Business (Managing K-12 Education)
School Facilities: What Do They Really Cost?
- By Ellen Kollie
- July 1st, 2018
PHOTO © BOONCHOKE
Because tight budgets are a fact of life for facility managers, low-priced systems and products may appear extremely attractive. However, those systems and products might have excessive lifetime operational costs, or they might have short usable lives, causing them to be replaced long before necessary. Enter Brett A. Mitchell, EdD. (ABD), director of Facilities Construction and Modernization at San Juan Unified School District (SJUSD), California, and a member of Design Build Institute of America. He manages a $2.4-billion capital improvement effort with current bond authorization of $1.2 billion in this district of 88 school sites spread across nearly 80 square miles serving nearly 50,000 K-12 students. SPM recently spoke with him about lifecycle costs and how to get the most bang for your facilities buck.
SPM: Why must lifecycle costs be taken into account on a school construction or retrofit project?
Mitchell: As facility managers, we have a fiduciary responsibility to our districts, with the resources we’ve been given, and it’s incumbent upon us to make sure we’re modernizing and/or building schools in the most efficient manner possible. That doesn’t mean building cheap schools. It means building as inexpensively as possible while considering the ongoing expense of what you’re building. For example, I can purchase inexpensive carpeting and save money on the initial installation, but it’ll end up being replaced soon—too soon. Paint is another example. I can use inexpensive paint, but I’ll have to repaint every year. We have to consider not only the material cost, but also the labor cost. In these examples, I’m not being fiscally prudent or responsible to the community that has entrusted me to spend its investment wisely.
SPM: What is the relationship of lifecycle costs to return on investment (ROI)?
Mitchell: Lifecycle costs are the sum total of all one-time and ongoing costs across a product’s life span. Your return on your investment is equal to the amount of money invested—however much you’re going to spend on it—divided by the cost per year you’re saving. By virtue of the math, the lower the resultant number, the higher the ROI. For example, if you invest $1 million, and save $500,000 per year, your ROI is two years. (Highly unlikely, but please indulge the numbers for simplicity in comparison.) Comparatively, if your savings are $300,000 per year, your ROI is 3.3 years. In this scenario, you can see that the savings of $500,000 per year is a better yield, as the ROI occurs in year two, rather than year 3.3. Now, let’s consider that same $1 million investment can be completed with a different product that costs just $800,000, with a yearly cost savings of $300,000 per year. Thusly, the ROI is 2.7 years. In this case, the lower cost investment is not worth the initial cost savings when the ROI is considered.
In deciding what are the best products for your school, you have to weigh the initial cost against the cost replacement. Take solar panels, for example, which might typically have to be replaced after 30 years of use. These are great investments where electric power is expensive. However, in some areas where electricity comes at a more reasonable rate, the ROI could be higher and therefore less attractive.
And you have to look at other components that give you a higher yield. LED lighting, for example, is considered low-hanging fruit, ripe for the picking. The proof of return of investment is easy because there’s literally zero maintenance with them for many years. You rarely need to change a light bulb, and you’re saving a tremendous amount of energy versus incandescent or fluorescent lighting.
There are other components to consider, such as different types of air conditioning systems, wherein it may also be difficult to determine the ROI. If you’re talking about an initial install, you would consider Seasonal Energy Efficiency Rating (SEER) rated 23, which might be a little more money than a rated 22 SEER. However, if you’re an established school with a 22 SEER rated system, then it doesn’t make sense to replace it with a 23 SEER rated unit. If you’re going to replace 18 SEER units with more modern 24 SEER, your ROI might not pan out depending on the 18 SEER model’s efficiency and the local consumer rate for power. Another air conditioning component comparison for an initial install is the value of traditional condensing units, at a known cost, to the more efficient geothermal heat, which is very expensive on an install and often the payback is too long of a period of time for a solid ROI, again based on local utility rates.
SPM: In addition to heating and cooling, what other facility components are often considered in terms of lifecycle costs?
Mitchell: Anything that requires some form of utility—water, electricity, gas—to provide the most efficient means possible. Low-flow toilets and sinks, for example, which reduce water consumption. It’s really going to depending on the region you’re in. In some regions, electricity may be a better alternative than gas.
SPM: At first glance, low-priced systems and products appear extremely attractive. How can administrators evaluate low-priced systems and products against lifecycle costs and thus make the best purchasing decision?
Mitchell: Sometimes you can tell a product’s value by the warranty period—how long the manufacturer is willing to warranty it. But probably the best way is to look at the manufacturer’s performance guarantee. It’s similar to purchasing tires. You can pay a decent price and get a tire that will last for 30,000 miles. Or you can pay a bit more and get tires that will yield twice that, or 60,000 miles. A third way to evaluate systems against lifecycle costs is to talk with the people in your district who maintain and repair those systems: What’s the most durable paint? What air conditioning units never need repairing? Finally, you can talk with your design professionals, who should have an idea of which systems will yield a good return on your investment.
SPM: What has changed about lifecycle costs in the last 20 years?
Mitchell: I think that there’s an awareness now of the importance of considering lifecycle costs and, in recent years, we’ve done a better job of looking at more efficient ways of doing things. It’s comparable to the auto industry, where a hyper sensitivity to a vehicle’s economy has developed.
SPM: What other factors must be considered in order for administrators to make the most effective, efficient choices for their facilities?
Mitchell: It’s important to keep an eye on emerging industry trends. Your design professionals may not know everything. So, keep an eye open when looking at publications and attending trade shows. Listen to what people are talking about.
SPM: What’s the most important thing for administrators to know about lifecycle costing?
Mitchell: That it’s not one-size-fits-all. Make sure that a published lifecycle cost is applicable to your region, climate and/or location. While solar may make sense for someone in one region, it might not for someone in another region.
SPM: What advice do you have for administrators regarding lifecycle costs?
Mitchell: Plan well. I tell school administrators in districts all over the nation: Plan your work, work your plan. When you’re proactive in your planning, you’re operating most efficiently. Failing to plan is planning to fail.
This article originally appeared in the July/August 2018 issue of School Planning & Management.