FINAL REPORT

Plant & Vehicle Management Review

For

Gladstone City Council

13th October 2006

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CONTENTS

PROJECT SCOPE ..................................................................................................... 4

EXECUTIVE SUMMARY............................................................................................ 5

SUMMARY RECOMMENDATIONS........................................................................... 7

1. REVIEW AND EVALUATION OF FLEET PERFORMANCE ............................... 11

1.1 Key Result Areas ..................................................................................................................... 11 1.1.1 Utilisation ........................................................................................................................... 11 1.1.2 Optimum Replacement Timing .......................................................................................... 15 1.1.3 Whole of Life Cost ............................................................................................................. 16 1.1.4 Downtime Cost .................................................................................................................. 18 1.1.5 Maintenance Failure Records............................................................................................ 19 1.1.6 Flat Rate Repair Times...................................................................................................... 20

1.2 External Plant Hire................................................................................................................... 21

1.3 Scheduling of Resources ....................................................................................................... 21

1.4 The Mechanical Workshop ..................................................................................................... 23 1.4.1 Efficiency issues ................................................................................................................ 24 1.4.2 Service Level Agreements (SLA’s).................................................................................... 26 1.4.3 Opportunities for Improvements in the Workshop............................................................. 27 1.4.4 Tyre Management ............................................................................................................. 28 1.4.5 Oil Sampling and Analysis................................................................................................. 28 1.4.6 Programmed (Scheduled) Maintenance............................................................................ 29 1.4.7 Ancillary Equipment........................................................................................................... 30 1.4.8 Parts Inventory................................................................................................................... 31 1.4.9 Risk Issues ........................................................................................................................ 31

2. RECOMMENDED MANAGEMENT PRACTICES ................................................ 33

2.1 Involve Staff in Decision Making ........................................................................................... 33

2.2 Plant Specifications ................................................................................................................ 33

2.3 Tender Assessment Process ................................................................................................. 35

2.4 Minimising Risk in New Purchases ....................................................................................... 35

3. PLANT REPLACEMENT PROGRAM & FINANCING STRATEGY..................... 37

3.1 Establishing Internal Hire Rates and a 10 Year Replacement Program ............................ 37

3.2 Ten Year Replacement Program ............................................................................................ 37

3.3 Plant Reserve........................................................................................................................... 38

4. SERVICING & REPAIRS ..................................................................................... 39

4.1 Contract Maintenance on New Equipment ........................................................................... 39

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4.2 Service Standards for Availability of Plant ........................................................................... 40

5 LIGHT FLEET.................................................................................................... 42

5.1 Choice of Fleet Vehicles (Fleet Mix) ...................................................................................... 42

5.2 Optimum Changeover For Light Fleet Vehicles ................................................................... 45

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Project Scope Stage 1 The scope of stage 1 of this project is to provide an initial review of Council's current plant & vehicle fleet operations including maintenance & repairs. Tasks include:

o Review current practices in fleet management and the mechanical workshop. o Ascertain any issues of concern to relevant stakeholders (service providers and service end users). o Review age and current utilisation of the fleet (including external hire if data is available), compare to

industry benchmarks and make recommendations on items requiring a business case review for ownership

o Review the current purchasing & disposal practices and financing strategy and make recommendations in line with industry best practices

o Review plant & heavy vehicle changeover policy and make recommendations on optimum replacement timing

o Review light fleet changeover policy and make recommendations on model mix and optimum changeover

o Identify areas of potential cost savings o Identify key drivers, performance measures and reporting requirements which should be used, on an

ongoing basis, to continually improve performance. o Make recommendations on the required level of service to be provided by the mechanical workshop and

a process for benchmarking performance. o Identify services that should be considered for outsourcing to external service providers o Review management structure, systems and processes and comment on suitability of current resources

(level of resources and skill base) A report will be provided covering all of the tasks together with recommendations. Not included in the Initial Review (Stage 1)

o Physical assessment of current condition of each item of plant o Matching plant & labour resources to meet councils future works program o Plant suitability for field tasks o In depth review of mechanical workshop performance

Stage 2 (optional) Plant & Vehicle Management Bureau Service to assist in implementing the recommended changes plus coaching and mentoring of staff in best practice plant & vehicle management. A quotation for this service would be provided as part of the stage 1 review during which time we will be able to scope what we believe will be required.

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Executive Summary The main issue to be addressed at Gladstone City Council is the inflexible work practices of the mechanical workshop which is causing excessive plant and vehicle downtime and in turn directly impacting on end user productivity. Downtime (not currently measured) is a significant issue as it brings with it additional associated costs such as hire of external plant, lost time on the job, inefficient redeployment of staff to other work etc. In our experience, the costs associated with downtime are likely to exceed the annual repair and maintenance costs. Work practices of concern in the mechanical workshop include:

over servicing of light fleet at the expense of much needed servicing of heavy fleet. inflexibility of some mechanical staff in tasks they undertake (multi skilling approach) pressure applied by mechanical staff on plant operators not to undertake very minor

tasks such as tighten a nut or replace a fuse and requiring this work to be undertaken by a mechanic

resistance to industry best practice times for servicing Despite this, plant and vehicle utilisation is generally within national benchmarks and this is a credit to the management of operational areas. The workshop situation is further compounded by the increasing sophistication of new technology associated with modern plant and vehicles and the corresponding need for specialist diagnostic equipment and mechanical skills. In our view, Gladstone City Council is not well placed to continue to undertake major servicing and repairs in house. The other major issue is the need to substantially improve the recording of data required for measuring key performance indicators and a fleet management reporting system to produce useful management reports. Key performance indicators are explained in the report and their adoption are critical to Gladstone achieving industry best practice fleet management. Some areas identified for improvement are:

Utilisation is being recorded but the information is not able to be used as management reports are not available

Without utilisation data items are changed over based on age only. This is likely to result on items being kept beyond their optimum replacement or replaced too early in their life cycle

Whole of life costing is not being used in tender assessment, hence purchase decision are not being optimised

Reasons for maintenance failures are not being recorded and not being followed up with end users

Other general issues of concern include:

Need for more formal processes and sign off on tasks o In tendering with the need for involvement of all stakeholders o Workshop procedures

Small plant of value less than $2,000 is not being adequately managed Current internal hire rates are based on historical costs and not industry benchmarks

In regard to ancillary or minor plant/equipment, we estimate that up to 40% of these items are being held because of the process used in purchasing and managing these items. This can be addressed by providing a specific budget for these items and introducing the management process recommended in the report.

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The above commentary is not a reflection of poor performance by the Plant Fleet Supervisor who has only been employed by Council for a short period. His focus to date has been on bringing the plant replacement program up to date and this is a key to improved fleet performance. His attempts to initiate change in work practices have unfortunately met with strong resistance from some workshop staff. Major Recommendations The major recommendations of the review include:

outsourcing of light fleet maintenance and repairs outsourcing of specialist mechanical repair and maintenance work development of service level agreements with internal and external service providers retention of current mechanical staffing levels, at least in the short term and

particularly during the change process when productivity may fall, but with redefined roles and changed work practices

recording of essential data to measure KPI’s introduction of a reporting system to deliver useful management information on KPI’s

The report focuses on the key result areas in plant and vehicle management, makes comment on Gladstone’s performance and provides recommendations to assist in improvements in fleet management.

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Summary Recommendations 1. REVIEW & EVALUATION OF FLEET PERFORMANCE 1.1 Key Performance Indicators 1.1.1 Utilisation

1) Based on utilisation information provided, a business case review be carried out to justify continued ownership of • a second grader with the view to potential disposal and replacement with a

long term hire contract locking in seasonal requirements • excavator 385.02 with the view to potential disposal and replacement with a

more suitable unit to meet future operational needs or a dry or wet hire unit on long term contract

2) A more detailed operational review be conducted on the use of the mowers and trucks identified in the utilisation report (refer table 2) with the aim to rationalise the number of units needed.

3) An oil pressure sensitive engine hour meter be fitted to the road sweeper vehicle and utilisation of the sweeper be based on engine hours and not kilometres travelled.

4) Hub-meters be fitted to plant trailers and utilisation be tracked based on kilometres travelled.

1.1.2 Optimum Replacement Timing

5) The schedule of plant/vehicles/equipment listed for changeover in the 10 year replacement plan be reviewed to take into account utilisation benchmarks detailed in Table 3.

1.1.3 Whole of Life Costs

6) Accurate recording of whole of life costs be assessed and “budget” internal hire rates reflect full cost recovery including the cost of replacement.

7) Depreciation charges reflect the level of funding required to replace an item at its optimum replacement point

8) Depreciation funds be directed to the Plant Replacement Reserve that is quarantined from other use to ensure the funds are available to fund the 10 year replacement program

9) Regular fuel consumption checks be undertaken and exceptions investigated 10) Whole of life costs (not just net purchase price) be used in the purchasing decision.

1.1.4 Downtime Costs

11) Accurate recording of all downtime costs be undertaken by the mechanical workshop and recorded in the new fleet management software.

1.1.5 Maintenance Failure Records

12) Accurate recording of maintenance failures be undertaken by the mechanical workshop and recorded in the new fleet management software.

1.1.6 Flat Rate Repair Times

13) Industry flat rate times are adopted as soon as practical. 1.2 External Plant Hire

14) Consideration be given to expanding the plant pool to provide a centralised point for external plant hire.

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15) External plant hire be recorded and categorised so that plant can be identified as a cost by category and as wet or dry hire to assist in future audits and business case analysis for retention/disposal/purchase of plant.

1.3 Scheduling of Resources

16) Consideration is given to the suggestions proposed to improve the effectiveness of weekly scheduling meetings as outlined in the report.

1.4 The Mechanical Workshop

17) Feedback to operational supervisors be provided on the reasons for failures if a failure is due to either the operator or inappropriate use of the item.

18) In order to reduce downtime, the workshop must coordinate service schedules with operational requirements.

19) To avoid carrying additional plant, programmed maintenance should where possible take place outside times when the item of plant or vehicle is required for normal operational purposes.

1.4.1 Efficiency Issues

20) Outsourcing be considered for: • All light fleet servicing and repairs • All new heavy fleet items that can be serviced in Gladstone (eg Komatsu and

Caterpillar) to have a service contract for major services • Other plant & truck servicing & repairs if a local contractor is available and

capable • Other specialist repair work (electrical, hydraulics etc) where accredited

agents are available 21) Local service providers be approached to become accredited to undertake servicing

of plant & trucks. 22) The existing workshop structure and staffing level be retained with the potential to

reduce to 3 mechanics plus a leading hand (total 4 mechanics) after outsourcing has been implemented.

23) The role of mechanical staff change over time to that of scheduled safety inspections and to respond to immediate breakdowns and to conduct scheduled services and servicing of small plant.

24) Unacceptable work practices be addressed through amended position descriptions and introduction of service level agreements with end users

1.4.2 Service Level Agreements (SLA’s)

25) The following Service Level Agreements be developed: • Between Fleet Management and the in-field service provider (Operations) for

the provision of plant/vehicle/equipment procurement and the maintenance and repair of plant/vehicle/equipment

• Between Fleet Management and external service providers • Between Fleet Management and the mechanical workshop

1.4.3 Opportunities for Improvements in the Workshop

26) Mechanical workshop rosters be reviewed with the view to: • have all mechanical staff available on Operations RDO’s • conduct scheduled servicing/maintenance as much as practical when items

are not required by operational business units ie on RDO’s 27) Operations staff RDO’s be spread over Mondays as well as Fridays if possible 28) On days other than operational units RDO

• have minimal staffing on early shift and

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• maximum staffing on late shift 1.4.4 Tyre Management

29) That tyre management be included as part of the annual tender for supply of tyres with the supplier being required to regularly monitor tread depths, tyre pressures and wear patterns and provide regular reports to the mechanical workshop.

1.4.5 Oil Sampling and Analysis

30) An oil analysis monitoring program be introduced for high utilisation items beyond manufacturers warranty periods as an important preventative maintenance tool

31) Oil consumption be recorded and monitored. 1.4.6 Programmed (Scheduled) Maintenance

32) The mechanical workshop provide feedback to end users on the reasons for failures in order to identify if a failure is due to either the operator or inappropriate use of the item.

33) Programmed maintenance take place wherever possible outside times when the item of plant or vehicle is required for normal operational purposes.

1.4.7 Ancillary Equipment

34) A separate budget allocation be made for ancillary plant and the funds for this be recovered through a charge to end users.

35) Ancillary plant and small items be subject to greater accountability along the lines proposed in the report.

36) Each item should be serviced at least once every 12 months and checked for safety every 6 months.

1.4.8 Parts Inventory

37) A process be initiated to ensure purchasing (stores) is advised when fleet items are replaced.

1.4.9 Risk Issues

38) In order to minimise risk the items listed in the report (Section 1.4.9) be included in policies, processes and procedures.

2. RECOMMENDED MANAGEMENT PRACTICES 2.1 Involve Staff in Decision Making

39) Operations staff be formally involved in business case studies, plant specification development and the tender evaluation process to increase the likelihood of the suitability of plant for the task required and minimise the risk of incorrect purchases.

2.2 Plant Specifications 40) Specifications be prepared on a descriptive basis detailing the role and function

required of the unit rather than a prescriptive specification that restricts suppliers opportunities to meet the real requirements of the item tendered and transfers risk to the purchaser.

2.3 Tender Assessment Process

41) Whole of life costs be used in the analysis of tender or quotation pricing and not the net tender price.

2.4 Minimising Risk in New Purchases

42) Consideration be given to adopting Uniqco’s suggested guidelines for minimising risks in new purchases.

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3. PLANT REPLACEMENT PROGRAM AND FINANCING STRATEGY 3.1 Establishing Internal Hire Rates and a 10 Year Replacement Program

43) That cost of capital and actual depreciation (purchase cost less anticipated residual revalued annually) be applied to all plant

3.2 Ten Year Replacement Program

44) The current 10 year plant replacement strategy be revised based on optimum replacement timing on utilisation as well as age

3.3 Plant Reserve

45) That Council continues to operate a plant replacement reserve as the method of funding the ongoing plant replacement program.

46) The guiding principles for the plant replacement reserve should be: • to recover sufficient funds through actual depreciation to meet the 10 year

replacement programs at optimum replacement timing • In the long term the Council should on average be spending as much on

capital replacement as the annual depreciation of the fleet. 4. SERVICING & REPAIRS 4.1 Contract Maintenance on New Equipment

47) In the case of new plant purchases, provision be made in the tender documents for a contract maintenance option to be provided by suppliers.

4.2 Service Standards for Availability of Plant

48) The following preventative maintenance schedule be adopted to minimise OH&S risk and downtime

Category of Plant Frequency of Safety Checks All plant including minor items Min 6 months Major high maintenance plant Weekly Small engine plant/equipment Weekly safety check by the operator and a

minor service every 6 months by a mechanic 5. LIGHT FLEET 5.1 Choice of Fleet Vehicles (Fleet Mix)

49) Fleet vehicles at Gladstone be generally sourced from the following list with preference to be given to 4 cylinder vehicles:

Holden Commodore where a 6 cyl is required for HR reasons Toyota Camry Altise (4 cyl)/Mazda 6 (4 cyl) Holden Astra Holden or Ford Utility (6 cyl) Ford Courier, Holden Rodeo OR Mitsubishi (diesel) Crew cab

5.2 Optimum Changeover for Light Fleet Vehicles

50) Council light fleet vehicles be changed over between 1 - 4 years with a minimum mileage of 60,000km and the Plant & Fleet Manager have delegated authority to change vehicles within these parameters.

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1. Review and Evaluation of Fleet Performance Managing the mechanical plant and vehicle fleet like any other resource requires accurate, reliable, timely, relevant and quantifiable information. Such data is required to set charge out rates, undertake needs analysis and buy / hire assessments, develop maintenance programs and set service and works programs and budgets. This section of the report details the information required to effectively manage the fleet. 1.1 Key Result Areas Task 1 focuses on the most critical review areas to ensure Plant and Vehicle Management best practice and these are:

Utilisation Optimum Replacement Points Whole of Life Costs Downtime Costs Maintenance Failure Records Flat Rate Repair Times External Plant Hire

1.1.1 Utilisation Utilisation is the extent of use of a particular item of plant, vehicle or equipment and is usually measured by hours worked, or distance travelled in a nominated time frame (generally the calendar year). Without knowing the utilisation, an accurate assessment of the following issues cannot be made:

Is the item needed on a permanent or intermittent basis and should the item be owned or hired as required?

What are the servicing requirements per annum? How much fuel and oil will be required per annum? What staff resources are required for servicing and repairs? What will the tyre wear be per annum? When can major maintenance be programmed?

For cars and trucks the kilometres travelled is a good indicator of utilisation. Whereas for plant such as refuse collection trucks, street sweepers, crane trucks, tractors and mowers, etc. engine hour meter readings are the best indicators. For items without engine hour meters, a record of time intervals between maintenance, servicing and repairs for each item will provide valuable information on utilisation. If the time intervals are extended then the chance is the utilisation of the item is low. Trailers and the like can be fitted with hub-meters to indicate the distance travelled in any given time interval. Knowledge of actual utilisation in kilometres or engine hours (levels and usage patterns) enables the fleet manager to:

Service vehicles based on manufacturers’ recommended service intervals (programmed maintenance).

Track actual use versus timesheet allocations to optimise operational requirements.

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Develop a floating replacement program to reduce costs in periods of lower activity, and change of plant at the optimum replacement point.

Develop accurate budget forecasts. Table 1 - Key Performance Indicators – Industry Benchmark Utilisation Industry Benchmark Utilisation

Group/Type National Annual Benchmark Utilisation

Backhoe Loader 700 Hrs Bus Mini 20,000 Kms Compressor 300 Hrs Excavator 1000 Hrs Excavator Mini 700 Hrs Forklift 500 Hrs Grader 1,000 Hrs Heavy duty Truck (HR & HC) 35,000 Kms Light duty Truck (LR) 10,000 Kms Loader 700 Hrs Medium duty Truck (MR) 20,000 Kms Mower Front Deck 500 Hrs Side Lift Compactor 25,000 Kms/2,000 Hrs Skid Steer 500 Hrs Sweeper 1700 hrs Tractor Medium 500 Hrs Wood chipper 500 Hrs

Comment on GCC Performance Utilisation is the key to the procurement and management of the plant and vehicle fleet. Under-utilisation, low, or poor utilisation raises questions about operational management, including co-ordination of use between work sites and operational units. It also raises the question of ownership versus hire. There are a number of items in the plant fleet that have significantly low utilisation compared to national benchmark levels – Refer Table 2. These are mostly mowers and trucks. From the interviews we were advised that a number of mowers were assigned to Water & Sewerage for seasonal use and to use surplus labour from time to time. While there are operational benefits in mowers being retained in water & sewerage, this might be at a higher net cost to council compared to using contractors or having mowers centralised under the Parks & Reserves Department. It is recommended a closer review be conducted of mowers with the view to increasing utilisation and reducing the number of mowers. In regard to the trucks it is necessary to review their operational use to determine the scope to either dispose of one or more units and/or replace some with more suitable items that will achieve benchmark utilisation. If utilisation projections continue to be low, then subject to availability of suitable contractors, truck hire be considered. The geographic size of the shire will impact on the utilisation of trucks in particular where utilisation is based on kilometres travelled. When it comes to plant the size of the shire could be expected to reduce travel time and increase available engine operating hours. We are not able to make an in depth assessment of the need for an item from just reviewing utilisation data. However utilisation data provides a useful indicator and flags the need to look

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at utilisation at the operational level. We fully appreciate there will be some cases where items are essential for the job regardless of utilisation. We suggest the benchmarks should still be used as a trigger to request a review by the operational manager in consultation with the respective supervisors. This applies particularly to some trucks and mowers. Utilisation of the Caterpillar 12H Grader at 785hrs and the Hitachi excavator at 775hrs are both in excess of 20% below benchmark levels. As the annual utilisation in the table is an average over 3 years it may not be showing a decline in utilisation that is likely to be occurring based on our interviews with staff. With an expected further decline in capital works utilisation is likely to fall further. There is therefore an opportunity to quit one grader based on current utilisation and the expected downturn in construction work. The review should be undertaken once the capital works program for the next 3 years is known and before the plant capital replacement budget is finalised for 2007/08. The option recommended is a long term grader hire contract The Hitachi excavator should be subject to a business case review to justify continued ownership based on future work. We understand from the interviews that the Hitachi may not be the most appropriate unit for future maintenance work. A long term hire contract may also be a viable option if expected utilisation is much below benchmark levels. Hire contracts are subject to the availability of hire plant and competent operators. As the fleet continues to move to optimum changeover, the increased plant availability will deliver increased productivity and along with a downturn in construction work may provide the opportunity to dispose of some additional plant items. This will be clearer when the draft budget program is being considered in March 2007. It is recommended a further review of past and projected utilisation be undertaken at that time prior to developing the plant & vehicle capital replacement budget. The utilisation of minor items such as chainsaws, whipper snippers, pumps etc is normally measured by tracking the repair/maintenance and fuel allocated to each item. Very limited information is available on these minor items. However based on our experience and interviews with staff, we expect that many small items will be unaccounted for. It is also likely items that should have been disposed of have been retained as a spare when a replacement item has been purchased. This is a reflection of there being no specific replacement program and budget for small plant items. Miscellaneous plant is dealt with in more detail in Section 1.4.7 of this report. Once utilisation is measured, a comparison with timesheet allocations would normally give a strong indicator of how much the item is required for operational purposes. When comparing these to timesheet hours, a ratio can be developed to allow assessment of plant or vehicle utilisation. However, timesheet hours were not available for this review. The ratios indicate the amount of use the item gets on the job and provide an additional performance indicator to utilisation on the need for the item. For example if an excavator is taken to site and sits without its engine running ie it is not physically working, but the operator records it on his timesheet it may be there as a convenience. Where the ratio is well below the national benchmark a business case study is recommended to assess the requirement to retain ownership. Notwithstanding the low utilisation and timesheet ratio the Business Case Study may still justify retention.

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RECOMMEND

1) Based on utilisation information provided, a business case review be carried out to justify continued ownership of

a. a second grader with the view to potential disposal and replacement with a long term hire contract locking in seasonal requirements

b. excavator 385.02 with the view to potential disposal and replacement with a more suitable unit to meet future operational needs or a dry or wet hire unit on long term contract

2) A more detailed operational review be conducted on the use of the mowers and trucks identified in the utilisation report (table 2) with the aim to rationalise the number of units needed.

3) An oil pressure sensitive engine hour meter be fitted to the road sweeper vehicle and utilisation of the sweeper be based on engine hours and not kilometres travelled.

4) Hub-meters be fitted to plant trailers and utilisation be tracked based on kilometres travelled.

Table 2- Gladstone City Council - Actual Utilisation to Benchmark

Unit No Description

Total KM/ Engine Hours

No of Travel Days

Annual Utilisation

km/hrs

Benchmark Utilisation

Km/hrs Comment

219.05 Nissan UD MK175 Tip Truck 806 43 6842 20000km

Early in life - utilisation may not be representative

219.99 Isuzu NQK 450 4.5 Tonne - 219 36,282 1463 9052 20000km Below benchmark -

review operational use

220.06 Hino Dutro 5000 2,193 133 6018 20000km Below benchmark - review operational use

234.04 Isuzu Truck- 234 17,425 726 8761 20000km Below benchmark - review operational use

240.03 Nissan UD Truck MK175K - 240 14,848 1018 5324 25000km Below benchmark -

review operational use

254.05 UD Nissan CW385 - 254 13,982 529 9647 35000km Below benchmark -

review operational use

258.98 Mazda T4600 tip truck - 258 27,903 1440 7073 20000km Below benchmark -

review operational use

371.97 Caterpillar 12H Grader 3,397 1557 785 1000hrs Business Case review

recommended

379 Ingersol Rand PR325 Roller 144 1350 38 300hrs Business Case review

recommended

380 Dynapac Multi 174 611 103 300hrs Business Case review recommended

385.02 Hitachi ZX230 Excavator 213 99 775 1000hrs Business Case review

recommended

396.06 New Holland TS100A 189 154 442 500hrs Tractor/mower - review

utilisation

401.01 John Deere LX277 Mower 533 992 193 350hrs Below benchmark -

review operational use

401.05 John Deere LX280 Mower 43 357 43 350hrs Below benchmark -

review operational use

410.99 Kingcat Mower 4 242 6 350hrs Below benchmark - review operational use

411.01 John Deere LX277 Mower 431 1420 109 350hrs Low utilisation - review

operational use

412.02 John Deere LX277 Mower 374 1009 133 350hrs Low utilisation - review

operational use

417.00 John Deere Tractor 427 670 229 500hrs Below benchmark - review operational use

447.00 John Deere Out Front Mower 71 328 78 500hrs Below benchmark -

review operational use

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Unit No Description

Total KM/ Engine Hours

No of Travel Days

Annual Utilisation

km/hrs

Benchmark Utilisation

Km/hrs Comment

447.04 John Deere 4115 Tractor 562 832 243 500hrs Below benchmark -

review operational use

447.97 John Deere 955 Tractor 565 1366 149 500hrs Below benchmark -

review operational use

459.00 John Deere 459 267 612 157 500hrs Below benchmark - review operational use

483.00 TD25 New Holland 868 1106 283 500hrs Below benchmark - review operational use

492.01 John Deere LX277 366 1076 122 350hrs Below benchmark - review operational use

492.05 John Deere LX280 223 419 192 350hrs Below benchmark - review operational use

1.1.2 Optimum Replacement Timing The optimum replacement timing (point) for a vehicle or an item of plant is calculated to best estimate the optimum timing, in either kilometres or engine hours, and time, to achieve the lowest average annual cost during the life of the machine. The optimum replacement point in the life of the plant item is when the decreasing line of depreciation intersects with the increasing cost of repairs and maintenance costs. Actual depreciation figures will show two distinct steep drops in resale value. The first significant drop is immediately post purchase. The second drop is prior to a major component overhaul, which is when second hand buyers are aware of a large impending maintenance bill. In order to best manage optimum replacement timing a 10 year replacement program is essential. GCC already has a 10 year plant replacement program in place. However the changeover is based on age only. The plan needs to be reviewed based on utilisation and this may impact on the optimum changeover of some items. National benchmarks for optimum replacement timing are shown in Table 3 below. Table 3 - Key Performance Indicators – Optimum Replacement Timing Group National Optimum Replacement

Type Annual Benchmark Utilisation Years KM/Hrs

Backhoe Loader 700 Hrs 7 5,000 Bus Mini 20,000 Kms 6 100,000 Compressor 300 Hrs 10 NA Excavator 700 Hrs 10 8,000 Excavator Mini 700 Hrs 6 5,000 Forklift 500 Hrs 10 5,000 Grader 1,000 Hrs 10 8,000 Heavy duty Truck (HR & HC) 35,000 Kms 8 500,000 Light duty Truck (LR) 10,000 Kms 6 100,000 Loader 700 Hrs 8 8,000 Medium duty Truck (MR) 20,000 Kms 8 200,000 Mower Front Deck 500 Hrs 4 2,000

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Group National Optimum Replacement

Type Annual Benchmark Utilisation Years KM/Hrs

Paver NA 10 NA Roller Large NA 10 5,000 Side Lift Compactor 25,000 Kms/2,000 Hrs 5 100,000/8000 Skid Steer 500 Hrs 5 5,000 Sweeper 1700 Hrs 8 8,000 Tractor Medium 500 Hrs 5 5,000 Trailer heavy NA 15 NA Trailer light NA 10 NA Wood chipper 500 Hrs 5 5,000

RECOMMEND

5) The schedule of plant/vehicles/equipment listed for changeover in the 10 year replacement plan is reviewed to take into account utilisation benchmarks detailed in Table 3.

1.1.3 Whole of Life Cost Whole of Life cost is the total cost of owning and operating an item of fleet over the estimated life of the item. Having established the optimum point at which to replace the vehicle/equipment, the next management tool is knowledge of whole of life costs. Whole of life costs include:

• Straight line annual depreciation, to an anticipated residual. • Finance or opportunity costs. • Operating costs, tyres, fuel, repairs and maintenance. • Fixed costs, overhead recovery, insurance, wages, license. • FBT for light vehicles

Note: FBT is included in Uniqco’s whole of life cost analysis on cars but not on utes as these are FBT free unless used for private use. Commuting use is treated the same as private use in regard to FBT for cars. Whole of life costs will reflect how much of the equipment’s annual costs will be based on annual utilisation and an optimum replacement point that has already been established. The annual costs calculated will provide a projected (budget) annual cost for the life of the equipment. A simple spreadsheet can be used to develop whole of life costs and provide an estimate of the total annual cost of an item of plant. By dividing annual cost by the operational timesheet hours used to recover the cost of operating plant, internal charge out rates can be determined. When these rates are applied they will provide the appropriate recovery of costs to a plant replacement reserve to fund plant replacement at the optimum time. Knowing whole of life costs the fleet manager can provide:

• Annual maintenance budget • Annual replacement provision

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• Annual operational costs • Internal recharge rates.

Comment on GCC Performance Whole of life costs are not currently being used in purchasing decision making. As a result decisions may not be delivering the best outcome for council. While costs might only represent 40-60% of the weighted analysis in purchasing, it is important to use whole of life costs and not the net purchase price (new price less trade in). The Finance Manager has only been with Council for a few weeks and was not in a position to provide information on the methodology used at GCC to calculate internal hire rates. Within the replacement program there is a need to ensure that internal hire (charge out) rates include an appropriate depreciation component which can eventually cover the cost of the replacement of the item of plant. The depreciation component should be directed to the plant replacement reserve to provide sufficient funds to fund the replacement program in the future. The Plant Replacement Reserve is discussed in more detail in Section 3.3 and Internal Charge Rates in Section 3.2. Uniqco recommends depreciation recovered through the recharge rate should be classified as “over recovery” and transferred directly to the reserve. In this way capital replacement funds will accumulate and be available to fund plant replacement without having to compete against other council budget priorities. We are unable to comment on internal hire rates at GCC as the data provided wasn’t in a usable form. When we tried to calculate hire rates from the spreadsheet that provided income and hours, all items in the fleet had a rate of $6.41/hr. This can be reviewed at a later date when the information is available. The aim should be to create an even balance sheet of plant replacement reserve against the long term plant replacement liability. This balance sheet should show in the 10 year plant replacement program. Fuel Consumption Fuel consumption in litres per hundred kilometres is an important performance measure and is also used in budget calculations Fuel consumption is currently available through the fuel system but is not being used as a performance measure. By measuring fuel consumption we can detect exceptions such as loss of fuel or excessive fuel consumption which can be costly to operations. It is important to be aware of the time lag in the transfer of usage data from the supplier to the fuel management systems. High fuel utilisation can go unnoticed for some time if fuel supplier’s data is not regularly uploaded and analysed. Dispensing Fuel All fuels must be accurately dispensed under strict environmental controls. Accurate records should be maintained of the type and amount of fuel issued, together with the plant number and mileage or engine hours of the item requiring the fuel. Monitoring of fuel records, will make it easier to detect changes in utilisation and take remedial action.

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In many cases it may be more prudent to outsource the supply of fuel by collecting fuel using fuel cards for mobile plant and having mini tankers deliver on site for loaders, graders, rollers, and excavators. This alleviates the risk of environmental hazards when handling fuel and fuel cards force better accountability for fuel use. RECOMMEND

6) Accurate recording of whole of life costs be assessed and “budget” internal hire rates reflect full cost recovery including the cost of replacement

7) Depreciation charges reflect the level of funding required to replace an item at its optimum replacement point

8) Depreciation funds be directed to the Plant Replacement Reserve that is quarantined from other use to ensure the funds are available to fund the 10 year replacement program

9) Regular fuel consumption checks be undertaken and exceptions investigated 10) Whole of life costs (not just net purchase price) be used in the purchasing decision

1.1.4 Downtime Cost Downtime cost is all costs associated with an item of the fleet being out of action for repairs or maintenance other than the costs of the work on the item. Downtime costs can accumulate and the associated increased operational cost often go undetected unless accurate assessment of the downtime is made. Downtime should be measured from when the machine is reported down in normal working hours until the machine gets back on the road. Downtime should also be recorded in the case where a machine is brought to the workshop for repairs. While the repair itself may only take a few hours there can be substantial delays (downtime) in waiting for parts for unanticipated work. Provision needs to be made in the new fleet software for recording downtime. The date and time that the item of plant is actually entered for either a scheduled or unscheduled service should be recorded and also the date and time that the vehicle is available again needs to be recorded. Downtime is very much the hidden cost of fleet management. Downtime costs have two major components:-

• Hire of a replacement item. This also incorporates the cost of holding additional plant/vehicles in order to compensate for the mechanical downtime on other units. Including the cost of providing an alternative machine to carry out the service within the optimum replacement calculation, will ensure the real cost of downtime is captured.

• Fixed costs related to the loss of an operational machine on a specific task. The fixed

costs of a machine are the costs incurred irrespective of ownership. These include license, insurance, finance costs, and depreciation. In addition to the fixed costs related to the plant, one needs to establish a cost related to the operator’s downtime, subject to whether or not the operator is allocated another chargeable job while his machine is down. If the task allocated is menial, there is a net loss of productivity which costs money. Rearranging work due to plant downtime also costs management time, in addition to employees travel time to and from equipment

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breakdowns. All these items need to be assessed and allocated as a fixed cost associated with downtime for every item of plant and fleet.

Downtime needs to be tracked in order to identify how much the downtime is costing for each vehicle. In order to accurately record downtime, the workshop needs to record the:

• Time the vehicle arrived for service or breakdown was reported • Time the mechanic commenced work on the vehicle • Time (if any) waiting for parts • Time the job was completed • Time the vehicle was collected

Downtime impact cost allocations can then be identified by plant or fleet item. Comment on GCC Performance Accurate assessment of the downtime of plant/vehicles/equipment is not currently being undertaken at GCC. However this is typically the case in local government and should not be viewed as a criticism. Repair & maintenance costs at GCC are higher than would be expected for the current level of utilisation. This is largely due to the inefficient workshop practices. The affect of downtime on productivity is significant as it not only impacts on the item of plant but also potentially a whole work crew. Measurement of downtime will provide important management information for GCC. RECOMMEND

11) Accurate recording of all downtime costs be undertaken by the mechanical workshop and recorded in the new fleet management software.

1.1.5 Maintenance Failure Records The mechanical workshop does not currently record and measure maintenance failure records. Maintenance failure records provide the historical information for decisions affecting equipment by identifying downtime, failures and repair costs which will be reflected in charge out rates. Maintenance failure records provide an understanding of the impact of failures that may not be directly attributed to the equipment itself. Maintenance failure records identify:

• lack of daily maintenance such as failure to check the oil and water at start up, • exceeding equipment application or incorrect operational use such as the wrong

machine being used for the task required to be performed) • operator negligence – in the field or lack of daily maintenance, • accidents, • Manufacturers design failures or • age of the machine (expected component failure).

The accurate recording of failures is a fundamental step in controlling costs in plant and vehicle fleet management. When an item fails in the field, the impact on costs is not restricted to the repairs. Feedback to end users on the reasons for failures is critical if a failure is due to either the operator or inappropriate use of the item.

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Numerous hidden costs start to compound:

• A mechanic is sent to investigate the failure, resulting in the delay of planned maintenance on items scheduled for service.

• The operator stands idle while the equipment is assessed for suitability for field repairs.

• A cost is involved to recover the item from the field to the workshop. • The team relying on the item is held up until a replacement item is provided. • Additional expenditure in replacement plant hire should the activity be critical.

Being aware of the cause of the failures is particularly important to operational business unit managers at GCC to provide the information to become proactive in their approach to staff training and the correct equipment application in the field. Improving these areas will result in reduced costs and optimise plant & vehicle availability. It is important that the Workshop Supervisor records the failures of plant and fleet and allocate the cost of these failures to each category. Categories include failures due to:-

• Lack of daily maintenance, no greasing, no daily checks carried out, or tyre damage caused by incorrect tyre pressure.

• The age of the machine. • The operational requirement of the machine. • Design fault - normally appears during the warranty period. • Operator inattention or inexperience while operating on the machine. • An accident

By recording the reasons and cost of failures, GCC will be more informed and be in a better position to:

• action planned maintenance, • assess the need for operator training, • develop simple procedures to reduce the impact of these failures on operations or • make a decision on the need for replacement with a more appropriate item of plant.

RECOMMEND

12) Accurate recording of maintenance failures be undertaken by the mechanical workshop and recorded in the new fleet management software.

1.1.6 Flat Rate Repair Times “Flat rates” refer to the time that the mechanic is allocated to do a task based on industry standards for resource allocation in the workshop for both mechanical services and maintenance work. Flat rate repair times refer to an adopted industry standard for the expected repair time for a maintenance task. The term is applied by the vehicle repair industry to every task undertaken in the repair and maintenance of machinery. Mechanics usually don’t appreciate being asked to work to flat rate times. Uniqco always recommends the use of flat rates be instituted by the workshop supervisor in consultation with the mechanics. The normal arguments against flat rates include:

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• Rates are set on new machinery, often without bodies or protection guards fitted, • Manufacturers establish the labour flat rates for a workshop fully equipped with

special tools to undertake the task required. • When items are presented for service or repair there is always more work required

than requested. Maintenance flat rates are an excellent benchmark. Without flat rates and audit procedures to control repair labour, in our experience, maintenance costs are likely to be excessive. We recommend that once the Mechanical Workshop has developed a preventative maintenance plan, that flat rates be adopted for standard repair type work as well. All service books supplied by manufacturers normally have flat rates recommended for every service. Any service level agreement covering flat rates must include rate and time factors to complete the task while providing a specific quality of service. Comment on GCC Performance With the opposition to change and current inflexible work practices it would be difficult to implement flat rates even for standard servicing. Introducing flat rate repair times will be an important tool to deliver much needed productivity improvements in the mechanical workshop. RECOMMEND

13) Industry flat rate times be adopted as soon as practical.

1.2 External Plant Hire It is important that external plant hire is monitored to ensure the owned assets are being used as a priority to maximise their utilisation. External plant hire records were not readily available in a format that could be assessed as part of the review. External plant hire at GCC is currently arranged by the individual departments. Indications from the interview process lead us to believe substantial savings in external plant hire can be achieved by expanding the role of the current plant pool operating within the Works Department. This is detailed in Section 1.3 below. RECOMMEND

14) Consideration be given to expanding the plant pool to provide a centralised point for external plant hire

15) External plant hire be recorded so that plant can be identified as a cost by category and as wet or dry hire to assist in future audits and business case analysis for retention/disposal/purchase of plant.

1.3 Scheduling of Resources

Currently Works operate a plant and truck pool and this is commended. Based on our experience we believe the benefits of this concept can be increased by expanding the scope of the pool to include labour and external plant hire and closer liaison with Water & Sewerage. There are some guiding principles that Uniqco recommends. Guiding Principles

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I. The basis of scheduling of plant & labour from an operations viewpoint should be that

only the required plant and labour needed for a particular job should be allocated to that job and not the traditional “crew” which can result in low utilisation of plant and excessive job costs.

II. In terms of capital works a core work crew should always be retained to ensure GCC

retains a skill base in house and provides the ability to respond to short notice needs.

a. If there is a shortage of capital works the capital works crew can be reassigned to maintenance tasks.

b. If there is an excess of capital works, additional plant and labour can be hired in or Works can tender the work out.

c. If the capital works crew is successful in winning external work this is a good indicator of their market competitiveness

III. In terms of maintenance works, core work crews should be retained for the typical

restoration and maintenance work with additional resources being engaged to meet peak or fluctuating demands.

Weekly Scheduling Meetings In aiming to achieve item (I) above in addition to the overall works schedules and estimates prepared by the Works Manager there is a need for weekly meetings for works planning and scheduling of plant & labour allocation coordinated by the Supervisor Depot Services under direction of Ian Johnson. Currently it is understood the weekly planning involves only Works and the focus is on trucks and heavy plant not required as core items for daily use by construction crews. It is recommended the pool also include surplus labour and take into account the needs of Water & Sewerage. The aim would be to:

• Plan plant & labour requirements for the week ahead based on the capital works program and fluctuating requirements of Water & Sewerage

• Schedule any planned servicing in conjunction with the Mechanical Workshop • Minimise external plant hire • Maximise use of owned plant

This would involve some basic principles:

• All participants to consider their requirements for the following week o Mechanical Services in terms of planned servicing o Operations team leaders in terms of their plant & labour needs based on first

principles for the work scheduled for the week Meeting to be held on Thursday or Friday and chaired by the Works Manager or Operations Coordinator Works & Traffic Ian Johnson provided he has authority to make decisions such as:

o Is there any surplus owned plant? Rather than stand the item down can another job be brought forward?

o If there is no work for particular items of plant/vehicles then these should be stood down and the operators be allocated to other jobs/other work areas

o Any surplus plant/labour would become the responsibility of the Supervisor Depot Services who would need to be able to supervise any small jobs that could be programmed to utilise the surplus resources.

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• The meeting would be joined by the Mechanical Workshop to discuss any rescheduling of planned services.

• It is the responsibility of operational supervisors and not the Supervisor Depot Services to ensure their jobs are run efficiently and neither surplus plant & labour is carried on jobs. Only the resources needed for a job should be allocated to the job.

The Supervisor Depot Services principle duties should involve:

• responsibility for the plant & labour resources “pool” and the day to day allocation of resources from within the pool

• Supervisor Depot Services responsibility for external plant hire • coordinating plant/vehicle servicing needs with Mechanical Services in accordance

with the service level agreement RECOMMEND

16) Consideration is given to the suggestions proposed to improve the effectiveness of weekly scheduling meetings as outlined in the report.

1.4 The Mechanical Workshop If the organisation is to continue to own and operate its own workshop (which Uniqco strongly recommends), good recording and monitoring systems need to be in place. This is to ensure that repair and maintenance times are controlled, performance standards are met and that accurate records of each repair are kept. The same standards must be applied to external service providers. All costs incurred on a particular item should be allocated against that item. The date and time of commencement and completion of every task, and parts waiting time, needs to be recorded. Labour repair time for each job should be itemised and recorded for future audit and analysis. Parts need to be allocated to the repair and a record of the part number and the parts supplier kept as part of the repair details. Apart from monitoring cost and performance, detailed records are essential to avoid the issue of liability in the case of operational accidents being open to question. It is understood GCC currently outsource some specialist repair and maintenance work such as auto electrical, hydraulics and fabrication/machining and this should continue. Accurate recording of job start and finish times is essential to ensuring:

• costs are accurately allocated to the jobs undertaken • mechanical workshop staff are working within industry standards.

Feedback to operations supervisors on the reasons for failures is important if a failure is due to either the operator or inappropriate use of the item. This provides the supervisor with the information needed to take corrective action with the operator. In order to reduce downtime, the workshop must coordinate service schedules with operational requirements. There appears to be a good level of cooperation between the workshop and operational sections to undertake scheduled preventative maintenance. However there is a significant opportunity to achieve servicing outside times when the item of plant or vehicle is required for normal operational purposes. Refer Section 1.4.1

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Uniqco recommends service level agreements be established with all end users and external service providers. This is explained in more detail in Section 1.4.2 The Mechanical Workshop should be responsible to:

• Establish failure records and identify the reasons for plant/vehicle failures. It is essential to identify if the failure is due to:

o operator negligence – in the field or lack of daily maintenance (such as failure to check the oil and water at start up)

o application the machine is being used – wrong machine for the task required to be performed

o manufacturers fault, or o simply the age of machine – expected component failure

• Monitor downtime, including equipment availability, and downtime related to parts and labour

• Report back to fleet end users on the reasons for failures and the amount of associated downtime

• Scheduled maintenance and preventative maintenance planning • Workshop staffing levels and skills audit

Note: The scope of the review has not included:

• A skills and equipment audit of the existing workshop • Investigation of external contractor options for suitability and cost • The impact, if any, of in-house servicing on warranty and resale values.

RECOMMEND

17) Feedback to operational supervisors be provided on the reasons for failures if a failure is due to either the operator or inappropriate use of the item.

18) In order to reduce downtime, the workshop must coordinate service schedules with operational requirements.

19) To avoid carrying additional plant, programmed maintenance should where possible take place outside times when the item of plant or vehicle is required for normal operational purposes.

1.4.1 Efficiency issues Efficiency in the Mechanical Workshop is pivotal to the efficiency of the other operational business units at GCC. There are definite advantages of providing an in-house service to other business units. However, the mechanical workshop has a responsibility to ensure they provide a quality and efficient business capable of competing against private sector operators. Factors to be considered include:

• Business operating hours – are staff prepared to provide a service outside the normal operating hours of end user business units?

• In today’s environment of increased electronic management of engines and improved reliability, dealer service facilities are often better placed to provide scheduled service and maintenance.

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Comment on GCC Performance The main issue to be addressed at Gladstone City Council is the inflexible work practices of the mechanical workshop which is causing excessive plant and vehicle downtime and in turn directly impacting on end user productivity. Downtime is a significant issue as it brings with it additional associated costs such as hire of external plant, lost time on the job, inefficient redeployment of staff to other work etc. In our experience, the costs associated with downtime are likely to exceed the annual repair and maintenance costs. Work practices of concern in the mechanical workshop include:

over servicing of light fleet at the expense of much needed servicing of heavy fleet. inflexibility of some mechanical staff in tasks they undertake (multi skilling approach) pressure applied by mechanical staff on plant operators not to undertake very minor

tasks such as tighten a nut or replace a fuse and requiring this work to be undertaken by a mechanic

resistance to industry best practice times for servicing The workshop situation is further compounded by the increasing sophistication of new technology associated with modern plant and vehicles and the corresponding need for specialist diagnostic equipment and mechanical skills. In our view, Gladstone City Council is not well placed to continue to undertake major servicing and repairs in house. The current fleet management structure is considered appropriate for GCC operations. The issue is the ability and attitude of some staff. Our recommendations for change include:

outsourcing of specialist mechanical repair and maintenance work development of service level agreements with internal and external service providers retention of mechanical staffing levels but with redefined roles and changed work

practices From our assessment we believe that the mechanical workshop has sufficient manpower to support the existing fleet. However their role should change to one of preventative maintenance, safety checks and emergency repairs. As the fleet is progressively outsourced this will free up mechanics hours which can then be used to introduce regular safety checks on the fleet. The end result will be significantly less operational downtime and greater productivity which will be reflected in lower job costs for operational areas. The recommendation to outsource relates primarily to scheduled services which we estimate should only account for 20% of the available mechanic hours. This would free up Council staff to look after breakdowns and minor repairs. Major repairs should also be outsourced where practical. The major issue other than equipment and skill levels is efficiency. We don’t believe more staff would be needed if servicing was to be retained in house rather that they would need to be much more efficient. Staff would need to work to flat rate times for scheduled servicing, operate more flexible shifts (working hour spread) and all staff need to be available on operational RDOs. As a guide we estimate the following hours would be released by outsourcing: (i) light fleet (cars, utes and vans) servicing will only release 235hours of a mechanics time. (ii) Heavy and light fleet (trucks) releases a further 343 hours

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(iii) Heavy plant (not including mowers/tractors) would release 483hrs This in total equates to say 1 mechanic based on effective hours of work at about 1400hours. Purchase of the specialist equipment and training of staff in a small workshop for such a wide spread of plant, vehicles and equipment just isn’t practical when other options are readily available. As downtime is not currently being measured it is difficult to forecast the extent of savings in operational areas. In our experience the savings will far exceed the additional cost caused by outsourcing but still retaining 4 mechanics. The change process can be expected to be resisted by some workshop staff and we recommend GCC proceed with the temporary engagement of a mechanic to cover for the staff member on long term sick leave. RECOMMEND

20) Outsourcing be considered for: • All light fleet servicing • All new heavy fleet items that can be serviced in Gladstone (eg Komatsu and

Caterpillar) to have a service contract for major services • Other plant & truck servicing & repairs if a local contractor is available and

capable • Other specialist repair work (electrical, hydraulics etc) where accredited agents

are available 21) Local service providers be approached to become accredited to undertake servicing

of plant & trucks. 22) The existing workshop structure and staffing level be retained with the potential to

reduce to 3 mechanics plus a leading hand (total 4 mechanics) after outsourcing has been implemented.

23) The role of mechanical staff change over time to that of scheduled safety inspections and to respond to immediate breakdowns and to conduct scheduled services and servicing of small plant.

24) Unacceptable work practices be addressed through amended position descriptions and the introduction of service level agreements.

1.4.2 Service Level Agreements (SLA’s) Nowhere are there more appropriate circumstances for the application of an SLA than in the provision of plant and vehicle maintenance and repairs where performance is critical in maintaining high utilisation for plant and vehicles and reducing costs. The following SLA’s are recommended:

• Between Fleet Management and the in-field service provider (Operations) for the provision of plant/vehicle/equipment procurement and the maintenance and repair of plant/vehicle/equipment

• Between Fleet Management and their external service providers The SLA’s should:

• Focus on agreed service specifications • Enable the internal Business Units to get the exact level and standard of service

required • Create a partnership between “provider” and “purchaser” Business Units • Enable the “provider” Business Unit and “purchaser” Business Unit to be clear on

what is required to achieve the desired outcomes

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• Increase the accountability of service providers • Improve customer service and service delivery.

RECOMMEND

25) The following Service Level Agreements be developed:

• Between Fleet Management and the in-field service provider (Operations) for the provision of plant/vehicle/equipment procurement and the maintenance and repair of plant/vehicle/equipment

• Between Fleet Management and external service providers • Between Fleet Management and the mechanical workshop

Shift Roster Principles for the effective use of available mechanics hours

• Scheduled Servicing and Planned Maintenance should occur as much as possible outside normal working hours of operational plant – to maximise utilisation and minimise downtime.

• As most vehicles only have minor defects early in the shift (eg flat battery, air leak, blown bulbs etc) the majority of maintenance work in the workshop starts to occur after the vehicles become operational for a period in the field.

• Hence other than on operational business units RDO’s there is a need for minimum staff only at start up of outside operations (min 1 staff)

• Vehicles that have minor defects can normally sustain their operations during the day but these defects need to be repaired the night before so the vehicles are operational for the next day.

• With this style of work flow ALL workshops (commercial and in house) normally program less staff early in the day and the maximum at the end of the day.

• Full use should be made of Operational RDO’s for scheduled services and full staffing should occur on those days.

• Major services should be scheduled to be undertaken when not required by operations such as RDO’s or other times that don’t affect productivity.

• Outside staff RDO’s should be spread as much as practical to assist workshop servicing. ie Fridays/Mondays and alternate weeks

1.4.3 Opportunities for Improvements in the Workshop Currently a single shift is in operation. It is recommended staggered working hours be considered for the mechanics during the spread of hours between 6am-6pm with the maximum number of staff available to cover the afternoon period. RDO days taken by workshop staff should be limited to days other than the RDO’s of operational departments to ensure maximum staffing on days when plant is not working. This would allow scheduled services to be undertaken on Fridays. Such a move may not be welcomed by workshop staff because of the impact on the current long weekends. RECOMMEND

26) Mechanical workshop rosters be reviewed with the view to: • have all mechanical staff available on Operations RDO’s

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• conduct scheduled servicing/maintenance as much as practical when items are not required by operational business units ie on RDO’s

27) Operations staff RDO’s be spread over Mondays as well as Fridays if possible 28) On days other than operational units RDO

• have minimal staffing on early shift and • maximum staffing on late shift

1.4.4 Tyre Management Any tyres, other than spare tyres, should not be held in stock unless there is a substantial lead-time on supply. Tyre maintenance and fitment is best provided by the tyre supplier. The specialised nature of tyre management requires significant skills and the Mechanical workshop is unlikely to have the time to undertake tyre management and optimise tyre performance. Tyre tread depth measurement and tyre pressures should be measured at least every 14 days, and low pressures investigated and rectified. Tread depth calculations can provide a clear indication when tyres should be replaced, giving an early indication of the requirement to order replacement tyres. These calculations can also provide an indication when tyres should be rotated to maximise tread life. By providing information on tyre wear based on cents/km the fleet manager will be able to accurately forecast future tyre requirements and costs. A number of major tyre suppliers can provide this service as part of their supply tender and at no extra cost to Council. Comment on GCC Performance Limited tyre management is currently undertaken with a check by mechanical staff every 2 months and there is no formal tyre management program where tread depths, tyre pressures and wear patterns are regularly monitored and recorded. It is recommended tyre management be required by the tyre supplier as part of the annual supply contract. RECOMMEND

29) That tyre management be included as part of the annual tender for supply of tyres with the supplier being required to regularly monitor tread depths, tyre pressures and wear patterns and provide regular reports to the mechanical workshop.

1.4.5 Oil Sampling and Analysis Oil Analysis is an important risk management tool and should be an integral part of the condition monitoring program of the fleet. An oil analysis program can identify abnormal trends and pinpoint the wearing components as well as the severity of wear taking place. This allows for appropriate action to be taken rather than ‘unscheduled reactions’. The analysis of lubricating oil from a wide variety of mechanical equipment for preventative maintenance purposes is a well-established practice. Depending on the capital cost of the equipment, substantial savings can be made through the use of oil analysis by reducing unscheduled downtime and extending equipment life and oil drain intervals. Testing the oil in equipment can answer the key questions:

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• What is the condition of the equipment? • What is the condition of the oil?

Regular analysis of oil from engines, gearboxes, hydraulic systems, compressors, and other machinery allows a wear pattern to be established for each piece of equipment. By monitoring these wear levels and contaminants at regular intervals, relevant changes in wear patterns can be determined at an early stage. This can provide the alert to enable remedial action. The benefits of oil analysis allow:

• Problems to be identified early. • Problem areas to be identified. • Problems to be rectified during scheduled downtime periods. • Breakdowns to be minimised.

The ultimate goal of an oil condition monitoring program is to reduce costs and reduce downtime. Oil Consumption Oil stocks, like fuel stocks in a workshop environment, are substantial cost items. Grades and types of oil in stock need to be minimised and at each service the amount of oil and type used must be recorded. Should there be a failure and a need to make a claim on a manufacturer this information will be critical. Individual vehicles’ oil consumption should be monitored. Where it is identified vehicles are using excessive oil between oil changes, an investigation should be undertaken to determine the cause. Comment on GCC Performance It is understood from the interviews that there is no formal preventative maintenance program using oil analysis other than with new plant. Uniqco recommends a regular oil analysis program be introduced for all high maintenance vehicles. We also recommend use of an independent provider such as ALS WearCheck for this service. RECOMMEND

30) An oil analysis monitoring program be introduced for high utilisation items beyond manufacturers warranty periods as an important preventative maintenance tool

31) Oil consumption be recorded and monitored. 1.4.6 Programmed (Scheduled) Maintenance Scheduling of both maintenance and repairs is critical to the efficient operation of the plant and vehicle fleet and the in-field delivery of in-house works and services. Preventative maintenance planning must be a priority as plant and vehicles have service requirements that must be followed irrespective of actual utilisation. However, the preventative maintenance program has been severely hampered at GCC by poor work practices and inefficiencies in the mechanical workshop.

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RECOMMEND

32) The mechanical workshop provides feedback to end users on the reasons for failures in order to identify if a failure is due to either the operator or inappropriate use of the item.

33) Programmed maintenance take place wherever possible outside times when the item of plant or vehicle is required for normal operational purposes.

1.4.7 Ancillary Equipment Ancillary, or miscellaneous, plant and equipment includes items such as push mowers, edgers, chainsaws, water pumps, radios, electronic sign trailers, light trailers, plate compactors, and concrete saws. GCC operates an excellent internal hire business under the supervision of Alan Jones. The section is operated along similar lines to an external hire business and includes such items as generators, whipper snippers, compressors, chainsaws, small trucks, a bobcat, utes, a crane, a ride on mower, drills and other non asset items. Non asset items (value less than $2,000 are hired out without charge. It is understood operational departments purchase non asset items with the cost going against jobs. In our experience ancillary plant and small items can easily go unnoticed within substantial operational budgets. Without some degree of control these minor items can become costly in terms of lost productivity and operational expense. Some simple management practices will ensure the ongoing cost of owning these items is kept to a minimum. Our concern with minor plant is that there is likely to be many older items that should have been disposed of when a replacement item has been purchased but they have been retained as a spare. This results in excessive ancillary plant being retained. This problem is likely to be exacerbated by not having a budget for ancillary plant. The following management guidelines are recommended for ancillary plant:

• Itemise every minor item and tag them with an identification number or, preferably, a bar code which is more efficient. Simple metal tags can however be just as effective. To ensure costs can be monitored, these items should not be lumped into one all inclusive account where high cost items cannot be identified.

• Develop a schedule to ensure each item is serviced at least once every 12 months and the item is tagged and recorded as serviceable.

• Ensure that internal hire rates include the cost for both the maintenance and replacement of these items of plant. For example, when a work-crew needs a chainsaw on a permanent basis, the vehicle hire rate associated with that crew can be increased by a marginal amount (say a couple of dollars) to recover the costs of the ancillary plant.

• Ensure replacement criteria are established and made known to equipment maintenance staff to avoid more money being spent on repairs than the cost of a replacement item. For example, it is not wise to spend 15 hours removing and replacing a piston and crankshaft in a pump that can be replaced for $800.00.

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• Review maintenance costs on minor equipment every six months. Items that have not been presented for service or maintenance may not be used regularly and may not be required at all.

• Spare replacement items should be available for machines that are subject to heavy use to ensure a job is not held up while the item is in the workshop for a minor breakdown or service.

• Ensure new operators of minor and major items are trained on how to start and operate the equipment and trained in the correct procedure in the case of a machine failure. Minimal operator training on an item as small as a trimmer can save time and both operational and maintenance costs.

• Develop a schedule of annual charges for these smaller items. Ensure end user managers and supervisors are aware of the annual cost of ownership to their departments.

• Light, highly mobile items such as pumps, chainsaws and edgers are extremely difficult to secure. It is recommended that all operators be required to present these items on a regular basis for ongoing safety and stock-take purposes.

• Ancillary equipment is best controlled from an issue store. The store can provide clean, efficiently serviced items in return for units requiring maintenance. A storeman can regularly ensure all items are still issued to the person responsible for their operations. The store can provide the facility for operational repair assessment and incident recording to ensure abuse and mishandling issues are recorded for monitoring by management.

Note: A NSW council reduced its small plant inventory by two thirds through greater accountability along the lines suggested. RECOMMEND

34) A separate budget allocation be made for ancillary plant and the funds for this be recovered through a charge to end users.

35) Ancillary plant and small items be subject to greater accountability along the lines proposed in the report.

36) Each item should be serviced at least once every 12 months and checked for safety every 6 months.

1.4.8 Parts Inventory Parts inventory refers to the level of spare parts being held by the workshop and should be closely monitored as a large inventory means higher inventory costs. GCC maintains a minimal parts store and parts are ordered on a just in time basis. Consumables are issued by stores. Comment was made during the interviews with stores that some consumables stock is being written off due to purchasing not being advised when fleet items were disposed of. This can be overcome by including purchasing in the loop when fleet is changed over. RECOMMEND

37) A process be initiated to ensure purchasing (stores) is advised when fleet items are replaced.

1.4.9 Risk Issues The following issues are highlighted from the perspective of minimising GCC exposure to risk in the provision of mechanical services.

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Detailed Records

• Apart from monitoring cost and performance, detailed records of servicing and repair and maintenance, are essential to avoid the issue of liability in the case of operational accidents being open to question.

Use of Genuine Parts

• Where possible, genuine manufacturers parts should be used in repairs. o Warranty on genuine spare parts often ensures subsequent premature

failures are also covered by warranty. o Where evidence can be produced that genuine parts have been used this will

normally improve the resale value. Program Safety Checks

• Safety checks on every item of plant and vehicle are critical. o Miscellaneous plant must be checked every year as a minimum. o Low utilisation plant should be checked and serviced regularly (every six

months minimum) to ensure there is no downtime accumulated from flat batteries and the like when the plant or vehicle is required for operational use.

Repairs to Manufacturer’s Specifications

• When specifying repairs, ensure that the repair is undertaken to the plant or vehicle to manufacturers’ specifications.

o In many circumstances items are repaired just to keep them running, but this often causes more failures.

o Where repairs are undertaken by an in-house workshop to manufacturer’s specification there is a greater likelihood that warranty claims will be accepted.

Avoid Specifications That are too Prescriptive

• In writing specifications for it is important to give the supplier all of the information about what the item will be used for to avoid the purchaser accepting liability risk for:

o The product if what is specified cannot meet the requirements of job o Personal Injury as a result of the item being incorrectly used

Ensure Appropriate Staff Training

• Staff must be adequately (and continuously) trained in the proper use of plant/vehicles/equipment

RECOMMEND

38) In order to minimise risk the items listed in the report (Section 1.4.9) be included in policies, processes and procedures.

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2. Recommended Management Practices

2.1 Involve Staff in Decision Making Involving down the line staff is particularly important to ensure the suitability of the plant required and ownership of the decision at end user level. This is also a risk management strategy. While staff are involved this should be more formalised. End user staff should be involved in:

• Business case studies, • Preparation of plant specifications and • Tender evaluation.

RECOMMEND

39) Operations staff be formally involved in business case studies, plant specification development and the tender evaluation process to increase the likelihood of the suitability of plant for the task required and minimise the risk of incorrect purchases.

2.2 Plant Specifications The following process is recommended by Uniqco in preparing a specification.

• Review current vehicle specification (for a replacement item) and compile a list of the operator’s requests for modifications to suit their requirements.

• Research current market and discuss with potential suppliers their most recent model features and benefits that may suit the operational requirements.

• Develop specification outlining the role the equipment will play in the organisation. Add all options required by the operational crews. Review the potential resale value of the options and allow for variable depreciation depending on their popularity in the second hand market.

• Develop a weighted criteria analysis for the item. Weightings should be discussed with stakeholders and the tender assessment panel.

The specification should be structured to provide clarity for suppliers in preparing tender offers and for assessment of the offers. A performance based approach is preferred to a prescriptive specification. A performance based approach provides guidelines outlining the performance requirements of the item which then allows a supplier the opportunity to submit new technology and innovative solutions to meet the purchaser’s needs. For example, a prescriptive tender specification may stifle a truck supplier's potential where there is a requirement to supply an 8 tonne payload truck. The tender might call for a GVM of 15000kg only, thereby eliminating trucks with a GVM of 13900kg with a lighter chassis that would still carry 8 tonnes. A descriptive performance based approach can be achieved through studying the requirements of the task the item of plant or vehicle is required to perform and building the specification around these. This will allow the supplier the opportunity to respond directly to the range of tasks required to be performed.

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The specification should lead each tenderer to the same general conclusion for meeting the plant or vehicle requirements. Trucks for example should be specified by maximum gross vehicle mass, cars by cylinders, loaders by cubic capacity, and skid steers by engine kilowatt. Standard industry terminology should always be used in specifications for earthmoving plant and trucks. This should then be followed by a detailed description of the functions to be performed by the plant or vehicle. For example, when calling for tenders for a crew cab vehicle, nominate the number of staff and functions to be performed by the staff that the vehicle is required to support. By identifying the role and functions required of the vehicle, tenderers are presented with the opportunity to offer a range of solutions. The same principles apply irrespective of the plant item or vehicle to be acquired. A prescriptive approach stipulates detailed specification requirements to meet the user’s needs and while this approach may appear to deliver the end user what they want it may result in:

• Over specification • Transfer of liability for the performance of the item to the purchaser (i.e. ability to do

the job resulting in incorrect application of the item) • Increased cost • A tenderer with a suitable item being considered non conforming and being rejected

Minimising Risk - Compliance Requirements Compliance requirements are the mandatory minimum requirements of a specification. For example, minimum horsepower, minimum operating weight, type of steering, type of tyres, type of fuel, maximum emission standard along with a range of requirements which are dictated by the functions and roles required to be performed. The compliance requirements must be structured to allow an assessment of whether the plant or vehicles on offer from the range available to the Tenderer will meet the requirements of the buyer. The compliance requirements must be task or function orientated and not biased towards one particular manufacturer. Other non-task or function compliance requirements to be met by Tenderers may include:

• Evidence that the Supplier is an authorised Dealer. • Date of delivery of the new item of plant or vehicle. • Evidence that service support training is up to date. • Evidence of third party quality assurance attainment. • Date of manufacture of the goods offered. • Certification of the vehicle’s origin if second-hand, confirmation that parts are

compatible with Australian parts and confirmation the vehicle meets all Australian regulations.

• Provision of antitheft devices and explanation of their capability • Evidence that the tender item meets all State and Federal regulations including

OH&S (eg noise).

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RECOMMEND

40) Specifications be prepared on a descriptive basis detailing the role and function required of the unit rather than a prescriptive specification that restricts suppliers opportunities to meet the real requirements of the item tendered and transfers risk to the purchaser.

2.3 Tender Assessment Process Options for tendering in local government include:

• Via a government supply contract • Open market • From pre qualified tenderers only • Through a panel of preferred suppliers (generally established through a tender

process) Tender Assessment Criteria The tender documents should clearly set out the tender assessment criteria and its relative weighting to enable Tenderers to identify how the assessment will be made and to enable quantifiable and meaningful feedback to all Tenderers following award of the Tender. The criteria to be weighted and the weightings will be likely to vary for each tender and should include but not be limited to:

• Tender price offer incorporating Whole of Life costs • Operational requirements • Mechanical assessment • Warranty, service and parts backup • Environmental issues • User testimonials

Refer to the IPWEA Plant & Vehicle Management Manual for a model for tender assessment. Currently whole of life costing is not being used in assessing the price offers from suppliers. RECOMMEND

41) Whole of life costs be used in the analysis of tender or quotation pricing and not the net tender price.

2.4 Minimising Risk in New Purchases The following guidelines are put forward to minimise risk. (i) Undertake an operational assessment when an item is to be changed. Interview the operators and review the specification to meet operational needs where applicable. Operators will appreciate the time taken to provide for operational needs, and opportunities to save operational and capital costs may be found through the consultation process. All manufacturers design plant/vehicles to within load and operational tolerances. Ensure operators are aware of these tolerances as overstressing vehicles can cause substantial failures resulting in increased costs.

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(ii) When specifying vehicles, explain the role the vehicle has to play. Describe the annual kilometres the vehicle is expected to travel, the type of loads it will be expected to carry and how the truck will be loaded. Let the manufacturers offer a vehicle they believe is suitable. (iv) Ensure the Request for Tender clearly spells out the supplier’s responsibilities if the vehicle supplied does not meet the specification limits. Make sure conditions are included that will allow the return of the vehicle with all costs and expenditure refunded, and the supply of a suitable replacement vehicle that will meet the specified requirements. (v) Don’t be too specific when specifying a body or vehicle because vehicle design continuously changes. Manufacturers will offer upgraded technology while the specification is based on older technology for which a premium may be paid. (vi) All new trucks are required to comply with Australian Design Rules (ADR’s). These design rules cover the fitting of mirrors, seatbelts, bodies, tow hitches, rims/tyres and exhaust locations. It is important to understand these rules and not specify modifications outside the rule requirements. For more information on the ADR’s see http://www.dotars.gov.au/transreg/str_adrindx.htm RECOMMEND

42) Consideration be given to adopting Uniqco’s suggested guidelines for minimising risks in new purchases.

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3. Plant Replacement Program & Financing Strategy 3.1 Establishing Internal Hire Rates and a 10 Year Replacement Program To develop internal hire rates, it is necessary to first establish whole of life costs. As described in Section 1.1.3, the elements of whole of life costs include purchase price, resale value, opportunity costs, fuel, repairs, maintenance, insurance, oil, registration, and admin costs. When establishing whole of life costs, budget items need to be allocated directly to either operational or capital expenditure. (i) Operational Expenditure Operational costs, both fixed and variable, such as fuel, repairs, maintenance, insurance, oil, registration, and administration are added for each vehicle. The total cost is then divided by the timesheet hours if recovery of the annual operational cost is required. (ii) Capital Expenditure Annual replacement provision is actual depreciation (purchase cost less anticipated residual, divided by the projected years of ownership) plus opportunity cost. The sum of these items is then again divided by the timesheet hours or annualised to identify annual replacement provision. The annual operational costs plus the annual replacement provision divided by the anticipated timesheet hours where applicable allow for an accurate internal hire rate. These hire rates can then be applied to operator timesheet hours or used just as an annual charge out rate, both to recover operational costs and develop a suitable plant replacement fund. In the case of leasing, full recovery of lease costs should be achieved. Exceeding “budget” utilisation in a lease arrangement would incur additional payments to the leasing company and add to operating costs for the end user. This is in contrast to when the fleet is owned and increased utilisation results in reduced operating costs. RECOMMEND

43) That cost of capital and actual depreciation (purchase cost less anticipated residual revalued annually) be applied to all plant

3.2 Ten Year Replacement Program The current 10 year replacement program needs to be reviewed to take utilisation into account. Equipment utilisation should be the second driving factor in the replacement equation. If utilisation is ignored, or not adequately addressed, downtime, repair and maintenance costs will escalate plant and vehicle fleet costs and increase downtime. Developing ten year equipment changeover plan should take into account projected future operational requirements. Time should not be the only replacement criterion when preparing forward plans. . The 10 year plan should be based on the following information:-

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• Purchase price of the equipment • Projected resale values • Projected finance costs • Projected repairs and maintenance costs • Current operational downtime costs for plant (these must include displaced operators

and other works held up, and standing costs for the plant item concerned) The 10 year replacement program should be reflected as a long term liability in the balance sheet and this will offset the accumulated funds in plant reserve and reflect the true financial position. RECOMMEND

44) The current 10 year plant replacement strategy be revised based on optimum replacement timing on utilisation as well as age.

3.3 Plant Reserve GCC has a well established plant and vehicle replacement reserve whereas some councils attempt to buy vehicles with cash using the current year’s income. While there are no guarantees plant replacement reserves won’t be raided to fund other capital purchases, they are more likely to result in the funds being available to optimise timely replacement. Deferring replacements compounds costs by increasing maintenance costs, and reduces operational efficiency of services through downtime due to mechanical failure. Organisations that rely on annual budget allocations for replacement of the fleet are more at risk of funding cuts to the fleet capital budget and as a result not optimising their fleet replacement program. The plant reserve method also ensures that internal charge rates relate to capital replacement as opposed to being a set rate that may be derived from another source such as a state road authority with completely different cost structures. In the long term GCC should be spending as much on capital replacement as the annual depreciation of the fleet. This will ensure the written down value (WDV) of the investment is maintained. This does not mean the expenditure in each year should match the level of depreciation as this could result in items being changed over prematurely. It is important that GCC continue to build sufficient reserves using funds allocated from both fixed rate depreciation (accounting principle) and additional reserves funded through operational allocations based on utilisation (variable rate depreciation). RECOMMEND

45) That Council continues to operate a plant replacement reserve as the method of funding the ongoing plant replacement program.

46) The guiding principles for the plant replacement reserve should be: • to recover sufficient funds through actual depreciation to meet the 10 year

replacement programs at optimum replacement timing • In the long term the Council should on average be spending as much on capital

replacement as the annual depreciation of the fleet.

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4. Servicing & Repairs

4.1 Contract Maintenance on New Equipment With rapidly changing technology and highly specialised equipment needed for plant and vehicle servicing, a periodic maintenance contract for scheduled servicing and maintenance should be requested when preparing tender documents for new and replacement plant purchases. Making a decision to accept a periodic service contract should be given some weighting in the overall tender assessment matrix. There are some key questions that should be addressed when considering a periodic maintenance contract associated with a new purchase.

• Does the service provider have the necessary qualifications and specialist skills to do the work? For example, electronic diagnostics of light vehicles is fast making in-house repairs of light vehicles difficult to substantiate.

• Is servicing available out of hours?

If not this will add considerable downtime costs to the operational business unit during routine servicing and repairs and these costs should be taken into consideration in the decision making process

• Where will the servicing be conducted?

Breakdowns on site? Planned maintenance? Who will be responsible for transport of vehicle/plant and in what

circumstances?

• What are the warranty considerations if the work is done in house? The increased resale value of dealer-serviced vehicles further

increases the attractiveness of outsourcing servicing. Many manufacturers are offering additional second hand warranties if

the vehicles are serviced from new by the dealers • What is the contract term? Is there any “out” clauses if the service level provided is

not as expected?

• What performance benchmarks will be used Unless fixed rates are offered by a contractor, the contractor must be

subject to meeting flat rate repair times. To not do so is to provide an open cheque book.

A contractor shall always be responsible for rework at his cost.

• What are the downtime costs? The cost of transporting the unit to the contractor’s workshop facility

must be added to the contractor’s price unless the contractor has a mobile service or the work can be undertaken in the client’s workshop.

Will a replacement unit be provided by the service provider and at what cost

• Total cost comparisons between options

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Tendered prices Downtime comparisons Transport and labour taking plant to and from the service provider Increased trade-in value as a result of dealer servicing?

The following assessment matrix shown in Table 4 provides a mechanism to compare contractors or a contractor with the in house team. Table 4 – Periodic Maintenance Assessment Matrix

Maintenance Service Provider

Supplier1 Supplier2 SELECTION CRITERIA

WEIGHT FACTOR

SCORE TOTAL SCORE TOTAL

Specialist Skills

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Out of Hours Servicing

15

Field Servicing 15 Warranty 5 Cost 35 Benchmarking 5 Downtime 5 TOTALS: 100 Even when the servicing and repairs are outsourced, there will always be the need for in house mechanical staff to understand problems when they arise, to have the knowledge to manage the contractor and to undertake minor daily maintenance on plant and vehicles and repairs on small items of equipment. Any contract maintenance agreement should allow Council to undertake minor servicing and breakdowns with major services being done in cooperation with the contractor. RECOMMEND

47) In the case of new plant purchases, provision be made in the tender documents for a contract maintenance option to be provided by suppliers.

4.2 Service Standards for Availability of Plant The need for programmed maintenance and servicing of plant and vehicles out of their normal operating hours is addressed fully in Section 1. As a minimum Manufacturer’s recommendations should be adopted. There is also a need for proactive safety checks in addition to Manufacturer’s scheduled servicing. All plant including minor items should be subject to a safety check a minimum of every 6 months. This safety check is not only to ensure the mechanical condition of the item but also registration on the asset data base which is particularly important with minor plant.

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Major plant items such as road patching vehicles (high maintenance items) need a weekly safety check and a preventative program developed to enure downtime is minimised. For example:

• replacing brake linings well before they cause subsequent damage to drums • replacing bearings and bushes before they can cause any additional failure or safety

risk operating outside their known wear tolerances Small engine plant & equipment should be subject to a weekly safety check by the operator and a minor service every 6 months by a mechanic. RECOMMEND

48) The following preventative maintenance schedule be adopted to minimise OH&S risk and downtime

Category of Plant Frequency of Safety Checks All plant including minor items Min 6 months Major high maintenance plant Weekly Small engine plant/equipment Weekly safety check by the operator and a

minor service every 6 months by a mechanic

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5 Light Fleet The scope of the review of light fleet is limited to changeover policy and recommendations on model mix and optimum changeover. By definition light fleet is anything that can be driven on an A class licence ie less than 4495GVM (Gross vehicle mass). However in this section we are only referring to cars, utes and vans. 5.1 Choice of Fleet Vehicles (Fleet Mix) There is an opportunity to reduce the current size of vehicles in the light fleet from a business use perspective and this would lower fleet costs substantially. The only barrier to achieving this is the HR impact on recruitment and retention.

In terms of downsizing the fleet, the following should be noted:

• There are small 4 cylinder cars available in the market today that have an equal to or

greater safety rating than the larger vehicles currently in the fleet. • Most small vehicles have significant load carrying capacity. • 4 cylinder vehicles of 1.8 litre capacity and above are quite capable of operating even

in mountainous terrain.

When it comes to utilities there is no benefit in considering smaller vehicles which would be unsuitable for business use.

Six cylinder sedan and station wagon vehicles are fast becoming a luxury that is difficult to justify for business use and to the community who expect their local council to take a lead role setting standards. Uniqco’s recommended fleet mix is made on the basis of: • Vehicles that are fit for the use/application proposed for the vehicle, • Lowest whole of life costs and • Offering vehicles to staff on a like for like basis The whole of life cost comparisons between some of the vehicles in the current fleet mix and the proposed mix is best demonstrated in Figure 1 - Light vehicle Executive Cars and Figure 2 - Standard Cars Annual Cost Comparisons. These graphs show the annual cost of each of the vehicles based on changeover at 1,2,3 & 4 years with an annual utilisation of 20,000km. Clearly the recommended vehicles will save GCC considerable annual costs with the exception of the Holden Commodore range which has been included where there is a HR requirement for a 6 cylinder vehicles. The graph also shows CO2 output comparisons. The major savings in “going small” is in vehicle resale values and fuel savings. Figure 3 provides a similar comparison for utilities. RECOMMEND

49) Fleet vehicles at Gladstone be generally sourced from the following list with preference to be given to 4 cylinder vehicles:

Holden Commodore where a 6 cyl is required for HR reasons

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Toyota Camry Altise (4 cyl)/Mazda 6 (4 cyl) Holden Astra Holden or Ford Utility (6 cyl) Ford Courier, Holden Rodeo OR Mitsubishi (diesel) Crew cab

Figure 1 – Light Vehicle Annual Cost Comparisons – Executive Cars

Figure 2 – Light Vehicle Annual Cost Comparisons – Standard Cars

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Figure 3 – Utility Vehicle Annual Cost Comparisons

5.2 Optimum Changeover For Light Fleet Vehicles The decision of when to changeover items within the light fleet should be based on optimum replacement timing. Optimum Changeover timing is influenced by a combination of:

• Resale value, • Maintenance costs , • Downtime costs and • Changeover administration costs.

The optimum replacement will vary by vehicle manufacturer/type and utilisation. For example a vehicle travelling 60,000 km/yr would be recommended to be changed over at 12 months. However the same vehicle travelling only 15,000km/yr would be recommend for changeover at 4 years. This is best shown in Figures 1-3 which shows the annual cost comparisons between different vehicles based on whole of life costs. The graphs shows the annual cost of each of the vehicles based on changeover at 1,2, 3 & 4 years with an annual utilisation of 20,000km. GCC currently change light fleet at 3 years or 60,000km. Uniqco recommends Council light fleet vehicles be changed over between 1 - 4 years with a minimum mileage of 60,000km.

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We also recommend the Fleet manager should have delegated authority to change vehicles within these parameters. However for this to be successful the Fleet Manager must have current market information. Without this there is a likelihood minimum rather than optimum changeover periods would occur. Current market information is accessible from the Uniqco International web site. RECOMMEND

50) Council light fleet vehicles be changed over between 1 - 4 years with a minimum mileage of 60,000km and the Plant & Fleet Manager have delegated authority to change vehicles within these parameters.