Planning for MEP System Capital and Operating Expenses

Understanding the costs of conducting business is critical to the profitability of that business. One aspect that is often overlooked is the maintenance and replacement of Mechanical, Electrical, and Plumbing (MEP) systems. These systems are easy to overlook because the expenses to maintain them seem optional. If you skip a month or year you may not see an immediate problem. However, not maintaining MEP systems can lead to larger expenses down the road. MEP systems are like the engine in your car — they are responsible for making the building run. If you don’t change the oil in your car, you can have poor performance and it will leave you stranded on the side of the road at the least opportune time. In addition, you will have to arrange temporary transportation while waiting to have the engine replaced. The same is true of MEP systems. If they are not maintained you will have poor performance and they will fail at the most inconvenient moment. Then you will have to replace them while determining how to conduct business without the system.


The most expensive costs during a MEP system failure are the business interruptions. How much does your business cost to operate for an hour or a day? Can you afford to lose lighting, HVAC, or plumbing systems for an hour, day, or several days? The cost of business interruptions far outweighs the costs of maintaining MEP systems. While maintenance does not guarantee failure prevention, it significantly reduces the chance of failures. By maintaining your MEP systems and planning changeouts you reduce (nearly eliminate) the chance of system failure. You are planning when the system is shut down rather than waiting for a failure and performing an emergency change out.


Emergency/immediate MEP system replacements cost thousands of dollars (usually 5-6 digit costs per system), plus the business interruption costs (How much money will your business lose when your employees are unable to work?). In comparison, maintenance contracts are hundreds of dollars (3-4 digit costs per system) depending on the system(s) being maintained and the services performed. Regular maintenance also helps alert you to high-risk systems that may need to be replaced or repaired. Planned MEP system replacements (while still costing thousands) are typically cheaper than emergency replacements. By planning ahead, you have time to get competitive pricing, minimize downtime, and reduce or eliminate business interruption costs.


Okay, got it. MEP system maintenance and planned replacements are important. So, how do you do that? The first step is to document the MEP systems in your building. Important items to document include model and serial number, age, and condition of system and components. A property condition assessment will document all of these items. The assessment will summarize any immediate concerns/repairs needed and the costs associated with those issues.


The next step is to determine planned maintenance requirements. Each equipment manufacturer has recommended periodic maintenance for their equipment. These requirements are compiled, maintenance checklists are created from the requirements, and the maintenance is scheduled/planned. Maintenance can be completed by in-house staff or can be outsourced to a service contractor. Providing the maintenance requirements, checklists, and schedules to the service contractor allow you to get a price in advance and allows you to bid on the service contract and make sure you are getting competitive pricing.


In addition to maintenance, a replacement plan should be created for the MEP systems. All MEP systems have an expected service life and will require replacement at some point. Determining the age of the existing MEP systems and their condition can provide an understanding of where the system is in its expected service life and when the system may be replaced to avoid an unexpected shutdown/failure. Work scopes and designs for the system replacements can be completed in advance for competitive bidding and planned replacements.


Assembling all this information — maintenance costs, system replacement costs, and system life expectancy — will help you budget. A well-maintained system will last longer and use less energy than a poorly-maintained system. By maintaining your systems and planning for their replacement, you will minimize risk for unexpected business interruptions and emergency replacements.