Thursday, July 20, 2006

If You Build It

There has been a lot in the news lately about maintenance problems. We have has a number of water main breaks and the water department estimates there are $85,000,000 in repairs needed to completely fix the system as of today. The school board was shocked by how much money was needed for repairs of its buildings, not counting the cost to build new ones. At the last council meeting we heard that around $5,000,000 would be needed to renovate the basement of city hall and rearrange and consolidate offices in the buildings at city hall plaza. The convention center is loosing business because of the age of its audio-visual equipment. These stories have much in common.

Our local governing bodies need to get rid of the habit of build it for the lowest price and then forget it. They are starting to ask for big picture, long term estimates on the cost of fixing existing problems. This is good, as it gives a better picture of where money is likely to go and helps set goals and priorities. The old practice of ignoring maintenance until it's a crisis and then managing the crisis for the photo op just doesn't work. We need to go beyond this. We need to ask as part of the planning process "What is the likely life expectancy of project, and what are the on going maintenance and operating expenses likely to be."

Here is a real life example. One of my customers does a lot of laser printing. He goes through at least a ream of paper a day. The printer he was using was one that was recommended to work with his software, was competitive in toner cost, and for the most part worked well. The problem was, he was replacing the drum almost once a week. At $200 per drum, that added up pretty fast. We checked the specifications and with the manufacturer and found the printer was working as designed. The drum wasn't designed for that much printing. We started shopping for a new printer. We found sites that actually estimated the cost per page based on costs of consumables (toner, drums, paper, etc.) and the expected use life of the printer. He eventually bought a new printer at about twice the price of the printer he was using. His cost per page dropped from about 10 cents per page to just over 2 cents per page. The printer paid for itself in a little over 3 months. He learned that initial purchase price is only one of the questions that needs to be asked, and in his case it was not the most important one.

Similar questions need to be asked on all projects, especially the big expensive ones. Questions like how much electricity will be needed to heat, cool, and light a building? How long will a roof last? How long before you have to dig up buried pipes? What can be done to lower operating costs and make components last longer? What types of preventive maintenance will get the best use and life for new facilities and infrastructure and what is the cost? These questions need to be answered when we are looking at the up front, procurement costs. It needs to be part of the design and planning process.

In the end, if you build it you have to maintain it.


  1. You are 100% correct. The cost of the buildings needs to be considered as do the construction time, quality of construction, and overall evaluation of systems used in the buildings.

    Many people are not interested in purchasing the lowest priced item, especially when the operating costs are higher, or the life of the item is shorter. As you mentioned in your article, the life-cost of the facility must be considered in the analysis of the project.

    Other areas need to be considered as well. Utilization of environmental systems for the site irrigation (grey water systems or rain water collection systems) need to be considered and used in many of the city's facilities. Much of this can be acomplished for little cost especially when the payback is 2.5 to 3 years in length.

    Our City and School District have done a very poor job of budgeting for replacements or scheduling replacements. All successful real estate developers have an account called replacement for reserves where they place or budget money each year in anticipation for capital expenses. Most of us as home owners have similar strategies and plan on carpet, furniture, or appliance replacements ahead of the time the replacements are needed.

    Why can't the City, County and School District operate in the same manner. It is time for our city officials including elected officials to take a positive step by looking in the future at needs, wants and desires.

  2. Excellent article and an excellent anonymous comment. Spread them around. Tony Massaro