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OCR for page 17
3
THE MAINTENANCE AND REPA
.
__ _ COMPONENT
OF THE COST OF OWNERSHIP
Building owners--and those elected and appointed officials
who represent the owners of public buildings--should recognize
explicitly the full cost of ownership to which they are committed
by virtue of ownership. Important components of this cost are
the routine expenditures for needed maintenance, repairs, and
planned replacement. Characteristics of a building's design and
construction, operating procedures, climate and location, and age
influence the need for maintenance and repair (M&R). The
owner's policies about M&R and service to tenants have influence
as well. Random events such as heavy storms, human error, or air
pollution may increase needs for M&R.
Most of the factors that influence the need for M&R apply to
individual buildings. However, the manager of a substantial
building inventory may enjoy what economists term economies
of scale--opportunities for savings because larger quantities of
materials are purchased or personnel are more effectively uti-
lized or learn by experience to be more efficient. On the other
hand, costs may be incurred in managing a large inventory--such
as travel among buildings or costs of keeping parts and equip-
ment in stock--that offset some of these economies. In general,
the following factors can have a major influence on the
appropriate level of M&R expenditures:
Building size and complexity
Types of finishes
Current age and condition
Mechanical and electrical system technologies
Telecommunications and security technologies
· Historic or community value
· Type of occupants or users
· Climatic severity
· Churn (i.e., tenancy turnover rates)
· Criticality of role or function
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Ownership time horizon
Labor prices
Energy prices
Materials prices
Distances between buildings in inventory
While the M&R component of the cost of ownership will vary
from building to building, it is possible to develop a consistent
relationship between this component and characteristics of an
inventory of buildings. A variety of such relationships are in use
to estimate average levels of the cost of M&R. Typical main-
tenance expenditure per square foot is frequently used as a yard-
stick for determining what an appropriate level of M&R budget-
ing should be, but such a measure is insufficiently sensitive to
either external financial conditions or building characteristics.
The relationship is better stated in terms of an annual percentage
of the inventory's current replacement value.
Based on experience and judgment, the committee proposes
that the anorooriate level of M&R spending should be. on
averages in the range of 2 to 4 percent of current replacement
value of the inventory.iZ The specific percentage for any
inventory will depend on such factors as the age of the buildings
in the inventory, the type of construction (permanent vs. tempo-
rary), the level of use of the buildings, the structure of the
maintenance organization, and the climate. However, the rela-
tionship between M&R requirements and the current replace-
ment value of single buildings may vary widely and for any one
building may be outside the proposed range.
This 2 to 4 percent range is most valid as a budget guide for
a large inventory of buildings and over time periods of several
years. A small town or school district may find that a severe
winter, or an older building nearing the time that a substantial
renovation is warranted, temporarily raises annual M&R costs
above this normal range. Such a jurisdiction may also find that
past decisions to reduce construction expenditures now have, as
a consequence, higher M&R costs. However, even with small
inventories the 2 to 4 percent rule of thumb may be applied over
a longer period of time, such as 5 to 10 years.
A reliable estimate of the current replacement value of a
building or an inventory is a necessary element of this budgeting
rule. Current replacement value can be determined in several
ways. The simplest approach estimates what it would cost in any
given year to construct or purchase each building in the inven-
tory. Another approach applies escalation factors to the original
|2 This rule is based on the committee's combined judgment.
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acquisition cost of the buildings in the inventory. Some agencies
have developed computer programs to perform such calculations
and to provide a replacement value for the total inventory each
year. There may be substantial uncertainties in these estimates,
particularly among the older stock of public buildings (some more
than 100 years old). Each agency must evaluate its own inven-
tory and develop the best approach for determining its replace-
ment value.
If an inventory of buildings receives an adequate level of
M&R funding, a steady-state situation should exist wherein the
inventory would remain in a service condition that would neither
decline nor improve and a backlog of deferred deficiencies would
not develop.~3
However, if a backlog exists, it is unlikely to be reduced by
expenditures limited to the 2 to 4 percent level. Further deter-
ioration will occur if the backlog is not reduced, and the ultimate
cost of correcting the deficiencies will increase. The committee
proposes that a second element of the total M&R budget must be
recognized--funds required to reduce the backlog. The total
budget then includes the routine M&R components, which are a
continuing part of the cost of ownership, and the backlog
reduction component, which is determined by the physical
condition of the inventory.
Assessing the size of the backlog that develops when M&R are
neglected requires a condition assessment. A condition assess-
ment is an evaluation of the degree of accumulated damage
inferred from diagnostic observations and tests.~4
Condition assessment, at its simplest, is a monitoring activity
applied regularly as a part of a good M&R program. Systems and
materials are inspected on a planned schedule to determine if
they are sound and functional. Standards must be available as a
basis for determining when systems or materials are deviating
from their anticipated condition to spot potential problems
before they become critical. Condition assessment is also used to
|3 This expectation depends on effective use of M&R funds,
which requires adequate management and staff capability. Refer
to Chapter 5.
i4 The general field of building diagnostics is still relatively
young and evolving (BRB, 1985~. Most diagnostic assessments are
undertaken because of specific observable failures or perfor-
mance problems, not for the broad assessment of backlog envi-
sioned by the committee. This broader assessment is in some
ways analogous to medical diagnostics that may alert a physician
to a patient's potential problems or help assess the extent of those
problems.
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develop information on facilities that have not received regular
maintenance or inspections so as to develop comprehensive data
bases on conditions and thereby establish the scope of
maintenance backlogs.
If a substantial backlog has developed, several years of effort
may be required to eliminate it. An appropriate M&R budget
should be established to reduce the backlog as quickly as possible,
which requires that repair spending must be adequate to outpace
the backlog growth that occurs as a cumulative result of past
neglect. No generally valid rules of thumb can be recommended
for this determination.
If the backlog has been eliminated, maintenance spending may
be reduced to levels truly required to maintain adequate facility
performance. Escrow or set-aside accounts may be established to
preserve funds budgeted but not actually expended in a given
year due to favorable use conditions (e.g., warmer or drier than
average weather or lower than typical utilization).~5 Condition
assessment should be used to assure that performance is, in fact,
being maintained at target levels.
Reference
Building Research Board (BRB), Committee on Building
Diagnostics, Building Diagnostics: A Concentual Framework,
Washington, D.C., National Academy Press, l9SS.
t5 Establishing such accounts in the public sector requires
changes in government financial practices.
20
Representative terms from entire chapter:
current replacement
