How to Quickly Estimate a 30 Year Operations Cost

[wacky174]

All,

I have been tasked to estimate OM&M operations cost for a facility that I oversee. I have an annual budget in mind but need to get a snapshot together of what it would cost our client to operate this facility for the next 30 years.

I need a simple formula to use, and do not want to purchase any software yet.

Thanks in advance..

W

 

[gerhardl]

I would have used an excel spreadsheet and split the facility running cost i main groups. Samplewise for instance: financial yearly costs (interest, rent, insurance etc), bought yearly outside services (gas, electricity, oil, services), yearly manpower - human resources.

Add to that equipment and building 'parts' in main groups: vehicles, machinery, heating, ventilation, roof, floors, ouitside are and roads etc with yearly running cost.

Add to that not a 'tax related' depreciation each year as a cost, but evaluate in stead what actually will have to be replaced or be selected renewed in the next 30-year periode.

This will vary, according to the wish to end up with a 'tip-top' standard facility after the 30 years, or taking out the value of existing facilities by leaving the facility more run-down.

You are of course right, no standard formula I know of , differ between the range of choices for running up or riding down the standard of something. 'Running cost' is a somewhat variable choice if you go for a 30-year periode.

 

[cvg]

I'm not sure there is a simple formula. However, a spreadsheet program is more than adequate software to do the analysis. gerhard gave good advice regarding your reserve fund and capital improvement fund which you will be able to draw money in the future to repair or replace items that reach their useful life or for any desired improvements that need to be made. Also, don't forget to add in inflation to your costs for future repairs as well as any interest income you may recieve when you put money into your savings account.