Balancing CAPEX Realities with OPEX Savings for Smarter Building Construction Decisions

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CAPEX and OPEX are not mutually exclusive. They each impact the balance sheet and total cost of ownership (TCO). Problem is, certain elements of building lifecycle costs – taxes, incentives, energy, maintenance and replacement – are very difficult to predict or analyze upfront (pre-build) with any high degree of confidence or accuracy. At least, not until now.

SmartView™ by Butler® is a powerful TCO analysis tool.

Total cost of ownership is more than a theory. For several years now, businesses have factored TCO into capital investment decisions for things like heavy equipment, IT systems, HVAC systems, vehicles/fleets, and other major expense items.

Now, the data to perform such calculations for not-yet-constructed facilities is available and part of the calculations performed by sophisticated modeling technology, known as SmartView™. The program was developed by Butler Manufacturing™, as a reliable cost analysis tool for evaluating the initial and long-term impact of different building system construction options.

SmartView analyzes all significant contributors to Total Cost of Ownership (as seen below).

Total cost of ownership calculations include:

Initial Construction Costs

 

Long-Term Energy / Operating Costs

 

Maintenance / Replacement Costs

 

Rebates, Deductions & Incentives

 

Retrofit Strategies

 

Project Financing / Cost of Capital

 

Inflation / Energy Price Escalation

 

Equipment Life / Cost Segregation

Why the SmartView is the long view

The advantage of SmartView is that it prevents short-sighted thinking, and enables more informed judgments and conclusions regarding each stage in a facility’s lifespan. Without having all the facts at hand prior to construction, project owners could forego substantial amounts of money in terms of unrealized (potential) revenues.

Additionally, the SmartView calculator requires fewer inputs and includes local-level DOE2 data, plus other built-in data factors (NPV cost of capital, tax deductions, energy rebates/incentives, and more) to automatically determine specific building lifecycle savings.

For a clearer picture of the types and amounts of savings that can be anticipated, it’s helpful to look at a couple of actual case study examples.

CASE STUDY #1:

NATIONAL HARDWARE STORE CHAIN

By determining construction & operating cost savings for a 400,000 ft2 distribution center roof-retrofit solution that featured LED and daylighting systems, SmartView revealed:

$138,000/year savings

(LEDs+Controls+Daylighting)

$1,080,000 tax deductions

$50,000 energy rebate


CASE STUDY #2:

REGIONAL DISCOUNT STORE CHAIN

When considering a 480,000 ft2 distribution center expansion, SmartView analyzed the operating/maintenance cost savings and energy tax rebates/incentives resulting from specified wall/insulation systems, LED controls, and roof daylighting. Cost segregation of depreciated assets was included in the final SmartView calculation:

$700,000

(Cost Segregation Year 1 Cash)

$1.82MM savings

(Over 1st five years)

$90,000+/year

(energy savings)

EPAct $345K

(additional cash still pending)

What these case studies emphasize is that initial construction costs (CAPEX) typically pale in comparison – and are greatly offset by – lifecycle operating cost savings (OPEX).

The future of construction planning and decision-making is here now, and at its core is detailed TCO data.

“Today, TCO analysis supports acquisition and planning decisions for a wide range of assets. These include especially those that bring large maintenance and operating costs across a long ownership life. Total cost of ownership is therefore center stage when leaders face purchase or planning decisions...”Building the Business Case Analysis by Solution Matrix Ltd.

The ultimate advantage in balancing CAPEX realities with OPEX savings is uncovering the hidden (less obvious) cost savings, which can be easily overlooked. Of course, having more information is always preferable for the most astute and perceptive business executives.

To learn more, contact a Butler Corporate Accounts Manager. If you would like to schedule a meeting, please complete this simple form.

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