LEED Construction Articles
to Cut Costs? 3 Manageable Strategies to Lower Your Facility Budget
really can lower your costs without compromising your business.
like most businesses in America, you probably set a budget for your facility's
operation each year based on the previous year and occasionally plan for large
capital projects, without really measuring how it affects your profitability.
Of course, budgeting for a facility's operating costs is absolutely necessary
- but the method in which you make that budget has serious consequences to your
bottom line. In fact, you may be spending a tremendous amount of money
that could be otherwise spent on your core business or revenue-producing projects.
So what follows are explanations and three manageable strategies that you can
employ to create some extra dollars in your organization.
AND ANALYZE YOUR BUILDING'S ENERGY USE.
Research done by the United
States Department of Energy shows that buildings in the United States utilize
65.2% of the nation's total electricity consumption, and over 36% of the nation's
total primary energy use. In addition, 30% of total U.S. greenhouse gas emissions
come from our facilities - the largest share of the country's emissions - not
cars! With the "Go Green" movement in today's society and the high cost of energy,
you have plenty of reason to suspect that you may be wasting money on your facility.
no secret that energy costs have risen dramatically, and will continue to rise
in the future. The expense will never go completely away, but you can do some
things to help offset it. Money you spend on your utility bills each month should
be separated into two categories: money spent on the energy that your facility
requires, and money spent on the energy that your facility wastes.
On average, the largest energy consumers in a non-manufacturing facility
and, by default, the largest energy wasters are usually the mechanical
systems that provide heating, ventilation, air conditioning (HVAC), and lighting
to the interior of your building (up to 70% of electricity costs and 100% of natural
As HVAC equipment ages, it becomes more inefficient and costs
your organization extra money. For example, a gas boiler installed in 1993 at
a rating of 80% efficiency (for every $1.00 of gas you put into it you receive
$0.80 worth in heating) could have lost 5% efficiency or more today - even if
properly serviced! Plus, HVAC equipment that is over even three years old could
have efficiency ratings well below the high-efficient technology that is available
One simple way to measure and analyze your facility's efficiency
is available online at www.energystar.gov.
This is a great tool produced by the Environmental Protection Agency (EPA) that
allows you to input your facility attributes and the information from your utility
bills. Your facility will receive a rating on a scale of 0-100 to determine where
it stands against other facilities like it in energy efficiency. It will provide
you with a good indication of whether or not you need should proactively invest
in your facility to get the most efficiency out of your systems, and the most
out of your dollars.
A second method of determining where inefficiencies
may exist is by utilizing the knowledge of an authorized Energy Star contractor.
Many of these organizations have experts that will meet with you at your facility
to determine if any potential savings exist, and some will assist you in a simple
energy study free of charge. You may want to check the company's references and
credentials, though - especially for LEED accredited professionals as well as
membership in organizations like the United States Green Building Council (USGBC).
They should be able to identify savings opportunities and their costs, implement
the solution, and measure what the financial impact will be on your organization's
2. MEASURE YOUR CAPITAL AVOIDANCE/LIFE-CYCLE COSTS
American Society for Heating, Refrigeration, and Air Conditioning Engineers (ASHRAE)
publishes a list that states the average life expectancy of mechanical equipment
used to condition the environment within your building. On it, you can find information
that states typical life expectancy for the majority of HVAC equipment to be between
15 and 20 years, if maintained properly. Unfortunately, that means over the life
of an average building, this equipment will have to be replaced at least once,
and you should determine what your annualized cost is to pay for that replacement.
you need to find the total replacement cost of your HVAC system. If available,
find the amount that you paid for the HVAC systems in your facility to be installed.
An educated guess of $7.00-$10.00 per square foot could be used, depending
upon your systems' complexity. Next, determine how much of your system could be
salvaged, such as piping, ductwork, and diffusers (this amount is typically 15%-25%).
Then ask your HVAC expert or contractor to report on the physical state of your
equipment and to make an educated guess as to how much longer it will last you
(keeping the ASHRAE life expectancies and your operating methods in mind). With
this information (adjusting for inflation and salvage value), take your total
replacement cost and divide it by the remaining years of useful life. This will
give you an annualized cost, or deferred liability, that you need to save for
when your equipment needs replacement. A sample looks like this:
cost: $500,000.00 / Life expectancy: 15 years / Age: 5 years /
20% / Inflation rate: 3%
$500,000.00 * 115% * .80 / 10 = $46,000.00 per
When you determine your annual deferred liability, decide
where this money will come from. Consider that saving this money now will avoid
unexpected capital spending in the future. In addition, proactive planning of
major energy consuming equipment allows you to purchase more efficient equipment.
You could also explore different options such as service coverage that includes
repairs and replacement, or look into alternative financing that defers capital
expenses to your operating budget. The point is this: you must plan for the inevitable
to avoid costly interruptions in your business.
3. REVISE YOUR MAINTENANCE
Research done by the U.S. Federal Facilities Council shows that
over the life of a building, the total amount of money put into it consists of
5% for cost of construction, and 95% for cost of ownership. Translation: the
upkeep of your facility is extremely important in saving you money over time -
particularly on your HVAC systems. Quality of maintenance affects several important
factors, including but not limited to: energy usage, extended equipment life,
improved reliability, increased productivity, and less system downtime.
schools of thought exist when it comes to HVAC maintenance methods: (1) spend
little or no money up front, and utilize the money saved on repairs and replacements,
or (2) spend more money annually on your maintenance program to avoid costly repairs,
downtime, and wasted energy. In most cases, strategy number 2 is not the lowest
first cost solution, but proves to be the most proactive and cost-effective solution
Much like buying a new car, HVAC equipment decreases in value
over time, while the operating costs associated with it increase. A proactive
maintenance method will help to offset these changes. In addition, proper preventive
maintenance can cut your system's energy consumption 10-30% per year!
you utilize in-house staff, you must make sure that you properly train and equip
your employees for their jobs. They should have a good working knowledge of your
HVAC systems and how to service them, as well as a relationship with a qualified
service contractor if they encounter problems not able to be handled in-house.
An annual plan should be developed to make sure that no equipment goes overlooked,
and it should be revised at regular intervals to reflect any changes in the facility.
In addition, identify any areas they may be spending a lot of time or money in,
and make sure a plan exists to resolve the problem - because the cost of repair
will only go up over time.
If you depend on outside contractors to take
care of your equipment, you will want to ensure that you receive the right amount
of service and measure its financial impact to your organization. The right amount
of service refers to physically analyzing your systems and operating hours/procedures,
determining exactly what needs to be done, and planning for the future.
Make sure you receive documentation of work that has been completed after every
visit, and have your contractor create a financial analysis to justify the service
and repair work that you are paying for. Outside contractors positively or negatively
affect your operating budget, and how you choose to buy from them can have a big
impact on your bottom line.
This is not intended to be an all-inclusive
strategy to lower your facility costs. However, the three items mentioned, (1)
measure and analyze your energy use, (2) measure your life-cycle costs, and (3)
revise your maintenance methods provide a good foundation for you to begin a proactive,
long-term strategy to get more out of your facility and increase your profitability.
By Michael Piper, Harris Companies (St. Paul, Minnesota)
2, 3, 4 - Energy Information Administration, U.S. Department of Energy
- R.S. Means Costworks 2003
6 - U.S. Federal Facilities
Council Technical Report #142
7 - Louisiana Cooperative
Extension Service 1991
About the Author
This website was created to promote green building
and LEED certification, by Bob Moore Construction. A leading commercial construction
company in Texas since 1946, Bob Moore Construction is a member of the Associated General Contractors of America (AGC) and the Tilt-up Concrete Association (TCA). For more information
about Bob Moore Construction's LEED and green building program, please visit