Executive Order 13327 Compliance and MARS Training: Agricultural Research Service Whitestone Research Corporation August

1. Executive Order 13327 Compliance and MARS Training:Agricultural Research ServiceWhitestone Research CorporationAugust 2, 2007

2. What is the Need? Executive Order 13327 requires all major Federal agencies to report what facilities they own, assess their condition, and plan for full life cycle management. Key metrics include: Deferred Maintenance Sustainment Requirements Operations Costs Plant Replacement Value (PRV) Improved ARS Planning: Linking resource requirements to the facility inventory

3. Final Result E.O. 13327 Compliance requires estimating total facility costs for all ARS Real Property.

4. Project Overview “The Facilities Division requires an independent verification, validation, and estimation of ARS real property condition reporting, recapitalization targets, and operational costs for facilities located throughout the United States. ” Project deliverables: • CPAIS validation • Site inspections • MARS calibration • M&R estimates • Operations estimates • Recapitalization estimates

5. CPAIS Validation Review and revise CPAIS database for: • Completeness • Inconsistencies • Extreme values • PRVs

6. Overview of Estimation Procedure • Define asset population from CPAIS • Select a statistically valid sample • On-site inventory of representative buildings at 11 sites • Calibrate MARS life cycle model • Generate estimates

7. Select a Statistically Valid Sample • Statistically valid sample determined by building use, age, and size. Sample 31% of ARS assets. Buildings, N=536.

8. Inventory of Representative Buildings Inspection Process: • Survey team covers major disciplines: mechanical, electrical, architecture/building envelope • Major equipment capacity and condition reviewed • Room-by-room inspection & inventory of sample buildings • Detailed analysis of inventory data provided by sites • Inventory verified with drawings and master equipment lists

9. Calibrate MARS Life Cycle Model

10. Calibrate MARS Life Cycle Model Site management provided actual staff and contract labor rates, mark ups, overhead, and unscheduled maintenance cost ratios Also provided utilization measures for individual assets: operating hours, security, safety & permitting requirements Unique components and maintenance protocols are defined where necessary Over 240 unique components were identified and added to the MARS component/task library.

11. Calibrate MARS Life Cycle Model Whitestone data was used where site-provided data was not available

12. Calibrate MARS Life Cycle Model Utilization adjustments added up to 79% to DM and sustainment costs.

13. Three Types of Estimates are Produced Whitestone cost models are explicitly aligned with Federal accounting definitions

14. Focus on Deferred Maintenance and Future Sustainment • MARS estimates task-based deficiencies and future requirements for representative building models • Building models represent specific asset classes and age-size cohorts • Overall estimates for buildings were made by multiplying sample costs by the SF total for cohorts in each asset class

15. Focus on Deferred Maintenance and Future Sustainment • Total DM = $317 mil, Overall Condition Index = 90 percent • Average 5-year M&R Cost = $85 mil or 2.7 percent of PRV

16. Focus on Operations Costs • Annual Operation Costs = $67 mil or 2.2 percent of PRV

17. Focus on Recapitalization Costs • Annual Recapitalization Costs = $36 mil or 1.18 percent of PRV

18. Total Building Costs • Total Building Costs = $188 mil or 6.1 percent of PRV

19. Distribution of Total Costs

20. Distribution of Total Costs

21. Selected Structure Inventory

22. Structure Sustainment and Recapitalization Estimates • Average 50-year M&R Cost = $6.4 mil or 1.4 percent of PRV • Annual Recapitalization Cost = $9.1 mil or 2.0 percent of PRV

23. Summary of Estimates • Total building deferred maintenance is an estimated $317 million, with $198 million related to critical systems. • Assuming a plant replacement value of $3.1 billion, the building condition index ratio (1 - DM / PRV) is .90, an outcome commonly classified as “fair.” • Average annual sustainment costs are: Buildings: $85 million (5-year average), or 2.7 percent of PRV Structures: $6 million (50-year average), or 1.4 percent of PRV • Average annual recapitalization costs are: Buildings: $36 million, or 1.2 percent of PRV Structures: $9 million, or 2.0 percent of PRV • Average annual operating costs, excluding M&R, are: Buildings: $67 million or 2.2 percent of PRV Structures: Not estimated • Total annual costs (not including deferred maintenance) are: Buildings: $188 million, 6.1 percent of PRV, or $14.48 per gross square foot Structures: $15 million, or 3.5 percent of PRV

24. Upcoming Deliverables for FY08 • Re-evaluate and update PRVs • Additional 10 percent (1.3 million GSFT) on-site inventory of ARS buildings at: - El Reno, OK - Albany, CA - Fargo, ND - Weslaco, TX - Boston, MA • Update estimates with current market data (labor, materials, equipment, PRVs)

25. Key Questions Going Forward • Should ARS assess 100% of its Real Property Assets? • Who should complete future assessments? • How often should ARS inspect its assets? • How and by who should the database be maintained? • Should ARS invest in a web-based application?

26. Critical Interaction with Sites To answer the key questions, four topics must be addressed by the sites: • Data input • Validation • Site-specific reports • Best MARS configuration

27. MARS Demonstration MARS Facility Cost Forecast System Version 7

28. Two Questions about MARS • Do ARS sites want full capabilities or just viewer access? • Should MARS be installed as a client server or a web-based application? [Discussion]

29. Whitestone Recommendations • Should ARS assess 100% of its Real Property Assets? Yes, if the detailed inventory and forecasts are utilized by the sites. If estimates serve only as a HQ approximation, then sampling is sufficient. 2) Who should complete future assessments? If resources are sufficient, sites can complete assessments. For consistency, consider contractor support until 100% of the Real Property is assessed.

30. Whitestone Recommendations 3) How often should ARS inspect its assets? Most Federal agencies inspect assets on a 5-year cycle (20% of assets per year). 4) How and by who should the database be maintained? The database should be maintained annually with major repairs and replacements submitted by the sites and entered by Whitestone. • Should ARS invest in a web-based application? Yes, web-based MARS meets more specifically ARS requirements.

31. Virtues of Web-based MARS • Distribution speed • User access • Administration simplicity • Auto-updates of DM, Sustainment, Operations, Recapitalization, and PRVs • CPAIS Integration

32. Background Slides

33. Definitions of Deferred Maintenance • FASAB Standard Number 6: “Deferred maintenance is maintenance not performed when it should have been or was scheduled…” • DOE: “for the purpose of reporting deferred maintenance …(it) is that cost required to restore a facility to its current use and as-built condition.” • MARS: Deferred Maintenance is “the cost of component replacement tasks not performed according to their prescribed frequency…and does not double count tasks that have missed their frequency more than once.” MARS deferred maintenance estimates do not include preventive maintenance, minor repairs, or recapitalization projects

34. Operations Definitions • Custodial. The custodial function cost factors represent the expense of cleaning offices, work areas, restrooms and common areas. They include cost of labor and supplies, equipment, and any necessary contract services. Trash removal costs are not included. The cost factors are based on survey data; location indexes are based on relevant prevailing labor and material rates. • Grounds. The grounds function includes any expense related to the maintenance of exterior areas, such as landscaping, snow removal, signage, sidewalks, and external parking lots. They include cost of labor and supplies, equipment, and any necessary contract services. The cost factors are model-based; location indexes are based on relevant prevailing labor and material rates. • Management. Real property management function describes all costs associated with facility management, including: public works, contracts, material procurement, facility data, furnishings, real estate, and engineering services. The cost factors is expressed as a fixed percentage of Property Replacement Value, and derived from case study values; location indexes are based on relevant prevailing labor and material rates. • Pest Control. Pest Control expenses cover indoor and outdoor pest control programs, separate from the grounds function. The cost factors are based on a micro-model developed by Whitestone Research; location indexes are based on relevant prevailing labor and material rates. • Energy. Energy represents all expenses related to the purchase, generation, distribution, and conservation of energy and source fuels necessary to operate a building. The main energy sources considered are electricity and natural gas, expressed in kBtus and Source Energy terms. Location indexes are based on local commodity costs, prevailing labor rates, and climatic variables.

35. Operations Definitions • Refuse. Refuse costs include all costs related to trash collection and disposal, pick-up services, fees, recycling operations and administration, composting, etc. Excludes handling and disposal of HAZMAT materials. Cost Factors are based on survey data; location indexes are based on relevant prevailing labor and material rates, and tipping fees. • Road Clearance. All expenses related to sweeping and removing snow and ice from paved areas including sidewalks, walkways, and parking lots. Cost factors are model-based; location indexes are based on relevant prevailing labor and material rates, and climatic variables (number of snow days, average annual snowfall). • Security. Security expenses relate to the physical security of buildings and occupants, and include personnel, operating, monitoring and maintaining security equipment, and patrol services. . The cost factors are model-based; location indexes are based on relevant prevailing labor and material rates. • Telecom Telecom expenses cover the purchase of all the services ordinarily associated with commercial activities, such as voice and data equipment and service subscriptions, maintenance. The cost factors are based on survey data; location indexes are based on relevant prevailing labor and material rates. • Water Water expenses include all costs related to providing the building with potable water, irrigation water, and sewage service. The cost factors are based on survey data; location indexes are based on relevant prevailing labor and material rates.

36. Economic Depreciation of Office Buildings Recapitalization Model • Restoration & modernization costs are based on the economic depreciation known for individual facility types

37. Recapitalization Model • Recapitalization costs are expressed as a percentage of asset PRV

38. About Whitestone Research Employee-owned, organized in 1993 Economists, Operations Research Scientists, Computer Scientists Consulting, Publishing & Software Offices in Washington, DC and Santa Barbara, CA Small Business

39. Whitestone Products M&R Cost Reference 12th Annual Edition Facility Operations Cost Reference1st Annual Edition North American MRO Market Data MARS Facility Cost Forecast System Version 7 BrickBits.com Home Owner Cost Calculator

40. Consulting Services Life-Cycle Cost Studies Facilities Operations Cost Modeling Index Definition and Benchmarking Economic Impact Analysis Market Research E.O. 13327 Compliance

41. Recent Publications & Presentations • Peter Lufkin, An alternative view of depreciation and recapitalization costs in Facilities Manager (January-February 2004) • Lufkin, Desai, and Janke, Estimating the restoration and modernization costs of infrastructure and facilities in Public Works Management & Policy (July 2005) • Jay Janke, Peter Lufkin, Facility cost models in The Military Engineer (September-October 2005) • Jay Janke, Executive Order 13327: Getting to green, the unwritten requirements. MARS User Conference, June 1-2 2006, Santa Barbara • Peter Lufkin, Bernard Mattimore, Extended service life and its implications. EFCOG Infrastructure Management Working Group Annual Meeting, October 17-19 2006, Oak Ridge

42. Whitestone Contacts Peter Lufkin Principal 509 East Montecito Street, Suite 200 Santa Barbara, CA 93103 (805) 884-9174 plufkin@whitestoneresearch.com Jay Janke Director of Federal Services 1250 24th Street NW, Suite 300 Washington DC 20037 (202) 776-7760 jjanke@whitestoneresearch.com Mike Panesis V.P. of Product Development 509 East Montecito Street, Suite 200 Santa Barbara, CA 93103 (805) 879-9928 mpanesis@whitestoneresearch.com Jon Miller Senior Analyst 509 East Montecito Street, Suite 200 Santa Barbara, CA 93103 (805) 879-9920 jmiller@whitestoneresearch.com 42