FP+A Blog

Repair, Replace, or Upgrade? How To Make The Right Choice

When you need major repairs for your car you are generally faced with three choices: 1) Repair - go ahead and fix it, 2) Replace - buy a similar used car, or 3) Upgrade - buy a new car. If you choose to buy a car (used or new) you consider the initial price, the trade in value of your existing car, and the cost of ownership. Since you will likely keep the car for about 5 years this cost of ownership analysis really determines the "price" of the car. There are numerous sources for cost of ownership analysis for cars to help in your buying decision (example: Edmunds TCO).

A similar process should be used to effectively evaluate decisions related to facility management. To develop a "cost of ownership" analysis you will need to consider:

• Terminology - how are the various expense factors defined.
• Processes and practices - how you currently make buying decisions and evaluate alternatives.
• Metrics and/or cost models - what data do you have or need to make an informed decision.
• Resources and skills - where can you get the advice and capabilities needed for the analysis.

The International Facility Management Association (IFMA) has publications which can help in the development of a total cost of ownership analysis. They publish various benchmark studies and Asset Lifecycle Model for Total Cost of Ownership Management. This latter publication provides an excellent framework for understanding the terms and definitions related to space management, project delivery management, operations management, and capital asset management.

We have developed an example of Total Cost of Ownership (TCO) analysis for the need for new 25,000 square foot office space. This analysis considers:

• Repair - Renovate existing space with hard walled offices and similar cube farm layouts.
• Replace - Move to new 'vanilla" space with office features but with lower rent.
• Upgrade - Move to "vanilla" space, but use new flexible office furniture and components.

Our TCO analysis, based on various assumptions and a 10 year lease period, indicates that the Upgrade option will have the lowest cost of ownership. The results are:

• Repair - $7,610,000
• Replace - $7,040,000
• Upgrade - $6,900,000

For details on our analysis, link to FP+A TCO for 25,000 SF office, or contact Garry Brinton at gbrinton@facplan.com.

What are you "preventing" through Preventive Maintenance?

"Preventive maintenance", along with "capital renewal," are fundamental strategies for facility management. But what exactly are you preventing? The common answer is failure. But how do you define "failure?":

• Lights-out, dead-stop, send everyone home and close the doors catastrophe?
• Roof leak in server room, computers ruined, data lost?
• Inefficient operation?
• Incorrect use?
• Inconvenience?

How you define failure determines the level, focus, and costs of maintenance processes. The facility manager should not only prevent failure but also anticipate user demands, system stress, technology limits, and varying conditions of use. Perhaps a more appropriate term to use is "pre-emptive maintenance." Timely and correct maintenance is an investment that extends asset life and creates the option to incur capital expenditure at the last gasp of assets' operational effectiveness, when they are completely work or woefully inadequate or hopelessly obsolete.

Facility condition assessments (and energy studies) provide a baseline profile of the current state for setting both maintenance standards and prioirities. We have defined four tiers of condition assessments, ranging from a basic technical review to a comprehensive program. Each tier has a specific scope of work, a specific work product or solution, and costs. For more information, contact us (Garry Brinton, gbrinton@facplan.com).