|
|
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.
|
|
|
