Owner’s often make decisions to build or not build new capital projects based primarily on the cost of initial development and depreciation. However, the first build cost of a project is a small fraction of its lifecycle cost and not understanding the total costs could be catastrophic. In the past FM’s have used various budget tools such as the APPA model to predict future operating costs. Today, Building Information Modeling (BIM) not only improves the design and first build cost of a new facility, it also aids in modeling operations and predicting the Total Cost of Ownership.
To help understand the Total Cost of Ownership of a project, break the costs into time sensitive categories as follows.
One Time Development and Decommissioning Costs: These are non-recurring costs that occur once in a project’s life. Costs in this category include conceptualizing and designing the project, bidding the project, financing the project and building and commissioning the project. To these front end costs do not forget to add the cost to decommission, demolish and dispose of the project at the end of its lifecycle.
Annual Recurring Costs: Operating budgets should be forecast through the entire lifecycle of the project and should include staffing, planned maintenance, unplanned maintenance necessary to make repairs, and utilities. These costs may all be forecast by modeling building infrastructure and systems against your use profile, and by applying your historical maintenance experience as a modifier. The last will help fine tune your projection to account for your individual style of operations and efficiency levels.
Periodic Recapitalization Costs: This category should include estimated allowances for retrofits and improvements over time, modifications to support changing program requirements, and the replacement or upgrade of systems as they reach the end of their life cycles. The less certain of these costs, allowances for retrofits, improvements and programmatic changes, can be estimated using past experience as a guide. The upgrade and replacement of major building systems can be predicted with a high degree of accuracy, especially with the aid of BIM.
Defining and forecasting project development, operating, and retirement costs as outlined above improves the information available to decision makers, informs the design process, and helps facility managers properly organize and staff support functions. Aside from predicting the overall investment required the analysis also provides a cash flow model and supports investment decisions to replace major systems (or the entire asset when the time comes).
BIM allows us to model operating and recapitalization costs with a much higher degree of certainty. BIM not only improves the efficiency of the design and construction processes but also the ongoing financial requirements to operate and support the building. By operating the building virtually we can test operating profiles, develop maintenance routines, model energy performance, inform process re-engineering and predict system replacement timing. All of these benefits further inform the understanding of the Total Cost of Ownership of the facility.
When considering the Total Cost of Ownership also factor in the effects of sustainability policies and practices. Sustainability is now a core issue in any new development project. It is likely that the decision to implement a new project will quickly lead to a discussion of sustainability goals for the project and ongoing operations. These discussions and resulting decisions may well place additional demands upon the project which have the potential to change programmatic requirements. For example, a sustainability policy to support the use of mass transit in a new project might lead to a different site selection decision and/or the inclusion of child care facilities. Every time the program changes the requirements to support the facility changes, as does the Total Cost of Ownership of the facility over its lifecycle.
FM’s have a responsibility to elevate the dialogue on these issues when new developments are planned, and a need to demonstrate leadership and knowledge of current best practices. Doing so helps the organization make better decisions, improves FM credibility and best positions FM to operate successfully in the new environment.