| It's every Chief's dream - to have a completely | | | | expenses. Calculate the historical annual growth |
| modern and safe fleet. | | | | rate. Examine if the expense growth rate will be |
| Sounds impossible? Well, it's not if you develop a | | | | higher, same, or lower than your recent |
| comprehensive fleet replacement plan and have | | | | experience. Finally, project your future expenses |
| the discipline to work the plan. | | | | based on recent experience and at the calculated |
| Many departments have been developing and | | | | growth rate. Be sure to specifically include any |
| using a truck replacement schedule to define | | | | significant expenses that you know will grow |
| when to upgrade their fleet. This is a critical first | | | | beyond the expected inflation rate such as |
| step but falls far short of developing a | | | | insurance premiums or fuel. |
| comprehensive fleet replacement plan. Creating a | | | | Third Factor: Capital expenses. You spend money |
| replacement schedule only is like having a | | | | on two types of expenses - operating expenses |
| Christmas wish list but without any money to buy | | | | such as insurance, payroll, fuel, utilities, repairs, |
| anything. A comprehensive plan includes the | | | | maintenance, etc. and capital expenses for large |
| schedule and the budget to guide you for a | | | | purchases such as new trucks, stations, loan |
| properly replaced fleet. | | | | payments, or large equipment purchases. |
| This article will guide you about the 4 key steps in | | | | For a comprehensive plan, project what capital |
| developing a comprehensive fleet replacement | | | | purchases you consistently have to make each |
| plan. | | | | year. Analyze your past few years of purchases |
| Step 1. Inventory and plan your fleet. This is the | | | | and again calculate if they will rise, fall, or stay the |
| critical first step that many departments are doing | | | | same. |
| right now. This step involves writing down every | | | | Please note that this is not your future fleet |
| single vehicle that your department owns and | | | | replacement purchases - we'll get to that later. |
| determining when you should replace each vehicle. | | | | If you have loans, you'll need to continue to |
| Then develop replacement criteria - should you | | | | include the payments until the loans are paid off. |
| replace the vehicle based on age, mileage, hours, | | | | Loan payments are a capital expense since they |
| condition, or other criteria that demands you | | | | were used to buy a capital item such as a truck |
| update the vehicle. Determine a year that each | | | | or station. |
| vehicle will have to be replaced according to the | | | | So, after you've projected your revenues and |
| schedule. | | | | subtracted your operating expenses and capital |
| A word of caution here: You must have | | | | expenses, you have an amount of cash flow to |
| defensible reasons for replacing your fleet. | | | | use for new trucks. |
| Government budgets are tight and getting tighter. | | | | The next step is to determine how much your |
| You will be second-guessed about the need for | | | | future trucks will cost when you need to buy |
| the purchases. They need to know that spending | | | | them. |
| this money is. Each replacement should be | | | | Step 3. Predict your future purchase costs. An |
| measured against some definable cost - whether | | | | often-overlooked factor in fleet plans is the |
| in terms of safety for the fire fighters or | | | | reduced buying power as each year goes by. |
| community, the technological obsolescence of the | | | | Many replacement schedules have been sidelined |
| old truck, or the costs of repair and maintenance. | | | | when the time comes to buy the truck and the |
| But a comprehensive plan also includes more than | | | | bid prices are 20% - 50% higher than expected. |
| just vehicles. Remember to include such major | | | | But a comprehensive plan includes the future cost. |
| purchases such as large gear or equipment | | | | For example, if the truck you need will cost |
| replacements or a new station or station addition. | | | | $300,000 today and you expect truck prices to |
| Step 2. Develop your future budget. A | | | | increase 5% per year, that same truck will cost |
| comprehensive fleet replacement plan includes | | | | $382,884 in 5 years. So, if you budget $300,000 |
| both the replacement schedule and the capital and | | | | in 2013 to replace the truck, your plan will be off |
| operating budget necessary to buy the trucks | | | | by over $82,000. It's key to prepare for a higher |
| you will need. The next step is to develop the | | | | future cost so that your plan will not be |
| financial roadmap that will pay for your new | | | | sidetracked. |
| modern fleet. | | | | It's easy to think that the plan you developed |
| It's important to include all the financial factors to | | | | back in 2008 will accurately predict the future. |
| ensure you have a complete and accurate plan. | | | | After all, you did do all the steps correctly and |
| The key is to analyze all 3 financial factors that | | | | didn't overestimate anything. Well, the plan works |
| will control what your future budget will look like. | | | | because you work the plan. Here's how. |
| First factor: Project your revenues. This can be a | | | | Step 4. Work the plan. The plan is not an exact |
| daunting calculation but you already have a lot of | | | | picture of what your future will be like. It's more |
| information in your head and at your fingertips to | | | | like a roadmap, providing a sense of direction and |
| help with this factor. | | | | a path of where you'd like to head. |
| First, start with your past 3 year's revenues. | | | | The key factor is to use the plan to chart your |
| Eliminate all the non-recurring income such as | | | | course and determine if you are still on track |
| grants or other revenues that you can't count on | | | | each year. Your future revenues, expenses, and |
| receiving each year. You should have an accurate | | | | truck costs will not be exactly what you planned. |
| repeatable revenue amount. Then, you want to | | | | So, what's the purpose of the plan at all? The |
| begin projecting your future revenues from this | | | | purpose is to help you know if you are heading in |
| amount. | | | | the direction of your primary goal which is a fully |
| What do you think will happen to your revenues | | | | funded modern fleet replaced according to a set |
| over the next 3 to 5 years? Based on the past 3 | | | | operational schedule. |
| years, do you think that they will be increasing, | | | | Work your plan each year by examining your |
| staying stable, or decreasing? | | | | results. Were your actual revenues, operating |
| After you have a general sense of your revenue | | | | expenses, capital expenses, and truck purchase or |
| trend, it's time to estimate a percentage change. | | | | financing costs last year close to what you |
| Use your actual experience to help guide you. Will | | | | projected? If not, what changes in your plan are |
| the rate increase at the same pace, lower pace, | | | | needed to get back on track? |
| or higher pace? Let's show an example. | | | | The point is that if you don't have a plan to |
| If your revenues have increased at 4% per year, | | | | measure where you should be, you don't know |
| on average, over the past few years and you | | | | how you are doing. Without a plan, you won't |
| see a consistent growth rate, use 4% to increase | | | | know if your financial results each year are leading |
| your revenue each year. If you have lower | | | | you toward a fully replaced modern fleet or not. |
| expectations, use a lower percentage. If you feel | | | | A comprehensive fleet replacement plan is a fully |
| that your revenues will do much better than the | | | | developed replacement schedule and a financial |
| recent past, use a higher percentage. | | | | budget designed to ensure your funding is ready |
| Second Factor: Project your operating expenses. | | | | when you need to replace your trucks. When you |
| This follows a similar path as your revenue | | | | have a comprehensive plan, you'll have all the |
| projection. | | | | factors in place to have a station full of modern, |
| Determine your recent repeatable operating | | | | safe trucks. |
