Deferred Maintenance - The Use of Parametrics for Estimating Maintenance Costs
Last updated: 06-10-2010
Facilities managers must know and understand the condition of their facilities including the estimated cost of their deferred maintenance (DM). If managers know their facility conditions and DM cost by facility system, individual facility, type of facility, site and for an Agency or Department, they will best be able to budget for and prioritize their facilities repair efforts.
Federal agencies have struggled to find an efficient and effective method to produce accurate DM cost estimates and facility condition assessments. In the late 1980's Congress focused attention on the rising levels of backlog of maintenance and repair (BMAR) reported by the Department of Defense (DoD). Despite a decade of maintenance and repair funding increases to reduce maintenance backlogs, DoD's BMAR estimate increased in the early 1990's. DoD installations reacted to the increased funding by spending more resources on studies and inspections to further increase their BMAR estimates (in hopes that even more funding would be forthcoming). This result weakened DoD's credibility with Congress, and has been a source of concern over the last decade, as well as being costly and time consuming.1;
The Federal Facilities Council (FFC) Standing Committee on Operations and Maintenance completed a study and issued a report to identify issues related to the reporting of DM for facilities. The study, Deferred Maintenance Reporting for Federal Facilities: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended, reviewed DM reporting requirements as described in the Federal Accounting Standards Advisory Board (FASAB) Standard #6 (PDF 202 KB). The study reviewed alternative options for developing credible, consistent, auditable, and cost effective DM estimates.
A. Parametric Estimating Models
The FFC study describes a number of methodologies for reporting DM. Most of the methods use condition assessment surveys, life cycle costs, or a combination of the two. Statistical approaches involving extrapolation to determine DM were also reviewed in the study. The study concluded that the current methods being used to track and report DM are not cost-effective, and described several ongoing efforts to devise new methods that are cost effective, consistent, and accurate.
One of the methods currently in use is parametric cost estimating. Parametric cost estimating is an accepted technique used by contractors and the government in planning, budgeting, and performance stages of the acquisition process. The technique expedites the development of cost estimates and is appropriate when discrete estimating techniques would require inordinate amounts of time and resources, without leading to significant improvements in estimate accuracy or probability of obtaining additional resources.
This process of documenting DM by using parametric cost estimates is designed to be a simplified approach based on existing empirical data. The method assumes that:
- condition assessments are performed at the system level rather than the component level;
- simple condition levels are used;
- there are a limited number of systems to assess; and
- the CRV of the systems and the facility they support are available.
To perform the DM estimate a parametric cost estimate model, similar to Figure 1, is used. This is a model that uses cost estimating relationships (CERs) based on existing engineering data and associated mathematical algorithms (or logic) to establish cost estimates. For example, detailed cost estimates for the repair of a building system (i.e., its plumbing system) can be developed using very precise work measurement standards. However, if history has demonstrated that repairs (as the dependent variable) have normally been valued at about 25% of the original value (the independent variable), then a detailed estimate need not be performed and can simply be computed at the 25% (CER) level. It is important, though, that any CERs used be carefully tested for validity using standard statistical approaches.
Fig. 1. Theoretical Model for Parametric Estimates
Parametric techniques focus on the cost drivers, not the miscellaneous details. The drivers are the controllable system design or planning characteristics, and have a predominant effect on system cost. This technique uses the few important parameters that have the most significant cost impact on the product being estimated, in this case the DM of systems within a facility.
B. The National Aeronautics and Space Administration (NASA) DM Parametric Estimating Model
NASA developed a new method of assessment, the DM Parametric Estimating method, when auditors of the fiscal year FY01 Accountability Report indicated that a new, more consistent method for estimating deferred maintenance was required for the FY02 Accountability Report. The new DM assessment, as approved by an independent audit firm, provides a facilities condition assessment that satisfies the FASAB Standard #6 (PDF 202 KB) and NASA's requirement to advise Congress of facility conditions in the Agency's Annual Accountability Report as well as a deferred maintenance cost estimate. Although it is similar to BMAR in definition, DM differs in many ways as shown in Figure 2 below.
Figure 2. BMAR – DM Comparison
The NASA DM Parametric Estimating Model's primary purpose is to produce a consistent assessment of the overall DM cost and facility conditions for systems, facilities, installations, and agencies by using a parametric model. It is based upon rapid visual inspection of nine primary systems in each facility by independent teams and field consultation with facilities management staff. The assessment ratings (5 through 1, with 5 being excellent condition) are then placed in models that account for different facility types derived from the Parametric Cost Estimating System (PACES)3, an accepted estimating tool for Federal construction projects and RSMeans™ CostWorks 2002 Version 6-14. This produces condition ratings for each facility system, each facility, each site, each installation, and an entire Agency. The parametric models also convert the condition ratings to DM cost estimate based on the facilities CRV. As reports are created annually, trends will develop that will prove useful in evaluating the overall effectiveness of the maintenance programs.
In support of the FY02 Accountability Report NASA commissioned agency-wide assessments conducted between June and September of 2002. During the project, all 5720 NASA facilities, including those that are in mothballed, abandoned, heritage, out-grant or standby status and those that are remote and low value were assessed at a cost of less than $.02 per square foot. Analysis of the results found that this low-cost assessment method produced consistent, repeatable results that were sufficient for their intended use, which is to provide DM cost estimates for a large population of facilities across the entire Agency, at the same time producing condition assessments of facilities systems, individual facilities, and groups of facilities up to the Agency level.
C. Facility Sustainment Model (FSM)
Over the last five years, the Department of Defense (DoD) has developed and has been refining its Facility Sustainment Model (FSM), a parametric estimating tool for forecasting maintenance funding annual requirements for their facilities. The DoD FSM has matured, and can be economically applied to estimate the annual maintenance funding for facilities population that is accurate enough for budgeting purposes, without excessive costs to determine.
The FSM estimates resources for maintenance and repair activities necessary to keep a typical inventory of facilities in good working order over a 50-year service life. It includes regularly scheduled adjustments and inspections, preventive maintenance tasks, and emergency response and service calls for minor repairs. It also includes major repairs or replacement of facility components (usually accomplished by contract) that are expected to occur periodically throughout the facility life cycle. Sustainment does not include restoration, modernization, environmental compliance, specialized historical preservation, or costs related to acts of Nature, which are funded elsewhere.
Currently, there are many methods for estimating both facility conditions, deferred maintenance cost and facilities sustainment cost. Most of these methods use condition assessment surveys, life cycle costs, or a combination of the two. However, the current methods being used to track and report DM are not cost-effective, and have been challenged by auditors because the methods vary from site to site and the results are not auditable, consistent, or repeatable.
Managers need a method that is low-cost, auditable, and can be updated annually. One way to do this is through parametric cost estimating. Parametric cost estimating is an accepted technique used by contractors and the government in planning, budgeting, and performance stages of the acquisition process. The technique expedites the development of cost estimates and is appropriate when discrete estimating techniques would require inordinate amounts of time and resources, without leading to significant improvements in estimate accuracy or probability of obtaining additional resources. Studies5 have found that the parametric cost estimates are acceptable and accurate enough for government reporting requirements.
- The President's Management Agenda and the Federal Real Property Council (FRPC)
- Web basing
- American Institute of Architects, AIA
1735 New York Ave., NW, Washington, DC 20006, Phone: 800-AIA-3837, Fax: 202-626-7547, E-mail: email@example.com
- Building Owners and Managers Association, BOMA
1201 New York Avenue, NW, Suite 300, Washington, DC 20005
- BUILDER Support Center, University of Illinois
- International Facility Management Association, (IFMA)
1 E. Greenway Plaza, Suite 1100, Houston, TX 77046-0194, Phone: 713-623-4362, Fax: 713-623-6124, E-mail: firstname.lastname@example.org
- Vanderweil Facility Advisors, VFA
266 Summer Street, Boston, MA 02210-1112
- Charette, Robert P. and Marshall, Harold E. UNIFORMAT II
- DM/Condition Assessment Discussion Paper, 4/8/1999; by Charles B. Pittinger, Jr., P.E., Facilities Engineering Division, NASA
- Elemental Classification for Building Specifications, Cost Estimating, and Cost Analysis, U.S. Department of Commerce, Technology Administration, National Institute of Standards and Technology (NIST), 1999, Gaithersburg, MD.
- Federal Accounting Standards Advisory Board (FASAB). 1996. Accounting for Property Plant and Equipment. Statement of Recommended Accounting Standards, Number 6 (PDF 202 KB)
- Federal Facilities Council (FFC). Standing Committee On Operations and Maintenance, Federal facilities Council Technical Report #141. Deferred Maintenance Reporting for Federal Facilities 2001.
- National Aeronautics and Space Administration (NASA). Report on the FY02 NASA-wide Standardized Deferred Maintenance Assessment. March 10, 2003.
- Washington State Department of Transportation. Facilities Condition Assessment and Prioritization. Ron Niemi, Manager, Facilities Planning, Programming and Fiscal. (360) 705-7890
- Parametric Cost Estimating System (PACES). Developed for the Department of Defense by Talisman Partners LTD. Point of contact is Rod Hunt at (303) 224-6755.
- Facilities Manager, FacMan, software, POC: William H. Managan, Assistant Director of Operations Facilities Management Western Washington University, (360) 650-3077
1 Typical cost to do a BMAR analysis ranges between $.30 and $1.50 per square foot.
2This number is used by NASA HQ as an average across NASA to approximate BMAR assessment costs. It was derived from the Federal Facilities Council (FFC) report, Budgeting for Facilities Maintenance and Repair Activities: Report Number 131 (1996), and NASA experience at various Centers using the Department of Energy (DOE) condition assessment system (CAS) and the Office of Space Flight (OSF) assessment conducted by Bechtel National, Inc. in 1991. The 1991 OSF assessment covered roughly a quarter of NASA's facility value and cost nearly $12M.
3PACES is an integrated PC-based parametric budgeting and cost estimating system developed by Earth Tech that prepares parametric cost estimates for new facility construction and renovation. It was developed for military facility application and will soon be commercialized for use in the general building, industrial facilities, and transportation industries. PACES is available to military personnel via the U.S. Air Force. A U.S. Government employee can obtain a copy of the current military version of PACES by contacting the Air Force Civil Engineer Support Agency.
4RSMeans™. CostWorks 2002 Version 6.1; 1996-2002. RSMeans™ is North America's leading supplier of construction cost information. A product line of Reed Construction Data, RSMeans™ provides accurate and up-to-date cost information that helps owners developers, architects, engineers, contractors and others to carefully and precisely project and control the cost of both new building construction and renovation projects.
5Federal Accounting Standards Advisory Board. Deferred Maintenance Reporting For Federal Facilities, Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended, Accounting for Property, Plant and Equipment (PP&E), June 1996. GPO #041-001-00462-9.