Original Date: 04/22/1996
Revision Date: 01/18/2007
Best Practice : Converting Fleet Maintenance to an Internal Service
The City of Chattanooga consolidated its fleet maintenance operations to an internal service or activity-based center that provides services to other government departments while operating similar to a private enterprise. For 20 years, Chattanooga operated two municipal garages and gasoline stations for its public works, and fire and police operations. Both garages were budget-driven departmental systems, which typically neglected addressing operations as an enterprise. Expenditures were not justified, record keeping was inadequate, preventive maintenance was not followed through as prescribed, vehicle down time was high, inventories were suspect, and mechanic skill levels were declining.
In 1993, the City initiated a five-year plan to convert fleet maintenance to an internal service or activity-based center. The objective was to provide specialized management focus on fleet maintenance operations and systematically provide services to all departments. The conversion was built on existing strengths including the Mayor’s support, a $1M start-up fund, employees and facilities that were in place, a captive customer base, and the willingness of employees and management to make change. Obstacles included inexperience in enterprise operations, inadequate recordkeeping, the need to justify expenditures, and low mechanic skill levels. With proper controls imposed, the opportunity to reduce costs of fleet maintenance operations could be realized.
The conversion process is ongoing, although the activity-based center has already reduced operating costs to 70% of the average commercial vehicle maintenance costs. There are other substantial changes. Funds for garage operations and gasoline stations are now separate from the general budget, and individual users must include maintenance and gasoline in their own departmental budgets. Both garages have computerized operations which track work orders, labor costs, and inventory. Productivity and efficiency relative to national standards are calculated for each job. The inventory system determines part mix, economic order quantity, and provides vendor analysis.
Management training includes accounting practices, basic supervision, task cycle management, and mentoring. All mechanics are on a career path to become SAE Certified. The team concept is used and decisions are decentralized. Mechanics are encouraged to collect data, analyze it, make decisions, and act on their decisions. Safety committees exist for employees to effect their safety and health. Profit and loss statements are communicated with employees, and team captains meet regularly with management.
Parts inventory of the former fire and police garage has been reduced from $750K to $350K, and the former public works garage has been reduced from $900K to $500K, equating to an annual savings of $400K. Labor productivity has increased from an estimated 45% to an average of 85%. Databases have been established to predict vehicle system failures, and preventive maintenance is now fully on schedule. Maintenance cost has been improved from 70% of private enterprise rates for labor and parts to 60%.
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