View Cart (0 items)

Facility number crunching: Total cost of ownership

September 19, 2010
/ Print / Reprints /
| Share More
/ Text Size+
The season of fall sports is upon us.

Across the nation and on our television sets, various sporting events — at all levels — are being played.

High school, college and professional football events surround us, soccer events are afoot, and soon basketballs will be swishing through nets.

All of these sports, and many others, have several common themes.

First, these are team sports.

In order to succeed, individual players must work together as a team.

Second, each individual team member must aspire to be the best that he or she can be.

Finally, in order to win, the players must have a clear understanding of their visions and goals.

If teams do not work together, hone their skills as teams as well as individuals, and do not have a clear understanding of the end outcome, very minimal results may be achieved.

However, if a team and its members work hard to achieve all of these variables, the team has a greater chance of being successful during the season.

Facility vision
Successful building service contractors (BSCs) and in-house service providers (ISPs) in the facilities arena have a common vision: To maintain buildings at the highest level of quality, while maintaining costs at an acceptable level.

The goal is to meet this vision on a regular and consistent basis by maintaining one building or company at a time.

However, the clarity and complexity surrounding this lofty goal and vision are not always recognized or appreciated.

BSCs and ISPs are often challenged because it is perceived that costs are too high, quality is too low and productivity is less than effective or efficient.

Building owners and operators often do not see the key element that BSCs or ISPs bring to the table — the added value element.

Whether they are cleaners, maintenance repair technicians or landscaping specialists, these key players bring added value to every building that they maintain.

Unique value
The services that BSCs and ISPs provide bring value to the buildings.

James P. Whittaker, in the September/ October 2005 issue of Facilities Manager, writes, “Have you ever managed this data to determine just how maintenance has extended the life of a facility asset and what was the return on investment of that maintenance? Facilities that have can show that extending the service life of a facility asset by 10 to 20 percent can yield significant savings.”

In other words, BSCs and ISPs add value to the tangible asset that they maintain, which is the building and the building envelope.

This added value significantly contributes to the bottom line — the total cost of ownership (TCO) of a building.

Defining the total cost of ownership
After buildings are erected, many administrators and building owners often consider it to be the “end game.”

If necessary, one may choose to minimize or eliminate services in order to save money.

However, the fact is that constructing a building is only the start of a journey, a journey that actually starts from the time the building is a concept in someone’s mind, until the building is built, used and then buried after it has fulfilled its useful life.

According to a definitions committee convened in 2002, which included APPA, the National Association of State Facilities Administrators, the Federal Facilities Council, the International Facility Management Association, Holder Construction Company, and Infrastructure Strategies, the total cost of ownership “…includes the representation of the sum total of the present value of all direct, indirect, recurring and non-recurring costs incurred or estimated to be incurred in the design, development, production, operation, maintenance of a facility/structure/ asset over its anticipated lifespan. (Inclusive of site/utilities, new construction, deferred maintenance, preventive/ routine maintenance, renovation, compliance, capital renewal and occupancy costs.)”

The bottom line is that TCO is a combination of all costs associated with a building from cradle to grave and that cleaning and maintenance operations significantly contribute to the bottom line costs of any facility.

Adds up over the years
An example of a factor in total cost of ownership from a BSC/ISP perspective, according to the “36th Annual M&O (Maintenance and Operating) Cost Study” published by American School & University in April 2007, is the maintenance and operating cost at the college level, which is $5.16 per square foot.

This includes salaries, benefits, utilities, equipment, supplies and other elements.

The bottom line is that maintaining a building, over the life of the building, will probably cost more than the initial startup costs of the building.

For instance, if a building costs $16 million and it has 100,000 square feet, that building will cost $516,000 to maintain for the first year.

If the building is designed to last 50 years, for example, the maintenance cost in today’s dollars would be $25,800,000.

If an inflation factor were inserted into this equation, the building would cost more than double to maintain over its life than it cost to build.

A real-life example is provided by the Construction Specifications Institute (2005) for a complex library project where the total cost of building the facility was just over $203 million and the total cost of ownership, over 50 years, is estimated to be over $573 million.

As key team players in the total cost of building ownership, ISPs and BSCs play a vital role that directly impacts the life cycle cost of a building.

Conveying the message
As BSCs and ISPs seek to convey their provision of services and products to building owners, who are the “powers that be” and make decisions about types and levels of services to be provided, it is very easy to state that you can provide such-and-such a service for X or Y dollars and that you can do it better than anyone else.

If one really wishes to get the attention of building owners and administrators, one must clearly demonstrate the value-added component that BSCs and ISPs offer.

For instance, if you can clean a facility for $1 per square foot and the competitor states that he or she can perform the same work for $.80 per square foot, who do you think will win the job?

However, if the BSC or ISP quantifies and qualifies the services that they are to provide and how those services can extend the bottom line of the total cost of ownership, then that BSC or ISP has been proactive in indicating that they are in it for the long haul and for the total savings that can be realized over time.

Tangible tips to convey added value
As the ISP or BSC prepares a presentation to the building owners or managers, they need to do their homework and answer several questions, such as:
  • What buildings need to be cleaned and maintained?
  • What is the total square footage?
  • What are the customer’s expectations?
  • What normal tasks need to be performed?
  • How frequently and what level of service is expected needs to be analyzed?
Then, find out the cost of the building(s) and start to compute methodologies on how you can save resources over time by being a proactive service provider; clearly demonstrate the value-added elements that you bring to the table. Some examples include:

Carpet life cycle cost
It is very expensive to replace carpet in a building, yet building owners and managers may wish to cut corners by saving on cleaning expenses.

However, this can be fatal to the life of the carpet.

The life cycle of a carpet is directly relational to the level of cleaning service provided.

If cleaning service is provided daily, such as daily vacuuming, the life expectancy of the carpet will increase; however, if it is only infrequently cleaned, the life expectancy of the carpet will dramatically decrease and the carpet will have to be replaced more often.

Clearly demonstrate that if you provide routine carpet cleaning services at such-and-such a cost that this will relate savings over time because the carpet will not have to be replaced as often.

In real life experiences, carpets can last three to five years or seven to ten years, the difference — regular cleaning
schedules.

Routine and proactive carpet cleaning will enhance the daily appearance of a building, while generating long-term savings for building owners.

Cleaning life cycle costs
It is significantly more costly to remove soil from a building after it has entered than it is to keep it out of the building or stop it at the door through the effective use of walk-off mats.

However, if tracked-in soil is not removed, the long-term costs can be astronomical to the building owner.

Too often, building managers choose the easy way out and want to save money for that day.

The real story is that if you save money now, you will be paying later.

Dirty buildings impact the health of the occupants and cause indoor air quality problems.

These buildings can also more easily clog-up air filters on air handling systems, which may in turn increase energy costs or cause equipment failure.

According to Whittaker, a proactive and effective cleaning program will decrease maintenance costs and extend the overall life of a building (Whittaker’s estimate was between 10 to 20 percent) and thus decrease the cost of building ownership.

Equipment life cycle costs
Often, building owners and cleaning services operators will not wish to expend dollars on cleaning equipment.

However, the proper cleaning equipment that is sized to the job at hand may save significant dollars per year and over the life of the building.

For instance, a custodian who vacuums large carpet areas with small hand-held sweepers will be less effective than if he/she used a riding sweeper, which could perform the same task in one-tenth the time, with less need for labor, less ergonomic wear on the employee and a more rapid turnaround of the facility for its next use.

A total return on investment analysis will clearly demonstrate to building owners and operators the need to invest in the most productive piece of equipment possible and not the cheapest.

The right equipment will decrease the total cost of building ownership as it will decrease the need for the manpower.

Design and finishes life cycle cost
The BSC or ISP needs to become team players during the design or redesign of buildings and demonstrate to architects and interior designers how they can add value to the design and finishes in a building.

For instance, due to the concept of value engineering, where short-term cost analysis of the building project may recommend the inclusion of less expensive alternative finishes without taking into consideration long-term gains by including an item, the total cost of ownership is often overlooked.

If the paint is cheap and it gets dirty, then the cleaner must clean it.

If the paint wipes off the wall during the cleaning process, then the wall will have to be repainted sooner.

Thus the inclusion of cheap paints during the building project may save dollars during construction, but over the life of the building will cost the occupants dearly.

The ISP or BSC can recommend services and designs that not only add value to the building today, but that can save on the total cost of ownership later.

A classic example of this is the use of floor drains in restroom areas.

Ideally, any room that generates the quantity of water that restrooms do should have floor drains.

However, far too often these are value engineered out of the project.

This can have tragic results.

The recommendation of the BSC or ISP to install floor drains can save dollars every time a toilet or sink overflows.

ISPs and BSCs, because of their professional experiences, can bring valuable information and ideas to the table that will save on the total cost of building ownership.

In today’s tight-fisted facilities environment where building owners and operators are seeking to minimize short-term costs, the proactive ISP and BSC needs to utilize a different strategy than just citing cost per square foot or the quality of service.

The successful BSC and ISP needs to clearly communicate to building owners and operators how their service contributes to the long-term bottom line of the total cost of building ownership.

By clearly demonstrating that your value-added services actually save costs over time, you will be identifying to the owners and operators that you are team players, who work together to maximize the returns on their assets.

If you wish to have a fruitful relationship with building owners, you must tell your story now in a manner that clearly identifies the long-term benefits of your services through the total costs of ownership model.

You must make abundantly clear how your services extend the life of a building and thus decrease the total cost of ownership or defer that cost over additional years.

To be successful, you must do your homework, crunch the numbers and convey the benefits of an effective cleaning and maintenance program to building owners and operators.

Do you wish to be replaced by the cheapest service (often the current model) or do you wish to be retained as the best (the model of the future) that looks at long-term gains through the total cost of ownership model?

The choice is yours!

Do you wish to be in the game or sit on the sidelines?



Alan S. Bigger, B.S., M.A., R.E.H., is director of facilities at Earlham College. He is also the current APPA president. Linda B. Bigger, B.A., B.S., is a freelance editor.
You must login or register in order to post a comment.