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Estimating capital costs: an effective way to assess maintenance costs.

As a manager of your city's or county's facilities, you need a way to assess the condition of these facilities and to determine the cost to maintain them. This method needs to be low-cost, repeatable, auditable, and have the ability to be applied consistently across numerous sites. Understanding the condition of the assets for which you are held accountable is critical to your success.

To accurately measure the condition of your facilities you need to know both the estimated cost of deferred maintenance (DM), which can equate to a capital investment cost, and the estimated cost of sustaining the facilities over time. Knowing this, you will be able to better prioritize your facilities repair and capital investment efforts. Although as a facility manager, you may have an intuitive feel for this information, the current methods being used to assess facilities conditions and to track and report DM are not cost-effective. These methods have been challenged by auditors because the results are not auditable, consistent, or repeatable and vary from site to site.

Plexus Scientific Corp., Alexandria, Va., has developed a set of strategic tools for NASA that aids facilities managers in planning and budgeting for facility sustainment, repair/renewal, and capital investment. This set of tools combines a facility condition assessment with an integrated DM (repair/renewal) cost estimating function based on parametrics.

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The NASA Method provides condition assessment and strategic budgeting information that:

* Is very low-cost (less than $0.02 per square foot for NASA's 5700 facilities)

* Meets the criteria of the Federal Accounting Standards Advisory Board (FASAB) No. 6 requirements as an annual facilities condition assessment for federal agencies

* Is consistent across the agency

* Achieves reasonable, credible, auditable deferred maintenance/renewal cost estimates over a large number of facilities as a direct result of a facility's condition

* Can be used to establish capital investment cost

* Creates data that are flexible enough to provide a variety of useful information for systems, for facilities, types of facilities, sites, and agencies

* Estimates the amount of investment required to improve the condition of a site's facilities to a specific goal.

MAKING AN ASSESSMENT

The condition assessment in the NASA Method begins with a rapid visual inspection of nine different building elements within each facility at a given installation. Site visits are conducted using two-person teams, one person for architectural building elements and the other for mechanical/electrical elements.

The assessors rate nine building elements or systems based on the ASTM UNIFORMAT II, Classification for Building Elements. The rating varies from 5 (excellent: only normal scheduled maintenance required) to 1 (bad: major repair or replacement required to restore function, unsafe to use) for 42 different facility categories. The building elements are:

* Structure -- foundations, slabs, floors, pavements

* Roof -- roofing, gutters, flashing

* Exterior finishes -- walls, windows, doors

* Interior finishes -- floors, walls, ceilings, doors, stairs

* Electrical -- distribution, lighting, other wiring/controls

* HVAC -- HVAC and related mechanical systems

* Plumbing -- water, sewer, fire protection piping

* Conveying -- cranes, elevators, hoisting equipment

* Program support equipment -- test, research, program equipment.

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The 42 facility types are based on NASA and Department of Defense facilities and capture facilities of similar types. The intent is for the majority of facilities in each DM category to have similar system current replacement value (CRV) percentages for each of the nine facility systems. The 42 facility categories include:

* traditional buildings that consist of most of the nine building elements

* facilities that may not consist of the nine building elements, such as sheds, launch pads, roads, railways, fuel tanks

* utility systems, such as electrical distribution systems, power plants, and water distribution and treatment facilities.

When the assessments are complete, the ratings are recorded in a Microsoft Access database where the model converts the assessed condition ratings into three useful sets of metrics. All three sets of metrics are capable of providing the following information in a variety of ways (by systems, facilities, type of facilities for sites, and by agency hierarchy).

* System condition index (SCI) -- This is a rating derived from the condition assessment ratings for one of the nine building systems, such as structure, electricity, or plumbing. The SCI helps a facility manager determine if a particular building system (for example, the roof) is in poor condition requiring a higher priority maintenance effort or budgeting.

* Facilities condition index (FCI) -- This is not the traditional FCI, which equates to the DM divided by the CRV. The FCI is a simple calculation that weights each of the nine system condition ratings by its associated system CRV percentage for each of the 42 facility categories. In each system, the rating is multiplied by its system CRV percentage to get a weighted SCI. The sum of the nine weighted SCIs equals the facility's FCI. A facility's FCI is the CRV normalized sum of the condition ratings for each system within each facility. In other words, facilities or systems with a higher CRV contribute more to the overall FCI.

* Deferred maintenance cost estimate (DM) -- FASAB recently has relied upon deferred maintenance as a tool to reflect the degree of unfunded liability due to an agency's under-funding of facilities maintenance and repair in their annual chief financial officer's reports. Although not recognized in the commercial world, deferred maintenance has been used by federal agencies to indicate the degree of facilities work that has been deferred for budgetary reasons and that is required to restore the facilities to a good, usable condition. When tracked and trended over time with other basic facility performance metrics such as the annual cost of maintenance and repair, and facility reliability or availability, the DM allows us to evaluate the effectiveness of a maintenance and repair program.

DEVELOPING ESTIMATES

This process of documenting deferred maintenance is designed to be a simplified approach based on existing empirical data in a parametric model. For example, detailed cost estimates for the repair of a building system (like its plumbing system) can be developed using very precise work measurement standards. However, if history has demonstrated that repairs (as the dependent variable) have normally been valued at about 25% of the original value (the independent variable), then a detailed estimate need not be performed and can simply be computed at the 25% cost estimating relationships (CER) level.

It is important to note that any CERs used can be carefully tested for validity using standard statistical approaches. The NASA Method CERs are based on exceptionally good costing models. The first step in the model, the replacement value system percentage, is derived from the Parametric Cost Estimating System (PACES), an accepted estimating tool for federal construction projects. The PACES method was derived from an evaluation of more than $40 billion of federal facilities projects. The second step in the model is arriving at system condition percentages for each of the nine systems for each of the five ratings. To obtain these percentages we use RSMeans CostWorks 2002 Version 6-1 estimating tools.

Also built into the database are several tools that facilities managers and organizations will find useful. First, there are managerial tools that provide basic reports of SCI, FCI, and DM by agency hierarchy and facility category specifically tailored for the manager's use in developing budget information and prioritizing investment. A second set of tools lets an analyst compare individual ratings, SCI, FCI, and DM estimates, from a single system to the entire agency. These tools enable an analyst to perform trend analysis over any sequence or type of assessment for a certain time. The database is also capable of running the calculations for the Department of Defense Facilities Sustainment Model, which provides estimates for annual maintenance sustainment cost.

Finally, the database contains a Facilities Incremental Condition Change model. This model can help a manager determine the required condition of facilities to meet mission, operations, safety, and human health/comfort issues based on facility condition goals and a facility's lowest acceptable condition. It can also aid in determining a DM limit and goal. Once those goals are established the model can determine the amount of DM cost per 1/10 incremental increase (or decrease) in a site's facilities condition. The model gives a manager an estimate of renewal/repair/capital investment cost to increase the condition of a site's facilities by any increment of up to a 5 rating (5 is the rating for a facility that requires only normal maintenance and has no deferred maintenance cost), and can prioritize work efforts to get the greatest condition increase with the least amount of expenditure. It is a powerful planning, programming, and budgeting tool.

The NASA Method is a streamlined condition assessment technique that is low-cost and consistent across an agency. The assessment ratings are used to produce a series of useful metrics reflecting the condition of both building elements and facilities. The metrics also include an auditable estimate of deferred maintenance costs that are proven accurate enough for its use in prioritizing and estimating the cost of repair/renewal and capital investment projects. Facilities managers can use these metrics to compare and trend the data from the system level to agency level and by facility category over time. In turn this will determine if a facilities maintenance program is successful. The NASA Method provides facilities managers a valuable tool for making strategic decisions regarding their facilities inventory at a fraction of the cost of previous condition assessments that provide no budgeting information.
Deferred maintenance assessment more efficient

BMAR                              DM

Center (local use)                HQ (strategic use)
Detailed analysis and inspection  Rapid visual inspection
Different methods at each site    Consistent method
Typically only active facilities  All facilities, including heritage,
                                  stand-by, out-grant, abandoned, and
                                  mothballed
Very expensive ($0.30 to $1.50    Very inexpensive (less than $0.02 per
per square foot)                  square foot)
Time-consuming                    Quick (20 to 40 buildings per day for
                                  a two-man team)

This table shows the differences between BMAR (backlog of maintenance
and repair) assessment and DM assessment. Source: Plexus Scientific


--Sapp is a project manager at Plexus Scientific Corp.
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Title Annotation:Asset Management
Author:Sapp, Don
Publication:Public Works
Date:Dec 1, 2004
Words:1661
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