Appx__C_-_DOI_CRV__DM__FCI_and_Estimating_Guidance_060608.pdf

05/30/08

Department of the Interior

Policy on Deferred Maintenance, Current Replacement Value and Facility Condition Index in Life-Cycle Cost Management

I. Purpose

The purpose of this Policy is to supplement the direction provided in the Department of the Interior (DOI) Site-Specific Asset Business Plan (ABP) Guidance1 by providing guidance to standardize the methodology used in measuring the condition of DOI’s asset portfolio reported in the Federal Real Property Profile (FRPP)2. This Policy also supports previous guidance and tools issued to implement the DOI Asset Management Plan (AMP) and Executive Order 13327 (EO) on Federal Real Property Asset Management. (See Appendix 1 of the list of Departmental asset management guidance and tools)

Using Facility Condition Index (FCI), an accepted industry metric for determining the relative condition of constructed assets at a specific point in time, and the other performance metrics such as the Asset Priority Index (API), the Facility Utilization Index (FUI), and Operations and Maintenance (O&M) costs help asset managers make informed investment decisions that drive budget prioritization and the distribution of resources. This Policy is focused on standardizing the basic elements used to assess the condition of constructed asset investments and for estimating the current replacement value (CRV) on an asset and completing deferred maintenance (DM) work that was not performed when it should have been or when it was scheduled. DM divided by CRV provides the FCI. In no instance is FCI less than zero or greater than 1.0.

In calculating FCI, only those asset components and substructures that directly contribute to the integrity and the functionality of the constructed asset as planned and designed are to be factored into FCI. The inclusion of asset components, such as exhibits, landscapes, appliances, other types of personal property, among others, in calculating the CRV and DM costs for buildings and structures skews the FCI of constructed assets so that it may not reflect their true condition. Furthermore, cultural and maintained landscapes, and maintained archeological sites are not reported into the FRPP and do not use FCI to measure condition of these assets. The intent of the EO was to capture information in the FRPP on constructed assets and lands improved as result of constructed assets.

Though exhibits and appliances are not to be factored in determining the FCI for constructed assets, they are to be tracked separately to monitor their condition. To help ensure DOI managers in the field calculate and apply FCI properly and consistently, Appendix 2 provides supplemental guidance on identifying the types of assets and component parts that are to be considered when calculating the FCI for a constructed asset.

1 An ABP provides facility and regional managers with a micro-level view of a site’s assets. The ABP projects a 5 to 10-year snapshot of the assets using the performance metrics of the Asset Priority Index (API), the Facility Condition Index (FCI), Facility Utilization Index (FUI), and Operations and Maintenance (O&M) costs to help make informed investment decisions that drive budget distribution.

2 The General Services Administration defines the FRPP as the "single, comprehensive, and descriptive database of all real property under the custody and control of all executive branch agencies, except when otherwise required for reasons of national security," in accordance with Executive Order 13327.

https://www.realpropertyprofile.gov/Default.aspx?module=Login

Only constructed assets that clearly meet the definition of one of the FRPP predominant use categories and for which CRV and DM estimates result in an accurate and valid assessment of an asset’s condition will be reported to FRPP. Historic landscapes, cultural landscapes, and maintained archeological sites, for example, do not meet these requirements and will not be reported to FRPP.

The Policy identifies common, industry standard-based methodologies for calculating both CRV and DM for:

• Non-heritage buildings;

• Non-heritage structures3;

• Heritage buildings and structures4;

• Road assets; and

• Dams, water distribution systems, and power assets.

All bureaus are required to use these methodologies to estimate CRV and DM. Industry standard estimating practice and unit cost data will be used in conjunction with vendor quotes for materials not included in industry standard unit cost data as defined by this policy.

This Policy will:

• Provide for a consistent methodology in estimating CRV and DM costs across the

Department;

• Enable comparison of asset condition (FCI) across the entire DOI portfolio;

• Support the process used to allocate funds to improve asset condition; and

• Provide consistency in reporting deferred maintenance in the financial statement and

Condition Index value and the Value of assets to the FRPP.

A glossary of terms used in this Policy is provided in Appendix 3.

II. Structure of this Policy

This Policy is comprised of the following components:

I. Purpose II. Structure of the Policy III. Defining Deferred Maintenance IV. Defining the Current Replacement Value V. Calculating CRV and DM VI. Asset Condition VII. Systems Support VIII. Appendices

3 Does not include road assets, and dams, water distribution systems, and power assets.

4 Does not include road assets, and dams, water distribution systems, and power assets.

III. Defining Deferred Maintenance

Deferred maintenance (DM), which is used with CRV to calculate the FCI of an asset, is maintenance that was not performed when it should have been or when it was scheduled and which, therefore, was put off or delayed for a future period.5 The DM estimates used to calculate FCI should not be used for program formulation. Estimates for actual project work must incorporate a higher level of detail and accuracy than the DM and CRV estimates used to calculate FCI provide. Estimates for actual project cost should achieve a Class A or Class B estimate prior to inclusion of the project in a budget request.

If maintenance deficiencies are observed by skilled professionals in the course of condition assessments, and in their judgment the deficiencies or needs have existed for some time, the repairs are deferred maintenance. An example of this might be a roof that needs repairs due to missing shingles. Evidence such as deteriorated roof sheathing or water damage to structural members provides justification for classification of the work as deferred maintenance. (See Appendix 2 for supplemental guidance on identifying the types of assets that must report data to FRPP and the component parts that are to be considered when calculating the FCI for those constructed assets.)

Similar situations arise for Heritage Assets. For instance, the roof of a Civilian Conservation Corps (CCC) era cabin may need replacement. The need for a new roof and the associated damage observed classify this as deferred maintenance. However, in this case, the replacement materials needed would have to be historically accurate materials applied using historically accurate construction methods (Figure 1).

Figure 1. A heritage asset will require historically accurate materials for repair and maintenance in order to maintain the intrinsic value of the asset.

Determining the deferred maintenance for the Adams House in Utah, for example, which is being restored as a visitor center for tourists, will require consideration of maintaining historic

5 Statement of Federal Financial Accounting Standards (SSFAS No. 6) definition.

integrity at the detail level while accommodating potentially heavy visitor traffic and incorporating safety considerations.

Figure 3 Adams House in Utah

(BLM heritage asset)

Most assets will have deferred maintenance determined as a result of scheduled work not being completed as planned. For instance, if a generator was due to have bearings replaced on a three-year schedule and a work order with a target start date was created in the facility maintenance management system, but the work was not completed as planned due to funding, or other constraints, the work should be considered deferred. In some cases, measurements of technical specifications such as remaining material thickness or variance exceeding allowed tolerances can be considered justification for classification of the work as deferred maintenance.

(See Appendix 4 for a general description of condition assessments performed in the Department of the Interior).

DM is maintenance work that is deferred to a future budget cycle, or postponed, until funds become available. The failure to perform needed inspections, lubrication, repair, maintenance, and renewal through normal maintenance practice results in deferred maintenance. The under-budgeting of regular maintenance accumulates into a number of familiar needs: roof repairs, masonry repointing, and faulty heating, ventilation, and air conditioning (HVAC)6 and control systems. These are familiar examples that accumulate into problems requiring major funding to correct.

The DOI standard work types include facility maintenance with subdivisions for corrective, recurring, component renewal, demolition, rehabilitation, and replacement. If the work is not done while the work order is classified as facility maintenance, it may become deferred maintenance based on the passage of the target start date, or on the recommendation of qualified condition assessment personnel. The categories of maintenance are as follows:

6 HVAC systems control the ambient environment (temperature, humidity, air flow, and air filtering) and must be planned for and operated along with other data center components such as computing hardware, cabling, data storage, fire protection, physical security systems and power.

Work Type Code

Type of Maintenance Definition

DMCM Corrective Maintenance

Work to restore a damaged, broken, or worn-out asset, asset component, or item of equipment to normal operating condition.

DMRM Recurring Maintenance

Planned preventive maintenance activity that recurs on a periodic and scheduled cycle of greater than 1 year, but less than 10 years that was not completed as scheduled.

DMCR Component Renewal

Planned preventive maintenance activity that recurs on a periodic and scheduled cycle greater than 10 years that was not completed as scheduled.

DMDE Demolition Dismantling and removal, or the surplus of a deteriorated or otherwise unneeded asset or item of equipment, including necessary clean-up work.

DMRH Rehabilitation Renovation of an existing asset or any of its components in order to restore and/or extend the life of the asset. Because there is no expansion or change of function the work primarily addresses deferred maintenance.

DMRP Replacement Substitution or exchange of one existing asset, asset component, or item of fixed, in-place equipment for another having the capacity to perform the same function.

IV. Defining Current Replacement Value

Estimates for the CRV of assets, including those calculated for heritage assets, are used to calculate the FCI, which is an indicator of the asset’s condition and serves as a performance measure for condition improvement. In addition, CRV is reported to FRPP as the value of the asset.

The CRV estimates should not be used for any other purpose than to calculate FCI and reporting data to FRPP (i.e., not for program or budget formulation, project level cost estimates, appraisal value, reproduction value, acquisition costs for capitalization and depreciation, etc.).7 Estimates for the actual replacement of individual facilities and projects must incorporate a higher level of detail and accuracy than the CRV estimates used to calculate FCI provide.

Estimates for actual replacement cost or project cost should achieve a Class A or Class B estimate prior to the inclusion of a project in a budget request. Though in most instances there

7 As noted in the Federal Real Property Council Real Property Inventory - User Guidance for FY 2007 Reporting, Plant Replacement Value (PRV). which is the same as CRV is used for reporting the “value” of an asset in the Federal Real Property Profile and is defined as the cost of replacing the existing constructed asset at today’s standards, should be a relationship between the CRV of an asset and the cost identified to replace an asset in a maintenance budgeting and planning system

CRV is defined as the standard industry cost and engineering estimate of materials, supplies, and labor required to replace a facility or item of equipment at its existing size and functional capability, and to meet applicable regulatory codes. When estimating CRV and DM, it should be assumed that code compliant materials and systems will be used to replace the existing asset. CRV is to be estimated for reconstructing an asset as it currently exits, without modifications or improvements. (See Appendix 2 for supplemental guidance on identifying the types of assets that must report data to FRPP and the component parts that are to be considered when calculating the FCI for these constructed assets.)

A. CRV for Non-Heritage Assets CRV for non-heritage assets includes all the costs necessary to reconstruct an asset as it currently exists, without modification or improvements. The cost of planning/design, and project management must be included in the CRV. Special study costs, such as geotechnical, hydraulic, and hydrologic, permits, and applicable taxes and special assessments should also be included in the value. Indirect costs, which include salaries and benefits for government employees, are covered by annual appropriations and will not be included in CRV estimates.

The CRV should only be used as the denominator in the FCI for estimating the condition index of the asset. The CRV for condition assessment purposes is a Class “C” estimate8. In the case of a building, a Class "C" estimate is an approximation of the construction cost based on the cost per square foot of a similar constructed building.

In the event that an asset is to be replaced, a more detailed cost estimate to support the maintenance budgeting and planning system, including cost estimates to support the contracting/ bidding process must be completed. This estimate should include a detailed time and materials estimate to replace the asset and should be of sufficient detail to insure that appropriate funding is available for completion of the project.

B. CRV for Heritage Assets and Multi-Use Assets9 Only constructed assets that clearly meet the definition of one of the FRPP predominant use categories and for which CRV and DM estimates result in an accurate and valid assessment of an asset’s condition will be reported to FRPP. Historic landscapes, cultural landscapes, and maintained archeological sites, for example, do not meet these requirements and will not be reported to FRPP. Calculating CRV estimates for them and like assets is not required.

Heritage buildings and structures, including multi-use assets, can be unique, irreplaceable, and have intrinsic value beyond the basic cost of the materials and the labor used to build them.

8 Class “C” estimate is an approximation based on the square foot costs of similar construction. It does not include the cost of support utilities and structures, such as water and electrical utilities or sidewalks and conduits.

9 Multi-Use Assets meet the definition of a heritage asset but currently have a predominant use that could be accomplished by a non-heritage asset.

They are properties valued because of their historical or cultural associations and/or as sources of historical or scientific information. Heritage assets, for the purposes of this policy, are limited to historic buildings and structures because they are the only assets that are reported to FRPP and that must have a CRV and condition index.

It is Department of the Interior policy to manage heritage assets in ways that preserve their cultural, historical, and scientific values. This policy is mandated by Federal laws, such as the National Historic Preservation Act (NHPA) and the Archaeological Resources Protection Act (ARPA), and executive orders such as EO 13287 “Preserve America” In addition, the Secretary of the Interior’s Standards for the Treatment of Historic Properties provide guidance on the preservation and protection of historic buildings and structures. These statutes, Executive Orders, and Standards identify the Federal Government’s lead role in preserving, protecting, maintaining, and using its historic properties.

For historic buildings and structures, a CRV based on standard industry construction costs may not accurately reflect the cost of replacing the asset using historically accurate materials and construction techniques. A replacement-in-kind CRV estimate—one that captures the costs associated with using historically accurate construction techniques and materials— may be needed to create an accurate CRV estimate.

Replacement-in-kind costs may not be commonly found in industry standards and often must be determined on a case-by-case basis utilizing the expertise of cultural resource professionals familiar with the heritage asset being evaluated. These experts include architects, archaeologists, architectural historians, and tradesmen expert in historic materials and their application. Planning/design, pre-and post-rehabilitation documentation, project management, special studies (e.g., historic preservation compliance, geothermal, hydrologic), permits, and special assessments should be included in the CRV. Indirect costs, which include salaries and benefits for government employees, are covered by annual appropriations and will not be added to estimated costs for CRV and DM, nor will they be included in the numbers reported to the Department for the annual DM display in the Department’s financial statement or any bureau financial statement.

An example referenced in Section III (Defining Deferred Maintenance) of this policy is pertinent here, which involves replacing the roof of a Civilian Conservation Corps cabin. Once the maintenance is defined, the needed materials would be identified by a professional with historical or cultural resources expertise and the items secured from an appropriate vendor.

The roof is repaired in a manner consistent with roofing techniques of the era.

V. Calculating CRV and DM

CRV and DM estimates are to be calculated using the methodologies specified in this Policy for:

A. Non-heritage buildings;

B. Non-heritage structures;

C. Heritage buildings and structures;

D. Road assets; and

E. Dams, water distribution systems, and power assets.

Consistent application of the following methodologies defined in this section will ensure consistency in resultant FCI values across the DOI portfolio. All bureaus will use the CRV and DM methodology as set forth in this section. The methodology described in this Section will be used to create CRV and DM estimates for buildings and structural assets. The CRV and DM for these assets will be calculated using the same factors from the same industry standard cost databases, when such cost data is available. Without exception, the resultant value for FCI will be between 0 and 1.0.

Indirect costs, which include salaries and benefits for government employees, are covered by annual appropriations and will not be added to estimated costs for CRV and DM, nor will they be included in the numbers reported to the Department for the annual DM display in the Department’s financial statement or any bureau financial statement.

Consistent application of CRV and DM calculation methodology across bureaus is the Department’s primary goal. Realizing this goal will lead to valid comparison of Facility Condition Index (FCI) for assets in the Department’s portfolio.

A. Non Heritage Building CRV and DM Estimate Labor: Labor rates will include the average percentage contractor markups applied to base labor rates provided on the back page (table “Installing Contractor’s Overhead and Profit”) of the back of the RS Means Building Construction Cost Data guide. Bare labor costs will not be used.

Materials: Use the total cost amount (column titled “Total including O&P”) from the most recently published version of the RS Means Building Construction Cost Guide, the most recently published version of the RS Means Facilities Construction Cost Data guide, or the most recently published version of any cost guide available in the suite of RS Means cost guides. Bare materials costs will not be used for estimating.

Materials Not Covered by RS Means: If RS Means does not provide cost data for a specific material item, a price quote for that item will be obtained from a vendor or acquisition costs from recent contracts can be used to estimate the cost of the item. Labor installation costs will be estimated using the most recently published version of the RS Means Facilities Construction Cost Data guide or the most recently published version of any cost guide available in the suite of RS Means cost guides. If installation costs for non-RS Means materials do not exist, data provided by external or internal consultants can provide rates for the estimate. The source of these estimates and their supporting assumptions must be documented.

Fees and Markups: Apply the percentages below, which were taken from the most recently published version (2007) of the RS Means Square Foot Costs guide and the most recently published version (2008) of the RS Means Facilities Construction Cost Data guide. The appropriate percentage should be applied based upon anticipated project cost. RS Means cost guides were used to select the below percentages.

Item

DM Project or CRV Costs < $1,000,000

DM Project or CRV Costs > $1,000,000

General Requirements (G) 15% 10% Overhead (O) 15% 10%

Profit (P) 10% 10% Design Fee (D) 15% 10%

Estimating Contingency (C) 20% 15%

CRV Estimate (CRV) Calculated As:

In the below formula, the capital letters correspond to the items in the above table. The percentages shown in the table should be summed and used as decimals.

CRV is the sum of the following items:

(Labor + Materials) multiplied by LAF (local adjustment factor) + (Labor + Materials) multiplied by (G+O+P) + {(Labor + Materials) + (Labor + Materials) multiplied by (G+O+P)} multiplied by C + {(Labor + Materials) + (Labor + Materials) multiplied by (G+O+P)} multiplied by D

= CRV Estimate Total

Note that the same equation is used to create a DM estimate.

B. Non-Heritage Structure CRV and DM Estimate The methodology for creating structure CRV and DM estimates is the same as buildings and structures with the following exceptions:

1) Heritage and multi-use building and structural assets, roads, dams, power assets, and water distribution systems have their own asset specific methodologies for creating CRV estimates (see Sub-Section C, D and E below).

2) If RS Means does not provide cost data for a specific equipment item, such as a turbine or pump, a price quote for any equipment that exceeds $5,000 in cost will be obtained from a vendor. Labor installation costs will be estimated using the most recently published version of the suite of RS Means cost guides.

3) All equipment quotes for equipment that exceeds $5,000 in cost must be documented. The vendor name, location, and the date the quote was received will be documented. The name of the equipment and its identifying number (order or serial number) will also be recorded along with a brief written description of the equipment.

C. Heritage Asset and Multi-Use Asset CRV and DM Estimate The CRV and DM estimates for these assets will be computed by using the methodology hierarchy below. If data is unavailable to calculate the CRV at the first hierarchal tier, the second tier will be used and then the third. The three tiers may be used in combination as required.

The tiers will be used for historic structures and buildings, including their component features, to ensure consistent and repeatable CRV and DM estimates and conformance with historic preservation standards. The costs of supplemental services, pre-design, design, management, special studies, and historically accurate materials and workmanship must be included. All estimates should be coordinated with heritage asset and cultural resource staff.

Tier I: Use the RS Means standard industry costs with added cost factors, if necessary, to estimate CRV and DM. The added factors and the assumptions underlying them should address the specific needs of the asset and be clearly documented in the estimate.

Tier II: Use cultural resource professionals to estimate the CRV and DM. These professionals include historical architects, archeologists, architectural conservators, and craftsmen expert in historically accurate materials and workmanship. All estimating and material cost assumptions must be documented in the estimate.

Tier III: Use cost quotes from contractors with expertise in historically accurate materials and workmanship required to estimate CRV and DM. All estimating and material cost assumptions must be documented in the estimate.

D. Road CRV and DM Estimate To calculate CRV and DM for a road, and to identify the correct condition assessment methodology, the road must first be assigned to the appropriate DOI Road Band. The DOI Road Band system is comprised of five functional tiers; each tier has minimum requirements for calculating CRV and DM estimates and for performing condition assessments. The DOI Road Band functional tiers are defined in the table below.

DOI Road Band

Road Band Description

Tier I Parkways and City Streets. Parkways are restricted access facilities and serve high volumes of traffic in an urban area. City Streets are extensions of a municipal or urban street system within a DOI managed system.

Tier II Principal roads that constitute the main public access route to and within parks, refuges, reservations, recreation areas, or other DOI managed lands or facilities.

Tier III Connector roads that provide access within a park, refuge, reservation, or parcel of DOI managed lands.

Tier IV Administrative, restricted, and special purpose roads that provide access to administrative facilities, campgrounds, concessionaire facilities, picnic areas, or other special interest areas within a park, refuge, reservation, or parcel of DOI managed lands.

DOI Road Band Road Band Description

Tier V Primitive roads provide access to remote, primitive, and undeveloped areas on often rough or difficult to pass tracks.

Once a road is assigned to an appropriate tier the policy in this section is used to identify the minimum requirements for calculating CRV and DM estimates and performing condition assessments.

Condition Assessment Requirements Tier I through Tier II (Parkways and City Streets and Principal Roads)

• Condition is assessed for equipment associated with the road. Equipment may include pavement10, drainage, and roadside appurtenances such as signs, guardrails, retaining walls, low water crossings, gates, cattle guards, and culverts, among others.

• Each equipment type is assessed individually and the assessment method and guidance used are defined and documented for each type of equipment.

• Road pavement/surface assessment must use industry standard methods. Industry standard methods are defined as any method approved or implemented by the Federal Highway Administration (FHWA), such as the Pavement Condition Rating system, or any other published and widely used systems such as the University of Wisconsin PASER11 system, the Metropolitan Transportation Commission pavement condition index system, and the MicroPAVER™ rating system developed by the US Army Corps of Engineers.

Tier III through Tier V (Connector Roads and Administrative, Restricted, and Special Purpose Roads)

• Condition assessment may be limited to an assessment of the pavement/surface as a surrogate for the entire asset.

• If individual equipment types are included in the condition assessment, they may be considered in the aggregate, rather than being assessed and documented individually.

• Bureaus may define appropriate pavement/surface condition assessment methods provided each method is reviewed and approved by FHWA for adequacy and consistency. At a minimum, all methods will be based upon ratings derived from the observed severity and extent of pavement distress12.

10 Pavement is defined as any structural or surface course placed in layers above a prepared subgrade. Pavements range from asphalt, concrete, surface treated earth roads and stabilized materials to loose surfaces such as earth, shell, crushed stone, and bank run gravel.

11 PASER is the Pavement Surface Evaluation and Rating. It is applicable to native, gravel, asphalt, or concrete surfaces and links type, number and severity of defects with the type of maintenance treatment required.

12 Distress is cracking, rutting, and roughness

All Tiers

• Bridge and tunnel condition assessment methods will comply with federal requirements defined by the National Bridge Inspection Standards (23 CFR 650.303 (c)) and the American Association of State Highway and Transportation Officials Manual for Condition Evaluation of Bridges (AASHTO MCEB–2). Exceptions can be made for bridges that no longer carry vehicle loads.

DM Requirements All Tiers

• All DM is identified based upon direct observation of distress per the condition assessment requirements specified for each roadway tier.

• The DM estimate is the cost of work necessary to correct the observed distress and return the facility to good condition. DM does not include any improvement to the original function or capacity of the asset.

• DM estimates are based upon unit costs for various types of repair and construction activities. Unit costs are expressed in common units of measure ($/square ft, $/each, $/linear ft, etc.) and are derived for common roadway repair activities such as paving, culvert replacement, surface treatment, gravel layer placement, and so forth.

• All unit costs are based upon national averages. These averages will be adjusted by the Location Adjustment Factor defined on page fifteen of this policy to account for local cost variance.

Tier I (Parkways and City Streets)

• Unit costs for estimating DM are based upon data from completed road and bridge projects.

Analysis of FHWA project costs and/or bureau project costs is performed to generate unit costs. Procedures used to generate the unit costs must be documented.

• Unit costs include adjustments to account for the high cost of working in an urban environment. High cost is caused by the need for complex traffic control systems, the high cost of mobilization, and working in and around limited rights-of-way, buildings, and utilities.

These costs may be acknowledged as separate line items or incorporated directly into the unit costs, but the assumptions used to generate them must be documented.

• DM estimates are prepared and documented for equipment types on an individual basis.

Tier II and Tier III (Principal Roads and Connector Roads)

• Unit costs for estimating DM are based upon data from completed road and bridge projects.

Analysis of FHWA project costs and/or bureau project costs is performed to generate unit costs. Procedures used to generate the unit costs must be documented.

• DM estimates are prepared and documented for equipment types on an individual basis.

Tier IV and V (Administrative, Restricted, and Special Purpose Roads and Primitive Roads)

• If unit costs for completed road and bridge projects are unavailable, unit costs for DM estimates can be based upon RS Means or other industry standard sources. The table containing fee and markup percentages on page nine of this policy shall be applied when DM is estimated from RS Means data or a similar source. Source data and assumptions used to create the estimate must be documented.

• Equipment types do not need to have individual DM estimates. The estimates can be prepared and presented in the aggregate.

CRV Requirements All Tiers

• All unit costs are based upon national averages. These averages will be adjusted by the

Location Adjustment Factor defined on page fifteen of this policy to account for local cost variance.

• CRV estimates can be based upon unit costs for each individual equipment type or a unit cost based upon cost per mile of construction may be used.

• When unit costs per mile of construction are used, they must be adjusted to account for the cost structures presented by different terrain types. At least four terrain factors – urban, level, rolling, and mountainous - must be available to adjust unit costs.

• Unit costs per mile must also be adjusted if unique terrain characteristics are present that will significantly increase the cost of construction. Examples are terrain that has a high moisture content, inherently weak soil, or that is very unstable.

• If unit costs per mile are used to create an estimate, the width of the road used to derive the unit cost must be specified. Note that unit cost per mile must be adjusted if it is being used to estimate CRV for a road with a width different from the road width used to derive the unit cost. A ratio of the two road widths can be used to make the necessary adjustment to the unit cost per mile.

• In some instances, a road that meets the definition of a Tier I road may actually have a DM and CRV cost structure that is more accurately represented by a Tier II road. For instance, city streets in small towns or in large cities that can be closed for construction may not have the high cost structure typically associated with Tier I roads that cannot be closed. Tier II cost structures may be used to estimate CRV for some Tier I roads provided it will result in a more defensible CRV estimate and the reason(s) Tier II costs were used are documented.

Tier I (Parkways and City Streets)

• Unit costs are based upon industry-specific data from road and bridge new construction or full reconstruction projects. Analysis of FHWA and/or bureau project costs is performed to generate unit costs. Cost determination procedures are documented.

• Unit costs include adjustments to account for the high cost of working in an urban environment. High cost is caused by the need for complex traffic control systems, the high cost of mobilization, and working in and around limited rights-of-way, buildings, and utilities.

These costs may be acknowledged as separate line items or incorporated directly into the unit costs, but the assumptions used to generate them must be documented.

Tier II and Tier III (Principal Roads and Connector Roads)

• Unit costs are based upon industry-specific data from road/bridge new construction or full reconstruction projects. Analysis of FHWA and/or bureau project costs is performed to generate unit costs. Cost determination procedures are documented.

Tier IV and Tier V (Administrative, Restricted, and Special Purpose Roads and Primitive Roads)

• If unit costs for completed road and bridge projects are unavailable, unit costs for CRV estimates can be based upon RS Means or other industry standard sources. The table containing fee and markup percentages on page nine of this policy shall be applied when DM is estimated from RS Means data or a similar source. Data sources and assumptions used to create the estimate must be documented.

• Cost adjustment for terrain type may not apply to primitive roads or other assets that were constructed without engineering design. These roads were often built at grade and CRV estimates for them may not need to include earthwork, earth retention structures, large culverts, or other equipment types typically associated with engineered roads in mountainous or rolling terrain. The CRV for these facilities may be estimated by using the “flat” terrain factor if generalized unit costs are employed.

Roads Located on Other Reportable FRPP Assets The DOI inventory contains numerous roads that are located on the top of levees, dikes, and other assets that have data reported to FRPP. The DM and CRV estimates for these roads will only include the work required to repair the constructed surface or replace it, respectively. If erosion or some other cause has degraded the width or structural integrity of the road so that it can no longer support the safe passage of passenger vehicles, the repairs needed to restore the constructed surface shall be reported to FRPP as road DM.

Repairs to the levee, dike, or other constructed feature beneath the constructed surface shall be assigned to those assets, not to the road.

Trails The road section of this policy document is not applicable to DM and CRV estimates for trails.

The National Trail Data Standard is the controlling policy for trails.

E. Dams, Power Assets, and Water Distribution Systems CRV and DM Estimate The CRV and DM estimates for these assets will be computed by using the methodology hierarchy below. If data is unavailable to calculate the CRV at the first hierarchal tier, the second tier will be used and then the third.

Tier I: Original Construction Costs Known. Identify the asset’s original construction date and acquisition cost. Apply the appropriate index value from the Construction Cost Trend Index to the original acquisition cost for the asset type (concrete dam, diversion dam, etc.) to create a CRV for the asset. Capital improvements that added to the value of the asset should be included in the CRV calculation by identifying the original date of the capital improvement and its cost and applying the appropriate index value. If an index value is not available for an asset type, use the Composite Cost Trend Index located at the bottom of the bottom of the index table. The Construction Cost Trend Index table is located at:

http://www.doi.gov/pam/assetmanage.html. The table will be updated annually and maintained on this website. Appendix 9 contains the formula for indexing original acquisition cost to present year dollars.

Tier II: Original Cost is Unknown. Identify an asset that is similar in size, function, and construction materials that has original construction date and acquisition cost data. Use the original acquisition cost data for that asset and update it to current year dollars by using the same procedure specified for Level One.

Tier III: Original Cost is Unknown. No similar asset is in close proximity. Use the most recent version of the RS Means Heavy Construction Cost Data to estimate the CRV. If RS Means does not provide cost data for a specific work activity or equipment item, price quotes shall be obtained from a vendor and documented in the estimate. Labor costs will be estimated using the most recently published version of the suite of RS Means cost guides.

F. Location Adjustment Factor The RS Means three-digit weighted average zip code adjustment factors will be used to adjust for locality cost variation. The same zip code adjustment factor applied to CRV must be applied to DM estimates. If individual bureaus have developed their own local cost indices and they are based upon actual costs from completed construction contracts, they may submit documentation to DOI requesting the ability to use their own cost index in lieu of the RS Means three-digit weighted average zip code adjustment factor.

Documentation must provide a general description of the methodology used to create the index, the number of completed construction contracts used to complete the index, and the number of distinct locations (parks, refuges, reservations, recreation areas, or other DOI managed lands or facilities) from which completed construction contracts are drawn. If a bureau’s local cost index is approved by DOI, other bureaus may use those index values provided they are in close proximity and representative of the cost structure to be encountered in a specific geographic area. Again, the locality factor must be applied to both the CRV and the DM estimates.

G. Adjustment for Inflation CRV and DM estimates will be adjusted for inflation each year by applying the appropriate RS Means three-digit weighted average zip code adjustment factor. The most recently published annual national index value will be used. The adjustment will be completed by April 1 each year.

H. Annual Display of DM for the Financial Report The required reporting range for DM will be -15 for the low total to +25 percent for the high total of the summed DM values reported by each of the bureaus. Indirect costs, which include salaries and benefits for government employees, are covered by annual appropriations and will not be added to estimated costs for DM, nor will they be included in the numbers reported to the Department for the annual DM display in the Department’s financial statement or any bureau financial statement.

I. Increasing Competency in the Use of Industry Standards for Estimating Costs Bureaus are required to ensure that only qualified individuals develop DM and CRV cost estimates. Because accurate, valid cost estimating is complicated, the bureaus must provide required training to ensure cost estimating tools are used properly or deploy simple-to-use cost estimating tools.

VI. Asset Condition

Articulating asset condition enables bureau managers to address a major asset management question, “What is the condition of my portfolio?” The relative condition of owned assets is measured using the FCI, which is an accepted industry metric for determining the condition of assets. FCI is used to measure the condition of all buildings and structures in the DOI real property portfolio that is reported into the government-wide Federal Real Property Profile (FRPP). Facility Condition Index is calculated for assets by dividing the cost of Deferred Maintenance by the Current Replacement Value. The result of this formula is a value that is never less than zero and never greater than 1.0. An asset with an FCI of 0 is in excellent condition and an asset with a rating of 1.0 is in very poor condition. Condition Index (CI) as reported in the FRPP for each asset is calculated by using the following algorithm; CI = (1 – FCI rating) X 100. An asset with a CI of 100 is in excellent condition and an asset with a rating of 0 is in very poor condition.

FCI estimates are based upon condition assessments and Class C cost estimates. The deferred maintenance (DM) and current replacement value (CRV) estimates used to calculate FCI should not be used for program formulation. Estimates for the actual replacement of individual facilities and projects must incorporate a higher level of detail and accuracy than the DM and CRV estimates used to calculate FCI provide. Estimates for actual replacement cost or project cost should achieve a Class A or Class B estimate prior inclusion of the projects in a budget request. (See Appendix 2 for supplemental guidance on identifying the types of assets and component parts that are to be considered when calculating the FCI for a constructed asset.)

FCI is not always an appropriate measure for determining the condition of high valued assets.

The enormous cost of replacing many large dams, power assets, and water distribution systems often results in distorted FCI values because the CRV for these assets are several orders of magnitude larger than the associated DM. This results in FCI values that are so small that they provide little value for assessing asset condition and are not useful for managing an asset portfolio.

To address this issue, the Department will calculate FCI for the above assets by combining deferred maintenance need (FCI dm),13 major rehabilitation and replacement need (FCI mr),14

13 Deferred Maintenance Index (FCI dm) – Deferred maintenance divided by current replacement value.

Deferred maintenance is maintenance that was scheduled, but not accomplished, and subsequently deferred to the future.

14 Major Rehabilitation and Replacement Index (FCI mr) - Major rehabilitation and replacement costs divided by the current replacement value of the asset. This includes the cost of safety-of-dams modification work and the cost of restoring an asset to a condition substantially equivalent to its originally intended capacity, efficiency, or capability.

CI

and indicated maintenance need (FCI im)15 into a single measure, FCI comp, which stands for F comprehensive. The use of the combined FCI comp measure will provide a better indication of an asset’s condition than the CI measure defined by FRPC, and therefore provide more useful information to asset managers. The resultant value for condition will be reported in the FRPP.

The CI is calculated with the formula below:

FCI comp = (FCI dm + FCI mr + FCI im)/CRV

The FCI comp is used to calculate the CI comp measure, which will be reported as the FRPC-defined CI value to the FRPP. The formula for CI comp is below:

CI comp = (1.0 – FCI comp ) x 100

Other first-tier metrics reported by DOI at the individual asset level in the Federal Real Property Profile (FRPP)16may be useful in conjunction with the FCI to properly categorize condition as acceptable and unacceptable. The FCI is to be used with a fully developed Asset Priority Index (API) that rates each existing or proposed owned and leased asset in the inventory based on its importance in carrying out the DOI mission and achieving strategic goals. (See Appendix 5 for an overview of the DOI FCI/API analysis.) With baseline FCI’s established from the existing data, bureaus can prepare to answer another question, “What condition level should a particular asset be maintained to provide the mission support functionality required?” These FCI target ranges will vary based on asset type and bureau mission. Using the two metrics of API and FCI will help bureau managers set acceptable baseline FCI ranges.

Second-tier metrics may also be useful in conjunction with the FCI to properly categorize condition as acceptable or unacceptable. Failure of a critical system or asset component can be considered as justification for an asset investment even though the cost of repair does not render the asset in unacceptable condition. For instance, if a $2 million elevator replacement on an asset with CRV of $100 million results in an FCI of .02; managers not responsible for the operations and maintenance of the asset might consider in acceptable condition and not qualify the asset or project for funding. If the failure of the elevators resulted in making the asset unusable, an asset manager would still be justified in correcting the deficiencies on this critical subsystem.

Criticality of components might also play a role in asset management decision-making on other assets where a critical component represents a small portion of an asset’s CRV. An asset may not have any critical or serious deficiencies, i.e., it is in an acceptable condition but still be

15 Indicated Maintenance Index (FCI im) –The cost of addressing maintenance-related recommendations noted in periodic condition assessments divided by the current replacement value of the asset.

16 Performance metrics reported into the FRPP are FCI (or condition index), mission dependency, annual operating costs and utilization. These metrics, reported into the FRPP by all Federal agencies are referred by the Federal Real Property Council as first-tier metrics. Second-tier metrics are agency-level based measures to be used in conjunction with the first-tier metrics to measure asset performance.

unacceptable because the asset does not meet functional requirements. This is usually not reflected in the “condition” of an asset. For example, a maintenance facility may not meet the functional requirements needed for a full service maintenance shop even though the FCI of the building is acceptable (see Description of Second-Tier Metrics in Appendix 6).

VII. Systems Support

Data on FCI and CRV will be formulated and maintained utilizing the Facility Maintenance Management System (FMMS) and the Financial and Business Management System (FBMS)17.

These web-based information systems allow bureau staff to store and manipulate data for each asset and each asset type in the real property inventory. FMMS will interface with the FBMS and will provide the bureaus and Department with a method to collect and analyze comparable facility information in a timely and efficient way. The FMMS and FBMS will be automatically linked with asset inventory information, performance measures data, and financial and accounting information.

The FMMS, a standardized single-platform Departmental solution for facilities management, is a cornerstone in the strategy for improving the management of the Department's constructed assets. This system is an important tool for improvement of the overall condition of the constructed assets, better allocation and utilization of the limited resources dedicated to maintaining those assets, and providing accurate and timely information to the Office of Management and Budget, the Congress, and the public. The core functions of the FMMS include the following (see Appendix 7 for an overview of the standardized single platform

FMMS):

• The ability to capture the cost of current and deferred maintenance need as well as capital improvement costs for all constructed assets and relate them back to unique asset numbers assigned from FBMS. Each work order, upon completion, will contain materials, contract, and burdened labor costs to enable documentation of the full costs of activities. This capability will allow the DOI, bureau and field sites to develop asset-based maintenance histories on all constructed assets.

• The ability to record the complete history of maintenance and capital improvement activities accumulated over time for each individual constructed asset to enable documentation of full life-cycle costs.

• The ability to record individual components of constructed assets identified in FMMS so that component renewal costs can be planned and monitored.

• The ability to record maintenance deficiencies identified through condition assessments in FMMS in the form of work orders. Scheduling of condition assessments may also be accommodated within the FMMS.

17 The FBMS is an…