Performance audit, Department of Administration, General Services Division

              PERFORMANCE AUDIT
DEPARTMENT OF ADMINISTRATION
GENERAL SERVICES DIVISION
Report to the Arizona Legislature
By the Auditor General
September 1994
Report 94- 5
DOUGLAS R. NORTON, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
DEPUTY I Y D I T O R CIENERAL
September 27, 1994
Members of the Arizona Legislature
The Honorable Fife Symington, Governor
Mr. J. Elliott Hibbs, Director
Department of Administration
Transmitted herewith is a report of the Auditor General, A Performance Audit of the
Department of Administration, General Services Division. This report is in response
to a May 5,1993, resolution of the Joint Legislative Audit Committee. The performance
audit was conducted as part of the Sunset review set forth in A. R. S. $ 541- 2951 through
41- 2957.
Although State government is a major business, it often functions in ways that would
be unacceptable in a major private enterprise. ' In this report we looked at two
important functional areas - property management and fleet management. We found
that although the Department of Administration ( DOA) serves directly as the property
manager for $ 177 million worth of property, it has almost no preventative maintenance
programs, pays too much and receives too little for custodial services, and does not link
its rental rates to the cost of operating its buildings. We found that the management
of the State's vehicle fleet is fragmented among ten separate agencies and that only
1,500 of the State's 8,000 vehicles are under the control of the DOA. Further, DOA's
taxi fleet is often not used cost- effectively. We recommend a number of legislative and
administrative actions to allow DOA to operate in a more businesslike manner
including funding a pilot program for preventative maintenance, contracting for
custodial services, and coordinating fleet management on a statewide basis to reduce
costs.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on September 28, 1994.
Sincerely,
~ o u aRs. N orton
Auditor General
2910 NORTH 44TH STREET SUITE 410 1 PHOENIX, ARIZONA 85018 . ( 602) 553- 0333 . FAX ( 602) 553- 0051
SUMMARY
The Office of the Auditor General has conducted two performance audits of the
Department of Administration ( DOA), General Services Division, pursuant to a May 5,
1993, resolution of the Joint Legislative Audit Committee. The resolution called for an
audit of the Division and also specifically authorized a separate audit of the Fleet
Management Office ( Motor Pool) located within the Division. For reporting purposes,
the two audits have been combined into a single report and represent the thrd and
fourth of six audits scheduled of the Department. These audits were conducted as part
of the Sunset review set forth in Arizona Revised Statutes 5841- 2951 through 41- 2957.
Preventative Maintenance Program
Needed To Protect State's Investment
In Its Buildings ( see pages 7 through 12)
Implementation of a preventative maintenance program is essential to forestalling
building deterioration. However, the DOA lacks sufficient management information to
operate an effective program. As a result, the DOA's Tenant Services staff spend most
of their time on costly repairs rather than preventing the need for such repairs. In fact,
the DOA's General Manager estimates that Tenant Services' staff spend 80 percent of
their time " fixing what breaks," leaving them unavailable for routine maintenance. To
stop this cycle, the state should invest in a pilot program on two to three state
buildings, thereby allowing it to begin the process needed to save money in repairs
and maintain its investment in buildings.
The DOA Provides Mediocre
Custodial Services At A
High Cost ( see pages 13 through 16)
Although the DOA's rates for custodial services are significantly higher than the private
sectors', state buildings serviced by DOA custodians receive only superficial cleaning.
Whle proper cleaning requires frequent performance of some tasks ( such as emptying
wastepaper baskets, cleaning rest rooms, and vacuuming carpets), and periodic
performance of other tasks ( such as dusting furniture, shampooing carpets, and
washng walls), many tasks are either not performed on schedule or are never
performed. As a result, tenants who rely on the DOA are dissatisfied with the mediocre
service they receive. By contracting for custodial services, the state could save nearly
$ 700,000 annually. However, if the DOA retains in- house services, significant
improvements are needed.
The DOA Needs To Calculate Its
Cost Of Operating State Buildings
And Link These Costs To Rental
Rates ( see pages 19 through 22)
While the DOA is a major lessor and manager of building space, it is unaware what
it costs to operate and provide services to the buildings it manages. Without this crucial
information, the DOA has been unable to determine the cost effectiveness of some of
its services. For example, after calculating the DOA's unit costs for providing custodial
services, we found it was paying significantly more than necessary. Further, the DOA's
failure to determine service costs impacts its ability to determine areas that are not
adequately funded, such as preventative maintenance. Once the DOA has determined
reasonable costs for providing its services, the Legislature should consider revising the
process used to set state agency rental rates so that the DOA is funded on a cost-recovery
basis.
Arizona Needs A Coordinated Approach To
Addressing Statewide Fleet Issues
( see pages 23 through 28)
Although Arizona owns and operates a large fleet of vehcles, management of the fleet
is fragmented among more than ten separate entities, resulting in lost opportunities to
reduce costs on a statewide basis. Currently, there is little sharing of maintenance and
repair facilities. Further, use of state fuel pumps is not maximized, and there is no
statewide coordination for fuel tank replacement. In addition, other fleet management
areas are not consistently addressed. To provide a statewide perspective on fleet issues,
the state should centralize responsibility and accountability within one agency. Whle
the DOA would organizationally be the logical agency to provide statewide
coordination, such an endeavor would require significant upgrades of the DOA's
personnel and information system. If the DOA is unable to make needed changes, the
state may want to consider other alternatives, such as the Department of
Transportation, for this purpose. Regardless of who is selected for the lead role, an
advisory committee of state fleet professionals should be utilized to assist in addressing
statewide fleet issues.
The DOA Needs To Improve Management
Of Its Taxi Fleet ( see pages 29 through 34)
The DOA's Fleet Management Office is not effectively managing its taxi fleet. Whle
many requests for out- of- town trips are denied, the Fleet Management Office is
dedicating more than half of its taxi fleet to state employees for low- mileage in- town
travel. In fact, nearly 25 percent of taxi rentals were for trips of 10 miles a day or less.
In addition, the DOA has allowed some agencies and employees to monopolize the taxi
fleet, thus impacting availability for others. The DOA needs to develop policies
governing usage of taxi vehicles, and use them to actively manage the taxi fleet.
Further, once new rules are in place and inappropriate use of the taxi fleet is halted,
it needs to determine whether its fleet could be downsized.
Table of Contents
Introduction and Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Finding I: Preventative Maintenance Program
Needed To Protect State's
Investment In Its Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Preventative Maintenance
Program Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Lack of Critical Management
Information and Sufficient Funding
Impact Ability to Provide Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Pilot Program Needed to
End Cycle of Neglect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Finding II: The DOA Provides Mediocre
Custodial Services At a High Cost. . . . . . . . . . . . . . . . . . . . . . . . 13
Only Minimal
Cleaning Provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3
The DOA Should
Consider Contracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Significant Changes
AreNeeded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table of Contents ( con't)
Finding Ill: The DOA Needs To Calculate
Its Cost of Operating State Buildings
and Link These Costs To Rental Rates . . . . . . . . . . . . . . . . . . . . . 19
DOA Needs to Determine
Its Building Service Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Change in Funding Method
Could Improve DOA's Accountability . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Finding IV: Arizona Needs a Coordinated
Approach to Addressing Statewide
Fleetlssues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Responsibility for
Vehicles Fragmented . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Lost Opportunities
to Reduce Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Responsibility for Addressing
Statewide Vehcle Issues
Should Be Affixed . . . . . . . . . . . . . . . . . . .
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Finding V: The Department of Administration Needs
to Improve Management of Its Taxi Fleet . . . . . . . . . . . . . . . . . . . 29
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Taxi Requests
Frequently Not Met . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Taxi Availability
Hindered by Poor Utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Table of Contents ( concl'd)
Paqe
Finding V: ( con't)
Changes Needed to Encourage
Appropriate Fleet Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Other Pertinent Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Areas For Further Audit Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7
Agency Response
Tables
Table 1 Department of Administration-
General Services Division
Fiscal Year 1993- 94 Estimated Nonappropriated Funds
Special Services Revolving Funds . . . . . . . . . . . . . . . . . . . . . . . 3
Table 2 Underutilitzed Taxi Rentals
For April Through September 1993 . . . . . . . . . . . . . . . . . . . . . 31
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted two performance audits and Sunset
reviews of the Department of Administration ( DOA), General Services Division,
pursuant to a May 5, 1993, resolution of the Joint Legislative Audit Committee. The
resolution called for an audit of the Division and also specifically authorized a separate
audit of the Fleet Management Office ( Motor Pool) located within the Division. For
reporting purposes, the two audits have been combined into a single report and
represent the third and fourth of six audits scheduled of the Department. These audits
were conducted as part of the Sunset review set forth in Arizona Revised Statutes
( A. R. S.) @ 41- 2951 through 41- 2957.
Mission and
Responsibilities
The mission of the Department of Administration's General Services Division is to
provide lugh- quality services and products in a professional, courteous, and timely
manner to state employees, government agencies, and the public. The Division is
organized into four sections: Tenant Services, Special Services, Building and Planning
Services, and Construction Services. Recent audits have already addressed issues in
Building and Planning Services ( Performance Audit Report No. 93- 9), and Construction
Services ( No. 91- 12). This report focuses on Tenant Services and the Fleet Management
Office housed within Special Services.
Tenant Services ( 197 FTEs) - Tenant Services' mission is to provide for the
repair, maintenance, cleanliness, and environmental control of all DOA- managed
buildings. To fulfill its mission, Tenant Services staff perform custodial services,
groundskeeping, maintenance of building systems such as heating and air
conditioning equipment, control of inside temperatures, painting, and remodeling
or minor renovations.
Tenant Services currently performs these functions for more than 40 buildings.
These buildings consist of the majority of buildings located in the Capitol Mall
Complex, and the Tucson state office building complex. These buildings
constitute more than 2.5 million square feet of space with a total replacement
value of $ 177 million. In addition, Tenant Services provides groundskeeping
service for 121 acres in the Capitol complex alone.
Fleet Management Office ( 34 FTEs) - The Fleet Management Office, located
within Special Services, is responsible for acquiring, maintaining, and
coordinating the state motor pool vehicles for use by state agencies. It manages
over 1,500 vehicles, of which 400 are loaned to agencies on a short- term basis
( two weeks or less). The remainder are extended to individual agencies on a
permanent basis, but oversight remains with the Fleet Management Office for
maintenance and replacement.
In addition to the Motor Pool, Special Services houses three other offices that provide
diverse services to state agencies. Our audit included a limited review of these offices,
which include:
Business Services Office ( 36 FTEs) - The Business Services Office provides
services such as printing, office supplies, mail handling, and office machne
repair.
Surplus Property Management Office ( 19 FTEs) - The Surplus Property
Management Office distributes used state and federal property to state agencies
or eligible government and nonprofit organizations for reuse. Remaining
property may be sold to the general public through periodic auctions.
The State Boards Office ( 2 FTEs) - The State Boards Office provides general
office and accounting support to ten licensing boards. A portion of the boards'
licensing fees pay for these services.
Budget and Personnel
The General Services Division receives both appropriated and nonappropriated funding.
For fiscal year 1993- 94, General Services was appropriated $ 6.9 million from the General
Fund and approximately $ 6.0 million from the Capital Outlay Stabilization Fund. The
majority of the appropriated funds are used by Tenant Services. For fiscal year 1993- 94,
Tenant Services was budgeted approximately $ 11.9 million, with more than half of that
amount being allocated for state- owned buildings' utility charges.
In addition to the appropriated funds, the General Services Division has several
revolving funds available. The offices within the Special Services Section of the Division
are primarily funded through fees collected from agencies using its various centralized
services. As shown in Table 1 ( page 3), Special Services had an estimated $ 11.9 million
available from various revolving funds for fiscal year 1993- 94.
Table 1
Department of Administration
General Services Division
Fiscal Year 1993- 94 Estimated Nonappropriated Funds
Special Services Revolving Funds
Funds Available Funds Expended
Fund { estimated) { estimated)
Motor Pool $ 7,364,100 $ 5,292,500
Surplus Property - Federal 410,400 387,100
Surplus Property - State 1,424,200 1,357,300
Special Services( a) 2,745,300 2,726,400
Total $ 1 1.944.000 $ 9.763.300
( a) This revolving fund receives payment from agencies using services from the DOA's print shop,
repair shop, mail room, office supply room, and the State Board's Office.
Source: State of Arizona, Budget for Fiscal Year 1994, Nonappropriated Funds, prepared by the Joint
Legislative Budget Committee.
Although the General Services Division is appropriated only 201 FTEs from General
Fund and Capitol Outlay Stabilization Fund monies, it actually employs approximately
300 FTEs. These additional employees are funded through the revolving funds.
Audit Scope
Our report presents findings and recommendations in three areas addressed by our
audit of the General Services Division:
The need to implement a preventative maintenance program for DOA- managed
buildings
The need for the DOA to improve its custodial services or pursue contracting for
those services
The need to make the DOA's Tenant Services more accountable through changes
in its method of funding
Our report presents two findings and recommendations specifically addressing the
Motor Pool:
The need for a statewide approach to management and coordination of the
state's motor vehicle fleet
The need to improve management of the DOA's taxi fleet
Our ability to analyze state fleet issues was severely impaired due to the lack of reliable
statewide vehcle information. To obtain vehicle information for analysis, information
must be gathered from multiple sources. While some agencies have well developed
information systems and can readily provide detailed fleet information, others are
unable to provide the information needed to reach reliable conclusions. Further, each
agency has its own system for capturing information, thus there is no consistency in
the types of information captured.
Even the most basic information is not readily available. During our audit, we
attempted to determine the size and cost to operate the state's fleet. To obtain the
number of vehcles owned by each agency, we contacted individual agencies both
outside of DOA's control, as well as those participating in DOA's Fleet Management
Program. Even then, it was difficult to find a single source within some agencies who
had knowledge of all vehicles assigned to that particular agency. Further, for those
agencies participating in DOA's Fleet Management Program, the number of vehicles
reported by the agency often conflicted with DOA's records. After much effort, we still
did not have a reliable statewide vehicle count.
Our efforts to obtain statewide cost information were also fruitless - no reliable single
source of vehicle cost information exists.
We have also included an Other Pertinent Information section which discusses recent
reports and their recommendations regarding the consolidation of print shop operations
within state government. In addition, the Area for Further Audit Work section of this
report discusses the need to evaluate the effectiveness of the DOA's Surplus Property
Management Office.
Ths audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to the Director of the Department
of Administration and the staff of the Tenant Services Section and the Fleet
Management Office for their cooperation and assistance during the audit.
( This Page Intentionally Left Blank)
FINDING I
PREVENTATIVE MAINTENANCE PROGRAM
NEEDED TO PROTECT STATE'S
INVESTMENT IN ITS BUILDINGS
Implementation of a preventative maintenance program is essential to forestalling
building deterioration. However, the DOA lacks sufficient management information to
operate an effective program. As a result, Tenant Services staff spend most of their time
on costly repairs, rather than preventing the need for such repairs. To end tlus cycle,
the state should invest in a pilot program on two to three buildings thereby allowing
it to begin the process needed to save money in repairs and maintain its investment
in buildings.
Preventative maintenance is the periodic inspection and minor repair of buildings and
equipment to prevent future breakdowns and deterioration. The majority of
preventative maintenance tasks are routine and regularly scheduled. For example, a
roof should be swept and inspected monthly for cracks and blisters, and an air
conditioning system should be inspected quarterly to ensure vibrations from daily
operation have not loosened screws. Typically, equipment manuals recommend specific
tasks and their corresponding frequency. These periodic inspections identify and
remedy problems before emergencies and costly repairs develop. As a result, regular
preventative maintenance permits equipment to function efficiently for its expected
useful life.
Tenant Services employs approximately 45 staff to provide building maintenance
services. These staff include refrigeration mechanics, electricians, and building
maintenance technicians.
Preventative Maintenance
Program Limited
The DOA provides an inadequate preventative maintenance program. Without a
comprehensive preventative maintenance program, component and equipment failures
dictate the DOA's work schedule. In addition, repairs occur more often and become
more time consuming and costly.
Limited pmvmtative maintenance - The DOA provides extremely limited preventative
maintenance on the buildings it manages. The current in- house program includes only
inspecting and changing air filters and belts, inspecting fire alarms, boilers, and roofs,
and testing emergency generators.(') However, the DOA cannot document that it
regularly performs even these basic tasks. Further, other important preventative
maintenance work, such as inspecting electrical systems, inspecting light fixtures, and
providing comprehensive servicing of HVAC systems, is not even being scheduled.
We requested preventative maintenance information for five buildings in the Capitol
Mall Complex and found many in- house tasks were either not performed or were not
documented. In fact, if information provided by the DOA is accurate, it provided only
five hours of preventative maintenance work for these five buildings over a year's time,
whle our research shows that more than 3,500 hours would be needed per year for just
two of the five buildings.
Crisis- imposed work flow - Without preventative maintenance, component and
equipment failures become scheduling priorities and work flow becomes unmanageable.
One Tenant Services manager estimated that poor preventative maintenance creates 90
percent of the emergencies to which h s section responds. Consequently, emergencies
necessitate that staff and other resources be directed to the current crisis. The General
Manager estimated Tenant Services' staff spend 80 percent of their time " fixing what
breaks." Because staff spend so much time dealing with emergencies, they perform
very little routine maintenance; likewise, equipment downtime for maintenance cannot
be planned and scheduled appropriately.
An efficient preventative maintenance program should allow management to schedule
its workload. According to industry literature, a well- run facility management operation
can ensure 90 to 97 percent of its work is routinely scheduled and performed. When
work is scheduled, staff and other resources are better managed and downtime of both
equipment and staff is reduced.
Costly Repairs - An effective preventative maintenance program reduces long- term
costs. According to a Wisconsin report, " One estimate widely accepted among facility
management professionals is that every dollar spent on preventative maintenance
programs results in reducing future repair and replacement costs by five dollars."( 2)
Because the DOA has not documented and maintained preventative maintenance and
repair information, we could not determine the extent of repairs and their costs.
However, Tenant Services' staff provided several instances where they believe repairs
(') The DOA also contracts the following services: chiller maintenance and repair, coil cleaning,
generator load bank tests, fire extinguisher inspection and tests, and elevator repair and
maintenance. These services are contracted because they require special equipment or certified
technicians.
( 2) Department of Administration and University of Wisconsin, " An Evaluation of Building
Maintenance and Construction Supervision," January 1991.
were necessitated due to failure to perform routine maintenance. The following
examples are just a few:
A blockage of a sump pump drain at the Department of Revenue caused
increased pressure which eventually broke the pipe and flooded the basement,
resulting in $ 5,000 in water damage. Tenant Services staff indicated that this
could have been avoided by regular clearing of the sump pump drain and/ or
inspecting and replacing the $ 34 piece of pipe.
Water inside a 12- year- old boiler went untreated and the boiler rusted. The
boiler had to be replaced at a cost of $ 100,000. According to Tenant Services
staff, with regular chemical treatment, maintenance, and inspection, a boiler
should last 20 years.
A blower sheld in a seven- year- old cooling tower was allowed to deteriorate
causing ensuing damage and the failure of the blower. The extent of the damage
required complete replacement of the tower at a cost of $ 10,000. With proper
maintenance, cooling towers should last 15 years.
Lack of Critical Management
Information and Sufficient Funding
Impact Ability to Provide Program
While a comprehensive preventative maintenance program is essential in curbing
building deterioration, the DOA is currently unable to provide an effective program.
The DOA lacks the information necessary to determine its workload and resource
needs. Further, DOA officials contend that the DOA's preventative maintenance
program is underfunded.
Management information lucking - Tenant Services lacks adequate information to
determine its workload and resource needs. Although some Tenant Services building
systems are inventoried, many are not. Knowing what needs to be maintained is a
critical first step in developing a comprehensive program. Further, once systems are
identified, Tenant Services needs to determine what types of maintenance are required
for the systems, and at what intervals. For example, an air compressor may require oil
to be added at 6 months, and new belts and air filters at 12 months. This information
should then be used for generating work orders and determining the resources needed
to address the workload. Whle the former maintenance/ engineering manager for
Tenant Services contends that a comprehensive preventative maintenance program
would initially require double his current staff, without better management information,
it is impossible to determine Tenant Services' resource needs.
The DOA also needs to maintain historical information for each building system,
including when inspections and repairs have occurred, how much time these
inspections and repairs have taken, and their associated costs. Such information is
important for determining equipment condition and developing budgets, and for
scheduling.
To facilitate the capturing and analysis of management information, Tenant Services
needs to speed implementation of its automated system. In August 1992, the DOA
purchased software to assist Tenant Services in identifying needed work, assigning
resources, and tracking progress. Once implemented, the software could also streamline
scheduling, recordkeeping, and managing operating costs. However, at the time of our
audit, Tenant Services staff estimated that they were using only about 5 percent of the
software program's capacity. Tenant Services' officials attribute delayed implementation
to lack of the necessary personnel and computer equipment needed to implement the
system.
Inadequatefinding - The DOA maintains that insufficient funding has also impeded
its ability to provide comprehensive preventative maintenance. Interviews conducted
with DOA staff suggest that Tenant Services' HVAC and General Maintenance Units
do not receive the funding necessary to complete the day- to- day building repairs.
However, repeated attempts to document the actual amounts spent on building repair
versus the amount necessary, proved futile. Therefore, we were unable to demonstrate
the extent to which inadequate funding has hampered the DOA's establislung a
preventative maintenance program.
Pilot Program Needed to
End Cycle of Neglect
The state needs to implement a pilot program to stop the cycle of building neglect. By
investing in a pilot program in two or three buildings, the state can begin the process
needed to save money in repairs and maintain its investment in buildings.
Pilot program needed to end cycb - As described previously, the state is caught in a
vicious cycle with regard to building maintenance. Lack of preventative maintenance
leads to more extensive and expensive building repairs. When these repairs occur, they
further divert resources from preventative maintenance. While preventative maintenance
will over time more than pay for itself by reducing unnecessary repairs, there are
currently not enough resources to make the needed repairs and to conduct preventative
maintenance. Rather than let the situation continue to worsen indefinitely, the state
must end the cycle, if only a few buildings at a time. By investing in a pilot program
in two or three buildings, the state can begin the process needed to save money in
repairs and maintain its investment in buildings.
Cost of pilot estimated at $ 88,000 to $ 134,000 - To estimate the cost of implementing
a pilot program, we first selected two " typical" DOA- managed buildings for in- depth
review. After considering building age, size, replacement cost, and significantly unique
usage, we chose the Corporation Commission and the Attorney General's Office
buildings.(')
Next we contacted the building maintenance managers of the Department of Economic
Security and the Supreme Court buildings as both managers are responsible for
operating preventative maintenance programs for non- DOA- managed state buildings.
These managers provided information regarding their workload, staffing levels, and
operating costs. Further, we consulted an engineer with over 20 years' experience in
institutional maintenance to assist with developing estimates. c2)
Based on this information and assistance, we estimate the cost of a pilot preventative
maintenance project for the Corporation Commission and Attorney General's Office
buildings would be between $ 88,000 and $ 134,000. These cost estimates include salaries
and employee- related expenses, operational costs, and material expenditures. We
projected that the work order system would schedule over 900 total work orders and
more than 3,300 tasks per year. Also, the pilot would require one full- time program
supervisor and approximately 3,800 to 4,500 maintenance support hours to implement.
DOA has also proposed developing a pilot program, but would prefer to begin with
buildings other than those used in our analysis. Our purpose in selecting the
Corporation Commission and Attorney General's office building was to provide an
estimate of what it would cost to implement preventative maintenance programs in two
" typical" DOA buildings. While DOA has not made a final selection as to buildings it
would propose for a pilot program, they would prefer using buildings which do not
share the same cooling system to facilitate development of " costs per building." Once
DOA has made its building selection, it will need to develop cost estimates specific to
those buildings.
In addition to monies needed for preventative maintenance, funds may be needed to
address building renewal needs. As noted in our 1993 report on DOA's Building and
Planning Services Section ( Report No. 93- 9), only one- half of the monies needed for
building renewal needs were appropriated from fiscal years 1987 to 1993. Therefore,
initial building and equipment assessments and periodic inspections will likely reveal
significant problems resulting from years of neglect. However, until the inspections are
conducted and the problems identified, total costs cannot be estimated.
The Attorney General's office building and the Corporation Commission building were included
together in our review because the two buildings share the same air cooling system. The air cooling
system ( which is one of the major building systems) is linked to both buildings through an
underground connection. The Corporation Commission building is 14 years old, 41,726 square feet,
and has a replacement value of $ 2,670,751. The Attorney General's office building is 13 years old,
101,741 square feet, and has a replacement value of $ 6,585,616.
( 2) Because of the tecluucal nature of the maintenance issues addressed in this report, we solicited the
help of a consultant, Leo Mortensen, as part of our Office's Volunteer Program. Mr. Mortensen has
over 20 years' management experience in institutional maintenance.
It may take several years to gather the data and see cost savings resulting from the
pilot project. However, DOA's success in implementing the program can be measured
much sooner. After the pilot project has been operational for one year, DOA should
have developed a comprehensive work order system for the buildings selected. Further,
DOA should be using the work order system to both schedule work as well as
determine resource needs. Thus, the type of work performed should shift from reactive
(" fixing what breaks") to preventative ( work which is routinely scheduled and
performed). In addition, DOA should be able to list all preventative maintenance work
completed, the time required to perform the work, and the associated costs.
RECOMMENDATIONS
1. The Department of Administration should devote adequate resources to ensure full
implementation and operation of Tenant Services' automated system.
2. Tenant Services should conduct a thorough building systems and components
inventory and incorporate it into its automated system.
3. The Legislature should consider funding a pilot project of two or three state
buildings to begin the process needed to save money in repairs and maintain the
state's investment in its buildings. At the end of one year, the Legislature should
review how well DOA has implemented the pilot project and consider expanding
funding to other DOA- managed buildings.
FINDING II
THE DOA PROVIDES
MEDIOCRE CUSTODIAL SERVICES
AT A HIGH COST
Although the DOA's costs for custodial services are significantly more than the private
sectors', state buildings serviced by DOA custodians receive only superficial cleaning.
Thus, the state is essentially " paying more for less." The state could save nearly
$ 700,000 annually by contracting for custodial services. However, if the DOA continues
to provide in- house custodial services, it must significantly improve its management
and performance of this function.
Appropriate custodial services contribute to a clean, safe, and acceptable work
environment. Clean working conditions allow state employees and the public to
conduct the state's business more efficiently, and also help maintain buildings by
preventing dust and debris from causing damage or deterioration to flooring, walls, and
equipment. Proper cleaning requires the frequent, even daily, performance of some
tasks such as emptying wastepaper baskets, cleaning rest rooms, vacuuming carpets,
and sweeping floors. Other tasks should be performed periodically, including cleaning
stairwells weekly, vacuuming drapes quarterly, and shampooing carpets and washing
walls annually.
Only Minimal
Cleaning Provided
State buildings serviced by DOA custodians receive only superficial cleaning. Many
daily or periodic tasks are not performed on schedule, and some tasks are never
performed. As a result, tenants who rely on the DOA are dissatisfied with its mediocre
services.
Basic cleaning - In many building areas the DOA provides only three basic cleaning
tasks on a daily basis: cleaning rest rooms, emptying the trash, and vacuuming lightly.
The DOA has termed this level of cleaning " priority" cleaning, and implemented it
because of high staff absenteeism. As a result, on any given night at least 20 percent
of the Capitol Mall building space ( or the equivalent of 6 of the 40 DOA- managed
buildings) receive this inadequate cleaning level. However, custodial supervisors
indicate priority cleaning may be more widespread as it has become a standard
practice. Therefore, some daily tasks, such as dusting and cleaning drinking fountains,
are not frequently completed.
Likewise, we found many nondaily tasks are not completed on a regular basis and
some services are not performed at all. We inspected six buildings in the Capitol Mall
Complex and saw areas where window sills, walls, baseboards, and blinds were dusty
and dirty. We also noticed dirty vents, light fixtures, and windows. Because the DOA
has failed to systematically schedule and complete periodic tasks, it could not document
how frequently these tasks have been performed or when they were last provided.
Some tenants contend that services such as carpet cleaning and window washng have
not been done in several years.
Dissatisfsed tenants - Tenants in the buildings we inspected voiced dissatisfaction
with the custodial services they receive. Four of the five building managers we spoke
with rated the DOA's custodial services as extremely poor. One tenant categorized these
services as the " worst services the DOA provides." Another tenant indicated agencies
would rather contract with outside vendors than receive services from the DOA. In fact,
two agencies use their own funds to contract for some custodial services, such as
interior and exterior window washing, because the DOA has not provided these
services as it should. Furthermore, in addition to DOA- assigned custodians, the
Department of Corrections has formed an inmate custodial crew to clean its building.
The DOA Should
Consider Contracting
Not only are the DOA's tenants receiving substandard service, they are also paying a
premium price for it. By contracting for custodial services, the state could save nearly
$ 700,000 annually. Additionally, privatization may improve the level of service agencies
receive.
Cost savings - The DOA's in- house custodial services are expensive. The state spends
over $ 2,000,000 annually, or approximately $ 1.00 per square foot, providing custodial
services for the DOA- managed buildings. Private sector custodial firms deliver services
for considerably less. We received phone quotes for basic cleaning services from four
private firms, whch ranged from 48 to 78 cents per square foot. We also reviewed 21
formal bids that the DOA received for a recent full- service custodial contract, whch
ranged from 33 cents to $ 1.06 per square foot, with an average of 60 cents per square
foot.( l) If the DOA were to contract at the average of 60 cents per square foot for
custodial services, the state would reduce its custodial costs by $ 900,000 annually.
The contract proposal was for providing cleaning services to the Sun State Savings building. The
DOA selected the lowest bidder at 33 cents per square foot, or $ 33,000 annually.
14
However, an estimated $ 200,000 would be needed for contract monitoring, reducing the
overall savings to $ 700,000.(')
The state's hgher in- house costs are primarily due to costly state employee wages and
benefits. Whle the starting wage for the DOA's new custodial worker 1' s is $ 6.15 an
hour, the average wage earned by this entry- level group is $ 7.32 an hour.( 2) The state
also provides employee benefits, which account for approximately 23 cents of the state's
$ 1.00 per square foot cost. In contrast, the private sector pays minimum wage ($ 4.25)
to entry- level custodians, and seldom offers benefits.
Other consitierations - In addition to cost savings, other features of service contracts
should be considered. Our literature review identified several positive features of
contracting. For instance, service may improve due to higher worker productivity, and
through the use of better equipment. However, some unfavorable points were also
identified. For example, the possible displacement of many employees, and the
potentially poor performance of a contractor, may reduce any cost savings achieved
through contracting. Nevertheless, the literature also suggests these downfalls could be
managed; for example, through redeployment and contract monitoring.
Significant Changes
Are Needed
Because contracting for custodial services would require the termination of nearly 100
employees, the state may decide to retain its in- house services. However, if the DOA
continues providing in- house custodial services, it must make considerable modifica-tions.
It must significantly improve its management and institute quality control
measures to increase the level of service it provides.
Management changes needed - Lack of vital information has hindered the DOA's
management of the custodial operation. Although the DOA contends it has a staff
shortage, it can not show how many additional staff are needed and why. Based on our
review, it appears the DOA has an adequate number of custodians. For example,
contacts with private sector firms indicate a custodian should be able to clean an
average of 23,000 to 33,000 square feet per eight- hour shift depending on area
Our estimate assumes that contractors be responsible for providing the same basic custodial services
for which DOA custodians are currently responsible. During the course of our review, DOA
contacted a large custodial firm to obtain an estimate of its costs to provide custodial services. The
firm toured the DOA- managed buildings and developed an estimate of its costs. While the custodial
firm's estimate was based on providing a higher level of custodial service, its overall estimated costs
were still $ 180,000 less than the state's current custodial expenditures.
( 2) The average wage may be high due to increases in salaries for employees with long terms of
service. For example, several custodial worker 1' s wages exceed $ 8.65 an hour. All of these
employees have been with the state for over 14 years.
congestion.(') Applying these private firm standards to the DOA's current building
square footage, DOA's custodial staffing levels equate to 25,000 square feet per
custodian per eight- hour shift.
We found cleaning time standards exist for most custodial tasks. Information such as
cleaning time standards, actual area covered, and congestion factors should be used by
the DOA to evaluate the number of staff required.
Likewise, absenteeism has not been adequately managed. We found the DOA's
absenteeism rate to be fairly consistent, suggesting that it should be revising staff
coverage areas, providing a floating team, or hiring temp~ raries.(~ In) s tead, it has
lowered its level of service by institutionalizing priority cleaning and using the janitors
designated for heavy- duty cleaning and an inmate crew to fill in for absent employ-ee~.(~)
Quality control needed - Poor quality control also prevents the DOA from operating
efficiently. We found that unlike the private sector, the DOA has no regular method
for inspecting buildings' cleanliness or assessing work quality. For example, one
supervisor indicated he tries to inspect areas nightly, whereas another indicated he
might inspect each area about once a week. Because we found some building areas are
poorly cleaned, a standard inspection program may help the DOA to ensure that all
staff clean the buildings satisfactorily.
Insufficient training may also result in quality control problems. The DOA's custodians
receive very little training. For the past two fiscal years, the DOA has not budgeted any
money for training costs. The private sector, conversely, stresses regular supervisory
inspections and continuous training as a means of quality control.
RECOMMENDATIONS
1 Based on cost savings and other potential benefits, the DOA should consider
contracting for custodial services.
Area congestion relates to the amount of furniture per floor space. The more congested an area, the
slower a custodian can clean, and vice versa.
( 2) Based on handwritten attendance charts aanuary through June 1993), we found a 13.7 percent
absenteeism rate, with the majority of absenteeism falling into the annual leave and sick leave
categories.
( 3) The DOA uses five to seven ADOC inmates nightly. These inmates were originally assigned to
work with the DOA's " heavy- duty" janitors on cleaning carpets and hard floors; however, at the
time of our review, these inmates and two heavy- duty janitors were primarily assigned to daily
cleaning tasks.
2. If the DOA retains its custodial services, it should improve its management and
performance by formally scheduling nondaily tasks, maintaining critical information,
formulating a plan to deal with staffing problems, and increasing quality control
through regular training and inspection.
( This Page Intentionally Left Blank)
FINDING Ill
THE DOA NEEDS TO CALCULATE ITS COST
OF OPERATING STATE BUILDINGS AND LINK
THESE COSTS TO RENTAL RATES
While the DOA is a major lessor and manager of building space, it is unaware what
it costs to operate and provide services to the buildings it manages. Without ths crucial
cost information, the DOA has been unable to determine which building services are
not cost effective and which need additional funding. Once the DOA establishes its
costs, the Legislature should consider revising the process used to set rental rates so
that the DOA is funded on a cost- recovery basis.
The DOA's Tenant Services is a major lessor and manager of building space. It has
direct oversight and management responsibilities for 40 buildings and over 121 acres
of grounds, and provides partial services to four additional buildings.(') Of these 44
buildings, 35 are state owned and 9 are lease purchased. Tenant Services performs a
role similar to a private building management company - it pays utility bills and
provides maintenance, engineering, custodial, and groundskeeping services.
DOA Needs To Determine
Its Building Service Costs
The DOA does not know the cost of providing each of its building services. Cost
information is essential to determining whch services receive too much funding, and
whch are underfunded. The DOA can then use this information to conduct further
evaluation of problem areas.
The DOA needs to calnrlate service costs - Establishing a unit cost is a critical first
step for converting building data into a form that is meaningful for building
management purposes. Once established, cost information can be used to determine the
cost effectiveness of services. Our evaluation of the DOA's cost of providing custodial
services, for example, identified a potential target area for cost reduction.
The 40 buildings maintained by the DOA are located in the Capitol Mall in Phoenix, and the state
office complex in Tucson. The four buildings receiving partial DOA services are also located in the
Capitol Mall and include the Arts Commission building ( groundskeeping), the Courts buildings
( groundskeeping and utilities), and the House and Senate ( groundskeeping, maintenance and
engineering, and utilities.)
H After dividing the DOA's total operational costs for custodial services ( i. e.,
personnel, employee related, and operating expenditures) by the total gross
square footage serviced, we found that the DOA's costs run about $ 1.00 per
gross square foot. After comparing these costs to those of the private sector, we
found the DOA's costs per gross square foot to be about $. 40 hgher. Therefore,
by conducting this function in- house, the DOA is paying $ 700,000 more per year
than if it were to contract for ths service.
Additionally, unit cost figures can also identify underfunded areas. For example, our
review found few resources dedicated to preventative maintenance ( See Finding I,
pages 7 through 12).
Cost infomration can convey solutions - Once the DOA has calculated its unit costs
and identified areas of concern, it can then conduct further evaluation to determine
what action is needed. For those areas that are not cost effective, the DOA could study
whether the service should be retained in- house and streamlined, or whether
contracting would be a less expensive alternative. For those areas that appear to be
underfunded, the DOA can determine whether additional monies are indeed needed,
and then consider reallocating monies from " overfunded services, or requesting
additional monies in its budget request.
Change In Funding Method
Could Improve DONS
Accountabiltty
The Legislature should consider changing the way the DOA is funded for its building
services to hold it more accountable for both service cost and quality. The DOA's
current funding sources do not consider its actual cost of providing building services.
Adopting a cost- recovery funding method would provide ths valuable link.
Currentfinding lacks tie to service costs - The DOA currently receives funding from
two sources: The General Fund and the Capital Outlay Stabilization Fund ( COSF).(')
General Fund appropriations cover the DOA's custodial, groundskeeping, engineering
and maintenance costs, while COSF appropriations primarily pay for utility costs.
However, the funding amount the DOA receives is not linked to its actual cost of
providing these services. Therefore, the Legislature has no means of knowing whether
the DOA's services are cost effective, and cannot hold the DOA accountable for
providing high quality and cost effective services.
COSF monies are generated by charging agencies rent for occupying space in state- owned buildingd.
Agencies are charged $ 11 per square foot for usable space and $ 4.50 per square foot for storage
space ( usable space does not include areas such as rest rooms, elevators, or public corridors and
lobbies).
Operating m m like private sector could improve accountability - Organizations
leasing commercial space typically are provided with comprehensive building services
including utilities, housekeeping, landscaping, maintenance/ repair, security, and
parking as part of their lease agreement, and in return for paying rent. Because there
is a relationshp between the rent paid and the services received, and because the rent
and services can be compared to other lessors', there is an incentive to provide quality
services as efficiently as possible.
DOA Tenant Services could operate in a similar fashion to the private sector lessors.
If agencies occupying space in DOA- managed buildings were charged a rental fee
based on the cost of services rendered, the DOA could be held accountable for
providing high- quality, cost- effective services. The following examples illustrate
methods for charging agencies rent:
Florida bases its rental charge on a cost per square foot. Florida's rate combines
several precisely figured components. Its current $ 14.38 per square foot rate
includes ( among others) the following components: capital depreciation, $ 1.38;
utilities, $ 2.80; refurbishment, $ 0.25; and building maintenance and administra-tion,
$ 3.48. Florida's Management Services Department ( similar to DOA- Tenant
Services) uses both in- house staff and contracted services depending on market
rate, building needs, and cost effectiveness.
Maricopa County allocates costs among agencies using three separate mecha-nisms.
The first mechanism allocates cost by determining the floor space or area
covered by a service. For example, the County uses square footage to divide
custodial service costs among agencies. A second mechanism assigns costs by the
number of items used. For example, the County bases parking garage assess-ments
on the number of parking spaces used. The third mechanism allocates
costs using service level charges. The County determines the cost for the service
level deemed appropriate. If a tenant needs an increased service level, the
County recoups its cost by calculating the extra expense. Because each agency
uses different services, each agency rental charge may be unique. A County
official indicated agencies pay for the services they use without subsidizing other
agencies.
Using funding approaches such as these offers several advantages. First, the DOA
would be more accountable for its service costs, because users of DOA services would
have a means of comparing the DOA's costs to the private sector's. Further, as all
agencies using services would be required to pay for services received, subsidization
by others would be eliminated.(') Finally, like Maricopa County, agencies could pay an
additional fee to increase their service levels. For example, a tenant might pay an
additional amount for more frequent blind cleaning and carpet shampooing. The tenant
would reimburse the DOA for its increased costs.
RECOMMENDATIONS:
1. The DOA should establish the unit cost and the cost effectiveness of each service
it provides.
2. The Legislature should consider eventually funding the DOA through a cost-recovery
system that would charge rent to all agencies occupying space in
DOA- managed buildings based on the cost of services rendered.
Some consideration would need to be given as to how to link rental rates and the typically higher-than-
marketplace costs of lease- purchased space. Under the current method, agencies in state- owned
buildings pay COSF rent. However, agencies in lease- purchased buildings in the Capitol Mall
Complex pay towards their Certificate of Particip't<-:, n ( COP), but do not pay an additional amount
to offset utility costs. Therefore, agencies in state- owned buildings are subsidizing the utility costs
for agencies in these lease- purchased buildings. One solution could be to assess these agencies an
operating and maintenance fee, as is currently required of agencies housed in the recently acquired
distressed properties.
FINDING IV
ARIZONA NEEDS A COORDINATED
APPROACH TO ADDRESSING
STATEWIDE FLEET ISSUES
Although Arizona owns and operates a large fleet of vehicles, management of the fleet
is fragmented among more than 10 separate agencies, resulting in lost opportunities to
reduce costs on a statewide basis. To provide a statewide perspective on fleet issues,
the state should centralize responsibility and accountability withn one entity. Whle the
DOA would organizationally be the logical agency to provide statewide coordination,
such an endeavor would require significant upgrades of the DOA's personnel and
information system. For these reasons, the state may also want to consider the Arizona
Department of Transportation for this purpose. Regardless of who is selected for the
lead role, an advisory committee of state fleet professionals should be utilized to assist
in addressing statewide fleet issues.
Responsibility for
Vehicles Fragmented
A. R. S. g41- 803. A. authorizes the Director of the Department of Administration to
operate a motor vehicle fleet for all state- owned motor vehicles. However, statutes and
intergovernmental agreements have excluded a number of agencies from participation
in the state motor vehicle fleet.( l) As a result, over 80 percent of state vehcles are
outside of the DOA's control. As of November 1993, the state owned approximately
8,000 passenger vehicles, with an asset value of nearly $ 80 million. An estimated 1,500
vehicles are owned by the DOA's Fleet Management Program. The remaining vehicles
are either owned by exempt agencies or were purchased by nonexempt agencies but
not brought into DOA's program. Thus, responsibility for state vehcles is fragmented
among more than ten separate entities.
Agencies excluded from participation in the state motor vehcle fleet per A. R. S. 841- 803. E include
the Department of Public Safety, the Department of Transportation, the Department of Economic
Security, the Department of Corrections, and the universities and community colleges. Further, the
State Compensation Fund statutes exempt it from DOA oversight. In addition, both the Game and
Fish Department and the State Mine Inspector have entered into intergovernmental agreements
which allow them to maintain and operate their own vehicle fleets with minimal DOA oversight
or control.
Lost Opportunities To
Reduce Costs
Without centralized review of fleet issues, the state misses opportunities to reduce fleet
operating costs and increase efficiencies. Currently, there is little sharing of maintenance
and repair facilities. Further, use of state fuel pumps is not maximized, and there is no
statewide coordination of fuel tank replacement. In addition, the state lacks standard-ized
approaches for accident prevention and review, monitoring of vehicle utilization,
and defining appropriate use of state vehicles.
Maintenance and Repair - The state should explore whether increased coordina-tion
of maintenance and repair facilities as well as statewide contracts for some
services would be cost beneficial. Nine agencies currently have developed their
own facilities to maintain and repair vehcles. However, whle over 30 separate
facilities are located throughout the state, agencies with facilities will primarily
service only their own agency's vehcles. Thus, those agencies without access to
a state facility rely on private vendors for maintenance and repair.
A comprehensive evaluation is needed to determine whether increased sharing
of facilities could reduce the cost of maintaining the states's fleet. For example,
the Game and Fish Department has recently contracted with the Arizona
Department of Transportation ( ADOT) to maintain its vehicles. In addition, a
review should be conducted of existing facilities to determine whether facilities
could be consolidated. Currently, a project is underway in the Phoenix
metropolitan area to collocate all DOA repair services at the ADOT Durango
Repair Facility. A statewide review of the state's fleet facilities could identify
other opportunities for either coordination or consolidation.
A statewide review should also be conducted to determine if it is more
convenient, as well as cost effective, to contract for some services, such as oil
changes. Several states, for example, contract with private vendors such as Jiffy
Lube and Minut Lube to provide oil changes.
Fuel - A statewide approach to fuel is needed to encourage greater use of
existing state pumps, to reduce the cost of fuel purchased from private vendors,
and to address replacement of underground fuel storage tanks.
Through greater utilization of existing state fuel pumps, the state could reduce
its overall fuel costs. As with maintenance and repair facilities, many agencies
own fuel pumps but there is a lack of statewide coordination to maximize their
usage. As a result, many state employees purchase fuel from private vendors
when it would be far cheaper to use state fuel. According to an ADOT official,
its per gallon charge for fuel is generally 10 to 20 cents less than the private
vendor rate.(') While no statewide data exists regarding fuel purchases, we
obtained information from the DOA regarding its fuel purchases. According to
DOA records, 46 percent ($ 467,000) of fuel purchased by the DOA during fiscal
year 1992- 93 was purchased from private vendors. Assuming all of these
purchases could have been made at state fuel sites, the state would have saved
approximately $ 50,000 to $ 75,000. Further, when there is a need to purchase from
private vendors, a statewide contract may reduce the per- gallon cost of fuel.
Automated Fueling Systems - Greater sharing of resources among agencies may
also make it more cost- effective to install improvements in the system, such as
automated fueling systems. Automated fueling systems can provide such
additional benefits as eliminating manual record- keeping, providing information
on fuel usage by individual vehicle, reducing or eliminating the need for pump
attendants, and deterring theft.
Fuel Storage Tanks - Finally, the state should also establish a statewide plan for
meeting Environmental Protection Agency ( EPA) guidelines for underground fuel
storage tanks. As of January 1994, 13 state agencies had more than 200
underground storage tanks the majority of whch will need removal,
remediation, and/ or replacement with either in- ground or above ground tanks
to meet the EPA's stricter guidelines.( 2) To date, agencies with underground
storage tanks are at various stages of addressing their agency's replacement
needs. Utah conducted a statewide review of its underground storage tanks. By
taking a statewide approach to this area, Utah estimated a savings of $ 10 million
over a 10- year period.
In addition to these areas, others to review on a statewide basis include: the state's
progress in replacing vehicles with those capable of using alternative fuels; the need
to establish a standard program for accident prevention and review; the need to
develop utilization standards for determining whether vehicles are fully utilized and
properly deployed; and the need for standards defining appropriate vehicle use and a
centralized system for addressing complaints of abuse.
The 1993- 94 average cost for fuel purchased by ADOT was 83 cents. ADOT adds a 5 cent per
gallon administrative charge for fuel used by other state agencies. Private vendors charge the state
their pump price, less the 18 cents per gallon federal excise tax. The difference between private
vendor rates and ADOT rates is about 10 to 15 percent.
( 2) According to an official from the Department of Administration's Risk Management Office, the
number of underground storage tanks has dramatically decreased. Many of the state agencies faced
with expensive cleanup and replacement costs have chosen instead to eliminate underground
storage tanks.
Responsibility for Addressing Statewide
Vehicle Issues Should Be Affixed
To gain the benefits of a statewide approach, someone has to ultimately be responsible
and have authority for addressing issues regarding the state's fleet. Over the years, a
number of other states have found that without central responsibility and authority, an
effective statewide approach cannot be established. While organizationally DOA would
be the logical agency to provide ths statewide coordination role, it would require
significant improvement in its operations to do so. If DOA is unable to make needed
changes, the Arizona Department of Transportation should be considered for the lead
agency for ths purpose. Regardless of who provides the lead role, an advisory
committee should be utilized to assist in addressing statewide fleet issues.
As noted earlier, the state currently has ten separate entities with their own fleet
systems. While many of these agencies already have well- established systems in place
for managing their fleets, the state lacks the ability to look at its fleet from a statewide
perspective to ensure maximum efficiency.
Other states' studies have recunzmend! ed centralization - We reviewed a number of
audit reports of fleet management operations in other states including Colorado,
Florida, Kansas, Mississippi, New Jersey, South Carolina, Utah, and Virginia. In
addition, we contacted fleet managers from other western states including California,
Colorado, Nevada, New Mexico, Oregon, Texas, Utah, and Washington to obtain
information on their fleet operations.
We found that other states faced statewide issues similar to those Arizona faces. Two
states in particular, Colorado and South Carolina, had previously studied and
attempted to address these issues in the past. Their attempts were unsuccessful, and
follow- up audits concluded that the reason was that no agency had been made
accountable and responsible for statewide management. Most of the studies we
reviewed and other state officials we interviewed recommended placing this authority
within one central fleet manager.
The DOA cumtly incapable of handling statewide fleet issues - Addressing
statewide issues will require capturing statewide fleet information, conducting
sophisticated analyses of this information, and possessing knowledge of state- of- the- art
fleet practices. While organizationally it makes sense to address statewide fleet issues
through the Department of Administration, the DOA's motor vehcle fleet operation
may not currently be capable of handling such an assignment for two reasons. First,
the DOA does not have the caliber of professional staff needed to oversee a comprehen-sive
fleet management program. Fleet management is increasingly a professional,
specialized area of management. An effective fleet manager needs to be knowledgeable
in vehicle acquisition and marketing, management principles, computerization, law,
insurance, safety, finance and accounting, and vehicle technology and maintenance.(')
The City of Phoenix and Salt fiver Project require their fleet administrators to have
both a college degree and several years of fleet management experience. The DOA,
however, does not require previous fleet management experience. In fact, its current
fleet manager position is classified as an Administrative Services Officer. Further, the
current fleet manager's experience prior to joining the DOA was primarily in vehcle
service and sales.
DOA also needs to consider adding techrucal positions to assist in oversight of the
state's fleet. In contacting the City of Phoenix, and Salt River Project, we found they
employed information specialists, transportation engineers, and equipment analysts to
provide both the information and problem- solving skills necessary for efficiently
overseeing a large fleet. Further, both SRP and the City of Phoenix required employees
in these positions to have advanced degrees and related experience.
Second, the DOA currently lacks the ability to generate the information needed to
effectively manage a fleet. In order to do so, an agency needs to track such tlungs as
vehicle utilization, cost information, fuel utilization, and maintenance and repair
histories. The DOA has computer software designed to track these items; however, the
DOA has not utilized the system for generating management information for these
areas because it can not trust the information. In reviewing reports generated from the
DOA's system, we discovered obvious data flaws. Further, after comparing a sample
of hard record files for maintenance and repair to the automated system, we discovered
that the system was altering mileage figures, and misadding expenditure information.
At the time of our review, the DOA was unaware of these system " bugs." In contrast,
the Arizona Department of Transportation uses the same software as DOA; however,
it heavily relies on its system to provide management information. Further, it has
enhanced its system with software whch allows it to obtain special reports. In addition,
ADOT has an information specialist who is responsible for the system's integrity.
Altmtives to the DOA - If the DOA cannot upgrade its staff and automated system
to the level needed to address statewide issues, the state may want to consider having
another agency meet this need. One agency whch could be considered is ADOT.
ADOT already employs a number of fleet specialists and has a sophsticated
information system. ADOT also currently owns the largest vehicle fleet in the state.
Further, it has the most repair and maintenance facilities and fuel sites, which are
distributed throughout the state.
A d v i s q committee needed for input and decision- making - Some states that have
moved to centralize motor vehicle operations use advisory committees to provide input
in developing statewide policies, procedures, and programs. For example, Washngton
established a motor vehcle advisory committee composed of representatives from state
agencies, institutions of hgher education, and the private sector.
(') The National Association of Fleet Administrators requires those seeking to become certified
automotive fleet managers to pass a written exam concentrating on these areas of fleet management.
RECOMMENDATIONS
1. The Legislature should consider revising statutes to affix the authority and
responsibility for addressing statewide motor vehicle fleet issues withn one entity.
Further, statutes should establish a committee consisting of representatives from
state agencies to advise the responsible entity on policies, procedures, standards,
and implementation of programs in the motor vehicle fleet area.
2. The motor vehicle advisory committee should study measures that could reduce the
state's fleet operating costs, including: sharing of maintenance and repair facilities,
maximum usage and automation of state fuel pumps, and coordinated replacement
of underground storage tanks. Further, the committee should address how the state
can monitor its progress in implementing the alternative fuel program. Finally, the
committee should develop standards for accident prevention and review, vehicle
utilization, and personal use of vehicles.
FINDING V
THE DEPARTMENT OF ADMINISTRATION
NEEDS TO IMPROVE MANAGEMENT
OF ITS TAXI FLEET
The Department of Administration ( DOA), Fleet Management Office is not effectively
managing its taxi fleet. While many requests for taxi vehcles for out- of- town trips are
denied, the Fleet Management Office is dedicating more than half its taxi fleet to state
employees for low- mileage in- town travel. In fact, nearly 25 percent of taxi rentals were
for trips of 10 miles a day or less. In addition, it has allowed monopolization of the
fleet by some agencies and employees, thus impacting vehicle availability for others.
The DOA needs to develop rules governing usage of taxi vehicles, and use these rules
to actively manage the taxi fleet. Further, once new rules are in place and inappropriate
use of the taxi fleet is halted, it needs to determine whether its fleet could be
downsized.
Background
The Fleet Management Office operates a taxi fleet of over 400 vehicles. The fleet
consists of numerous vehcle models which are grouped into vehicle classes ranging
from sedans, to pickups, to passenger vans. The rental rates are made up of a daily
charge of $ 6.50 to $ 12.00 per day, plus a mileage charge of 9 cents to 16 cents per mile,
depending on the vehcle class. Taxi vehcles are intended for temporary assignment,
30 calendar days or less, by short- notice dispatch to agencies as needed. The Fleet
Management Office also fills special- need requests for vehcles with special notification.
Taxi Requests
Frequently Not Met
The DOA's current process for requesting a taxi vehicle is inconvenient for its users.
Further, requests for vehicles frequently go unmet, causing further employee inconve-nience.
Users are inconvenienced by the DOA's resmation policies - Obtaining a taxi vehicle
can be a frustrating experience. Current DOA policies indicate that reservations must
be made no more than five business days in advance and reservations are on a
first- come, first- serve basis. However, because of the hgh demand for taxis, employees
often call from home at 6: 00 a. m. to obtain reservations. When vehcles are not
available, the employee's name is put on a waiting list. The employee is then told to
call back at 4: 00 p. m. the day before they need the vehicle to see if one is available. If
an agency does not pick up their vehcle withn one hour of the requested time, the
Fleet Management Office will rent it to a subsequent requestor rather than call a name
on the waiting list.
Employees who do not know their vehcle needs at least five days in advance, and
those who do but are unable to obtain reservations, must make other arrangements for
transportation. This may include using personal vehcles and being reimbursed for
mileage, renting vehicles from private rental companies, or using available public
transportation. Failing these options, they may have to cancel or reschedule their
business.
Significant number of taxi requests not met - In June 1993, DOA began tracking
various service measurements on fleet management operations, including the number
of taxi requests not met. We reviewed the service measurement reports from July
through December 1993 and found fleet management was unable to fill an average of
132 taxi requests per month. We then analyzed taxi requests not filled for six weeks of
ths six- month period to determine the purpose of the requests.(') We found that 70
percent of these requests were for out- of- town needs. These out- of- town requests would
appear to be a priority for taxi use as: 1) they are the most cost- effective use of the
taxis because of the number of miles driven, and 2) it is more difficult to fill these
needs through other options.
Taxi Availability
Hindered by Poor Usage
DOA claims that they do not have enough vehicles to meet their customers' needs;
however, the size of the fleet does not appear to be the problem but rather how the
taxis are used. Based on our analysis, over 51 percent of taxi rental use was for trips
of 45 miles or less per day. In addition to tying up vehicles with short trips, the Fleet
Management Office is allowing monopolization of the fleet by some users.
Half of the taxi usage is for short local trips - The use of taxi vehicles for primarily
short local trips is affecting taxi availability. We analyzed DOA taxi billings from April
through September 1993, to determine vehicle usage. Our analysis was based on the
premise that velucles driven more than 45 miles per day are properly utilized.( 2) We
Motor Pool does not maintain detailed information on agencies whose taxi requests were not met.
Therefore, we asked them to log the date, agency, vehicle type, destination, and number of
passengers on taxi requests not met for a six- week period.
( 2) The DOA stated that taxis are operated 22 days per month. Vehicles are considered fully utilized
at 1,000 miles per month. We divided 1,000 miles by 22 operating days per month to get 45.45
miles per day. Therefore, vehicles driven more than 45 miles per day are considered fully utilized.
30
found that the motor pool processed 6,417 taxi rentals during the April through
September 1993 time period. Of these rentals, 3,323, or 51.8 percent, were for usage of
less than 45 miles per day, whch we refer to as underutilized rentals.
The underutilized taxi rentals were further analyzed to determine the extent of
underutilization. During the 6 months examined, 25 percent of the underutilized rentals
were used 10 miles or less per day. The number of trips in the 10- miles- or- less per- day
category alone would cover the number of taxi requests not filled each month.
Table 2
Underutilized Taxi Rentals
For April Through September 1993
Number of Cateqories Rentals
Rentals at 10.0 miles or less per day
Rentals at 10.1 to 20.0 miles per day
Rentals at 20.1 to 30.0 miles per day
Rentals at 30.1 to 40.0 miles per day
Rentals at 40.1 to 45.0 miles per day
Total Underutihzed Rentals
Source: Auditor General analysis of DOA taxi billings.
Listed below are a few examples of underutilized rentals.
Two agencies had taxis out for 15 days and only logged 1 mile on each vehicle.
Nine agencies had taxis out for 1 day and only drove 1 mile on each vehicle.
One agency had a taxi out for 94 days and drove only 19 miles
One agency had 279 taxi rentals out for 15- day periods between April and
September 1993 and drove each of them only 10 miles or less per day.
Whle we recognize that there is a regular need for state employees to travel short
distances on state business, alternatives to the taxi fleet exist and should be encouraged.
One alternative is to encourage state employees to use their own vehicles for short local
trips whenever possible. The cost of using a state motor pool vehcle is significantly
hgher for short trips than reimbursing personal mileage. We compared the cost of
reimbursing mileage for the short trips identified in Table 2 ( see page 31) versus
renting vehicles from the motor pool. State agencies paid approximately $ 98,000 more
in taxi charges during the 6 months examined, on the 3,323 underutilized rentals, than
they would have spent on personal mileage reimbursement. Second, as noted in
Finding IV ( see pages 23 through 28), most state agencies have permanent vehcles
assigned which are available for use by their employees. The DOA should encourage
agencies to utilize these permanently assigned vehicles for short trips, and use the taxi
fleet as a " last resort."
Fleet m a n a g m t pmctices tie up taxis - In addition to taxi rentals being used for
short trips, Fleet Management is also not monitoring assignment practices to ensure the
fleet is used for its intended purpose. We found that the Fleet Management Office is
allowing monopolization of the fleet by some users.
w The Fleet Management Office has allowed the Department of Economic Security,
whch is exempted by A. R. S. 541- 803 from participation in the state motor
vehicle fleet, to utilize over half of the taxi fleet at any given time. By allowing
such monopolization, vehicles are not available for use by other " nonexempt"
agencies. As noted earlier, agencies are required to meet ongoing needs with
permanent vehicles, and only use the taxi fleet for short- term needs. It appears
that the DES is relying on the DOA's taxi fleet to fulfill its vehicle shortage.
w The Fleet Management Office has also allowed some state employees to receive
continuous taxi rentals which contradicts the purpose of the taxi fleet and
significantly impacts vehicle availability. The Fleet Management Office staff
identified 89 " continuous" users who are automatically given a different taxi
vehicle every two weeks.
Changes Needed To Encourage
Appropriate Fleet Usage
The DOA's Fleet Management Office needs to become proactive in managing the central
taxi fleet to ensure it is used both appropriately and cost effectively. Proactive
management should include defining appropriate use of the taxi fleet, encouraging the
most cost- effective mode of travel, and requiring agencies to fulfill long- term vehicle
needs with permanent vehicles. After fleet management changes its operations, the
DOA needs to evaluate whether its fleet size could be reduced.
Guidelines addmssing taxi use and mileage requirements - The Fleet Management
Office needs to set specific guidelines to encourage cost- effective use of the fleet. First,
the Fleet Management Office needs to determine the break- even point on each vehicle
class. ( The break- even point is the mileage for each vehicle class at which it is less
expensive to take a motor pool vehicle versus reimbursing personal mileage.) For
example, a sedan costing $ 6.50 per day plus $ 0.10 per mile would need to be driven
an average of 34 miles or more a day to be less costly than reimbursing an employee
$ 0.29 per mile to drive their own vehcle. The DOA needs to then use these break- even
points as guidelines in assessing vehicle requests. For those requests where it is not cost
effective to use a taxi vehicle, the DOA should encourage the agency or employee
making the request to use an agency- owned vehcle, a private vehcle, or, where
convenient, use public transportation.
Dispatching taxis to continuous users - The Fleet Management Office needs to
evaluate agencies and employees who are continuous users of the taxi fleet to
determine whether the agency is optimally using its own fleet or whether the agency
may need to request funding for additional permanent vehicles. As defined in R2- 1- 204,
Categories of Dispatch, an extended dispatch vehcle " is for user agencies which have
continuing requirements for official state business travel." Again, the purpose of the
taxi fleet is to meet short- term needs.
Size of taxi fleet needs to be reevaluated - Once the Fleet Management Office has
revised its policies and procedures to discourage inappropriate use of the taxi fleet, it
will need to determine the appropriate size of its fleet. As noted earlier, the fleet
currently consists of over 400 vehicles, yet DOA still cannot meet all taxi requests.
However, other states reviewed have much smaller fleets. For example, both New
Mexico and Colorado have only about 50 taxi vehicles available for short- term use.( l)
The Fleet Management Office has hstorically addressed demand for vehicles by
increasing the size of the fleet rather than addressing the causes of such hgh usage. In
fact, the Fleet Management Office has increased the size of the taxi fleet by over 150
vehcles in recent years by retaining vehicles that should have been surplused. Once
new policies and procedures are in place regarding appropriate taxi fleet usage, DOA
should realize a significant decrease in vehicle requests. Therefore, it will need to
reevaluate its fleet size and determine whether it could be reduced while still meeting
the needs of appropriate users.
(') Colorado has an additional 100 older, high- mileage vehicles which it provides to agencies for
periods of three months or more.
RECOMMENDATIONS
1. DOA should revise its rules and practices regarding taxi dispatch to provide
vehicles to agencies on short notice for temporary needs. Specifically, DOA should:
Clearly define when the use of a taxi is appropriate and the best mode of
transportation for the state.
Establish minimum mileage requirements for taxi use.
Allow flexibility in reservation practices that conform to the current rules.
2. DOA should encourage agencies with frequent taxi needs to evaluate their own
fleets to determine whether they are optimally utilized or whether additional
permanent vehcles are warranted.
3. Once the Fleet Management Office has revised its policies and procedures to
discourage inappropriate use of the taxi fleet, DOA should determine whether the
size of the taxi fleet could be reduced.
OTHER PERTINENT INFORMATION
During the audit we obtained other pertinent information regarding the cost effective-ness
of consolidating print shop services withn state government.
A function of the Department of Administration is to provide support services to other
state agencies, including printing services. Located within the DOA's Special Services
section is the print shop operation. It provides printing and copying services ranging
from quick copy work to four- color printing work. It employs approximately 20 FTEs
and is funded by the Special Services Revolving Fund. However, several agencies have
established their own in- house print shops.
Three studies have examined the cost effectiveness of duplicated printing services. They
concluded that there should be consolidation and better coordination of the state's
multiple print shops.
In 1990, the Joint Legislative Budget Committee ( JLBC) reported that there were
nine agencies which had print shops operating ( not including the state's universi-ties,
judicial or legislative branches). cl) Ths report recommends additional study,
but suggests that consolidation of printing services may reduce the duplication
of support services, equipment, and inventories needed to run these nine shops.
In 1992 Project SLIM ( SLIM) recommended that the nine agency print shops be
consolidated into two: DOA and the Department of Correction's Arizona
Correctional Industries. SLIM estimated the state would save $ 474,000 through
a reduction in personnel and better utilization of its services.
A Governor's Office for Excellence print shop task team also reported in 1993
that there was a need to establish resource coordination among state agency
print shops to better assist management and lower the state's costs.
Although the reports concluded there could be cost savings through consolidation of
printing operations, none have been combined or eliminated.
(') Department of Administration, Department of Corrections' Arizona Correctional Industries,
Department of Economic Security, Department of Education, Department of Transportation, State
Compensation Fund, Department of Public Safety, Registrar of Contractors, and the Game and Fish
Department.
( This Page Intentionally Left Blank)
AREA FOR FURTHER AUDIT WORK
During the course of our audit, we identified an area for further audit work that we
did not pursue due to time limitations.
Does the Surplus Property Management Office ( SPMO) adequately protect the value of
surplused items and ensure maximum revenues to the state ?
The SPMO's primary mission is to reutilize surplus state and federal property and
maximize dollar return on property sold to the public. Used property may be
distributed to state agencies for reuse, or to eligible government and nonprofit
organizations for reuse. The remaining property may be sold to the general public
through periodic auctions. Redistributing usable items reduces state expenditures and
the sale of surplus items may generate revenues for the state. The SPMO is supported
by the federal and state surplus revolving funds. Revenues generated from the sale of
surplus property are placed in the respective revolving funds. However, if at the end
of the fiscal year, the state surplus revolving fund contains more than $ 100,000, the
excess is reverted to the General Fund. No money has been reverted for the last two
fiscal years.
We conducted a preliminary examination of the SPMO and were concerned about
aspects of its operations.
Storage pructices - Inadequate storage practices exposed equipment to dust, rain, and
heat, thereby possibly reducing its usefulness and value. We visited the surplus lot and
found computers, printers, copiers and other equipment stored outside, some items
covered by a roof and others not.
Much of the equipment was dusty and not protected from rain or the sun. We were
surprised to see equipment stored outside when the indoor warehouse was approxi-mately
two- thrds empty. When asked why electronic equipment sensitive to exposure
is stored outside and not in the warehouse, SPMO personnel told us that although the
equipment may have been expensive to purchase, by the time it comes to the SPMO
it has little value. For example, computers become outdated, and the high repair costs
for other electronic items such as phones and copiers reduce their value. They also
noted that the roof over the warehouse leaks and items stored inside cannot be
guaranteed protection from the rain. Nevertheless, outside storage of such equipment
can damage its condition and ability to operate; thereby reducing its value to potential
buyers.
Price detmination - The process for determining a price for incoming property
appeared to be inadequate. We observed one agency bring a load of 18 surplused items
to the SPMO. After receiving and marking the items with an inventory number, the
SPMO staff determined the price of each item. The SPMO staff did not check any of
the equipment to determine if it worked. A price was assigned based solely on the
staff's knowledge of what they thought the demand and the going rate for an item
would be and that the SPMO's minimum purchase price is $ 20 to cover processing
expenses.(') For some of the items the staff admitted that they had no idea of its
purpose - in those cases they assigned the minimum $ 20 purchase price. According
to the SPMO staff, it would require more staff resources than they have available to do
a more thorough assessment of incoming goods. Also they would prefer to underprice
an item and sell it quickly rather than overprice it and have it remain on the lot taking
up limited storage space.
Additional audit work is needed to determine the cost effectiveness of more thoroughly
assessing incoming goods and improving storage practices.
The $ 20 minimum purchase price may include more than one item. Individual items could be
marked less than $ 20 but would be grouped by SPMO staff with other items to ensure the
minimum price per unit. For example, two medical tables were priced at $ 10 apiece, but were
designated as one unit.
I Fife Symington
Governor I
J. Elliott Hibbs
Director
ARIZONA DEPARTMENT OF ADMlNfSTRATlON
GENERAL SERVICES DIVISION 1700 WEST WASHINGTON STREET, ROOM 600
PHOENIX, ARIZONA 85007
( 602) 542- 1 920
September 19, 1994
Mr. Douglas R. Norton, Auditor General
Office of the Auditor General
2910 N. 44th Street, Suite 410
Phoenix, Arizona 85018
Dear Mr. Norton:
The Department of Administration ( DOA) thanks you for the opportunity to comment on
the two performance audits of the General Services Division: Tenant Services and the Fleet
Management Office ( Motor Pool).
We understand the nature of the audit and concur with the general findings.
We have taken a positive and pro- active approach to the report findings. In fact, several
recommendations in the report have already been acted upon, such as sharing of repair facilities
across various fleets, consolidation of a Capital mall fuel site, increasing the emphasis and
staffing on preventive maintenance, and increasing the effectiveness of custodial services.
We will focus our response on the primary issues highlighted within the audit report in
each area:
TENANT SERVICES
Maintenance
A Preventative Maintenance Program is of primary importance to the Department of
Administration, Tenant Services Section. We agree with the Auditor General's Report that pilot
program buildings should be identified to begin an aggressive preventative maintenance program.
We also agree that implementation of the Tenant Services automated system must be operational
in the very near future, and we recognize the importance of scheduling maintenance to help
prevent further deterioration in the states building systems.
Mr. Norton, Auditor General
September 19, 1994
Page 2
An aggressive equipment inventory program has been implemented in DOA managed buildings.
Pertinent information is being gathered and documentated which will provide a baseline for
future preventative maintenance. We concur, that a Capitol Complex wide preventative
maintenance plan must be developed in order to properly utilize our assets and to meet new
federal mandates that require a written program for the maintenance of building systems. This
program must be preventative in scope, reflect equipment manufacturers ' recommendations,
describe the equipment to be maintained, and recommend maintenance procedures and frequency
of performance. We are very concerned that with the planned installation of new chillers and
systems controls, it will be imperative that we have a highly skilled staff to maintain and monitor
this equipment. This is not only for maximum efficiency of equipment, but also for the
necessary compliance with new regulations and potential indoor air quality liabilities.
The Auditor General recommended pilot program for preventative maintenance is a positive step
to the management of the Capitol Complex properties in addressing the critical deterioration of
our buildings; and a request to implement such a pilot has been included within the Department's
fiscal year 199511996 Operating Budget. Additionally, we have addressed the shortage of
maintenance staff by requesting four ( 4) additional HVAC mechanics for mandated programs and
to increase the percentage of preventative maintenance accomplished.
The Auditor General's report points out that at the time the audit was conducted, there were 45
staff to provide building maintenance services. It should be noted however, that only 32 of those
employees provide preventive and repair services in HVAC, pumps, roofs, generators, fire
protection, electrical, etc. The other 13 employees are construction workers ( responsible for
tenant improvement and building renewal projects), painters, and management.
We would submit that there are three major reasons for the deficiencies noted in the audit report:
1) Lack of proper funding in the operating maintenance and building renewal budget ( a 1993
Auditor General Report on Building Renewal indicated that building renewal has been under
funded $ 30 million since 1986)
2) Lack of manpower to dedicate to an aggressive maintenance program
3) Lack of building history and actual costs to maintain each building individually.
The providing of proper funding and manpower would allow the Department of Administration
to perform the services on a planned and dedicated basis, rather than on a crisis response as in
the past.
The recommended pilot program would benefit budgeting, staffing requirements and building
renewal cost effectiveness, as well as provide the necessary tracking to begin the process of
linking building operations costs to actual rental rates. The Department of Administration agrees
with the Auditor General's findings that it will take several years to gather pertinent data,
however, a comprehensive work order system will be implemented within one year.
Mr. Norton, Auditor General
September 19, 1994
Page 3
Custodial Services
We concur with the audit finding that custodial services being provided have been less than
outstanding. However, we disagree with the determination of causes. Further, we have been
examining the privatization of custodial services for several months and while we concur that this
option has considerable merit, we disagree with the Auditor General estimates of cost savings
from privatization, based on the information we have accumulated to date.
The Department agrees with the assessment of needed management changes, and in fact during
the last six months has selected a new General Manager for Tenant Services, two new Physical
Plant Directors for Maintenance, and a new Custodial Manager. This new management team
has already begun establishing appropriate staffing levels per facility, implemented quality control
inspections, and established training of custodians by product vendors and equipment suppliers
to educate our staff on state of the art cleaning methods and processes. By the end of fiscal year
1995, each Department of Administration managed building will have a detailed work sheet
developed which will track anticipated and actual costs for custodial services.
While we agree that cost savings will be achieved by contracting out our Custodial Services, we
disagree with the Audit report estimate of $ 700,000 annually and believe that number to be
excessively high. For the past several months, the Department has been examining out sourcing
custodial services, and has been reviewing this matter with both the City of Phoenix and with
Service Master, a National firm specializing in custodial and maintenance services. Service
Master has provided cost estimates for the Capital Mall Complex that indicate a cost savings in
the vicinity of $ 200,000, and have informed us that the state's current cost is actually quite low
for the size and make up of our facilities. Service Master does agree with the Auditor General,
however, that they could do a better job than we are currently doing in this area. It appears that
the major benefit of privatization may be improved service/ cleanliness rather than cost as
suggested by the Auditor General's report. Additionally the Department of Administration would
still have to provide in- house management support to private contractors resulting in additional
funding considerations. We are presently examining a pilot program to evaluate costs and quality
through privatization compared to our improved state provided services.
While we concur with the audit report that there are many dissatisfied customers, we would
submit that there has been recent improvements, as referenced by the January 1994 Building
Services Survey that tracks levels of performance by task. In reviewing this survey, the
respondents indicated an acceptable or higher level of service in trashing of 92 % , in vacuuming
of 57% and in dusting of 50%. Although we are still below acceptable levels of service, these
indicators do not suggest a total dissatisfaction with custodial services as the audit suggests.
Mr. Norton, Auditor General
September 19, 1994
Page 4
FLEET MANAGEMENT OFFICE
While we concur with the Auditor General's report recommendations, we would offer the
following information and clarification on several of their findings:
The Department of Administration's Incapability to Manage A State Fleet
The Auditor General reports that the Department of Administration is incapable of managing
statewide fleet issues because the Department does not ~ u r r e mem ploy technically qualified
individuals and has inadequate data processing capacity for a combined fleet of 8,000 vehicles.
The Department of Administration & capable of recruiting and selecting qualified staff to manage
a much larger fleet and the requisite data systems to support it if centralization of the fleet is
decided.
In the past agencies have been allowed considerable latitude concerning their fleet needs. If this
degree of latitude is no longer desired, as suggested by the auditor, then steps would be taken
to bring these vehicles back into the Department of Administration fleet. If it is determined
agencies should continue to operate separate fleets, we should legitimize their existence through
formal recognition of current practice.
The report appropriately criticizes the efforts on a statewide basis being taken to prevent traffic
accidents. However, a systematic process for traffic accident review, documentation and
appropriate disciplinary actions is established within the Department of Administration. These
processes could easily be expanded to encompass a larger fleet.
The report implies there is not a systematic way to monitor fleet usage. Again, the Department
of Administration has had for many years a systematic approach and deployment for notifying
fleet users of utilization information. Monthly, each agency is provided an invoicelutilization
report listing, by vehicle, the number of days and miles traveled. It has been the Department
of Administration's position that user management should determine how best to meet their
individual travel needs in a cost effective way.
The current fleet management staff has repeatedly been instructed to meet or exceed customer
needs. Arguably customer needs are not being met concerning taxi vehicles, as demand greatly
exceeds current capacity. One approach is to limit certain users who appear, from an outside
perspective, not to be using resources appropriately. The Department of Administration has
taken the position with our users to not question their need when requesting service. It is the
management responsibility of the requesting agency to ensure they are spending their budgets
effectively, not a clerk within the motor pool. As stated above, usage and cost data are provided
monthly to user agency management for their review and action. In light of these recent
findings, additional notification to the upper Management levels within agencies under utilizing
the fleet is appropriate. Also modifying the rate structure, which has not been an incentive for
good agency vehicle utilization management, is being changed to discourage inappropriate use,
and it is being proposed for the Fiscal 199511996 budget.
Mr. Norton, Auditor General
September 19, 1994
Page 5
Sharing of Repair Facilities
The Draft report speaks of little sharing of facilities across the various fleets. This issue has
been recognized by both the Department of Transportation and the Department of Administration
and teams have been working for more than a year to eliminate the duplication of repair,
dispatch and fueling facilities within the Capitol Mall. These efforts are briefly mentioned in the
auditor report. As of this date, the repair functions have been combined and agreements have
been reached on co- locating dispatch and fueling activities.
The audit report suggests using a private sector vendor for lubrication service. This has been
tried by the Department of Administration, and our experence with private sector preventive
maintenance was that future repair needs were not discovered in a timely fashion, and the quality
of maintenance was continually called into question. Fluid levels were often found to have gone
unchecked, tire pressures were not routinely monitored, and overall quality was lacking. For
these reasons, the current philosophy of both the Department of Transportation and the
Department of Administration is that less costly and better preventive maintenance can be
accomplished through in- house routine vehicle servicing.
Overall Report Concerning the Fleet Management Office
The major philosophical assumption made within the Audit Report is that centralization of fleet
management will be cost efficient. While we agree with most of the foundational issues ( little
sharing of maintenance, under utilized fuel pumps, and lack of readily accessible data), without
additional information, the Department of Administration disagrees with the conclusion at this
time. Time should be taken to correct the problems found by the audit team, working with those
agencies currently managing separate fleets. An externally mandated centralization of services
may not resolve the issues and will cause in- fighting within the major executive branch agencies.
The Auditor General's Report would lead most readers to believe the Department of
Administration does not have processes in place concerning most of the issues discussed within
the report. This is not the case. The Department of Administration has been progressive and
responsive in its administration of its portion of the state vehicle fleet. The Department of
Administration would be willing to share its experience and insights with other fleet
administrators to ensure the state is most effectively using its resources.
Lastly, the Department of Administration is pressing forward with the process of continuous
improvement. We are presently conducting analysis in the areas reviewed in this Performance
Audit in an effort to better satisfy our customers.
Sincerely,
/ JD~, E~; Hibbs