Raise the Roof

How to manage the total lifecycle cost of facility assets


By Jim McIntosh and Russ Witt

When Hurricane Ike battered Houston in September 2008, some buildings emerged from the storm practically unscathed while others suffered costly damage. Two Army Reserve facilities located right next to each other show the difference (see Figure 1). One building's roof — Roof A — is intact. Roof B, in contrast, required over $1 million to repair the roof and interior damage.

Why did Roof A weather the hurricane so much better? While we can't claim to know all the reasons, we do know this: what governed Roof B decision-making was simply a desire to keep initial costs low. In contrast, the decisions about Roof A were made in order to manage the total lifecycle costs. This approach has been captured by the Army Reserve Roof Lifecycle Management program. It standardizes roof specifications; provides for onsite quality assurance, control and regular inspections; monitors performance — and mandates a 20-year "no dollar limit (NDL) warranty" for new roofs. The program shifts focus from minimizing short-term cost to maximizing long-term performance. Interestingly, all Army Reserve roofs of this kind survived the hurricane undamaged.

The total lifecycle cost benefits to this approach are quite substantial. By ensuring a high-quality design and using high-quality contractors, the Roof Lifecycle Management program has the potential to lower the Army's annual low-slope roofing expenses by as much as 20 percent. Across roughly 200 million square feet of roof area, that adds up to big savings.

The story behind the Roof Lifecycle Management program will be familiar to all facilities managers. Chronic underfunding of maintenance forces tough decisions about priorities. Managers who need to stretch limited budgets may focus on short-term cost rather than quality when selecting contractors or when deciding to patch a roof rather than fund a needed replacement. In addition, managers seldom have the budget for assessments or tools for proactive facilities management.

The result is predictable: substantial project backlogs and funding requirements get pushed into the future. And when repairs and replacements are postponed, the eventual price tag is inevitably larger.

To regain control, facilities managers must shift their focus from keeping near-term costs low to optimizing total lifetime costs. Even when budgets are constrained, managers can adopt a total lifetime cost perspective when prioritizing and contracting for projects, to better understand how to get the biggest impact from limited dollars.

The question is, of course, how can facility managers make informed decisions? To trade off low initial purchase price against long-term cost of ownership, they need to understand what an asset will cost over its lifetime and why. With this information, they can select the best strategic option. The final hurdle is to implement what may be a counter-intuitive approach among their people on the front line.

Identify Lifecycle Costs: How Much Does It Really Cost?

Human nature primes us to think more about immediate, short-term costs than about all the associated costs incurred over time. Additionally, we usually have a pretty clear picture of the immediate costs but are uncertain about future costs. This presents a challenge because, in many cases — and frequently with facility assets — "sustainment" costs far outweigh the initial purchase price. To understand the true cost, managers should consider ongoing maintenance, energy, externalities (such as collateral damage and downtime), and employee morale and productivity that continue well beyond the initial purchase.

Identifying these cost elements requires a mix of art and science. The mix includes personal observation (the equivalent of managing by walking around), talking to people (including vendors and facilities occupants), analyzing current spending and brainstorming.

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