HVAC – Planning and Implementation

Health care organizations spend more than $6.5 billion each year on energy to accommodate patient needs, according to the Department of Energy’s Energy Information Administration (www.eia.doe.gov). Moreover, HVAC systems can comprise up to 45 percent of a typical health care facility’s energy use, according to the Consortium for Energy Efficiency (www.cee1.org).

Planning and implementing an HVAC project in the same manner as managing a large maintenance expense is a short-sighted decision. Specifically, it ignores two key issues:

• HVAC upgrades, which will likely remain in place for 20 to 25 years or more, are capital investments made within a board’s fixed asset management program; and
• A facility that is comfortable in terms of temperature, humidity, air quality, noise level and energy consumption plays a mission-critical role in a caregiver’s ability to concentrate and provide services as well as a patient’s ability to heal.

For these reasons, hospital administrators and health care facilities professionals should undertake a more strategic, asset management focus to new HVAC investments.

Traditionally, bids for HVAC upgrades are solicited on a first-cost basis. In these cases, the requests for proposals (RFPs) ask vendors to present their lowest possible pricing for the initial acquisition of their recommended equipment. Using a first-cost basis to determine the bid outcome on the purchase of supplies or commodities is fine. However, a major HVAC project is a capital asset: The installation will likely see five decades of service and represent a substantial funding investment. Moreover, the up-front cost of HVAC components often represent only 5 percent of the overall investment in terms of total cost of ownership when measured over 20 or more years.

Paradigm change

Many organizations continue to purchase HVAC upgrades on a first-cost basis. Only recently has the paradigm begun to change, with hospitals maximizing efficiency and saving money by evaluating their HVAC projects in view of their life-cycle cost (LCC).

The LCC of an asset is “the total discounted dollar cost of owning, operating, maintaining and disposing of a building or a building system” over a period of time, according to The National Institute of Standards and Technology’s (NIST’s) Life-Cycle Costing Manual for the Federal Energy Management Program. An LCC analysis (LCCA) examines a capital project’s total costs of ownership by comparing initial, maintenance, repair and operating costs over the life of the system.

In this era of ever-tightening budgets, a low-priced system is bound to appear extremely attractive. However, that low-priced system might have excessive lifetime operational costs, or it might have a short usable life, causing the buyer to replace it long before a new system should have been required.