Senior Manager

Advanced Fleet Budgeting Workshop

Mercury Associates, Inc.

Tony Yankovich

Workshop Agenda

• Introduction• Fleet Operation Funding Principles• Types of Charge-back Systems• Rate Development• Conclusions

Introduction

• Relevant Experience

• Workshop Goals– Walk through the development of Service-based

Charge-back Rates

Fleet Funding Principles

Direct Appropriation Charge-back System

•Easy to administer

•Requires minimal effort

•Provides a means to distribute costs (direct and indirect)

•Promotes understanding of cost

•Links behavior to cost

•Demonstrates competitiveness

•Complies with A-87

•Consistent with Best Practices

Link Behavior to Cost

Types of Charge-back Systems

• Proportional Systems• Class-based Systems

– Charged by time– Charged by usage

• Service-based Systems– Mimics private sector approach

“RUN IT LIKE A BUSINESS”

Rate Development

1. Identify Costs to be Distributed

2. Define Services

3. Allocate Costs

4. Calculate Rates

5. Update Rates Annually

Rate Development

1. Identify Costs to be Distributed

(Setting the Rate Base)

– Direct Costs– Indirect Costs– Facilities Costs– Depreciation Costs

Rate Development

2. Define Services– In-house Maintenance and Repair– Parts– Sublet Work– Fuel– Fleet Management– Vehicle Wash

Rate Development

3. Allocate Costs– Direct Costs– Indirect Costs

Rate Development

Position M&R Parts Sublet Fuel FMAVehicle Wash

Total

Mechanic 1 100% 100%

Mechanic 2 100% 100%

Mechanic 3 85% 5% 5% 5% 100%

Lead Mechanic 75% 5% 20% 100%

Admin Asst 50% 15% 7% 10% 15% 3% 100%

Rate Development

Position Total S&B M&R M&R Cost Parts Parts Cost

Mechanic 1 $75,000 100% $75,000 0% $0

Mechanic 2 $75,000 100% $75,000 0% $0

Mechanic 3 $75,000 85% $63,750 0% $0

Lead Mechanic $90,000 75% $67,500 20% $18,000

Admin Asst $55,000 50% $27,500 7% $3,850

Total 100% 81% 4.5%

Rate Development

Line Item Budget Allocation M&R Parts Sublet Fuel FMAVehicle Wash

S&W 81.0% 4.5% 3.0% 2.5% 8.0% 1.0%

Shop Tools $26,000 Direct $26,000

Car Wash Supplies

$6,000 Direct $6,000

Office Supplies $18,000 S&W $14,580 $810 $540 $450 $1,440 $180

Rate Development

4. Calculate Rates– Identify Billable Unit of Service– Convert Cost of the Activity into a Rate

Rate Development

Charge-Back Rate Billable Units of Service FY 2011-12 Rate

Shop Labor RateNumber of available billable labor hours

$87.71 hour

Parts Markup Cost of parts dispensedParts invoice cost plus

14.0% markup

Sublet Repair Management Fee Cost of sublet repairsSublet repair invoice cost

plus 8.1% markup

Fuel Management Fee Gallons of fuel dispensed $.08 per gallon markup

Vehicle Management FeeVehicle months of availability for assigned vehicles

$5.56 per vehicle per month

Vehicle Wash FeeNumber of vehicle washes completed

$4.50 per vehicle wash

Rate Development

5. Update Rates Annually– Review Revenues vs. Expenses– Review Rate Base for Next Year– Review Billable Units of Service

Conclusions

• Direct Appropriations vs. Charge-back Approach

• Service-based Rate System• Accurate Rates Provide Clear Indication of

Competitiveness of Fleet Operation• Manage Rates

Contact Information

Tony Yankovich, Senior Manager

Mercury Associates, Inc.

tyankovich@mercury-assoc.com

913-568-5837

www.mercury-assoc.com