November 20, 2012

Procurement Perspectives | Stephen Bauld

The costs of deferring maintenance

One of the rising challenges in public government procurement today, both in Canada and across the developed world must deal with, is that of deferred maintenance.

“Deferred maintenance” is maintenance that was not performed when it should have been or was scheduled to be and which, therefore, is put off or delayed for a future period. It has also been defined as “the extent of maintenance, repair, rehabilitation, etc., that is needed to bring capital assets from a sub-par condition to needed service levels”.

Governments in Canada collectively own hundreds of thousands of buildings and other structural infrastructure. These facilities should constitute a portfolio of significant durable public assets. They constitute a multi-billion dollar investment of public funds, which are held and administered by the government on any given day in trust for future taxpayers. At the municipal level, it is an obvious obligation of council to take steps to ensure these resources are properly sustained.

Inevitably, the performance of facilities declines due to aging and wear and tear of components and systems, functional changes and a variety of other factors. However, with modern construction and building repair methods, the lifespan of a facility can be maintained indefinitely. Doing so, however, requires a thorough and ongoing maintenance and repairs. With proper maintenance many of these facilities would last for centuries.

The necessary level of maintenance and repairs expenditure for an individual facility requires a consideration of many factors, such as building size and complexity; types of finishes; current age and condition; mechanical an electrical technologies; historic or community value; types of occupants or users; tenancy turnover rates; critically of role or function; labour, energy, and material prices; and distances between buildings in inventories.

An effective program for facilities maintenance and repair employs a combination of strategies and approaches. These include preventive maintenance, programmed major maintenance, predictive testing and inspection, routine repairs, service calls and run-to-failure.

Unfortunately, while proper maintenance can extend the life of a facility, delaying or deferring maintenance and repairs can diminish the quality of the building as a workplace environment. Over the long term, it can lead to reduced building life expectancy and eventual building failure.

Even when buildings can be saved, deferring maintenance generally results in significantly higher rehabilitation costs when work is eventually carried out. For example, steel cladding that is not painted at scheduled intervals, will eventually rust and deteriorate, perhaps necessitating complete replacement, at many times the cost of having painted it on schedule. In addition, deferred maintenance can give rise to health and safety concerns, for the staff who must work in the decaying facilities — not to mention the public, who must on occasion visit them.

Working in extended periods in such conditions is also likely to damage the morale of staff, which in turn often results in increased absenteeism and adversely affects their ability to work efficiently.

The problem of deferred maintenance has become critical because so many governments have adopted policies of reducing annual maintenance (and mid-life upgrade) expenditures, as a way of reducing budget increases. Common sense would suggest that a percentage of the replacement cost of every government capital facility should be spent on maintenance.

It should not be forgotten that depreciation charges on financial statements with respect to capital assets reflect the fact that those assets are being used up — that is, consumed. If an asset is being consumed, then it will likely need to be replaced. Municipal councils need to be properly briefed concerning the long-term implications of their maintenance and repair decisions. The public (which eventually foots the bill) should be encouraged to participate in that decision, so that taxpayers understand the need for expenditure.

Stephen Bauld, Canada’s leading expert on government procurement, is a member of the Daily Commercial News editorial advisory board. He can be reached at stephenbauld@bell.blackberry.net.

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