Optimizing Bus Warranty (2014)

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OPTIMIZING BUS WARRANTY Despite its importance, this appears to be the first known state-of-the-practice study that exam- ines transit bus warranty. Although automobile dealers maximize profits by closely monitoring warranty to ensure that manufacturers pay for warranty-related repairs, transit agencies lag behind. Although FTA requires agencies to aggressively seek warranty reimbursement, reality is such that many agencies lack the resources, time, and motivation. More pressing is the need to meet peak service requirements, deal with increasingly complex bus technologies, and cope with ever-present pressures to do more with less. As a result, some funds legitimately due to agencies go unclaimed, in effect depriving taxpayers and rewarding bus and equipment manufacturers that benefit by not having to pay out funds already set aside for warranty. This synthesis documents how a select number of transit agencies address key aspects of their warranty programs. Included are the steps taken to more accurately monitor warranty coverage periods, optimize the warranty process, and maximize warranty reimbursement to fulfill FTA requirements and taxpayer expectations. Given the lack of transit funding, institut- ing a more effective warranty program to recoup monies legitimately owed to agencies for faulty workmanship and materials is relatively straightforward and makes good business sense. Establishing a strong warranty program is also consistent with FTA’s emphasis on Transit Asset Management Systems and bringing transit systems into a State of Good Repair. The primary instrument used to collect data and assist others to strengthen their warranty programs was a survey consisting of more than 100 questions, which was completed by 31 of 38 solicited agencies of varying sizes totaling close to 20,000 buses, an 82% response rate. Another source of information consisted of three case examples: the Rockford (Illinois) Mass Transit District (MTD), Potomac and Rappahannock Transportation Commission (PRTC) in Northern Virginia, and Dallas Area Rapid Transit (DART). Information was also obtained through a literature review that included warranty aspects of FTA’s Best Practices Procurement Manual, FTA’s Triennial Review Program, and Standard Bus Procurement Guidelines (SBPG) developed by APTA. This study revealed several noteworthy findings. Most importantly is that each public transit agency has a requirement to FTA and taxpayers to aggressively seek reimbursement for warranty repairs. Successful warranty programs are those where a dedication to the active pursuit of warranty is instilled in several agency departments as a team effort, with primary responsibility residing with maintenance personnel. A thorough warranty tracking process, whether of manual pen-and-paper design or a computer-based program, is another essential element of efficient warranty. Survey results show that while most warranty administrative personnel are trained for their jobs, there are times when a warranty repair is made but no claim for reimbursement is submitted. Of those agencies that acknowledge not submitting claims, many note that a more streamlined process would help them do so. Innovative warranty techniques identified in this synthesis include the use of digital photographs, Internet-based claims processing, real-time online tracking of submitted claims, software that flags warranty work, an Internet site to share warranty information, reviewing claims with vendors on a regular basis, and SUMMARY

2 use of e-mail to track claim status with vendors. Critical components to optimize warranty reimbursement include the use of strong contractual language, excellent record keeping, and employee dedication to warranty recovery. Nearly half of those surveyed opt for the extended engine and transmission warranty coverage options offered in the SBPG; however, the process can deprive agency technicians of the experience they will need to make repairs once warranties expire. The top three bus component areas where vendors are called in to make the warranty repairs include engines, transmissions, and air conditioning. Although many agencies use vendor-made repairs as a learning experience for their own technicians, most admit that those technicians are only marginally prepared to make repairs after warranty coverage ends. Other findings point to areas where agencies are not obtaining full warranty reimbursement. Although the SBPG recommends that agencies add fringe benefits and overhead to arrive at fully loaded hourly warranty labor rates, one-third of the responding agencies do not. Only about one-third of those surveyed assess a 15% handling charge for warranty parts, even though the SBPG recommends doing so. Survey respondents suggest that agencies might become more thoroughly familiar with FTA warranty requirements and APTA’s SBPG to more aggressively pursue warranty recovery. They also support implementation of a standardized, Internet-based warranty claim form to help streamline the process, a concept supported by the vast majority of survey respondents. The SBPG might also be revised to clarify how diagnostic time is to be charged for warranty repairs, to standardize vendor reporting of the warranty repairs made, and to revisit the 15% parts handling charge to be more representative for all agencies. It was also suggested that an electronic bulletin board might be established where agencies could collectively discuss warranty-related topics.