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Optimizing Bus Warranty (2014)

Chapter: Chapter Five - Case Examples

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Suggested Citation:"Chapter Five - Case Examples ." National Academies of Sciences, Engineering, and Medicine. 2014. Optimizing Bus Warranty. Washington, DC: The National Academies Press. doi: 10.17226/22410.
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Suggested Citation:"Chapter Five - Case Examples ." National Academies of Sciences, Engineering, and Medicine. 2014. Optimizing Bus Warranty. Washington, DC: The National Academies Press. doi: 10.17226/22410.
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Suggested Citation:"Chapter Five - Case Examples ." National Academies of Sciences, Engineering, and Medicine. 2014. Optimizing Bus Warranty. Washington, DC: The National Academies Press. doi: 10.17226/22410.
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Suggested Citation:"Chapter Five - Case Examples ." National Academies of Sciences, Engineering, and Medicine. 2014. Optimizing Bus Warranty. Washington, DC: The National Academies Press. doi: 10.17226/22410.
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Suggested Citation:"Chapter Five - Case Examples ." National Academies of Sciences, Engineering, and Medicine. 2014. Optimizing Bus Warranty. Washington, DC: The National Academies Press. doi: 10.17226/22410.
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Suggested Citation:"Chapter Five - Case Examples ." National Academies of Sciences, Engineering, and Medicine. 2014. Optimizing Bus Warranty. Washington, DC: The National Academies Press. doi: 10.17226/22410.
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29 Warranty Tracking Because the agency typically has only one set of buses in war- ranty at a given time, tracking warranty coverage becomes a relatively easy task. Even though the agency’s MIS allows it to track warranty coverage periods electronically, the process is primarily done manually because of the low vehicle count. Technicians, the foreman, a maintenance assistant, and the maintenance manager work together to collectively identify warranty repairs. The work order serves as the basis for gener- ating warranty claims, which are done manually through pen and paper forms. The same method is used to track warranty of replacement parts and components bought outside new bus procurements. Because of the small fleet size, Rockford sees no need to issue periodic reports showing warranty start and end dates. All maintenance workers including the technicians are informed of warranty coverage periods. Even if a warranty- eligible repair gets by the technician, foreman, and assistant, the maintenance manager will know what is covered and for how long. The maintenance manager reviews warranty claims monthly to determine those that are still outstand- ing. Although Rockford believes it has a good process for tracking warranty coverage periods and identifying warranty repairs it recognizes the need for improvements. One area involves warranty repairs made during the Preventive Main- tenance Inspection (PMI) where technicians fail to generate a separate work order. In these cases, the repair gets “buried” within the PMI work order and the warranty repair is some- times missed. Another occasional oversight involves longer- period rust and structural warranties where the agency sometimes forgets that these warranties still apply. Warranty Documentation While Rockford may track its warranty coverage periods manually, it still uses a detailed warranty spreadsheet program to document warranty claims separately for its bus fleets. The spreadsheets include a listing of each warranty repair broken down by labor and parts. The data sheets itemize each warranty claim, showing the claim amount and actual reimbursements received. Supporting this documentation are periodic warranty reports issued by the bus OEMs detailing individual claims that show the amount submitted and the amount actually paid out. ROCKFORD MASS TRANSIT DISTRICT (MTD) Agency Overview The Rockford MTD, the smallest agency of the three case examples, provides fixed-route and paratransit service to the cities of Rockford, Loves Park, Machesney Park, and Belvidere, Illinois, with a combined fleet of 75 buses. Vital service statistics are provided in Table 14. Warranty Personnel and Training Four workers are assigned to handle warranty, with each indi- vidual dedicated to warranty on a part-time basis, including the maintenance manager, the maintenance shop foreman, and two clerk assistants. Each full-time employee has other job duties within the maintenance department. With only three bus types, warranty training requirements are minimal. The agency does, however, specify that bus manufacturers provide warranty training, which amounts to refresher training of about one hour per person for each new bus purchase. Warranty Periods Rockford follows the SBPG as the basis for assigning new bus warranty coverage periods. The engine is the only com- ponent where OEMs are required to provide an extended warranty (5 years/300,000 miles) because it is the only com- ponent Rockford can justify from a cost standpoint. To justify extended warranty, the agency tracks parts and labor costs for each engine warranty repair and documents costs within the extended coverage period (i.e., costs incurred between the standard 2-year/100,000 period and the extended coverage period of 5 years/300,000 miles). It then compares those costs with the cost of purchasing the extended engine warranties. With this documentation Rockford’s maintenance department is able to prove to its own accounting department and FTA that the combined costs paid by vendors during the extended warranty period exceed the combined extended warranty cost for a given fleet of buses. Since the same justification could not be made for transmissions, extended warranties are not purchased for that component. chapter five CASE EXAMPLES

30 In addition to supporting the agency’s own warranty record keeping system, this documentation, along with the justification mentioned earlier to support extended engine warranty, is used to satisfy FTA triennial review requirements. Claim Forms Rockford uses warranty claim forms provided by each bus OEM, which are very similar. A typical example of a bus OEM warranty claim form is provided as Appendix F. Most claim forms include instructions for ordering warranty parts, submitting warranty claims, and returning warranty parts. One of the forms used by Rockford uses reference numbers for each area of the form that corresponds to numbered sections of the instructions. These numbered references provide thorough instructions for completing each required section, making it difficult to incorrectly complete the form. One copy of the five-part claim form is retained by the agency, three are returned to the OEM, and a fifth copy is kept with the part if returned or examined on site by the OEM. All three bus OEMs require manual submission of claims (pen and paper). Given how extensive the Internet has become, Rockford’s maintenance manager is not sure why a more streamlined approach using electronic claim submittal has not yet been adopted. The agency appears to believe that OEMs want to make it as difficult as possible so that they receive fewer claims. One of the reasons the paper method takes additional time to complete is that OEMs require much of the same information for each claim (i.e., agency name, contact information, etc.), whereas electronic versions would have that information pre-entered. Warranty repairs having to do with engines, transmissions, and air conditioning are typically handled directly with the appropriate vendor. The OEM is kept informed of all warranty work performed by subsystem vendors and the dialog that takes place between them and Rockford staff. All other claims regarding the vehicle are directed to the bus OEM. Rockford believes that OEMs should adopt a more streamlined process for submitting claims. Although claim forms are very similar among its three bus OEMs, Rockford believes the industry would benefit from a standardized warranty process, one that establishes and recommends an electronic, Internet-based claims processing format. Instead of using flat-rate times Rockford specifies that actual labor time be paid for warranty repairs. Before sub- mitting a claim, however, the maintenance manager will review the flat rate manual to see if the time being submitted is close to the OEM allotment. Overhead is used to calculate Rockford’s $37.51 hourly labor rate, but the agency does not mark-up parts costs, nor does it charge for towing, because bus OEMs do not allow Rockford those charges. The agency is now considering adding a handling charge for warranty parts. Rockford has a mixed approach for charging diagnostic time to warranty claims. If diagnosing the problem was difficult for skilled technicians, diagnostic time is charged, otherwise the agency uses the diagnostic time as a training exercise for its less-skilled technicians and it is not charged. In cases where vendors question labor time or other aspects of the warranty claim, Rockford works with them to negotiate reimbursement acceptable to both parties. Rarely is a claim rejected outright. Warranty reimbursements are made by check; spare parts credits proved to be too much of an accounting inconvenience. Warranty monies reimbursed are classified between labor and parts and placed in the appropriate agency account. Warranty Repairs Warranty repairs are made by the agency or OEM depending on the nature of the repair. Generally, Rockford’s own tech- nicians perform day-to-day warranty repairs. However, as a small agency with limited staff, vendors are called in if a large number of units need attention, if an update or retrofit needs to be made on many or all units, or if the warranty repair requires a large time commitment. As mentioned previously, the agency does not typically make warranty repairs on major drivetrain components such as the engine, transmission, and differential and axle except to remove and replace it with a new or vendor- repaired unit. Nor does Rockford tend to make air conditioning- related warranty repairs. When vendors make warranty repairs Rockford frequently uses it as a learning opportunity for its own technicians. The agency has established good working relationships with its vendors. As such, field service representatives visiting the facility generally work with agency technicians to explain the fault and repair procedures, sometimes even working together as a team to facilitate repairs. This informal training comple- ments more formal training provided by vendors as part of new vehicle procurements. With no formal training department, Rockford relies primarily on vendor training. Instead of scheduling all of its OEM-provided training up front as part of new bus pro- curements, Rockford schedules training on engines, trans- missions, and air conditioning, units that get repaired under warranty by subsystem vendors, toward the end of the war- ranty period. Doing so provides training in proximity to the Population Served Number of Buses Annual Revenue- Miles Annual Passenger Trips 240,414 75 565,200 98,300 Source: Rockford MTD. TABLE 14 ROCKFORD MTD—VITAL BUS SERVICE STATISTICS

31 time when Rockford technicians will be required to take over repairs from the subsystem vendors. This in combination with the informal training received from subsystem vendors while they make warranty repairs places Rockford’s technicians in a better position to handle drivetrain and heating, ventilating, and air conditioning repairs after the warranties end. Virtually all warranty repairs are done on site. There has been an instance or two where buses had to be sent off property because required equipment such as an alignment rack or a dynamometer needed to complete the repair was not available on site. The agency notes that going off site can add costs that neither party wants to pay, including transportation and related labor costs. Regarding innovative methods for warranty repairs, the agency has a policy of looking more closely at major compo- nents during the last few weeks or miles before the warranty is ready to expire. By doing so the agency sometimes identifies a bearing noise, oil leaks, etc., that may not have been caught until after the warranty had expired. Vendor Relationships Rockford is a believer in forging strong vendor relationships. Doing so has allowed them to resolve warranty disputes in an amicable manner, and obtain technical assistance and goodwill warranty after warranty periods expire. Goodwill warranty occurs when the vendor agrees to pay part or all of a repair shortly after warranty coverage has expired as an act of “good will.” Forming strong vendor working relation- ships also benefits Rockford in other ways. As a small agency without a formal training department, Rockford has been successful in getting vendors to provide targeted training when needed. Even after warranty coverage ends, Rockford’s main- tenance manager keeps vendors informed of any technical problems. In addition to keeping OEMs aware of technical issues that may impact other customers, the communication helps Rockford obtain assistance to facilitate repairs. In one example, Rockford experienced an unusual rear tire wear condition on a fleet of buses that developed after warranty had expired that it could not fully resolve. The maintenance manager contacted the bus OEM, providing photographs and other information. The bus OEM in turn dispatched a service representative who solved the problem by adding shims and making other minor adjustments. Rockford’s advice to smaller agencies with limited resources is to establish many vendor contacts to obtain as much war- ranty and technical assistance as possible. Rockford has found that most vendors are responsive to agency requests and will travel to provide assistance, even if the agency is small. However, smaller agencies need to reach out and seek assis- tance from the OEMs—the worst they could do is say “no.” POTOMAC AND RAPPAHANNOCK TRANSPORTATION COMMISSION (PRTC) Agency Overview PRTC provides public transportation to six jurisdictions in Northern Virginia. In addition to commuter bus service to Washington, D.C., PRTC provides connections to nearby Metrorail stations, a cross-town connector service, and a unique flex-routing service to help those who have difficulty using fixed bus stops. The agency also operates Virginia Railway Express (VRE), a commuter rail service into Washington, D.C. Vital bus service statistics are provided in Table 15. Warranty Personnel and Training Three maintenance workers at PRTC work part-time at war- ranty, a clerk who also has parts department responsibilities and two maintenance management personnel. Vendors provide the warranty training, with each of the three workers receiving less than an hour. The agency does not specify that warranty training be provided in its bid specifications. Warranty Periods Like most other agencies PRTC uses the SBPG for its warranty coverage periods, opting for extended warranty options for engines, transmissions, and differentials. It also requires a two-year complete bus warranty instead of the typical one- year warranty. Regarding major drivetrain components pur- chased separately as replacement parts, the agency specifies an extended warranty of 5 years/300,000 miles. Warranty Tracking With its fleet size growing, the agency realized it could no longer manually track warranty. The old method of trying to “remember” warranty periods was resulting in too many warranty repairs going undetected. In addition, even if the warranty was detected after completing the repair, the defective part in too many cases had already been discarded and was not available for return. Starting with replacement parts, the MIS was modified to print the letter “W” next to each replacement part listed on the work order that comes with a warranty. The MIS is coded such that anytime the same replacement part number is charged out of the parts room for 486,692 135 3.2 million 3.4 million Source: PRTC. Population Served Number of Buses Annual Revenue- Miles Annual Passenger Trips TABLE 15 PRTC—VITAL BUS SERVICE STATISTICS

32 by one of its bus OEMs. The clerk enters all data directly into a computer-based form, which is submitted by means of the Internet. For the vast majority of cases based on the part(s) being claimed, the program automatically enters the labor hours allowed by the OEM for the warranty repair. A place on the e-form allows the agency to note if the bus is down because of the warranty repair (i.e., replacement parts are not in stock); if so, the bus OEM expedites the part(s), thereby minimizing bus down time. An e-mail is generated if the bus OEM has a follow-up question or to confirm that the claim has been received. An average e-claim can be completed and submitted with five minutes. Manual, pen and paper claim submittals take much longer. One particular bus OEM using this method at PRTC requires the clerk to call for warranty authorization before submitting a claim, which often results in missed calls, multiple phone messages, and delays. Even though the completed claim can be faxed to help expedite the process, the fax machine is physically located in another area of the facility. The con- trast in submitting claims at PRTC certainly makes the case for adopting a standardized process through the SBPG that involves Internet-based electronic warranty claims processing. Warranty Repairs Like most other agencies, PRTC makes some warranty repairs and calls in vendors at other times to make others. Vendors are typically called in to make warranty repairs on engines, transmissions, differentials, air conditioning, destination signs, and fire suppression systems. Technicians work with vendors when making warranty repairs, using it as a learning opportunity. The agency feels that technicians are well pre- pared to make warranty repairs after warranty has ended, due in part to working with vendors and the agency’s efficient training program. Additionally, nearly all technicians have Automotive Service Excellence (ASE) certifications, with nearly 40% of them ASE Master Certified. DALLAS AREA RAPID TRANSIT (DART) Agency Overview DART provides public transportation services to the city of Dallas, Texas, and 12 surrounding cities. Its extensive net- work of transportation modes includes a fleet of more than 600 buses, 163 light rail vehicles, and two streetcars to service 130 routes over a 700-square-mile service area. Vital bus service statistics are provided in Table 16. Warranty Personnel, Training, and Team Approach DART sees its warranty program as an integral part of maintaining its $4.8 billion worth of assets in a state of good repair, and for providing critical feedback to both internal agency staff and vendors regarding systems performance. that bus, the part is flagged as having warranty coverage. The procedure immediately notifies the technician and supervisor that additional investigation is needed to determine whether a claim needs to be submitted. Most importantly, it lets them know that the failed part needs to be set aside until a final determination can be made. This is significant for repairs made during night shifts because warranty is handled by the day-shift foreman and clerk handling warranty on a part-time basis, who also works days. Each work order has a “recent repair history” section showing dates, work order numbers, odometer readings, and a brief description of the repair activities going back about eight previous work orders. If not listed in the recent repair history section or if additional detail is needed, the previous work order containing full work details can be retrieved and reviewed. The review allows the day-shift foreman and war- ranty clerk to determine if the failed part still covered under warranty did so because of faulty workmanship or if it falls outside the warranty scope (e.g., faulty installation). PRTC is currently investigating whether to apply a simi- lar procedure to new bus warranties. In a similar fashion to replacement parts, each new bus would be coded with war- ranty coverage periods applicable to the entire bus, extended drivetrain warranties, and any superior warranties that extend beyond those offered by the bus OEMs. Warranty Documentation As noted in chapter two, agencies are required under FTA triennial review requirements to have a system in place for identifying warranty claims, recording claims, and enforcing claims against the manufacturers. These efforts are needed to ensure that the cost of defects is borne properly by the equip- ment manufacturer and not the grantee and FTA. To satisfy this requirement, PRTC uses a spreadsheet program presented as Appendix G that tracks each warranty claim. It shows the: • Bus number, • Claim number and date submitted, • Description of the fault and repair, • Labor and part costs submitted to the vendor, • Labor and part costs actually paid by the vendor, • Difference in amounts submitted and paid, and • Claim status (in process, closed, rejected). The spreadsheet example provides clear documentation that warranty claims are being reordered per FTA requirements. Despite its procedures, the agency admits that it could do more to improve its warranty tracking methods. Claim Forms Although claims are submitted both manually and electroni- cally, PRTC much prefers the electronic method developed

33 Two full-time employees are assigned to administer warranty; one for bus warranty recovery, the other for rail warranty recovery. The bus warranty administrator has been trained by the bus OEMs in line with requirements set forth in DART’s specifications, and received about 16 hours of warranty train- ing for each bus procurement contract. The agency approaches warranty as a team effort, not only in the recovery of warranty funds but to help vendors improve their products, resulting in reduced downtime and cost for DART. Employees administrating warranty view their jobs as a part of a business to ensure the agency receives something in return of value for every legitimate warranty repair due them, and to ultimately improve the reliability and operating cost of DART’s equipment. Although primary bus warranty tasks are handled by one full-time staff member, responsibility is also shared among technicians, maintenance supervisory personnel, and various other departments including Fleet Services, Fleet Engineering, Procurement, Finance, and Material Support. Sharing of infor- mation among various departments is helpful in indentifying waranty repairs, warranty trends, and fleet defects. DART takes a system view toward warranty that goes beyond rolling stock; extending to facility equipment, rail stations, communication, signals, parking lots, lighting, and even landscaping. Warranty coverage is applied to virtually every product and service the agency procures. Warranty Periods DART uses the SBPG as a general rule for establishing war- ranty periods with some significant exceptions. For the com- plete bus, DART specifies 2 years/150,000 miles instead of the more traditional 1-year/50,000-mile period. The agency currently only procures CNG buses, and for engines and transmissions specifies 2-year/unlimited mileage coverage. Subcomponents such as starters, destination signs, and fire suppression also get 2-year/150,000-mile warranty coverage. Replacement camera systems are required to have a two- or three-year unlimited mileage warranty depending on the type. Warranty Classifications DART classifies warranty into two distinct groups, each having its own set of conditions: contractual warranty and commercial warranty. A contractual warranty is where terms and conditions are negotiated as part of a larger procurement. A two-year bumper-to-bumper bus warranty negotiated as part of a vehicle purchase is an example of a contractual warranty. A commercial warranty is defined as a warranty that has not been negotiated. This is where DART purchases, for example, a certain number of brake valves as replacement parts and accepts the standard warranty terms and conditions offered by the vendor (e.g., a six-month warranty, parts no labor). Commercial warranty also applies to warranty coverage on individual bus parts that extend beyond the contractual warranty period offered by the bus OEM. An example is a three-year warranty offered by the original destination sign manufacturer that continues beyond the standard two-year warranty provided by the bus OEM. The third year of that coverage is considered a commercial warranty under DART’s classification; others call it superior warranty. Terms and con- ditions for commercial warranties are generally provided by the individual part supplier within the context of the overall bus procurement. Because each classification has its own set of warranty conditions, DART’s ability to track warranty to each clas- sification is essential to maximizing its warranty program. For example, a part replaced prior to the end of a complete bus warranty may have a separate commercial warranty with a separate set of conditions that apply after the contractual bus warranty expires. Understanding whether contractual or commercial warranty conditions apply allows DART to more accurately submit claims and avoid delays caused by vendor disagreements where each insists the other is responsible for warranty. Warranty Tracking Key to DART’s effective approach to warranty is a comprehen- sive tracking system, an integral part of its computer-based MIS, developed by a vendor with strong input and custom- ization by agency personnel. DART is continually refining its warranty tracking system to better identify warranty coverage for both types of warranty classifications. For contractual warranties that apply to new bus purchases, conditions are created in the MIS with pertinent informa- tion including the warranty start date for the entire bus and separate coverage periods for subcomponents. Warranty start dates correspond to the acceptance date of each bus. An SOP is developed for each type bus in DART’s fleet. The purpose is to clarify the active warranty periods and warranty terms and conditions for each new bus order. It documents warranty coverage periods for the entire bus and individual components including superior warranty, the warranty start date for each individual bus in that fleet, and instructions for processing warranty claims for that particular bus type and components. A copy of a typical warranty SOP is included as Appendix H. 4,145,659 619 20.1 million 38.7 million Source: DART. Population Served Number of Buses Annual Revenue- Miles Annual Passenger Trips TABLE 16 DART—VITAL BUS SERVICE STATISTICS

34 on-site vendor warranty work and uses it as an opportunity to understand what went wrong and the steps taken by the vendor to correct it. DART shop personnel oversee and docu- ment all warranty repair work made by vendors. No vendor is allowed to conduct warranty work on site without DART’s permission. DART also insists that the vendor provide all training needed for DART technicians to make warranty repairs as part of the vendor-provided training program. Claims Processing and Reimbursement All warranty work, whether performed by DART or vendors, is entered into the MIS as a work order and becomes part of the permanent vehicle history file. Warranty claims are generated by the MIS using the information taken directly from the work order and can be printed as hard copies or as an Adobe PDF file by the maintenance specialists. The PDF-formatted claims are e-mailed to the respective vendor or OEM. The only time claims are not submitted is when the vendor makes the repair on site. The warranty repair is, however, documented on a work order and included in the vehicle history file. DART uses a standardized warranty claim form developed for its needs within the MIS. Its bus specification informs vendors that DART’s form will be used to submit warranty claims. The agency has, however, remained open to the use of other warranty forms and processes if they present an advantage for DART as a way to improve recovery of warranty claims. DART currently uses a fully loaded labor rate of $70.65 per hour, with a fleet defect labor rate of $75.82. A warranty handling cost of 15% is applied to warranty parts priced at $650 or less. Those warranty parts greater than $650 have a flat rate handling charge of $100 applied. Troubleshooting and diagnostic time is charged; actual towing charges and other applicable costs are passed on to the vendor as appropriate. DART’s aggressive warranty program results in the col- lecting of more than 89% of the total warranties submitted. A report is generated by the maintenance specialists showing outstanding claims yet to be paid. The key to obtaining full reimbursement and avoiding disputes according to DART is to make clear in the warranty specification what the warranty is, how the warranty is to be processed, and all terms and condi- tions. The goal, as stated earlier, is to always get something of value, either in the form a refund check or replacement part. Teamwork, coordination, and communication, both inter- nally within various agency departments and externally with vendors, serve as the basis for DART’s successful warranty program. A similar process is used for commercial warranties, such as rebuilt starter motors, where warranty terms are specified by the vendor. Any time a technician orders a part, that part is logged in the MIS with the appropriate bus number, part number, warranty start date and mileage, and warranty terms. Removed warranty parts are identified with a bright orange tag containing the work order number, bus number, and other information. Logging all pertinent information into the MIS allows DART personnel to access a full range of warranty data including detailed contractual and commercial warranty language for each bus or individual part. Should the same part number appear on another work order within the warranty coverage period the MIS will automati- cally print a “Warranty Applies” heading on the work order. All completed work orders flagged by the MIS as having warranty implications are reviewed by the maintenance spe- cialist, who more closely investigates all work entries made by the technician using MIS data as needed. If the maintenance specialist notes that any of the work done by the technician is warranty related, a claim is submitted by the warranty clerk to the appropriate vendor. All technicians are instructed that if there be any doubt if a removed part is covered by warranty, it is to be tagged and returned to Materials Management for warranty consideration. Once verified that warranty coverage applies, and if undamaged, a warranty claim is processed. Claims become part of the permanent vehicle history file. DART is also experimenting with ways to incorporate bar coding information provided on some replacement parts into its existing tagging system for tracking warranty coverage periods. An MIS-based custom reporting program developed by DART is used to track parts usage patterns to help identify fleet defects. The agency specifies a fleet failure rate of 20%, not the 25% recommended by the SBPG. Additionally, a “hit list” report identifies components installed or removed from a bus within a 12-month period, the generally accepted time frame for components covered under commercial warranty. Warranty Repairs DART uses a clause in its warranty specification that gives the agency right of first refusal to have its own technicians perform warranty-related work depending on its own work load and other conditions. DART technicians are trained and authorized to make warranty repairs to the bus and all the subcomponents. At the sole discretion of DART, the vendor may be called to perform warranty work. Except in cases where revenue vehicles are taken off site to the dealer for warranty repairs, DART closely monitors

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TRB’s Transit Cooperative Research Program (TCRP) Synthesis 111: Optimizing Bus Warranty explores how some transit agencies address key aspects of their warranty programs. The report examines the steps taken to more accurately monitor warranty coverage periods, optimize the warranty process, and maximize warranty reimbursement to fulfill U.S. Federal Transit Administration requirements and taxpayer expectations.

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