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1 INTRODUCTION The nation's public buildings--government administration buildings, health care facilities, schools, correctional facilities, and a variety of other elements of public infrastructure--are crit- ical to the nation's high quality of life and productive environ- ment. These facilities are public assets that have been acquired through the investment of public tax dollars over the years. Pub- lic officials are the stewards of these assets, and their decisions about how these facilities are used, operated, maintained, retired, or replaced can have far-reaching consequences for the public. These public assets are substantial. Department of Defense buildings alone are estimated to be worth more than $500 billion. Replacement cost of the nation's S8,021 public school buildings might exceed $422 billion. It would cost more than $300 billion to replace the physical structure of Americans institutions of higher learning (public and private). State and local govern- ment building replacement value is estimated to be $400 billion.) ~ There is no compiled estimate of current replacement value for all publicly owned buildings. The committee drew these- ex- amples primarily from recently published reports and notes the variety of methods used to determine replacement costs: insured values, appraised values, unit costs to reconstruct per square foot of facility space. Department of Defense estimates are reported in Renewing the Built Environment: Real Pronertv Maintenance Activities, Department of Defense Report to Congress, 1989. Re- placement value of public school buildings is estimated in Wolves at the Schoolhouse Doors Education Writers Associations 1989. page 4. College and university estimates are stated in The Decav- ine American Camous: A Ticking Time Bomb, Association of Physical Plant Administrators of Universities and Colleges, 1989, page 21. State and local government building replacement values were calculated by Building Research Board staff based on an

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In addition, water supply, waste disposal, transportation, and other physical infrastructure systems, an investment worth many billions of dollars, are beyond the scope of this report but play a similarly critical national role. Ha, It is unfortunate but inevitable that the construction of new facilities attracts far greater attention than the maintenance and repair of existing ones. While facilities are designed to provide service over long periods of time, the substantial costs of con- struction are addressed all at once in public debate and manage- ment decision. In contrast, the yearly costs of maintenance seem small, although over the course of a facility's service life they generally total much more than the initial costs of construction. The commissioning and occupancy of a new facility are a news- worthy event that attracts public attention, but the ongoing work of maintenance and repair receives little notice except when failures occur that affect the ability of a facility's users to perform their work. At local levels particularly, few government entities recognize their buildings as more than a "trapping incidental to the provi- sion of public services, to be maintained at the lowest possible cost" (ICMA, 1989~. This view pervades all levels of government. Public agency managers and elected officials, faced with the constant challenge of balancing competing public priorities and limited fiscal resources, often find it easy to neglect the main- tenance and repair of public buildings, and not only because new construction or other activities have greater public interest. The cumulative effects of wear on a facility are slow to become ap- parent and only infrequently disrupt a facility's users. Managers of facilities seldom have adequate information to predict when problems will occur if maintenance efforts are deferred. These managers are often poorly equipped to argue persuasively the need for steady continuing commitment to maintenance. Under- funding of maintenance and repair is such a prevalent practice in the public sector that it has become in many agencies a de facto policy that each year compounds the problem as the back- log of deficiencies grows. Neglect of maintenance can nevertheless affect public health and safety, reduce productivity of public employees, and cause long-term financial losses as buildings wear out prematurely and must be replaced. Decisions to neglect maintenance, whether made intentionally or through ignorance, violate the public trust and constitute a mismanagement of public funds. In those cases estimated inventory of 4 billion square feet at an average replacement cost of $100 per square foot. All estimates exclude costs-of land and major infrastructure. 2

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where political expediency motivates the decision, it is not too harsh to term neglect of maintenance a form of embezzlement of public funds, a wasting of the nation's assets. . . ~ he purpose or this report Is to provide public decision makers and facility managers guidance that may-help to over- come this persistent problem of underfunding of maintenance and repair. The central principle of this guidance is full recognition and firm commitment to the cost of ownership of public facilities, the stream of costs incurred by the decision to acquire a new facility. In the absence of an adequate statistical basis for recommendations, the authors of this report have ap- plied their extensive experience and judgment to propose a benchmark for budgeting for the maintenance and repair com- ponent of this cost of ownership. Adequate funding is not the only element of effective maintenance and repair, but it is so critical that no maintenance and repair program can be success- ful for long without it. SOURCE OF THIS STUDY Concern about maintenance and repair of Public buildings led the agencies of the Federal Construction Council (FCC)2 to ask the Building Research Board (BRB) of the National Research Council to undertake a broad review of the operation, mainte- nance, and repair activities of federal facilities. The FCC asked specifically for advice on how federal agencies might (1) predict the impact of decisions regarding construction materials and building systems on future operation, maintenance, and repair costs; (2) improve their methods of determining professional staffing requirements for field-level facilities management; (3) improve their procedures for programming and budgeting for operation, maintenance, and repair work; and (4) make effective use of diagnostic techniques for determining the need for main- tenance and repair. The concern about maintenance and repair is not limited to federal agencies. State and local governments are similarly confronted with problems of inadequate maintenance and repair of their facilities. A number of these agencies formally , ~ ~_ 2 Fourteen federal government agencies with major interests in building and facilities research, construction, operation, and maintenance comprise the FCC. These agencies have a combined annual construction budget that typically exceeds $12 billion. 3

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articulated their concerns through the BRB,s Public Facilities Council (PFC), a group of state and local government agencies organized to identify and share technical needs for buildings at state and local levels. A statement endorsed by the BRB,s PFC sponsors in 1987 urged the undertaking of a research project that would "lead to a determination of the percentage of building re- placement cost that should be reinvested annually in building maintenance in order to protect the original investment, assure structural integrity, assure continuous usage within designed capacity, and reduce the potential for system breakdown or ~nca- pacitation."3 The PFC thus became cosponsors of the study that led to this report. . ~. ~ THE STUDY COMMITTEE AND ITS WORK . The BRB selected a committee of professionals with broad ex- pertise and extensive experience to respond to the FCC and PFC request.4 This committee reviewed available information; heard testimony by professional staff of federal, state, and local government agencies: and debated at length the key issues and nstltutlonal challenges 1nnerent in its charge. The committee decided early in its deliberations that the problem of persistent underfunding of maintenance and repair in public buildings is of such overriding importance that the four tasks given in the committee's statement of work should be recast. The committee concluded that prediction of the impacts of deci- sions about building materials and systems and advice on opera- tion and maintenance staffing requirements--legitimate concerns of substantial importance--can be considered only within a con- text of an integrated maintenance and repair management pro ~ ~ - . . . . _ gram and that such a program is impossible without adequate and reliable funding. The committee therefore focused on the latter two tasks as a means to combat the institutional incentives to underfund--that is, improving maintenance and repair budgeting procedures and using diagnostic techniques to determine the need for main- tenance and repair. The committee undertook to propose means to demonstrate the need for an effective maintenance and repair 3 From "Proposal for Public Facilities Councils submitted to the Public Facilities Council on June 5, 1986, by Mr. Harry Stevens, then director of Design and Construction for the State of New York. 4 Appendix A presents biographical descriptions of com- mittee members. 4

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management effort and to describe the impact of underfunding; to define elements of an effective maintenance and repair- management effort, including condition assessment and resource management; and to propose tools for facilities managers to use in justifying resource requirements for maintenance and repair of public buildings. WORK YET TO BE DONE It was recognized at~the start that time and available-re- sources would not permit the committee to deal-adequately with all aspects of the problems of maintenance and repair. Under a cooperative agreement between the National Research Council and the American Public Works Association (APWA), an arrange- ment was made to have active APWA liaison participation on the committee in order to bring to the committee the views and experiences of APWA's 850 member jurisdictions that comprise the association's Institute for Buildings and Grounds. The APWA's Research Foundation subsequently approved a research project to be sponsored and supported by APWA members to use the results of the BRB committee's work to develop tools, tech- niques, and procedures for use by facility managers at state and local levels to forecast maintenance and repair needs. The Research Foundation plans to develop training materials to make these management aids accessible to a broad audience through an APWA-sponsored workshop series. (See Appendix B.) Other work will be needed as well, to develop applications, guidelines, education programs, and reliable measures of the influence of maintenance on the government and private users of facilities. This committee's work is at best an important step toward overcoming a serious problem. KEY DEFINITIONS The committee found in its early deliberations that such commonly used terms as operation and maintenance (O&M) or maintenance and repair (M&R) are often defined and measured quite differently by different agencies. The committee appointed a subcommittee to review public and private sector definitions of such key terms and to develop working definitions for the s

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committee's use.5 The following definitions are meant to be simple while conveying important principles that the committee wishes to emphasize in this report: Cost of ownership of a building is the total of all expendi- tures an owner will make over the course of the building's service lifetime. How these expenditures are measured and reported may vary from owner to owner, depending on such factors as whether the owner is a private individual, business enterprise, or a public agency as well as relevant accounting procedures and current tax laws. Regardless of the specific accounting methods, the cost of ownership will generally include not only planning, design, and construction but also maintenance, repairs, replacements, altera- tions, and normal operations such as heating, cooling, and light- ing as well as ultimate disposal. A building owner should recog- nize at the outset that the cost of ownership is not fully paid when construction is complete or when a building is purchased but instead continues for many years.- Failure to recognize this can lead to short-sighted decisions that increase the overall cost of ownership. A building's service lifetime is the period of years over which the building provides shelter and an environment supportive of the activities it houses. Buildings can have lifetimes that last centuries, although parts of the building may change greatly dur- ing that period. Builcling owners, designers, and managers generally make decisions about maintenance, repairs, operations, and alterations with an assumed design service life in mind, typically between 10 and 30 years. Maintenance is the upkeep of property and equipment, work necessary to realize the originally anticipated useful life of a fixed asset. Maintenance includes periodic or occasional inspec- tion; adjustment, lubrication, and cleaning (nonjanitorial) of equipment; replacement of parts; painting; resurfacing; and other actions to assure continuing service and to prevent breakdown. Maintenance does not prolong the design service life of the property or equipment, nor does it add to the asset's value. 5 The subcommittee consulted the following sources to de- velop its definitions, which the full committee accepted: (1) Webster's Seventh Collegiate DictionarY, (2) DuPont's Cost Accounting Procedures Manuals (3) OMB Circular A-87, (4) ASTM Standard Terminolo~v of Building Constructions' (5) Public Health Service Facilities Manual. and (6) Indian Health Service Facilities Manual. 6

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However, lack of maintenance can reduce an asset's value by leading to equipment breakdown, premature failure of a build- ing's subsystems, and shortening of the asset's useful service lifetime. Renair is work to restore damaged or worn-out property to a normal operating condition. Repairs are curative, while mainte- nance is preventative. Replacement of an item that is part of the permanent invest- ment of plant and equipment is an exchange or substitution of one fixed asset for another having the capacity to perform the same function. Replacement may arise from obsolescence, cumu- lative effect of wear and tear throughout the anticipated service lifetime, premature service failure, or destruction through ex- posure to fire or other hazard. In contrast to repair, replace- ment generally involves a complete identifiable item of invest- ment (i.e., a major building component or subsystem). When major building subsystems fail, a building owner may sometimes have a choice of repair or replacement of that subsystem. Re- placement is typically funded in maintenance and repair budgets. Deficiencies occur when maintenance and repair tasks are not performed in a timely manner. Deficiencies may or may not have immediately observable physical consequences, but when allowed to accumulate uncorrected, they inevitably lead to deterioration of performance, loss of asset value, or both. An accumulation of such uncorrected or deferred deficiencies is a backlog that represents a liability (in both physical and financial terms) for a building. When a backlog is permitted to exist from year to year, some deficiencies in it may threaten public health or safety or result in major long-term economic losses. Such deficiencies are critical and require urgent attention. Until deficiencies reach this state of urgency, building owners and the public at large may fail to recognize or may choose to ignore the problem, but it remains a problem nevertheless, a problem of growing proportions. Onerations encompass those activities related to a building's normal performance of the functions for which it is used. The costs of utilities, janitorial services, window cleaning, rodent and pest control, and waste management are generally included with- in the scope of operations and are not maintenance. Alterations are work performed to change the interior arrangements or other physical characteristics of an existing facility or installed equipment so that it can be used more effectively for its currently designated purpose or adapted to a new use. Alterations may include work referred to as improve- ment, conversion, remodeling, and modernization but are not maintenance. 7

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In principle, any building owner must establish an annual maintenance and reDair (M&R) budaet.6 An annual maintenance and repair budget will in general be the sum of two components: (1) routine expenditures for maintenance, repairs, and planned replacement and (2) expenditures for correction of deferred deficiencies (i.e., backlog reduction). An M&R budget should not include operations or alterations expenditures. The scale and scope of routine expenditures, the first com- ponent, are related to the physical nature of the inventory of buildings and building uses, including design, age, intensity of use, and climate of the region where a building is located. These factors influence the rate at which a building deteriorates through normal aging and use. - The second component, backlog reduction, is related to the level of funding available for routine maintenance and repair and the effectiveness of the owner's maintenance efforts. If maintenance and repair needs that should be addressed on an ongoing basis are neglected, the backlog of deferred deficiencies grows. When physical consequences of deferred deficiencies lead to more serious repair or replacement needs than might otherwise have been anticipated, the rate of backlog growth may accelerate. Taken together, M&R expenses are an important element of the costs of ownership. Many factors--financial, political, and social as well as technical--influence a building owner's assess- ment of what should be done to control the costs of ownership while assuring that the facilities provide the shelter and services for which they were designed. Reference International City Management Association (ICMA), MIS Recort, Washington, D.C., April 1989. 6 In practice, small-scale property owners or managers may not have a formal budget or may fail even to anticipate the need for M&R expenditures. Public agencies and experienced private property owners will establish formal budgets for such expenditures. 8