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39 ATTACHMENT Recommended Process for Determining Full Cost of Highway Maintenance Activities Contents activity requires knowledge of the transportation agency's Introduction and Objective . . . . . . . . . . . . . . . . . . . . . . . . . 39 full costs associated with such activity. Often, some of the Full Cost Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 elements making up the total cost of an activity are not appro- Overview of Full Cost Determination Process . . . . . . . . . 40 priately considered or, in some instances, are not included. Who Should Participate in the Calculation . . . . . . . . . . . 40 The cost elements most frequently missed or mishandled Step 1: Gather and Classify Maintenance are those related to maintenance program and agency-wide Program Activities and Expenditures . . . . . . . . . . 40 (or enterprise) support. Step 2: Allocate Maintenance Support Expenditures The objective of the process is to provide state DOTs with a to Line Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 practical and robust methodology for determining the full Step 3: Gather and Classify Enterprise Programs costs associated with performing any particular maintenance and Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 activity. The process can be applied to any maintenance activ- Step 4: Allocate a Portion of Enterprise Support ity, and it ensures that the resulting full cost incorporates a fair Expenditures to the Maintenance Program . . . . . 44 share of both maintenance program and enterprise support. Step 5: Combine Cost Categories to Derive Full Cost . . . 45 Calculation Options and Exceptions . . . . . . . . . . . . . . . . . 46 Full Cost Context Additional Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Summary Process, Input, and Result Illustration . . . . . . 51 Figure 1 illustrates the state DOT maintenance activity full Appendix A: Documented Calculations for cost context that is the basis for full cost determination process. Selected State DOTs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Various elements in this illustration will be referenced in the Appendix B: Maintenance Cost Tracking Activities process description, but the following statements about the full for Selected State DOTs . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 cost context are intended to facilitate understanding: The proposed process is a recommendation of the research · At their highest level, DOT expenditures can be divided into team at Cambridge Systematics, Inc., for NCHRP Project 14-18, two categories: line programs and support programs. Line Determining Highway Maintenance Costs. The process has programs are groups of activities that actually deliver the not been approved by NCHRP or any AASHTO committee, work product of the DOT--for example, maintenance nor has it been formally accepted for adoption by AASHTO. and construction. Support programs, as their name sug- gests, are groups of activities that support the DOT's line programs--for example, executive management and plan- Introduction and Objective ning and research. Because of growing demands and resource limitations for · Likewise, maintenance program expenditures can be divided highway maintenance, state DOTs and other highway agen- into two categories: line activity costs and maintenance cies often consider nontraditional means for financing and program support. Line activities are defined as activities contracting these services. For example, some state DOTs have that involve the actual performance of work directly on considered the options of outsourcing and publicprivate one or more transportation assets or work responding to partnership of some maintenance services. However, identi- an unpredictable event. Maintenance program support fying the most desirable option for a specific maintenance encompasses planning, administration, supervision, and
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40 Figure 1. State DOT maintenance activity full cost context. other functions that effectively support the maintenance · Line activity expenditures (LEMO), program's line activities. · An allocation of maintenance program support expendi- · Line activity costs are composed of four elements: labor, tures, and equipment, materials, and other. · An allocation of enterprise support program expenditures. · In order to determine the full cost of any particular line activity, a fair allocation of both maintenance program sup- The following sections describe each step of the calculation port and enterprise support expenditures must be added to in more detail and present an illustrative example. the line activity cost. Who Should Participate Overview of Full Cost in the Calculation Determination Process The full cost calculation requires an in-depth understanding Figure 2 illustrates the full cost determination process. The of agency organization, activities, and financial and other infor- sequence is deliberate and starts out in Step 1 by identifying mation that goes beyond the maintenance program. Therefore, the cost elements that are directly related to the performance it is critical that input is sought from agency experts in the of a particular line activity (i.e., LEMO). Next, the process areas of the agency finance and information systems as well as recognizes that certain maintenance activities and expendi- the maintenance program itself. Such a team approach will tures support one or more line activities and identifies a share ensure full cost coverage, ease the computational task, and of these expenditures that must be allocated to each line activ- enhance the credibility of the calculation. ity (Step 2). Furthermore, it recognizes that the maintenance program as a whole is supported by a variety of enterprise Step 1: Gather and Classify support programs and expenditures and identifies a share of Maintenance Program these expenditures that must be allocated to the maintenance Activities and Expenditures program (Steps 3 and 4). Finally, the process combines the Objective results of Steps 1 through 4 to determine the full cost of each line activity (Step 5). The full cost of any particular line activ- The objectives of Step 1 are to collect information on all ity can be considered to be composed of three discrete cate- maintenance program activities and expenditures and to gories of cost: classify them as either line or support.
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41 by activity, activity group, geographic areas, highway func- tional class). In most cases, maintenance activity expenditures are broken down into the four LEMO components of labor, equipment, material, and other for each activity. In order to ensure the validity of the full cost calculation, there are a number of key considerations: · Labor expenditures must include regular and overtime, and must be fully burdened (i.e., salary plus fringe benefits). · Agency rental rates must account for all equipment charges. Any excluded charges must be identified and included in either program or enterprise support. · Sign installation and maintenance costs must be calculated based on all sign shop expenditures. Any excluded charges must be identified and included in either program or enterprise support. · Material charges must be based on material consumption. · All expenditures associated with maintenance and operation of maintenance facilities, including utilities, stores operation, and others, must be identified. Any missing expenditures must be included in enterprise support. · All maintenance program management expenditures must be identified, including the costs associated with state and regional maintenance engineers and managers, which are sometimes excluded from maintenance management systems. Any missing management expenditures must be obtained from another source (for example, the financial manage- ment system) and included in program support. Classification of Maintenance Expenditures Once all of the maintenance program activities and expen- ditures have been gathered, they must be classified as either line or support activities according to the following definitions. Line activity. An activity that involves the actual perfor- Figure 2. Full cost mance of work on, or inspection of (if required by law), one determination or more transportation infrastructure assets, as well as work process. responding to an unpredictable event. Examples of line activ- ities include pothole patching, mowing, snow and ice control, bridge inspection, and accident and disaster recovery. Support activity. An activity that is done in support of one Sources of Information and or more line activities. Examples of support activities include Key Considerations administrative support, training, inspection and patrol activi- The source of maintenance activity expenditure information ties that identify locations where line activities must be per- varies by agency and depends on the information systems in formed, radio operations, maintenance program management, place and agency reporting procedures and infrastructure. The and stores operations. most common sources of expenditure data include mainte- In most cases, the classification of a particular activity is nance and/or financial management systems as well as annual obvious from its name; however, activity descriptions pro- maintenance program reports that often summarize program vided in agency maintenance and procedure manuals can accomplishments and expenditures in a number of ways (e.g., guide the classification where there is any question.
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42 Illustrative Example be associated with all line activities. Examples of support activ- ities that are only associated with a subset of line include Table 1 identifies the set of maintenance activities, total expenditures and associated accomplishment, and the classifi- · Inspection and patrol support activities that result in the ini- cation of expenditures as either line or support for the example. tiation of one or more line activities. (e.g., a fence inspection For the purposes of this example, therefore, total line activity support activity and fence repair, maintenance, and instal- expenditure is $17,800,000 and total support activity expendi- lation line activities). ture is $2,200,000. · Sign shop support activities in cases where material-related line activity sign charges do not capture all sign shop expen- Step 2: Allocate Maintenance ditures. Sign shop support activities should be allocated to Support Expenditures to sign repair, maintenance, and installation line activities. Line Activities · Nonspecific, other activities that are a catchall for admin- Objective istrative and/or other activities that cannot be classified as one of the specific line activities within a particular group The objective of Step 2 is to establish the relationship between of related activities. support and line activities in order to allocate an appropriate · Support activities that are exclusively in support of winter portion of maintenance program support expenditures to each operations line activities (e.g., winter operations super- line activity. vision, dining room and dormitory operations, mix deicer, and other winter-specific material functions). Sources of Information and · Contract solicitation and administration support activities, Key Considerations which should only be allocated to contractor line activities when separate line activities exist for in-house and contrac- The best source of information regarding the relationships tor performance of a particular activity. between maintenance support and line activities is the agency's maintenance personnel. This can be supplemented by docu- The other key consideration for this step is selecting the mentation about agency maintenance procedures and defi- basis by which each support activity expenditure is allocated nitions, which can often be found in agency maintenance to the line activities. The benchmark approach allocates sup- manuals, maintenance management system documentation, port activity expenditures to all supported line activities on and training materials. The effort required to establish the rela- the basis of the line activity costs identified in Step 1. tionships between activities depends on both the number of activities and the clarity of definition. Illustrative Example A key consideration for this step in the process is the objec- tive that the full cost determination process be as practical as Table 2 presents a crosswalk between maintenance line and possible. To satisfy this objective it is recommended that unless support activities for the example. Line activities are repre- a particular maintenance support expenditure is unambigu- sented by the rows, and support activities are represented by the ously associated with only a subset of the line activities, it should columns. In the event that a particular line activity is supported Table 1. Example classification of maintenance activities and expenditures. Activity Name Type Total Expenditure Accomplishment Units Crack sealing Line $500,000 75,000 Pounds Deicing Line $10,000,000 9,000,000 Pounds Sign washing Line $300,000 20,000 Each Striping Line $7,000,000 18,000 Linear feet Subtotal $17,800,000 Mix deicer Support $250,000 N/A None Training Support $200,000 N/A None Management Support $1,500,000 N/A None Stores Support $250,000 N/A None Subtotal $2,200,000 Total $20,000,000
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43 Table 2. Example line and support activity crosswalk. Support Activities Line Activities Mix Deicer Training Management Stores Crack sealing X X X Deicing X X X X Sign washing X X X Striping X X X by a particular support activity, an X is displayed in the corre- Sources of Information and sponding cell. In this case, three out of the four support activi- Key Considerations ties provide support to all four line activities. However, as might In most agencies there are multiple sources of information reasonably be interpreted from its name, the mix-deicer sup- on enterprise program expenditures. The most common port activity is only related to the deicing line activity. sources of this data include agency and/or state financial man- Table 3 illustrates the results of applying the benchmark agement systems and data warehouses, as well as annual agency approach to allocate support activity expenditures to the line reports. For example, a number of state DOTs prepare a CAFR, activities. The allocation calculation is performed for each which presents detailed financial information, including valid combination of line and support activities (i.e., for each changes in asset values, sources and amounts of revenue, expen- X in Table 2). The support activity allocation is equal to: ditures broken down in a variety of ways, and associated notes and commentary. Other potential sources include agency indi- ($LAIQ $ASLA ) $SAIQ rect cost allocation plans and reports detailing annual budgets, as well as budget versus expenditure reports. Where In order to ensure the validity of the full cost calculation, $LAIQ = line cost of line activity in question, there are a number of key issues that must be considered. For $ASLA = line cost of all supported line activities, and example: $SAIQ = cost of support activity in question. For example, the allocation of the mix-deicer support activity · If enterprise expenditure data is obtained from a CAFR or to deicing equals other financial report, care must be taken to ensure that all expenditure categories are fully accounted for and that no ($10,000,000 $10,000,000 ) $250,000 = $250,000. expenditures are double counted. · If enterprise expenditure data is extracted from an FMS, it Step 3: Gather and Classify is important to understand whether any expenditures are Enterprise Programs automatically allocated, and if so, which ones, on what and Expenditures basis, and to which other expenditures they are allocated. Objective Classification of Enterprise Expenditures The objectives of Step 3 are to collect information on all Once all of the enterprise expenditures have been gathered, enterprise programs and expenditures and to classify them as they must be categorized as line, support, or special/pass- line, support, or special/pass-through. through according to the following definitions. Table 3. Example allocation of support activity expenditures to line activities. Allocation of Support Activity Expenditures Total Support Line Activities Mix Deicer Training Management Stores Activity Allocation Crack sealing $5,618 $42,135 $7,022 $54,775 Deicing $250,000 $112,359 $842,697 $140,449 $1,345,506 Sign washing $3,371 $25,281 $4,213 $32,865 Striping $78,652 $589,887 $98,315 $766,854 Totals $250,000 $200,000 $1,500,000 $250,000 $2,200,000 Note: Some totals rounded to the nearest dollar.
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44 Line program. A line program is a logical grouping of sim- In most cases, the classification of a program is obvious ilar activities or projects that are primarily focused on actually from its name; however, program descriptions provided in delivering the main work products of a state DOT. For exam- agency annual reports and budget documents can guide the ple, construction projects make up a construction program, classification where there is any question. and maintenance activities and projects make up a mainte- nance program. Illustrative Example Support program. A support program is one that supports Table 4 lists the set of enterprise programs, total expendi- the delivery of one or more line programs (e.g., agency exec- tures, and the classification of programs as line, support, or utive management, information systems, human resources, special/pass-through for the example. In this case, the equip- legal, and finance). ment fund is classified as special/pass-through because it rep- Special/pass-through. Many state DOTs report expendi- resents all expenditures associated with the agency vehicle fleet, tures that do not fit nicely into either the line or support cat- which are in turn charged in their entirety to the line programs egories (e.g., debt-related expenditures associated with past through rental rates. In this case, classifying the equipment bond issuance, or direct payments or pass-throughs to other fund as a special/pass-through expenditure ensures that these state and local agencies). charges are not double counted. Debt-related expenditures are, in most cases, the result For the purposes of this example, therefore, total line pro- of agency efforts to advance larger construction programs gram expenditure is $127,500,000, total support program sooner than traditional revenues would permit. In this case, expenditure is $8,000,000, and $7,500,000 associated with the debt-related expenditures have nothing whatsoever to do equipment fund is excluded from the calculation. with the maintenance program. The classification of debt expenditures as an enterprise support program allocable to Step 4: Allocate a Portion of maintenance would falsely increase the allocation of enter- Enterprise Support Expenditures prise support expenditures to line activities. to the Maintenance Program Direct payments or pass-throughs to other state or local government agencies, unlike construction and maintenance Objective programs, do not involve DOT personnel administering, over- The objective of Step 4 is to establish the relationship between seeing, or performing work, nor do they benefit the agency in enterprise support and line programs in order to allocate an any way. The classification of direct payments or pass-throughs appropriate portion of enterprise support expenditures to the as a line program would falsely reduce the allocation of enter- maintenance program. prise support expenditures to line activities. The examples described, or any similar expenditures, must Sources of Information and be excluded from the calculation. The full cost determination Key Considerations process therefore identifies a third category of enterprise expen- ditures, special/pass-through, and any expenditure identified as The best source of information regarding the relationships such is indeed excluded. between enterprise support and line programs is the agency's Table 4. Example classification of enterprise programs and expenditures. Program Name Type Total Expenditure Maintenance Line $20,000,000 Construction Line $100,000,000 Traffic operations Line $2,500,000 Public transportation Line $5,000,000 Subtotal $127,500,000 Administration Support $5,000,000 Program delivery support Support $3,000,000 Subtotal $8,000,000 Equipment fund Special/pass-through $7,500,000 Total $143,000,000
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45 Table 5. Example line and support program crosswalk. Support Programs Line Programs Program Delivery Support Administration Maintenance X X Construction X X Traffic operations X Public transportation X personnel. This can be supplemented by documentation about Table 6 illustrates the results of applying the benchmark agency programs, which can usually be found in agency annual approach to allocate support program expenditures to the line reports and budget documents. programs. The allocation calculation is performed for each As with Step 2, a key consideration for this step in the valid combination of line and support programs (i.e., for each process is the objective that the full cost determination process X in Table 5). The support program allocation is equal to: be as practical as possible. To satisfy this objective, it is recom- mended that unless a particular enterprise support program is ($LPIQ $ASLP ) $SPIQ unambiguously associated with only a subset of the line pro- grams, it should be associated with all line programs. For example, some state DOTs have program delivery support Where programs that only relate to the construction and mainte- $LPIQ = line cost of line program in question, nance programs. Similarly, enterprise expenditures related to $ASLP = line cost of all supported line programs, and testing and labs, sign shops, equipment/fleet maintenance and $SPIQ = cost of support program in question. garages, and line-programspecific administration and super- For example, the allocation of the program delivery support vision are examples of support programs that may only sup- program to maintenance is port the construction and maintenance line programs. The other key consideration for this step is selecting the basis by which expenditures in each enterprise support program are ($20,000,000 $120,000,000 ) $3,000,000 = $500,000. allocated to the line programs. The benchmark approach allo- cates support program expenditures to line programs on the The share of enterprise support that must be allocated to basis of the line program costs identified in Step 3. the maintenance program is therefore $1,284,314. Illustrative Example Step 5: Combine Cost Categories Table 5 presents a crosswalk between the enterprise line and to Derive Full Cost support programs for the example. Line programs are repre- Objective sented by the rows, and support programs are represented by the columns. In the event that a particular line program is sup- The objective of Step 5 is to combine the line activity cost ported by a particular support program, an X is displayed. In with the appropriate allocations of both maintenance pro- this case, the program delivery support program is only related gram and enterprise support expenditures to determine the to the maintenance and construction line programs. full cost of the line activities. Table 6. Example allocation of support program expenditures to line programs. Allocation of Support Program Expenditure Total Support Line Programs Program Delivery Support Administration Program Allocation Maintenance $500,000 $784,314 $1,284,314 Construction $2,500,000 $3,921,569 $6,421,569 Traffic operations N/A $98,039 $98,039 Public transportation N/A $196,078 $196,078 Total $3,000,000 $5,000,000 $8,000,000
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46 Table 7. Example full cost breakdown for line activities. Cost Categories Line Activity Line Program Support Enterprise Support Full Cost Crack sealing $500,000 $54,775 $36,076 $590,851 Deicing $10,000,000 $1,345,506 $721,525 $12,067,031 Sign washing $300,000 $32,865 $21,646 $354,511 Striping $7,000,000 $766,854 $505,067 $8,271,921 Total $17,800,000 $2,200,000 $1,284,314 $21,284,314 Sources of Information and $AESM = allocation of enterprise support to the mainte- Key Considerations nance program. All of the information required to complete the full cost cal- For example, the allocation of the enterprise support to culation is produced through Steps 1 through 4. At this point, sign washing equals the process has identified the line activity expenditures, an allo- cation of maintenance program support expenditures for each ($300,000 $17,800,000 ) $1,284,314 = $21,646. line activity, and the allocation of enterprise support expendi- Table 8 presents the full unit costs for production of each tures that must be applied to the maintenance program. The of the line activities in the example. next step, therefore, is to allocate the maintenance program share of enterprise support expenditures to the line activities themselves. Consistent with the approach for program support Calculation Options and Exceptions expenditures, the benchmark approach involves doing this on The preceding sections describe and illustrate the bench- the basis of line activity cost. mark approach to the full cost calculation. The benchmark The result of this calculation is the total cost for each line approach is specifically designed for ease of use (i.e., to meet activity. Dividing this amount by the accomplishment recorded the practical requirement) and should therefore be feasible/ by the agency for each activity (where available) provides the attainable in most, if not all, state DOTs. However, depending full cost per unit of production, which now incorporates a fair on the data available, the knowledge of the personnel per- share of both maintenance program and enterprise support expenditures. forming the calculation, and the resources/time available, there are options at each step that should be considered. These Illustrative Example are described in the remainder of this attachment. Table 7 draws upon numbers from Tables 1 and 3 and the Simplified Benchmark Approach (All to All) results of the enterprise support cost allocation calculations. It shows the breakdown of the full cost between the three cost The benchmark calculation described in the previous sec- categories: line, program support, and enterprise support. tions accounts for two different types of maintenance pro- The allocation of enterprise support to each line activity is gram and enterprise support expenditure. The first type is general in nature and effectively supports all line activities and ($LAIQ $ALA ) $ AESM all line programs, respectively (for example, maintenance pro- gram and agency executive management). The second type of Where support expenditure is for more focused support activities and $LAIQ = line cost of line activity in question, programs that only support a subset of line activities and line $ALA = line cost of all line activities, and programs, respectively. For example, sign shop activities not Table 8. Example full unit costs for line activities. Line Activity Full Cost Accomplishment Units Full Unit Cost Crack sealing $590,852 75,000 Pounds $7.88 Deicing $12,067,030 9,000,000 Pounds $1.34 Sign washing $354,511 20,000 Each $17.73 Striping $8,271,921 18,000 Linear feet $459.55
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47 Table 9. Example simplified allocation of support activity expenditures to line activities. Allocation of Support Activity Expenditures Total Support Line Activities Mix Deicer Training Management Stores Activity Allocation Crack sealing $7,023 $5,618 $42,135 $7,022 $61,798 Deicing $140,449 $112,359 $842,697 $140,449 $1,235,954 Sign washing $4,213 $3,371 $25,281 $4,214 $37,079 Striping $98,315 $78,652 $589,887 $98,315 $865,169 Totals $250,000 $200,000 $1,500,000 $250,000 $2,200,000 recouped through sign material expenditures support only ditures to the line activities for the example described previ- sign installation and maintenance activities. The second type ously. The allocation calculation is now performed for every of support expenditure can occur at both the maintenance combination of line and support activities. The support activ- program and enterprise levels; however, on the basis of the full ity allocation is equal to: cost calculations performed in this study, it is more common within the maintenance program itself. ($LAIQ $ASLA ) $SAIQ The number of maintenance activities and enterprise pro- Where grams varies by agency and, in some cases, can be quite large. As $LAIQ = line cost of line activity in question, the number increases, so does the effort required to relate line $ASLA = line cost of all supported line activities, and and support activities and programs. In addition, activity and $SAIQ = cost of support activity in question. program definitions tend to become closer and differences more nuanced, which further increases the knowledge, time, Using the simplified benchmark approach, now the alloca- and effort that can be expended developing the line and support tion of the mix deicer support activity to deicing equals crosswalks in Steps 2 and 4. Finally, although it is recommended ($10,000,000 $17,800,000 ) $250,000 = $140,449 that the full cost calculation be undertaken by a team with rep- resentatives from the maintenance program or finance division ( versus $250,000 calculated previously ). or office, as well as people knowledgeable in agency informa- Step 4. Table 10 illustrates the results of applying the tion systems, there may be circumstances where such a team simplified benchmark approach to allocate support program approach is not possible. In any of these situations, the simpli- expenditures to the line programs. The allocation calculation fied benchmark approach can be used to determine the full cost is now performed for every combination of line and support of maintenance activities. programs. The support program allocation is equal to: As its name suggests, the simplified benchmark approach simplifies Steps 2 and 4 with the assumption that all mainte- ($LPIQ $ASLP ) $SPIQ nance program and enterprise support expenditures support all line activities and all line programs, respectively, essentially plac- Where ing Xs in every cell of the crosswalk matrices in Steps 2 and 4. $LPIQ = cost of line program in question, Step 2. Table 9 illustrates the results of applying the simpli- $ASLP = cost of all supported line programs, and fied benchmark approach to allocate support activity expen- $SPIQ = cost of support program in question. Table 10. Example simplified allocation of support program expenditures to line programs. Allocation of Support Program Expenditure Total Support Line Programs Program Delivery Support Administration Program Allocation Maintenance $470,588 $784,314 $1,254,902 Construction $2,352,941 $3,921,569 $6,274,510 Traffic operations $58,824 $98,039 $156,863 Public transportation $117,647 $196,078 $313,725 Total $3,000,000 $5,000,000 $8,000,000
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48 Usingthesimplifiedbenchmarkapproach,now the allocation Where of the program delivery support program to maintenance is $LAIQ = line cost of line activity in question, $ALA = line cost of all line activities, and ($20,000,000 $127,500,000 ) $3,000,000 = $470,588 $AESM = allocation of enterprise support to the mainte- ( versus $500,000 calculated previously ). nance program. Using the simplified benchmark approach, now the alloca- Now the allocation of enterprise support expenditures to tion of the enterprise support to sign washing equals the maintenance program is $1,254,902 (versus $1,284,314 calculated previously). ($300,000 $17,800,000 ) $1,254,902 = $21,150 Step 5. Table 11 draws upon numbers from Tables 1 and 9 and the results of the simplified enterprise support cost ( versus $21,646 calculated previously ). allocation calculation just completed, whereby the mainte- Table 12 presents the full unit costs for production of each nance program share of enterprise support is now $1,254,902. of the line activities in the example using the simplified bench- It shows the breakdown of the full cost between the three cost mark approach. categories of line, program support, and enterprise support Table 13 shows a comparison of the full unit costs for the that results from using the simplified benchmark approach. example calculated using the benchmark and simplified bench- The allocation of enterprise support to each line activity is mark approaches. The difference in this case is very modest; however, using real and complete agency data can result in ($LAIQ $ALA ) $ AESM much more significant differences in full unit costs. Table 11. Example simplified full cost breakdown for line activities. Cost Categories Line Activity Line Program Support Enterprise Support Full Cost Crack sealing $500,000 $61,798 $35,250 $597,048 Deicing $10,000,000 $1,235,955 $705,001 $11,940,956 Sign washing $300,000 $37,079 $21,150 $358,229 Striping $7,000,000 $865,169 $493,501 $8,358,669 Total $17,800,000 $2,200,000 $1,254,902 $21,254,902 Table 12. Example simplified full unit costs for line activities. Line Activity Full Cost Accomplishment Units Full Unit Cost Crack sealing $597,048 75,000 Pounds $7.96 Deicing $11,940,956 9,000,000 Pounds $1.33 Sign washing $358,229 20,000 Each $17.91 Striping $8,358,669 18,000 Linear feet $464.37 Table 13. Example comparison of benchmark and simplified benchmark full unit cost. Full Unit Cost Line Activity Units Benchmark Simplified Benchmark Percent Difference Crack sealing Pounds $7.88 $7.96 1.01% Deicing Pounds $1.34 $1.33 -0.75% Sign washing Each $17.73 $17.91 1.01% Striping Linear feet $459.55 $464.37 1.04%
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49 Forward-Looking or Step 2: Gather and Classify Enterprise Programs Budgetary Approximation and Expenditures The sources, calculation, and tracking details for the line As with Step 1, the preferred approach to obtaining this activity, program support, and enterprise support expendi- information is to extract it from agency information systems tures vary by agency. However, irrespective of these varia- and/or financial reports for a complete fiscal year in the past tions, the full cost calculation requires that these costs be (i.e., actual expenditure information). However, just as for obtained from somewhere. The prior description of Steps 1 maintenance program activities and expenditures, another and 3 focuses on a backward-looking, accounting approach option is to use forward-looking budgetary information as to determining the contributions to full cost for each category the principal input for this step. of cost. If such a forensic approach is possible, combining actual expenditures, it is the most straightforward (i.e., prac- tical) solution. However, it also is possible to make a forward- Allocation Basis looking cost projection of the type that is done during the Step 3: Allocate Maintenance Support Expenditures budget development process. to Line Activities In order to help ensure the practicality of the full cost Step 1: Gather and Classify Maintenance Program determination process, both the benchmark and simplified Activities and Expenditures benchmark approaches described and illustrated in this doc- The following steps provide an example of forward look- ument consistently use the line cost as the basis for allocating ing or budgetary approximation for determining the cost of all program support expenditures to line activities. However, maintenance activities. an agency may choose a different basis for allocating all pro- gram support expenditures or even choose different bases for 1. Estimate the number of crew days of a particular mainte- different support activities. nance activity that will be required during the next budget Beyond line activity cost, the most obvious alternative allo- year; cation basis can be found within the elements of line cost as 2. Determine the crew profile that will be required to perform follows: each activity (i.e., number and classes of maintenance personnel); · Workman's compensation support activity expenditures 3. Estimate the average daily crew cost by using current aver- (or other support activity expenditures reasonably related to age loaded rates by personnel class as well as any cost-of- labor expended) could be allocated on the basis of labor living or other adjustments; expenditure for each line activity; 4. Multiply the results of Steps 1 and 3 to estimate the pro- · Material stores and handling support activities expendi- jected labor cost for the activity; tures could be allocated on the basis of material expendi- 5. Review past expenditures on the activity in question and ture for each line activity; calculate the percentage of the total cost contributed by · Unused equipment and other equipment support activity LEMO; and expenditures could be allocated on the basis of equipment 6. Estimate equipment, material, and other costs using the expenditure for each activity; and results of Steps 4 and 5 and combine them with the labor · Contractor solicitation, administration, and oversight sup- estimate--this gives an estimate of the sum of line cost ele- port activities could be allocated on the basis of other expen- ments for the activity. ditures for each activity (provided other expenditures are predominantly contractor payments). The process must be completed for all activities prior to moving on to Step 2. In addition, it is important to understand In addition, labor hours and equipment hours could be the extent to which maintenance program support is covered used as the basis of allocating support activity expenditures. by the budget activities. In the event that certain support expen- ditures are not covered--say, for example, expenditures for the Step 4: Allocate a Portion of Enterprise Support state maintenance engineer and other maintenance program Expenditures to the Maintenance Program support and administration--these must either be added as additional activities here and their expenditures estimated, or As with the allocation of program support expenditures, they must be identified as a maintenance-programspecific both the benchmark and simplified benchmark approaches enterprise support expenditure in Step 3. described and illustrated in this document consistently use the
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81 APPENDIX B Maintenance Cost Tracking Activities for Selected State DOTs Introduction tive maintenance activities, Caltrans' 2007/2008 budget in- cluded $2.5 billion for its State Highway Operations and Pro- This appendix summarizes the maintenance cost tracking ac- tection Program (SHOPP). The SHOPP program is composed tivities at DOTs in three states: California, Minnesota, and Ver- of more major projects, above and beyond preventive main- mont. In each case, a summary introduction to the agency and tenance activities. Caltrans coordinates the activities con- its maintenance program is provided, followed by a description ducted under its maintenance and SHOPP programs since of the management systems and processes used to track the var- it must avoid expenditure of maintenance dollars in areas ious categories of cost that compose the full cost of any partic- that are scheduled to be addressed by SHOPP projects. ular maintenance activity. The purpose of this appendix is to Caltrans uses a combination of in-house maintenance crews supplement both the process description and the documented and contractors. In 2007/2008, approximately $420 million calculations and to provide practitioners with additional insight of the $1.1 billion maintenance budget was paid to contractors, into maintenance cost tracking practices at state DOTs collected or 38%. during this project. Full cost calculations were not performed The Caltrans maintenance program is composed of just over for these agencies because it was determined that the full cost 500 discrete activities organized into 16 families, which are in process does not vary between agencies; the only differences re- turn grouped into seven broader groups. The groups and fam- late to the systems and other sources of input data, as illustrated ilies are as follows: by the six calculations documented in Appendix A. · HM 1 Road Bed: Contents A. Flexible Pavement; and California Department of Transportation....................... 81 B. Rigid Pavement. Minnesota DOT ................................................................. 85 · HM 2 Roadside: Vermont Agency of Transportation ................................. 87 C. Slopes, Drainage, Vegetation; D. Litter, Debris; California Department E. Landscaping; of Transportation F. Environmental; and G. Public Facilities. Introduction · HM 3 Structure: The California Department of Transportation (Caltrans) is H. Bridges; and responsible for approximately 15,000 centerline miles of high- J. Other Structure. way, representing approximately 9% of the statewide total and · HM 4 Traffic Control and Service Facilities: encompassing 50,000 lane miles. Caltrans has responsibility K. Electrical; and for approximately 12,000 highway bridges with a total deck M. Traffic Control. area of 21 million square meters. · HM 5 MTCE Auxiliary: Caltrans' annual maintenance budget for the year 2007/2008 T. Support; and was approximately $1.1 billion, representing an increase of ap- W. Training, Field Auxiliary Services. proximately $162M from 2006/2007. The total agency budget · HM 6 Snow and Major Damage: was $13.9 billion in 2007/2008. In addition to Caltrans' main- R. Snow/Ice Control; and tenance budget, which is directed primarily toward preventa- S. Storm Maintenance.
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82 · HM 7 Radio: ganization, their costs are still reported in the same way as all U. Radio Support. other maintenance activities. Travel time (i.e., time spent traveling between yard and site At its highest level, Caltrans is organized into 12 district or between sites) is not tracked separately but gets charged to offices and the headquarters. Each of the districts covers one or whatever activity is being undertaken. more counties and oversees activities at multiple geographically There are circumstances in which Caltrans maintenance per- dispersed maintenance stations. The majority of maintenance sonnel perform work that is outside of the agency's mainte- activities are run by the districts, although there are some activ- nance program, although this is very limited. When such "day ities that are coordinated on a statewide basis--for example, labor" activity occurs--for example, where maintenance per- structures inspection. sonnel perform work on selected capital projects/activities-- Caltrans uses the following three systems to capture and the maintenance personnel involved charge time against the ap- manage maintenance cost data (one integrated maintenance propriate capital EA, which is available within the IMMS. management system and two financial accounting systems): In other instances, nonmaintenance employees (other than contractors) effectively perform maintenance work for the · Integrated maintenance management system (IMMS): agency--for example, when construction personnel per- Caltrans operates an integrated maintenance management form certain oversight functions for maintenance activities. In system, the initial implementation of which was completed these cases, a portion of the maintenance budget is transferred in 2003. The system is a Hanson product; however, it is now to the appropriate construction EA(s). The production rates are maintained and supported by another vendor. The primary also tracked, so Caltrans can estimate the benefit and the equiv- users of the system are the districts. The IMMS is a work- alent internal cost. tracking system that is used to track field maintenance staff Caltrans also has instances where its maintenance crews are time, activities accomplished and scheduled for mainte- paid for certain work by other agencies--for example, The nance crews, and the statewide road inventory. All charges Bay Area Toll Authority. in the IMMS must be assigned to an expenditure authority (EA), which are represented by the 16 letter codes, or fam- Equipment Costs ilies, identified previously. · Financial accounting systems: Caltrans uses two financial Caltrans used to calculate and utilize equivalent equipment accounting systems: CLASS, which is a California state gov- rental rates to allocate equipment usage costs to maintenance ernment accounting system, and TRAMS, which is a Cal- activities. When they are tracked/utilized, Caltrans equipment trans accounting system used for tracking expenditures. Cal- charges are based on the time of possession for a particular trans is working to replace TRAMS with a new integrated activity and therefore include travel time as well as any down/ financial management system (IFMS), which is an off-the- idle time. The features and functionality of the current account- shelf system. ing system (TRAMS) are such that this calculation was deemed too time consuming, and as result, Caltrans stopped perform- The IMMS is not reconciled to the TRAMS/IFMS because of ing it two to three years ago. One of the anticipated benefits of the different uses of each system, although some data is trans- the new accounting system (IFMS) will be to better support ferred from IMMS to TRAMS, specifically labor and material the calculation of equivalent vehicle rental rates, and Caltrans usage. expects to return to this approach for tracking equipment costs as and when IFMS is implemented. At the present time, and since the suspension of the rental Labor Costs rate calculation, Caltrans allocates a portion of total equipment Field maintenance employees fill out a daily time sheet on costs to each program that includes a line item for equipment the IMMS and assign their time to the appropriate EA and costs. The percent allocation was set based on the relative mag- activity along with equipment and material usage. (For exam- nitude of equipment line item budgets at the time the internal ple, the A series is flexible pavement and the B series is con- rental rate calculation was suspended. Although the equipment crete pavements.) The maintenance supervisor's time is budget can vary from year to year, the program allocation con- recorded in Staff Central (another Caltrans timesheet system) tinues to be based on the original budget split. and is then automatically charged to maintenance EA. Cal- trans also has special maintenance forces--for example, struc- Material Costs tures inspection personnel--who report to and are managed by the headquarters. Although their organization and report- Caltrans' IMMS calculates and maintains average unit prices ing structure is different from the rest of the maintenance or- for materials on a district-by-district basis. Maintenance per-
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83 sonnel record material consumption on a daily basis in IMMS 1. Program functional rates: This rate covers the indirect associated with the appropriate EA and maintenance activity, costs associated with an individual program and sub- just as they do labor hours and equipment usage. program. Programs include highways, aeronautics, mass transportation, planning, and administration. Subpro- grams within the highway program include capital outlay Overhead Costs support, local assistance, maintenance, and operations. California's full cost recovery policy requires state agencies Each subprogram has its own program functional rate. to "recover full costs when goods or services are provided to 2. Administration rates: This rate covers the costs of activi- others" (California Department of Finance, 2002). The policy ties accrued centrally that benefit all programs. Examples defines "full costs" as the sum of direct and indirect costs. include the department's legal services, building depreci- ation, and bond expenses. Administration rates are deter- · Direct costs are easily identifiable with a specific objective, mined first by calculating the total administration costs, such as the implementation of a project or the delivery of and then by allocating a portion of this total to each pro- a specific service. Examples include the cost of personnel gram. These calculations are done at the program level, so directly responsible for the objective, material costs, and each subprogram within a program has the same admin- equipment expenses. istration rate. · Indirect costs are not directly related to a specific objective. Examples include the cost of management staff, IT staff, The combination of these two rates represents each pro- and accounting staff. gram's indirect cost rate. Table B.1 shows these rates for fiscal year 2008/2009. In order to comply with this policy, Caltrans calculates two Details on how these rates are determined are provided types of indirect cost rates: on page 84. Table B.1. Caltrans indirect cost rates, fiscal year 2008/2009. Reimbursed Work Program Program Administration Billing Functional Rate 10: AERONAUTICS 37.90% 33.59% 71.49% 20: HIGHWAYS 20.10 Capital Outlay Support 33.12% 28.11% 61.23% 20.30 Local Assistance 18.30% 28.11% 46.41% 20.40 Program Development 18.30% 28.11% 46.41% 20.65 Legal n/a 28.11% 28.11% 20.70 Toll Collection n/a 28.11% 28.11% 20.70 Operations 17.23% 28.11% 45.34% 20.80 Maintenance 36.15% 28.11% 64.26% 30: MASS TRANSPORTATION 29.02% 18.43% 47.45% 40: TRANSPORTATION PLANNING 0.68% 14.08% 14.76% 50: ADMINISTRATION n/a 28.11% 28.11% Capital Outlay Support Projects - SB45 Program Program Administration Billing Functional Rate 20.10 CAPITAL OUTLAY SUPPORT 33.12% n/a 33.12% NOTE: Rates are applied to the Direct Labor cost of work performed.
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84 Program Functional Rate The prior year's total functional indirect cost is computed the same way as the current year's total functional indirect The program functional rate is the ratio of the total indi- cost. It is the sum of the prior year's indirect labor and the rect cost to the direct labor, as expression (1) shows: previous year's operating expenses. PFIC The prior year's recovery of indirect cost is the product of FR = (1) DL the prior year's program functional rate and the difference between the prior year's total labor and the prior year's indi- Where rect labor, as expression (7) shows: FR is the functional rate, PFIC is the total program functional indirect cost, and RIC PY = FRPY (TLPY - ILPY ). (7) DL is the direct labor. The total program functional indirect cost is the sum of the The direct labor cost is the difference between the total total functional indirect cost and of the carryforward, as ex- budgeted labor and the indirect labor, as expression (8) shows: pression (2) shows: DL = BL - PS (8) PFIC = TFI + carryforward (2) Where BL is the total budgeted labor. Where TFI is the total functional indirect cost. The total functional indirect cost is the sum of the indirect Administration Rate labor and the indirect operating expenses, as expression (3) shows: The administration rate, like the program functional rate, is the ratio of the total indirect cost to the direct labor, as TFI = PS + OE (3) expression (9) shows: Where AIC PS is the indirect labor, and AR = (9) DL OE is the indirect operating expenses. Where The indirect labor is computed as expression (4) shows: AR is the administration rate, ILPY AIC is the total administration indirect cost, and PS = BL (4) DL is the direct labor. TLPY Where The direct labor remains unchanged and is calculated as ILPY is the prior year's indirect labor, expression (8) showed. However, since the administration TLPY is the prior year's total labor, and rate is calculated for each major program (i.e., not for the BL is the budgeted labor for the current year. subprograms), the direct labor should be calculated for each major program, summing the subprogram's direct labor. The indirect operating expenses are calculated the same way: The administration indirect cost for each program is the IOE PY sum for each program of the total administration cost, legal OE = BOE (5) cost, equipment depreciation cost, building depreciation cost, TOE PY bond interest, and carryforward, as expression (10) shows: Where IOEPY is the prior year's indirect operating expenses, AIC = TAC + LC + EDC + BDC + BI + carryforward (10) TOEPY is the prior year's total operating expenses, and BOE is the budgeted operating expenses for the current year. Where TAC is the total administration cost, The carryforward is intended to take into account the sum LC is the legal cost, of money or debts from the previous year. It is the difference EDC is the equipment depreciation cost, between the prior year's recovery of indirect costs and the prior BDC is the building depreciation cost, and year's total functional indirect costs, as expression (6) shows: BI is the bond interest. carryforward = RIC PY - TFI PY (6) The total administration cost for a program (i) is the sum of the general administration cost (50.10) for a program (i), Where RICPY is the prior year's recovery of indirect cost. central and services cost (50.20) for a program (i), and pro-
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85 fessional and technical services cost (50.60) for a program (i), The building depreciation cost is the balance amount on the as expression (11) shows: building multiplied by the building depreciation rate (2%). The bond interest is the sum of the budgeted bonds less the TACi = GACi + CSCi + PTSCi (11) rental income. The carryforward is intended to take into account the sum Where of money or debts from the previous year. It is the difference GAC is the general administration cost, between the prior year's recovery of indirect costs and the CSC is the central and services cost, and prior year's administration indirect costs, as expression (15) PTSC is the professional and technical services cost. shows: The central and services cost is the budgeted amount on carryforward = RIC PY - AIC PY (15) the governor's budget. The general administration cost and professional and Where RICPY is the prior year's recovery of indirect cost. technical services cost are computed, as expression (12) shows: The prior year's administration indirect cost is computed the same way as the current year's administration indirect AOE PY cost [refer to expression (10)]. GAC = BOE + BL (12) TOE PY The prior year's recovery of indirect cost is the product of the prior year's administration rate and the difference between Where the prior year's total labor and the prior year's indirect labor, AOEPY is the prior year's allowable operating expenses for as expression (16) shows: general administration cost, TOEPY is the prior year's total operating expenses for RIC PY = ARPY (TLPY - ILPY ). (16) general administration cost, BOE is the budgeted operating expenses for the current year Contracts for general administration cost, and BL is the budgeted labor for the current year for general ad- The costs of work performed by maintenance contractors ministration cost. are calculated with a contract management system. However, since a lot of this work is responding to a particular incident, To calculate the general administration cost and profes- it can be difficult to determine exactly what work was done, sional and technical services cost for each program (i), the and it is more challenging than with in-house personnel to costs are prorated to the department's major programs, as track units of production. Maintenance contract expenditures shown in expression (13): can be and are rolled into the other in-house expenditures. Strict standards have been established by Caltrans for the BPYH i GACi = GAC (13) use of personnel service contracts. For example, the contract- TBPY ing agency should clearly demonstrate that the proposed con- Where tract will result in actual overall cost savings to the state, but BPYHi is the budgeted PY hours for program i, and the contractor's wages should be at the industry's level and TBPY is the total budgeted PY hours. should not significantly undercut state pay rates. The legal support cost for programs 10, 30, and 40 is the Minnesota DOT budgeted amount on the governor's budget. The legal support cost for program 20.65 is the total budgeted legal support less Introduction tort expenditures. The Minnesota Department of Transportation (Mn/DOT) The equipment depreciation cost for programs 10 and 20 accomplishes most of its maintenance in-house with state is the balance amount of the equipment multiplied by the maintenance employees. Mn/DOT is responsible for maintain- equipment depreciation rate (6.67%). For programs 30 ing approximately 11,382 centerline miles (21,191 lane miles) and 40, the equipment depreciation cost is shown in expres- of Interstate roadways and state trunk highways. Mn/DOT's sion (14): maintenance operations budget for fiscal year 2007 was BPYH i $233,000,000. Minnesota counties are responsible for road EDC = BAE 6.67% (14) maintenance on the approximate 45,000 lane miles of county BPYH 30 + BPYH 40 road systems. Some counties will also maintain township roads Where BAE is the balance amount of the equipment. under contracts with selected townships.
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86 Mn/DOT's maintenance function is organized into eight nance management systems (discussed below), including geographic districts and a central office providing management the Work Management System (WMS), Equipment Man- and financial oversight, support for contract administration, agement System (EMS-M5), Building Maintenance System, and coordination of state road maintenance activities. Central the Automated Facilities Management System, and Bridge office field support includes the fleet management unit, sign Maintenance System. RCA data, including labor hours shop, and coordination of regional striping crews. Mainte- worked, vacation hours, sick time, and holiday pay, are nance functions for each of the eight districts are organized shared with statewide systems, including the Statewide Au- into either one or two maintenance areas, which are then tomated Materials Management System (SAMMS), State- subdivided into truck stations sufficient to cover the road wide Employee Management Application (SEMA4), Min- miles for winter and summer maintenance in each area. nesota Accounting and Purchasing System (MAPS), and the Mn/DOT organizes its maintenance costs into the follow- statewide information access warehouse. All data entries ing products and services for budgeting purposes: include job number, activity code, organization code, and funding code. The RCA system also collects equipment · Clear roads: (hours or miles of use) and materials usage data for interface Clear obstructions (debris removal); and with SEMA4. All data is inputted into RCA electronically Snow and ice control. with no paper forms used. · Roadsides: · Statewide Employee Management Application: SEMA4, Mowing and planting; Mn/DOT's human resources and payroll system, is a per- Spraying; sonnel and payroll system common to most state of Min- Brush and tree removal; and nesota departments that tracks labor costs and related Rest area and property management. human resources administrative costs. RCA labor inputs · Smooth roads: are fed into SEMA4. SEMA4 also captures employee com- Pavement and shoulder repair; pensation data not inputted into RCA such as state-paid Paving; and insurance benefits and retirement and Social Security con- Drainage repair. tributions. It shares this data with RCA and the statewide · Traffic management: MAPS system. Signals, signs, and striping; · Minnesota Accounting and Purchasing System: MAPS is a Guardrail repair; statewide accounting and purchase system that gathers pay- Lighting; and roll information, equipment usage and depreciation data Traffic operations and systems maintenance. · (from EMS-M5), materials usage, and other data. Equip- Fleet management. · ment rates are used by MAPS to assign costs to jobs and ac- Bridges: Bridge inspection; and tivities based on the usage reported by job and activity. Sys- Bridge repair/maintenance. tem data is distributed to the information access warehouse · Facilities management. and ongoing Mn/DOT financial application initiatives such · Regulation: as activity-based costing and activity-based budgeting and Issue permits. management. · · Work Management System: WMS utilizes RCA, SAMMS, Information traveler services. · Inventory control. and other system inputs for work planning, preparation of · Infrastructure operations and maintenance administration. field work orders, development of work plans, and creation of post-project reports (mostly for snow and ice control at present). No overhead costs are included in the labor costs Maintenance Costing Systems reported by WMS. Thus, a comparison of MAPS and Mn/DOT uses the following financial and maintenance WMS costs may not give equal results since labor overhead management systems for collecting, integrating, and manag- costs are applied in the MAPS system. WMS data is used to ing maintenance operations cost data. These systems are de- develop Mn/DOT "dashboard" performance measures. scribed briefly in the following paragraphs. Note that Mn/DOT Maintenance and Office of Human Resources are just beginning to develop a system or model · Resource Consumption Application (RCA): RCA is a for identifying production units or measures. Expert input department-wide system used by all Mn/DOT maintenance from field maintenance forces is being used to establish the and other employees to capture on a daily basis time, equip- production unit or measurement parameters, collect the ment, and materials used in state work activities. This infor- necessary data, and monitor selected projects to compare mation is shared with and used by several other mainte- model performance with actual experience.
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87 · Equipment Management System: EMS-M5, which em- funds in the appropriate account), some activities often con- TM ploys the FleetFocus web-based fleet management sys- sidered as preservation or rehabilitation maintenance are usu- tem, is used to collect fleet management resource informa- ally done by contract. As an example, some joint repair, con- tion, including labor, equipment, and materials used by sidered by some as preventive maintenance, is sometimes done fleet mechanics and managers. Equipment status codes are by contract. For winter maintenance, Mn/DOT Maintenance maintained for major equipment items to track current sta- may contract on a seasonal or ad hoc basis with small local tus. EMS-M5 only tracks miles driven by each unit. Other equipment operators to maintain a relatively short segment of costs for operation of mobile equipment (depreciation, fuel state trunk highway in a small rural community. Mn/DOT use, etc.) are captured in the MAPS directly or through may also enter into agreement with local farmers in some areas SAMMS and SEMA4 interfaces. for mowing of hay on roadsides. For debris cleanup, Mn/DOT · Statewide Automated Materials Management System: enters into agreements with interested counties (mostly in the SAMMS collects and manages material (salt, sand, etc.) MinneapolisSt. Paul metro area) for "sentence to serve" assis- usage employed in Mn/DOT's field maintenance opera- tance with litter pickup on roadsides. Similarly, Mn/DOT con- tions, including related inventory control costs, fuel usage summates agreements with local Adopt-a-Highway groups for (from EMS), stockpile usage (from RCA) and materials litter pickup on state trunk highway roadsides. usage from numerous other maintenance activities. Stan- Mn/DOT also enters into annual contract agreements with dard English units of measure are used. Material purchases the Greenview Organization for janitorial services and minor tracked through SAMMS are recorded by location code and maintenance of Mn/DOT rest areas on state trunk and Inter- local rates used and include a material handling cost to ar- state highways and selected building sites. Staffing under these rive at total costs. contracts is accomplished mainly by retired persons who in- · Other systems/cost management initiatives: Other main- terface with the public and perform cleaning, minor mainte- tenance management systems for collecting data for the nance, and some mowing of rest area facilities and grounds. management of building maintenance include the Max- imo Building Maintenance System to manage Mn/DOT's central office and district buildings, and the Automated Fa- Vermont Agency of Transportation cilities Management System for maintenance area and rest Introduction area facilities. The bridge maintenance system is used by the central bridge office and district bridge maintenance The highway maintenance responsibilities of the Vermont staffs to collect bridge maintenance data. Another system Agency of Transportation (VTrans) extend to a statewide net- used for Mn/DOT pavement maintenance projects is the work of more than 2,600 centerline miles (6,500 lane miles) of Bridge and Road Construction (BARC) system, project state highway, of which about 700 miles are designated on the funding for which comes from the State Transportation NHS. The breakout of this mileage by functional class is: Inter- Improvement Program (STIP). Work under the BARC state, 320 miles; principal arterial, 382 miles; major collector, program is done under contract. Costs for projects com- 1,145 miles; urban collector, 5 miles; and minor collector or pleted under this program are charged to the affected road local, 10 miles. The system is largely rural: only 22% of Inter- segment, job code, and maintenance activity code. state highways and 15% of NHS mileage is classified as urban. There are also Class 1 town highways that form an extension of Additional cost management systems presently under de- a state highway route and that carry a state highway route num- velopment within Mn/DOT include Activity-Based Costing, ber. These roads are maintained by the respective towns, how- Activity-Based Budgeting, and Activity-Based Management. ever, and are not part of the state highway network. These programs still await the development of discrete pro- Highway maintenance in Vermont is defined as work cov- duction or performance measurement units for comparative ered by the legislative highway and bridge maintenance ap- measures of project performance. Pilot programs have been propriation. The highway routine maintenance program ex- run in a few Mn/DOT offices to assess measurement param- cludes, for example, bridge reconstruction and rehabilitation, eters developed to date, but these hierarchal systems await as well as separate funding for maintenance work in other further development of the measurement units. modes (rail, public transit, and aviation/aeronautics). The budget for highway routine maintenance is about $65 million annually (FY 2008). VTrans' maintenance program expendi- Contract Maintenance tures are displayed in two levels of reports: Only a small portion of Mn/DOT's routine and preventive road maintenance work is accomplished under contract with · The allotment report tracks total expenditures for mainte- others. It should be noted that depending on the size and com- nance, covering all monies appropriated by the legislature. plexity of the maintenance activity (and the availability of This total includes the cost to accomplish maintenance,
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88 plus administrative costs and support costs for items such · Maintenance work: Its group, type, and scope; what as utilities, building rental and maintenance, and insurance. resources are used; and what work and improvements are This total corresponds to the $65 million budget number accomplished. above. · Money: Its source (e.g., fund, appropriation, account, · The activity cost report tracks the basic maintenance work line item) and use in transactions to enable maintenance costs (i.e., the labor, equipment, and material costs to ac- work. tually perform maintenance work, plus some indirect and support activities by maintenance personnel). It excludes MATS' development has been accomplished with key some administrative costs and the support costs for utili- philosophies in mind (e.g., the importance of current infor- ties, rent, and so forth. The activity costs constitute about mation and the interpretation of cost as the representation $60 million within the $65 million budget discussed above. of the value of something accomplished rather than the more purely financial concept of payment for an item received). Routine maintenance expenditures are distributed among The idea of information currency is embodied in opera- categories of activities as follows: tions that are performed daily [e.g., the daily updates per- formed between MATS and the financial system, the input · Road surface, 7.2%; of the daily work report (DWR), and the daily input of con- · Bridge, 2.4%; tract estimated costs and accomplishments]. These opera- · Roadside, 14.2%; tions will be discussed further in the sections that follow. · Traffic features, 5.9%; The idea of cost as representing value rather than a strictly · Winter maintenance, 30.6%; financial transaction is embodied in operations such as · Overhead activities, 36.1%; and stockpile calculations and treatment of agency and con- · Other categories, 3.6%. tracted equipment rental charges. Monthly quality checks of MATS information are conducted to identify and correct Maintenance of the state highway network is performed human errors. through nine districts. MATS interacts with several systems, either directly or through uploads and downloads to a data warehouse. For ex- General Information ample, it interacts directly with the agency's financial system and indirectly with its payroll system and equipment man- MATS Development and Philosophy agement system. (Direct electronic interaction with the pay- The Maintenance Activity Tracking System (MATS) repre- roll system is forthcoming.) It downloads information on sents a tri-state collaboration among Vermont, New Hamp- pavements and bridges from the data warehouse, such infor- shire, and Maine. Each state works on system advances that mation having been generated and uploaded by the agency's are shared with the other partnering states, with technical as- pavement and bridge management systems. sistance provided by a consulting firm under retainer. MATS' VTrans continues to improve MATS, in conjunction with capabilities thus continue to evolve, and the level of system the tri-state team and its system development framework, to development varies slightly among the states. The descrip- provide a comprehensive agency-wide approach to managing, tions below represent the current implementation in Ver- tracking, and reporting maintenance program costs and ac- mont. There is as yet no formal system documentation for complishments. MATS has evolved as a Web-based product, general use. MATS information has been gained through in- and VTrans is considering loading it onto personal handheld terviews and review of an internal paper on MATS' develop- devices such as PDAs. While application of MATS is now ment and operating philosophy (Spaulding, 2008). focused in the central office and district maintenance func- The three agencies involved credit the development of tions, MATS is sufficiently general in its approach and sys- MATS with helping their staff to think about maintenance tem capabilities to apply to other agency functions as well. business processes anew. There is now an understanding that VTrans is beginning to migrate the system horizontally to maintenance management has as a first priority the accom- other divisions (e.g., Construction, Planning, Finance and plishment of work to improve the transportation system. It is Administration, Motor Vehicles). [It has been suggested not solely a tabulation of expenditures that "pay the bills." that, when MATS is migrated to other divisions, its name Maintenance management is seen as a three-legged model may need to be generalized beyond maintenance (e.g., Man- encompassing: aging Assets on Transportation Systems.)] MATS is also being migrated vertically to go deeper within the mainte- · Transportation assets: Their group, type, and location, nance organization (to the garage level). In the future MATS and what specific asset is affected by maintenance. may also be offered to towns.
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89 Work Performance · Travel and supporting activities (e.g., flagging) are in- cluded in the time charged to an activity. Highway maintenance in Vermont is performed largely by · All daily work time is covered, including time spent on in- state agency forces. Contract work is primarily for rental of direct activities (e.g., training, leave). individual pieces of private equipment as well as services such · From the information in the daily work reports, MATS as mowing, pavement leveling, certain bridge maintenance, generates a labor time sheet entry for each employee in real Interstate paint striping, and emergency response. The re- time. When the payroll time period is completed, the time porting of contract work in maintenance cost varies. For ex- sheet is submitted in paper form to the payroll system. ample, pavement leveling [which is funded through the Within the tri-state MATS compact, Maine has already ef- state's Pavement Management System (PMS) program] does fected this transfer of time sheet information to the payroll appear in the actual cost reports for maintenance, and en- system electronically. Vermont is now working on a simi- compasses work beyond traditional pavement maintenance lar electronic connection. such as patching. Emergency services work, which for system · The labor cost rate is a loaded or built-up rate that in- purposes is designated as a type of special event, can also be cludes the employee's actual hourly wage plus benefits tracked by MATS for purposes of billing towns for emergency (e.g., allowance for vacation, leave, sick time, holidays, mili- assistance and reimbursement from the Federal Emergency tary service) and applicable taxes (Social Security, Medicare). Management Agency (FEMA). Certain contracted bridge Data on rate burdens are contained in a MATS fringe fac- maintenance work, however, is not tracked in MATS, but does appear in other cost reports for bridges. tor table. · Nonmaintenance labor does perform maintenance. Prison labor is tallied at $200 per crew per day. Volunteer labor for Daily Work Report litter pick-up is recorded in labor hours; no cost is attributed. Work performed by maintenance crews is reported on However, VTrans could report an equivalent cost if needed. activity work reports. These reports summarize the labor, equipment, and materials used for an activity. An activity re- Equipment Costs port is completed for each individual activity performed dur- ing the day. The multiple activity reports for a given day are VTrans has two ways of accounting for equipment costs: compiled within the MATS DWR to compute both costs and the rental costs of agency equipment as managed through the accomplishments of maintenance activities. Accomplishments central garage, and the contracted costs of private equipment. are expressed in physical units (e.g., square yards, cubic yards, acres, lineal feet, each) as identified in the MATS activity Agency Equipment table. The labor hours in the DWR cover the total daily work hours (eight hours) plus any overtime. Additional informa- The central garage manages VTrans' fleet of vehicles and tion is presented below for each of the component resources heavy equipment. As capital assets exceeding $5,000 in value of labor, equipment, and materials, respectively. DWRs also and with a life of at least two years, maintenance equipment establish linkages between work performed and location on is managed according to VTrans' policy on assets capitaliza- the highway system. Administratively, they enable the process tion. This policy calls for: of opening and closing work requests and budget requests to function properly, and their cost and accomplishment data · Capital equipment assets to be recorded at purchase price can be compared to the work plan to evaluate progress in plus any incidental cost (e.g., insurance during transit, meeting plan targets. freight, duties, title registration, and breaking-in costs); · Straight-line depreciation; · Physical inventories to be taken every year, with any inven- Labor Costs tory adjustments signed and approved by the division di- Labor cost reporting and processing is straightforward. rector; and Key points are as follows: · Maintenance of records on equipment inventory through a capital asset management system maintained by the Fi- · Crews fill out daily activity reports. One report is completed nance and Administration division, with the appropriate for each individual activity, showing the hours worked on business managers providing information on new assets, that activity. These activity reports for each crew are com- retired assets, adjustments, and depreciation. bined within a DWR and entered into MATS. The cumula- tive total hours in the DWR should equal the full eight-hour The central garage uses a Maintenance Control and Man- regular workday plus any overtime. agement System (MCMS) to help manage the maintenance
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90 equipment fleet and provide the data needed for Finance activities using the private excavator, the correct equipment and Administration's capital asset management system. The rate would be $92.31 per hour. This adjustment maintains MCMS tallies the purchase cost and annual maintenance and the integrity of the unit cost and total cost data from both a operating costs and statistics for each piece of equipment. It performance-based and an invoice-paid perspective. computes depreciation and has an algorithm to help man- agers identify whether it is more economical to overhaul or Material Costs replace an aging piece of equipment. The cost profiles devel- oped through MCMS for the equipment, plus current costs Material costs are handled by MATS either in stockpile cal- of fuel and other operating items, are used to quantify equiv- culations or as over-the-counter purchases. The MATS DWR alent rental rates (hourly or per mile) for equipment use. thus has two separate tabs for processing material costs. The "Stockpile" tab is used to report use of materials that are kept in stockpiles (i.e., they have a known and continually tracked Private Equipment quantity). The "Materials" tab is used to report use of other Determining the performance-based cost of using private materials that are consumed on an activity but whose overall equipment under contract may be complicated by different quantities are otherwise not tracked. Calculations involved in ways in which contract payment is structured. In this context, the "Materials" tab are straightforward: quantity multiplied "performance-based" refers to understanding the extent to by unit price (price to be discussed below). The discussion in which equipment is used (i.e., its hours of operation). If the this section therefore focuses on the handling of "Stockpile" materials. equipment is charged on an hourly basis, there is no issue-- The stockpile calculations help to track quantity and cost the hourly charge is equivalent to a rental rate, and the equip- of materials over time, recognizing that use of materials may ment use can be charged according to the hours worked by the occur at some time after their purchase. When a DWR iden- crew as recorded on the DWR. If the equipment is charged on tifies use of a material, that quantity will be charged at the a flat daily, weekly, or monthly basis, however, reflecting its appropriate unit price, and the quantity will be deducted performance-based cost correctly requires additional steps from the stockpile. Additional adjustments are also managed and MATS features. for deliveries, distributions, and corrections to or from the stockpile. · The additional steps needed are to estimate the hours that the equipment will be used and then to compute an equivalent · A crew inserts a "Delivery" when material from a vendor is rental rate. As an example: assume an excavator will be con- added to the stockpile. tracted for $3,000/month for two months. Its contract cost · A crew specifies a "Distribution" when material is trans- will be $6,000. It is estimated that during the two months, it ferred from one stockpile to another. (The business rule is will be used on some number of jobs by some number of that the sending crew always does the distribution, to avoid crews for a total of 60 hours. The effective rental rate (or missed or double counts.) The sender's stockpile quantity hourly charge) will be $6,000/60 hours or $100 per hour. is reduced and the receiver's stockpile is increased by the · The relevant MATS' features involve two options for sub- amount distributed. mitted private equipment cost data on the "Rental Setup" · A correction allows recalibration of the stockpile quantity to screen, based on the method of payment in the rental agree- account for inaccuracies inherent in usage reporting, partic- ment. If hourly charges are the basis of payment for the pri- ularly with bulk materials such as salt or brine. (Corrections vate equipment, the MATS "Rental Type" is specified to use should rarely if ever be required for countable items such as the DWR hours for the appropriate activity as the basis of pipe.) Piles of bulk materials should be periodically meas- payment. If another charge structure is used (e.g., daily, ured and adjusted. For example, with reasonably accurate weekly, monthly), the MATS "Rental Type" is specified to usage reporting, stockpiles of winter bulk materials will use the vendor's invoice as the basis of payment (e.g., $3,000 show several small corrections throughout the winter. per month in the contract example above). The MATS computation of activity charges, however, would be based Pricing of materials may be done through a statewide or re- on the estimated hourly rate ($100 per hour in the example gional average price, which is provided to MATS in a crew above) as the equivalent rental charge. material rate table. While usage of most materials reflects a · The MATS "Rental Setup" screen also includes a field labeled straightforward cost calculation, some issues have been iden- "Actual" that allows post-contract adjustment in the MATS tified but not yet resolved: data to reflect actual, rather than estimated, usage. It permits back-calculating the actual effective rate based on this actual · Reuse of materials (e.g., framing lumber and plywood on usage. For example, if the crews actually spent 65 hours on bridge maintenance); and
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91 · Consumable materials (cleaners, etc.) used in cleaning rest the maintenance activity and other program costs. This oper- areas, which currently are not reported. (The recommen- ation enables the agency to provide total dollar-per-lane-mile dation is to treat these costs as expenditures that are not re- costs for summer and winter periods to answer the question, ported on the DWR.) "How much does it cost . . . ?" Indirect or Overhead Costs Contracts Some indirect costs are tracked directly in MATS (e.g., VTrans does not contract a significant amount of its main- fringe benefits on maintenance labor, and labor time reported tenance work. Approximately 5% of its work is contracted in overhead-type maintenance activities); for example: (Cambridge Systematics, Inc., 2002), and about 70% of this contract volume is for mowing. Most of the analytic issues · 0001-4110: Training, meetings, and conferences; leave time; associated with contract costs were discussed under the general administration; working with towns; and patrol Equipment Costs section. One other item of import is that and inspection. information on contract accomplishment as well as cost · 5720-5760: Controlling stock and inventory, and manu- is input daily to MATS, providing up-to-date estimates of facturing and stockpiling materials. contractor billing. · 5860-5870: Maintainingbuildings,grounds,and equipment. Level of Service and Relationship to Costs Other indirect costs are factored in through nightly up- dates between the financial system and MATS. In these oper- VTrans does not use a level of service approach such as that, ations the VTrans administrative costs, including executives' for example, applied by Washington State. Rather, the concept salaries and administrative-position salaries, and the support is more one of the relationship of proposed work to total in- costs (for utilities, building rental, building maintenance and ventory and network condition, and--for a given activity--the janitorial services, etc.) are spread on a pro-rata basis among amount of work to be accomplished for given dollars spent.