RIT Instructions

An agency seeking to acquire printing equipment must be able to demonstrate that it can recover the cost of owning and operating that printing equipment over five years. The Recovery of Investment Template is a fiscal analysis tool that details and projects annual cost avoidance/revenue and expenditures. The agency must complete a five-year fiscal analysis.

The agency must complete each section of the RIT. Failure to complete the RIT according to the instructions contained herein may result in the State Printer denying the Printing Equipment Acquisition Request (PEAR).

Except for those sections noted herein, the RIT automatically calculates the projected cost avoidance/revenue and expenditures for years two through five of the analysis. The projected cost avoidance/revenue and expenditures are calculated at a 3% increase per year.

The RIT is comprised of the following sections:

1. Recovery of Investment Summary

The Recovery of Investment Summary is a one-page summary of the cost avoidance/revenue and expenditure information included in the RIT. This worksheet is populated automatically as the agency completes each section of the RIT.

The agency may not modify this worksheet.

2. Estimated Purchase Price

The agency should detail the estimated cost of acquisition.

Cost of Equipment: The agency should provide the estimated purchase price of the equipment and sales tax rate. The worksheet will automatically calculate the amount of sales tax and the total equipment cost.
Depreciation: Pursuant to SAM Section 2876(C), the equipment’s depreciation schedule is determined by the cost of the equipment before sales tax. The agency should enter the depreciation period in years pursuant to the following schedule:

Standard: $50,000 – $1,999,999: Five-year depreciation period
Industrial: $2,000,000 – $4,999,999: Seven-year depreciation period
Large Industrial: Greater than $5,000,000: Ten-year depreciation period
The agency may not exceed the depreciation length indicated but may choose a lesser depreciation period at their discretion. The worksheet will automatically calculate a depreciation schedule for the first five years.
Service Contract/Warranty: The cost and terms of a service contract may vary considerably by manufacturer. It is important that in addition to detailing the cost, the agency also include highlighted service terms, particularly if this contract covers specific operating expenditures.

The agency should provide the estimated annual service/maintenance contract cost for the first five years of the service contract. The agency should provide the estimated annual warranty expense for the first five years of the warranty. (Enter “0” if there is no additional warranty cost). The worksheet will automatically calculate an estimated annual total service contract and warranty expense.

Use the Service Contract Details field to include any pertinent information about the service contract, including whether the contract covers training, installation, specialized hardware or software, or consumables. If any costs on the Expenditures worksheet are covered by the service contract, these must be clearly identified in this field.
Total Estimated Cost: The worksheet will automatically calculate the per year total estimated acquisition cost.

3. Projected Cost Avoidance/Revenue

There are two sources by which a state agency in-plant printing operation can demonstrate cost deferment or revenue:

Cost Avoidance: The savings the agency obtains/would obtain by producing its own print work in comparison to vending out the same print work. To determine this amount, the agency may obtain an OSP quote from their OSP customer service representative. Cost avoidance is typically used only for internal print work.
Revenue: This is the income obtained from producing print work for another state agency as authorized by the State Printer. The revenue amount is determined by the amount of the interagency agreement (IAA, MOU, etc). The agency may only itemize revenue that will be derived from work authorized by an OSP-approved PSER (see SAM Section 2811(A)). The agency must have OSP-approved rates before the agency may be authorized to perform print work for other state agencies (see SAM Section 2875(E) for information on rate development). Interagency agreements entered into prior to February 1, 2019, may be itemized as Revenue if the agency is in compliance with SAM Section 2812.

a. Cost Avoidance: The agency should detail the print work it expects to produce on the equipment:
1. General description of the print work performed (e.g. brochures, letters, envelopes, etc.);
2. The finished quantity of each product required;
3. The impressions or clicks required to produce each finished piece;
  Note: Impressions can be used for offset presses and bindery equipment; Clicks are used for digital presses.
4. The finishing services required to complete the product;
5. Estimated cost to the agency to vend out this work; and
6. Any notes or comments on the product.
The agency should provide documentation with the RIT to support its estimates. The worksheet will automatically calculate the total cost avoidance.

b. Revenue: The agency should detail the print work it is authorized to produce for other state agencies:
1. General description of the print work performed (e.g. brochures, letters, envelopes, etc.);
2. The finished quantity of each product required;
3. The impressions or clicks required to produce each finished piece;
  Note: Impressions can be used for offset presses and bindery equipment. Clicks are used for digital presses.
4. The finishing services required to complete the product;
5. The amount the agency will be paid to perform that work pursuant to the terms of the PSER or interagency agreement;
6. The recipient agency of the finished product; and
7. Any notes or comments on the product.
The agency may only itemize revenue that will be derived from work authorized by an OSP-approved PSER. The worksheet will automatically calculate the total revenue.

c. Total Annual Projected Cost Avoidance/Revenue: The worksheet will automatically calculate the total projected cost avoidance and revenue.

4. Personal Services Cost

Total Annual Hours: The agency should identify the projected total annual hours of operation for the requested equipment. The total annual hours are determined by equipment usage, not personnel hours.
Benefits Percentage: “Benefits percentage” refers to the percentage of an employee’s salary that is budgeted for the cost of the employee’s benefits. (For example, OSP budgets benefits at approximately 60% of the employee’s salary.) The agency should enter the benefits percentage consistent with the agency’s budgeting practices.
Personal Services Chart: The RIT includes a personnel chart for day, swing, and night shifts, with the corresponding shift differential included in each respective chart. The agency should select the number of personnel from the appropriate classification(s) required to operate the requested printing equipment. The agency should make the selection on the appropriate chart for each shift it intends to operate the requested printing equipment. The worksheet will automatically populate the annual salary (at the top of the classification range), shift differential (if applicable), total salary (with differential), benefits, and total salary with benefits for each selection.
Personal Services Summary: The worksheet will automatically calculate the total number of positions, total salary, total benefits, and total annual personal services cost associated with the requested printing equipment.

Changes from Previous Version:

Added classifications, including the Information Technology and Business Service series, to Personal Services charts

5. Projected Expenditures

The agency should detail the estimated overhead and operational expenses attributed to the printing equipment. The worksheet divides the expenditures analysis between those expenses shared by the entire printing operation and those expenses which can be specifically attributed to the equipment.

While many state in-plants are budgeted as an administrative service within their agency, to demonstrate cost recovery, the agency must detail the operating costs attributable to the printing operation on the RIT. The agency may use the methodology of its choice in determining the cost but must detail this methodology and provide the formulas used on the expenditures worksheet.

Expense Factor: The “expense factor” refers to the proportion of the printing operation’s expenditures that will be attributed to the requested equipment. The expense factor is used to equitably distribute operating expenses among the operation’s equipment.
1. The agency should enter the total number of pieces of printing equipment in the printing operation (including the requested equipment).
2. The agency should enter the projected annual total printing operation output hours. The agency would determine this number by taking the sum of production hours for each piece of equipment (based on the actual output hours of the equipment in prior years and any anticipated new print work) in the in-plant operation. Agencies which operate more than one in-plant location should follow their budgeting practices for calculating the output hours. The agency should detail which locations are included in the calculation in the supplemental box.
3. The agency should enter the projected total annual production hours for the requested equipment. (The standard of 1500 hours per shift annually, incorporates state holidays, employee breaks/lunch period, start-up and shut-down times, but implies continuous operation for the duration of each shift).
4. The worksheet will automatically calculate the expense factor for all Printing Operation Expenditures listed in the following section.
Printing Operation Expenditures: The agency should detail each of the following costs for the entire printing operation. The worksheet will automatically calculate the cost attributed to the requested equipment.
1. General Expenses: The costs incurred through regular printing operation activity. For those costs shared throughout the agency, the agency must attribute a fair share percentage of those expenditures to the printing operation. The agency should identify the source(s) of each expense and the methodology used for determining the proportion attributed to the printing operation. The agency should enter "0" if itemized cost is included in a separate expenditure or not applicable to the operation and include an explanation in the comments box. The worksheet will automatically calculate the total general expenses based on the following categories of expenses:
  1. Communications: Communications equipment and services – such as desk phones, cell phones, fax equipment;
  2. Contracts: Contracts for any (non-personal) services used to support the printing operations;
  3. Depreciation (All Equipment): Depreciation expenses attributable to the printing operation (e.g. office machinery, vehicles);
  4. General Operations: General operating expenses;
  5. Insurance: Cost of any insurance services which benefit the printing operation (in whole or in part);
  6. Non-Printing Supplies: Operational supplies not directly attributable to print production (e.g. pens, staplers, cleaning supplies);
  7. Professional Services: Contracts for any personal services used to support the printing operations (e.g. consultants);
  8. Security: Independent security costs or fair share of building security costs;
  9. Service and Warranty Expenses: Service contract and warranty costs used to support the printing operation;
  10. Training: Cost to train printing operation employees;
  11. Transportation: Travel and transportation expenses for printing operation personnel or management; and
  12. Other Expenses: Any other general operation budgetary items not otherwise itemized.
2. Overhead Expenses: “Overhead” refers to the mandatory costs (also referred to as “indirect costs”) paid by each state agency (see SAM Section 8752.1). The agency must identify the percentage of overhead costs attributed to its printing operation – for the purposes of the RIT, it may not distribute this expense through the overall agency. The agency may identify the share of overhead attributed to the printing operation by the method of its choosing, but must include an explanation of its methodology with the RIT. The worksheet will automatically calculate the total overhead expenses based on the following categories of expenses:
  1. Statewide Pro-Rata: Statewide central administrative costs;
  2. Departmental Overhead: Administrative costs by agency;
  3. Program Overhead: Administrative costs by program/division, which oversees the printing operation; and
  4. FI$Cal: Administrative costs for use of FI$Cal
  5. Other Overhead Funds: Additional overhead expenditures paid by the agency (and attributable to the printing operation) that are not otherwise itemized (e.g. 21st Century).
3. Space Utilization Expenses: The agency should detail total space utilization costs for the in-plant. If the in-plant is housed inside of a larger facility, the agency should utilize a formula (by square footage or comparable means) for determining the cost attributable to the in-plant operation.
4. Utility Expenses: The agency should detail the estimated annual utility cost of electric, gas, and water for the printing operation at the relevant location. The agency should enter “0” for any utility not used.
5. Technical Support Expenses: The agency should detail the estimated annual cost of technical support personnel and/or services.
6. Miscellaneous Expenses: The agency should detail any other operating costs shared by the entire printing operation which are not otherwise included on the RIT. The agency should enter a “0” if there are no additional expenses.
Equipment Expenditures: The agency should detail each of the following costs attributed to the requested printing equipment. If the expenditure is included with the service contract on the requested equipment, this should be described in the comments box next to the expenditure as well as included in the Service Contract/Warranty Details box in the “Purchase Price” section.
1. Click Charges: “Click charges” are a cost per print surcharge included with most print service contracts. The agency should provide the annual estimated cost of click charges for the printing equipment.
2. Consumables: The agency should detail the cost of consumables, the materials necessary for the operation of the printing equipment (such as blankets, ink, cleaners). Consumables are distinct from costs of goods sold, which are materials used for the completion of a specific print job (such as paper, ink, plates). The worksheet will automatically calculate the total consumables expenses based on the following categories of expenses:
  1. Blankets;
  2. Ink;
  3. Machine Cleaning Supplies;
  4. Plates;
  5. Rollers;
  6. Solvent; and
  7. Other Consumables
3. Hardware Expenses: The agency should detail the estimated annual cost of the external hardware necessary to support the operation of the requested printing equipment. If this hardware is also used to support other equipment in the agency’s printing operation, the agency should divide the hardware cost by the pieces of equipment using the hardware, and notate how many pieces of equipment also use this hardware in the comments box. If no additional hardware is required to support the equipment, the agency should enter “0” for the hardware expense.
4. Software Expenses: The agency should detail the estimated annual cost of the software necessary to support the operation of the requested printing equipment. This amount should include the annual cost of any supporting licenses. If this software is also used to support other equipment in the agency’s printing operation, the agency should divide the software cost by the pieces of equipment using the software, and notate how many pieces of equipment also use this software in the comments box.
5. Miscellaneous Expenses: The agency should detail any other operating expenses for the requested equipment which are not otherwise included on the RIT. The agency should enter a “0” if there are no additional expenses.
Total Annual Projected Expenditures: The worksheet will automatically calculate the total annual projected expenditures.

Changes from Previous Version:

Added overhead line item for FI$Cal
Removed supplemental tables for Space Utilization and Utility expenditures

6. Optional: Rate Development

This worksheet automatically calculates an hourly machine rate based on the total annual projected expenditures and the projected new equipment annual hours. This worksheet is included as a courtesy for in-plant operations with approved rates or agencies that will be completing the Rates Development Spreadsheet (RDS) in the future. The agency may not modify any information on this sheet.

The completed RIT and any supporting documentation must be submitted with the PEAR to the Statewide In-Plant Operations Manager. OSP will not review a PEAR without a complete RIT.

Please contact the Statewide In-Plant Operations Manager at inplantopsmanager@dgs.ca.gov with any questions with regard to completing this document.