Advanced Fleet Budgeting Workshop Tony Yankovich Senior Manager
Advanced Fleet Budgeting Workshop Tony Yankovich Senior Manager Mercury Associates, Inc.
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 • Easy to administer Charge-back System • Provides a means to distribute costs (direct and indirect) • Requires minimal effort • 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. 2. 3. 4. 5. Identify Costs to be Distributed Define Services Allocate Costs Calculate Rates 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 FMA Vehicle Wash Total Mechanic 1 100% Mechanic 2 100% Mechanic 3 85% Lead Mechanic 75% 5% 20% Admin Asst 50% 15% 7% 5% 5% 5% 100% 10% 15% 3% 100%
Rate Development Position Total S&B M&R Cost 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 FMA Vehicle Wash S&W 81. 0% 4. 5% 3. 0% 2. 5% 8. 0% 1. 0% $26, 000 Shop Tools $26, 000 Direct Car Wash Supplies $6, 000 Direct Office Supplies $18, 000 S&W $6, 000 $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 Shop Labor Rate Number of available billable labor hours Parts Markup Cost of parts dispensed Sublet Repair Management Fee Cost of sublet repairs Fuel Management Fee Gallons of fuel dispensed Vehicle Management Fee Vehicle months of availability for assigned vehicles Vehicle Wash Fee Number of vehicle washes completed FY 2011 -12 Rate $87. 71 hour Parts invoice cost plus 14. 0% markup Sublet repair invoice cost plus 8. 1% markup $. 08 per gallon markup $5. 56 per vehicle per month $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
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