With limited funds and competing demands, property leaders are challenged with financially meeting the day-to-day operational needs of properties while balancing the need to make facility repairs. To keep overall operational costs in check, many facility managers find themselves in scenarios where repairs get deferred to a future budget cycle or postponed until funding becomes available (known as Deferred Repairs.)
Deferred repairs may seem like a reasonable short-term fix but the fact is this is a growing issue with long-term adverse impacts. The effects of having to close even a portion of a facility because of structural failures affects not only the occupancy revenue, but guest experience, and stakeholder confidence in the property’s leadership. Additionally, aging, under-repaired facilities can end up costing more to repair or replace in the long run, draining operational budgets.
Another key point to consider when deferring repairs is the fact that poorly maintained envelopes deteriorate exponentially faster than their expected end of life. Consider the following:
Facility cracks, spalls and leaks receiving less than the Structural Concrete recommended per ICRI, preventive maintenance will deteriorate before their projected replacement date, producing unsafe conditions.
A study conducted by the Pacific Partners Consulting Group determined that every $1.00 of preventative maintenance deferred to a later date resulted in $4.00 of capital renewal.*
For many properties, deferred repairs have created a backlog of critical repairs during the off peak season, often triggering emergency repairs, typically costing 3-4 times more than recommended scheduled repairs.
Buildings depreciate at approximately 2% per year and the average Maui property is over 35 years in age.
The good news is 80% of these properties can be kept fully operational with preventive repairs. The following are general recommended repair timelines for efficient performance of facilities:
Traditionally, deferred repair is calculated by subtracting the accumulated expenditures for preventive and regular repairs, minor repairs, system and component replacement from the current replacement value of a facility accumulated over the projected life of the facility – usually factored as a 25 to 50-year facility life as seen below:
Formula: DR=CRV – [Year 1(PR+RR+CAP Repairs+Replacements) + Year 2(PR+RR+CaP Repairs+Replacements) + Year 3 to N] N=Number of years of projected live of the facility*
Structural Concrete uses modern practices and the highest quality materials for maintaining and upgrading current high occupancy facilities.
“A general industry standard for facility M&O indicates that a minimum of 3% of the current replacement value (CRV) should be budgeted annually. An additional 1% of the CRV should be budgeted annually to systematically reduce the accumulation of deferred repairs over the next 10 years.”*
With limited operational budgets, properties may consider packaging deferred repairs within a broad facilities master plan and vision to closely link property monies with low profile envelope repairs.
How Can properties plan for continuous facility upkeep and reduce deferred repair costs?
More proactive planning and a less reactive (“fix it when it breaks”) approach can help properties reduce deferred repair costs. Preventive repiar planning starts with a data-driven strategy built on tracked metrics and an understanding of the optimal project investment for the building envelope required for a property.
It’s critical to assess the envelope conditions using robust data collection. It’s also important to fully understand the condition of your property and how your operations affect occupant satisfaction, the facility financial well-being and overall community vitality. Strong data demonstrating property success, incorporating information from comparable properties, are also invaluable when prioritizing facility repairs. Collectively, these data points and metrics can provide a strong case for communicating the need for repair funding.
In addition to limited financial resource, it can be difficult for properties to find the time to create a strategic plan and sort through the best way to allocate funding for your property. Consult with our experts to help navigate through an assessment and provide guidance to devise a plan that meets your propert’s goals and objectives. We have been providing structural assessment and repair on Maui since 1987. It is likely we are very familiar with your property already. We are here to help.
*Source: Sodexo Services, North America