August 25, 1999

To: Administration Committee

From: Chief Administrative Officer

Subject: Response to Councillor Pitfield's Motion, re: Fleet and Garage Operations

Purpose:

Council approved the Chief Administrative Officer report on the "Review of Corporate Fleet and Garage Operations" on July 29, 1999. The Administration Committee adopted the Chief Administrative Officer report at its meeting on July 13, 1999 and requested the Chief Administrative Officer to report further on a number of fleet related questions raised by Councillor Pitfield. This report is in response to the questions raised.

In addition, the Chief Administrative Officer will also be providing specific fleet progress reports in December 1999, March 2000, June 2000 and September 2000.

Recommendation:

This report be received for information.

Background:

Administration Committee at its meeting of July 13, 1999, referred the following motion to the Chief Administrative Officer for report thereon to the Administration Committee for its meeting scheduled to be held on September 7, 1999:

that the City Auditor be requested to complete a checklist showing the extent to which the deliverables have been received by the City;

the Chief Administrative Officer be requested to report to the Administration Committee by September 1999 that there are sufficient staff and data to complete the zero based review;

that the Chief Administrative Officer be requested to report to the Administration Committee by September 1999 that there is a methodology, data, and resources to complete the Yards Rationalization Study;

that the Commissioners of Corporate Services, Works and Emergency Services and Economic Development, Culture and Tourism be requested to report by October 1999 on the plan for adopting the four garage model as identified by KPMG and the implementation of that model by December 2000;

that the Chief Administrative Officer be requested to report to the Administration Committee by September 1999 and confirm the adoption of the M4 fleet system by the City to enable tracking of monthly expenditures, maintenance, parts, and fuel; to track monthly garage output, to issue invoices to each client department and link the financial data to the City's SAP accounting system;

that Fleet Management Services achieve a five percent efficiency gain based on standard labour hours by December 1999, and the resulting savings be reflected in the year 2000 budget for garage operations;

that the attached tables for year 1997 and year 1999, entitled City of Toronto - Financial Summary of Fleet Operations - Table 1 and 2 be used to summarize garage operations; and

that the Chief Administrative Officer be requested to report to the Administration Committee by September 1999, on the financial summary of fleet and garage operations for 1997 and 1999 and establish the estimated savings of $2.6 million identified in this report.

Discussion:

Study Deliverables

The City Auditor is in receipt of the checklist and will report separately, in conjunction with his assessment of the contract by KPMG.

The Zero Base Review

Fleet Management Services (FMS) has identified a manager with responsibility for completing the Zero Base Review by December 31, 1999. Additional staffing plans to complete this review include hiring an additional dedicated resource to undertake the day to day data collection, analysis, departmental liaison and situation assessment. Additional support staff will be assigned as needed. The Zero Base Review will be conducted in collaboration with departmental staff to facilitate the assessment of the usage of fleet assets, its deployment and potential efficiencies.

Normally, a zero base review would be supported by detailed utilization information for each fleet asset, a corporate fleet assignment policy, and firm service delivery standards and service delivery plans to determine the need for the fleet asset. However, at this stage of amalgamation, utilization data is not available for some types of vehicles, a new City-wide fleet assignment policy is not yet in place, and harmonization for service delivery programs is still in progress. The following objectives and guiding principles will be used to conduct the Zero Base Review which will be completed by December 31, 1999.

Zero Base Review Objectives

To determine the optimal number of vehicles and equipment needed for departments to deliver services in an effective manner, taking into consideration operational costs.

To identify potentially under-utilized fleet units where under-utilization is defined as traveling or operating engine hours less than 2.0 standard deviations from the norm for that class of equipment or less than 22,000 kilometers a year, which ever is less.

To identify over utilized fleet units where over utilization is defined as travelling or operating engine hours more than 2.0 standard deviations from the norm for that class of equipment or more than 100,000 kilometers a year, which ever is more.

To identify opportunities for increasing the utilization of fleet vehicles/equipment through the sharing of seasonal units or the creation of a Corporate pool for certain classes of vehicles.

To identify opportunities for reducing the number of fleet units by replacing two or more specific purpose vehicles with one or more general or multi purpose type vehicle.

To identify alternative, more cost effective mechanisms for meeting departmental fleet needs for under-utilized vehicles and equipment such as short-term rentals or leasing.

To identify alternative, more cost-effective mechanisms for meeting departmental fleet needs for over-utilized vehicles and equipment that may be on lease or short-term rental agreements.

To identify and assess fleet units that may not be appropriately utilized in that:

the vehicle is used for personal use beyond a level that is reasonable;

the vehicle is being taken home without specific operational reasons such as being on-call or having to attend a location other than the usual business location first thing on the next day;

the vehicle has been assigned to an individual but does not meet the following assignment criteria:

the vehicle requires City of Toronto markings;

the vehicle required is other than a sedan, minivan or station wagon;

equipment of a specialized nature is required on the vehicle;

the area of travel is off-road;

annual use is less than 22,000 kilometers; and

the vehicle is unmarked for inspection reasons.

Zero Base Review Guiding Principles

Fleet Management Services considers itself to be an operational partner with user departments in assisting them to manage their fleet needs as effectively and efficiently as possible. Fleet Management Services is also responsible for ensuring that Corporate Fleet related costs are contained and the City's fleet assets are utilized in an optimum manner.

The review will balance Departmental program delivery needs with Corporate accountability, and will be conducted to assist Departments in refining and meeting their fleet needs.

The review will be conducted within a limited time span and will focus on the essential data collection elements.

As a minimum, the following information will be collected for each vehicle/equipment:

- Unique identifier and vehicle description, noting specialized equipment outfitting.

- Type of use: i.e., personal use, crew transport, inspections, special service equipment/vehicle, etc. Vehicles will have to be grouped into a class wherever possible to allow use for distribution analysis.

- Operational reasons for need of that vehicle.

- Intensity of use: Annual distances and/or engine hours.

- Distribution analysis where feasible, noting range, average and standard deviations.

- Frequency of use: monthly, weekly, daily, seasonal.

Yards Rationalization

This item will be reported separately by the Chief Administrative Officer at a later date.

Feasibility Study - Four Garage Model

As part of the overall plan to rationalize the number of garages in the City, Council approved the closure of six garages on July 29, 1999. The next stage is to proceed with the assessment and rationalization of the number of yards in the City. Only upon completion of the relevant data collection and a current assessment of the yards and garages, will it be feasible to comment on the adoption of the four garage model. This will be reported out to the Administration Committee by September 2000.

Fleet Management Systems

The M4 Fleet Management Information System is currently being rolled out at the various FMS garage locations throughout the City, on schedule for full operational implementation by September 30, 1999. When implemented it will enable tracking of monthly expenditures, maintenance, parts and fuel, track monthly garage output and issue invoices to each client department.

The M4/SAP interface is under development. M4 will automatically inform SAP of debits to client departments, which will be handled through the general ledger. Until completion of the interface, FMS staff will continue to input directly into SAP and the legacy financial systems.

Labour Utilization

Fleet Management Services will achieve a five percent efficiency gain in labour utilization by December 2000 as previously reported, and will ensure that standard labour hours are in place for the year 2000. The appropriate systems are being implemented and productivity gains based on standard labour hours require time to implement and assess.

Financial Summary

As noted in the KPMG report, only approximately half of the fleet related budget currently resides with Fleet Management Services. To complete these tables for 1997 and 1999 requires extensive and time consuming manual data collection through seven legacy financial systems for the 1997 data and through the current three financial systems for 1999 data. In some instances, the former municipalities did not collect the appropriate information by the categories requested, for example by garage location or contribution to reserve by program. The budget will be consolidated for the year 2000 and the M4 system will facilitate data collection and analysis by garage location.

Savings Realized

As part of the 1999 budget process, the Budget Committee reduced the Fleet Management Services budget by $965,853.00 in 1998 and by an additional $1,650,372.00 in 1999 for a total reduction of $2,616,225.00.

Savings of $465,853.00 in salaries and benefits were realized in 1998. Savings in 1999 consist of an annualized saving of the 1998 reduction in salaries and benefits of $80,244.00, and an additional reduction of $903,128.00 in salaries and benefits for 1999 for a total salaries and benefits reduction in 1998 and 1999 of $1,449,225.00. The savings targets were achieved by reducing staff.

Contracted services were reduced in 1998 by $300,000.00. Savings in 1999 consist of an annualized saving in contracted services of $100,000.00 and by reducing contracted services by an additional $500,000.00 in 1999. These savings were achieved through more intensive use of Fleet Management Services in-maintenance capacity for a total contracted services reduction of $900,000.00.

Savings of $200,000.00 in materials and supply were realized in 1998. Savings in 1999 consist of an annualized saving in materials and supply of $67,000.00, for a total reduction in materials and supply of $267,000.00. This was accomplished by reducing purchases.

Contact Name:

Stan Burrows, Fleet Management Services

392-7791

Firoz Kara, Strategic and Corporate Policy Division

392-8678

Michael R. Garrett

Chief Administrative Officer