Optimizing Bus Warranty (2014)

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18 14% have three or four full-time warranty staff. Although all large agencies have full-time warranty staff, 72% do not supplement that staff with part-time assistance; 14% use one or two staff on a part-time basis; and 14% use five to six staff working warranty on a part-time basis. Very Large-Sized Agencies All very large agencies surveyed have full-time staff dedicated to warranty; 50% have one or two such workers, 25% have three or four full-time warranty staff, and 25% have five or six full-time warranty workers. Seventy-five percent of the large agencies do not supplement their warranty departments with part-time assistance; the remaining 25% use one or two workers on a part-time basis. Other Work Assignments For agencies with staff dedicated to warranty on a part-time basis, 34% also work in maintenance and repair, 32% share work in the parts department, 26% share work at clerical/ administrative functions, and 8% work in other positions. WARRANTY TRAINING Training for administrative aspects of warranty work takes place at 74% of participating agencies, with 26% not pro- viding training. Given the importance of recouping warranty funds, the number of untrained warranty personnel, which exists in every agency size category surveyed, is significant. Table 11 shows the warranty breakdown training by agency size. As noted in that table, medium-sized agencies partici- pating in the survey provide the highest percentage of war- ranty training, whereas 50% of the small agencies provide no training. Most surveyed agencies, 54%, conduct their own warranty training, with bus OEMs providing warranty training to the remainder. For DART, OEM training consists of a one-time session provided online per contract requirements. It is interesting to note that 90% of responding agencies do not have specific language requiring vendors to provide administrative warranty training. However, since 46% of agencies surveyed reported that warranty training is provided INTRODUCTION This chapter examines how agencies manage their warranty programs. Topics covered include warranty staffing levels and training, claim submittal procedures, labor and parts alloca- tion, warranty tracking and reimbursement, vendor topics, fleet defects, and warranty violations and disputes. The chapter con- cludes with a list of agency suggestions to optimize warranty. WARRANTY STAFFING Survey results revealed that agencies use staff in a vari- ety of ways to manage warranty depending on agency size; some engaged full-time with warranty administration, others on a part-time basis, splitting their work load with other maintenance-related assignments. Table 10 shows the break- down of personnel dedicated full-time and part-time to administering warranty by agency size. Not reflected in the personnel count of this table are agencies such as DART, described in the chapter five case example, which uses a team approach where every maintenance staff member is charged with helping to ensure that warranty repairs are identified and claims submitted. Small-Sized Agencies All small agencies represented in the survey have no full-time staff dedicated to warranty. Instead, 75% have one to two workers dedicated part-time to warranty, with the remaining 25% employing three to four workers on a part-time basis. Medium-Sized Agencies Of the medium-sized agencies surveyed, 67% have one or two workers dedicated full-time to warranty, with the remain- der having no full-time warranty staff. Of those medium-size agencies using staff on a part-time basis for warranty, 25% have one or two staff working on warranty part-time with the remainder using three to ten staff working warranty on a part-time basis. Large-Sized Agencies Of the large agencies surveyed, all have full-time staff dedi- cated to warranty; 86% have one or two such workers, while chapter four SURVEY RESPONSES: WARRANTY MANAGEMENT

19 by OEMs, agencies must either assume that bus OEMs and vendors will provide training if asked without putting the request in writing or that written warranty instructions pro- vided by the vendors are sufficient for agencies to do their own training. Of responding agencies that offer warranty training, 48% provide less than one hour per employee, a small amount of time given the warranty’s importance, whereas 52% provide over an hour. Responses for those spending under and over one hour of warranty training per employee are shown in Table 12 by agency size. Of responding agencies providing more than an hour of administrative warranty training per employee the amount of training varies widely, which illustrates just how inconsistent agencies are when it comes to preparing warranty personnel for their jobs. Two responding agencies provide one to two hours, another two provide three to six hours, four provide eight to 12 hours, and two provide 16 to 24 hours of warranty training per employee. One outlier is Orange County Trans- portation Authority, which provides 80 hours of warranty training per employee. Several agencies reported that much of the training is informal and achieved by pairing experienced warranty workers with trainees (i.e., mentoring). At Metro- politan Atlanta Rapid Transit Authority (MARTA), much of the warranty staff has substantial understanding, with more than 20 years’ experience. SUBMITTING CLAIMS A warranty claim is a document agencies use to declare that a product has failed and to request reimbursement. It includes pertinent information required by the vendor including agency name, defective product, diagnostic steps taken by the agency, and amount of reimbursement being requested broken down by parts and labor. Vendors also request the return of the failed part or digital photographs of those parts. Submit- ting or “filing” claims is the act of sending this documen- tation to the appropriate OEM or vendor. When asked if warranty claims are submitted manually or electronically, the 31 responding agencies provided 42 responses, indicat- ing that many use both manual and electronic methods for submitting warranty claims. Responses are nearly equal, Agency Size Agencies Where Warranty Personnel Are Trained Agencies Where Warranty Personnel Are Not Trained Small 50% 50% Medium 92% 8% Large 71% 29% Very Large 75% 25% All Agencies 74% 26% Source: Survey responses. TABLE 11 AGENCIES THAT PROVIDE WARRANTY TRAINING TABLE 12 TIME SPENT ON WARRANTY TRAINING TABLE 10 NUMBER OF AGENCY PERSONNEL INVOLVED WITH ADMINISTERING WARRANTY Number of Agency Personnel Dedicated Full-Time to Warranty Number of Agency Personnel Dedicated Part-Time to Warranty 0 1–2 3–4 5–6 0 1–2 3–4 5–6 10 Small 100% 75% 25% Medium 33% 67% 50% 25% 8% 8% 8% Large 86% 14% 72% 14% 14% Very Large 50% 25% 25% 75% 25% All Agencies 39% 52% 6% 3% 45% 35% 10% 6% 3% Source: Survey responses. Agency Size Less Than an Hour per Employee More than an Hour per Employee Agency Size Small 86% 13% Medium 42% 50% Large 29% 71% Very Large 0 75% Total 48% 52% Source: Survey responses.

20 with 52% reporting they submit claims electronically rang- ing from e-mail attachments to a computer-generated form from the Internet, while 48% reported using manual “pen and paper” methods. The method for submitting claims depends on each ven- dor’s requirements. As noted in the chapter five case example of Rockford MTD, the maintenance manager did not under- stand why all claims were not completed and submitted elec- tronically given today’s widespread Internet use. The PRTC example also supports electronic claim submittal; doing so would save time over manually entering much of the same information repeatedly for each claim. OEM versus Vendor Claim Submittals As noted in chapter two, the SBPG allows OEMs to assign or “pass through” their warranty obligations to others, but only on a case-by-case basis and only with agency approval. Given that engine, transmission, and air conditioning vendors typi- cally have dealers located in major metropolitan areas, many agencies make arrangements with the bus OEMs to submit warranty claims directly to the individual sub system vendors. Survey results show that most agencies, 74%, submit warranty claims to both the bus manufacturer and subsystem vendors, whereas 26% submit all claims through the bus manufacturer. In some cases the claim is submitted to the subsystem vendor and reimbursed by the bus OEM. Others reported that they submit claims to bus OEMs for standard warranty and then go directly to subsystem vendors for extended and superior warranties. When agency warranty claims are submitted to subsystem vendors, 64% of responding agencies sometimes inform the bus OEM, 20% always inform the bus OEM, and 6% never inform the bus manufacturer. For 10% of surveyed agencies this question was not applicable, because all claims are sub- mitted through the bus OEM. Reasons for Not Submitting Claims Sixty-eight percent of responding agencies reported that there are times when a warranty repair is made but a claim is not submitted, which is significant; only 29% of respondents reported they always submit a claim. In addition to violat- ing FTA warranty program requirements, not submitting a claim for warranty repairs deprives the agency of revenue, may create incomplete repair histories, and may diminish an agency’s ability to claim a fleet defect. In cases where warranty claims are not submitted, 67% of the surveyed agencies reported that the effort to submit the claim is not worth the reimbursement, 33% reported not submitting claims because of the cumbersome filing process, and 19% admitted they sometimes simply forget to submit claims. Other reasons for not submitting claims include the time pressures needed to assure bus availability to make pull-outs, technicians that did not save the failed part, failure to obtain required pre-approval, designating the repair as a maintenance activity rather than warranty, or the nature of the failure is unclear. One agency has a policy of not submit- ting warranty claims if the repair takes 15 minutes or less to complete. Of agencies that make warranty repairs without submitting claims, 38% believe that a more streamlined process from the vendor would help them send in more claims, 28% that more agency staff would help, 24% say a more streamlined process by their own agency would help, and 10% cite needing more time to submit claims. Claim Forms The majority of survey respondents (78%) use the warranty claim form provided by each vendor, 16% use their own standardized warranty claim form, and the others use a com- bination of the two. Several agencies expressed frustration with having to com- plete a separate warranty form for each vendor, stating that there should be a standard claim form for the transit indus- try. When asked if they favor the industry adopting a stan- dardized warranty claim form and process for submitting claims, 77% were in favor; of those, 95% believe claim standardization should be made part of the SBPG. Con- cerns about standardized forms center on the observation that there are too many variables for standardized forms to fit every agency. Innovative Warranty Submittal Procedures Responding agencies use and/or suggest a wide array of effi- cient and innovative methods to optimize submitting war- ranty claims, including: • Forwarding digital photographs of failed parts by e-mail instead of sending the actual part. • Use of bar coding on all parts that will be processed for warranty. • Use of on-line, Internet-based warranty claims process- ing with the vendor. • Use of reports that pull data directly from the agency data management system utilizing the vendor’s war- ranty form, saving time versus entering the informa- tion separately into their form or system. • Fleet software designed to flag possible warranty jobs and that force technicians to enter warranty repair notes. • Review claims with vendors to ensure timely feedback. (Note: the SBPG calls for agencies and vendors to jointly review all claims at least once per quarter throughout the entire warranty period to ensure that open claims are

21 WARRANTY PARTS The SBPG allows agencies to add a 15% handling charge for warranty parts not supplied by the vendor. Despite that provision, only 26% of responding agencies mark up war- ranty part costs to recoup handling. Of those agencies that do mark up warranty parts, 63% charge 15% as recommended by the SBPG, while 38% mark up parts by 20%. One agency charges 35% for parts handling. One immediate step agen- cies can take to maximize their warranty program appears to be to add a 15% handling charge for warranty parts not supplied by the vendor. SHOP SUPPLIES, DIAGNOSTIC TIME, AND TOWING CHARGES A majority of responding agencies, 90%, do not charge ven- dors for shop supplies, while most (62%) also do not charge separately for troubleshooting and diagnostic time. Although the SBPG allows agencies to charge for labor, there was no mention found in the APTA document regarding diagnostic time. As noted in the chapter five case example for Rockford MTD, the agency charges diagnostic labor time only when it is required by an experienced technician to make a warranty repair. Otherwise, the time is considered a training exercise for less experienced workers. All but one of the responding agencies charges vendors when towing is required for warranty repairs. The SBPG allows applicable towing cost as a legitimate warranty expense. Of those charging for towing, 65% pass the actual charge on to the vendor and 15% charge a flat-rate fee. In some cases, the flat fee is established by the vendor, with one agency charging a flat fee of $175 per tow. The remainder charge a fee based on per-mile cost established by the agency, one agency marks up the actual towing charge, and two agencies have their own tow truck. One of the agencies with a tow truck charges a war- ranty tow fee based on a formula of two technicians at their standard warranty labor rate plus an hourly charge for the tow truck operation. The SBPG does not offer guidance on how towing charges are to be applied. One agency comments that vendors have being tracked and properly reimbursed. See chapter two for details.) • Use of e-mail to follow-up on claims submitted to vendors. WARRANTY LABOR Labor Allocation Most agencies surveyed (58%) use a combination of actual labor time needed to make repairs and flat-rate times pro- vided by manufacturers. Flat-rate times are the established number of labor hours OEMs will typically pay for com- mon warranty repairs regardless of how much time is actu- ally spent on the repair. Of the remaining agencies, 29% reported using only the actual labor time to make the war- ranty repair, whereas 13% strictly use the flat-rate times pro- vided by the manufacturer. Of those responding agencies that use OEM flat-rate times, the majority (67%) reported using those times in more than 50% of all claims submitted. Several agencies that reported using actual time noted that the time is sometimes questioned by manufacturers and in some cases agencies reported lowering labor time to get the claim approved. Labor Rates As noted in chapter two, the SBPG states that warranty labor should be based on a qualified technician at a straight time wage hourly rate, which includes fringe benefits and over- head. Of the agencies surveyed, however, 31% do not include overhead in their hourly warranty labor rates charged to the OEM. Again, monies legitimately due to agencies are left unclaimed. Both base and fully loaded warranty labor rates trend higher with agency size. The range for base labor rates for all responding agencies is $24 to $61 per hour; the fully loaded labor rates range from $43 to $113 per hour. Table 13 breaks down the warranty labor rates based on agency size and includes median rates. As shown in that table, although hourly warranty labor rates tend to trend high with agency size there are exceptions. TABLE 13 WARRANTY LABOR RATES Agency Size Range for Agencies Using Base Hourly Labor Rate* Median Rate* Range for Agencies Using Fully Loaded Hourly Labor Rate* Median Rate* Small $38 $38 $48–$72 $63 Medium $24–$45 $38 $43–$95 $74 Large $60–$61 $60 $54–$104 $61 Very Large $60 $60 $93–$113 $99 Source: Survey responses. *Rounded to the nearest dollar.

22 pushed for towing not to be covered, feeling that it is hard to control costs. WARRANTY REIMBURSEMENT Agencies participating in the survey are nearly equally divided on how warranty reimbursements are made: 26% receive reim- bursement by check, 26% receive parts credits, and 38% receive warranty reimbursements using both payment types. Parts credits, also known as parts memos, are credits given to the agency to purchase parts from that vendor when needed. One agency admits, however, that keeping track of parts credits is not worth the time. Another agency notes that parts cred- its end up favoring the vendor in that it restricts the agency to parts—and pricing—offered by that one vendor. Others reported receiving warranty reimbursement in the form of actual replacement parts. Forty-eight percent of responding agencies distribute war- ranty reimbursements from vendors to a general agency fund, 39% distribute reimbursements to the maintenance depart- ment, and the others distribute warranty funds to a warranty department account or accounts receivable. A majority of responding agencies, 74%, estimate that they recover 80% to 100% of warranty repair monies requested from vendors, 13% recover 50% to 80%, and 13% recover less than 50%. Innovative and efficient methods to optimize reimburse- ment of warranty claims used by the responding agencies include: • Clear, strong contractual language stating what the war- ranty is, how the warranty is to be processed, and all terms and conditions. Language should reference always get- ting something back of value, either in a replacement part or a refund in the form of a check, and never accepting any credit memos. • Excellent record keeping and follow up. • Real-time warranty online tracking of submitted claims. • Employees dedicated to warranty recovery. • Where agencies have on-going payments for new buses, accept credit against payments due for new buses for warranty claims not paid in a timely manner. WARRANTY TRACKING Warranty tracking is arguably the most critical function to maximize warranty processing and reimbursements. It applies not only to keeping accurate records to determine which vehicles and individual parts have which coverage con- ditions and for how long, but is also critical for keeping tabs on reimbursement status, parts credits received in lieu of warranty payments, and to satisfy FTA triennial review requirements. Tracking Methods Tracking warranty is not easy given the number of bus parts, the varying terms and warranty periods offered for each part and component, determining whether the parts are to a new bus purchase or installed afterwards as a replacement, and that buses remain in service for at least 12 years. Nearly half of the agencies surveyed use a combination of manual (pen and paper) and electronic data accounting methods to keep track of warranty-related activities; the remaining agencies surveyed are almost evenly split on exclusively using man- ual or electronic methods. In reality, however, any electronic data method for tracking warranty involves some level of manual investigation to determine if a part is actually under warranty or to follow up on a delinquent reimbursement. Manual tracking typically consists of investigating whether each part being charged on a work order is being used to replace a defective part covered under warranty. When buses are new; for example, within the first year when the compre- hensive complete bus warranty is still in effect, determina- tions are easier to make. As the bus ages, however, manually keeping track of warranty coverage becomes progressively more difficult to determine if the failed part is: • Covered by superior warranty, • Covered by an extended warranty, • Covered by the bus OEM or an aftermarket supplier, • Being used to replace a part that previously failed and therefore may have a separate warranty, • Is the result of a manufacturing defect or was an agency- induced fault, or • Covered by which specific terms and conditions. One agency with manual warranty tracking conducts a daily review of work orders by its warranty administrator to determine coverage; others do it weekly. It is difficult to determine just how many valid warranty repairs go undetected and are not reimbursed using manual tracking methods. The keys to any warranty tracking method, especially those done manually, are reported as dedication, persistence, and a team approach. As bus fleets increase in size, manual warranty tracking becomes increasingly difficult. Although only about 36% of the small and mid-sized agencies surveyed use electronic methods to track warranty, that number jumps to more than 80% for the large and very large agencies surveyed. Mainte- nance information systems (MIS) purchased from companies that specialize in developing maintenance data programs or those developed in-house by agency personnel have varying levels of capability to capture warranty information for indi- vidual buses and components. The process used by DART as presented in chapter five is an efficient example and is included as a standard operating procedure (SOP) that describes the warranty coverage periods and warranty terms for each fleet of buses. As with any MIS-based tracking system, however,

23 Closed Claims Report, included as Appendix C, shows the disposition of each claim classified by vendor and garage location. It includes labor and parts paid, parts handling charge, total amount claimed, total amount reimbursed, and claim closing dates. A Cancelled Warranty Report, included as Appendix D, documents those claims rejected by vendors and the reasons why. DART’s MIS system does not issue periodic warranty coverage reports. However, the agency has established cus- tom reporting capability for tracking individual bus and com- ponent warranty start and end dates through another software program. The agency reminds others that after the bus manu- facturers’ warranty has ended, there is still a need to track the component and system manufacturer’s warranty, which may exceed the original contractual warranty (also known as superior warranty). Two agencies noted that their MIS sys- tems are new, indicating a move to such reporting tools. On the other side of the reporting spectrum is an agency that declares its MIS is “supposed” to issue periodic reports, implying that the system is not very efficient. Other agencies with smaller fleets claim that it is easy for them to “know” which buses and parts are covered and therefore do not need reports. Indeed, nearly a one-third of those surveyed admit to not having periodic reporting of active warranty cover- age; two of these noted that their systems should provide this valuable data, indicating a lack of personnel with the infor- mation technology expertise to implement and train staff. Agencies without sufficient warrant documentation, regard- less of the reason, may not satisfy the FTA triennial review requirements summarized in chapter two. Identifying Warranty Repairs When agencies were asked to describe how they determine if repairs are covered under warranty once the work order is closed out, responses varied greatly. At a majority of agencies surveyed (58%), maintenance department personnel review records afterwards to identify if the repair is covered under warranty; 26% of agencies claim to have automated MIS- based systems that flag components under warranty; and 13% review warranty status of repairs before beginning the work. One agency relies on vendor confirmation of warranty status. Of particular interest is that more than half of the agencies surveyed (52%) admit that they do not have a quick and effi- cient way to identify if repairs are covered under warranty. Given the pressures of making pull-out each day, the likeli- hood that legitimate warranty repairs may go unclaimed is considerable. As noted earlier, 68% of responding agencies admit to instances where they make warranty repairs, but corresponding claims seeking reimbursement are not made. This does not include instances where the agency may not be aware that warranty coverage applies because their tracking methods are insufficient. the process is constantly evolving as agencies seek more effi- cient ways to track warranty given the many variables. Kitsap Transit reports that it recently moved to a new fleet management software program, and before year’s end is planning to have the capability of identifying every part under warranty on every bus. When operational, the system will flag any part used in a repair that generally comes with a warranty (e.g., starters, alternators, compressors, or door motors) and will not issue a replacement part to a particular bus until a determination can be made as to whether that part is covered by warranty or not. The process is similar to that in use by PRTC, as also noted in the chapter five case example. One agency expressed frustration with its computer-based system stating that the parts inventory is controlled by one software program while fleet tracking is controlled by another, and the two cannot communicate. Another admits to having an automated warranty tracking system as part of its MIS, but per- sonnel with access do not utilize it and those who would have no access. Instead, they manually check each part charged out to determine warranty coverage. Several agencies mentioned using standard spreadsheet programs such as those offered by Excel to track warranty. Tracking Methods for Replacement Parts Most of the responding agencies, 80%, use the same method to track replacement parts and components bought outside new bus procurements; 20% use other methods. Agencies not using the same tracking method track such components using various means that include manually check- ing each part charged out, the use of spreadsheets, using the parts department for tracking, a weekly review of work orders by warranty administrator, use supervisory personnel to iden- tify warranty parts, track the last date the part was installed, and apply date codes. One agency admitted to not tracking these components at all. Warranty Reports When asked if their tracking system issues periodic reports showing buses and components covered under warranty such as start and end dates and mileages, a majority of responding agencies, 65%, reported having such tracking capabilities. When an individual wants to know what is covered under warranty for a bus at Metro Transit, Minneapolis/St. Paul, they simply type the bus number in the MIS and a chart is displayed that depicts the warranty coverage for that particu- lar bus. The information is provided in real time based on the actual bus mileage and age as maintained by the MIS. Metro’s comprehensive warranty tracking and reporting system was developed in-house utilizing the agency’s own data management system and Microsoft Access. A Warranty

24 on warranty tracking to recoup monies legitimately due to them by vendors. Of responding agencies with an excellent tracking pro- gram, 42% have agency-developed systems while 58% have tracking systems supplied to them by companies that special- ize in MIS. Tracking Outstanding Claims Just over half of responding agencies report that their warranty tracking system monitors outstanding claims, whereas 47% say they need to check manually. Metro Transit, Minneapolis/ St. Paul, has what it calls a “60 day” report that is sent to ven- dors for claims that have not been settled and are 60 days or older. This report allows the agency to ensure the vendor has received the claim and that claims are paid in a timely man- ner. Other agencies note that their systems will provide this information in the future after enhancements are made. Warranty Repair Histories Nearly all responding agencies keep a history of the warranty repairs they make themselves. Of those, 87% use that infor- mation to determine fleet defects. Metro Transit, Minneapolis/ St. Paul, has developed a system that automatically monitors fleet defects based on parts usage for each bus group. When vendors make warranty repairs, nearly all respond- ing agencies reported receiving a report of the repair; of these, 56% require a complete report from vendors including the fault and labor and parts used. The others receive a vendor report with limited repair data. Of agencies that keep a his- tory of warranty repairs by vendors, 89% use such vendor warranty reports for determining fleet defects. For Connect Transit, Bloomington, Illinois, most vendor reports are sufficiently detailed; however, there are some rare instances where the information is not as detailed as it could be. The agency believes there should be a standard process for vendors to provide a list of needed information for every war- ranty repair they make. King County Metro, Seattle, Washing- ton, notes that vendor repair data are very difficult to capture in great detail. As a result, the agency relies on its own mainte- nance staff at the various garage locations to keep headquarters informed regarding vendor repairs, and believes the process needs improvement to enable better tracking for fleet defects. SPECIFIC VENDOR TOPICS Training When asked if vendors require agency personnel to undergo prerequisite training before warranty claims can be submit- ted, 35% of agencies surveyed reported that such training is required for technicians. Agencies note an engine OEM in The lack of tracking sophistication is exemplified by one agency that simply “tells the supervisors and technicians to send us anything that could be possible warranty and we sort out what is and isn’t.” Another admits “we should [learn to] check warranty status on a component before starting the repair,” implying the procedure is currently not used. Others are more proactive and have more precise ways to identify warranty coverage. For all new buses in its fleet, Santa Clara Valley Transportation Authority assumes all repair work is warranty-related unless discovered otherwise or an indication is given that warranty has ended. At the city of Edmonton Fleet Services, its MIS generates an e-mail copy of all closed jobs that contain warranty flags. The jobs are reviewed and claims issued for valid warranty repairs. At New York MTA the MIS is coded at the beginning of each contract to list all warranty terms and conditions, and is set up to automatically identify all warranty repairs. Other agencies such as Broward County, Florida; Kitsap Transit, Washington; and Connect Transit, Illinois, are opti- mistic that a new computer-based MIS will give them greater capability to track future warranty. Notice of Expiring Warranty Periods A majority of agencies surveyed, 65%, reported that their tracking systems are lacking in that they do not have a way of alerting them when the warranty period of a bus or compo- nent is about to expire. One small agency reports they “know” because of the small size of its fleet; others are counting on planned MIS systems to provide this kind of alert once the system is fully up and running. Metro Transit, Minneapolis/ St. Paul, an agency with more capabilities as described ear- lier, uses a color-coded system in its MIS to denote cover- age periods: Green—still in warranty; Yellow—coming out of warranty within the next 90 days; Red—out of warranty. An example of Metro’s color-coded report showing warranty coverage coming to an end is provided as Appendix E. Although 35% of agencies surveyed do have tracking systems that alert them when warranties are about to expire, the majority lack that capability, thereby limiting their abil- ity to identify items in need of repair before warranty cov- erage ends. Self-Rating of Warranty Tracking Capability When asked to rate their warranty tracking abilities, it is inter- esting to note that only 19% of responding agencies admit to having an excellent process for tracking warranty cover- age periods and identifying warranty repairs. Nearly 50% acknowledge that they have a good process that could use some improvement, whereas 32% report they need to improve their warranty tracking methods. The responses provide a clear indication that agencies need to focus more attention

25 way to streamline the warranty process, saving the time and costs associated with packing and shipping failed parts. Once the photographs are received vendors can then make a deter- mination to have the parts scraped or returned if needed for further analysis. Either way, the use of digital photographs can make the warranty claim process more efficient for both agencies and vendors. King County, Seattle, reports that one of its hybrid ven- dors requires pre-approvals for hybrid system components based on reports generated from its electronic diagnostic software. Coast Mountain Bus also noted similar vendor requirements for troubleshooting trees and electronic control module images before warranty claims are accepted. Rejected Claims Most responding agencies, 68%, reported that only 10% or less of their warranty claim are completely rejected by ven- dors; one agency reported no claim rejections, and another a rejection rate of less than 5%. Twenty-nine percent of respond- ing agencies reported that between 10% and 30% of their warranty claims are completely rejected by vendors. One agency admits to having 30% to 50% of its warranty claims completely rejected by vendors, an indication that its war- ranty process needs to be revisited. About the same number of responding agencies, 65%, reported that 10% or less of their warranty claims are par- tially rejected by vendors, with 29% reporting between 10% and 30% partially rejected by vendors. Excessive labor time is the primary reason for having warranty claims rejected, as reported by 52% of responding agencies. The second most frequently mentioned reason, as reported by 45% of responding agencies, is that the vendor reviewed the failed part and found no defect. Thirty-five per- cent of responding agencies reported claims being rejected because a part or system was out of warranty or submitted beyond the claim limit. Other reasons given by vendors for rejecting warranty claims include: • Item not covered • Incomplete documentation • Part not returned • Improper installation or repair • Accident damage • Unauthorized repair • Protocol not followed • Excessive parts mark-up. Replacement Parts Almost half of surveyed agencies say the requirement to pur- chase replacement parts from the vendor providing the war- ranty depends on the part, 29% are not required to purchase particular that first requires technicians to undergo and pass on-line training and become certified before performing any warranty work to make certain faults are properly diagnosed and repaired. King County Metro is one agency that certifies their technicians to make engine warranty repairs, also ensur- ing they are prepared to address engine faults after warranty expires. Other surveyed agencies contact the engine OEM to make warranty repairs. In addition to engines, agencies reported needing prerequisite technical training for transmis- sions, air conditioning, wheelchair lifts, and fire suppression systems. Regarding administrative warranty training, only 13% of the agencies surveyed report it as a vendor prerequisite. Regardless of a vendor’s imposing it as a prerequisite, 74% of warranty administrative personnel at agencies surveyed do receive training as noted earlier in chapter three. Warranty Return Parts Virtually every vendor has certain parts replaced under war- ranty that it wants sent back or held for them to inspect and verify. The majority of responding agencies, 71%, reported that they must return or hold 50% or more of their failed warranty parts for vendors to inspect before reimbursement can be made. New York MTA has negotiated an arrangement where it has the option to dispose of parts without invali- dating the warranty claim. Rockford MTD plays it safe and holds all parts used for warranty repairs until the claim is closed; Edmonton reports that it must hold all warranty parts. Other Vendor Requirements Responding agencies described a variety of vendor-imposed warranty requirements: • Use of the vendor’s diagnostic procedures as proof of proper troubleshooting, • Detailed reporting of the diagnostic methods used, • Data downloads from the component’s electronic con- trol modules, • Prior authorization before agencies are allowed to make warranty repairs, • A deadline for the return of defective parts, • A deadline for claim submission, • Disallowing reimbursement of diagnostic time, and • Proof of proper PM. Coast Mountain Bus Company, Vancouver, BC, Canada, sends digital photographs of parts requested by vendors, mak- ing it necessary to only send back or hold about 10% of failed warranty parts. Bi-State Development Agency (St. Louis County, Missouri and the St. Clair County Illinois Transit District) also sends digital photographs when requested. The use of digital photographs in lieu of shipping failed parts when submitting warranty claims represents an innovative

26 about the failure and nature of the repair. Present the facts and history. • Reviewing disputes with a field service representative. • Documenting the troubleshooting steps used to deter- mine the part had failed and follow up with reports show- ing there were no further complications after replacing the suspect part. • Inviting vendor(s) to review the failure. • Using third-party testing to verify the reason for failure. • Where warranty has expired in the previous several months, providing documentation showing the same issue with similar buses in the fleet. • Showing the history of common fleet defects (even if it does not support the fleet defect requirement described under Fleet Defects in the following section). • Presenting contract language supporting the dispute, and reviewing proper interpretation of the contract with the vendor. • Reminding the vendor if a reasonable claim is rejected that the agency has the choice to not buy their products and to advise other agencies to not buy their products. • Negotiating claim amount. • Litigation. FLEET DEFECTS APTA’s SBPG Definition Surveyed agencies were informed of the SBPG that defines fleet defects as: Cumulative failures of twenty-five (25) of the same compo- nents in the same or similar application in a minimum fleet size of twelve (12) or more buses where such items are covered by warranty. . . . When a Fleet Defect is declared, the remaining warranty on that item/component stops. The warranty period does not restart until the Fleet Defect is corrected. . . . After cor- recting the Defect, the Agency and the Contractor shall mutu- ally agree to and the Contractor shall promptly undertake and complete a work program reasonably designed to prevent the occurrence of the same Defect in all other buses and spare parts purchased under this Contract. . . . The Contractor shall update, as necessary, technical support information (parts, service, and operator’s manuals) due to changes resulting from warranty repairs. Based on the information provided, 68% of responding agencies claim to be aware of all aspects of the SBPG defini- tion, whereas 32% were not. Specific aspects of the defini- tion that agencies were not aware of include: the warranty period does not restart until the fleet defect is corrected, the minimum fleet size is 12, and the failure rate is 25%. Fleet Defects Declared The majority of responding agencies, 52%, reported no fleet defects in the previous five years; 30% reported one to four fleet defects, 13% reported 10 to 30, and just one agency declared more than 50 fleet defects in the previous 5 years. Reasons for replacement parts from the vendor, and 23% are required to purchase replacement parts from the vendor providing the warranty. As noted in chapter two, the SBPG recommends that for warranty repairs made by the vendor, the vendor shall pro- vide all spare parts and tools required to complete repairs at its own expense. If the agency performs warranty repairs, the SBPG recommends that the agency use parts supplied by the vendor; however, the agency can use contractor-specified parts available from its own stock if deemed in its best inter- ests. Under the SBPG, agencies can also require the vendor to supply parts for warranty-covered repairs being performed by the agency. When asked if they purchase OEM replacement parts or those approved by the OEM when making warranty repairs, 50% of responding agencies do so, 39% report that it depends on the part, and 11% do not purchase OEM or OEM approved parts. Most agencies, 90%, say they have never had a claim rejected because of using aftermarket parts, typically referred to as those parts not manufactured or recommended by the OEM. Aftermarket parts that caused warranty claim rejection include transmission filters and oxygen sensors. Add-On Equipment Only one agency, King County, Seattle, reported having had claims rejected because of add-on equipment such as cam- eras, AVL systems, fareboxes, and next-stop voice annuncia- tion systems. For example, the agency had a farebox installed with smart card capability; subsequently it contracted with a vendor to install an integrated AVL, next-stop announce- ment, and destination signage system. An integration issue with the farebox soon developed and neither manufacturer is willing to assume warranty responsibility, each side blaming the other for the interface problem. King County believes that the agency is being held hostage by the vendors, having to assume the time and costs associated with resolving the problems on its own. Overturning Denied Claims Of responding agencies that had warranty claims denied, a sig- nificant 79% have been successful in overturning a vendor’s original refusal; the issue being that agencies need to question rejected claims if they have a valid case. Reasons given for convincing the vendor to honor the original warranty include: • Having solid records, a good maintenance program, and warranty agreements in place. • Providing all required documentation and failed parts. Include failure reports regarding defective parts being returned, and, if needed, provide additional information

27 tiating warranty issues with maintenance records and testing, having clear warranty language and using that language to resolve disputes, using third-party testing, and providing as much repair detail as possible including digital photographs and even video clips to document failures. As one agency noted, negotiating is all about both parties “bending a little.” Others suggested withholding payment of retained funds for bus purchases and to keep appealing the vendor’s decision. OUT OF BUSINESS VENDORS Of agencies surveyed, 32% reported having had an instance where a vendor went out of business during the warranty period. Of these, 67% reported that the vendor was a part or component manufacturer, whereas 36% reported that the vendor was a vehicle manufacturer. When a vendor has gone out of business during the warranty period, more than 90% of those agencies report that the vendor covered the remaining warranty period. One agency reported the vendor provided parts but no compensation for labor, another that the vendor had the failed parts manufactured at the agency’s expense, another agency had to find an alternate supplier, one agency became responsible for all costs incurred, and two reported having paratransit hybrid buses out of service because parts and service support was lacking. SUGGESTIONS FROM SURVEY PARTICIPANTS Surveyed agencies were asked to add any suggestions or advice regarding warranty they would pass along to their peers. Their suggestions, organized by agency size, can serve as guidance to those looking for ways to optimize their warranty programs. Small-Sized Agencies • Advise your technicians of warranty coverage periods when new buses arrive and keep reminding them through- out the warranty period. (Rockford MTD) • Warranty negotiations can only be accomplished in large agencies with a lot of buying power. Small purchasers are at the mercy of the manufacturer. (Unidentified) • Our agency doesn’t realize a fraction of the warranty recovery that we should, and it’s only a matter of a lack of staff to initiate, track, and follow up on warranty claims. (Unidentified) • Reward effective warranty recovery, send warranty recovery money back to the shop so staff can see the “payoff” for time and effort spent on warranty claims, and don’t let warranty claims become a nuisance. (What- com Transportation Authority) Medium-Sized Agencies • Create a comprehensive warranty policy. (ABQ Ride, Albuquerque Transit Department) declaring fleet defects are too diverse to categorize and include everything from engines, brakes, transmissions, and cracked frames to axle alignment, windshields, and electrical problems. Most responding agencies, 72%, reported never having a fleet defect they could not substantiate, while the remainder had fleet defects but did not claim them because they could not be substantiated. Of those who did not submit fleet defect claims, 55% did not file because failures fell short of the 25% fleet requirement and 36% because they lacked the required documentation. Of responding agencies that declared a fleet defect, 72% noted that vendors honored their claims, although some reported that vendor recognition took a significant amount of time; 28% report declaring fleet defects but that the bus manufacturer failed to recognize them as such. Reasons given for vendors rejecting fleet defects include: • A testing procedure caused premature failure. • Not all of the failed parts were returned. • Vendor disagreed with the agency’s reasoning. • Vendor believed that the part met published life expectancy. • Failures occurred outside the warranty period. • Percent required to meet a fleet defect was not sufficient. Technical Support Documentation A significant number of agencies, 30%, reported that they have had fleet defects where the bus manufacturer failed to update technical support documentation (i.e., parts, service, and operator’s manuals) resulting from warranty repairs. Com- ments on this oversight included vendors that tended to leave such updates to component manufacturers, which rarely takes place, and manufacturers that do not take documentation updates seriously. WARRANTY VIOLATIONS AND DISPUTES Survey results indicated that warranty disputes are not wide- spread. Nearly all participating agencies, 94%, reported that they have warranty disputes with 10% or less of the claims they submit. Two agencies reported having no disputes at all. Just two agencies reported having vendor disputes with 10% to 30% of all warranty claims. Surveyed agencies cited many strategies they have found effective in resolving warranty violations and disputes. Among them is a suggestion by many to establish strong relationships and communication channels with the vendors, which will allow agencies to have effective dialog, which often results in their receiving warranty assistance, sometimes even after the warranty period has expired. In addition to establishing good communications with vendors, agencies suggested substan-

28 • Don’t depend on someone else to do your warranty work. (Metropolitan Atlanta Rapid Transit Authority) • Start a network for all transit agencies to join and col- laborate regarding bus warranty. (City of Edmonton Fleet Services) • Remember there are two types of warranty, contrac- tual and commercial, and both of these can be appli- cable to the same fleet, same parts and systems. Know the time frames and limitations to each one; otherwise, you will be giving money away that rightfully would be going to your transit agency to correct a condi- tion that the supplier should have already addressed. Go by the facts and just the facts, know the terms of your contract. Communicate clearly and consistently. (DART, Dallas) Very Large-Sized Agencies • Conduct an overall inspection just before the warranty period expires. (Coast Mountain Bus Company, Van- couver, BC) • Create relationships with the manufacturer and compo- nent suppliers. If unsure of a potential claim call and discuss the issue before making the claim. Communi- cate warranty requirements with maintenance employ- ees. (Denver Regional Transportation District) • Make sure your contract specification is strong, reason- able, and enforceable. Have enough warranty staff to ensure claim processing within the time requirements of the vendors. Pay very close attention to failure trends and use the fleet defect language of your contract. (King County Metro, Seattle) • Be sure your contract language is strong, educate ven- dors on your warranty and fleet defect procedures, and provide a dispute resolution that does not necessitate legal action. (New York City Transit) • Standardized warranty forms and practices would pro- vide a great benefit. Electronic warranty submittal and record keeping would also be beneficial. However, when dealing with the many different agencies and systems, achieving a standardized system could be problematic. (Santa Clara Valley Transportation Authority—VTA) • Get the extended warranty coverage, clearly identify all warranty periods for buses and components, and after receiving new units schedule a meeting with the man- ufacturer and your maintenance staff to review those warranties. (Montgomery County) • Make sure all warranty issues are addressed in your procurement where possible, include vendor training regarding their warranty claim submittal process, and insist that the OEM take the lead on warranty retrofits if it involves a totally new system upgrade from what was delivered on the vehicle. (Kitsap Transit) • Hire a full-time warranty administrator, be extremely vigilant in the claims process, strongly emphasize to technicians that they need to be proactive in warranty administration. (San Bernardino—Omnitrans) Large-Sized Agencies • Be sure to include handling fees in all warranty contracts. We typically charge 15%. Also, develop a system that allows you to effectively track all warranties; be diligent in archiving all correspondence with vendors, you will benefit from this; and hold the vendors to what is agreed upon contractually. (Metro Transit—Minneapolis/ St. Paul) • The return on investment for warranty recovery is huge; it’s worth having a dedicated team recovering warranty. Also, keep good records, involve your maintenance team in warranty recovery, and offer recovery bonus to your maintenance/inventory employees. (Orange County)