Determining Cost and Useful Life Data

The costs and useful life data of components is the foundation on which the remainder of the reserve study is based as all recommended financial strategies are directly impacted by the estimated current and future costs for repair / replacement. Inaccurate data during the component analysis portion of the reserve study will likely lead to inaccurate projections in the future and funding plans which may not meet the goals and statutory requirements.

Where does the Cost data and Useful Life come from?

  • Prior Studies
    The most reliable data we have is thousands of prior reserve studies that we have at our disposal and for review. Many of these have invoices and bids from vendors which were reviewed and included as actual costs data into these prior studies. We have a database that is updated regularly to reflect actual costs data from these vendors for all types of building and grounds components.The useful life of components is also listed in these prior studies and are specific to each community as we assign a placed in service data for each component, many we know the install date. When a composition shingle roof last about 25 years for the vast majority of buildings we encounter that is a good sign that it will also last 25 years on your building.

  • Cost Manuals
    We also regularly utilize cost manuals such as RS Means and Marshall & Swift both of which are extremely accurate, updated quarterly and specific all the way down to the zip code. These cost manual companies interview thousands of vendors for many thousands of ground and building components to determine average costs and then provide them in very comprehensive cost manuals. We have found thee to be extremely accurate.Architectural, Engineering and to a lesser extent Cost Manuals also supply Useful Life of Components. These again based on interview of vendors who deal with these materials every day as well as manufactures indicators related to warranties and in house tests for longevity.

  • Client History
    When we complete a reserve study for our Clients we ask for any relevant bids, vendor invoices and known historical expenses so that we can incorporate these into the reserve study. These are generally pretty reliable with the exception of some that did not obtain numerous bids and overpaid or a vendor who has provided a bid for work that is less than the recommended standards (e.g. one sealcoat layer versus the recommended two). The reason vendors provide high or low bids are numerous and can include: they do not really want the job (too big or too small), they are too busy, they lack the necessary equipment (high bid to purchase it), not experienced with some aspect of the job, etc.It has been our experience that the most accurate indicator of the Useful Life of a component is the prior history of that component in a specific community. All site characteristics and building designs are different so materials will wear at slightly different rates (e.g.  If the roof on a building has been replaced at 20 years twice prior we will likely fund for replacement at 20 years again.) All types of items impact useful life including sun exposure, rain, wind, sand/dust, wooded, desert, arid, humid, etc. The more information we have regarding the historical timeline of replacement of components the more accurate and catered the reserve study will be.

How is Remaining Useful Life of Components Determined?

Remaining Useful life of components is based on the placed in service data (client historical records) as well as our comprehensive onsite visual inspections. We typically have a good read on the remaining useful life for more typical components such as roofing, siding, fencing, paint, and asphalt as we have seen these thousands of times prior and are familiar with the different condition levels during the life cycle of these more common components. Mechanical equipment can be much tougher to determine just by looking at it so we will often also rely on serial number data to determine manufacturing dates.

Hidden Components

Then there are components completing out of view such as plumbing, electrical, drainage systems, etc. These are much more difficult to place a condition assessment on, determine costs for or determine a remaining useful life; often we must rely only on data provided to us from the client. These types of components are often addressed with a contingency in the reserve study based on the prior history of repair for the component. If the community has averaged about $5,000 every 3 years in plumbing repairs in recent history that would be a good projected amount for the future. Revisions to the costs and remaining useful lives can always be made in updates to the study if repairs become more costly or the Client has a professional analysis of the systems completed; determining a scope, timeline and costs for large scale replacement of these hidden systems.

It is our is priority to provide accurate and reliable data in our reserve studies; with our extensive experience, vendor provided data and client provided data our studies do just that.