U.S. Department

of Commerce

National Bureau

of Standards

AlllOb ^^^S 03 I

NBSIR 80-1973(R)

Budget Estimates for

Replacement of Plant and Facility

Equipment at the NBS Campuses

Phillip T. Chen

Robert E. Chapman

NBS-Gaithersburg, Maryland

NBS-Boulder, Colorado

-QC

ICO

.U56

30-1973

1980

Building Economics and Regulatory Technology Division

Center for Building Technology

National Engineering Laboratory

National Bureau of Standards

Washington, D.C. 20234

Sponsored by:

Plant Divisions Office of the Director of

Administrative and Information Systems

National Bureau of Standards

Washington, D.C. 20234

June 1980

NATIONAL BUREAD

or 8TANDAJU18

LXBRART

NBSIR 80-1973(R) • - ' SEP i 9 1980

t * 1 Budget Estimates for

Replacement of Plant and Facility

Equipment at the NBS Campuses

Phillip T. Chen

Robert E. Chapman

Building Economics and Regulatory Technology Division

Center for Building Technology

National Engineering Laboratory

National Bureau of Standards

Washington, D.C. 20234

Sponsored by:

Plant Divisions Office of the Director of

Administrative and Information Systems

National Bureau of Standards

Washington, D.C. 20234

U.S. Department of Commerce

Philip M. Klutznick, Secretary

Luther H. Hodges, Jr., Deputy Secretary

Jordan J. Baruch, Assistant Secretary for Productivity, Technology, and Innovation

National Bureau of Standards

Ernest Ambler, Director
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PREFACE

This study was conducted by the Building Economics and Regulatory Technology

Division, Center for Building Technology, National Engineering Laboratory,

for the Plant Divisions at Gaithersburg and Boulder, to demonstrate how

economic principles and rehabilitation technology can be applied to the

planned replacement of the aging and obsolete plant equipment at the National

Bureau of Standards. James G. Gross, Carl 0. Muehlhause, James H, Pielert,

Harold E. Marshall, William G. Hall, David A. Didion, Thomas K. Faison, and

Frank H. Lerchen provided general reviews of this paper. Preston E. McNall,

Tamami Kusuda, Paul R. Achenbach, James Y. Kao, James H. Hill,

Robert R. Jones, Lawrence S. Galowln, Robert G. Mathey and Felix Y. Yokel

provided technical consultation. Bruce E. Thompson provided computer services,

Mary M. Chaney, Catherine Nowstrup and Charity Starr provided production

services, and the numerous persons in the Plant Division at Gaithersburg and

Boulder provided data, guidance and review.

The authors wish to express their appreciation to the above persons, without

whose help this study could not have been completed.

iil
EXECUTIVE SUMMARY

The replacement of aging plant and facility equipment is a major concern of

all Federally-owned and operated installations. Past efforts at equipment

replacement, however, have often underutilized information on the service

life distribution of a particular component/system. More specifically,

equipment was usually maintained until it either failed or reached some average age at which time total replacement was initiated.

This study develops a framework, based on service life distributions fitted

to data from a published survey, for dealing with the "replacement problem.

Service life distributions are used to develop replacement schedules for

approximately 50 major plant and facility equipment items at the National

Bureau of Standards (NBS) Gaithersburg and Boulder sites. ^ Two sets of

costs associated with these replacement schedules are estimated. The first

approach produces an estimate of the expected replacement cost for each

item over the ten-year planning horizon. This approach makes use of a manual procedure referred to as the cost factor model. The second approach

produces both annual and total cost estimates over the ten-year planning

horizon. This approach makes use of a computerized procedure referred to as the probabilistic cost model. Estimates from this model are intended

for use in budgeting for replacements over the planning horizon.

The results of this study indicate that the total annual estimates for 10

years, in terms of first quarter 1980 dollars, for equipment replacement

at the NBS Gaithersburg and Boulder sites are approximately:

FISCAL YEAR

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

TOTAL

1.702.000

1.615.000

1.667.000

1.647.000

1.575.000

1.511.000

1.462.000

1.353.000

1.318.000

1.304.000

TOTAL 15,154,000

1 The Gaithersburg, Maryland site was built between 1963 and 1968 on 589 acres of land and includes 27 buildings; the 1980 replacement value of

the entire facility is $325 million. The Boulder, Colorado site was built

between 1955 and 1957 on 205 acres of land and includes nine buildings;

the 1980 replacement value of the entire facility is $40 million.

iv
Based on the results of this study, three areas of additional work are

identified.

First, prior to the actual replacement of any equipment, the appropriate

engineering studies should be performed. Furthermore, life-cycle cost

techniques should be used to ensure that the most cost-effective items

(which are technically feasible in the engineering sense) are selected for

replacement.

Second, a data bank which will permit the validation and modification of

equipment service lives actually experienced at the NBS campuses should

be developed and maintained. In addition to providing information on equippment services lives, such a data bank would facilitate the process (either

manually or via computer calculations) of identifying and pursuing more

cost-effective levels of equipment maintenance.

Third, this study should be updated at least every five years to support the

NBS budget planning process.

V
TABLE OF CONTENTS

Page

PREFACE iii

EXECUTIVE SUMMARY iv

LIST OF TABLES vili

LIST OF FIGURES vili

SI CONVERSION UNITS x

ABSTRACT xi

1. INTRODUCTION 1

1.1 Background 1 1.2 Purpose 2 1.3 Scope 2

1.3.1 Information Sources 2

1.3.2 Evaluation Methods 3

1.3.3 Evaluation Results 3

1.4 Organization 4

2. DESCRIPTION OF PLANNED REPLACEMENT STUDY 5

2.1 Engineering Considerations 5 2.1.1 Site Descriptions 5 2.1.2 Plant Equipment Service Life 5

2.1.3 Engineering Cost Estimates 7 2.1.4 Summary of Engineering Considerations 14

2.1.5 Discussion 14

2.2 Economic Considerations 17

2.2.1 Cost Considerations 18

2.2.2 Data Base Development 19

2.2.3 Annual Cost Figures 21

2.2.4 Assessing the Sensitivity of the Budget

Estimates to Changes In the Timing of Funds for

Equipment Replacement 26

3. SUMMARY AND RECOMMENDATIONS 34

3.1 Summary 34

3.2 Recommendations 34

vl
Page

APPENDIX A: INFORMATION SOURCES 36

A. 1 Site and Replacement Information 36

A. 2 Service Life Information 36

A. 3 Engineering Cost Information 37

A. 4 Building Occupancy Year 37

APPENDIX B: ENGINEERING STUDIES 41

B. l Gaithersburg Site 41

B. 2 Boulder Site 44

APPENDIX C: ECONOMIC PRINCIPLES AND APPLICATIONS 46

C. l Assessing the Sensitivity of the Budget Estimates to

Changes in Equipment Replacement Cost and Service Life .... 46

C.2 Life-Cycle Cost Considerations 50

REFERENCES 55

vii
LIST OF TABLES

Page

2.1 Engineering Considerations: Gaithersburg Site 9

2.2 Engineering Considerations: Boulder Site 12

2.3 Equipment Service Life Distributions: Gaithersburg Site 23

2.4 Equipment Service Life Distributions: Boulder Site 25

2.5 Estimated Annual Replacement Costs in Thousands of 1980

Dollars: Gaithersburg Site 29

2.6 Estimated Annual Replacement Costs in Thousands of 1980

Dollars: Boulder Site 29

2.7 Most Likely Replacement Costs of Various Delays in Thousands

of 1980 Dollars: Gaithersburg Site 33

2.8 Most Likely Replacement Costs of Various Delays in Thousands

of 1980 Dollars: Boulder Site 33

A.l Equipment Service Life Statistics 39

C.l Parameter Values Used in the Sensitivity Analyses of

Equipment Replacement Cost and Service Life '^7

LIST OF FIGURES

Page

2.1 Example of a Fitted Triangular Distribution Using Data on the

25th Percentile, the Mode, and the 75th Percentile 22

2.2 Alternative Replacement Cost Schedules for

Gaithersburg Site 27

2.3 Alternative Replacement Cost Schedules for Boulder Site 28

2.4 Effects of Funding Delays on the Gaithersburg Replacement Cost

Schedule 31

2.5 Effects of Funding Delays on the Boulder Replacement Cost

Schedule 32

C.l Results of the Replacement Cost-Service Life Sensitivity

Analysis for the NBS Gaithersburg Site 48

vlll •
LIST OF FIGURES (contd.)

Page

C.2 Results of the Replacement Cost-Service Life Sensitivity

Analysis for the NBS Boulder Site ^9

C.3 Defining the Level of Effective Maintenance Which Minimizes

Life-Cycle Costs 34
SI Conversion Units

The following list of selected conversion factors for the most frequently

used quantities in building design and construction may be used.

QUANTITY INTERNATIONAL (SI) UNIT U.S. CUSTOMARY UNIT APPROXIMATE CONVERSION

LENGTH

AREA

VOLUME

CAPACITY

meter (m) minimeter (mm)

square meter (m*)

square millimeter (mu')

cubic meter (m’)

cubic millimeter (nm’) liter (L) milliliter (mL)

VELOCITY. SPEED

ACCELERATION

MASS

DENSITY

FORCE

meter per second (m/s) kilometer per hour (km/h)

meter per second squared (m/s*)

metric ton (t) [1000 kg]

kiloqram (kg) gram (g)

metric ton per cubic mrter (t/m*) kiloqram per cubic meter (kg/m’)

kilonewton (kN)

newton (N)

MOMENT OF FORCE . kilonewton meter (kN-m) TORQUE newton meter (N*m)

PRESSURE. STRESS megapascal (MPa)

kilopascal (kPa)

tWRK. ENERGY. QUANTITY 0r~HEAT

POWER. HEAT aOW

PSTe

megajoule (MJ) kilojoule (kj) Joule (J)

k11»/att (kW) watt IW)

COEFFICIENT OF HEAT watt per square meter kelvin TRANSFER [U-valuel (H/m'*K) [= (W/m’*'’C)l

thermal CONOUC- watt per meter kelvin (W/m*K) TIVITY Ik-va)ue] [(J/m-'^d))

foot (ft) 1 inch (in) 1

square yard (yd*) 1 square foot (ft*) 1 square inch (in*) 1

cubic yard (yd’) 1 cubic foot (ft’) 1 cubic inch (in’) 1 gallon (gal) 1 fluid ounce (fl oz) 1

foot per second (ft/s or f.p.s.) 1 mile per hour (mile/h or m.p.h.) 1

foot per second squared (ft/s*) 1

short ton [2000 lb] 1 pound (lb) 1 ounce (oz) 1

ton per cubic yard (ton/yd’) 1 pound per cubic foot (1b/ft’) 1

ton-force (tonf) 1 kip [1000 Ibf] 1 pound-force (Ibf) 1

ton-force foot (tonf*ft) 1 pound-force inch (Ibf’in) 1

ton-force per square inch (tonf/1n*) 1 ton-force per square foot (tonf/ft*) 1 pound-force per square inch (1bf/in*) 1 pound-force per square foot (ibf/ft*) 1

kilowatthour (kWh) 1 British thermal unit (Btu) 1 foot pound-force (ft* Ibf) 1

horsepower (hp) 1 British thermal unit per hour (Btu/h) 1 foot pound-force per second (fflbf/s) 1

Btu per square foot hour degree 1 Fahrenheit (Btu/ft**h*“F)

Btu per square foot degree Fahrenheit 1 (Btu/ft**"F)

m = 3.2808 ft nm - = 0.0394 in

m* 1.1960 yd*

m* = 10.764 ft’

fim* = 1.5500 X 10'3in*

m’ - 1.3080 yd’

m’ = 35.315 ft’ nm’ = 61.024 X 10'^in’

L

= 0.2642 gal mL = 0.0338 fl oz

m/s = 3.2808 ft/s km/h = 0.6214 mile/h

m/s’ = 3.2808 ft/s’

t

- 1.1023 ton

1^9 = 2.2046 1b

9

= 0.0353 oz

t/m’ = 0.8428 ton/yd’

kg/m’ = 0.0624 1b/ft’

kN = 0.1124 tonf

kN = 0.2248 kip

N

= 0.2248 Ibf

kN*m 0.3688 tonf* ft N*m = 8.8508 1bf*in

MPa 0.0725 tonf/in’

MPa = 10.443 tonf/ft’

kPa = 0.1450 1bf/in’ kPa = 20.885 Ibf/ft’

MJ = 0.2778 kWh

kJ = 0.9478 Btu

J

= 0.7376 ft* Ibf

kW 1.3410 hp

W = 3.4121 Btu/h

W = 0.7376 ft*lbf/s

W/m* • K = 0.1761 Btu/ft’*h*'’F

W/m*K B 0.5778 Btu/ft**"F

NOTES: (1) The above conversion factors are shown to three or four places of decimals.

(2) Unpreflxed SI units are underlined. (The kilogram, although prefixed, Is an SI base unit.)

REFERENCES; NBS Guidelines for the Use of the Metric System, LC1056, Revised August 1977; The Metric System of Measurement, Federal Register Notice of October 26, 1977, LC 1078, Revised November 1977; NBS Special Publication 330, "The International System of Units (SI) ," 1977 Edition;

NBS Technical Note 938, "Recoimsended Practice for the Use of Metric (SI) Units In Building Design and Construction," Revised edition June 1977; ASTM Standard E621-78, "Standard Practice for the Use of Metric (SI) Units In Building Design and Construction," (based on NBS TN 938), March 1978; ANSI Z210. 1-1976, "American National Standard for Metric Practice;" also Issued as ASTM E380-76^, or

IEEE Std. 268-1976.

X
ABSTRACT

The replacement of aging plant and facility equipment is a major concern

of all Federally-owned and operated installations. Past efforts at

equipment replacement have often underutilized information on the service

life distribution of a particular component/system. More specifically,

equipment was usually maintained until it either failed or reached some average age at which time total replacement was initiated.

This study develops a framework, based on service life distributions fitted

to data from a published survey, for dealing with the "replacement problem."

Service life distribution are used to develop replacement schedules for

approximately 50 major plant andd facility equipment items at the National

Bureau of Standards (NBS) Gaithersburg and Boulder sites. The costs

associated with these replacement schedules are estimated on an annual

basis over a ten-year planning horizon using a probabilistic cost model.

Estimates from this model are intended for use in budgeting for replacements

over the planning horizon. The results of this study indicate that approximately $15 million (all estimates are in first quarter of 1980 dollars)

will be needed to meet expected replacements during fiscal years 1982

through 1991 at the NBS Gaithersburg and Boulder sites.

Key Words: Building maintenance; cost engineering; economic analysis;

rehabilitation cost.

xi
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1 INTRODUCTION

The replacement of aging plant and facility equipment is a major concern of

all Federally-owned and operated installations. Past efforts at equipment

replacement however, have often underutilized information on the service life

distribution of a particular component/system. More specifically, equipment

was usually maintained until it either failed or reached some average age

at which time total replacement was initiated. The current maintenance

program of the physical plant at the National Bureau of Standards (NBS)

follows this approach in that it focuses on the repair of major plant and

facility equipment of system components. Consequently, as the system components in the physical plant age and their remaining useful lives shorten,

replacement rather than repair becomes highly probable.

The replacement of obsolete equipment represents a unique opportunity to

apply techniques from engineering, economics and operations research to the

"replacement problem." More specifically, data on service life distributions

for approximately 50 major plant and facility equipment items are used to

develop replacement schedules and the annual costs required to support these

schedules for the NBS Gaithersburg and Boulder sites. Furthermore, Executive

Order 12003, dated July 20, 1977, states that by 1985 all existing Federallyowned buildings shall have the average annual energy use per gross square foot

of floor area reduced by 20 percent compared to the energy consumption in

1975. Consequently, energy conservation should play a major role in the

selection of replacement equipment at the NBS.

The NBS is widely recognized as a leader in the development and application

of engineering economics techniques for making cost-effective decisions regarding alternative building components/systems. Among these techniques are parametric cost estimation, computer simulation and life-cycle costing. Using

these techniques as firm technical underpinnings, it is possible to develop a planned budgeting strategy for the replacement of aging and obsolete plant and

facility equipment.

1.1 BACKGROUND

On September 5, 1978, the Plant Division of the Center for Facilities Management

(CFM) sent an Interdivision Work Order (IWO-351-5028) to the Building Economics

and Regulatory Technology Division (BERT), Center for Building Technology (CBT),

for conducting a preliminary replacement study. Pursuant to this request, a report entitled Preliminary Study of Planned Replacement of Plant and Facility

Equipment at the NBS Gaithersburg Site ^ was prepared and transmitted to

both Plant Divisions in November 1978.

^ Phillip T. Chen, Preliminary Study of Planned Replacement of Plant and

Facility Equipment at the NBS Gaithersburg Site , National Bureau of

Standards, NBSIR 78-1567, November 1978.

1
As a result of the above study, the Gaithersburg Plant Division requested,

on February 13, 1979, that the Building Economics and Regulatory Technology

Division conduct a plant equipment replacement study for both the Gaithersburg

and Boulder sites. Due to Insufficient funding, however, the effects of

energy conservation and program changes could not be included within the

framework of this replacement study.

As part of the above study, a Letter Report was transmitted to both Plant

Divisions on May 14, 1979. This report contained preliminary cost estimates

for facility modernization activities at both sites for fiscal years 1981,

1982, and 1983.

At various times during this study, progress briefings have been made to

Dr. Thomas A. Dillon, NBS Deputy Director, and to the personnel from the

Office of the Director of Administrative and Information Systems (Units 320

and 351), and Office of the Associate Director for Programs, Budget and

Finance (Units 111, 112, and 114).

1.2 PURPOSE

The goal of this study is to estimate the annual plant equipment replacement

cost. This study is needed because much of the NBS plant and facility

equipment service life has already exceeded its expected useful life or will exceed it in the next decade. These annual cost estimates cover both

the NBS Gaithersburg and Boulder sites for a ten-year period beginning in

FY82.1 The annual cost estimates are derived by first distributing and then

summing up the individual engineering cost estimates over the ten-year period.

This study does not include the annual replacement cost of plant equipment

items due to technical obsolescence. Technical obsolescence is most likely

caused by: (1) a change in NBS research needs; (2) a change in national

policy, such as barrier free design; and (3) the need to conserve energy due

to rapidly rising energy costs and Presidential directives.

1 . 3 SCOPE

The approach for this study includes the collection and selection of basic

information on equipment replacement, the selection and application of evaluation methods, and the presentation and assessment of the results of this

evaluation.

1.3.1 Information Sources^

The information presented in this study was derived from five basic sources:

The rationale behind the selection of a ten-year planning period is given

in section 2.2.

^ See appendix A for a complete listing of Information sources.

2
(a) Interviews with the engineering and operating personnel of Plant

Divisions at Gaithersburg and Boulder;

(b) Inspections of physical plants at Gaithersburg and Boulder, including

representative equipment items;

(c) NBS budget for facility maintenance, modifications, and improvements;

(d) Equipment service life data from the American Society of Heating,

Refrigerating, and Air Conditioning Engineers (ASHRAE),^ equipment

manufacturers, local contractors and NBS operations and maintenance

records; and

(e) Cost data from past experience of the Plant Divisions, local area

governments, manufacturers, contractors and the 1979 edition of the

R. S. Means Mechanical and Electrical Cost Data^ guide.

1.3.2 Evaluation Methods

The methods for analyzing and synthesizing the replacement Information consist

of

(a) Performing qualitative analyses on equipment component history to

determine which plant equipment items are good candidates for replacement.

(b) Establishing service lives for the candidate replacements;

(c) Developing engineering cost estimates for the replacement of plant

equipment items; and

(d) Performing an economic synthesis to define annual cost estimates based

on the most likely plant equipment replacements which will occur over

the ten-year period beginning in FY82.

1.3.3 Evaluation Results

The results of this study consist of:

(a) Annual replacement costs of plant equipment due to physical obsolescence

at both the NBS Gaithersburg and Boulder sites for ten years starting

from FY82;

^ Mustafa T. Akalin, "Equipment Life and Maintenance Cost Survey," ASHRAE

Journal, October 1978.

^ Mechanical and Electrical Cost Data: 1979 , Second Edition, Robert Snow Means

Company, Inc., Kingston, Massachusetts, 1979.

3
(b) Recommendations of engineering studies^ capable of identifying plant

replacements required due to technical obsolescence; and

(c) Guidelines for using economic concepts to ensure that plant equipment

replacements at the NBS sites are carried out in the most cost-effective

manner .

1.4 ORGANIZATION

The report Includes two technical chapters and three appendices. In particular,

the report is organized along these lines.

Section 2.1 includes a discussion of engineering considerations associated with

each plant replacement item, background information on the distribution of

the service life for each item and itemized engineering cost estimates.

Section 2.2 focuses on the economic evaluation methods used in this study as well as methods recommended for use in evaluating equipment replacements due

to technical obsolescence. Section 3 includes the summary and recommendations

for further work.

Three technical appendices are also included. They are concerned with: (A) a complete listing of information sources; (B) engineering studies related to

energy conservation and technical obsolescence; and (C) economic principles

and applications suitable for replacement studies.

^ See appendix B for the listing and discussion of engineering studies. The

costs of replacing equipment which are technologically obsolete are not

Included in this study.

See appendix C for a listing and discussion of economic principles and

applications

4
22.1. DESCRIPTION OF PLANNED REPLACEMENT STUDY

ENGINEERING CONSIDERATIONS

Based on the information sources listed in section 1.3.1, the following topics

are included as engineering considerations for this study: site descriptions;

plant equipment service life; engineering cost estimates; and summary tables

and discussion.

2.1.1 Site Descriptions

(a) Gaithersburg site - The average age of the buildings is 15 years. Since

most of the buildings were designed by one architectural-engineering firm,

which had worked closely with GSA and NBS personnel in an earlier planning

phase, the building systems such as roofs, HVAC, plumbing and electrical

distribution, are similar in design, workmanship, maintainability and durability. Furthermore, a good maintenance program (both regular and preventive) has been in continuous operation since building occupancy. Therefore,

of the approximately 90 groups of equipment in Gaithersburg, only 29 groups

are identified as needing replacement. (The selection of the 29 groups

was based on consultation with the Plant Division.) These groups are listed

in table 2.1.

(b) Boulder site - The average age of buildings at Boulder is 25 years. Many of

the HVAC systems are either window units or small systems added to the

buildings after occupancy. Most of the buildings are dissimilar in design.

However, because of a good maintenance and operation program, the building

systems and components are still in use despite their old age. The situation in Boulder is further complicated by the requirement to share occupancy

with other Federal agencies which are not a part of the NBS and do not have

similar facility requirements. In this study 18 groups, listed in table 2.2 are defined as in need of replacement over the ten-year period beginning

in FY82. (The selection of the 18 groups was based on consultation with the

Plant Division.

2.1.2 Plant Equipment Service Life

Service life is defined as the number of years before the total replacement of

the system/component is likely to be initiated. Previous studies ^ have concluded

that equipment service life is generally influenced by the following five factors

(a) Replacement with an identical item becomes less costly than continued

maintenance and repair;

(b) Replacement with an identical item becomes necessary to ensure reliability

and safety;

^Mustafa T. Akalin, "Equipment Life and Maintenance Cost Survey," ASHRAE

Journal

October 1978.

5
(c) Advanced technology suggests replacement due to lower operating costs

for new equipment;

(d) Changing requirements necessitate replacement to meet new needs not within

the capabilities of existing equipment; and

(e) Human desires dictate replacement for non-economic reasons.

Since this study only deals with physical obsolescence, only factors (a) and (b) are considered. Although factors (c), (d) and (e) are beyond the scope of this

report, a methodology is outlined which will facilitate the assessment of equipment replacements falling into factors (c) and (d).

Generally, the expected service life of a particular piece of plant equipment

is obtained through consideration of the following:

(a) The service life estimates published by or obtained from the manufacturer

or respective trade association;

(b) The effect that a particular arrangement of the total system is likely

to have on the service life of an individual piece of equipment; and

(c) The effect that an operation and maintenance procedure is likely to have

on the equipment service life, i.e., the historical engineering performance

of the existing plant.

For this study, the service lives of plant equipment items were derived from the

following sources: ASHRAE, manufacturers, contractors, local governmental records

and NBS records. Engineering judgment was used when service life data were not

available from any of the above sources.

In order to facilitate the distribution of engineering cost estimates over several

consecutive years, the service lives of plant equipment items are expressed in

three statistical terms. These terms are the Mode, the 25th percentile, and the

75th percentile. In the context of this study:

(a) The "Mode" is defined as the year in which the greatest number of identical

items (i.e., of the same kind of plant equipment) will require replacement.

(b) The "25th percentile" is defined as the year by which 25 percent of the same kind of plant equipment items will have required replacement.

(c) The "75th percentile" is defined as the year by which 75 percent of the same kind of plant equipment items will have required replacement.

The three statistical terms associated with service life are listed in tables 2.1

and 2.2. To Illustrate the relationship of these three statistical terms to

service life, the following data from table 2.2 are presented:

6
SERVICE LIFE IN YEARS

GROUP EQUIPMENT MODE 25% 75% QUANTITY

10 Fan Coil Unit 20 15 22 180

The service life of the fan coil units is expressed using three terms:

(a) The 20th year is the single year during which a replacement of a fan coil unit is most likely to occur.

(b) At the end of 15 years, 25 percent of all fan coil units (45 units)

will have been replaced.

(c) At the end of 22 years, 75 percent of all fan coil units (135 units)

will have been replaced.

2.1.3 Engineering Cost Estimates

Engineering economic principles usually distinguish among three types of cost

estimates. These three types of estimates, in increasing order of accuracy,

are:

(a) Order of Magnitude;

(b) Ball Park; and

(c) Detailed.

Each term is defined here in terms of the "possible" spread about the expected

bid price for the contract. An order of magnitude estimate is expected to be

only accurate to a spread of + 100 percent of the bid price, a ball park estimate is expected to be within + 30 percent, and a detailed estimate within

+ 5 percent. In general, order of magnitude estimates are used only in the

conceptual phase. Planning activities are usually conducted using ball park

figures. Detailed estimates are prepared at the same time as the engineering

deign parameters are established.

The engineering cost estimate for a plant equipment item is defined as the

estimated total cost, in 1980 dollars (first quarter), to replace an old piece

of equipment with an identical or similar piece. The estimated total cost

includes engineering design cost, disconnecting cost, the removal cost of the

item, reconnecting cost of the new item, and all related overhead costs and/or

profit if it is done by an outside contractor. Salvage value is not included

since it is dependent on the physical condition of the equipment item and, as such, cannot be estimated at this time. In this study, it is assumed that the

engineering design will be done at the time of replacement need so that all

estimated costs are of "ball park" accuracy. The engineering cost estimates,

expressed in dollars of the first quarter of 1980, are divided into three types

7
(a) "Most likely" engineering cost estimates are the realistic cost estimates

for the replacement which will most likely be needed in the ten-year period

beginning in FY82. These estimates are based on the probabilistic cost

model ^ described in section 2.2.

(b) "CFME" (Cost Factor Model Estimates) are engineering cost estimates based

on a parametric cost estimation procedure. They cover equipment replacements which may be needed for the ten years beginning in FY82.

(c) "Total Replacement" estimates are the one-time costs of replacing the

equipment items in a group or a component of a group. It is simply equal

to the quantity of the equipment item times the unit cost of the item.

All three types of cost information are Included in the cost engineering

estimates presented in tables 2.1 and 2.2.

The CFME figures may be numerically derived from the total replacement cost

figure through use of a cost factor model. This model separates, or factors,

the current age of the plant equipment and the length of the planning horizon,

in this case ten years. A deflator, actually the mode of the service life

distribution, is then used to measure the expected replacement potential of the

system/component. In order to apply the cost factor model, each item was broken

up into a homogeneous group. For example, as shown in equipment group 3 for

the Gaithersburg site, 144 bearings were replaced five years ago and the remaining 800 are 15 years old. If we denote the total replacement estimate as TR,

the equipment age as EA, the planning horizon as PH, and the 75th percentile

as P(75), the CFME figures are defined as;

CFME = (TR)[(EA/Mode)-((P(75)-EA)/Mode)+(PH/Mode)] (1)

where (EA/Mode) ^ 1

In equation (1) the term TR(EA/Mode) represents the expected total cost of

equipment replacement to date. The term (EA/Mode) is a probability factor for

total replacement of equipment to date. The term TR[ (P(75)-EA)/Mode] represents

the total cost avoided during the planning horizon. The term ( (P(75)-EA)/Mode)

is a deflator representing a probability factor for that portion of the existing

equipment not replaced and expected to last throughout the planning horizon.

Similarly the term TR(PH/Mode) represents cost of equipment replacement within

the planning horizon.

It is important to point out that the mode is used as the denominator in all

three terras in equation (1). The mode is only one of three measures of

central tendency, however. The other two are the mean (the average service

^The computerized probabilistic cost model is also used to produce other

baseline cost estimates. These estimates, which are discussed in section 2.2,

include: "theoretical replacement cost;" "no historic replacement cost;"

and "most likely replace costs with a one, two or three year delay."

8
Table

2.L

Engineering

Considerations:

Gaithersburg

Site

I

I

9&

Ia

9S

z

i s

O m O <n \o nO m ^ 00 00

.-I <N o

O o O oj o r*.

«> o a c

O O -tf « >» ^ <M O <» r*» «»

CS 00 “* ^

> *a

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Cb O Z S3 :x M

o.

01

8'< om

iz

o

o o

o\ o o 00

'O in

CNJ

m

00 o

lA so •-t CM •-< On ^ *0 CO O

O O O O lA O »A

CM lA CM CM <A m cn

o o o o o o CO 1-1 ^ CM (O CM

o o lA m in o lA

CM ^ CM CM

e-s

O > ki c eOJZOUCGC 33X9O<0cO4 0uOh3OCJU«bC2<

OO O

>o ^

CO ^

CO

lACM O O 00 in lA

CM

00<o

&

M

o5

J=

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Mo£

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01

blo

o

o

o.

01

b<

<0

(0 •ooo

9>s

>s

oz

03

9

i
Age

SERVICE

LIFE

IN

YEARS

ESTIMATES

In

1980

DOLLARS

X

1000

Equipment

Group

Coaponent

In

10

Year

Total

Total

Quantity

Quantity

Nane

Yeara

Mode

2bX

75%

Moat

Likely

CFMR

Replacement

Commanta

JO

A

Tube

17

Stean

Generator

A

12

Valve

17

1

Lot

Insulation

17

1

Lot

Boiler

Auxiliaries

17
Table

2.1

Engineering

Considerations:

Gaithersburg

Site

(Continued)

I

I

I

oo

o

d«

4)

Vi

00 c (s < ’H V

4)ez

u
Age

SKRVICE

LIFE

IN

YEARS

ESTIMATES

In

1980

DOLLARS

X

1000

RqulpMnc

Croup

Component

in

10

Year

Total

Total

Qu*nHty

Qu»ntlty

Nana

Yeara

Mode

25X

75X

Moat

Likely

CKME

Replacement

Commenta

I
Table

2.2

Engineering

Considerations:

Boulder

Site

(cont.

o o o •-.I ^o

CO o

CM

C*J CM

CO >-• U »O

I >%0u

O bu o b

13
life) and the median (the year by which 50 percent of the same kind of plant

equipment items will have required replacement). Due to the belief that

maintenance management policies tend to respond to changes in equipment

replacements (in particular increases), the mode was selected for use rather

than the mean or the median. More succinctly, as equipment ages the rate at

which it must be replaced increases over some time period. Maintenance policies

respond by anticipating a higher replacement schedule in the following year(s).

Consequently, by the time the mode is reached, it is quite likely that the

decision to initiate total replacement of all equipment beyond some certain average

will have been made.

Most likely estimates are the results of a probabilistic cost model based on computerized calculations using the service life distribution for each item.

The probabilistic cost model is discussed in section 2.2.

The results of the calculations made with equation (1) and the most likely

estimates are listed in tables 2.1 and 2.2.

2.1.4 Summary of Engineering Considerations

Table 2.1, Engineering Considerations: Gaithersburg Site, and table 2‘. 2,

Engineering Considerations: Boulder Site, are included as summaries of the

information presented in sections 2.1.2 through 2.1.3.

The information contained in these two tables is used in section 2.2 for

computing the most likely estimates. The CFME estimates shown in the tables are ”ball park" figures obtained with the use of equation (1) in section 2.1.3.

These estimates are useful for the preliminary selection and evaluation of

replacement candidates before computer applications. The ten-year most likely

estimates are the results of a series of computer applications and are discussed in section 2.2.

The engineering aspects associated with tables 2.1 and 2.2 are discussed in

section 2.1.5.

2.1.5 Discussion

Based on tables 2.1 and 2.2, the following observations of the engineering con- siderations for Gaithersburg and Boulder can be made.

A. Gaithersburg Site

The following equipment groups appear to require substantial replacement

within ten years.

(1) Group 1, Air Compressor - The water jacket, piston, cylinder and

after cooler, components for the two compressors supplying air

to the whole site, are expected to be replaced within ten years.

14
(2) Group 3, Air Handler Unit - The 800 bearings listed are expected

to be replaced within ten years. The 144 bearings which were

replaced five years ago will need minimum replacement in the next

ten years.

(3) Group 8, Condensate Pump - 21 condensate pumps are expected to be

replaced within ten years.

(4) Group 9, Cooling Tower - The five components listed are expected

to be replaced within ten years. The most likely estimates of

the component replacement costs for ten years are $341,000, as compared to a total replacement cost estimate of $700,000.

(5) Group 10, Electrical System - In order to reduce the likelihood

of electrical power interruption due to potential equipment failure

and voltage drop, some parts of the primary switch gear at the

substation will have to be stocked since the manufacturer. Federal

Pacific, no longer will make and supply these parts after January

1980. The above parts, sufficient for the next five years, will

be purchased by the Plant Division. A study is being conducted

by the Plant Division to replace the whole primary switch gear

system at the substation by 1985. The preliminary cost estimate

for this complete replacement is $4,500,000 and is not included

in the annual replacement estimate.

(6) Group 14, Heat Exchangers, Chilled Water - Most of the heat

exchangers for the 55°F chilled water may have to be replaced

due to contamination by corrosion. The 55°F chilled water is

supplied for laboratory equipment cooling.

(7) Group 19, Piping, 55°F Chilled Water - This steel piping is

corroded internally. It should be replaced by copper tubing

in order to provide an improved quality of cooling water for

laboratory equipment.

(8) Group 21, Refrigeration Unit - The most likely estimate for

component replacement is $404,000 for the next ten years.

This replacement is needed to assure the efficient operation

of the four refrigeration units, the complete replacement

estimate of which would be $3,000,000.

(9) Group 22, Roof - Most of the roof areas are expected to be

replaced within ten years.

(10) Group 24, Safety - The CO 2 system for fire protection in

Building 236 is expected to be replaced. 200 heat detectors

and 50 smoke detectors may be found to be defective within

ten years and, therefore, will require replacement.

(11) Group 25, Steam Generator - The backs, tubes and valves for the

four steam generators are expected to be replaced within ten

15
years. These generators are the source for building heat and processing steam. In addition to the replacement of backs, tubes and

valves, thermal insulation and boiler auxiliaries (water softener,

etc.) are the remaining replacement needs within ten years. The

most likely replacement estimate is $42,000 for the five components,

while the total replacement cost of these four generators is estimated to be $1,200,000.

(12) Group 27, Valve - Replacement is needed for 12 backflow preventors

to assure the supply of clean and safe domestic water in the

buildings. Some of the 700 valves, 3 inches and above in size,

may have to be replaced also.

The replacements of the following equipment groups are also essential for the

operation of buildings:

(13) Group 26, Underground Piping - Some portions of the condensate return

piping inside of the Ricwil^ are expected to be replaced within ten

years due to corrosion within the pipe and outside of the Ricwil.

(14) Items within the remaining equipment groups analyzed in Table 2.1

of the study but not specifically discussed above.

The following items, although not included in this study, are good candidates

for evaluation five years hence because replacement for these items may be

needed ten years from now.

(15) Elements of building envelope, such as walls, construction joints,

facia, mullions, etc. Roofing, although being an element of the

building envelope, has been included as equipment Group 22.

(16) Elevators, hoists, cranes, dock elevators and dumbwaiters are also

good candidates for evaluation five years from now.

(17) Laboratory furniture and laboratory services should also be evaluated

five years from now.

B. Boulder Site

The following equipment groups appear to require substantial replacement.

(1) Group 1, Air Compressor - All 22 air compressors are expected to

be replaced within ten years.

(2) Group 2, Air Conditioner, Window Unit - All 300 units are expected

to be replaced at least once within ten years.

^ Trade name of the underground piping system in use at the Gaithersburg site.

Mention of the trade name is not intended as an endorsement of the product.

16
(3) Group 4, Boiler - 6 of the 12 boilers listed are expected to be

replaced.

(4) Group 6, Electrical System - 3 emergency generators are expected

to be replaced. The 150 batteries are also expected to be replaced.

Some of the 28 transformers are expected to be replaced within ten

years.

(5) Group 9, Holst, Elevator and Crane - Some portions of the hoists, cranes and overhead doors are expected to be replaced within ten

years

.

(6) Group 10, HVAC System - Some of the package units, refrigeration

units and cooling towers are expected to be replaced within ten

years

.

(7) Group 11, Piping System - Some of the valves, steam traps and expansion joints are expected to be replaced. The 500 feet of underground

piping will also need replacement due to corrosion.

(8) Group 12, Pump - Some of the circulating and condensate pumps are expected to be replaced within ten years.

(9) Group 14, Lighting - Some of the 5000 interior lighting fixtures

will be replaced due to the fact that the existing fixtures are no longer suitable for laboratory work.

(10) Group 15, Roof - The roofing of some areas is expected to be replaced

In particular, new edge treatment is required for the area adjacent

to the parapets, expansion joints and facia.

(11) Group 17, Safety - Some of the batteries for emergency lights are expected to be replaced.

(12) All remaining groups listed in table 2.2, but not discussed above,

are also essential for the effective operation of buildings and

sites.

(13) Within five years, it is suggested that all laboratory furniture and

laboratory services be evaluated for possible need of replacement.

2.2 ECONOMIC CONSIDERATIONS

The purpose of this section is to discuss how the engineering principles

presented earlier can be synthesized into a set of annual cost estimates.

These cost estimates, based on the probabilistic cost model, are intended for use as budgetary planning figures over the ten-year period beginning in FY82.

The selection of a ten-year planning period for this study was intended to

satisfy three criteria. First, due to the current age of the plant equipment

at both the Gaithersburg and Boulder sites, it is likely that many, if not a

17
majority, of the major pieces of equipment will have to be replaced by the

end of the planning period. Second, a ten-year period is short enough to ensure

that most of the engineering considerations are based on sound technical underpinnings. In addition, a relatively short period serves to keep uncertainty

within manageable bounds. Third, a ten-year planning period represents two

five-year planning periods back-to-back. As such, the estimates can be viewed

as being valid primarily only over the first five-year period and then be

"refitted" to a second five-year period for future reference.

2.2.1 Cost Considerations

Two types of cost considerations are important in the preparation of budgetary

planning figures. These two types are:

(a) Initial cost considerations; and

(b) Life-cycle cost considerations.

Initial costs may be defined in terms of direct costs and Indirect costs.

Those costs that a contractor incurs if he undertakes a specific job (i.e.,

labor costs including: fringe benefits, social security, workmen’s compensation, unemployment insurance, bonding, risk acceptance, and the cost to the

contractor for building materials and construction equipment) are called

direct costs . Those costs that the contractor incurs regardless of whether

he undertakes a specific job or not (e.g., rental payments for clerical and

secretarial labor and payments for management) are called indirect costs . The ratio of indirect costs to direct costs is usually referred to as the

mark-up factor. A mark-up factor is important because it can be varied

somewhat depending on the contracting mode. For example, the replacement of

a severely deteriorated piece of equipment might be accomplished at a lower

price thorugh in-house replacement because NBS, rather than a private contractor, is assuming the risk for a cost overrun. Generally speaking, due to

the greater risk of a cost overrun, contractor mark-ups are significantly higher

in renovation activities than in new construction activities. Since all estimates in this study are assumed to be "ball park" figures, however, no assumptions about a specific contracting mode will be made. The decision as to the

contracting mode is best left to the time when the relevant engineering

parameters are defined.

Life-cycle cost techniques differ from initial cost considerations in that

they explicitly take into account all costs (i.e., owning, operating and

maintaining) which occur over the period under study. Thus, if a particular

component were installed in the cooling tower and due to a lack of long-tern

durability had to be replaced every five years, then the value of the cash

flows resulting from periodic replacement must be estimated. These cash

flows should in principle include any escalation in construction costs as well as incorporate a measure of the time value of money. Using the initial

cost figure rather than the life-cycle cost figure would understate the

true cost of using the cooling tower component mentioned earlier. To

pursue this topic a bit further, suppose an alternative component for the

cooling tower has a higher Initial cost but is expected to last 15 years.

18
Thus if we compared the two alternatives over a given time horizon, say

15 years, then it is possible that the more expensive component from an initial

cost viewpoint is less costly from a life-cycle cost viewpoint due to its

greater long-term durability. Only with life-cycle costing will the "true”

costs of ownership over the time horizon be represented.

It is important to point out, however, that the degree of sophistication gained

through the life-cycle cost approach requires that detailed engineering specifications be available. Ideally, these specifications would be based on the

results of special engineering studies. Since this study assumes that an item

is replaced with a like item, no changes in operational characteristics are permitted. Consequently, no alternatives are considered. Under this rather

confining assumption, life-cycle costing provides little new information. The

emphasis of this study will thus be on the use of initial cost figures to

facilitate the preparation of a baseline budget over the ten-year planning

period. Guidelines for applying life-cycle cost techniques are provided in

appendix C. This approach was taken to ensure that, as replacement became

necessary and additional engineering information on the system became available, it would be possible to use the funds allocated for replacement in the

most cost-effective manner.

2.2.2 Data Base Development

The development of a data base is the key step which enables the engineering

considerations discussed earlier to be translated into a set of expected annual

cost figures. The actual development of a data base makes use of statistical

techniques as well as techniques from operations research. In tables 2.1 and

2.2 three types of service life figures are given. These figures provide the

years corresponding to the 25th percentile, the mode, and the 75th percentile.

The mode is stressed, rather than the mean or the median, because it represents

the year where replacement is most likely to occur. Furthermore, under certain

reasonable assumptions, the use of the three measures discussed above permits

additional information about the overall service life distribution to be

obtained. In particular, if the service life distribution is assumed to be

triangular (see figure 2.1), these three points permit the entire service life

distribution to be approximated. It is important to point out that authorities

in the area of simulation modeling have advocated the use of either a Beta or triangular distribution if the data available on the process being modeled are sketchy.^ The decision to use a triangular, rather than a Beta, distribution

in this study was based primarily on computational ease. Another important

factor which favored the triangular, distribution over other, potential service

life distributions (e.g., the normal or the uniform) was that it allowed

skewness to be incorporated into the modeling process. For example, the mean

(average) service life of a particular component may be 20 years but the mode,

the year where the largest number of components are replaced, may be 23 years.

Thus the use of the mean exclusively (as is commonly done) would tend to force

the budgeted replacement funds to become "out-of-phase" with the required

replacement funds.

^ Phillip F. Ostwald, Cost Estimating for Engineering and Management , Prentice-Hall, Inc., Englewood Cliffs, New Jersey, 1974.

19
The annual cost estimates are based on the probabilistic cost model. The

key pieces of information used to exercise the probabilistic cost model

are presented in tables 2.3 and 2.4. Table 2.3 summarizes data used in

preparing the annual estimates for the Gaithersburg site. Table 2.4 is concerned with the Boulder site. The cost model is referred to as probabilistic

because component replacements are scheduled based on a service life (probability) distribution. Individual replacement costs, however, are assumed to

be constant rather than distributed over some range specified by a probability

distribution. In addition to the total replacement cost for each piece of

equipment/component, seven additional pieces of information were used in

exercising the probabilistic cost model. These data are:

(a) the item count;

(b) the age of the equipment;

(c) the low point of ‘the service life distribution;

(d) the 25th percentile;

(e) the mode;

(f) the 75th percentile; and

(g) the high point of the service life distributio.

The item count is used to determine the unit replacement cost and the expected

number of item replacements that will be required in a given year based on the

respective probability distribution. The unit replacement cost is then used to

determine the total annual expected cost due to replacements. The age of the

equipment is used to ensure that each category of plant equipment examined is as homogeneous as possible. Given the approach taken in this study, this requirement is particularly important. The last five pieces of information define the

service life (probability) distribution.

Data for each item on the 25th percentile, the mode, and the 75th percentile,

were used to fit the two end points of the triangular distribution. See

figure 2.1 for an example of a fitted triangular distribution using the information on the fan coil units presented earlier. A computerized procedure was

then used to estimate the number of theoretically ideal replacements which

should have occurred prior to the present time period (i.e., the age of the

equipment). This figure was then compared to the historical replacement cost

schedule to determine what proportion of the theoretically ideal replacements

were actually installed.^ The remainder thus represents items which should

have been replaced, but for various reasons were not. The proportion which

remains is defined as the probability of "theoretical" replacement. Suppose

this figure was calculated as 20 percent, that the age of the equipment is

17 years, and that the maximum life of the equipment is 36 years. Since all

of the equipment is currently in use, the 20 percent of the population

corresponding to "theoretical" replacements are still candidates for potential

^ Replacement cost schedules for each site were reconstructed from the records

of the respective Plant Division. Adjustments into first quarter 1980

dollars were made using the Engineering New Record Building Construction

Cost Index.

20
replacements in the future. Therefore, in order to avoid an underestimate of

the potential replacements, the 20 percent of the population which are "theoretical" replacements are uniformly distributed over the period from the

present to the maximum life of the equipment. In this case, the probability

of a replacement in a given year (between years 17 and 36) would experience

a net increase of one percent. Alternative methods could be used to distribute

the "theoretical" replacements; however, the assumption that they are uniformly

distributed across the remainder of the service life distribution was appealing

both from a conceptual and a computational viewpoint. The computerized procedure then calculates the expected number of replacements in each year and

the cost of replacement. It then sums the costs across all items for each year.

The figure which results is the expected annual budget required to cover all

items expected to require replacement in that year.

2.2.3 Annual Cost Figures

The annual cost figures plotted in figures 2.2 and 2.3 are the result of the

application of the probabilistic cost model to the data bases for Gaithersburg

and Boulder, respectively. The vertical axis of each figure shows the expected

annual replacement cost in 1980 dollars. The horizontal axis of each figure

enumerates each of the fiscal years for which the site was in use through

FY1991. Each expected annual replacement cost produced by the probabilistic

cost model is designated by a circle, hexagon, or a triangle.

Three sets of annual cost estimates for each site are provided to show the

potential effects of alternative historical equipment replacement scenarios.

The first set of estimates, those designated by a circle, are based on the

theoretically ideal replacement scenario. In this scenario equipment is

replaced based solely on the service life distribution defined in tables 2.3

and 2.4. The second set of estimates, those designated by a hexagon, are based on the historical replacement cost schedule for each site. In this

scenario only a proportion of the theoretically ideal replacements are installed so that an increment of "theoretical" replacements is built up.

This increment is then distributed uniformly over the remaining service life

of the item. ^ The third set of estimates, those designated by a triangle, are based on the assumption that no expenditures for equipment replacement took

place until FY82. This scenario is included as an upper bound estimate for

comparison against any actual or planned replacement program. It also serves

^ The proportion of ideal replacements actually installed for each year may

vary. For example, at the Gaithersburg site the ratio of actual expenditures to the theoretically ideal replacement funds tends to decline up through

FY81, whereas for Boulder it is a constant 20 percent through FY81. For any

given year the proportion of a particular item replaced is equal to the proportion of theoretically ideal replacement funds required that were actually

spent. This approach was used because it was not possible to get item-by-item

breakdowns from the historical records. The estimates of actual replacement

costs up through FY81 each site plotted in figures 2.2 and 2.3 were provided

by the respective Plant Division.

21
FIGURE

2.1

EXAMPLE

OF

A

FITTED

TRI/VIGULAR

DISTRIBUTION

USING

DATA

ON

DE

1

Q

5 y

t—^

LU

R

R

S

8

8

8 g

S

8 e

S. «> if

is li

s a

I 1 I Si

it

ills I

22
TABLE 2.3 EQUIPMENT SERVICE LIFE DISTRIBUTIONS: GAITHERSBURG SITE

GROUP EQUIPMENT/ QUANTITY AGE IN CRITICAL POINTS IN SERVICE LIFE DISTRIBUTION

NO. COMPONENT YEARS LOW 25% MODE 75% HIGH

1 Water Jacket 2 17 0 10 18 20 27 Piston & Cylinder 4 17 9 15 18 20 25 After Cooler 2 17 0 10 16 20 29

9 15 4 15 20 25 36

2 Air Conditioner 9 17 0 8 13 15 21 Air Conditioner 3 7 0 8 13 15 21

3 Coll & Support 210 15 0 15 20 30 48

Coll & Support 26 5 0 15 20 30 48 Bearing 800 15 9 15 18 20 25 Bearing 144 5 9 15 18 20 25 Motor & Starter 472 15 0 15 20 30 48 Fan 472 15 0 20 25 40 65 Pneumatic Cont 944 15 8 15 20 20 24

4 Air Receiver 30 15 4 15 20 25 36

5 Air Separator Tank 7 15 5 15 18 25 38

6 Air Washer 2 15 6 20 30 30 38

7 Boiler 1 3 8 20 25 30 42 Boiler 1 11 13 25 30 35 47

8 Condensate Pump 36 15 0 10 15 25 40 Condensate Pump 4 3 0 10 15 25 40

9 Fan Stack 4 17 10 15 16 20 27 Gear Box, Shaft 4 17 9 15 18 20 25

and Motor

Butterfly Valve 4 17 9 15 18 20 25 Wood Deck & Fill 1 8 5 8 10 10 12 Sprinkler System 1 14 0 10 15 20 30

10 Replacement Parts 100 17 10 25 30 38 55

for Primary and Secondary Switch

Primary Switch Gear

to Pepco 1 17 — — — — —

11 Fume Hood 368 15 Duct 110 15 8 15 20 20 24 Duct 258 15 5 30 40 50 75 Fan 60 15 0 10 15 20 30 Fan 50 5 0 10 15 20 30 Fan 258 15 3 20 25 35 54

12 Duct 138 15 5 30 40 50 75 Fan 138 15 3 20 25 35 54

13 Expansion Tank 23 15 8 15 20 20 24 Expansion Tank 5 5 8 15 20 20 24

14 Heat Exchanger

Chilled Water

18 15 0 15 20 30 48

15 Heat Exchanger

Hot Water

50 15 8 20 25 30 42

23
TABLE 2.3 EQUIPMENT SERVICE LIFE DISTRIBUTIONS: GAITHERSBURG SITE (cont.)

GROUP EQUIPMENT/ QUANTITY AGE IN CRITICAL POINTS IN SERVICE LIFE DISTRIBUTION

NO. COMPONENT YEARS LOW 25% MODE 75% HIGH

16 Interior Piping 80,000 15 5 20 20 40 67 Steam Manholes 1 15 0 10 15 20 30 All Other 1 15 12 20 20 30 44

17 Landscaping 1 15 —

18 Perimeter Fence 1

19 55 *F CH H,0 11,200 15 0 10 15 20 30

20 Pumps 201 15 4 15 20 24 35 Pumps 24 7 4 15 20 24 35

21 Gear Box 3 17 0 10 20 25 35 Gear Box 1 5 4 15 20 25 36 Rotor 4 17 0 10 20 20 26 Motor Insulation 4 5 0 10 20 20 26 Motor Starter & Breaker 12 17 0 10 15 30 50 Insulation 4 17 12 20 20 30 44 Booster Pump 4 17 4 15 20 25 36 Valve 4 17 8 20 25 30 42

22 Roof 983,000 15 4 15 20 25 36

23 Road Resurfacing 824,000 15 3 12 15 20 30 Parking Resurfacing 12,000 15 3 12 15 20 30 Curb Replacement 83,000 15 5 30 40 50 75

24 COj System 1 15 4 15 20 25 36 Heat Detector 1 15 — — — — —

Smoke Detector 1 15 — — — — —

25 Back 4 17 8 15 20 20 24 Tube 4 17 8 15 20 20 24 Valve 12 17 9 15 18 20 25 Insulation 1 17 10 20 22 30 43 Boiler Auxiliary 1 17 4 15 20 25 36

26 Chilled Water Supply

& Return

16,600 15 5 30 40 50 75

Condensate in Rlcwil 13,900 15 13 25 30 35 47 Steam in Rlcwil 13,900 15 1 25 35 45 69 Natural Gas 14,600 15 5 30 40 50 75 Water 26,000 15 0 30 50 60 90

27 Back Flow Preventor 19 15 4 15 20 25 36 Bldg. & Sys. 700 15 8 20 25 30 42

28 Vacuum Pump 25 15 4 15 20 25 36 Vacuum Pump 5 5 4 15 20 25 36

24

I
TABLE 2.4 EQUIPMENT SERVICE LIFE DISTRIBUTIONS: BOULDER SITE

GROUP EQUIPMENT/ QUANTITY AGE IN CRITICAL POINTS IN SERVICE LIFE DISTRIBUTION

NO. COMPONENT YEARS LOW 25% MODE 75% HIGH

1 Air Compressor 22 21 4 15 20 25 36

2 Air Conditioner

Window Unit

300 10 0 5 10 10 13

3 Air Washer 3 20 6 20 30 30 38

4 Boiler 12 25 0 20 30 35 52

5 Domestic Hot Water

Heater

10 15 1 15 20 27 42

6 Primary Switch 12 27 19 35 40 50 69 Secondary Switch 72 25 19 35 40 50 69 Underground Wiring 2,000 20 — — — — —

Emergency Generator 4 15 4 15 20 25 36 Transformer 28 27 0 20 30 40 60 Battery 150 20 5 10 12 15 21

7 Fume Hood 20 Fume Hood Duct Work and Fan

20 10 8 15 20 20 24

Laboratory Exhaust

Duct Work and Fan

125 25 0 20 30 40 60

Other 30 25 1 25 35 45 69

8 Expansion Tank and Air Receiver20 20 4 15 20 25 36

9 Hoist and Crane 7 20 8 20 25 30 42 Dock Elevator 2 15 8 20 25 30 42 Elevator 2 20 0 20 30 40 60 Overhead Crane 26 20 8 20 25 30 42

10 Air Handler Unit 75 20 8 20 25 30 42 Package Unit 15 15 4 15 20 25 36 Fan Coil Unit 180 12 8 16 20 22 29 Refrigerator Unit 64 15 8 15 20 20 24 Cooling Tower 11 22 1 15 20 27 42

11 Pipe 1,000 20 4 15 20 25 36 Valve 3" and Larger 60 25 8 20 25 30 42 Valve 3” and Smaller 400 22 8 20 25 30 42 Steam Trap 400 25 0 10 15 20 30 Insulation 5,000 18 5 20 20 40 67 Expansion Joint 52 25 4 15 20 25 35 Acid Neutralizing Tank 16 5 0 10 15 20 30 Underground Piping 5,000 25 13 25 30 35 47

12 Circulating Pump 75 20 0 13 20 24 36 Condensate Pump 20 22 0 10 15 25 40

13 Landscaping

14 Street & Parking Lot 66 15 0 20 30 40 60 Interior Fixture 5,000 15 8 20 25 30 42

15 Roadway Resurfacing 285,000 15 3 12 15 20 30 Parking Lot Resurfacing 30,000 15 3 12 15 20 30 Concrete Curb 27 5 30 40 50 75

16 Roof 300,000 15 4 15 20 25 36

17 Fire Detector 20 5 0 10 15 20 30 Pull Station 60 15 4 15 20 25 36 Fire Bell 100 15 4 15 20 25 36 Emergency Light,

Battery Powered

200 10 0 10 12 20 33

18 Cone. Sun Shade 4,000 27 18 30 35 40 52

• .11 . Surface 50,000 25 5 30 40 50 75

25
as a baseline against which the implications of funding delays can be compared

(see the sensitivity analyses presented in section 2.2.4). Note that, in

each case, the annual cost estimates begin with the first year of building

occupancy for each site. (Thus in figure 2.2 the annual estimates begin with

FY65 and in figure 2.3 they begin with FY55.) As in all other parts of this

study, estimates are presented in terms of first quarter 1980 dollars.

It is important to point out that a portion of the "theoretical" replacements

may fail in use and hence require immediate replacement at some time during

the ten-year planning period. Since the per unit replacement cost figures

used to establish the total replacement cost estimates presented in tables 2.1

and 2.2 are based on ideal replacement conditions, it is quite likely that the

costs of immediate replacement may significantly exceed those of the best-case

replacement conditions. In order to accommodate such situations, the replacement costs for items expected to experience a failure during the ten-year

planning period were factored up by an optimistic estimate of the extra costs

associated with an immediate replacement. More succinctly, the added costs

associated with equipment failures in the historical replacement cost schedules

represent no more than a 10 percent mark-up for any item; the estimates

associated with the no previous replacement cost schedules include no more

than a 15 percent mark-up for any item. No mark-up is applied to any item

in either of the theoretical replacement cost schedules.

Since the estimates shown in figures 2.2 and 2.3 are reasonably smooth, a budget curve has been approximated by connecting each set of points. Due

to the fact that appropriations are now usually distributed over more than

one year, it is believed that this approach will facilitate long-range

planning. The expected annual replacement costs for Gaithersburg are summarized in table 2.5. The expected annual replacement costs for Boulder

are summarized in table 2.6. It is important to point out that, since all

cost figures presented in this report are in terms of first quarter 1980

dollars, in future years it will be necessary to escalate these costs to

reflect the true cost of item replacement at that time.

2.2.4 Assessing the Sensitivity of the Budget Estimates to Changes in

the Timing of Funds for Equipment Replacement

The purpose of this section is to provide background information on how

a change in the timing of funds for equipment replacement will affect the

expected annual replacement cost figures between FY82 and FY91. These

sensitivity analyses are designed to answer a series of "what if" questions

related to potential delays in the allocation of funds needed to undertake

the replacement of aging equipment.

The estimates presented in this section are the result of the application

of the probabilistic cost model to the data bases for Gaithersburg and

Boulder, respectively. The annual estimates for each site are shown in

figures 2.4 and 2.5.^ The estimated costs for Gaithersburg are shown in

^ The cost estimates presented in figures 2.4 and 2.5 do not include any

additional operating or maintenance costs due to replacement delays.

26
Fig.

2.2

Alternative

replacement

cost

schedules

for

Gaithersburg

site

OtSI M ISOO 031VNUS3

27

FISCAL

YEAR
Fig.

2.3

Alternative

replacement

cost

schedules

for

Boulder

site

acs>-

0861 ‘Vt Nl S1S03 aiLVNIiS3

28

80

81

82

83

84

85

86

87

88

89

90

91
Table 2.5

Estimated Annual Replacement Costs in Thousands of 1980 Dollars:

Gaithersburg Site

FISCAL YEAR THEORETICAL

REPLACEMENT

MOST LIKELY

REPLACEMENT

NO HISTORIC

REPLACEMENT

1982 896 1,133 1,427

1983 946 1,173 1,469

1984 991 1,207 1,503

1985 994 1,198 1,487

1986 953 1,145 1,417

1987 922 1,098 1,355

1988 900 1,067 1,312

1989 892 1,001 1,225

1990 899 973 1,187

1991 909 972 1,181

Table 2.6

Estimated Annual Replacement Costs in Thousands of 1980 Dollars:

Boulder Site

FISCAL YEAR THEORETICAL

REPLACEMENT

MOST LIKELY

REPLACEMENT

NO HISTORIC

REPLACEMENT

1982 304 569 682

1983 320 442 506

1984 340 460 641

1985 342 449 509

1986 326 430 489

1987 311 413 468

1988 295 395 450

1989 288 352 398

1990 282 345 392

1991 272 332 378
figure 2.4 and for Boulder in figure 2.5. The vertical axis of each

figure shows the expected annual replacement cost in 1980 dollars. The

horizontal axis of each figure enumerates each of the fiscal years in the

ten-year period beginning in FY82. Each expected annual replacement cost curve produced by the probabilistic cost model is designated by a hexagon,

a circle, a triangle, or a square, indicating no delay, a one-year delay,

a two-year delay, or a three-year delay, respectively.

The changes in the timing of the funds were designed to show that, unless a substantial increase in the level of equipment replacements is undertaken

in the very near future, annual replacement costs will escalate rapidly.

Although this result might be expected for the Boulder site, one would

probably not expect to see a significant change for the Gaithersburg site.

The estimates associated with a one-, two-, or three-year delay in funding

for both sites are based on a projected trend of current expenditure levels.

These projected expenditures are shown in the respective columns of tables

2.7 and 2.8. For example, with a one-year delay, the projected expenditure

for Gaithersburg is 280K in FY82 and 62K for Boulder. For a three-year

delay, the projected expenditures are 280K in FY82, 281K in FY83 and 284K in

FY84 for Gaithersburg and 62K in FY82, 65K in FY83 and 70K in FY84 for

Boulder. If we define the first fiscal year in which the full replacement

cost needed is allocated as the "f irst-year-replaceraent cost," we see that

substantial increases in this figure occur for each site. Referring to

table 2.8, it can be seen that the "first-year-replacement cost" for

Boulder increases from 569K with no delay to 732K with a delay of three

years. Perhaps what is most startling is the rapid increase in the "firstyear-replacement cost" for the Gaithersburg site. Table 2.7 shows that

although the Gaithersburg site is newer than the Boulder site, an increase

in "first-year-replacement costs" of approximately 30 percent can be

expected if the current level of funding is maintained over the next three

years. Similar patterns are also revealed in tables 2.7 and 2.8 for

"second-," "third-," and "fourth-year-replaceraent costs." One can thus conclude that the annual replacement costs for each site are very sensitive to

any delays in the required level of funding for replacement expenditures.

Note that the expected replacement cost for FY91 for a three-year delay at

the Gaithersburg site exceeds the no delay cost figure by approximately

lOOK. Since such differences persist for some time into the future, the

total replacement costs of the three-year delay will likely exceed those

of the no-delay scenairo when considered over a longer period of time,

say 15 to 20 years.

30
Fig. 2.4 Effects of funding deiays on the Gaithersburg

repiacement cost scheduie

<(

31
Fig. 2.5 Effects of funding delays on the Boulder replacement

cost schedule

750

700

650

600

550

500

ooo

a>

450

400

COoo

o 350

LU

»— 300 —

CO

LU

250

200 -

150

100

50

0

T\—I—^ ^

^—

I r

• No delay • 1 year delay

A 2 year delay

3 year delay

J L J L 80 81 82 83 84 85 86 87 88 89 90 91

FISCAL YEAR

32
TABLE 2.7

MOST LIKELY REPLACEMENT COSTS OF VARIOUS DELAYS

IN THOUSANDS OF 1980 DOLLARS;

GAITHERSBURG SITE^

FISCAL YEAR NO DELAY 1 YEAR DELAY 2 YEAR DELAY 3 YEAR DELAY

1982 1,133 280 280 280

1983 1,173 1,242 281 281

1984 1,207 1,277 1,365 284

1985 1,198 1,269 1,359 1,475

1986 1,145 1,217 1,307 1,425

1987 1,098 1,162 1,242 1,342

1988 1,067 1,128 1,208 1,309

1989 1,001 1,040 1,091 1,154

1990 973 1,002 1,037 1,085

1991 972 998 1,030 1,070

TABLE 2.8

MOST LIKELY

IN

REPLACEMENT COSTS OF VARIOUS DELAYS

THOUSANDS OF 1980 DOLLARS:

BOULDER SITE^

FISCAL YEAR NO DELAY 1 YEAR DELAY 2 YEAR DELAY 3 YEAR DELAY

1982 569 62 62 62

1983 442 617 65 65

1984 460 495 685 70

1985 449 477 515 732

1986 430 460 498 546

1987 413 441 479 529

1988 395 423 461 511

1989 352 365 381 401

1990 345 357 373 394

1991 332 343 357 376

^ The cost estimates presented in tables 2.7 and 2.8 do not include any

additional operating or maintenance costs due to replacement delays.

33
3. SUMMARY AND RECOMMENDATIONS

3.1 SUMMARY

(a) For a ten-year period between FY82 and FY91, the estimates in terms of

first quarter 1980 dollars for plant and facility equipment replacement at

the NBS campuses are as follows

BOULDER GAITHERSBURG TOTAL

4,187,000 10,967,000 15,154,000

(b) The annual estimates in terms of first quarter 1980 dollars for the

above equipment replacement are:

FISCAL YEAR BOULDER GAITHERSBURG TOTAL NBS

1982 569,000 1,133,000 1,702,000

1983 442,000 1,173,000 1,615,000

1984 460,000 1,207,000 1,667,000

1985 449,000 1,198,000 1,647,000

1986 430,000 1,145,000 1,575,000

1987 413,000 1,098,000 1,511,000

1988 395,000 1,067,000 1,462,000

1989 352,000 1,001,000 1,353,000

1990 345,000 973,000 1,318,000

1991 332,000 972,000 1,304,000

TOTAL 4,187,000 10,967,000 15,154,000

(c) The equipment service life concept, the cost factor model (manual

procedure) and the probabilistic cost model (computerized procedure)

are useful for this study.

(d) The engineering studies and economic principles and applications

suitable for the identification and selection of plant equipment replacements in energy conserving and cost-effective ways are presented in

appendices B and C. These appendices include the technical areas of

equipment efficiency, computer simulation, thermal insulation, equipment

control, solar energy, water conservation and life-cycle costing in

which CBT is actively involved.

3.2 RECOMMENDATIONS

(a) Before any actual equipment replacement is scheduled, the appropriate engineering studies^ should be performed. Life-cycle cost

1 See appendix B for a complete listing of studies relative to energy

conservation.

34
techniques^ should be used to ensure that the most cost-effective items

are selected for replacement.

(b) Develop and maintain a data bank which will permit the validation and

modification of equipment service lives actually experienced at the NBS

campuses. In addition to providing information on equipment service lives,

such a data bank would facilitate the process (either manually or via

computer calculations) of Identifying and pursuing more cost-effective

levels of equipment maintenance.

(c) Update this study at least every five years to support the NBS budget

planning process.

1 The discussion in appendix C is intended to establish broad guidelines

as to how life-cycle cost techniques can be used to facilitate equipment

selection and maintenance. Details of this approach, including a format

for performing life-cycle cost calculations related to alternative

equipment selection, maintenance and replacement programs, should be

developed through consultation with the Plant Division.

35
APPENDIX A

INFORMATION SOURCES

A.l SITE AND REPLACEMENT INFORMATION

a. Gaithersburg site:

(1) Information contained in the Preliminary Study of Planned

Replacement of Plant and Facility Equipment at NBS

Gaithersburg Site , NBSIR 78-1567, November 1978; and

(2) A request made by the Gaithersburg Plant Division on November 15, 1979, for the inclusion of fume hoods and

related exhaust ductwork in this study.

b. Boulder site:

(1) Building Number 3, renovation and remodeling, an undated

report

(2) Space survey, cryogenic building, dated May 1965;

(3) Solar energy chemical dehumidification system research

proposal, data April 7, 1975;

(4) Radio building HVAC study and appendix report, dated

August 28, 1975;

(5) Feasibility study, improvements to the window systems,

data May 18, 1976;

(6) Planning report, site utilization, dated January 5, 1977; and

(7) Coal conversion study, dated October 20, 1978.

A. 2 SERVICE LIFE INFORMATION

a. Equipment service life statistics published in 1978 for

discussion purposes only.^ The discussion led to an approval

to include the service life statistics in ASHRAE Transactions

1978, Vol. 84, Part 2. Table A.l is by courtesy of ASHRAE.

b. Service life for underground piping, refrigerated compressors

and boilers was obtained from Ricwll Corporation, York

^ Mustaf i r. Ak.illn, "Equipment Life and Maintenance Cost Survey,"

ASHkAI lournal, October 1978.

36
Corporation and Union Iron Works, the manufacturers of the

original equipment.

c. Service lives for roadway and parking lots were obtained from

the Transportation Department of Montgomery County, Maryland.

A. 3 ENGINEERING COST INFORMATION

The following engineering cost information was obtained for making

estimates for equipment replacements:

a. Cost experiences and cost estimates of potential projects obtained

from Plant Divisions at the Gaithersburg and Boulder sites;

b. Estimates for refrigerated compressors and boilers were obtained

from York Corporation and Union Iron Works, the original manufacturers of the equipment; and

c. Mechanical and electrical cost data published by the R. S. Means

Company.

A. 4 BUILDING OCCUPANCY YEAR

a. Gaithersburg site

BUILDING OCCUPANCY YEAR BUILDING OCCUPANCY YEAR

101 1965 236 1968

202 1963 245 1964

206 1963 301 1964

220 1966 303 1964

221 1966 304 1964

222 1966 302 1963

223 1966 306 1963

224 1966 102 1970

225 1966 205 1974

226 1966 230 1969

231 1968 237/238 1968

233 1968 307 1972

235 1965 308 1969

309 1975

Average occupancy year (weighted by floor area) = 1965

1 Mechanical and Electrical Cost Data: 1979 , Second Edition,

Robert Snow Means Company, Inc., Kingston, Massachusetts, 1979.

37
b. Boulder site

BUILDING OCCUPANCY YEAR

12

3

4

5

21

22

24

25

1954

1952

1952

1951

1951

1963

1964

1967

1966

Average occupancy year (weighted by floor area) = 1955
TABLE A.l

EQUIPMENT SERVICE LIFE STATISTICS®

PERCENTILES

EQUIPMENT ITEM MEAN MEDIAN MODE(S) 25% 75% N

UNITARY EQUIPMENT

ROOM AIR CONDITIONERS

(window or through-the-wall) UNITARY AIR CONDITIONERS

1. Air Cooled - Residential

(Single Package or Split System)

2. Air Cooled - Commercial/ Industrial

(Single Package - through-the-wall or split system

3. Water Cooled - Electric

UNITARY HEAT PUMPS

1. Air Source - Residential

(Single Package or Split System)

2. Air Source - Commercial/ Industrial

(Single Package or Split System)

3. Water Source - Commercial/ Industrial

COMPUTER ROOM CONDITIONERS

ROOF TOP HVAC SYSTEMS

SINGLE ZONE Heating, Ventilating & Cooling or Cooling Only

MULTIZONE

Heating, Ventilating & Cooling or Cooling Only

HEATING EQUIPMENT

BOILERS

1. Steam - Steel Watertube

- Steel Firetube

- Cast Iron

2. Hot Water - Steel Watertube

- Steel Firetube

- Cast Iron

3. Electric

BURNERS

Gas - Forced & Natual and Oil-Forced

FURNACES

Gas or Oil

UNIT HEATERS

Gas or Electric

Hot Water or Steam

RADIANT HEATERS & PANELS Electric Heaters

Hot Water or Steam Panels

AIR HANDLING & TREATING EQUIPMENT

TERMINAL UNITS

1. Induction Units

2. Fan Coll

3. Diffusers, Grilles & Registers

4. Double Duct Mixing Boxes Constant or Variable Air Volume

5. Variable Air Volume (VAV) Boxes Single Duct

AIR WASHERS

HUMIDIFIERS

DUCTWOK

DAMPERS including Actuators

10 10 10 5 10 38

14 15 15 8 20 29

15 15 15 10 20 40

15 15 15-20 10 20 17

11 10 10 10 12.5 12

15 15 15 11 15 13 13 13 10 10 20 8

18 15 15 15 20 23

15 15 15 10 20 30

16 15 15 10 20 25

30 26 40 20 40 30

24 25 25 20 30 14 30 30 30 20 35 12 24 23 20 20 27 12 23 24 30 17 30 16 30 30 30 20 40 13

14 15 15 7 17 9

22 20 20 17 7 58

18 20 20 12 20 35

14 , 13 10 10 20 28

23 20 20 20 30 30

11 10 10 5 25 6 26 25 20-25 20 30 7

26 20 20 20 30 16

21 20 20 16 22 28

35 27 20 20 50 26

21 20 20 15 30 20

24 20 20 20 30 7

20 17 30 10 30 6

18 15 10 10 20 23

35 30 50 24 50 31

25 20 20 15 30 20

® SOURCE: ASHRAE

39
TABLE A.

EQUIPMENT SERVICE LIFE STATISTICS (cont.)®

PERCENTILES EQUIPMENT ITEM MEAN MEDIAN MODE(S) 25Z 75Z N

FANS (supply or exhaust)

1. Centrifugal-Forward curve or Backward Inclined 27 25 20 20 40 43

2. Axial Flow 23 20 20 10 30 16

3. Wall Mounted - Propeller Type 17 15 20 10 20 15

4. Ventilating - Roof Mounted 17 20 20 10 20 22

HEAT EXCHANGERS

COILS

1. DX 22 20 20 15 27 21

2. Water or Steam 24 20 20 20 30 49

3. Electric 15 15 10-15-20 10 20 9

SHELL & TUBE 25 24 20 20 30 20

COOLING EQUIPMENT

RECIPROCATING COMPRESSORS 18 20 20 12 20 7

CHILLERS-PACKAGED - Reciprocating 19 20 20 15 20 34

- Centrifugal 25 23 20 20 30 28 - Absorption 24 23 20 20 30 16

HEAT REJECTION EQUIPMENT

COOLING TOWER - Metal-Galvanized 18 20 20 10 20 33 - Wood 22 20 20 15 27 25

- Ceramic 33 34 20 20 45 6

AIR COOLED CONDENSER 20 20 20 15 25 27

EVAPORATIVE CONDENSER 18 20 20 15 20 13

GENERAL COMPONENTS

INSULATION

1. Preformed - block, molded, etc. 27 20 20 20 30 43

2. Blankets, batts 29 24 20 20 40 23 PUMPS

I. Circulating, Base Mounted 19 20 20 13 24 37

2. Circulating, Pipe Mounted 12 10 10-15 6 15 28

3. Sump & Well 15 10 30 6 30 25

4. Condensate & Receiver 18 15 15 10 25 25

ENGINES, TURBINES, MOTORS

1. Reciprocating Engine 19 20 20 20 20 12

2. Turbines - Steam 30 30 40 24 30 13

3. Electric Motors 18 18 20 13 20 24

MOTOR STARTERS - Across Line or Magnetic 19 17 20 10 30 34

TRANSFORMERS

Dry Type or Oil Filled 31 30 30 20 40 49

CONTROLS & INSTRUMENTATION

1. Pneumatic 21 20 20 15 24 35

2. Electrical 17 16 20 10 20 24

3. Electronic 15 15 10-15 10 20 16

4. Automated (computer) Building Control Systems 22 20 20-25 10 25 8

VALVE ACTUATORS

1. Electric 16 14 10-20-30 5 25 18

2. Hydraulic 15 15 20 5 24 8

3. Pneumatic 18 20 20 10 25 26

4. Self Contained 14 10 5-20 5 24 9

® SOURCE: ASHRAE
APPENDIX B

ENGINEERING STUDIES

This appendix includes a recommended list of engineering studies to determine

if equipment replacement due to technical obsolescence or for reasons

of energy conservation is necessary. The engineering results obtained

from the recommended studies will be evaluated by the economic principles

and applications outlined in appendix C of this report. The results of

this economic evaluation will be useful in planning and justifying future

costs for equipment at the time of its replacement.

B.l GAITHERSBURG SITE

a. Energy Studies, Computer Simulation - Investigate and recommend

energy and cost savings as determined by a computer simulation

for the site distribution system.

b. Central Chillers, Computer Simulation - Investigate and recommend

energy and cost savings as determined by a computer simulation

for the central chillers.

c. Central Boilers, Computer Simulation - Investigate and recommend

energy and cost savings as determined by a computer simulation

for the central boilers.

An example of the need for the above engineering studies is

that, based on past engineering performance data, the capacity

of the existing central compressor and central boiler may be

too large for cost-effective operation. Studies (a), (b) and

(c) are proposed to determine whether to replace the pieces

of equipment with the same capacity or with a smaller capacity.

d. Computerized Monitoring and Control System (CMCS) - Evaluate the

existing CMCS in Building 223 and recommend how this CMCS can be

extended to serve the entire Gaithersburg site including the

impact of the CMCS on facility maintenance. Special attention

is called to the possible need for computerized control of the

boilers in Building 301 and for the fresh air in-take control

of all buildings for conserving energy.

e. Solar Energy - Investigate and recommend whether solar energy^ can be technically and economically added for supplemental heat.

One possible use of solar energy is to provide for the reheat

of HVAC during the summer.

^ Coordination is required between this proposed project and the Federal

Solar Buildings Program which is being conducted by the Department of

Energy (DoE). This program is funded at $100 million and established

for Federal agencies to demonstrate the use of solar energy in existing

Federal buildings.

/

41
I

f. Building Envelopes - Investigate and recommend whether additional

insulation and storm windows should be provided for the building

envelopes.

g. Waste Heat Recovery - Investigate and recommend the possible use*

of the wasted heat discharged through the boiler stacks in Building 302.

h. Planning Activities - Develop a five-year facility planning study

responsive to the facility replacement need. It is recommended

that the economic principles outlined in appendix C be Included

in this study.

i. Additional Studies - Subsequent to the above recommended

engineering studies, in May 1979, the Plant Division developed

a list of detailed studies divided into two groups: feasibility

studies; and studies which are useful in determining plant

equipment replacements due to technical obsolescence. These

studies are listed as follows;

A. Feasibility Studies

1. Chilled Water, Total System - To examine the possibilities

for energy conservation from operational and design changes

of the system and to quantify the effects of these changes.

This study should Include:

a. Optimum year-round chilled water discharge temperatures;

b. Optimum size and drive possibilities for the fifth

refrigeration unit;

c. Changes of existing chiller components;

d. Imbalance between central plant chilled water generation

and site usage in spring, fall and winter, including the

possibility of primary and secondary loops, either at

single buildings or for groups; and

e. Value of shutting off refrigeration unit on winter nights

until the chilled water temperature reaches 50°F.

2. Steam, Total System - To examine the possibilities for energy

conservation from operational and design changes of the

system and to quantify the effects of these changes. This

study should Include;

a. Change to modern computerized controls;

b. Optimum year-round operating pressures;

42
c. Waste heat recovery (stacks, deaerators and air compressors). Note: The Trane Company provided a proposal

on the stacks to the Plant Division.

3. Air-Conditioning Unit (ACU) - Variable Air Volume (VAV) in

Building 223 - Demonstrate the feasibility of the unit set

up for VAV with the cooperation of Building 223 occupants

and, if feasible, measure the savings.

4. Solar Heating - A feasibility study by the Design Engineering

Office should be updated so as to satisfy DoE requirements.

B. Technical Obsolescence Studies

1. General Purpose Laboratories (GPL) Perimeter Air-Conditioning

Unit (ACU) Shut Off - As soon as the demonstration (hopefully

in Building 223) shows that this can be done, it should be

presented to the Executive Board with a request for:

a. Authority to operate GPLs on a nighttime and weekend

partial shutdown schedule;

b. Moving temperature sensitive operations out of the

perimeter; or

c. Justifying not doing so because of its Impact on technical research.

2. Miscellaneous Retrofit or Modification of Air-Conditioning

Operation - Review all ACU operations where they are run inefficiently [e.g., a unit is run continuously to condition

10 rooms, although out of hours it is only needed for 1 room. A unit is run continually when it should only come on outof-hours if humidity rises (202) or temperature varies more

than acceptable (library)].

3. ACU - VA Discharge Temperature (VADT) on Perimeters - Demonstrate with the Building 223 unit set up for VADT the possibilities (in the fall of 1980 when cold whether arrives) of

allowing the supply air temperatures to rise and save cooling

and improve comfort.

4. ACU Operation - Test units for correct operation and reduction of air stratification problems. Confirm best settings

of avoidance of conflict between damper and coils.

5. Building Shells - Review insulation requirements in walls

and roofs and value of changes in window design for energy

conservation. Consider value of making Adminstration

Building tower north side windows fixed; to be cleaned from

43
I

the outside, so as to reduce infiltration. Consider value

of caulking for all buildings, especially those with large

window exposure to the north.

6. Boiler Efficiency - Run test to establish efficiency.

7. RU Efficiency - Run test to establish efficiency.

8. CMOS Evaluation - Evaluate operation and recommend most

beneficial extension areas.

9. Energy Audit - Follow requirements of DoE ten-year plan

for audit. Consider the value of audits beyond those

required by DoE.

10.

RU Shut-Off - Follow the trend of winter RU load as changes in operations affect it, and continue to explore

the shut-off possibility in conjunction with section (e)

of study A. 1.

B.2 BOULDER SITE

a. Centralized HVAC Systems - Investigate and recommend the possible

use of centralized HVAC system(s) to replace many of the small

systems in Building Number 1 and elsewhere. These studies should

include work on the:

1. Central Hydronic Systems;

2. Wind Air Conditioning; and

3. Delta Control System.

b. Building Envelopes - Investigate and recommend whether additional

insulation and storm windows should be provided for the building

envelopes.

c. Solar Energy - Investigate and recommend whether solar energy

can be technically and economically added as a supplemental

energy source, in view of the possibility that the DoE will fund

the design and installation through the Federal Solar Buildings

Program.

d. Planning Activities - Develop a five-year facility planning study

responsive to facility replacement needs. It is recommended

that the economic principles outlined in appendix C be included

in this study. These studies should include:

1. Current Space and Facility Utilization;

2. Current Space and Facility Deficiencies;

4A
3. Project Space and Facility Requirements; and

4. Evaluation of Options for Space and Facility Modifications

and Acquisition.

e. Additional Studies - Based on the previous studies, it is

recommended that the Boulder Plant Division develop a list of

detailed engineering studies on specific projects.

45
APPENDIX C

ECONOMIC PRINCIPLES AND APPLICATIONS

C.l ASSESSING THE SENSITIVITY OF THE BUDGET ESTIMATES TO CHANGES IN

EQUIPMENT REPLACEMENT COST AND SERVICE LIFE

• The purpose of this section is to provide background information on how

a change in one or more of the key factors, other than the timing of funds

for equipment replacement, will affect the annual and total replacement

cost figures. In order to provide this information, a series of sensitivity

analyses were performed. These analyses are designed to answer several

specific "what if" questions. In principle, a series of "what if" questions could be applied to any factor; for example, item count or equipment

age. However, since the information on item count and equipment age was deemed to be relatively reliable, it was decided to focus attention on variations in replacement cost and equipment service life achieved through

alternative effective maintenance programs.

The second factor, effective maintenance program, recognizes the option

that the Plant Divisions have to maintain items for a longer or shorter

period of time than the original service life distribution would indicate

prior to their replacement. It is important to point out that under

this option there may be additional maintenance costs incurred by the

Plant Divisions due to greater demands on the staff. These costs are

not included in the estimates since they are staff rather than equipment

oriented. Thus one should not jump to the conclusion that the best policy

is to prolong indefinitely the useful life of a piece of equipment. As

will be shown in appendix C.2, the increases in operating and maintenance

costs associated with prolonged use may, beyond a certain point, rise

faster than the reductions in replacement costs achieved through a prolongation of useful equipment life. A program of "effective maintenance" permits (at least in theory) the service life of a particular

item to be extended beyond the period that would be expected with a normal maintenance program. The claim that an effective maintenance

program is already in effect at both NBS sites can be supported by the

relatively lower figures on past replacements across all items surveyed.

The specific parameter values used in the analyses are summarized in

table C.l.

From the table, it can be seen that under the most optimistic conditions

replacement costs might be only 80 percent of those presented earlier. By

the same token, under the most pessimistic conditions replacement costs

might be 30 percent higher than those presented earlier. (Recall that all

costs are in terms of first quarter 1980 dollars.) The ranges in replacement cost may seem rather large; however, they are designed to cover the

"true" replacement cost. This is because the estimates used in this

study are "ball park" in accuracy (i.e., + 30 percent). By factoring

all estimates up and down by roughly the outer limit of each estimate,

however, we are almost certain to contain the true total replacement

46
TABLE C.l

Parameter Values Used in the Sensitivity Analyses

of Equipment Replacement Cost and Service Life

FACTOR PARAMETER VALUE DESCRIPTION

Replacement Cost 0.80 Optimistic Cost Factor

1.00 Expected Cost Factor

1.30 Pessimistic Cost Factor

Change in Effective -1 Small Cutback

Maintenance Program 0 Remains As Is

2 Modest Improvement

4 Significant Improvement

cost. The change in the effective maintenance program ranges fom a small cutback to a significant improvement. More specifically, a parameter value of -1 translates into a 1-year reduction (on the average) of

the mode and end point in the service life distribution—that is, the

year in which replacement is most likely to occur is moved up 1 year.

Similarly, the year by which all equipment must have been replaced is

moved up by 1. A parameter value of 2 implies an increase in the scope of

the existing NBS maintenance program which postpones the year in which

replacement is most likely to take place (the mode) by two years and by

which total replacement must have taken place by 2 years. No estimates

of the expected increase (if any) in the cost of maintenance staff or potential changes in operating costs are included, however.

The results of the two sets of sensitivity analyses for Gaithersburg and

Boulder are presented in figures C.l and C.2, respectively. The total

expected replacement costs are shown along the vertical axes. The changes

in the effective maintenance program are shown along the horizontal axes. A value of 0 on the horizontal axis represents no change in the effective

maintenance program. Each figure contains three curves which roughly

parallel each other. The curves labeled 1.3, 1.0 and 0.8 represent the

level of total replacement costs as a function of the effective maintenance program under the pessimistic (1.3), expected (1.0), and optimistic

(0.8) replacement cost scenarios, respectively. For example, under the

pessimistic replacement cost scenario, if a small cutback in the effective

maintenance program at Gaithersburg is pursued, total replacement costs

are expected to be approximately $14.8 million over the ten-year planning

horizon rather than the original $11.0 million estimated by the probabilistic cost model. In the event that costs behave as expected and the

effective maintenance program Improves modestly, then expected total

replacement costs will fall from $11.0 million to $10.0 million. Under

47
Fig. C.1 Results of the replacement cost - sensitivity analysis

for the NBS Gaithersburg site

CHANGE IN EFFECTIVE MAINTENANCE PROGRAM

48
Figure C.2 Results of the replacement cost - service iife

sensitivity analysis for the NBS Boulder site

CHANGE IN EFFECTIVE MAINTENANCE PROGRAM

49
the optimistic replacement cost scenario, expected replacement costs may

be as high as $9.1 million and as low as $7.2 million. The results for

Boulder (See figure C.2) exhibit a similar trend.

The previous discussion serves to highlight the claim that, from a purely

hardware viewpoint, relatively small changes in an "Effective Maintenance"

program can be almost as Important as large swings in the estimated

replacement costs. Note that, since changes in the effective maintenance

program (including its expected costs) and expected replacement costs

are to some extent substitutes, it may be possible to balance the two

costs so as to minimize the total costs of operating, maintaining, and

repairing the physical plant. This does not imply that operating and

maintenance costs should be ignored. However, the previous discussion

does provide a rationale for not pursuing a single maintenance program

to the exclusion of all others just because the alternatives differ

somewhat from the status quo. The methodology behind such a "balancing"

procedure, including life-cycle cost considerations, is outlined in

section C.2.

C.2 LIFE-CYCLE COST CONSIDERATIONS

In this section, we shall review several economic concepts which permit

us to identify a cost-effective equipment replacement program. In particular, we shall focus on how life-cycle cost techniques enable us to

choose among alternative equipment types and maintenance programs.

Cost-benefit analysis provides the basic framework for an economic analysis

of alternative equipment maintenance programs. That is, by the systematic

weighing of available alternatives, cost-benefit analysis establishes

guidelines for increasing the efficiency of resource allocation. The

emphasis in this section will be on those portions of cost-benefit analysis

which permit us to choose among effective maintenance programs of varying

scales.

It was stated earlier that life-cycle cost techniques should be used at

the time a component is replaced because they explicitly considered all

costs over the study period. We now wish to examine how life-cycle cost

techniques can be used to define an optimal equipment maintenance program.

Under ideal situations the optimal level of equipment maintenance (denoted

hereafter as the effective maintenance program) may be defined through

the use of several broad types of data. The actual procedure for calculating the life-cycle costs associated with the alternative effective

maintenance programs is as follows:

(a) Identify the technically feasible alternatives;

(b) Identify the potential effective maintenance programs;

(c) Calculate the initial costs;

(d) Calculate the annual costs of the potential effective

maintenance program;

(e) Select or develop a service life distribution;

50
(f) Select a planning horizon;

(g) Calculate the annual expected replacement costs using the

service life distribution;

(h) Calculate the annual operating costs and maintenance based

on the effective maintenance program; and

(i) Discount all future costs to a present valve.

It is important to point out that all but three of the above-mentioned

steps have been thoroughly treated in this study. Although steps (b),

(d), and (h) were not performed in this study, information on steps (b)

and (d) was made available through ASHRAE. Information on step (h) could

probably be constructed from past records maintained by the Plant Divisions.

Information on steps (b) and (d) should also be available from the records

of each Plant Division. This information would be more desirable than that

from ASHRAE because it can be tailored to the specific mode of operation at

NBS.

Of the nine steps outlined above, the last one, discounting, usually causes

the most confusion. In particular, the selection of an inappropriate

discount rate may result in serious problems.

A discount rate is defined as that rate of interest which reflects the

time value of money. (The "time value" of money stems from the difference

between the value of a dollar today and its value at some future time if

invested at a stated interest rate. That is to say, a dollar today is

worth more than a dollar in ten years, apart from inflation.) The discount

rate may therefore be used to bring future costs back to the present so that all alternatives can be compared on an equivalent basis. Second,

a real discount rate is one expressed in constant terms (i.e., current

dollar values have been adjusted to take out the reduction in purchasing

power due to inflation). Therefore, a real discount rate may be thought

of as that rate which treats future costs and savings in terms of constant

dollars.

For most Federal agencies the discount rate is fixed by the Office of

Management and Budget. This figure is almost always a real rate. The

rate is currently ten percent.

Another area where confusion often results is when prices are escalating.

However, the use of a real discount rate serves to minimize this problem

since, unless a cost is known to be increasing over the general rate of

inflation, its current cost (e.g., in first quarter 1980 dollars) may

be used as the cost in real dollars for some future period (e.g., second

quarter 1984). This strategy, in essence, assumes that the cost of the

item rises at the general rate of inflation. For some items, energy for

instance, this assumption is not valid. More specifically, over the

past several years energy prices have been increasing or escalating at

a rate significantly over that of the general rate of inflation. Fortunately, fuel price escalation rates have been forecast by the Energy

Information Administration over the three five-year periods beginning

in 1980 and ending in 1995 (1980-85; 1985-1990; 1990-1995). For periods

51
between 1995 and 2010 the fuel price escalation rates between 1990 and

1995 should be used. These figures are broken down by region, building

type, and fuel type. They may be applied to the purchased energy cost

figure to get the anticipated increase in energy costs over the remainder

of the life cycle.

If the discount rate is denoted as D, the life cycle as L, the installation cost, Cq, and the costs for maintenance, repair or replacement in

year t as C^-, the life-cycle cost of an equipment maintenance program,

C, may be defined as:

L

C = C + E (C.)/(l + D)^

P t=l ^

In the case of energy costs, the life-cycle costs associated with the use of X units of energy at a cost of PiggO unit may be expressed as:

L

E = 2 [(X) (Pi98o) F(t)]/(1 +

t=l

where F(t) = the escalation factor through year t.

Returning once more to the earlier discussion, we see how life-cycle cost

concepts may be used to define an optimal equipment maintenance program.

Once steps (a) through (i) have been performed, two sets of curves for

each technical alternative will emerge. The two sets of curves are:

(1) The expected costs of installing and periodically

replacing the item; and

(2) The sum of the costs of operation and effective maintenance.

Both sets of curves may be plotted as a function of the level of effective

maintenance.

As the level of effective maintenance is increased, the expected costs of

Installation and repair are reduced. Since these costs contain substantial

initial cost components, however, they do not fall linearly. This relationship must be recognized and incorporated in the calculation of lifecycle costs. Referring to curve RqR in figure C.3, it can be seen that

the life-cycle costs associated with a nominal maintenance level, R , are quite high. As the scope of the effective maintenance program is Increased,

life-cycle costs fall off quickly at first and then at a diminishing rate.

Of course, if we are to count the benefits of reduced installation and

replacement costs which accrue from a better effective maintenance program,

we must also include all costs associated with that level of effective

maint'»nance. These costs, the life-cycle costs of operation and maintenance,

Tre Illustrated graphically by the curve MqM in figure C.3. The MqM curve

1 > LILusCrated as rising at a constant rate.

52
The choice must now be made as to how to tradeoff the costs of the

effective maintenance program against reduced installation and replacement

costs. If we vertically sum the two curves, we get the total life-cycle

costs. Notice that this curve, TqT, decreases to a minimum and then

rises. At the minimum, Topt» the total life-cycle costs are minimized.

It is this effective maintenance program level, &opt» that is optimal

because it minimizes the costs of owning and operating the system.

By a closer examination of the TqT curve, it can be seen that at any point

to the left of the point (Jiopt» ^opt^ total costs could be reduced by

increasing the level of the effective maintenance program. Similarly,

at any point to the right of (Jlopt* ^opt) total costs could be reduced

by decreasing the level of the effective maintenance program. Constraints

can easily be Introduced into this formulation. For example, if the

optimal level of effective maintenance is not feasible, say due to a slot

celling, then it would be possible to move leftward from £opt until the

point where life-cycle costs subject to the ceiling constraint were

minimized.

It is important to point out that in the previous discussion the level of

effective maintenance was an abstract concept. Although one can assert

that, as the level of effective maintenance increases from some nominal

or minimal level, the total costs of owning and operating the system will

decrease to a minimum and then rise indefinitely, it is not possible to

say either how far above the minimal level of how far below the optimal

level the current NBS programs lie. To determine the current level of

effective maintenance at the NBS and those effective maintenance programs

which are feasible in the engineering sense requires access to the data

defined in the previous section.

53
FIGURE

C.3

DEFINING

TIE

LEVEL

OF

FFECTIVE

miNieiANCE

WHiai

minimizes

LIFE-CYCLE

COSTS

¥

54

IfVEL

OF

EFFECTIVE

MAINTEII/UICE
REFERENCES

Akalin, Mustafa T. , "Equipment Life and Maintenance Cost Survey," ASHRAE

Journal , October 1978.

Chen, Phillip T. , Preliminary Study of Planned Replacement of Plant and

Facility Equipment at the NBS Gaithersburg Site , National Bureau of Standards, NBSIR 78-1567, November 1978.

Mechanical and Electrical Cost Data; 1979 , Second Edition,

Robert Snow Means Company, Inc., Kingston, Massachusetts, 1979.

Ostwald, Phillip F. , Cost Estimating for Engineering and Management , Prentice-Hall, Inc., Englewood Cliffs, New Jersey, 1974.

55
MBS-’ 14A RFV. 9-781

u.s. DEPT. OF COMM. 1. PUBLICATION OR REPORT NO. BIBLIOGRAPHIC DATA

SHEET NBSIR 80-1973 (R)

4. TITLE AND SUBTITLE

Budget Estimates for Replacement of Plant and Facility

Equipment at the NBS Campuses

7. AUTHOR(S)

5. Publication Date June 1980

8. Performing Organ. Report No. Phillip T. Chen, Robert E. Chapman

9. PERFORMING ORGANIZATION NAME AND ADDRESS

NATIONAL BUREAU OF STANDARDS

DEPARTMENT OF COMMERCE

WASHINGTON, DC 20234

11. Contract/Grant No.

12. SPONSORING ORGANIZATION NAME AND COMPLETE ADDRESS csfreef, City, state, ziP)

Plant Division

National Bureau of Standards

Washington, D.C. 20234

15. SUPPLEMENTARY NOTES

I I Document describes a computer program; SF-185, FIPS Software Summary, is attached.

16. ABSTRACT (A 200^word or leas factual aummary of most aignificar\t information ^ If document includes a significant bibliography or

literature survey, mention it here.)

a

r* The replacement of aging plant and facility equipment is a major concern of all

Federally owned and operated installations. Past efforts at equipment replacement

have often underutilized information on the service life distribution of a particular

component/system. More specifically, equipment was usually maintained until it

either failed or reached some average age at which time total replacement was initiated

This study develops a framework, based on service life distributions fitted to data

from a published survey, for dealing with the "replacement problem." Service life

distributions are used to develop replacement schedules for approximately 50 major

plant and facility equipment items at the National Bureau of Standards (NBS)

Gaithersburg and Boulder sites. The costs associated with these replacement schedules

are estimated on an annual basis over a ten-year planning horizon using a probabilistic

cost model. Estimates from this model are intended for use in budgeting for replacements over the planning horizon. The results of this study indicate that approximately

$15 million (all estimates are in first quarter 1980 dollars) will be needed to meet

expected replacements during fiscal years 1982 through 1991 at the NBS Gaithersburg and

Boulder sites.

17« KEY WORDS (six to twelve entries; alphabetical order; capitalize only the first letter of the first key word unless a proper name;

separated by semicolons)

Building maintenance; cost engineering; economic analysis; rehabilitation cost.

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(THIS REPORT) PRINTED PAGES

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1 Order From Sup. of Doc. U.S. Government Printing Office, Washington, DC

20402, SD Stock No. SN003-003-

20. SECURITY CLASS

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22. Price

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