using total cost of ownership to make decisions league of innovation conference march 13, 2013

Using Total Cost of Ownership To Make Decisions

League of Innovation ConferenceMarch 13, 2013

Greg Nelson Vice President of Administrative Services

San José City College• Founded in 1921

• 10th Oldest Community College in California

• Accredited by the ACCJC/WASC

• Approximately 10k Students

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Accreditation Requirements• Plan to Support the Operations and

Maintenance of New Planned Facilities

• Plan must include actual calculations of Total Cost of Ownership of New Facilities & Equipment

• Plan Also Must Include Planned Maintenance and Maintaining Existing Equipment of Existing Facilities

A 2010 Retrospective

• No Identifiable Methodology• No Preventative Maintenance • No Consistent Data• No Calculation of TCO• No Formalized Process• Placed On Sanctions

Total Cost of Ownership

• Traditionally Used for IT Hardware• Traditionally Used for IT Software• Used in Many Corporate Sectors for

Investment purposes

• What About Higher Education?

What is Your Definition of Total Cost of Ownership?

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TCO Lifecycle

San José City College

Overall:

“…to determine a value that will reflect the true, effective cost of the San José City College facility including planning, design, constructing and equipping of the facility and also the recurring costs to operate the facility over the useful lifespan on the facility.”

College Goals Related to TCO

• 1. Establish an agreed upon systematic procedure for the evaluation of existing and proposed college facilities

• 2. Utilize the concept of to develop a process for the evaluation of facilities that can be integrated into the overall TCO

• 3. Develop a procedure for the assessment of existing and proposed facilities that utilizes existing data from college files

College Goals Related to TCO

• 4. Ensure that the database developed for the procedure is compatible with current state reporting systems

• 5. Design the prototype system in a manner that allows the College to annually update the information in the system and add additional data elements related to planning and budgeting

Building the Foundation

• Formalized Plan and Process• Assessed All Campus Facilities• Instituted Data Collection Process• Established TCO Equation• Link Process to Decision Making

How Did We Approach It?

• Reviewed Revised Master Plan

• Demolishing and New Construction

• What Data Was Present

• How Are We Integrating Preventative Maintenance Issues

• What Was Missing

San José City CollegeTotal Cost of Ownership Process

Existing Facilities

• Approximately 480k Square Feet of Existing Space

• Some Buildings Scheduled for Demolishing• Buildings That Need Non-Aesthetic Upgrades• Newer Buildings Built in Last 10 years• Buildings from 1948 to 2012 • Campus is Land Locked

NEW DEMO PLAN

JAGUARGYM

New Facilities

• Renovate Existing Vo-Tech Facilities • New Media Arts Center• New Kinesiology, Athletics & Wellness Bldg.• Underground Infrastructure Improvements• New Campus Loop Road

San José City CollegeTotal Cost of Ownership Process

Ongoing Costs

• Payroll & Benefits – Custodial, Facilities Maintenance, Grounds, Management & Support Staff For These Employee Groups

• Elevator & Other Service Related Contracts

• Taxes – If Any

Ongoing Costs

• Energy, Water/Sewer, & Gas

• Maintenance Costs i.e. Filters, Bulbs etc.

• Telecommunication Related Costs

Present Value (R & S)• Current value of existing facilities based on Santa

Clara County Assessors Office and Commercial Rates in South bay (Buildings older than 1980 with no improvements value at 35% of replacement value. Buildings after 1980 with renovation, seismic upgrades or new facilities value at 80-90% of replacement value)

• Some Counties or Municipalities Complete Assessed Value for College For Exemption Calculations

• Multi-County Service Areas With Capital Assets Can Vary By County

Present Value (Replacement)• Costs associated with replacing a facility or unit of a

facility at the present fair market value or other third party assessment if fmv not available

• Gilbane Building Company and Foundation for Community Colleges (FUSION Database)

• Gilbane for Continuing and New Facilities

• Foundation for Community Colleges for Buildings Scheduled to be Demolished

TCO Equation• TCO = REPL – RES + E + W+ OM&R + O + P • TCO = Total Cost of Ownership• REPL = Present Value of Capital Replacement Costs• RES = Present Value (resale value, salvage value) • E = Present Value of Energy Costs• W = Present Value of Water Costs• OM&R = Present Value of Operating, Maintenance &

Repairs Costs• O = Present Value of other known costs (contracts for

services)• P = Payroll Costs of Maintenance & Custodial

Personnel

Preventative Maintenance

Which One Are You?

Total Costs of Ownership Calculations Assumptions

Total Gross Square Footage for SJCC Campus 840,528

Total Assignable Square Footage for SJCC Campus 435,108

Number of Custodians 8

Number of Grounds Personnel 2

Number of Maintenance Personnel 7

Number of Managers for above areas 2.25

Total Employee Count 19

Annulaized Cost of Custodians 952,283

Annulaized Costs of Grounds Personnel 164,636

Annualized Costs of Maintenance Personnel 608,786

Annualized Costs of Managers for above areas 246,132

Total Salary & Benefits 1,971,837

Custodians Cost per Square foot $2.19

Maintenance Cost per Square foot $0.72

Grounds Cost per Square Foot of outside space (Total Acreage less Gross Square Footage) $8.65

Managers Cost per Square foot $0.29

Annual Water Usage for May 2011- April 2012 $132,236.29

Cost Per Square Foot of Assignable Space $0.16

Annual Constellation Gas usage for May 2011 - April 2012 $80,168.00

Annual PG&E Gas usage for May 2011 - April 2012 $56,395.00

Cost Per Square Foot of Assignable Space $0.31

Total Gas usage $136,563.00

Annual Constellation Energy usage for May 2011 - April 2012 $271,220.03

Annual PG&E Energy usage for May 2011 - April 2012 $1,011,897.97

Cost Per Square Foot of Assignable Space $2.95

Total Energy usage $1,283,118.00

TCO Calculator SummaryTotal Gross Square Footage 844,285

Total Assignable square footage 441,485 Year 1 Year 5

$543,627,264 $2,526,242,706

Present ValueReplacement Value Per FUSION database 323,978,186$ 269,739,575$ 1,478,705,384$ 58.534%

Total Present Value 323,978,186$ 269,739,575$ 1,478,705,384$ 58.534%

Current Value of Exisiting FacilitySanta Clara County fair market value if sold or suplused216,851,996$ 197,868,482$ 1,034,845,040$ 40.964%

Total Current Value 216,851,996$ 197,868,482$ 1,034,845,040$ 40.964%

EnergyGas 202,208$ 158,802$ 893,829$ 0.035%

Electricity 2,490,641$ 2,077,579$ 11,337,788$ 0.449%

Total Energy Costs 2,692,849$ 2,236,381$ 12,231,617$ 0.484%

Water UsageWater 104,232$ 81,829$ 460,665$ 0.018%

Total Water Usage 104,232$ 81,829$ 460,665$ 0.018%

Operating, Planned Maintenance & Repair CostsOperating 168,100$ 148,100$ 780,500$ 0.031%

Planned Maintenance -$ 3,081,189$ 19,890,175$ 0.787%

Repair Costs 24,000$ -$ 213,573$ 0.008%

Total Oper/Planned Maint/Repairs 192,100$ 3,229,289$ 20,884,248$ 0.827%

Other Known CostsContracts 1,500,000$ 254,807$ 8,783,440$

Total Other Known Cost Totals 1,500,000$ 254,807$ 8,783,440$ 0.348%

Payroll (Salary & Benefits)Custodians 955,685$ 762,549$ 4,244,476$

Grounds 164,636$ 164,636$ 823,180$

Managers 244,843$ 204,237$ 1,114,562$

Maintenance & Support 607,885$ 507,070$ 2,767,189$

Total Payroll & Benefits 1,973,049$ 1,638,492$ 8,949,407$ 0.354%

Total Costs 543,627,264$ 469,926,268$ 2,526,242,706$

REPL-RES+E+W+OMR+O+P =TCO 113,588,421$ 79,311,890$ 495,169,722$

Year 1

Cumulative Costs

Year 5 Total ($) % of Total Cost

Where We Are Now

• Removed From Sanctions• Clear Calculations and Assumptions• Making Informed Decisions• Transparent to All Stakeholders• Proven Process• Good Data Sets and Criteria

Full Documents

• http://www.sjcc.edu/data/files/gallery/FacilitiesFileGallery/20112012_SJCC_Total_Cost_of_Ownership.pdf

It Really Works!!!