The facility condition index, and how to use it to get money

The facility condition index is the cost of a building’s outstanding repairs divided by what it would cost to replace that building. A school with 4 million of deferred work and a 50 million replacement value has an FCI of 0.08, or 8 percent. Lower is better.

It is the number that budget conversations in facilities, education and the public sector actually run on, because it puts buildings of wildly different sizes on one scale. It is also easy to produce badly, and a number nobody trusts is worse than no number.

The formula

FCI equals the cost of deferred maintenance and renewal needs divided by the current replacement value of the asset. It is usually written as a decimal or a percentage, and it is usually calculated per building and then rolled up.

A worked example

A 1974 office building, 80,000 square feet. Replacement cost is assessed at 280 US dollars per square foot, so current replacement value is 22.4 million.

The condition survey found:

• •Roof at the end of its life: 1,120,000
• •Two air handling units past 25 years: 640,000
• •Electrical distribution board obsolete, parts unavailable: 310,000
• •Lift modernisation due: 420,000
• •Fabric, glazing and internal repairs: 265,000

Deferred total is 2,755,000. Divided by 22,400,000 gives an FCI of 0.123, or 12.3 percent. That is a building in poor condition heading for fair-to-critical, and now the sentence "the roof needs doing" has a number attached to it.

What the ranges mean

Bands vary between organisations and there is no single authority. The widely used pattern is roughly this, and the important thing is to pick one, write it down, and use it consistently.

• •Under 5 percent: good, routine renewal only
• •5 to 10 percent: fair, planning needed
• •10 to 30 percent: poor, significant investment required
• •Over 30 percent: critical, and replacement may cost less than repair

The hard part is the top of the fraction

Everybody focuses on the formula. The formula is arithmetic. What decides whether the number survives being questioned is how the deferred maintenance figure was produced, and there are only three honest sources.

• •A condition survey with a cost attached to every finding, done consistently
• •Age against expected life, costed at replacement rates, for systems not yet surveyed
• •Known work already scoped and priced, which is the strongest evidence you have

Whatever you use, record the source of every line. The first question from a finance director is "where did that number come from", and an answer of "the survey" is not enough.

Getting replacement value right

Do not use book value, which depreciation has made meaningless, and do not use the insured sum unless it was assessed recently. Use current construction cost per square foot for that building type in your region, times the area, and write down which source and which year.

This matters more than people expect. A replacement value that is too low makes your FCI look worse and gets challenged. Too high, and you have quietly hidden your own problem.

Say which costs are in and which are out

The most common reason two FCI numbers disagree is scope. Decide and publish whether these are included: work required by changing regulations, energy improvements, alterations for a new use, and grounds and external works. There is no universally right answer. There is only being consistent.

How to use it in a budget request

The number on its own persuades nobody. Three framings do.

• •The trend: "our FCI has moved from 7 to 12 percent in four years at current funding" shows the direction of travel and what the current budget buys
• •The comparison: the same number across every building, sorted, so the argument is about which building rather than whether
• •The forecast: what the FCI will be in five years at three different funding levels, which turns a request into a choice

Two honest warnings

FCI is a condition measure, not a priority list. A building can have a low FCI and a failing fire alarm, and the fire alarm is what matters this week. Keep risk and compliance separate from condition, always.

And an FCI that improves because the replacement value went up rather than because work was done is not an improvement. Report the two numbers underneath the ratio every time, or the ratio will eventually be used to tell a story the numbers do not support.

Where to start

One building, this month. Get the replacement value from a real cost source, list the known deferred work with prices, and produce the number. It will be rough. It will still be the most useful page in your next budget meeting, and next year’s version will be better.