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How Far do I Forecast into the Future – Part 2

How Far do I Forecast into the Future – Part 2

In Part 1 of this post, I introduced the idea of an evaluation period for Facility Condition Assessment (FCA) projects and discussed how to determine the appropriate number of years for (re)financing and acquisition/disposition projects. This week we are going to look at FCAs being completed to support capital planning and asset management, and why we recommend that you eliminate the evaluation period and do an element-level inventory of your buildings.

When you collect an element-level inventory for a building, you are going to take an inventory of all the elements that are present in the building and gather a quantity, calculating a replacement value and assigning a Remaining Useful Life (RUL) to each. As a result, the client will have a lifecycle model for their entire building which will allow them to develop a theoretical infinite forecast of future renewal needs. While an infinite forecast is not terribly relevant, we have had clients that have been asked for a 100-year forecast of capital renewal.

One of the biggest benefits of doing a full element-level inventory is that your future FCAs should have a reduced scope as long as you maintain the data between assessments. When a second FCA is completed, the inventory does not need to be expanded to address elements that did not have any recommendations within the previous evaluation periods (e.g. An element that had an RUL of 21 in an FCA report that had a 20-year evaluation period).

Generally, the longer the evaluation period, the higher the cost of the FCA due to the additional effort to assess the RUL of more elements and assign replacement costs to them. However, it is definitely not a straight-line relationship (5-Year Evaluation should not be half the price of a 10-Year Evaluation). Even though the cost of the data collection may be higher, the overall value of the dataset is also greater as well, with the full element-level inventory providing the highest value for future planning.

It’s not that the decision is hard to make. It is more important that you make it for yourself instead of letting the market decide for you. If you go to an RFP and are not specific, you may not get apples-to-apples responses that are easy to evaluate. If you do ask multiple firms for a proposal to do an FCA and you are not clear on the evaluation period, make sure you understand what each firm is providing, especially if there is a large disparity in the overall fees.

If you are going to do a long-term (generally beyond 25 years) forecast of renewal needs, you will also need to consider if you are going to address Cyclical Renewals. I will cover off this topic in next week’s post.