The Challenge

As part of any request for funds for new facilities or major renovations, The University of Alabama is required to provide projections for the Operations & Maintenance (O&M) costs associated with the facility. In most cases, The University was utilizing the actual costs for a single facility for which data was readily available. Given the differing O&M demands between different types of facilities, this approach resulted in inaccurate projections. Additionally, The University wanted to ensure that all O&M costs were included in the projections rather than the current approach which typically considered just Utilities, Maintenance and Custodial.

The University of Alabama engaged Draper & Associates to develop an Operational Cost Model with the primary purpose to project O&M costs associated with new buildings being planned for the campus. The model allows The University to implement a more scientific and data-based methodology for estimating costs and presenting that information to the Board of Trustees for its consideration when evaluating proposed construction.

The Draper Approach

This Operational Cost Analysis entailed a combination of fact-finding and analysis directed at the objectives delineated above. Fact-finding activities included interviews of the appropriate administrative and facilities staff which have input and decision-making authority and review of pertinent operational costs.

The Draper staff worked with the decision makers to define the categories of expenses and classifications of space that would encompass the model. This analysis led to a model that provides the ability to calculate the costs for 10 different categories of expenses, including utilities, maintenance and custodial services, within 10 different classifications of space for the next eight years beginning with FY 2006.

Once the criteria was defined, base rates were developed for each category of expense within each classification of space. The base rates were developed using a synthesis of industry benchmarks and internal University of Alabama cost analysis. The industry benchmarks used for the model were obtained from the Operational and Maintenance Benchmarks 2005 by the International Facility Management Association (IFMA) and the Facilities Performance Indicators Report 2004-2005 by the Association of Physical Plant Administrators (APPA). In addition to using industry data, Draper staff conducted detailed analysis of historical utility, maintenance and custodial costs to ensure that the base rates were relevant to the environment for which the model is to be applied.

Upon completion of the draft model, meetings were conducted with relevant decision makers to review the logic behind the calculations and test the model based upon current buildings and actual costs. Based upon these meetings, minor alterations were made to the model and the final model and associated report were delivered to the University. Draper staff also provided the requisite training for the proponent staff.

Results Realized

The Operational Cost Analysis Model permits University staff to enter additional planned facilities data in the future and generate forecasted operational costs associated with those facilities.

By producing realistic projections of these costs, The University can clearly identify the necessary funds required to ensure the appropriate levels of services are provided for projected new buildings. Therefore, the base rates used in the model take into consideration the industry benchmarks listed above, but also used current costs of operations and maintenance, where the data was readily available.

The Operational Cost Model is a simple tool to use to generate anticipated operational and maintenance costs for any facility on campus. For each facility to be analyzed, the model uses basic programming data, extracted from the architectural programming documents, to produce projected costs, tables and graphs. The model calculates costs based upon pre-set inflation rates and has been developed to be easily customized by the user to adjust these rates and future base costs. The model provides a powerful tool for The University of Alabama to ensure that timely and accurate data is available when making financial decisions relative to future facilities.