Survey Analysis - CitiTech Systems Inc.

The most important conclusion reached as a result of this study was that severe budget constraints, increased costs and increased workloads are changing the way city public works and street departments operate cities are actively seeking methods to effectively meet increased demand using limited resources.

Department managers are forced to re-evaluate operations. Systems that worked in the past aren't working today. Improved productivity, better management control, increased cost-effectiveness are today's standards of operations. In the past, street departments simply operated within a budget. The budget sustained operations and little regard was given to effective cost control.

But, today, costs are skyrocketing. Virtually every area of operations (equipment costs, repair parts costs, inventory and material costs, and labor costs), have experienced significant cost increases.

Today's public works and street department is struggling from a "One-Two Punch" that is impacting on its ability to provide necessary services. Not only are individual project costs increasing, so are the number of required projects. The demand for services continues to grow, but the available resources are shrinking because of budget constraints and increased costs.

In addition to new work requirements driven by population growth, the decaying infrastructure is placing priority demand on a city's project list. Federally mandated projects such as handicapped access, highway safety and increased accountability add to the department's project responsibilities.

While these factors are forcing change, most cities lack a comprehensive plan or strategy to implement new systems. The current solutions tend to be "reactionary", rather than part of a long-term strategy. Crisis management promote crisis management. A long-term plan promotes a systematic approach to problem resolution.

For example, cities turn to computer automation in an attempt to streamline operations and improve management control and reporting. But, most often, these solutions are "patches" or band-aids.

At the time of the survey, a specialized system was not available at a price small cities could afford and most departments use "off-the-shelf" software, such as spreadsheets that some enterprising department head built to maintain a budget. These patches are unwieldy and aren't "integrated" with each other. In other words, a fleet management system may track equipment and repair parts costs, but it operates independently from other systems, such as project management. This requires duplicate systems to be managed separately. Not only does this increase the workload, it also fails to provide the "big picture" in managing operations. It is also prone to data errors because it is a known fact that the more time data is entered and re-entered, the greater the possibility of data error.

Cost Control

Cost control has become a major issue in these departments. Although small city street departments are not usually required to maintain job cost accounting systems, the need... if not the requirement... is there. Cities must get a handle on cost control and only an effective job costing system can provide it. Without detailed job cost controls, the department head can only guess where the real cost centers are.

Less than half of the cities surveyed do job cost accounting and only 20% use a computerized system. That means 80% of the cities either don't do job costing at all or are using manual, paper systems that are little more than recordkeeping. Manual systems inherently lack the ability to provide meaningful management reports. The mass of raw data is too great, the possibility of error exists in transferring and adding columns of numbers from one form to another, and the time required to compile and analyze job cost data from hundreds of projects, equipment fleets and thousands of repair parts is overwhelming.

Cost control systems not only improve the cost-effectiveness of the operation, they also improve productivity and efficiency. For example, employee productivity reporting is a subset of a cost control system. Tracking labor costs on a per-project or per-equipment item gives management the tools to evaluate productivity. Using a model to form a baseline, it becomes possible to manage productivity and efficiency standards. Based on historical data and management estimates, departments can evaluate the effective use of resources.

Cost control systems also identify projects, equipment items or other tracked categories that are not cost-effective. In other words, based on equipment repair records, it may become apparent an equipment item is to costly to maintain and a new purchase would result in more cost-efficient operations, decreased down time and lower costs.

General Overhead: It was unbelievable that almost 75% of the city street departments don't allocate for general overhead costs. It costs hundreds of thousands of dollars to maintain one or more facilities. Maintenance shops, offices, warehouse and storage sites, clerical and supervisory staffs, utilities, the list goes on and on. These overhead costs have to be considered to effectively control costs.

Let's say, for example, the maintenance shop is a poorly lit, poorly insulated building. Utility bills go through the roof in the winter. Insurance costs may be higher. Employee costs through missed work or shop accidents may be higher. These costs impact on the cost of maintaining equipment. Having that information at the fingertips of decision makers gives them the tools to evaluate and take appropriate actions.

Maintenance Billing: One area of cost control procedures that was particularly surprising is that while about half of the departments maintain equipment items for other departments, less than half of those departments bill the other department for maintenance work. That means the superintendent must absorb the cost of maintaining "non-department" equipment in a tightening budget. Free maintenance helps other city departments, like police or fire, but burdens the maintenance facilities of the street department and robs him of valuable maintenance dollars.

Even though most city governments operate with one pot of money, cost accounting allocates true costs to individual departments. For the public works or street department, funding is simply too critical to absorb costs, such as free maintenance. Further, operating a department that is one of the largest city budget items and not having the tools to effectively manage costs is fool-hardy. The demand is to great and the resources too limited.

The secret to an effective cost control system is that it must be used. The superintendent must have access to information and not have to be a "rocket scientist" to obtain it. For a superintendent, cost control information isn't "accounting" information. It's Operational information. Logging on to the big computer at City Hall isn't the solution, if the system fails to give the superintendent meaningful operational information.

Accounting vs. Operational Data: Survey results indicate one of the underlying reasons city street departments lack effective cost control procedures is that most departments rely on the finance office for accounting tasks. Many share the responsibility. This reliance, although it accommodates accounting requirements (like paying people), it fails to provide "operational" information needed by the department.

Typically, the street department simply forwards payroll information, purchase orders and vouchers to the finance office for action. Without question, the finance office is best prepared and bound by law to maintain fiscal or fund accounting.

But this process hand-cuffs the superintendent. The objectives of the finance office differ from the operational departments. While most street departments report their accounting reports were timely and accurate, it became clear these accounting reports were not providing the management information needed by the department.

The finance office is responsible for fund accounting. The street superintendent is responsible for operations. The objectives are different and today's methods fail to give the superintendent the tools required to effectively manage the operation.

With today's "productivity push", it's time to give the superintendent the ability to take charge. Until cost control systems that use the new ABC standard, the superintendent is faced with the daunting task of making costly decisions with inadequate information.

Tracking Costs

The first step in developing a cost control system is to develop procedures to track costs. Street departments were most effective at tracking labor costs, with the majority tracking payroll, vacation and sick leave data. Almost 75% of the cities used an automated payroll system, but these systems were little more than automated record-keeping.. passing payroll information to the finance office.

While most departments track labor costs at the department level, fewer cities tracked labor costs associated with individual projects, equipment items, pavement segments or other detailed basis. In other words, the superintendent could determine overall labor costs, but couldn't evaluate labor costs on a per-project, per-equipment item basis.

Likewise, most departments track equipment costs at the department level, but fewer cities track equipment costs by project or other basis. Several cities use a computerized fleet management system, but only less than half track fuel, oil, tires and repair parts by equipment item. This was surprising since more than half of the cities had an automated fuel system.

Repair parts and material inventories represent major cost centers for the department. Yet only 25% of those surveyed used an inventory control system and most of those systems were manual, hand processed recordkeeping.

Manual systems were obviously the most-common method of cost tracking. A manual system is clearly better than no system at all and it can form the basis for more sophisticated tracking systems. But, the evidence shows that manual systems fail to provide analytical information or meaningful management reports.

Maintenance Scheduling

A preventative maintenance program is essential to successful operations. Not only will it insure equipment is operational when needed, it also reduced down time, costly repairs and overall equipment costs. Yet, less than half of those surveyed track equipment maintenance schedules.

Highway Safety

Highway safety is becoming a major issue. Driven in part by federal mandates and a deteriorating infrastructure, a solid classification program is becoming more and more important. About a third of the cities track highway safety items, such as bridges, culverts/catchbasins, signage, lights and guardrails, and another third want to start a classification program.

Highway safety is also being driven by the courts. Numerous cases exist where a plaintiff was able to show the city was negligent in some action. For example, a motorist swerves to avoid a pothole, loses control of the vehicle and suffers injury and property damage. Unless the city can show it has a proactive safety program and took steps to protect the public, the courts have ruled for the plaintiff (the motorist).

Over 60% of those surveyed believe litigation is possible due to missing or poor quality highway safety items.

User Comments/Complaints

Tracking user comments and complaints and the action taken was one of the most desired applications. Most of the cities track complaints, but virtually all the departments track them by hand on little sheets of paper. In other words, user tracking is most usually a "log" that simply records the comment/complaint and perhaps the action done... but it doesn't help analyze comments, complaints and costs.

Management analysis would be difficult or impossible using this system. For example, how long would it take a superintendent to answer these questions.

Assuming the street department is effective at solving problems reported by users or others, an effective tracking or work order system accomplishes three goals:

Computer Automation

The survey indicated several significant trends relating to computer automation. While a majority of those surveyed had computer assets available, it became clear computer software applications were not providing meaningful management information.

For example, the most common computer software was word processing, followed closely by budgeting, accounting and payroll software. Considering the close ties to the finance office, these accounting functions are basically reporting systems used to administer department accounting at the city level.

The most desired software applications were specialized programs, such as pavement management, project management, work orders and user comments/complaints. Only a small segment of the departments were using these applications, although a majority wanted to implement these systems.

A major focus of the study dealt with how cities are automating their street departments. In the last several years, there has been significant improvement in the department's automation effort. Computers are now more common and departments heads have purchased a variety of software applications to better manage the department.

But, it became clear that most cities lack a comprehensive information plan to implement automation. The various software applications operate independently of each other. Individual software solutions have created a patchwork approach to computer automation.

With few exceptions, the street departments felt a specialized program was essential to improve productivity and cost-effectiveness. Such a system should utilize a leading-edge approach, called Activity based costing. Such a system should integrate the various functions of the department and promote a single-source document, such as work orders or time tickets. This single source document allows one entry to automatically maintain several essential tasks or functions. In other words, one entry in a time ticket module automatically updates project, equipment, labor, inventory and other files.

Time tickets and work orders form the basis of activity based costing. Each entry captures detailed information. Collectively, these entries manage all the major areas of a department and identify trends. They permit data queries, such as how much was spent on pothole repair costs in the north side of town in the last six months? Which equipment items are due maintenance or should be replaced, rather than repaired?

Using the time ticket approach makes sense because, in most instances, departments already use time tickets of some sort. It's used to pay employees. Adding other information, such as equipment or inventory used, work done, hours works expands the use of the time ticket as a source document and promotes single entry data collection. It captures mission-essential information the department needs to manage operations.


	Survey Analysis