Senior Manager

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 AppropriationCharge-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 PositionM&RPartsSubletFuelFMA Vehicle Wash Total Mechanic 1100% Mechanic 2100% Mechanic 385%5% 100% Lead Mechanic75%5%20%100% Admin Asst50%15%7%10%15%3%100%

Rate Development PositionTotal S&BM&RM&R CostPartsParts Cost Mechanic 1$75,000100%$75,0000%$0 Mechanic 2$75,000100%$75,0000%$0 Mechanic 3$75,00085%$63,7500%$0 Lead Mechanic$90,00075%$67,50020%$18,000 Admin Asst$55,00050%$27,5007%$3,850 Total100%81%4.5%

Rate Development Line ItemBudgetAllocationM&RPartsSubletFuelFMA Vehicle Wash S&W81.0%4.5%3.0%2.5%8.0%1.0% Shop Tools$26,000Direct$26,000 Car Wash Supplies $6,000Direct$6,000 Office Supplies$18,000S&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 RateBillable Units of ServiceFY Rate Shop Labor Rate Number of available billable labor hours $87.71 hour Parts MarkupCost of parts dispensed Parts invoice cost plus 14.0% markup Sublet Repair Management FeeCost of sublet repairs Sublet repair invoice cost plus 8.1% markup Fuel Management FeeGallons of fuel dispensed$.08 per gallon markup Vehicle Management Fee Vehicle months of availability for assigned vehicles $5.56 per vehicle per month Vehicle Wash Fee Number 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