What's the Cost?

The HVAC system that you want to specify for your institution’s new classroom building costs $200,000 more that what you could install, but is projected to save you approximately $50,000 in operating costs a year. What do you do?

This dilemma faces many college and university officials as they prepare plans for new facilities or the renovation of existing structures. A system or product may initially cost more than other alternatives — first-time costs when it comes to budgeting — but through the life of a building — its life-cycle costs — may actually save money while also contributing to more efficient operations.

While college and university clients are trying to evaluate long-term costs more now than in the past, the trend to go this route isn’t taking over the design and construction industry for the higher-education market. Architects and construction personnel serving the higher-education marketplace report that first costs are often the defining issue, even though officials know that going the life-cycle cost route may be more financially advantageous in the long run.

A Case-by-Case Basis

“We have more education clients taking into account life-cycle costs when they undertake a project,” says Scott Fleming, president of Fleming/Associates/Architects of Memphis.“Unfortunately, their projects are often budget-driven, and they can’t afford or obtain more funding for what they’d like to do even if it will save money through time. It’s very much a case-by-case basis when it comes to using first-time or life-cycle costs.”

Fleming says that this situation is especially true when it comes to public institutions.“It’s usually had to sell state officials that spending an additional $500,000 on a building’s systems now will save more than that in the future,” he says. “Private institutions often have deeper endowments that they can work with, but they also often have to sell on paying more up front to save money and to operate a building more efficiently throughout its life span.”

Architects, engineers and construction personnel must do a better job helping their clients to both understand and sell the advantages of using life-cycle costs rather than just their first-time investment, in Fleming’s opinion. He maintains that the design community must continue to educate and build its own knowledge regarding life-cycle costs to help clients make the best financial and operating decisions.

Start Early and Build Knowledge

Michael J. Murdock, operations manager for Turner Facilities Management Solutions, a unit of Turner Construction Company, agrees with Fleming’s contention that the design and construction community must play a larger role when it comes to evaluating life-cycle costs. “We’re continually building knowledge based on our experience that can help clients fully evaluate the cost of details, products and systems,” he says. “The life-cycle costs of a building can be four to 20 times the cost of construction, depending on the complexity of the project. A building component may cost more up front, but if it offers better operations, then clients may reap a payback on using that component very quickly.”

Murdock says that the analysis of first-time verses life-cycle costs must occur at the very beginning of a project, and that these discussions should involve all members of the project team — architects, engineers and construction personnel. “It’s always more cost effective and easier to make modifications to facility components during the schematic design phase rather than during the construction documentation or, even worse, the construction phase of a project,” Murdock says. “Bring your experts together early and have them assist you in analyzing first- verses life-cycle costs. You’ve got to use their expertise and experience to the greatest extent possible, and that includes having them help you sell the fact that investing more initially may yield greater financial rewards in the future.”

In Murdock’s opinion, the University of Notre Dame has become very thoughtful when it comes to long-term costs. University personnel collect their own data and have developed design standards that take into account life-cycle costs of various building features and systems. This enables the university to make more informed decisions when it comes to going with first or life-cycle costs.

Emory University is also looking more at long-term costs, according to Murdock. He says facility personnel are conducting an analysis of an existing and recently completed project to validate the effects of certain applications on operating and maintenance costs. The information gathered will help Emory to use the most appropriate products and systems in future buildings, based on proven data.

Many institutions are still using first-time costs when it comes to project delivery, but the trend could swing to using life-cycle costs as more design professionals and institutions build knowledge that can point to better operations through time. Spending more up front to save more later isn’t always an option, but it’s one that must be considered by more institutions as they seek to make the best building investments possible.