By August 8, 2012 1 Comments Read More →

Don’t Wait for a System to use Life Cycle Costing of Facilities for Decisions

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Capital PlanningManaging facilities often includes managing the physical assets. But getting into a system is often daunting, particularly for smaller portfolios.

Unfortunately, without a way to manage the assets, you won't have the information you need to make decisions about repair vs replace or information to justify your budget requirements. You are also much more likely to end up with emergency repairs rather than planned replacements.

But, there is a way.

For smaller portfolios the best tool to start with is Excel, no need for a large system (yet). Even for a larger portfolio, you can start with something like excel, perhaps focussed on a single building, and build your experience with managing this way before you procure a full FM system.

This way you will become more comfortable and familiar with the process and be better prepared to understand what you need in a full system. Another benefit is you will have some results to show your boss to justify a system, before you go for money and resources.

Excel has all the features you need for now and can even do lifecycle analysis. If you have critical facilities, an FM system would be advised from the start.

Then you need a decent CMMS system that will give you information about your equipment - things like breakdowns, repairs, comments and readings from the techs doing preventive maintenance, etc. (If you don't have CMMS, you need good records, even if it is Excel or a simple database.)

Next, get information on 'typical' life of components as a starting point. BOMA and RS Means have publications. Typical replacement values are also valuable and RS Means has those, or you can get it from vendors or based on initial installation costs. Don't blindly accept the lifecycles it suggests, you need to adjust - and they are indeed averages and in my experience, assuming a good preventive maintenance routine, they are somewhat short.

Of course, you should have an inventory of all your assets (hopefully in CMMS) along with make, model, capacity, etc. and age. Put it in Excel.

Then you should do a condition assessment of the equipment, roof, pavement, windows and all replaceable assets. Compare this with the typical life and how old the equipment is already and come up with an 'effective age' or simply identify, based on age, when replacement should occur. Just because BOMA or RS Means says your chiller has a lifecycle of 25 years doesn't mean you need to replace it in 25 years. (except for energy efficiency...)

The assessment should include usage, which includes climate. Cold climate is harder on some components, Hot climate is harder on others. Dusty climates, dry, wet, seasonal issues, etc. all play a part. Of course run-times is important too. HVAC that runs 24hours will be different from one that is only used during business hours, for instance. Pavement that takes punishment from heavy delivery trucks is different from an office parking lot.

Then you need to consider the level of your maintenance routines. I was in Abu Dhabi recently and FM's there told me they had 5 year old buildings with a much older effective age because they tend to build them to look nice and then don't put much money into maintenance, for instance.

If your goal is to develop a capital budget, let’s say for the next 5 or even 25 years, use your spreadsheet to rank condition (relative to usage needs, not just arbitrary), and risk if it fails. So pavement has low risk, roof is high risk, etc. Depending on your specific organization, you may have systems that are higher risk than others would. Risk should include what happens if it fails. Small components can be replaced quickly with little down-time or incremental costs. Large components cause major headaches if they fail, with long lead times and much higher costs to repair in an emergency situation, along with the downtime that can impact your organization.

Then, using the tools above, you have a spreadsheet with everything you need. For each asset, you would have columns to the right for as many years as you want, with the replacement/refurbishment costs put into the year where you believe it should be done. Factor in inflation for accuracy.

Revise as you do the work and add a column for next year. Let’s be honest, some planned work will be pushed out to subsequent years.

When managing a capital program, I recommend allocating money each year for two things:

  1. Funding for technical consulting and pre-design for some of the more complex projects you plan to do in the next fiscal so you can plan work in advance of your fiscal and have a better idea of the costs.
  2. A pot of money set aside to do a proportion of the lower risk items that should be done but always get bumped out every year as you prioritize your undersized capital replacement budget. Otherwise, some of these may never get funding.

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1 Comment on "Don’t Wait for a System to use Life Cycle Costing of Facilities for Decisions"

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  1. Paul Roberts says:

    Good article, Michel. I referenced a somewhat related article on our blog about factors to consider in total cost of ownership.

    If FM’s have asset listings in Excel, we offer a service to import the list into our product, so Excel is a good starting point.

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