After spending a tremendous amount of money in constructing a facility and installing the necessary assets within it, it is but natural for a client to rein in further spending. But if this tight-fistedness extends to facility management in general and maintenance in particular, the client may end up spending on preventable causes in the future.
Life cycle cost analysis is the scientific way to calculate the overall cost of an asset over its lifetime, convince the client about the financial wisdom of regular maintenance, and ensure that every asset is functioning at levels that match the facility’s standards, says M K Padmanabhan, CEO, Faber Sindoori Management Services Pvt Ltd.
Please explain the concept of life cycle cost analysis in FM.
In simple terms, it is the total expenditure required to efficiently maintain a facility in its optimal condition during its active period. There are multiple ways this analysis can be derived. One of the common practices followed in the industry is to assess the productivity of the services and acceptability of such services by the client. Acceptance of the property managed by the client plays an important role.
How is this analysis done?
When a property is installed or commissioned, the services to maintain the same are either awarded to service providers or their own in-house team to be handled effectively. In order to achieve the quality of services within the standards that are acceptable to the client, they need to be evaluated over a period of six months to fix measurable indicators, with an industry guideline period of the facilities within its safety norms. Averaging the cost to keep the property intact within the safety timeline will give us the life cycle cost of the product/facilities.
In most structured proposals, the life cycle cost is included as a measurable indicator for maintaining the property to meet its optimal safety and quality standards for a fixed time period.
In your experience, what are the long-term consequences of some clients choosing to avoid spending on critical needs in the short term?
It is commonly noticed with some clients that they have concerns about spending money to maintain the facilities at their optimum condition, even after investing huge amounts in their desired property. In most cases, such scenarios end up in a disastrous situation where the image of the facilities will get adversely affected and they will later end up spending double the amount to achieve certain quality standards. It is advisable to spend a reasonable amount systematically to keep up the facilities from the beginning as a practice, to ensure that the facility retains its brand all through.
How would you convince a client to not defer regular maintenance of their assets?
Convincing a client to spend to achieve the desired quality standards is a challenging task. Everyone expects the best standards with nominal cost. Here is where the service provider has to play a vital role in convincing the client about the genuine advantages and disadvantages of using certain materials. We should explain clearly with valid references to ensure the safety of the facilities as well as the best industry quality standards throughout.
We need to show the long-term costs of restoring standards after the performance of the facility has deteriorated due to wrong usage of parts, chemicals or consumables during its service period. Change in image creation of the facilities is the best way to convince the client to not defer the planned maintenance of their assets.
When it comes to repairing or replacing an asset, how would you advise a client to choose the right product to ensure longevity and cost efficiency across the life cycle?
This requires thorough analysis by experts where they will be assessing product analysis, client satisfaction over a period of its usage, competency of staff handling the facilities and the environmental conditions suiting to certain modality of facilities. During the product analysis, we need to have a detailed assessment of its failures during usage in other client premises and the optimal safety features. Periodic maintenance history as well as service backup by the competent team is mandatory during assessment.
We also have to study the incidents that have taken place during usage to ensure safety norms are met. In general, if the average repair cost of the assets exceeds 80% of the product cost, it is advisable to replace it with a new one with better features to avoid functional interruption during usage.
How can life cycle assessment of assets, products and equipment help a client meet their sustainability goals?
As long as asset utilisation is effective in meeting the client’s expectations during its optimal life cycle period, it shows adequate sustainability of their investment. If the utilisation is not effective due to its exceeded life cycle period, it is advisable to replace the product with a better technology-driven model to ensure consistency in quality standards, within the client’s expectations.
When a product gets aged, its overall efficiency in outcome gets deteriorated and the same will increase the product retention cost in its functional conditions. Since technology is advancing rapidly, it is strongly recommended to replace the product with better safety and functional features to achieve the desired results.