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Home My WebLink AboutIR 7433 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7433 Page 1 of 3 �aKfOR? To the Mayor and Members of the City Council January 2, 1990 Subject: PRIVATIZATION AND CONTRACTING FOR EQUIPMENT REPAIR AND MAINTENANCE BACKGROUND During the City Council 's review of the 1989/90 proposed budget, privatization was briefly discussed as a way the City could continue to provide services yet reduce costs. one of the functional areas that was identified by the City Council where this might be feasible was that of equipment repair and maintenance. Staff indicated that there was insufficient time for plans to be developed and implemented that could possibly impact the 1989/90 budget, but that during the new fiscal year additional information concerning privatization and contracting would be presented to the City Council for consideration. The following information concerning the Equipment Services Division is being provided pursuant to that discussion. OVERVIEW OF EQUIPMENT SERVICES DIVISION Equipment Services Division (ESD) is a division of the Department of City Services whose primary objective is to provide quality repair and maintenance services for City equipment at the lowest cost. ESD's ability to do this is dependent upon such factors as the number of mechanics that are authorized, their training and qualifications, parts availability, facilities and information. it is also dependent on the cooperation of user departments to deliver equipment when scheduled and to perform daily inspection and maintenance requirements. The extent to which this objective is achieved subsequently affects the levels of services that user departments are able to provide their customers. ESD's 1989/90 annual budget is $12,600,000. The Division is authorized 177 positions and is organized into four sections. The Administrative Section is responsible for the overall management of the division. All personnel , records management and billing is handled by this section which includes the ESD Superintendent and six other employees. The Technical Services Section is responsible for the acquisition and disposition of all vehicular equipment, ESD training/safety programs and all of the City's fuel programs including HAZMAT and EPA related matters. Last year this section purchased 2,721 , 161 gallons of fuel for the City's fleet. There are seven employees in this section. The Warehouse/Parts Section is responsible for procuring and issuing all parts and materials used in maintaining the fleet. The six (6) City Parts Centers have more than 8,800 different individual items in stock. Last year they prepared 17,415 requisitions, and issued in excess of $1 ,500,000 in parts to mechanics. Additionally, they administered 96 separate parts contracts. There are twenty-seven employees in this section. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7433 Page 2 of 3 ��F10P'. To the Mayor and Members of the City Council January 2, 1990 Subject: PRIVATIZATION AND CONTRACTING FOR EQUIPMENT REPAIR AND MAINTENANCE The Maintenance Section is responsible for both preventive and regular maintenance on the City's fleet of 3,815 vehicles. The approximate value of the City fleet is $50,000,000. The section consists of seven (7) service centers that work multiple shifts. Additionally, the section is supported by numerous outside specialized maintenance shops, and by after-hours tire and wrecker contractors. The maintenance section consists of 136 positions. COOPERS & LYBRAND STUDY In 1981 Coopers & Lybrand and James Mercer & Associates were engaged to conduct a management study of the Equipment Services Division. Those areas that were studied included preventive maintenance, emergency maintenance,' staffing levels, work performance standards, shop procedures, controls, responsibilities of user departments, management/ supervisory structure, training, equipment replacement and financing, leasing versus purchasing equipment, and low bid versus life cycle costing. Also contained in the report was a section concerning contracting. The primary rationale expressed in the report for contracting is that of achieving lower costs. The report cautions, however, that before contracting for services is done, it be assured that costs will indeed be reduced, service levels and quality of desired service will be met, responsiveness to user departments will be met, and the City will be protected against possible interruptions in the service due to contract non-performance. DISCUSSION Equipment Services Division attempts to continually evaluate the overall effectiveness and efficiency of its operations in an effort to minimize costs and improve the quality of work that is performed. ESD staff meets regularly with representatives from user departments to share common concerns and develop solutions to mutual problems. Staff meets with other fleet managers--both public and private--to hear about their experiences, what may be new, what works, and what does not work. ESD staff also meets regularly with vendors and contractors who provide services to listen to proposals and discuss the City's needs. What has evolved is the pragmatic approach that is used by ESD to determine whether work should be done in-house or contracted. It is believed that a balance of inside and outside repair work allows for healthy competition and enables the City to capitalize on the strong points of both the public and private sectors. Overall maintenance costs and labor rates of the City's Equipment Services operation compare favorably with both the private and public sectors. The Equipment Services Division's hourly labor rate has been reduced from $46.00 to $40.00 per hour over the past few years. This reduction can be attributed to improvements made in shop productivity, accountability, and in the way equipment is being specified. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7-433 a Pq 3 o 3 Ja6ue ary 2 f, 1990 X04 soar�� To the Mayor and Members of the City Council Subject: PRIVATIZATION AND CONTRACTING FOR EQUIPMENT REPAIR AND MAINTENANCE one point that is often overlooked in comparing the cost of maintaining a municipal fleet is the cost associated with decentralized maintenance operations. Decentralized maintenance operations tend to increase repair costs. if ESD could centralize all its shops, its overall cost of doing business could be significantly reduced from the present $40.00 per hour. Conversely, under a centralized maintenance operation the costs of providing other essential City services (Fire, Police, Street, Water, etc. ) would be substantially increased. overall , it is more beneficial and cost effective to the citizens of Fort Worth to maintain a decentralized fleet maintenance operation. A second point that is also overlooked in comparing the cost of maintaining a' municipal fleet is the additional cost associated with having to maintain so many different kinds of equipment. Types of vehicles range from Brown Bears used by the Water Department to Police Department patrol cars, Fire Department apparatus, Street Division dump trucks, Solid Waste Management Division garbage trucks, and Park and Recreation Department tractors and mowers. Certainly there are specialized maintenance functions that can and should be contracted. The fact that the City currently contracts out so much repair work and looks for other opportunities for contracting that would benefit the City is indicative of the approach that has been taken regarding contracting and privatization. However, it is believed that to attempt to contract out 100% of the equipment services operations would not be cost effective. If ESD is operating at maximum efficiency, the City's overall maintenance costs should be considerably less than if the services were provided by a private contractor because the City is able to provide replacement parts, fuel , oils, etc. , at a price equal too or less than the private sector. Additionally, the City is not required to pay taxes, nor earn a profit. Therefore, it is reasonable to believe that if ESD is operating efficiently it should be able to provide a majority of the fleet maintenance operations at a more economical cost. it is the goal of the Equipment Services Division to insure that this happens. 6^/David A. Ivory City Manager ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS ~ " Page 1 of 3 ATTACHMENT TO INFORMAL REPORT ON PRIVATIZATION AND CONTRACTING FOR EQUIPMENT REPAIR AND MAINTENANCE EXISTING WORK LOAD Last year the Maintenance Section initiated 69, 148 work orders and spent 135'823 manhmuro working on vehicles. Efforts were expended as follows: DepaQ,tDent Manhours Trans/Public Works 33.027 or 24.3% Solid Waste Management 21 ,501 or 15,8% Police 18,955 or 14.0% Fire 18,533 or 13.6% Water & Sewer 17,793 or 13. 1% Park & Recreation 16,512 or 12'2% Others Departments 9,502 or 7.0% Additionally, ESD contracted out approximately 37,730 man-hours of repair work to local vendors at a cost of $1 ,473,779. Types of work contracted out include: Services Contracts. . . . . . . . . . . . . . . .$R18,572 Major Equipment Rahuild, ' . . . . . . ' . . 229,034 ESO Shops Overload. . . . . . . . . . . . . . . . 625,313 Body/Glass/Springs $165.378 Engines Rebuild 98,033 Tire Repair 54,317 Transmissions 37`738 Aerial Ladders 27,245 Cooling Systems 12,966 Air Conditioning 11 ,816 Other Repairs 217,360 COMPONENTS OF ESD BUDGET During fiscal year 1988-89, ESO had expenditures totalling $10, 152,352, The ESQ budget is comprised of six (6) major components. 1 . Personnel Costs. . . . . . . . . . . .$4,G21 ,926 or 45'5% * 2. Maintenance Cumtrauts' ' , ' . ' 1 ,473,778 14'5% * 3' Parto/Materials. ' , . ' ' ' . ' . ' , 1 ,501 , 103 14.8% * 4. Fuel/oil ' . ' . ' . ' . . . . . ' . ' ' . . . 2, 173,743 21 .4% 5. Shop Utilities. . . . . . . . . . . . . 287,898 2,8% * 6. Capital Outlay (Shop) . . . . . . 93,897 1 .0% � The City received competitive bids on these items � � ` Page 2 of 3 ATTACHMENT TO INFORMAL REPORT ON PRIVATIZATION AND CONTRACTING FOR EQUIPMENT REPAIR AND MAINTENANCE COMPARISON OF LABOR RATES A. City of Fort Worth VS Private Contractors TYDe of Equipment Vendor Rate Automobile Jack Williams $44.00 Automobile Charlie Hillard $42.00 Automobile City of Ft Worth $40.00 Heavy Trucks Southwest Ford $42,50 Heavy Trucks City of Ft Worth $40.00 Heavy Trucks Summit GMC Truck $39.00 Off-Road Equip. Darr Caterpillar $40.00 Off-Rood Equip. City of Ft Worth $40.00 Off-Road Equip. Case Power Equip. $40.00 Specialized Eq. Utility Equip Co. $42.00 Specialized Eq. City of Ft Worth $40.00 , Specialized Eq. Masters Inter. $39,00 B. City of Fort Worth VS Other Governmental Agencies orgknization Rate Texas Dept' of Public Safety $46.00 Texas Highway Dept' $43.00 City of Arlington $43.00 City of Phoenix $42.00 City of Fort Worth $40.00 City of Dallas $38'77 C. Municipal Contract Experience City of Des Moines, Iowa $40.00 City of Beaumont, Texas $39.00/45.00 Notes/ Des Moines is fully contracted with exception of Firm and Aviation Departments. Generally oatiafied' ' . . . Beaumont contracted for several years. Experience unsatisfactory: expenses too high, restrictive bidding, downtime exceesive. ' ' . ' Page 3 of 3 ATTACHMENT TO INFORMAL REPORT ON PRIVATIZATION AND CONTRACTING FOR EQUIPMENT REPAIR AND MAINTENANCE PROBLEMS EXPERIENCED WITH EXISTING CONTRACTING EFFORTS * Poor Quality of Repair * Use of Inferior Repair/Replacement Parts * Poor Warranty Performance * City Receives Low Priority * Vendor Failure to Honor Bid Quotes/Prices * Instability of Vendor