Buildings and Properties

Transcription

1 Introduction Figure 1 Te Department of Transportation and Works (formerly te Department of Works, Services and Transportation) is responsible for managing and maintaining approximately 650,000 square metres of floor space in 851 Government owned buildings and properties. Te Engineering Support Services Division as responsibility for te facilities management of tese buildings and properties wic includes maintaining a government building inventory, a preventative maintenance program and an energy maintenance program. Te Division also provides tecnical support to te Department's four regional offices wic are responsible for te performance of maintenance and operational services. Figure 1 sows te number of sites, buildings, area, and estimated replacement cost of te building inventory per region as at 31 Marc Department of Transportation and Works Building and Property Inventory 31 Marc 2004 Avalon Region Sites Buildings and Properties Floor Area Square Metres Estimated Replacement Cost St. Jon s East ,435 $ 291,726,750 Avalon/Extern ,751 91,105,050 Mount Scio/Central , ,170,500 Total Avalon , ,002,300 Central , ,821,350 Western , ,876,100 Labrador ,579 58,713,500 Total ,957 $ 1,029,413,250 Source: Department's Engineering Support Services, Works Branc Database Te Department s Strategic Plan stated tat a greater pressure is being placed on funding due to increased repair and maintenance costs on its aging asset portfolio. As outlined in Figure 2, 379 of te 851 buildings wit an estimated replacement cost of $111 million in te Department's database did not sow te date of construction. Te remaining 472 buildings were constructed between 1739 and Of te 472 buildings wit construction dates, 200 wit an estimated replacement cost of $639 million are greater tan 30 years of age. Auditor General of Newfoundland and Labrador 559

2 Figure 2 Department of Transportation and Works Age Range of Buildings and Properties 31 Marc 2004 Age Range Since Construction Number of Buildings and Properties Estimated Replacement Cost Percentage of Estimated Replacement Cost No age indicated 379 $ 110,566, % Greater tan ,797, % Between ,309, % Between ,087, % Between ,441, % Less tan ,210, % Total 851 $ 1,029,413, % Source: Department s Engineering Support Services, Works Branc Database Figure 3 Figure 3 outlines costs incurred to maintain Government's buildings and properties for eac of te last five years. Department of Transportation and Works Annual Costs Relating to Buildings and Properties For te Years Ended 31 Marc Costs Utilities $9,467,625 $10,093,955 $9,905,156 $11,655,137 $11,409,951 Operating 4,509,944 4,971,820 4,885,434 5,000,168 5,203,591 General Maintenance 3,123,643 2,942,097 3,388,740 2,981,532 2,370,016 Programmed Maintenance 1,821,975 2,265,799 1,848,911 1,621,722 1,054,525 Capital 4,574,179 4,176,824 4,452,276 3,776,200 3,130,946 Total $23,497,366 $24,450,495 $24,480,517 $25,034,759 $23,169,029 Total Square Feet 6,245,952 6,413,233 7,030,174 7,030,174 7,066,045 Average Cost per Square Foot $3.76 $3.81 $3.48 $3.56 $3.28 Source: Department s Engineering Support Services, Works Branc 560 Auditor General of Newfoundland and Labrador

3 Scope and Objectives Te objectives of te review were to determine weter te Department as adequate systems and processes to: determine and monitor te condition of te government owned buildings and properties; forecast required annual maintenance expenditures for government owned buildings and properties and to determine te effectiveness of te maintenance program; and forecast long-term capital needs for te government owned buildings and properties, including required expenditures, planned expenditures, funding sources for te planned expenditures and capital work priorities. Conclusions Government owned buildings are in need of significant repairs. In January 2004, te Department projected tat it needed $261 million over 20 years in order to keep Government s buildings maintained and to extend teir useful life. Furtermore, te Department indicated tat it needs $173 million of te $261 million witin te next five years. Officials at te Department ave expressed concern about te lack of funding provided to maintain Government's buildings. Tese concerns date back as far as April 1998 wen a Departmental review indicated tat te current dilemma is tat tere is insufficient money in te present budgets to perform te normal level of maintenance and improvements required, particularly on te exterior envelopes of buildings. Te review concluded tat 40% of te buildings will encounter premature failure of major components or te building itself and will require replacement at an earlier time tan te normal predicted economic life. Over te past five years te Department as requested a total of $25.3 million for maintenance funding and it as received $23.4 million. Also over tis period te Department as requested a total of $55.0 million for capital alterations and improvements and as received only $21.9 million. As a result, te required work is not being performed and terefore te condition of te Government buildings is deteriorating. Te Department s database of buildings is not complete in tat te age of te building is not always indicated. As a result, it is not possible to calculate te overall average age of te buildings. For example, tere were 379 of te 851 buildings in wic no age was indicated. Of te 472 buildings wit construction dates, 200 ad an estimated replacement cost of $639 million and are greater tan 30 years of age. Auditor General of Newfoundland and Labrador 561

4 Te Department does not use a risk based system to identify and prioritize its maintenance work. Instead, eac of te four Regional Directors sets te priorities for te allocation of te maintenance funding witin teir Region. As a result, tere is no Province-wide risk or priority basis for wat work is performed wit te funding provided. Altoug te Department as started to assess te condition of Government buildings, te process is far from complete. Te Department as identified 60 buildings of different ages wic are in excess of 2,000 square metres and wic are used for a variety of purposes. Te concept was to identify a representative sample. Consultants assessed 13 of tese buildings and te Department as indicated tat it sould assess te remaining ones in order to get more accurate cost estimates. However, te Department as not performed any assessments to date. As a result, te Department does not ave te information necessary for a compreensive plan to address te nature, amount and timing of future capital expenditures. Government as a number of significant vacant buildings, e.g. te old Janeway, te Grace General, and te Miller Centre. Te Department does not ave a plan to devolve Government of its vacant buildings. Government's vacant buildings ave a total area of 66,500 square metres and an estimated replacement cost of $149 million. Findings and Recommendations Condition of te Government Owned Buildings Portfolio A major strategic priority identified by te Department in its Strategic Plan for was te appropriate stewardsip of public infrastructure, including its buildings and properties. Te overall goal of tis priority is stated to be te undertaking of preventative maintenance and repair/support activities directed towards acieving te maximum useful life of government assets. Te Department identified tat in order to acieve tis goal it would be necessary to optimize te use of available funding by focusing on critical maintenance requirements. In , te Department retained a consultant to conduct facility condition assessments on a sample of Government owned buildings maintained by te Department trougout te Province. In January 2004 te consultant along wit a team from te Department's Design and Construction Division selected a sample of 13 buildings to determine te repairs and improvements tat were necessary over te next 20 years. Te purpose was to determine te required deferred maintenance and capital alterations and improvements in order to extend te useful life of te buildings. Te estimated replacement cost of te 13 buildings selected for assessment was $120 million. 562 Auditor General of Newfoundland and Labrador

5 Te consultants produced 13 reports, one for eac building assessed. It was determined tat $35 million in maintenance and capital alterations and improvements was required over te next 20 years to extend te useful life of te buildings. Of te estimated $35 million in maintenance and capital alterations and improvements, $23 million or 66% of te total will be required witin te next 5 years. Based on te results of te consultant's study, te Department prepared a 20 year projection of estimated deferred maintenance and capital alterations and improvements costs on te entire building portfolio. Te Department assumed tat te estimated deferred maintenance and capital alterations and improvements for te 13 buildings was representative of Government's entire buildings and properties portfolio. Te Department determined tat te $120 million represented 13.5% of te $887 million replacement cost of te entire building and property portfolio as at August 2003, excluding vacant building sites suc as te old Janeway, te Grace General, and te Miller Centre. Te Department ten used te $35 million estimated deferred maintenance and capital alterations and improvements on te 13 buildings examined and projected te total estimated deferred maintenance and capital alterations and improvements costs to be $261 million ($35 million / 13.5%). Te $261 million was comprised of $95 million related to deferred maintenance costs and $166 million relating to capital alterations and improvements. Of te $261 million required over te next 20 years, te Department determined tat $173 million or 66% will be required witin te next 5 years to extend te useful life of te buildings. Figure 4 Figure 4 provides details on te projected costs. Department of Transportation and Works Projected Costs for Buildings and Properties 31 Marc 2004 Cost Category Projected Repairs Immediate $ 25,245,100 Deferred Maintenance 54,393,700 Placeolder 15,347,600 Total Maintenance 94,986,400 Discretionary Renewal 21,900,300 Upgrade/Betterment 70,709,220 Future Renewal 73,563,400 Total Capital 166,172,920 Total $ 261,159,320 Source: Department s Design and Construction, Works Branc Auditor General of Newfoundland and Labrador 563

6 Our review indicated te following: Tere is a need for significant funding to be made available to keep Government buildings and properties maintained. Altoug te Department estimates tat $173 million will be required over te next five years, representing an average annual requirement of $34.6 million annual funding for maintenance and capital averages, only approximately $9.4 million in funding as been provided. Departmental officials indicated tat a submission will be provided to Cabinet outlining te future funding requirements versus te current level of funding. In January 2004 te Department determined tat $53 million would be immediately required as priority 1 costs, i.e. required to maintain functionality of its buildings and properties trougout te Province. However, te Department was provided wit only approximately $8.4 million in As a result, tere is a significant sortfall in te funding provided versus te funding required. Altoug te Department as a Micro Roofer Software Program wic specializes in estimating costs for repairs to roofs, tis software was not used by te consultant wen tey assessed te 13 buildings in teir sample. Te Department as indicated tat it intends to undertake an additional 40 or more building assessments to obtain more information in projecting estimated costs and tat it intends to also use its Micro Roofer Software Program for tese assessments. Officials ave indicated tat no financial or uman resources are available to complete tese assessments. Te consultants indicated tat tere were limitations in performing te condition assessments in tat some of te findings were based on random sampling and some on visual review of te surface conditions. Maintenance Management General and Programmed Maintenance Te Department categorizes maintenance into two categories: general maintenance and programmed maintenance. General maintenance pertains to day-to-day occurrences were some form of repair or service is required, wile programmed maintenance pertains to planned project 564 Auditor General of Newfoundland and Labrador

7 Figure 5 Department of Transportation and Works Government Owned Buildings Maintenance Costs Years Ended 31 Marc maintenance. A major strategic objective identified by te Department in its Strategic Plan pertained to building infrastructure programs and te provision of effective and efficient preventative maintenance. Te Plan also stated tat it is critical tat te Department use modern tecnology and new tools available for optimizing preventive maintenance programs to sustain te useful life of its infrastructure. In January 2004, te Department estimated tat it would cost $95 million over 20 years to address maintenance costs related to Government's buildings and properties. Of te $95 million projected maintenance costs, $89 million is expected to be required over te next 5 years. During te Department spent $3.4 million on general maintenance and programmed maintenance. Figure 5 provides information on tese expenditure categories during te past 5 years and sows te average amount spent per square foot of te total square footage of all Government owned buildings and properties considered to be in use. Te information provided by te Department for purposes of inclusion in te Figure reflected square feet rater tan square metres Gross Area-Square Feet 6,245,952 6,413,233 7,030,174 7,030,174 7,066,045 General Maintenance $3,123,643 $2,942,097 $3,388,740 $2,981,532 $2,370,016 Average Cost per Sq. Foot $.50 $.46 $.48 $.42 $.34 Programmed Maintenance $1,821,975 $2,265,799 $1,848,911 $1,621,722 $1,054,525 Average Cost per Sq. Foot $.29 $.35 $.26 $.23 $.15 Total Maintenance Costs $4,945,618 $5,207,896 $5,237,651 $4,603,254 $3,424,541 Average Cost per Sq. Foot $0.79 $0.81 $0.75 $0.65 $0.48 Source: Department's Engineering Support Services, Works Branc Auditor General of Newfoundland and Labrador 565

8 Te Department as identified tat it as approximately 7 million square feet of building and property space tat it as to maintain. Tese buildings and properties are aging and Departmental officials indicated tat, as a result, annual maintenance costs sould be increasing. Our review indicated te following: Te Department does not use a risk based approac to identify and prioritize required maintenance. Eac of te regions submits a list of maintenance projects for eac building in its portfolio along wit an estimated cost. Te Regions are provided wit a budget by te ADM of te Works Branc of te Department. Eac of te four Regional Directors sets te priorities for te allocation of te maintenance funding witin teir Region. Funds for building maintenance are divided among te Regions based on te square footage of area of floor space tat eac Region is responsible for. General maintenance priorities are establised by building management staff and based on day to day wear and tear, client requests and deficiencies identified troug various building inspections. As a result, tere is no Province-wide risk or priority basis for wat work is performed wit te funding provided. Altoug until 2000 te Department used a Federal Government Preventative Maintenance Support System, it was not Y2K compliant and to date as not been updated. Tis system was being used by te Department to plan its preventative maintenance program. In te absence of tis program, te Department does not ave any compreensive basis to plan its maintenance activities. Altoug te Department as a preliminary projected estimate of $95 million over 20 years, tere is no plan currently in place to address te timing of te funding and te priority of te work. As Figure 5 sows, average maintenance cost per square foot declined in eac year since Departmental officials ave expressed concerns about te low level of funding provided for maintenance and te resulting increase in capital costs tat will be required in future years. Departmental officials still agree wit a conclusion outlined in an internal report prepared in April 1998 wic indicated tat te current dilemma is tat tere is insufficient money in te present budgets to perform te normal level of maintenance and improvements required, particularly on te exterior envelopes of buildings. Te report went on to state tat tere is a major list of outstanding work wic needs to be carried out to keep te buildings in proper condition in te last couple of years, 566 Auditor General of Newfoundland and Labrador

9 (maintenance funding as been) reduced over one million dollars per year below a sustainable level for basic maintenance and operational items. A review at tat time of 17 buildings concluded tat deferred maintenance at tat time amounted to $12.1 million or $70 million wen projected over te entire population. Te review concluded tat 40% of te buildings will encounter premature failure of major components or te building itself and will require replacement at an earlier time tan te normal predicted economic life. Prior to te , te Department did not ave a system tat could be used to provide information on te maintenance cost istory for its buildings and properties trougout te Province. As a result, te Department did not ave ready access to te information necessary to adequately monitor and plan maintenance costs. In , te Department implemented a new system to provide tis information. In August 1996, te Department acquired a Micro Roofer Software Program wic would estimate te cost of roof maintenance and/or replacement and assign a priority on a Province-wide basis. At tat time, te Department identified 48 buildings (representing $226 million or 22% of te total replacement cost) tat were to be inspected using tis software. However, as at January 2004, only 24 inspections (representing $75.2 million or 7.3% of te total replacement cost) ave been performed and entered into te software program, wit 20 of tese dating back to 2001 and prior. Furtermore, tere are no plans in place to use tis software program to estimate te cost of roof maintenance and/or replacement and assign a priority for all buildings and properties. Monies budgeted for maintenance work is included wit te operational expenditure budget. Terefore, wen operating expenses increase (e.g. eat, ligt, security, cleaning and snowclearing), te amount available for maintenance work decreases. As expected, operating costs are generally increasing annually and terefore, monies budgeted for maintenance are being used to cover operating costs. For example, an official at te Department indicated tat snow-clearing costs in te Avalon Region during exceeded budget by $250,000 and tat tis amount was reallocated from maintenance. As te cart sows, te amount spent on maintenance eac year is less tan te amount budgeted. Auditor General of Newfoundland and Labrador 567

10 Budget $5,069,800 $5,307,100 $5,626,900 $4,854,218 $4,417,404 Actual $4,945,618 $5,207,896 $5,237,651 $4,603,254 $3,424,541 Difference $ 124,182 $ 99,204 $ 389,249 $ 250,964 $ 992,863 Note: Te Budget amount for does not include te Labrador Region. Capital Planning and Budgeting Sound management practices would require te Department to preserve Government's buildings and properties and extend teir useful lives troug capital alterations and improvements. Terefore, it is important to periodically inspect te condition of te buildings and properties and establis priorities for capital alteration and improvements. Since capital alterations and improvements often result in major expenditures, it is also important tat future funding requirements be identified. In January 2004, te Department estimated tat it would cost $166 million over 20 years to address capital alterations and improvements related to Government's buildings and properties. Of te $166 million projected capital alterations and improvement costs, $84 million is expected to be required over te next 5 years. During te Department spent $5.6 million on capital alterations and improvements. Capital alterations and improvements are comprised of specific capital projects as approved by Treasury Board and block funding used for te maintaining of Government's buildings and properties. Of te $5.6 million $3.1 million was spent on block funding. Overall approved block funding as decreased from $4.6 million in to $4 million for eac of te last two years. Figure 6 provides information on te block expenditures during te past 5 years and sows te average amount spent per square foot of te total square footage of all Government owned buildings and properties considered to be in use and maintained by te Department of Transportation and Works. Te information provided by te Department for purposes of inclusion in te Figure reflected square feet rater tan square metres. 568 Auditor General of Newfoundland and Labrador

11 Figure 6 Department of Transportation and Works Government Owned Buildings Capital Alterations and Improvements Costs (Block Funding) Years Ended 31 Marc Gross Area-Square Feet 6,245,952 6,413,233 7,030,174 7,030,174 7,066,045 Capital Alterations and Improvements (Block Funding) $4,574,179 $4,176,824 $4,452,276 $3,776,200 $3,130,946 Average Cost per Sq. Foot $0.73 $0.65 $0.63 $0.54 $0.44 Source: Department's Engineering Support Services, Works Branc Our review indicated te following: Te Department does not use a standard consistent risk based approac to identify and prioritize required capital block funding. A letter is issued to all Departments requesting submissions identifying capital requirements. Wen tese submissions are received, tey are provided to te applicable Regional Director wo performs an assessment. Te Regional Director prioritizes te projects and submits a listing to te ead office. Senior officials at te ead office in consultation wit regional directors complete teir own assessment of te listings provided by te four Regional Directors and tey produce a listing of projects to be funded. Te allocation of te block funding among te Regions is based on square footage of floor space. Tere are no formal written criteria used to determine wic projects will be undertaken from te regional allocations. For example, te criteria used could be based on life safety and accessibility or based on ensuring tat te buildings are weater tigt. As a result tere is no Provincial-wide risk or priority basis for wat work is performed wit te funding provided. Altoug te Department as a preliminary projected estimate of $166 million over 20 years, tere is no plan currently in place to address te timing of te funding and te priority of te work. Auditor General of Newfoundland and Labrador 569

12 Te annual budget is currently determined from updates provided by te 4 Regions relating to te capital funding tey identify as being required. Te identified need for funding always exceeds te amount provided and as a result, te identified capital improvements are not always completed. Tis, terefore, is contrary to te Department's strategic objective of preserving Government's buildings and properties and extending teir useful lives troug capital block funding. As te cart sows, te amounts requested by te Regions for capital alterations and improvements eac year is always more tan te approved funding Total Amount Requested by te Regions $8,110,000 $12,051,000 $11,385,000 $17,089,000 $13,321,000 $61,956,000 Amount Requested by Department from Treasury Board $12,428,000 $9,600,000 $10,565,000 $11,000,000 $11,430,000 $55,023,000 Funding Approved by Treasury Board $4,600,000 $4,600,000 $4,715,000 $4,000,000 $4,000,000 $21,915,000 Actual Costs $4,574,179 $4,176,824 $4,452,276 $3,776,200 $3,130,946 $20,110,425 Average Cost per Sq. Foot $0.73 $0.65 $0.63 $0.54 $0.44 Source: Department's Engineering Support Services, Works Branc Over te past 5 years, te Regions ave requested a total of $62.0 million for capital alterations and improvements, of wic te Department requested $55.0 million from Treasury Board. Treasury Board as approved only $21.9 million. Expenditure under capital block funding in 2004 is 31.6% lower tan in Te overall capital funding budget, for oter tan specific projects, as remained at approximately $4 million for te last 5 years. During , wile te capital budget submissions from te regions totalled $13.3 million, te Department requested $11.4 million from Treasury Board, wic is 2.9 times more tan te $4.0 million approved. Altoug expenditure was approved for $4 million in te Department only managed to spend $3.1 million allowing $869,054 to lapse. 570 Auditor General of Newfoundland and Labrador

13 Departmental officials indicated tat te amounts requested by te regions over te past five years as sown in te cart do not represent te total funding required to address te need for alterations and improvements. Te regions do not include everyting in teir submissions because funding as been restricted to approximately $4 million per year Province-wide. Officials indicated tat wit everyting included, te annual requirement would be in excess of $50 million. One of te goals outlined in te Department's Strategic Plan pertains to te development and implementation of effective replacement/disposal strategies including buildings and properties. An objective under tis goal is to review and refine criteria to determine wen assets sould be acquired or disposed of. Our review indicated tat funding as not been identified or approved in order to eiter put surplus buildings in a saleable state or oterwise dispose of te existing buildings. As at 31 Marc 2004 Government ad a number of vacant building sites wit a total area of 66,500 square metres and an estimated replacement cost of $149 million. Te old Janeway, te Grace General, and te Miller Centre account for $121 million of te $149 million estimated replacement cost and 47,400 of te 66,500 square metres. Recommendations Te Department sould: Complete detailed condition reports on all of its significant Government owned buildings and develop a long-term capital plan wic outlines te nature, amount, and timing of required funding; Use a risk based approac to identify and prioritize required maintenance and capital alterations and improvement; and Develop a strategy to dispose of vacant buildings wic are determined to be of no furter use and outline te nature, amount and timing of required funding. Department s Response Te report states tat te department s database of buildings is not complete in tat te age of te buildings is not always indicated. Te department acknowledges tis and will attempt to obtain te information for all buildings. Tis may be difficult wit older buildings or buildings Auditor General of Newfoundland and Labrador 571

14 wic ave been built in sections over a number of years. Rater tan guessing a date te department as, up to tis time, left te data field blank. Te report furter states tat te department does not use a risk-based system to identify and prioritize maintenance work. Tis is not accurate. Eac region is required to rank projects wit consideration to te same priority ranking for te selection of projects. Tis ranking provides priorities in te order of (i) structural remediation or repair; (ii) life and fire safety; (iii) building envelope integrity; (iv) accessibility; (v) indoor environment and air quality; (vi) interior finises; (vii) client requested upgrades/betterment; and, (viii) site improvements. Te report also states tat te department does not ave a plan to devolve government of its vacant buildings. Te department as recognized tat it as a responsibility to any potential buyer to ensure tat we disclose everyting we can about te property. To tat end, prior to disposal, it is necessary to ave environmental assessments conducted of tese properties. Tis is especially important in tose cases were te buildings were not maintained by te department wen operational. Te department as arranged and funded tis work to be carried out witin te limitations of our annual budget. In te case of te Grace Hospital, te department as actively attempted to find a purcaser via te issuance of Expressions of Interest. To date, te marketplace as not presented a willing buyer. Wit respect to te draft report's reference to te Miller Centre, as tis building remains in operation, it is presumed te reference was meant to be te adjacent Old General Hospital - a facility wose title is currently eld by a private developer. On te matter of maintenance projects, wile it is true tat tere are a substantial number of priority projects identified, te department recognizes tat it is not practicable to address undertaking all of tese in a single year. During te fiscal 2004/05 budget process, te department identified additional projects tat would be undertaken if it received an additional $2M to $4M in block funding for alterations and improvements; unfortunately additional funding was not provided. Finally, te report states tat tere is no plan currently in place to address te timing of te funding and te priority of te work for maintenance and capital works projects. Te department advises tat wile tere is no long term commitment of funding for te work identified, te work itself is identified and prioritized. On an annual basis, we do receive a budget for suc work and it is applied to top priority projects. 572 Auditor General of Newfoundland and Labrador