degree staff attempts to
track labor hours, parts costs and fuel consumption. However, these
input and output indicators, while important components of the
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efficiency equation, fall short of effectively measuring the efficiency and
effectiveness of the City’s fleet operation.
Efficiency measures (or unit cost ratios) reveal how well an organization
is using the resources (dollars and staff) available for a particular service
or program. Efficiency is expressed as a ratio between the amount of
input and amount of output, and can be calculated on the basis of cost or
number of FTEs, for example. Outcome (effectiveness) measures
demonstrate how well a program or service is accomplishing its
objectives and fulfilling the purpose for which it exists. These measures
are fundamental to the practice of performance measurement in that they
indicate quality, impact and outcome (how important the service is to the
people it is intended to serve) and how well it is delivered.
Performance measures provide an objective way of documenting Fleet
Maintenance Division performance, including the level of service to its
customers. They provide a basis for internal trend analysis and for
comparison between fleets by tracking and monitoring resources (inputs)
and workload statistics (outputs) and measuring the degree of efficiency
and effectiveness of the operation.
The lack of reports being generated by fleet maintenance coupled with
the lack of performance measures leads us to believe that there is very
little analysis taking place. For instance, the absence of vehicle/equipment
life‐to‐date maintenance and repair history reports makes it almost
impossible to evaluate when a vehicle or piece of equipment should be
replaced.
Some examples of important performance measures not being tracked
include:
• Amount of time to perform preventive maintenance services and
other repair tasks
• Number of hours of downtime per each vehicle and piece of
equipment
• Number and types of repeat repairs
• Vehicle‐hours (or days) lost waiting for parts
• Percentage of repairs delayed due to stock outs/lack of parts
A more detailed list of performance measures is provided as Attachment
C.
Recommendation 16. Establish and monitor performance
standards with the goal of measuring performance
against industry and shop standards.
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Cost Analysis
To assess the efficiency of existing operations, Management Partners
would typically perform an activity‐based cost analysis. This would
enable us to calculate a shop labor rate to compare with local commercial
independent shops and dealerships to determine the City’s
competitiveness in the marketplace. Additionally we would calculate
markups for each of the major fleet programs including administration
and asset management, fuel, parts and commercial work, and benchmark
them against industry standards.
Unfortunately the Fleet Maintenance Division does not track its shop
overhead costs nor are the City‐wide cost allocations applied to the fleet
maintenance budget. This makes it difficult to determine the total cost of
the City’s vehicle maintenance operation. Furthermore, the mechanic’s
direct and indirect time is not being documented, making it difficult to
establish his productivity (wrenching hours), which is an integral
component of any shop labor rate calculation.
Instead, fleet maintenance uses a shop labor rate of $33.00 per hour which
is based on the salary that the City pays to the temporary help agency for
the part‐time mechanic. There are no markups in place for sublet, parts or
fuel. Should the City ever desire to allocate the costs associated with
vehicle maintenance to departments having assigned vehicles, all of these
costs will need to be identified and quantified.
Recommendation 17. Develop burdened shop labor rates
for light, heavy and small equipment work.
Recommendation 18. Develop markups for parts, fuel
and sublet services and an administrative/asset
management charge.
Chargeback System
A properly designed charge‐back system improves the consumption and
provision of fleet resources. When costs are identified and visible to the
customer department, the customer tends to economize. Conversely,
when customers are not held accountable, overall fleet costs rise and
customer responsibility and care for equipment tends to lessen. Such
systems also hold fleet service agencies accountable for the quality and
cost of the goods and services they provide. Additionally, they promote
equitable treatment of fleet users who only pay for the services they
consume with no cross‐subsidization of fleet costs.
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There is no formal chargeback system in place to recoup the costs
associated with fleet maintenance nor do fleet customers budget for fleet
maintenance, repairs, fuel, parts or sublet costs. Instead, these costs are
absorbed by the general fund. The City’s budgetary process does little to
encourage fleet customers to minimize the number of assigned vehicles or
influence efficiency in the vehicle support system.
Overhead costs (i.e., supplies, utilities, uniforms/clothing, travel and
training) are not part of the fleet maintenance budget but rather are
absorbed in the general fund budget of the City. This makes it difficult to
determine the total cost of fleet services in the City.
Accidents, abuse and damage to fleet units are absorbed in the fleet
maintenance budget including instances where the City operator is at
fault. This is not a “best fleet management practice.” In these cases,
where it is determined that the City employee was at fault, the
employee’s department should be responsible for the costs of damages to
the vehicle or piece of equipment and should reimburse fleet
maintenance for related expenses.
Public agencies utilize various chargeback structures to recoup their fleet
costs. One structure that is useful in controlling fleet size and has proven
successful for other fleet operations is a three‐tiered system that
incorporates: 1) a monthly flat fee that recoups the replacement costs over
the life of the unit; 2) a standing or flat fee that captures the
administrative overhead cost of the unit; and 3) a direct charge or cost per
mile rate that recovers the operational costs of the unit (costs associated
with fuel, tires, maintenance and repair).
We understand that such a cost allocation effort is currently being
undertaken by the City. Our recommendations are intended to ensure
that the cost analysis includes fully burdened shop labor rates; costs
associated with the provision of parts, fuel, and sublet services; and the
administrative costs associated with management of vehicle and
equipment assets.
Recommendation 19. Develop an “accountable” charge‐
back system that incorporates fleet replacement,
overhead and all operational costs.
Customer Service
An important mechanism for measuring performance is to solicit
feedback from customers. Customer surveys are considered a “best fleet
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management practice” and should be done annually. However fleet
maintenance does not regularly ask customers for feedback on the quality
of service being provided.
In the absence of survey data, we interviewed and asked representatives
from several City departments to comment on the quality of service they
receive from fleet maintenance. Representatives from the Lifeguard
Department told us that they are pleased with the timeliness and
attention that fleet maintenance provides and for the most part, they are
pleased with the turnaround time of repairs to their equipment.
The Police Department, on the other hand, is not pleased with
turnaround time and the cost of services, and has begun tracking
turnaround times. They provided three recent examples of repairs that
took longer than usual according to their records. Some of this may be
due to the fact that fleet maintenance is closed on Fridays. Additionally,
the Police Department’s calculation of “downtime” most likely includes
the time the shop was notified in writing of the problem rather than when
the vehicle was brought to the shop.
Our review of maintenance and repair work performed between July 1,
2011 and December 31, 2011 revealed that the there were only a few
instances where vehicles were kept for more than one day. However,
according to Public Works Department staff members, not all work was
documented during this time.
The Police Department would like better communication with fleet
maintenance about the status of vehicles being repaired. For example,
police would like to be notified when they can expect work to be
accomplished. Unfortunately, the “Vehicle Service Request” that is used
by fleet customers to report a problem with their vehicle or equipment is
not designed for the mechanic to enter an estimated time for work to be
completed.
Customers reported that they do not receive fleet reports reflecting the
type of work performed on their vehicles and equipment nor the
associated costs (labor/parts). Additionally, they would like to know in
advance when their units are due for servicing to better facilitate their
workload.
Recommendation 20. Conduct annual surveys to obtain
customer feedback on vehicle maintenance services.
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Preventive Maintenance Practices
Based on the data supplied to us from fleet maintenance, it appears that
little preventive maintenance (PM) is taking place and that the quality of
the PM program is sub‐par. According to a report (050 Fleet Maintenance
Log‐Fleet Maintenance Summary) generated from the Public Works
Department’s web‐based software system (Quick Base) a total of 36
preventive maintenance services were performed between July 1, 2011
and December 31, 2011. During this same period 63 unscheduled repairs
were completed. The PM to repairs ratio equates to 36% PM activities to
63% repairs. This is below the typical industry standard range of 60 to
70% PM activities to 30 to 40% repairs.
Not all maintenance and repair work was documented during this six‐
month period. In fact, only 233.5 hours of the mechanic’s time was
accounted for out of approximately 800 available hours. We were
informed that there is a backlog of preventive maintenance services but
the maintenance service manager was unable to determine the magnitude
of the backlog.
Fleet maintenance does not utilize a formal, progressive, multi‐level (A,
B, C, D services) preventive maintenance program. Instead, fleet
maintenance performs an “A” service on all units, except for police units,
which receive an “A” service and a “B” service. Furthermore, the
mechanic does not use a preventive maintenance check sheet when
performing PM. This is unusual. Instead, the mechanic uses the “Vehicle
Service Request” to record any work he performs.
To be effective a preventive maintenance program must be designed
around each vehicle and equipment classification to ensure that
manufacturer service requirements are followed. It must also be specific
for the conditions under which the units operate. PM checklists should be
designed for each vehicle and equipment class. Each should be dated and
signed by the mechanic who performed the service.
Fleet maintenance uses a very general vehicle and equipment
classification system rather than a specific system based upon best fleet
practices. For instance, all heavy trucks are grouped together without
specifying type (e.g., dump truck, aerial truck, or other specialized
vehicle). This makes it difficult to analyze fleet data pertaining to similar
vehicles and pieces of equipment.
PM servicing on all City vehicles except patrol cars is performed every
4,000 miles on those vehicles and equipment with odometers (miles) and
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every 100 hours on equipment with hour meters. Police patrol units are
provided with PM every 3,000 miles. Applying the same standard PM
servicing thresholds for all odometer‐type units and for all hour‐metered
units is not a best fleet practice, because it can result in deviation from
manufacturer specifications. For example, it may be premature to service
mileage units such as non‐public safety sedans at the 4,000‐mile service
interval when the normal standard for such vehicles is 5,000 miles. The
same applies for hour‐metered equipment being serviced at 100‐hour
intervals.
Instead, each unit should be evaluated in terms of when it should be
serviced based on how and under what conditions it is being utilized.
Those units that do not reach the minimum thresholds for preventive
maintenance should be inspected by a mechanic at least once per year.
Currently it is the responsibility of fleet customers to bring their vehicles
and equipment in for servicing based on date and mileage stickers placed
in their units. Fleet maintenance does not notify customers ahead of time
to schedule their units for servicing. As a result the shop is unable to
appropriately plan the annual workload and is compelled to service
whatever is brought into the shop on any given day
Fleet maintenance should be reviewing all unscheduled repairs to
identify trends in system failures (i.e., brakes, cooling, charging) and the
reason for failure. These are the first steps in determining appropriate
actions to prevent a reoccurrence, which may be caused by a number of
factors such as parts failures, improper repair techniques, lack of
mechanic training, operator misuse and/or problems not being identified
as part of the preventive maintenance program.
There is no “fast lube” service in place for light‐duty vehicles to
accommodate customers who are in a hurry. However, fleet maintenance
does offer a “quick fix” service to make minor repairs while customers
wait. An oil‐sampling program for heavy equipment is not used to
determine the optimum intervals to change oil.
Fleet maintenance does not have a formal, written warranty or guarantee
for its maintenance and repair work. However, staff will honor their
workmanship and customers are encouraged to bring their vehicles back
for service if problems are not corrected initially.
There are no reports that address vehicle downtime and reason codes that
indicate why the vehicle or piece of equipment is out of service (i.e.,
awaiting parts, insufficient staffing, and bay not available).
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Recommendation 21. Develop vehicle and equipment
classifications such as those provided by the American
Public Works Association or the National Association of
Fleet Administrators.
Recommendation 22. Develop a formal, progressive,
multi‐level (A, B, C, D services) preventive maintenance
program that includes class‐specific PM check lists and a
servicing schedule that incorporates time and mileage
thresholds.
Recommendation 23. Develop a pilot program that offers
a ʺfast lubeʺ service (ʺAʺ level PM service) for customers.
Recommendation 24. Develop outcome measures for
preventive maintenance and repair performance.
Parts Inventory and Management
Because of staffing limitations, there are no full‐time personnel dedicated
to the parts program. The Fleet Maintenance Division utilizes several
parts suppliers for the purchase of both stock and non‐stock items. These
vendors provide pick‐up and delivery service, which is a best fleet
management practice. Dealerships and specialty suppliers are used when
needed.
The budget for parts in FY 2011‐12 was $30,300. This represents 16% of
the total fleet budget. On our tour of the maintenance shop we observed a
significant number of parts that were outdated. The maintenance service
manager estimates that the outdated parts account for about 95% of the
total inventory, which consists of oil filters, various belts and hoses as
well as miscellaneous spare parts. The parts inventory value is estimated
to be about $1,000 according to staff.
Fleet maintenance performs “spot bidding” as well as the purchase order
process to obtain the best possible pricing. Both of these processes
provide flexibility in obtaining parts. The City’s current database system
has the ability to alert personnel when the cost of an item is 10% or more
out of range from previous purchases, which allows for spot checks with
the vendors regarding pricing variances.
The maintenance service manager was unaware of the shop’s parts
turnover ratio, which represents the total number of parts used during a
specified period divided by the average number of parts on hand at any
given time. The parts turnover ratio is important because it measures
Maintenance Practices
Vehicle Maintenance Practices Management Partners
32
stock utilization as a portion of maintenance and repair production.
Determining the turnover ratio indicates excessive or depleted stock
levels and highlights slow moving and/or potentially obsolete stock. An
annual parts inventory, which could help calculate a turnover ratio, is not
being performed by the City auditor or by fleet maintenance staff.
Life cycle counting for parts also is not being performed. Ideally, reports
should be generated that indicate use of items, reorder points, value of
inventory, non‐moving parts and turnover ratio.
Based on our discussions with the maintenance service manager, down‐
time due to lack of parts availability is not being tracked. The current
data‐base system does not have the capability to perform this function.
As discussed previously, fleet maintenance does not charge a markup on
parts. We calculated the “parts cost per vehicle equivalent” at $191 per
year, which is below the public sector standard of between $275 and $300
per year. This may be related to the limited amount of preventive
maintenance being performed.
Recommendation 25. Develop outcome measures for
parts inventory.
Recommendation 26. Develop a parts markup that
reflects the true cost of providing this service.
Fuel Monitoring and Management
The Fleet Maintenance Division is responsible for the City’s fueling
operation. This includes purchasing, storing and dispensing fuel,
maintaining the fuel infrastructure, capturing and recording fuel data and
assuring compliance with regulations.
The City utilizes the Voyager Fleet Card program to fuel its fleet.
Through this program customers can obtain fuel at any gasoline station
that accepts the Voyager credit card. There are four stations located
within the City limits and several more just outside the City in
Westminster, Sunset Beach and Los Alamitos. These locations also
provide diesel fuel.
Compressed natural gas (CNG) is purchased from Clean Energy using
Clean Energy cards. There is one site where CNG can be accessed in Seal
Beach; another is located in the City of Fountain Valley.
Diesel fuel for beach equipment (consisting of two beach tractors) is
stored in a 500‐gallon, above‐ground fuel tank located at City’s Beach
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Vehicle Maintenance Practices Management Partners
33
Yard facility. Three vendors are used to supply fuel to this site depending
on the price per gallon at the time the order is placed.
During FY 2010‐11 the City spent a total of $160,509 on fuel. The average
cost of unleaded fuel during this period was $3.33 per gallon and $3.60
per gallon for diesel. A breakdown of the quantities, costs and average
price per gallon is reflected in Table 7 below.
Table 7. Fuel Quantities and Costs by Type in FY 2010‐11
Type Quantity Cost
Average Price per
Gallon
Unleaded 45,974 gallons $152,983 $3.3276/gallon
Diesel 1,500 gallons $5,405 $3.6034/gallon
Propane 22 GGEs $68 $3.0909/GGE
CNG 1,479 GGEs $2,053 $1.3881/GGE
The City budgeted $127,000 for fuel for FY 2011‐12. During the first eight
months, however (July 2011 to February 2012), fuel expenditures have
totaled $113,572. The average price for unleaded fuel during this period
was $3.68 per gallon. As of March 28, 2012, the City was paying $3.95 per
gallon. Based on last year’s fuel consumption and assuming the current
price of unleaded fuel remains unchanged, the City may have under‐
budgeted for fuel by approximately $46,000.
Fuel performance measures are critical elements in evaluating a vehicle’s
overall performance. However, the City does not track many standard
fuel measures, such as average fuel consumption (mpg) by vehicle and
class, fuel cost per mile, and average total fuel cost by class. Measuring
fuel performance also helps identify vehicles that are being underutilized
(and may no longer be needed), and preventive maintenance needs that
impact fuel economy.
Recommendation 27. Develop a fuel markup that reflects
the true cost of providing the City’s fueling service.
Recommendation 28. Implement and monitor fuel
performance measures.
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Vehicle Maintenance Practices Management Partners
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Sublet Program
The Fleet Maintenance Division contracts a small amount ($65,600 in FY
2011‐12) of repair work. The majority of this budget is intended to cover
the cost of the contract mechanic ($52,000) while the remainder is to be
used for several in‐shop services and any commercial contract work. It is
uncertain how much is being spent on outside repairs; however, staff
estimates that about $6,000 was spent last year.
Fleet maintenance typically contracts body and paintwork, front‐end
alignments, transmission repairs and smog work. With its limited staffing
and significant backlog of preventive maintenance work, it is surprising
that more work is not contracted to alleviate the backlog. In addition, an
opportunity exists to improve customer service by ensuring contracts are
in place for minor emergency repairs to public safety vehicles on
weekends.
Recommendation 29. Establish contracts with third‐party
vendors to perform preventive maintenance and
emergency repairs on an as‐needed basis.
Although fleet maintenance services all of the lifeguard trucks, one of the
lifeguard employees is responsible for maintaining the ATVs and trailers,
as well as the department’s two boats. He spends about 40 hours per year
performing preventive maintenance and repairs to these units. The
Lifeguard Department budgets $1,200 per year for parts and has their two
jet skis serviced by a local Honda dealer.
The Police Department utilizes three outside firms to outfit their patrol
and administrative units. Radio installations and repairs are provided by
Orange County Communications. The Police Department budgets $4,500
per year for radio repairs. Additionally, $5,000 is budgeted for
miscellaneous repairs to their fleet by outside vendors and to cover car
wash expenses. Motorcycle maintenance and repairs are performed by
Honda of Orange and are paid for out of the Fleet Maintenance Division’s
budget.
Unfortunately, not all of the above‐mentioned in‐house labor/parts costs
and sublet costs that the public safety departments spend on assigned
vehicles and equipment are being documented and shared with fleet
maintenance to be included as part of each unit’s ongoing historical costs.
The omission of these costs from a unit’s life‐cycle costs results in
understating the total cost of fleet ownership and affects the calculations
determining the optimum point at which to replace a unit.
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Vehicle Maintenance Practices Management Partners
35
The City routinely bids sublet services over $1,000. However, we were
informed that the current agreements with commercial vendors do not
contain provisions for warranties, pickup and delivery of units and
standards to assure timeliness of work.
Seal Beach does not mark up its sublet work. A sublet markup can be
used to benchmark the costs of Seal Beach’s sublet operation against
those of other public agencies to measure efficiency. Such a markup
should include the costs of personnel who support the transportation of
units to and from the vendors as well as the administrative costs
associated with this program. In addition, there are no sublet
performance measures in place to assess the quality of the sublet work or
ensure accountability and efficiency.
Recommendation 30. Develop a sublet markup that
reflects the true cost of providing sublet service.
Recommendation 31. Develop outcome measures to
assess sublet performance.
Effective Management and Oversight
The maintenance service manager is responsible for overall fleet
operations, including planning, organizing, coordinating programs for
the acquisition, storage, utilization, maintenance/repair and
replacement/disposition. However, his authority for replacing and
acquiring new units is decentralized. Most departments have the
perception that they “own” their vehicles and equipment, even though
there are no allocations to their budgets for either replacement or
maintenance costs. Consequently, departments tend to advocate strongly
when a unit should be replaced as well as the make and model of the
replacement. This practice ignores the potential implications that new
models and units may have on mechanic training needs, or tool and
service equipment upgrades.
This perception exists primarily because the maintenance service
manager has not been given full authority over the fleet operation. Under
such an arrangement the maintenance service manager would act much
like a rental car agency in that he “owns” the vehicles and rents them to
his City customers. The maintenance service manager would determine if
and when a vehicle or piece of equipment was due to be replaced based
on an analysis of the various cost and performance data that has been
collected over the life span of the unit. If it was determined that a unit
needed to be replaced, the manager would meet with the department
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Vehicle Maintenance Practices Management Partners
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(customer) to discuss their needs and provide suggestions or alternatives
for providing an appropriate means of transportation, including renting,
leasing, purchasing, or drawing from a central or departmental pool.
Recommendation 32. Assign the maintenance service
manager full functional responsibility for the City’s
fleet, including the planning, directing, managing,
coordinating and supervising of programs for the
acquisition, assignment, utilization, maintenance and
repair, replacement and disposal of the vehicle and
equipment fleet.
Complicating matters, the maintenance service manager does not have
adequate time to devote to fleet maintenance because of his other
responsibilities. As an alternative to hiring additional staff, there are a
variety of systems and tools which would help make overall management
of the City’s fleet more manageable and require less of the maintenance
service manager’s time.
Recordkeeping and Information Systems
Record keeping for fleet activities is currently poor and inconsistent. Data
are either not kept or are scattered among various systems and
organizations. City staff members had a difficult time providing us with
the information we requested, not due to any lack of cooperation but
simply because the information was not available.
Fleet maintenance currently uses a web database software program
known as “Quick Base” developed by Intuit to track fleet costs. The
program, which the Public Works Department has been using since 2002,
lacks many features found on today’s “off‐the‐shelf” fleet management
information systems.
Fleet maintenance does not generate any reports from its Quick Base
system. Furthermore, this program does not have the capability of
interfacing with either the City’s financial system or the Voyager fuel
system.
There is one computer monitor located in the maintenance shop office
that the mechanic primarily uses to look up parts and repair procedures.
He uses the “Vehicle Service Request” to record his time and the parts
used on vehicles or equipment. This form is then turned in to the
executive assistant who enters the labor, parts and commercial costs into
the Quick Base system. Fuel gallons and costs are also entered into the
system on a monthly basis.
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Vehicle Maintenance Practices Management Partners
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It is unusual to use a vehicle service request to record data typically
captured on a work order. The City’s service request form does not allow
information that is vital to assessing the performance of the fleet
operation and the mechanics that support it, to be captured. For example,
the form is not designed for the mechanic to electronically log in and out
of jobs with reason codes such as “awaiting parts,” “emergency/priority
repair,” “shop equipment breakdown,” or “lack of proper tools.”
Furthermore, it does not track which vehicle and equipment systems and
sub‐systems were worked on and their corresponding repair hours.
Purchasing off‐the‐shelf fleet maintenance software would improve the
ability of the equipment service manager to effectively manage the City’s
fleet, monitor trends affecting performance, and provide better feedback
to customers on the status of their vehicles being serviced. The cost for
such software is approximately $17,000.
Recommendation 33. Purchase a new fleet management
information system.
Recommendation 34. Design reports that will capture
information to assess fleet maintenance performance.
In the absence of information, customers will assume the worst. In this
case, they may assume that vehicle maintenance staff are not diligently
providing the service required. Providing monthly reports on the work
performed for each department, as well as the associated costs, will help
inform departments about the services that have been provided and
enhance accountability of the vehicle maintenance program.
Recommendation 35. Develop a monthly reporting
summary of work performed for each customer
department.
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Conclusion Management Partners
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Conclusion
Seal Beach’s establishment of an internal vehicle replacement fund
represents a best financial practice that should be continued. However,
without additional investment in the fund, the current replacement needs
of the City’s fleet will deplete the fund by FY 2015‐16. This report
contains recommendations that will enable the City to pay for the
replacement of essential vehicles and equipment over the next 15 years,
while adhering to a replacement schedule based on the best practices for
fleet management.
The Fleet Maintenance Division of the Public Works Department has
done an admirable job responding to the needs of department customers,
given the staffing, tools and resources provided. In the absence of viable
alternative service delivery options, Seal Beach should focus on
improving the efficiency and effectiveness of its existing vehicle
maintenance program. This will require an increase in staffing of 1 FTE
mechanic, and a modest investment in shop equipment and tools. If
necessary, funding for basic diagnostic equipment, fleet management
software and other one‐time costs could be allocated from the vehicle
replacement fund.
Giving the Fleet Maintenance Division staff the resources they need to be
successful will improve customer service as well as enhance the ability of
City departments with assigned vehicles to respond to the needs of the
community in an effective and efficient manner.
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Attachment A – List of Recommendations Management Partners
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Attachment A – List of Recommendations
Recommendation 1. Adopt a formal methodology and criteria for the replacement of
vehicles and equipment.
Recommendation 2. Evaluate the condition and replacement need of vehicles currently
exceeding recommended replacement criteria to determine if replacement of some units may
be deferred.
Recommendation 3. Transfer at least $310,000 annually from the general fund to the vehicle
replacement fund to ensure sufficient resources are available to replace units when they have
reached the end of their useful life.
Recommendation 4. Develop a cost allocation plan and chargeback system to enable
departments to contribute to the replacement costs of assigned units on an annual basis.
Recommendation 5. Establish a Vehicle and Equipment Committee whose main task is to
develop a comprehensive administrative policy pertaining to vehicles and equipment.
Recommendation 6. Obtain samples of fleet policies and procedures from other
municipalities to assist the Vehicle and Equipment Committee in developing appropriate
policies for Seal Beach.
Recommendation 7. Hire a full‐time mechanic.
Recommendation 8. Retain the part‐time mechanic and adjust his hours from 32 hours per
week to 20 hours per week.
Recommendation 9. Increase the number of days the fleet maintenance shop is open from
four to five days per week.
Recommendation 10. Purchase and install a rotary 18,000‐pound capacity, four‐post, above‐
ground lift and install it in one of the bays adjacent to the office/parts room and tire repair
area.
Recommendation 11. Purchase a wheel balancer machine that performs computerized spin
balancing.
Recommendation 12. Purchase new overhead pumps, reels, guns and dispensing
equipment for oil and lubricants.
Recommendation 13. Purchase an automotive diagnostic system and scanner.
Recommendation 14. Purchase a brake lathe and institute a policy of turning rotors at the
time of brake pad replacement until they have served their useful life.
Recommendation 15. Purchase a vacuum and install it next to the wash rack.
Recommendation 16. Establish and monitor performance standards with the goal of
measuring performance against industry and shop standards.
Recommendation 17. Develop burdened shop labor rates for light, heavy and small
equipment work.
Recommendation 18. Develop markups for parts, fuel and sublet services and an
administrative/asset management charge.
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Attachment A – List of Recommendations Management Partners
40
Recommendation 19. Develop an “accountable” charge‐back system that incorporates fleet
replacement, overhead and all operational costs.
Recommendation 20. Conduct annual surveys to obtain customer feedback on vehicle
maintenance services.
Recommendation 21. Develop vehicle and equipment classifications such as those provided
by the American Public Works Association or the National Association of Fleet
Administrators.
Recommendation 22. Develop a formal, progressive, multi‐level (A, B, C, D services)
preventive maintenance program that includes class‐specific PM check lists and a servicing
schedule that incorporates time and mileage thresholds.
Recommendation 23. Develop a pilot program that offers a ʺfast lubeʺ service (ʺAʺ level PM
service) for customers.
Recommendation 24. Develop outcome measures for preventive maintenance and repair
performance.
Recommendation 25. Develop outcome measures for parts inventory.
Recommendation 26. Develop a parts markup that reflects the true cost of providing this
service.
Recommendation 27. Develop a fuel markup that reflects the true cost of providing the
City’s fueling service.
Recommendation 28. Implement and monitor fuel performance measures.
Recommendation 29. Establish contracts with third‐party vendors to perform preventive
maintenance and emergency repairs on an as‐needed basis.
Recommendation 30. Develop a sublet markup that reflects the true cost of providing
sublet service.
Recommendation 31. Develop outcome measures to assess sublet performance.
Recommendation 32. Assign the maintenance service manager full functional
responsibility for the City’s fleet, including the planning, directing, managing, coordinating
and supervising of programs for the acquisition, assignment, utilization, maintenance and
repair, replacement and disposal of the vehicle and equipment fleet.
Recommendation 33. Purchase a new fleet management information system.
Recommendation 34. Design reports that will capture information to assess fleet
maintenance performance.
Recommendation 35. Develop a monthly reporting summary of work performed for each
customer department.
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Maintenance Practices
Attachment C – Sample Performance Measures Management Partners
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Attachment C – Sample Performance Measures
Maintenance and Repair Performance Measures
• Ratio of direct technician labor hours to indirect technician labor hours
• Downtime (or uptime) percentage by class of vehicle (excludes accidents)
• Percentage repairs that are repeat repairs (comebacks by shop)
Performance Measures that Monitor Preventive Maintenance (PM) Compliance
• Mechanic Performance: Measures mechanic performance against time standard for each
PM service (A, B, C, D) for each class of vehicle over a given period.
• PM Compliance: Measures the percentage of PM inspections performed against PMs
due and scheduled on a monthly basis. PM labor hours backlogged at month‐end.
Parts Services Performance Measures
• Downtime due to missing parts
• Percentage of repairs delayed due to out of stock/lack of parts
• Percentage charge or markup on the price of parts, by light duty and heavy duty
• Parts turnover ratio (total number of parts used during a specified period divided by the
average number of parts on hand at any given time)
Fuel Services Performance Measures
• Fully burdened cost of fuel per gallon
• Average fuel consumption (miles per gallon) by vehicle and class
• Fuel cost per mile
Acquisition, Replacement and Disposal Performance Measures
Replacement performance measures
• Proportion of vehicles driven below minimum miles/hours criteria
• Average annual utilization (miles, hours) by vehicle class and type of assignment; Ratio
of annual utilization (miles, hours) by vehicle class to capacity (or output available)
Disposition Performance Measures
• Average salvage value per class by method of disposition
• Ratio of salvage value to original purchase price
Maintenance Practices
Attachment C – Sample Performance Measures
43
Other Performance Measures
Agency Profit/Loss
• Net annual revenues compared with operating expenditures (profit/loss) by fleet by
class and by vehicle
Fleet Costs
• Total vehicle cost per mile/hour by fleet, by department, by class, by vehicle function
• Capital cost per mile/hour by fleet, by department, by class, by vehicle function
• Annual unit cost of each vehicle by class
• Operating and maintenance cost per vehicle by class
• Administrative overhead and replacement cost per vehicle by class