Roof Dilemma Maintain or Replace Benchmark

Roof Dilemma Maintain or Replace Benchmark

Published in Maintenance Solutions (January 2000)

Roof Dilemma: Maintain or Replace?

Understanding the economics of the situation can lead managers to a budget-friendly decision

By Kent Mattison, P.E.

When is roof replacement a better option than roof maintenance? Answering this question is rarely easy. The ideal answer, or course, is never. But it isn’t often that a roof’s service life equals the service life of the rest of the building.

The more obvious answer to the question is: Roof replacement is a better option when the roof’s watertight integrity — its primary function — fails. In other words, when leaks become intolerable, it is time to replace the roof.

But when are leaks intolerable? And is leak tolerance the best or most cost effective reason to make a huge capital investment? A central task in the decision is determining when leaks become bad enough that replacement is necessary.

The economics of leaks

A financial model sometimes can help determine when roof maintenance has reached the point of diminishing returns. Managers essentially end up throwing good money after bad. As much as managers preach preventive roof maintenance, there comes a time when it can be useless.

It’s difficult to justify the capital expense of replacing a roof, especially when that money could go toward buying new equipment and systems that will increase revenues. But roof leaks also can hurt revenues. Consider these examples:

  • Interior damage . Roof leaks that damage ceiling tiles, carpet, furniture and computers are common, but damage can be much more severe. For example, one school lost its gymnasium floor due to roof leak damage. The school had to cancel or move athletic events and replace the floor at a cost of $500,000.
  • Production downtime. A roof leak for one building owner shut down production for a day, costing the company an estimated $700,000 in revenue.
  • Damaged products. A retail store recently lost more than $40,000 worth of products due to one roof leak.
  • Lost business. Roof leaks forced one hotel to close its top floor — its priciest rooms — for three weeks. The lost revenue was significant.

Mangers must figure all of these factors into any life-cycle cost analysis in trying to justify a roof replacement. Granted, for any manager who has not gone through the cost-justification process, projected costs are only predictions. But to avoid figuring in these costs is misleading and provides a false sense of security.

For a closer look at the long- and short-term costs of roofing decisions, see the accompanying article, Life-Cycle Costs: A Comparison.

Additional concerns

Two more factors in the replace-or-maintain decision that are less measurable are safety hazards and the negative impact the roof condition has on building occupants. They too often are not included in any financial analysis.

While no one will argue the importance of safety, old worn-out defective roofs are a hazard to those working on them, as well as to the building occupants underneath. The fact is rarely taken into consideration in debates over the need for roof replacement unless an accident has occurred.

Though it contributes on an average only 5 percent to the construction cost of a building, the roof is by far the most litigated component of a commercial or institutional building.

Consider a study by the Educational Writers Association, which found that one-fourth of the nation’s school buildings were inadequate, obsolete or downright dangerous, and that school budgets generally do not provide enough money to make a dent in the problem. Researchers report a correlation between poor physical conditions in schools and poor test scores.

It is not too far-fetched to blame a part of this situation on structural problems such as roof leaks. School districts face no bigger single problem than facility care. When capital improvement budgets are cut, by far the primary sacrificial lamb is the roof. School districts are not alone in this dilemma; it’s true for most buildings.

Whether it’s just a nuisance or a major safety hazard, a leaky roof tends to say something about a facility and the organization. Something as common as a roof leak can have a surprisingly negative impact on facility operations.

Avoiding trouble

Should a manager wait until leaks become intolerable — until the roof has failed — before starting to make the case roof replacement? Should a manger even wait until the roof leaks at all? There are several options.

The most cost-effective option to roof replacement is the trouble-avoidance option. Avoiding future problems reduces risks, as well as long-term roofing costs. Roof replacement usually should take place long before leaks become a regular occurrence.

If roof replacement is planned before failure occurs, managers can realize significant cost savings in two additional ways.

First, early planing for replacement may allow for overlaying the first roof, avoiding tear-off costs of the existing roof. This option may not always be available, due to potential restrictions — code or structural requirements, flashing height limits, etc. — but when it is, it can generate significant cost savings. A tear-off typically adds $1-2 per square foot to the replacement project. The savings created by overlaying become even more dramatic if the existing roof contains asbestos. Asbestos removal and disposal can increase the costs 10 percent or more.

Second, early planning for replacement can prevent damage to the roof’s structural deck. Delays in roof replacement can allow water to damage the structural deck, and costs associated with a deteriorating structural deck too often are unforeseen until replacement is under way. Deck replacement costs can be very significant, typically in the range of $2.50-$6 per square foot.

Plan ahead

Given all these factors to consider, how can a manager budget ahead of time for such a large expenditure? Conducting an inventory and analysis of the roof’s present condition is extremely helpful in the early phases of planning. Short of this step, however, managers still can do some generalized planning and budgeting.

Managers should use their experience to establish a projected average service life of roofs. Several factors will influence a roof’s service life: design quality, installation, products, maintenance, roof use and abuse, and weather.

For example, in a building with 1 million square feet of roofing and a projected performance life expectancy of 20 years, a manager might consider budgeting to replace 1/20 or the roof — 5 percent — or 50,000 square feet per year.

If the average cost of roof replacement is $5 per square foot, a manager could budget $250,000 for roof replacement each year. If 10 years is the expected service life of a roof, a manager should budget $500,000 each year for roof replacement.

Obviously, this approach uses many assumptions. For example, the entire roof may need replacing at once if it is the same age and condition. But for generalized planning purposes, budgeting in this fashion is a start.

This approach is usually more appropriate for a large number of buildings with roofs of different types and ages if, as mentioned earlier, an inventory of the roofs hasn’t been completed.

Every financial model makes several assumptions. Projecting a roof’s service life, future maintenance and repair costs, and costs due to leak damage, downtime, loss of business, etc. is an educated guess at best. And predicting the inflation race and the time value of money also can vary greatly depending on the source of the information.

The roof replacement-maintenance debate obviously encompasses many factors and areas of a facility. But when all is said and done, the ability of managers to cost-justify the project and make a sound decision come down to being able to analyze accurate information and to understand the risks and costs associated with each option.

A detailed look at the financial factors in the roof replacement/maintenance debate shows the value of looking past maintenance costs and first costs to the life-cycle costs of the roofing system.

The following life-cycle cost analysis (ASTM E917-93) compares the total present value life-cycle cost of two approaches to a 15-year-old, 50,000-square-foot roof that is near the end of its service life. Both approaches use a discount rate of 9 percent, an inflation factor of 3 percent, and a combined tax rate of 38.3 percent.

Approach 1

With this scenario, the approach is to patch and repair the roof for two years before replacing it. Based on recent history, projected costs over the next two years would be as follows:

  • Preventive maintenance

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