Kenny Reed, CEM, LEED AP, CxAPCommissioning Project Manager, AssociateM.E. GROUP

New Building Commissioning and ROI

AIA Quality Assurance

The Building Commissioning Association is a Registered Provider with The American Institute of Architects Continuing Education Systems (AIA/CES). Credit(s) earned on completion of this program will be reported to AIA/CES for AIA members. Certificates of Completion for both AIA members and non-AIA members are available upon request.

This program is registered with AIA/CES for continuing professional education. As such, it does not include content that may be deemed or construed to be an approval or endorsement by the AIA of any material of construction or any method or manner of handling, using, distributing, or dealing in any material or product.

Questions related to specific materials, methods, and services will be addressed at the conclusion of this presentation.

In today’s economy, building owners are asking questions about building commissioning that go further than just the initial costs of commissioning services. Facility executives now, more so than ever before, want to know about the ROI of building commissioning. This session will help attendees understand and communicate the financial imperatives of performing commissioning in today’s economy.

Course Description

At the end of this session, participants will be able to:

1. Learn to evaluate new building commissioning issues log and existing building facility improvement measures to develop ROI.

2. Learn to identify different costs and savings when evaluating ROI.

3. Learn how, using real-world examples, to build a viable roadmap in your facility for EBCx and sell it to the C-Suite.

4. Learn how to generate your EBCx story so that it has high impact to the CFO.

Learning Objectives

Commissioning and ROI

Why is it important?• Decision Metric for Executives and Board of

Directors○Operations budgets are shrinking○Cost of business is increasing○Necessity to closely examine purchasing options○ROI and focus on bottom line is here to stay

Cx and ROI Studies

Various Studies over the last 10 years• CACx – white papers• PECI Resources• Better Bricks – Case Studies• LBL Cx Study by Evan Mills• Based on surveys and project analysis• Focus on simple payback – not ROI

New Building Cx Simple Payback

Payback = Cost of Cx / First Year Avoided Costs

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*Healthcare *K-12 Schools Elementary School *New Building Average

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Building Type*From LBL Study

ROI and Simple Payback

Most attractive business decision• ROI – calculated from life cycle costs

○Based on 20 year life cycle○More complicated projects○Considers benefits over the assets life

• Simple Payback○Less expensive, simple projects○How long until the project “pays back”

• Buildings are long term projects○Heavily affected by the commissioning process.

ROI Explained

Calculating ROI• Often calculated as 1/(simple payback)• Additional ways

○20 year life○ROI = (avoided costs – cx cost)/cx cost

What about my projects?

Developing the business case• Review project issues log• Define benefit log costs and savings • Develop project specific payback and ROI

○Compare to Studies

Determining ROI

Issues Log Analysis• What needs to be documented?

○Costs/Benefits of issue resolution○Role of commissioning

• How do we identify costs and savings?○Energy and non-energy benefits○ Identify best and worst case scenario

Issue Analysis

Documenting Issues• Issue Description• Life of the issue• Role of commissioning

○ Identified vs. not identified through Commissioning

○Team members involved• Document Costs

○Avoided costs

Avoided Costs

• Issue Resolution Costs○Repair costs○Replacement costs○ Installation costs○Professional costs

• Issue Effect costs○Energy costs○Maintenance costs○Depreciation costs○Revenue loss costs○Productivity loss costs

K-8 School ROI

General Building Information• 63,000 SF Elementary / Middle School• Chinle, AZ• Construction Cost - $14.7 million• Opened - August 2011• Commissioning Cost - $126,900• Included design phase commissioning

K-8 School ROI

Cost Calculation Basis Cost Factor Value (Units)Contractor (O&M) Labor $50/hrProfessional Labor $125/hrProductivity Loss 2%/employee/dayEmployee Labor $20/hrEmployee work day 8 hr/dayTime Period for recurringcosts

20 (years)

K-8 School ROI

Example Issue Analysis • VAV minimums where designed at 70% of

maximum flow per mechanical schedule.• ASHRAE 62.1 minimums could be maintained

at 20% of total flow

Issue Analysis Continued

Best and worst case scenario• Best case

○ Issue is resolved through an RFI during balancing○Adds 10 hrs engineering time to project○$1,250 – one time cost

• Worst case○Results in comfort complaints during school year○Maintenance time to answer comfort calls○Additional energy costs○$8,922 annually

K-8 School ROI

Total Avoided Costs• First year avoided costs - $68,181• Recurring avoided costs - $44,055• Annualized ROI – 30.6%• Simple Payback – 1.9

Healthcare ROI

General Building Information• 115,800 SF Addition• Bellevue, NE• Completed - February 2011• Construction Cost - $23 Million• Commissioning Cost - $45,000• Commissioning started during construction

Healthcare ROI

Cost Calculation Basis

Cost Factor Value (Units)Contractor (O&M) Labor $50/hrProfessional Labor $125/hrProductivity Loss 2%/employee/dayEmployee Labor $75/hrEmployee work day 8 hr/dayTime Period for recurringcosts

20 (years)

Healthcare ROI

Total Avoided Costs• First year avoided costs - $39,587• Recurring avoided costs - $6,798• Annualized ROI – 13.7%• Simple Payback – 1.4

ROI and Case Study Comparison

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ROI Case Challenges

Estimating costs and savings• Keep it conservative• Ask the owner

○What is their preferred metric- ROI or simple payback- Each owner is different

Conclusions

New Building Commissioning ROI • What this means for the commissioning

industry○ Improve the financial case for commissioning○Higher quality services○Showcase accurate owner benefits – do it right

Kenny.reed@megroup.com

800-200-9160