Life-Cycle

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Speaker Name & Title
Larry Campbell, CPFP
Director of Fleet Management,
Ft. Wayne, IN
Samuel P. Lamerato, CPFP
Superintendent of Fleet Maintenance,
City of Troy, MI
Challenges with Fleet life cycles
 Revenue Down
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Budget cuts (more for Less)
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Demands for Service Up
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State and Federal Mandates Up
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Aging Fleet
Reduction
of fleet
Fleet Costs
• Two basic categories of Fleet expense:
• Fixed and variable
• Fixed expense: Depreciation,
– Lease or Purchase outright
• Variable expense:
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Fuel,
Maintenance and repair
Tires
Oils
At what age do you “like” to replace
vehicles?
• You may “like” to replace them at the end of lifecycle ,
but are not in the financial position to do so.
• Lifecycles for each class code of equipment may be
dramatically different:
– Criteria used in replacement schedules will be generally tailored to the
average use of the equipment
– Ability of the government agency to fund a replacement budget.
• What if age is not the only discriminator used?
– Point system – mileage, condition, maintenance history/costs.
• Question to ask? What is the average age of each
vehicle type/class
• Is it a seasonal piece of equipment?
Equipment Replacement Policy
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Equipment inventory
Replacement criteria
Equipment over $5,000
Replacement funds for General & Non-General Fund Departments
Specification writing (do it right) uniformity with in your fleet
Bid Process (Best Bid not the cheapest bid)
Underutilized equipment (<4,000 miles or 100 hrs.)
Fleet additions (budget request to Administration & Council)
Annual equipment replacement proposal list (life, miles/hrs., repair
costs, condition, use)
Five, Seven and Ten year replacement projections (strategic
budget) Are these numbers growing in your fleet?
Equipment disposal list, Auction companies or trade ins.
Equipment purchase status list (as approved by Administration &
Council)
Equipment purchases carried forward from one year to the next
(budget amendments)
Equipment Replacement Policy 2
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Geographical area you operate in
Annual usage miles, hrs, fuel consumption (also extended idling).
Image (What image do you want projected to your customer).
Severity of usage (hauling pipes, stone, asphalt, snow removal etc.,
does equipment get torn up)
Available funds (internally).
Interest rate, if funds are to be borrowed/leased
Effectiveness of your vehicle/equipment maintenance program
Vendor maintenance and parts support
Skill of maintenance personnel
Availability of vehicles/equipment (is new equipment available and
does your equipment spend more time in the shop than on the job)
Vehicle/equipment obsolescence
Resale value after life cycle
New equipment cost as compared to maintaining an older piece of
equipment.
Proper equipment usage for the job
• On-going evaluation of the departments job
requirements.
• Working together with the Purchasing, / Departments and
manufactures to meet the needs of individual
departments.
• By purchasing the proper equipment the departments are
more efficient and there is a overall lower cost.
• A by-product of efficiency is fuel savings, it takes less
time to complete each task.
• V-8 to V-6
• V-6 to 4cyl
• Will it work for the current job function or Vehicle
application
Maintenance procedures
• Properly maintaining equipment has proven not
only financial savings but it can reduce
emissions.
• By utilizing a regular Preventative Maintenance
schedule the vehicles/equipment last longer
and run more efficiently.
Remember: Vehicles always cost
something
• Other considerations to reduce costs and impact
organizational Changes:
• Review “Take-Home” vehicle us
• Consider outsourcing non-core tasks to experts who
• specialize (– Use a Fuel Card management program
w/controls
• Use nationwide purchasing consortiums like (NJPA)
• Use automation and technology where possible (i.e.
GPS, etc)
Vehicle Replacement Derailed
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Tight Budgets
Furlough Days
Reduced Staff
Deferment of Vehicle Replacement
Dealing with City Management
Attending City Council Meetings
Budgets
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Zero Growth Budgets
Reduce or Deferment of Vehicle Replacement Budgets
Transfer Funds from Capital to Operating?
Reduced Staff Positions and Hours
Significant Increase in Maintenance Costs
Avoid Peaks and Valleys – Reserve Fund?
Meet with Management and Finance director
Reduced resale value of equipment – (replacement fund)
Furlough Days & Reduced Staff
• Same Equipment Fewer Repair Hours (96 per Tech)
• Same Equipment Fewer Techs
• Same Equipment Same Repair Dollars
Deferment of Vehicle Replacement
• Deferred vehicle replacement appears to be the key factor
behind the increase in maintenance expenses.
• More expensive repairs due to aging inventory.
• Older fleets were incrementally impacted by a spike in
unscheduled, higher cost maintenance.
• Increased downtime
Source: Automotive Fleet Magazine
Replacement Funding
• Even in good economic times, securing sufficient funds
for timely vehicle replacement is a challenge for many
organizations. This challenge stems in part from a lack of
understanding of the trade-off between a vehicle capital
and operating cost.
Source: Government Fleet Magazine
• “Pennies up-front dollars in the rear”
Dealing with City Management
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Vehicle Replacement Plan
Life Cycle Cost Analysis – Best Practices
Project Long-Term Replacement (5 – Year Plan)
Extended Warranties (5 years 100,000 Miles – Power Train)
Advanced Design & Technologies
Lower Cost per Mile/Hour
Vehicle/Equipment Availability %
Reduced Downtime (track downtime)
Reduce Overtime
Proactive not Reactive
Vehicle Replacement Program
• Best Practice Method
Survey a number of Best in Class fleet organizations which
have comparable fleets. Take into account factors unique to
each fleet organization such as annual usage levels, types
of use, number of back-up units available, weather and
operating terrain.
FASTER 15 Point Report 3109 - This report shows vehicles
due for replacement on or before the ending replacement
date you enter. Points are accrued as follows: current life
compared to the life expectancy, life-to-date meter
compared to the life expectancy of the meter, repair dollars
spent compared to original cost.
Vehicle Replacement Program (cont.)
• Developing a set of vehicle replacement criteria establishes
the foundation for a planned approach to fleet replacement.
Fleet organizations can use one of two primary methods for
establishing vehicle replacement cycles.
• Empirical Method: Involves using a formal life-cycle cost
analysis technique (such as equivalent annual costs) to
calculate the least costly life-cycle per class of vehicle.
Vehicle Replacement Program (cont.)
• Best Practice Method: Involves surveying peer
organizations with similar fleet and operating conditions.
• Regardless of which method is used, life-cycles must be
developed with the goal to:
– Minimize overall fleet cost;
– Maximize vehicle availability;
– Provide fleet users with safe and reliable tools to perform their jobs.
Source: APWA Vehicle Replacement Guide
Vehicle Replacement Funding
• Ideally, a vehicle should be replaced around the same
time that the total cost of ownership is at a minimum –
before the total cost curve begins to turn upward.
• Decision makers who assume cutting replacement
purchases is a good way to help balance the budget must
understand such cuts usually transfer a portion of the
fleet costs from capital to operating.
Source: Government Fleet Magazine
Life-Cycle
• Calculates ownership and operating expenses
throughout the working life of the equipment.
• The process includes the valuation of equipment
availability, service, resale value and downtime
or rental expense for replacement equipment.
• When the cost for these factors are determined,
the most economical vehicle method provides
the lowest net cost.
Source: APWA Managing Public Equipment
Life-Cycle
• Life-cycle cost analysis enables management to
evaluate new equipment purchases and
determine if it is more economical to retain
equipment.
• Economic replacement follows these premises:
 As the unit ages average maintenance and
operating cost increase.
 As a unit grows older, investment cost decrease.
 There is a point in the equipment’s life at which
the total average cost is minimum. This is the
optimum economic life point
Source: APWA Managing Public Equipment
ECONOMIC REALITY OF VEHICLE
REPLACEMENT
COST
TOTAL
OPERATING
CAPITAL
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TIME/USAGE
Quality of Service
• The quality of services declines when the fleet wears out,
becomes technologically deficient or requires repetitive or
ongoing maintenance. Fleet assets have at least three
lives:
• Service Life – Amount of time (years, miles or hours) it is
capable of providing service.
• Technological Life – Productivity decline of current fleet
asset compared to newer assets.
• Economic Life – Total allocation of cost associated with
the vehicle over a period of time.
Source: APWA Calculating Public Fleet Rates
Vehicle Score Card (Sedans & Lt. Truck)
• Age – One point for each year – based on in service date.
• Miles/Hours – One point for each 10,000 miles or 250 hrs. of usage.
• Type of Service – Points assigned as 1 - 5 depending on the type of
service the vehicle performs.
• Reliability – 1 – 5 points based on frequency that a vehicle is in the
shop for repairs per month (P.M. work is not included).
• M&R Cost – 1 to 5 points based on the total life M&R cost (not
including accident repairs).
• Condition - 1 – 5 points for body condition, rust, interior condition,
anticipated repairs, etc.
• Point Range – Under 18 Excellent, 18 – 22 Good, 23 – 27 Qualifies
for replacement and 28 and above Immediate Replacement
Attending City Council Meetings
• “When it is time to perform, the time to prepare has
passed”
• Be prepared to answer tough questions.
• Know Your Fleet - Run it like a business.
• Have your facts straight and in-hand.
 Convert Engine Hours into Miles (30 - 40 miles per
hour)
 Utilization of Vehicle/Equipment
 Life-cycle Cost – 15 point FASTER report, etc.
• Inform Mayor and Council of the importance of timely vehicle
replacement.
• Cost Savings Information – Reduced Downtime, Operating
Cost & Overtime.
Keys To Success
• Keep Management and Councils in the loop with
quarterly Fleet updates.
• Invite Management and Council for a site visit of your
Fleet Operation.
• Don’t replace underutilized vehicles.
• Buy the correct vehicle for the job (Right Size).
• Avoid Fleet Creep.
• Maximize resale & trade-in values. (benchmark)
• “In a successful organization, no detail is too small to
escape close attention.”
Vince Lombardi
Quotes
ABILITY is what you are capable of
MOTIVATION determines what you do
ATTITUDE determines how well you do it.
Lou Holtz
Excellence is not a skill.
It is an attitude.
Individual commitment to a group effort - that is what
makes a team work, a company work, a society work, a
civilization work.
Vince Lombardi
Michael Eisner, while he was CEO of the Walt Disney said
“Partnerships promote common sense, a common purpose
and strong ethics… among other benefits…
They lead to amazing levels of success because”, as he put
it, “the people in a true partnership leverage the concept of
‘one plus one is a lot more than two’ to build up their
companies in an unprecedented manner.”
Quote
Questions
THANK YOU
Larry Campbell, CPFP, Ft. Wayne, IN
larry.campbell@cityoffortwayne.org
&
Samuel P. Lamerato, CPFP, City of Troy, MI
lameratosp@troymi.gov
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