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Project Change Orders

Project Change Orders received after accepting a contractors proposal should not be a surprise. Buyers should suspect alterations that promise immediate cash savings. Many General Contractors and Architects believe lowest price solutions are always at the forefront of clients interest.

CRS Roof Consultants analyzes several cost, price and expenses variables in accordance with real value over the asset life-cycle and explains where trade-offs affect the roof ROI.

A general contractor recently convinced an out-of-town property investor that a small alteration to a roof bid specification previously awarded would save investor money. On the surface, the recommended change in materials would reduce material cost by five percent (5%). Under analysis, we discovered the change required manufacturers approval and would affect the roof serviceable life of the roof system installation.

Projected TCO Warranty Savings (5%) Annualized TCO Adjusted TCO
800,000 20 Years - 40,000 800,000
755,000 15 Years 45,000 50,334 1,006,670

CRS Roof Consultants found a material substitution would alter the manufacturer's warranty with an associated impact on Serviceable Life and Total Cost of Ownership (TCO).

The analysis required we establish a base Annualized Cost of Ownership for each of the two waterproof systems, divide the two price tags by their respective Warranty Years, add the expense of extending the lower life roof to the original warranty period dividing the total by that original service period.

Material Change Resulted in:

  • A 25% Decrease in Total Cost of Ownership (TCO)
  • A $206,670 Increase in Out-of-Pocket Expenses

Investment Decision
If the property was going on the block to be sold, reducing immediate expense may very well calculate as a sound ROI decision. The important question is how much of the rooftop waterproof system investment can be recovered during a property's sale or through depreciation. One thing to consider is that buyers, through due diligence discovery will make similar calculations.

If property is going to be held for long term investment, the Annualized TCO, quality of materials and proficiency of installation are key factors in maximizing ROI and reducing maintenance expense.

 

Life-Cycle Cost Model
ASTM International  (a standards organization) publishes a Present Value Financial Forecast Model for commercial buildings and building envelope systems.

CRS Consultants prepared a Annual Cost Model with present day pricing data to compare three different approaches to roof systems maintenance programs. We also published an analysis on Roof Asset Management to help Investors and Property Managers forecast the funding requirements for Commercial Roof Assets.

©2008 Copyright. All rights reserved. CRS Roof Consultants, LLC
1361 Winchester Blvd, Suite 207
San Jose, CA 95128
(408) 871-9296 • (408) 871-9295 fax
Member of Silicon Valley BOMA