Overview
Any service provider incurs both direct cost to deliver
those services and indirect costs or overhead. It has been know for some
time that the overhead
costs incurred by Facilities & Services to provide services were
greater than the revenue generated from the labor markup that has been
assessed against every dollar of recharge labor (29%). What was not known
was the extent to which these costs were under recovered. With newly
deployed management tools such as RCM and a Business Intelligence (BI)
initiative, we are able to determine the extent to which subsidization
of recharge activities is occurring.
In FY2004, the projected subsidization for all recharge services will
be in excess of $2.4 million. In effect the labor markup rate (overhead)
should
have been nearer 40% to fully recover all costs. It should be pointed out
that nearly half of the subsidy relates to construction services. This means
that scarce and critical maintenance resources have been diverted to support
recharge activities resulting in fewer maintenance needs being met. With
the ever-present deferred maintenance problem, it is imprudent to continue
this practice. In addition, well-funded units are getting their work subsidized
to the detriment of poorly funded units who rely on F&S to fulfill their
maintenance needs.
The fair approach is that units who use our services should pay for all costs
associated with performing those services. This overhead rate increase attempts
to recover all costs associated with providing these recharge services.
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