Determining Cost and Useful Life Data

The costs and useful life data of components is the foundation on which the remainder of the reserve study is based as all recommended funding models are directly impacted by the estimated current and future costs for repair / replacement. Inaccurate data during the component analysis portion of the reserve study will likely lead to inappropriate recommendations for current reserve account allocation rates and inaccurate projections in the future.

Where does the Cost data and Useful Life come from?

Prior Studies
The most reliable data we have is thousands of prior reserve studies that we have at our disposal and for review. Many of these have invoices and bids from vendors which were reviewed and included as actual costs data into these prior studies. We have a database that is updated regularly to reflect actual costs data from these vendors for all types of building and grounds components. The useful life of components is also listed in these prior studies and are specific to each community as we assign a placed in-service data for each component, many we know the install date (e.g. when a composition shingle roof last about 25 years for the vast majority of buildings we encounter that is a good sign that it will also last 25 years on your building)

Cost Manuals
We also regularly utilize cost manuals such as RS Means and Marshall & Swift both of which are extremely accurate for average costs when used appropriately, updated quarterly and specific all the way down to the zip code. These cost manual companies interview thousands of vendors for many thousands of site and building components to determine average costs and then provide them in very comprehensive cost manuals. We have found these to be extremely accurate. Architectural, Engineering and to a lesser extent Cost Manuals also supply Useful Life of Components. These again based on interview of vendors who deal with these materials every day as well as manufactures indicators related to warranties and in-house tests for longevity.

Client History
When we complete a reserve study for our Clients we ask for any relevant bids, vendor invoices and known historical expenses so that we can incorporate these into the reserve study. These are generally reliable except for some that did not obtain numerous bids and overpaid or a vendor who has provided a bid for work that is less than the recommended standards (e.g. one sealcoat layer versus the recommended two). The reason vendors provide high or low bids are numerous and can include they don’t really want the job (too big or too small), they’re too busy, they lack the necessary equipment (high bid to purchase it), not experienced with some aspect of the job, etc. It has been our experience that the most accurate indicator of the Useful Life of a component is the prior history of that component in a specific community. All site characteristics and building designs are different so materials will wear at slightly different rates (e.g.  If the roof on a building has been replaced at 20 years twice prior, we will likely fund for replacement at 20 years again.) All types of items impact useful life including sun exposure, rain, wind, sand/dust, wooded, desert, arid, humid, etc. The more information we have regarding the historical timeline of replacement of components the more accurate and catered the reserve study will be.

How is Remaining Useful Life of Components Determined?

Remaining Useful life of components is based on the placed in-service data (client historical records) as well as our comprehensive onsite visual inspections. We typically have a good read on the remaining useful life for more typical components such as roofing, siding, fencing, paint, and asphalt as we have seen these thousands of times prior and are familiar with the different condition levels during the life cycle of these more common components. Mechanical equipment can be much tougher to determine just by looking at it so we will often also rely on serial number data to determine manufacturing dates. Here are some useful life tables that are good sources of information: Useful Life Tables