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