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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.
913-568-5837
www.mercury-assoc.com
