ASSET MANAGEMENT COST PLANS

Asset Management Cost Plans

A building is an expensive investment. To maintain its value, together with it’s robustness in keeping the weather out, requires regular maintenance and servicing, in the same way as a motor vehicle needs periodic maintenance.

How do occupiers know when building elements are likely to fail and the likely cost of renewal of that item? Roof failure, for example, which may require complete renewal including the provision of access scaffolding, will be a costly item. Planning the expenditure for this in advance, does not make it any cheaper, but is far less of a shock to the client’s budget than otherwise.

This is the purpose of the Asset Management Cost Plan, which can also be known as a Capex (Capital Expenditure) plan. By instructing a professional property surveyor, a report is produced detailing the anticipated life of the building elements, together with the estimated cost of their renewal.

The preparation of an Asset Management Cost Plan involves a detailed survey of the building in much the same way as a pre-acquisition survey. Measurements need to be taken and data collected, to enable the calculation of quantities of the various elements. In the case of buildings with complex services, this may also require the involvement of specialist services engineers, particularly for lifts and specialist electrical and mechanical services.

Each element is recorded, its remaining life noted and a spreadsheet is prepared with the elements listed in rows and the years in columns. Values are put in the various elements against the year in which they require maintenance for renewal. These values are calculated from detailed dimensions taken on site with a relevant rate applied. Rates are applied which are accessed from a variety of different sources, including historic data, uplifted for inflation and geographical location.

An allowance is made against costs for preliminaries, overheads costs, insurances, welfare and the like which the contractor has to provide. Inflation is included at a rate relevant at the time, usually in the order of 2 ½-3% per annum.

Fees and VAT can be added if required, if there is a sinking fund available, allowances can be made for its inclusion.

Maintenance schedules can be provided for any length of time required, although 10-30 years is usually the norm. Figures calculated for periods over 30 years come less and less accurate due to potential changes in rates of inflation and the like.

Arun Associates would be happy to discuss your requirements at no obligation so please feel free to contact us.

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