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The Economic Impact of Roof Leaks.

Maintenance and engineering managers at one time or another face this dilemma: When is roof replacement a better option than continued roof maintenance? Of course, the ideal answer to this question is never. But a roof's service life rarely equals the service life of the rest of the building.

The more obvious answer is that roof replacement is a better option when the roof's watertight integrity — its primary function — is compromised. In other words, when leaks become intolerable, it is time to replace the roof.

But when do leaks become intolerable? Is leak tolerance the best or most cost-effective reason to make a huge capital investment? A central element in the roof-replacement decision for managers is determining when leaks become bad enough to mandate a replacement.

The Economics of Leaks

In some cases, a financial model can help managers determine when roof maintenance has reached the point of diminishing returns, in which case managers essentially end up throwing good money after bad. As much as managers preach preventive maintenance (PM) for roof systems, at some point PM becomes useless.

It is difficult to justify the capital expense of replacing a roof, especially when that money could go toward buying new equipment and systems that would benefit the organization's bottom line. But roof leaks also can hurt the bottom line. Consider these real-world examples:

Interior damage. Roof leaks that damage ceiling tiles, carpet, furniture, and computers are common, but the damage can be much more severe. For example, one school lost its gymnasium floor due to damage from roof leaks. The school had to cancel or move athletic events and replace the floor at a cost of over $500,000.

Operations downtime. A roof leak for one building owner shut down operations for a day, costing the company an estimated $700,000 in revenue.

Damaged products. A retail store recently lost more than $70,000 worth of products due to one roof leak.

Lost business. Roof leaks forced one hotel to close its top floor — its priciest rooms — for three weeks, causing significant lost revenue.

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

Roof Replacement: Consider Safety Hazards, Impact on Occupants

Managers must consider two additional, but less measurable, factors in the replace-or-maintain decision — safety hazards and the negative impact that roof condition has on building occupants, who too often are left out of any financial analysis.

No one will argue the importance of safety. Old, worn-out, defective roofs are a hazard to those working on them and to the building occupants underneath. But unless an accident has occurred, facility professionals tend to not give this factor enough consideration when debating the need for roof replacement.

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

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

It is not too far-fetched to blame a part of this situation on structural problems, such as roof leaks, because so many districts face large amounts of deferred maintenance issues. When districts cut capital-improvement budgets, by far the primary target is the roof. Whether a leaky roof is a nuisance or a major safety hazard, its condition says something about the organization.

Avoiding Trouble

Should a manager wait until leaks become intolerable — until the roof has failed — before starting to make the case for roof replacement? The most cost-effective option for roof replacement is the trouble-avoidance option. Avoiding future problems reduces risks and long-term roofing costs.

Roof replacement should take place long before leaks become a regular occurrence. By planning a roof replacement before the system fails, managers can realize significant cost savings in two other ways.

First, early planning for replacement might allow for overlaying the first roof, which avoids tear-off costs related to the existing roof. This option might not always be available because of potential restrictions, such as code or structural requirements or flashing height limits.

But when overlaying is an option, it can generate significant cost savings. A tear-off of an existing roof can add $2-4 per square foot to the replacement project. This figure easily could double when the project requires interior protection to keep debris from falling into the building.

Second, early planning for replacement can prevent damage to the roof's structural deck. Delays in roof replacement can allow water to damage the deck, and managers too often neglect to consider costs associated with a deteriorating structural deck until replacement is underway. Deck replacement costs can be significant — typically about $47 per square foot. Again, the type of interior protection required can drive up the cost significantly.

Roof Replacement: Conduct Inventory and Analysis of Conditions

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

Managers should use their experience to establish a projected average service life of roofs. Several factors influence a roof's service life — the quality of the design, installation, products, and maintenance, as well as roof use, abuse, and weather.

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

If the average cost of roof replacement is $7 per square foot, a manager might budget $350,000 for roof replacement each year. If the expected service life of a roof is 10 years, a manager then would budget $700,000 annually for replacement.

Obviously, this approach involves many assumptions. For example, the entire roof might need replacement at one time if the entire system is the same age and condition. But for general planning, budgeting in this fashion is a start.

This approach is usually more appropriate for a large number of buildings with roofs of different types and ages if the manager has not completed a roof-system inventory.

Every financial model makes several assumptions. Projecting a roof's service life, future maintenance and repair costs, and costs resulting from leak damage, downtime, and lost business is an educated guess, at best. Predicting the inflation rate and the time value of money also can vary greatly, depending on the source of information.

The roof replacement-maintenance debate encompasses many factors and areas of a facility. But in the end, a manager's ability to cost-justify the project and make a sound decision comes down to analyzing accurate information and understanding the risks and costs associated with each option.

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