One of the most critical elements of any asset management program is a high level of confidence in the costs that have been used to develop your Deferred Capital Renewal and Maintenance (DCRM) backlog and Facility Condition Indices (FCIs).  These values typically play a critical role in telling your Asset Management Story.  As such, you need to clearly understand the basis of your costs and trust that they are within their expected limitations, that at a portfolio-level the costs will be representative of your overall needs.

Facility Condition Assessments (FCAs) use Class “D” cost estimates, and they deal with the costs of each Recommendation in isolation (as opposed to combining multiple Recommendations into projects or programs).  Consequently, there is a level of uncertainty built into the costs.  The uncertainty is not a flaw in the system, but it represents the first step in a journey.  The costs will get refined as you move from a “List of Needs” that you get with your FCA to a Prioritized Capital Plan (picking specifically which Recommendations you are going to do in a given period of time), through project design and execution (where you should be getting Class “A” cost estimates).

To clearly understand your costs you want to make sure you understand how they were derived.  Having someone give you a simple line-item cost, for example $750,000, is better than having no cost for the work at all.  However, consideration should be given to how that cost was developed.  If you don’t know, it is hard to have trust and confidence in the value.  Additionally, if you are just getting simple costing, how do you know if the values are consistent across your portfolio, without having to do a lot of forensic work of finding two buildings with two similar elements and then comparing the costs. Most asset and facility managers are too busy to have to time to do this.

Any cost data that you get should also provide you with the unit cost as well as a unit of measure that was used as the cost basis.  Based on the quantity observed, measured or assumed, you should then be able to deconstruct the costing fairly easily to see how the cost was developed.  There are other factors that you should consider including in your costing, which again should be easy to deconstruct, but we will cover those in a future post.  The key issues that we want to present here is the importance of clarity in unit costs and units of measure and the consistent application of both across your entire portfolio.

This is where we are going to leave off for this week.  Next week we will look at both the benefits and pitfalls associated with the use of cost guides such as R.S. Means and Marshall & Swift play in understanding your costs.