How to Navigate the Facility Condition Assessment Industry
Kyle Christiansen, VP of Roth IAMS, United States
Consistent and Defensible Data – Why it Matters
Can a Facility Condition Assessment be of use to you? Most Facility Managers know intuitively what their facilities need. However, the problem is providing clear and defensible data, documentation, and cost analysis when approaching asset managers or board members who are responsible for allocating funding.
These individuals want more than an opinion to base their budget funding allocations on. No matter the organization, various facilities and institutions are vying for the same dollars. Facility managers must make clear defensible capital plans if they hope to secure the necessary funding from those holding the purse strings.
Just today, I had a conversation with a former facility manager turned facility assessor. He stated that although he knew the size of the deferred maintenance problem, he could not put together a list of priorities if asked. The problem he described was a lack of comprehensive, consistent, and defensible data about the condition of systems within the facility he managed.
What’s the solution?
Facility Condition Assessments (FCA) help facility managers perform on-site assessments to articulate the needs of their facility, put together reports on equipment condition and deferred maintenance, and then plan operating budgets to address these needs. With the resulting data, facility managers are prepared to present and defend their priorities when advocating for project funding. Choosing an FCA consultant to work with that focuses on how the data is collected and reported is key as it will support maintenance planning and capital improvement strategies.
So, how do we get consistent and defensible data in the capital planning world?
Approach 1: Modeling – Based on Uniformat without Visual Assessment
Some FCA consultants model data based on a drive-by view of properties. Their base-line data focuses on the size, usage, and age of the facility. Assumptions on what the inside of the facility contains, are key to using this methodology.
Little of the data created by a modeling approach is based on or supported by investigation, observation, or research. Those who use this modeling approach to capital planning attempt to call this methodology a Facility Condition Report, but the value and accuracy is a long way off from the FCA approach that uses a visual assessment of individual systems to more carefully and accurately identify the exact systems used within a particular building.
Approach 2: ASTM E2018-15 – Based on Property Condition Assessment
Another approach to capital planning for commercial facilities is a reporting system based on the Property Condition Assessment (PCA) protocol used for commercial property reserve studies as outlined in ASTM E2018-15.
This system is based on visually gathered data collected by performing a walk-through survey to identify physical deficiencies in systems, components, and equipment noticeable to the field observer. It covers an industry standard of expected useful life (EUL) and a loosely agreed upon set of costs.
Because this approach utilizes a quick visual survey, costs for debt or refinancing reports are typically set below market rate. The purpose of these reports is not to replace systems, but rather to protect lenders with a small pot of money in case the property enters default or foreclosure. These reserves are also used to incentivize the general maintenance of the property. In general, this pot of money is 70% below the real cost of capital investment necessary to replace failing systems.
Commercial properties that are refinanced or purchased in the marketplace are required by lenders to complete a PCA report. There are approximately 250,000 reports completed annually, however they are not reliable for capital planning. Their purpose is to protect lenders from default and speculate on property conditions.
Approach 3: Facility Condition Assessment (FCA) – based on Uniformat with Visual Assessment
The previous two approaches described above do not provide reliable or credible data. They present financial needs based on loose estimates and speculation, but lack an accurate visual assessment, defensible data, and a credible cost analysis.
A third approach, the Facility Condition Assessment, is primarily used for institutional properties that are not sold or refinanced in the marketplace. The standard FCA approach is based on three key methodologies which support the proverbial stool seat, with three legs, that must be equally in place for the stool to be supported. FCA helps curate a reliable and defensible argument to accurately plan capital expenses, through the three methodologies listed below:
Leg #1: Expected Useful Life (EUL)
Expected Useful Life pertains to every type of building system and estimates the average amount of time a component or system will function assuming routine maintenance is regularly performed to keep the component/system running. This is typically estimated in years and helps calculate capital expenses required to maintain a facility while considering the life of equipment and cost of maintenance.
Example: An asphalt shingle roof is typically estimated to have an average EUL of 15 years. This average EUL can be modified when accounting for a variety of variables such as environmental conditions (rain, snow, heat), ultraviolet light, quality of materials, quality of installation, and most importantly the quality of maintenance.
A property assessor uses the EUL and knowledge of these variables to determine the remaining useful life (RUL). This process requires basic calculations and an experienced eye that can appropriate modifications to the standard EUL and establish a RUL.
Leg #2: UniFormat System ID and Cost
“UniFormat is a standard for classifying building specifications, cost estimating, and cost analysis in the U.S. and Canada. The elements are major components common to most buildings. The system can be used to provide consistency in the economic evaluation of building projects.” Wikipedia
It is used to identify and classify building conditions, cost estimates, and cost analyses. The system includes an expansive library of costs based on 16 categories of building systems with a detailed framework used to apply accurate industry-based costs.
The UniFormat ID and cost system is intended to be used to carefully identify and quantify the cost of systems with a high degree of accuracy. It is imperative the costs included are based upon readily verifiable industry information that considers current costs as well as intangible costs such as inflation and regional factors.
The modeling and PCA methodologies noted above, do not rely on a credible or defensible cost analysis, as assumptions about the equipment contained in a facility and visual assessments alone cannot accurately predict the life of equipment/systems or cost of maintenance.
Leg #3: Trained and Experienced Assessor
Leg 3 of the Facility Condition Assessment is known as the assessor. As noted above, the modeling methodology does not include an on-site assessor and does not include reliable information about system IDs or condition.
Many of the assessments required by the Facility Condition Assessment process are based upon educated and experienced judgement. Everything from age of installation, variables of condition, and antidotal information about maintenance history is necessary for an assessor to include in judgement–based recommendations.
Just a couple of weeks ago, I was contacted by an assessor in the US who is currently involved in a PCA-based lawsuit. He wanted my opinion for his legal defense. I advised him that the ASTM standard E2018-15, Baseline Guideline for Property Condition Assessments, clearly states that the PCA assessment protocol is not an architectural or engineering service. The scope of work is visual and requires experience that can be trusted by the client. In my experience, having hired and trained over 100 assessors, the following attributes are necessary:
- Education – training in building sciences
- Experience – seasoned by field experience to identify systems and conditions
- Knowledge – understand EUL, costs and Uniformat categories that are standard in the industry
- Critical Thinker – capable of making complex judgements
- Diligent – careful to gather and review available information through available documents and data
- Responsible/Reliable – trustworthy to gather and review data with accuracy
- Persistent – able to complete the task and to ask questions
- Technically Competent – capable of using tools – iPad, software, and camaras to collect and transfer data
- Wordsmith – able to write both for technical and lay readers to explain systems and conditions
- Credible – capable of supporting judgements with a log of data, photographs, notes, as well as making accurate quantity take-offs using visual skills and understanding of system measurements and units of measure
The three-legged FCA stool requires an industry standard EUL and RUL, industry standard credible and accurate cost analysis, and a trained and experienced assessor. Judgements and recommendations required by assessors include correctly assessing the variables affecting condition, historical information concerning maintenance, and cost variables.
Modeling and PCA based assessments are not based on a 3-legged support. Modeling is often done by groups that have limited assessment skills. PCAs are often done by groups that have limited building science training and limited experience in cost estimating. Most of the largest PCA-focused companies use 1099 – staffing who have limited in-house training. In-house staffing and training allows for more reliable and consistent data gathering and reporting.
Reliable and defensible data is based upon the consistent application of these three legs for the FCA stool to stand strong. The end goal of a Facility Condition Assessment is to relay an accurate outline of the facility condition and capital costs requiring investment and funding. Remember, those pulling the purse strings are comparing the quality and reliability of your data with others to distribute funds as necessary.