Determining Highway Maintenance Costs (2011) / Chapter Skim
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From page 7... ...
While many of these terms have a general management or financial meaning, definitions will often be narrowed for purposes of this report to address highway maintenance specifically. • Maintenance activity: A specific classification of maintenance work or service that is defined in the agency's maintenance program and maintenance management system (MMS)
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• Full cost determination process: For purposes of this report, the process of determining the full costs of maintenance for an activity, function, or program, whether statewide or by district or other geographical or organizational coverage. Reasonableness in Addressing Indirect Costs As OMB Circular A-87 notes, indirect costs are "incurred for common or joint purposes," which introduces an element of judgment in how these costs are allocated across cost objectives.
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Issues in Defining and Applying Indirect Costs Even with the allowable reasonable practices described above, it may not always be possible to distinguish clearly between direct and indirect costs among DOTs and other transportation agencies nationwide. One reason is the different interpretations, judgments, practices, procedures, and maintenance activity definitions that have evolved in individual agencies.
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The second type supports only a subset of line activities, for example, the fence inspection support activity supports the fence installation and repair line activities. • Enterprise support costs: Other expenditures of the transportation agency that can reasonably and fairly be allocated to highway maintenance.
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Charge to the maintenance program service center or clearing account for subsequent distribution to maintenance line costs or other service centers/accounts as appropriate.
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, and the sum of payments made to contractors to complete maintenance jobs in cases where maintenance activities are delivered through a combination of agency and contractor resources. These jobs, which may be bid for work on individual activities, for multiple activities within a given geographic area, or for multiple activities for a given length of highway route, must be within the scope of the routine maintenance program as the agency defines it and not within other programs (e.g., construction or capital preservation)
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• Using the guidelines above, establish the maintenance line costs by activity. Maintenance Program Support Costs Transportation agency maintenance organizations perform a variety of planning, management, research, and other functions that support the line activities.
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Even where program support costs are considered as indirect costs, they are often allocated 100% to the maintenance function because the cost determination result will differ only a small amount from the case where they would have been considered direct costs. As stated earlier, determining the complete set of maintenance line and support costs and the appropriate methods of allocating support costs to line costs are more important than whether individual costs are classified as "support" or "line." Exceptions to this 100% guideline are (1)
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Enterprise Support Costs Highway maintenance is one of a number of programs and functions that are managed by a typical transportation agency. In the same way that a maintenance program comprises line and support activities, the operations of a transportation agency comprise line and support programs and cost items.
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In each of these cases, the attribution of program support costs remains completely within the sphere of maintenance line costs. Therefore, regardless of how one might categorize them as direct or indirect, these program support costs are fully captured within the total unit maintenance costs that result from the cost determination process.
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The general approach to assigning full maintenance costs by activity is fundamentally the same across all line activities. Straightforward procedures also are available for support activities.
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. There also may be a general research expenditure item in enterprise support costs, representing a broad set of sponsored research projects, studies, and reports on behalf of the agency.
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Appendix A of the attachment illustrates the application of the recommended cost determination process to DOTs of varying characteristics with different maintenance programs. Some of these computations are relatively straightforward, while others are more detailed and sophisticated, taking full advantage of the capabilities of the agency's financial accounting system and maintenance management system.
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