Value Vs. Budget

A school district had an underground LP gas storage tank to provide fuel for the High School emergency generator. It was the responsibility of the building mechanic to order fuel annually. A recent retirement put a new person in that position. Unaware of this duty, the fuel level became low. This caused a gas smell on the area of the generator.

When reprimanded for the failure to order fuel the new person was told that this was a significant item and cost the district $3200 each year. It was a line item in the budget and had been for many years. Brought to light at the meeting, the cost appeared quite high. The generator automatically exercised for 1 hour every Friday. The local utility was very reliable and outages were infrequent. Given that the base operation was 52 hours per year and outages did not exceed another 4 hours annually, it was questioned how the generator could consume nearly $60 worth of fuel per hour. An investigation found the tank leaked underground. The leakage accounted for about $2600 of the annual budget.

Many times a budget figure is used as a basis for performance. If “X” number of dollars has been spent, we are in line with the budget and things are OK. We meet the budget and do not really know what we spent the money on. It is important to know the value, to micro-manage, every dollar spent.

Utilities and maintenance are ideal places to capture inefficiencies through micro-management. As with the generator fuel mentioned earlier, the ability to step back and analyze individual pieces of equipment or complete systems can bring dramatic cost reduction.  Most managers can do this effectively if their plate is not full already.