Finance News & Insights

Help your facility managers devise a master budget plan

Lifecycle costing for an entire building isn’t a quick process. But here’s some planning help for your facility managers — and in the long run, for Finance.  

Jeffery Campbell, facility management professor at BYU, recently addressed FMs at the IFMA World Workplace conference in Denver.

Many FMs feel fine with a wrench in their hands, but can feel out of their element with budgeting. No need to fear, Campbell says. Calculating a building’s total cost of ownership (TCO) takes time, but can help immensely with budgeting.

Nail down maintenance costs

The average building has a lifespan of 50 years, and the TCO estimates the total cost to operate and maintain the building over that time period.

Your FM can use benchmarks from the Whitestone Research Cost Reports to calculate operations and maintenance (O&M) and maintenance and repair (M&R) costs for each year, which is included in the TCO.

That allows companies to nail down exactly what should be spent on O&M and M&R annually, and then project those costs over 50 years. Campbell says it provides a definitive budget plan for management.

Two other key benefits

Campbell says there are two other key benefits from calculating TCO:

  • M&R expenses usually peak every five years when major assets need to be replaced or repaired. With that knowledge, Finance gets a heads up instead of a surprise when huge repair bills follow the failure of key assets.
  • Small savings in O&M costs add up big time over 50 years, and can help pay for major repairs. For example, reducing annual O&M costs per square foot by five cents can lead to hundreds of thousands saved over 50 years. The biggest area to look for savings? Custodial, which accounts for nearly one-third of most companies’ O&M costs.
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