Challenges in Assessing Total Cost of Ownership in Facilities Management

Part of the problem with managing total cost of ownership in facilities management derives from the variable ways in which organizations may measure total cost of ownership. Does it include all maintenance costs? Yes, but what happens when the facility doesn’t know those costs? What about energy costs within specific assets, such as older HVAC units? Everything adds up; the path to measuring total cost of ownership is not necessarily clear. Major challenges remain. At the same time, the industry is working to develop new standards for its assessment and management. According to the APPA, assessing “Total Cost of Ownership (TCO) provides a comprehensive approach to balancing both financial management and facilities management of an organization.  While TCO has long been a vision, few have implemented the concept.  A TCO standard, will provide guidance needed so that institutions can develop policy supporting a more holistic approach to the financial management of assets.  Since facility owners finance, build, operate, maintain, and ultimately dispose of their facilities; a TCO approach is a natural and critical step for sound fiscal management.  A trusted standard will provide a transparent, holistic, and efficient approach to financial management, asset management, and resource allocation.”

Of course, this does little good for facilities with limited experience and resources. So, the next best approach is to understand what problems exist in assessing total cost of ownership in the first place. 

Limited Visibility into the Recurring Maintenance Costs

A common challenge in assessing the total cost of ownership in facilities management lies within limited visibility into the recurring maintenance costs for each asset. Every repair, component, and impact on guest experiences adds to the total cost of ownership. For example, if a customer chooses to never return to your facility due to an uncomfortable indoor environment following an HVAC system breakdown, that lost customer effectively adds to the total cost of ownership because facilities management was unable to serve its true purpose for that event.

Multiple Departments May Contribute to Higher or Lower Total Cost of Ownership in Facilities Management

Another problem with assessing total cost of ownership revolves around multiple departments that may contribute to total cost of ownership. For example, custodial departments may purchase supplies to clean customer-facing portions of facility assets. However, those costs are not necessarily added into that asset’s total cost of ownership from a facilities management perspective, explains FacilitiesNet. The reverse may apply as well.

Failure to Track and Analyze Data Regarding Asset Condition Leads to Inaccuracies

When an asset begins to sell or otherwise needs maintenance, and failure to track and analyze such data may lead to inaccuracies regarding the total cost of ownership. For example, a proactive approach to total cost of ownership must consider the expected maintenance and facilities spend for maintaining such assets over a given time. In a sense, this goes back to improved budgeting and proactive, preventive maintenance strategies. In addition, the use of systems to track and manage performance themselves also contribute to the total cost of ownership of facilities management processes. It becomes a self-propagating cycle that adds to total cost of ownership.

Poorly Field Service Vetting Processes May Lead to Higher Maintenance Costs

The total cost of ownership in facilities management is further prone to problems and increases when maintenance and activities result in the need for “rework.” Consider this; poorly vetted field service vendors may lack the proper level of experience and skill to make necessary repairs to an HVAC unit. Without that level of skill already vetted and considered, the total cost of maintaining that asset is likely to increase. The irony is that with advanced systems and data-driven capabilities powered by smart analytics and integrated facilities management protocols, facility managers should be able to ensure that the right technician arrives at the right time, reducing disruption and helping to maintain control over total cost of ownership and facilities management.

Reduce Total Cost of Ownership in Facilities Management with Integrated Solutions

The path toward reductions within the total cost of ownership in facilities management is laden with risk. Failure to consider all aspects digital transformation within facilities management will counteract the need for assessing total comps of ownership in the first place. Total cost of ownership will increase at an exponential rate. Fortunately, facility managers that take the time to consider working with an established facilities services partner can help maintain increased transparency into the total cost of ownership in facilities management and keep it in check.

J Glasglow, MCR

J Glasglow, MCR

As Senior Vice President of Solutions Development for Cushman & Wakefield Global Occupier Services, J Glasgow partners with corporate occupiers of real estate to develop integrated real estate, facility, project and operational management programs designed to improve processes, manage risk while significantly reducing total cost of occupancy. J’s background includes more than 20 years of experience in diverse commercial and corporate real estate disciplines such as, account leadership, and management, facility and operational planning, project management and strategic portfolio optimization. J has advised global clients from a broad range of market sectors encompassing financial, insurance, healthcare, bio-science, engineering, and consumer goods companies that encompass, office, industrial and manufacturing portfolios. With a diverse background in corporate real estate planning, facility management and project management, J has leveraged savings for his clients of over $313 million dollars while aligning with their overall business strategy and mission.