Washington State Patrol Pursuit Vehicle Replacement

Washington State Patrol (WSP) uses a life cycle cost model to set the pursuit vehicle replacement target

A life cycle cost model is an analytical tool used to quantify the capital and operating costs of an asset over its useful life. For vehicle ownership, a model can convert total costs over time to costs per mile. The optimal replacement target is where total life cycle costs per mile are lowest. Exhibit 2.1 shows the relationship between capital and operating costs over time.

Exhibit 2.1: Capital costs decrease over time as the purchase price is spread out over additional years

Source: JLARC staff analysis.

Original 1999 model indicated 110,000 miles was optimal time to replace vehicles

WSP began using a life cycle cost model in 1999. The original model was developed during a 1999 JLARC audit to estimate the total cost of vehicle ownership at different mileage intervals. The model indicated that life cycle costs were lowest at 110,000 miles. This is known as the optimal replacement mileage or optimal replacement target. However, the analysis could not extend beyond 110,000 miles because there was insufficient data on higher mileage vehicles at the time.

WSP now uses a National Association of Fleet Administrators (NAFA) model that has resulted in the same replacement target

The 2003 Legislature reduced WSP's pursuit vehicle funding by $2.3 million and directed the agency and JLARC to update the vehicle life cycle cost model. The goal of the update was to identify the costs of keeping vehicles beyond the 110,000 mile replacement target.

WSP purchased a new model from NAFA that estimates life cycle costs up to 150,000 miles. In 2004, WSP reported that the optimal replacement target remained at 110,000 miles (see report to the Legislature, July 2004). WSP's analysis indicated that keeping vehicles until they reached 120,000 miles would increase biennial repair costs by over $200,000.

WSP continues to use the NAFA model to determine the optimal replacement mileage for the Ford Inceptor, its primary pursuit vehicle. WSP also sets replacement targets for its other vehicles, but does not use life cycle cost analysis to determine those targets.

WSP updates its pursuit vehicle life cycle cost model every biennium

WSP updates the data in its pursuit vehicle life cycle cost model every two years in advance of its biennial budget request. The results help to inform WSP's funding request for vehicle expenditures in the upcoming biennium.

To update the model, WSP's Fleet staff review existing data and add new information on vehicles, such as:

• Acquisition costs for new vehicles.
• Miles-per-gallon driven.
• Resale values.
• Costs and timing of 16 types of vehicle services and repairs.

Some of these data points are calculated based on WSP's fleet and maintenance data, while others are based on assumptions about vehicle performance and professional experience.

WSP includes a narrative summary of its vehicle life cycle cost analysis with its biennial budget request, as required. The summary outlines some of the changes to the model since the last budget request and the results of the analysis, including the optimal replacement target. WSP did not include a copy of the actual model in its most recent 2019-21 budget request. This was the first time agencies submitted their budget requests electronically.

WSP is not following best practices for using and communicating life cycle cost analysis. This limits the accuracy of the analysis and its impact on policy and funding decisions.

JLARC staff reviewed WSP's original NAFA life cycle cost model and the last six iterations of the model, starting with the 2009-11 biennium. WSP has added and removed some data fields, but the overall structure of the model has remained consistent over time. While WSP modeled three different pursuit vehicles Ford Crown Victoria, Chevrolet Caprice, Ford Police Interceptor Utility during this period, the reported optimal replacement target remained at 110,000 miles for each biennium except 2013-15, when it was 120,000 miles. The 110,00 mile replacement target equates to about four-and-a-half years of active pursuit duty.

JLARC staff found that WSP is not following best practices for updating, documenting, and communicating its life cost analysis. This limits the accuracy of its results, and its potential impact on policy and funding decisions. Best practices are based on U.S. General Accounting Office standards and academic literature.

Exhibit 2.2: WSP practices do not reflect best practices for life cycle cost analysis

Source: JLARC staff analysis.

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After updating the model and factoring in other considerations, JLARC staff identified an optimal replacement target of 130,000 miles

JLARC staff reviewed the 2019-21 pursuit vehicle life cycle cost model to verify whether the 110,000 mile replacement target is accurate. JLARC staff modified the structure and content of the model to align with available fleet data and incorporate best practices for life cycle costing. This included changes to the way certain values are calculated. Highlights of these updates include:

• Replacing the 16 service and repair categories that are identified in the model with aggregate maintenance costs per vehicle.
• Estimating high-mileage maintenance costs based on statistical modeling rather than professional judgement.
• Adding trooper downtime The amount of time troopers spend on tasks related to bringing their vehicles in for maintenance (e.g., transferring equipment between vehicles). to quantify the effect of extended vehicle downtime on agency operations.
• Calculating vehicle resale values at an annual rate of depreciation based on data provided by the Department of Enterprise Services.
• Discounting all future life cycle costs to present value The current value of a future cash flow given a specified interest rate. .

Additional details on the data and methodology for these updates are available in Appendix A. The new life cycle cost model is provided in Appendix B.

Costs for replacing vehicles at 130,000 miles and 175,000 miles are statistically equivalent

Life cycle costing, particularly with limited data, involves a certain degree of uncertainty. JLARC staff captured and quantified this uncertainty with a statistical margin of error—calculated at plus-or-minus 1%—and identified a replacement range of statistically equivalent costs.

The updated model calculates a replacement range from 130,000 miles to 230,000 miles. Discussions with law enforcement fleet managers and industry experts highlighted the risks and costs associated with operating high-mileage pursuit vehicles. Based on these conversations, and internal analysis that found increasing costs after 175,000 miles, JLARC staff excluded the upper end of the range. This adjustment left an optimal replacement range from 130,000 miles to 175,000 miles. Within this range, the costs per mile vary to a small degree, but they are within a 1% margin of error.

Exhibit 3.1: Lowest costs per mile are statistically equivalent between 130,000 and 175,000 miles

Source: JLARC staff analysis of WSP fleet data.

Annual fleet costs are also statistically equivalent between 130,000 and 175,000 miles

JLARC staff calculated the impact of different replacement targets on annual capital and operating costs for WSP's current fleet of 700 Ford Interceptors assigned to pursuit duty. If vehicles are replaced at 130,000 miles, annual fleet costs are $12.1 million. If they are replaced at 175,000 miles, annual costs are $11.9 million. While there is a difference in costs, the annual costs are both within a 1% margin of error. Replacing vehicles outside of the optimal range will increase costs, though only modestly. For example, changing the replacement target to 110,000 miles from 130,000 miles increases costs by about 3% or $400,000 per year.

Exhibit 3.2: Changes to replacement targets have modest impact on annual fleet costs

Source: JLARC staff analysis.

Vehicle replacements between 130,000 miles and 175,000 miles are considered cost equivalent. Because factors outside of the model (see below) favor a shorter replacement cycle, JLARC staff conclude that the optimal replacement target is currently 130,000 miles, the lowest mileage within the optimal range.

Additional costs and other non-cost factors should be considered when making vehicle replacement decisions

Life cycle costing is a key tool for efficient fleet management. However, life cycle cost models do not capture all relevant costs and other factors related to owning and operating a vehicle fleet. These factors are difficult to quantify yet important to consider. The cost or risk associated with each factor increases with vehicle mileage.

Some costs are not captured in life cycle cost analysis:

• Additional pool vehicles. JLARC staff found that non-routine maintenance needs increase with vehicle mileage. When vehicles are out of service for maintenance, there is more demand for pursuit capable pool vehiclesBackup pursuit vehicles that officers use when their normal vehicle is unavailable.. WSP will likely need to expand its pool of backup pursuit vehicles with a higher mileage replacement target, or face a reduction in service. With fewer vehicles available, the agency may not be able to respond as quickly to natural disasters, civil disturbances, and highway blockages.

  Compared to current practice, JLARC staff found that one additional pursuit pool vehicles would be needed to maintain operations at the 130,000-mile replacement level, and four more pool vehicles would be needed at the 175,000-mile replacement level (see Exhibit 3.3).

• Additional staff due to trooper downtime. JLARC staff's update to the model includes a data field for trooper downtime based on the amount of time troopers spend on non-routine duties when their vehicles require maintenance. This includes hours spent dropping off vehicles, picking up pool vehicles, and transferring equipment between vehicles. WSP may need to hire additional troopers if the amount of time spent on non-routine duties related to vehicle maintenance risks a reduction in service.
• Unexpected maintenance needs. WSP has limited experience with maintenance costs beyond the 110,000 mile replacement target. The updated model uses statistical methods to estimate high-mileage costs, but there is increasing uncertainty at each subsequent mileage interval. This uncertainty could lead to unexpectedly high costs and should be considered along with other factors when setting the replacement target.

Exhibit 3.3: WSP would need additional pool vehicles at higher replacement mileages to cover increased maintenance needs

Source: JLARC staff analysis of WSP fleet data.

Non-cost factors also influence the optimal replacement mileage for vehicles

Fleet experts, WSP staff, and academic literature identify other important factors to consider when making decisions on replacing vehicles. These include:

• Safety and emissions: Older pursuit vehicles often lack new safety features and technologies found in current vehicle models. Some of these technologies help to make cars more efficient, reducing the agency's greenhouse gas emissions. The longer a vehicle is held, the more likely it is to lack these features.
• Reliability: WSP does not typically operate pursuit vehicles beyond 120,000 miles. For an agency tasked with highway safety, uncertain reliability at high mileages could hamper its ability to respond to emergencies.
• Part availability: Reliable and affordable spare parts may be harder to find for older models.
• Agency image: WSP's public image includes standardized pursuit vehicles. A lower mileage replacement target can help to keep the fleet uniform and modern.

These non-cost factors favor a lower mileage replacement target and should be considered along with the results of the life cycle cost analysis and the other costs when making vehicle replacement decisions.

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JLARC staff applied sensitivity tests on the updated life cycle cost model to identify:

• Which costs have the largest effect on the optimal replacement target.
• Where the agency needs to improve its data quality.
• How future changes to vehicle acquisition costs and interest rates may affect the optimal replacement target.

Uncertain costs and assumptions can significantly impact the optimal replacement target

The optimal replacement target is sensitive to a number of inputs in the model:

• Generally, higher upfront costs (e.g., vehicle purchase costs) lead to higher optimal replacement mileages because it takes longer to spread out the costs of the initial capital investment. For example, a 1% increase in purchase costs (about $460) will increase the optimal replacement target by 1,500 miles.
• However, increased maintenance and operating costs can result in lower optimal replacement mileages. For example, a 1% increase in maintenance costs lowers the optimal replacement target by 900 miles.

WSP's transition to the EcoBoost model pursuit vehicle is expected to increase purchase costs in 2019-21 by 11%. The future maintenance and operating costs of this model are largely uncertain at this time. More reliable data on costs related to maintenance, trooper downtime, and resale value for the EcoBoost could significantly effect the optimal replacement target in the future.

Discount rates will also affect optimal replacement target

Discount rates also have a large effect on life cycle costs. The 5-year real discount rateThe inflation-adjusted interest rate used to calculate the present value of future cash flows. is currently -0.3%, per the Federal Office of Management and Budget. Exhibit 4.1 lists the optimal replacement target at various hypothetical 5-year real discount rates. These rates show a range of effects on the optimal replacement target. JLARC staff are unable to determine the likelihood of any specific future discount rate.

Exhibit 4.1: Future discount rates will affect optimal replacement target

Source: JLARC staff analysis.

The analysis above shows that the optimal replacement target is sensitive to a number of inputs used in the model. While rising costs to purchase and equip vehicles may increase the optimal replacement mileage, there is significant uncertainty surrounding many of the other future costs, including how the new EcoBoost model will perform relative to the previous model of pursuit vehicle.

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