Heavy Equipment Is a CFO Problem: Fleet Strategy, Preventive Maintenance & Benchmarking with Yvette Aubin (Ebsary Foundation)

Rishi Srivastava (00:41)
Today our guest is Yvette Auben. Yvette, welcome.

Yvette (00:44)
Thanks Rishi.

Rishi Srivastava (00:45)
The first section here is on your

journey and leadership in construction finance. You bring nearly 25 years of construction accounting experience, including auditing large GCs and government projects. How did that background prepare you for taking on the CFO role at Ebsari Foundation Company?

Yvette (01:04)
So I think that being an auditor and seeing how different companies approach certain aspects of their business has given me lot of insight into what my company can do well and be efficient at.

And as far as the government goes, the company I work for now, Ebsary Foundation, we are mostly focused on government work. And so I have an insight on how the other side approaches projects and how they receive pay applications and how they review documentation. So it allows us to be able to put together some quality control ⁓ measures in order to make sure we’re doing the right submissions to the government.

Rishi Srivastava (01:43)
Yeah, so you have some insights on the other side, you mean like government side?

Yvette (01:43)
Yes sir.

Well, auditing,

yeah, auditing some government entities. I was mostly focused on the capital improvement side of government entities. So, you know, dealing with contractors, reviewing contracts, reviewing pay applications to make sure that, you know, the contractors are following government procedure. So now on the other side of the coin, you know, I work for a contractor that needs to submit these pay application packages.

Rishi Srivastava (02:12)
Yeah, that makes sense. Seeing other person’s perspective is so valuable.

When you became company controller in 2007 and later CFO in 2011, you oversaw not just accounting, but also insurance, risk management, equipment financing, and cash flow. What were the biggest surprises or learning curves in taking on the equipment financing side of things?

Yvette (02:37)
I think understanding how equipment is one of the biggest drivers of success in a heavy contractor, think wrapping my head around that was really important, right? Because if our equipment has downtime or it’s not repaired properly, our jobs are going to have downtime and we might not meet schedules. And so I think it’s really important in understanding the resources that the fleet department requires and

Also, you know at the same side looking at the construction Department and making sure that they have the right resources in equipment right and that we’re facilitating that equipment and so I think Looking at trends and looking at our utilization Gives us some insight into how efficient we are and I think that was the most surprising thing right that I had no experience with

Rishi Srivastava (03:23)
Yeah, actually, telematics is probably a big deal too,

Yvette (03:27)
Yes, huge. is a tool that we use every day and it provides efficiency insights for us to be able to complete work.

Rishi Srivastava (03:38)
Equipment Financing is a beast that I have no clue about. So you are the real expert here.

Given your experience in auditing government contracts, Miami Dade Transit, Miami International Airport, and then the private sector heavy civil world, what differences have you seen in how equipment costing and financial controls are handled? What can private contractors learn from the public side?

Yvette (04:03)
⁓ you know, I really, I didn’t really audit any equipment.

information when I was an auditor, I don’t think that was a focus of ours, right? We just tested whether the company added a piece of equipment and, you know, it passed for kosherness. And so don’t think on the side, you really get exposed to the gravity of what or the importance of having a fleet program is. And as far as insights into the government side, you know, not equipment related, but, you know, it’s learning that

And this might sound bad, so we’re gonna try to make it nice. know, most government entities are using a checklist approach, right? And it might not make sense to us as contractors, but it’s knowing that whatever happens, the personnel on the government side, they have to follow that checklist approach. And so the easiest way for us to be able to communicate and get things done efficiently with the government and even getting payoffs in is following that checklist approach, right? We can ask them for a checklist.

hey, is it that I need to provide to you every month? And whether it makes sense to you or not, we just have to do it.

Rishi Srivastava (05:07)
I had a pilot on this podcast one time and he said he used checklists to make sure that his plane was okay to take off. Checklists are valuable actually.

Yvette (05:16)
Yes, they are.

Rishi Srivastava (05:18)
You’ve been deeply involved in CFMA leadership, past chapter president, conference chair, and now chair of CFMA’s National Heavy Construction Committee. How has that shaped your perspective on national construction financial trends?

Yvette (05:34)
So I was past president of the local chapter here, Miami-Dade chapter, and I was, or I still am the chair of the Florida Regional Conference. So not the national conference, but the regional. And then I am the current chair of the National Heavy Construction Committee. I think in those roles,

You know, each one has let me kind of expand my network base and let me meet contractors from bigger areas, right? You know, first it was the region, right? Then I started meeting people all over my state and making contacts with people in my state. And then nationally, I have made some lifelong friends, right? The heavy construction committee. And it’s really nice to be able to just call on them. Let’s say if I have a question or use them as a sounding board, it’s really nice for people to be open to that.

Rishi Srivastava (06:18)
Yeah, I have applied to speaking gigs at CFMA national and I’ve gotten rejected both times.

Yvette (06:26)
It’s hard,

it’s hard to get in.

Rishi Srivastava (06:28)
Yeah, but what’s the tip for me to get into one of these speaking platforms?

Yvette (06:33)
That I don’t know because I’m not on that conference planning. I’m not sure what it is they’re looking for, but you know, keep trying, you know.

Rishi Srivastava (06:41)
Do think there is some underhanded shady stuff going on?

Yvette (06:44)
No,

The team that actually reviews that, they review, I think, maybe over a hundred of applications. And so I think it’s a very difficult job and kudos to them for pulling it off and being able to put a good program together every year. But I would say keep trying. One day you’ll get it.

Rishi Srivastava (07:03)
Thank you. The next section here is on heavy equipment strategy, operations and benchmarking. One of the major capital burdens for heavy contractors is equipment. In your view, what are the top three financial risks associated with owning and operating heavy equipment?

Yvette (07:20)
you know, I think, you know, and this is my personal opinion, I think the…

Most important one is the risk contractors take that don’t have a preventative and predictive maintenance program. I think that ensuring that your equipment is running properly and that you’re doing service intervals is going to limit downtime on jobs, right? And limiting downtime drives our schedule and drives our profitability. So I think, number one, not having a predictive and preventative maintenance program.

⁓ will cause you to be reactive and likely spend more money, right? On the other side, I think that maybe having an underutilized fleet is another big thing. ⁓ So you don’t want to have people that have equipment sitting on job site and it’s not being used, right? So…

Rishi Srivastava (07:53)
Hmm.

Yvette (08:11)
One thing to remember is that if we own a piece of equipment, if it’s not being used, we’re still incurring costs like taxes, perhaps interest if it’s financed, any registration fees, insurance, anything like that, we’re still incurring while the equipment is sitting. So the more we can utilize our equipment, I think the more efficient the fleet will be.

Rishi Srivastava (08:31)
Is there another one?

Yvette (08:32)
I would say also not having the right rates, right? If you’re not able to take proper rate setting so that you can translate that back to your bidding department, you know, that can cause issues too because if, let’s say if you’re not tracking your rates properly and the bidding department is not using the actual rates or they don’t know what the fleet department is spending, then you you might miss your mark on the bid.

Rishi Srivastava (08:55)
Actually, I’m glad that you brought up that bidding department not having good information from accounting department. know, this is a big problem. know, people are bidding the jobs and sometimes they don’t even know how much it costs for, let’s say, certain cost code. know, and they’re like, you’re an accounting people if you don’t give them the right information. Hopefully, sometimes you don’t even have it yourself, but when you do, it can be very helpful for bidding department, right?

Yvette (09:11)
Yeah, it’s true.

Right, but I think that starts with, know, if you have a proper work order system, a proper fleet tracking system, you’re gonna have the data that you need. Whether you know how to compile it or not, you know, the first thing is getting that system in place. And I recommend that for any contractor that has heavy pieces of equipment.

Rishi Srivastava (09:41)
Yeah, this is a very tough business by the way construction and especially the heavy equipment operators like yourself, succeeding is so important to the industry, you know.

Yvette (09:50)
Yes.

Rishi Srivastava (09:50)
How do you balance the decision between owning equipment versus renting slash subcontracting? What financial indicators tip the scale in one direction or the other?

Yvette (10:02)
I think for us it’s just what work is in our backlog.

We’re not a company that’s heavy on renting pieces of equipment. I would say the only time that we rent is we lease to own so that we can test out the piece of equipment. For example, we might rent a crane that we want to buy for two to three months to determine whether we actually want to buy it, if it’s working, if it does what we need it to do. I would say for us, it makes sense to purchase. We look at the depreciation benefits.

and my company’s longstanding principle, which my company’s been around for over 100 years, and so there’s some pride in owning your own equipment, and I think that kinda carries a little bit of ⁓ the way we operate.

Rishi Srivastava (10:47)
Yeah, a lot of owners’ preferences, you have to respect them, even if sometimes it’s not making financial sense. The CFMA Heavy Equipment Comparator, HEC, provides KPIs around cost, utilization, maintenance, and ROI. How important is fleet benchmarking for CFOs? And how should companies use HEC data for planning and budgeting?

Yvette (11:12)
So I’m smiling here because this is a project that’s near and dear to my heart. I have been part of the team that has been working on this project for several years. And we did this in partnership with AAMP. And the goal of the HEC is to bring metrics.

that track our heavy fleet to determine whether people are efficient with the capital they’re deploying in their heavy fleet or they’re utilizing their equipment well, right?

And so I think that benchmarking overall is important, but if we didn’t benchmark against other contractors, we wouldn’t have the data to know whether we were doing well or not. I can benchmark myself year over year and maybe I’m improving. But if I’m not comparing that to outside contractors, I could be way off the mark. And so some indications about how we benchmark in certain KPIs give us information to know where we should be improving and where we should

focus, you know, maybe becoming more efficient. And so I think KPIs in general, whether they’re financial or they’re equipment related are really important to the success of your business.

Rishi Srivastava (12:18)
Actually, I listened to you and Rich talk about it in the CFMA annual presentation. my God, I learned so much from you guys.

Yvette (12:27)
you

It’s a really interesting topic and kind of, you know, kind of when you dive in, you know, if you’re a person that likes to be efficient or, you know, wants your company to be efficient, I think it’s amazing to figure out, ⁓ well, I’m not efficient in this part, right? Like maybe we should look at this, right? And I think that the equipment comparator is one thing that every heavy contractor should look at because I’m pretty sure that most of them will be surprised that they might be missing the mark no matter how well they think

their program is doing.

Rishi Srivastava (12:56)
Contractors under $100 million, what equipment KPIs from the HEC should they track early and often?

Yvette (13:04)
So I would say the main thing is, number one, the percentage of work orders that you have that are preventative and predictive. The main reason is a preventative and predictive maintenance program.

gives you some insight into how effective your program is. if I have a bunch of work orders for the year, if I have 100 work orders for the year, and only 25 % of them are preventative predictive maintenance, that means that I’m having 75 % of the work orders be either breakdowns or major repairs or something that we couldn’t anticipate. And so we’re running a reactive program that probably has higher costs instead of

of

a program that is servicing machines on manufacturer recommended intervals or doing, for example, the manufacturer recommends that you inspect train tracks every thousand hours, right? Are you doing that? That’s part of that program, right? You don’t want your crane to break down and not be able to move it. So it’s more of a…

Are we following all the manufacturer’s suggestions? Do we have a program in place to tell us when that has to happen? Are we creating those work orders and working on these machines within a, let’s say, a period of a week to make sure that we don’t miss these intervals? And are we avoiding any reactive downtime? And I think that’s the key to making a company a little bit more efficient. I think first, that is one of the most important ones.

Rishi Srivastava (14:33)
Yeah, yeah, preventative versus reactive.

You’ve managed insurance and risk management. How do you incorporate equipment breakdown risk, idle time, and unplanned repair costs into financial models or contingency planning?

Yvette (14:49)
that’s a hard one. ⁓ I would love to say that, you know, we’re psychic, and can do that well, but I think, you know, we, generally look at trends and so, we have to look at, again,

having some indications from a fleet program that can give us some idea into the costs that we’re putting to certain machines, right? Where they are, at what point should we be getting rid of them? Because maybe the machine is costing us too much money at this point, right? Is the machine old? So it’s hard, but us using actual information from the prior year is kind of how we project forward.

Rishi Srivastava (15:22)
So if it’s not hard, I would not ask you that question.

Yvette (15:24)
You

I agree.

Rishi Srivastava (15:26)
How do you tie equipment fleet KPIs back to margin improvement and job level profitability? Can you share an example of where fleet data led to better financial results?

Yvette (15:40)
So I think one of the important things is tracking all kinds of downtime on a project, right? Whether it be a weather delay or a contractor delay or a sub-delay, an owner delay, I think one of those should also be equipment delays. And I think that having your company be able to track equipment delays so that we understand the impact of

Rishi Srivastava (15:55)
Mmm.

Yvette (16:03)
the cost of the schedule because of equipment downtime is one of the most important things. So if we’re already being able to track payroll and hours, the crew should be able to be tracking delayed downtime for equipment. And we do that in order to get some insight into what’s going on with certain pieces of equipment in addition to the cost of repairing a machine, let’s say, that’s not preventative and predictive.

Rishi Srivastava (16:28)
So telemetics can help there and delay a downtown measurement or not.

Yvette (16:32)
⁓ so.

Telematics, depending on what system you use, can give you lot of predictors into what’s going on. I’m gonna have a plug here for the software that we use, We use HCSS, Equipment 360, and I will tell you their telematics boxes are really intuitive and they give us a lot of insight into predictive codes. So for example, today I am on that system because I test out most of the notifications and make sure things are kind of working right, but

We got a code today for a backhoe that had three error codes and so We go and we check what those three error codes are running to the computer and it turns out that it’s having fuel loss and pressure loss, right? so the first thing we do is we put a ticket in for that information and we make sure we made we get a mechanic out there because While the machine is still running it will likely fail at some point So the faster we can get out to that machine and make the repairs and check it out the better it is for us So that’s how

we kind of use predictive analytics in within telematics.

Rishi Srivastava (17:33)
Yeah, that’s such a good point. know, once somebody has, let’s say cancer, if you catch it early on, you have a higher chance of saving them versus catching them like towards the later part of the journey. So I’m kind of relating this to cancer.

Yvette (17:46)
Right. Exactly.

I mean, if you think about it, a breakdown is kind of a cancer to a machine, right? Especially if you leave it undetected, right? It might, you know, take the entire useful life of your machine away. So I think, you know, the sooner you get to it, the better.

Rishi Srivastava (17:56)
Yeah, yeah.

Yeah. The HEC highlights utilization, downtime, and preventive maintenance compliance. From finance viewpoint, how do you make those technical metrics meaningful to executives, owners, or non-operations leaders?

Yvette (18:21)
So I’m gonna go kind of back to the benchmarking against another company. If I’m a $150 million contractor and I have another company, let’s say across the country, that’s another $150 million contractor, and our metrics vary, let’s say even by half a percent, right?

Rishi Srivastava (18:40)
Mm-hmm.

Yvette (18:40)
At the

size of $150 million, you can translate an impact to your bottom line of about $2 million. That’s pretty significant, right? Wouldn’t owners want to make $2 million more, right? And that’s just one thing that we’re comparing, right? What if we’re comparing all the metrics and there’s other things that we can cut costs at, right? So a company that’s doing really well and that has a good preventative and predictive maintenance program in place might be running

really efficient and have, you know, are light years ahead of other companies that are not. And so you have to look at what the impact of the bottom line is, right? So I think learning with the HEC and figuring out, okay, I’m at 5.2 % and the industry is at 4 % in a given metric. Like, what does that translate to in dollars? And how can I make that improvement? Because at the end of the day, your owner, regardless of who they are, right, they want to put more money in their pocket. So

This is a way to do it to figure out where we’re least efficient and tackle that first.

Rishi Srivastava (19:38)
I’m thinking that you’re saving a lot of money to your owner.

Yvette (19:41)
I hope so.

Rishi Srivastava (19:44)
There might

be other owners who might want someone like you.

The next section here is on turning data into decisions. If a contractor sees they are underperforming compared to peers in the heavy equipment comparator, where should they start? What corrective steps do you recommend from the CFO’s perspective?

Yvette (20:04)
I would say that first and foremost if we do not have a work order system in place, that’s what you got to do. The theory of you got to spend money to make money applies here. You need to get a work order system.

Rishi Srivastava (20:10)
Hmm.

Yvette (20:16)
A work order system will help you drive the information and get what you need out of your equipment fleet. So that’s first of all. If you have a work order system and you’re not focused on your preventative and predictive maintenance, you need to get focused on preventative and predictive maintenance. Those two pieces are the low hanging fruit for anyone. And so I do know from polls that we’ve done at the heavy construction committee,

level of CFMA, only 20 % of contractors are using the work order system. So that’s low hanging fruit. I think that’s the first place to start.

Rishi Srivastava (20:48)
⁓

Yeah.

How should CFOs and operations teams collaborate to ensure fleet reporting isn’t just data collection, but actually driving performance improvements?

Yvette (21:03)
So I think that that requires buy-in from everyone. If you don’t have buy-in from the field and from the people that are putting the data in, you’re not going to have good data to analyze, right? So first of all, we have to start with getting buy-in from everybody and letting them understand why we’re doing what we’re doing. And then secondly, it’s

Setting up meetings, for example, my fleet manager and I ⁓ meet on a regular basis for us to look at the data that we have and look at what we can improve on, and set projects for ourselves going forward. Just like any software, these telematics and these work order systems, these fleet programs, they make improvements all the time. It’s also questioning, are we using this information? Are we using this capability? Is it going to give us some more insight?

So it’s having a plan in place to go forward and making sure that we’re touching upon everything that’s going to make us better, you know, and more efficient in our fleet.

Rishi Srivastava (21:57)
Actually, one of the we’ve observed, at least with respect to what we do in construction industry, is a lot of times people are not even trained on systems. They’re just struggling trying to figure out, and they don’t even know all the ins and outs and bells and whistles and notifications and whatever. They’re of blindly running these systems. What is your take on that?

Yvette (22:17)
Yeah, that’s

I think we, you know, everyone has to get out there and train, you know, you have to get out there and train your people. We certainly do. We try to have everyone kind of retrained on the system once a year, just to, you know, refresh and also give them new insight. You know.

The nice thing about it these days is a lot of stuff runs on apps. And so as long as they’re updating their apps, they’re getting all the new features and stuff, and they’re getting notifications telling them about the new features. We also have kind of an app that we use internally where we notify, depending on the levels, let’s say we notify our superintendents that there’s updates on these apps.

that they need to update, right? Because otherwise they won’t have the features. So we do try to communicate and get out there and train them at least once a year. And then in between, communicate that there’s updates. We try to give them some information on them. And sometimes we have people come in the office and they’re like, hey, I need help with this. And so that offers the opportunity to kind of go over other things that they need training on as well.

Rishi Srivastava (23:18)
I’m going to be a devil’s advocate here a little bit. you know, somebody like me, I hate training. Okay. You give me a new software, I want to go and figure it out myself. I’m sure there’s a bunch of people like that out there in the operations and finance. How do you deal with people like me? You’re one of them too? yes. You and I are the same people. We like to figure things out, right?

Yvette (23:33)
I’m one of them.

Yeah, ⁓ I’m one of those. You know, we joke around, I’m the resident IT person at my office. So I think just from years of kind of just solving problems, everyone just automatically comes to me, which is now backfiring for myself. know, ⁓ we just, we,

Rishi Srivastava (23:53)
Yeah.

Yvette (23:55)
I know who those people are and sometimes I just kind of reach out to them and ask them. I don’t have too many of those, so luckily. I’m just the guilty one.

Rishi Srivastava (24:02)
Okay.

It’s always good that it’s you. The other people are like not like you. They’re a lot better at training. When building a long-term equipment strategy, three to five years, what role should the CFO play? What questions should they be asking operations, estimators and project teams?

Yvette (24:07)
Yeah.

Yeah.

So we do sit down the executive officers two to three times a year, you know, depending on what kind of jobs are in our backlog. If we have a job that is on our backlog and it’s five years long and we’re already in it, we know what the equipment needs are.

But we sit down, we analyze, for example, what benefits we get from depreciation. We analyze what jobs are on our backlog, what the equipment needs are, if maybe we’re short pieces of equipment for the type of work that we’re doing, how are we gonna buy them, when are we gonna buy them? And so it’s more of a strategy, right? ⁓ We have an annual strategy that we update two to three times a year, sometimes more often, depending if some surprises happen. ⁓ But I think it’s really important

Rishi Srivastava (25:09)
Mm-hmm.

Yvette (25:11)
But you know both the estimating team is in there, the construction team is in there, the owner is in there, finance is in there, fleet is in there, right? Because if we’re making decisions about buying equipment and fleet isn’t in there, and all of a sudden we’ve decided that we’re gonna add seven significant pieces to our fleet and we don’t have enough mechanics, they don’t get a say, right? And then your program becomes reactive. So it’s really important to have all the

Rishi Srivastava (25:33)
Mm-hmm.

Yvette (25:38)
players of the teams of the different departments together and have strategy going forward.

Rishi Srivastava (25:43)
Yeah, yeah, that makes sense. Actually, numbers, even though it may seem obvious to you, but a lot of the fields and operations people, don’t quite understand these numbers. So what is this depreciation you’re talking about? It doesn’t make sense.

Yvette (25:53)
No. No.

I think to, you for us that we’ve been together for a long time, kind of, you know, we have set goals and so everyone kind of understands, but I think.

you know, for people that haven’t been around it, it might be a little difficult to wrap your head around. But, you know, that should be part of your decision making, right? If you’re not looking at the tax benefits of buying a piece of machinery or what you can buy or what the maximum amount you can buy is, you’re missing out on potential strategy, right? Potential tax strategy to avoid paying some taxes, right? Legally, obviously. So…

Rishi Srivastava (26:28)
Yeah,

yeah. So for that kind of attack strategy, do you need like an external CPA helping you or you yourself can figure out?

Yvette (26:35)
I am a CPA by trade. these are things that I do follow. So it’s in my wheelhouse.

Rishi Srivastava (26:37)
okay.

Ah, okay, your owner is so lucky. I’m like, taxes are so hard. You know, actually, I run a software company and like my tax CPA is saying me to submit all these documents. I got to figure out all these documents where they are, you know?

Yvette (26:44)
you

Yeah,

it’s not easy.

Rishi Srivastava (26:57)
Yeah, it’s so painful to find all these documents. The last section here is on future of equipment, finance and technology. And this is also the last question of it. With AI, telematics and IoT becoming more common for equipment monitoring, how do you see the CFO’s role changing in fleet management? How should financial leaders prepare

Yvette (27:01)
You

Rishi Srivastava (27:24)
for this shift.

Yvette (27:25)
So I think this is, know, the AI question and where we’re heading is the million dollar question that everyone has and how it’s gonna affect construction in general. But as far as equipment,

You know, we’re seeing some really cool things with AI being able to help with predictive analytics and being able to actually, you know, let’s say operate equipment remotely. That’s huge, right? Because you don’t have to have an operator sitting on site, right? We’re not there yet. I think it is heading in that way. I do think that the more technology that they’re going to drive into these newer pieces of equipment are going to give us a lot more insight, right?

some of these machines now already have ⁓ depth regulations and things that we didn’t have before. So it’s just maybe embracing the technology and embracing the AI and seeing what efficiencies it can bring us as a company.

Rishi Srivastava (28:14)
I was in San Francisco a couple of months ago. Waymo is running driverless there. you know, I use my telephone, the taxi came, it opened itself, I sat and it drove me to you know, place and it was so cool.

Yvette (28:20)
Thank

It’s very cool. You know,

I don’t think the machines are there yet, but I think eventually, depending on what it is, I think I’ve seen some videos out of China where they’re using it to lay brick and lay asphalt very quickly without operators. I think eventually we’ll get there. I don’t think we’re there yet. But if you can’t find people, use the machines.

Rishi Srivastava (28:53)
Yeah, most blue collar workers in construction, they think that AI can do this, laying the bricks and pouring the concrete. It can do the white collar job a lot easier. I’ve talked to several. But I feel like it’s getting there too, even to the blue collar jobs. It’s kind of after that too. What do you think?

Yvette (29:11)
Yeah,

I think your job, my job are more endangered.

Rishi Srivastava (29:15)
Exactly.

We are going to be like useless, maybe like 10 years. Yeah, exactly. was fantastic chatting with you, Yvette. Thank you so much for coming on to the show.

Yvette (29:19)
Yeah. Hopefully we can retire by then.

Thanks Ruchiyo, it was a pleasure.