Home of Building Operating Management & Facility Maintenance Decisions
Insider Reports

FacilitiesNet eNewsletter
eNews Best Information Tool For Busy FMs
We will keep you updated with trends, education, strategies, insights & benchmarks to help drive your career & project success.
Sign up for eBook




Building Operating Management

Understanding the Real Cost of Carpet



First cost is a poor indicator of total cost of ownership


A report prepared on behalf of the Carpet and Rug Institute

Perhaps it’s not surprising that initial costs often take center stage when a facilities manager is considering a carpet purchase. After all, the price tag probably will be sizable.

It’s important, however, to look beyond the initial expense. “The cost of ownership is not just the upfront costs,” says Marc Ahrens, market segment manager, INVISTA Antron. “Many issues have to be factored into the cost of ownership.”

Among the less visible costs are expenses to prepare the floor and install the carpet, cleaning and maintenance costs, and the cost of disposing of and replacing the carpet.

“These typically are greater than the first costs of the carpet by a great degree,” says Bill Gregory, director of sustainable initiatives, Milliken & Co.

In fact, over the life of a carpet, ongoing maintenance expenses can account for 50 to 70 percent of total costs. The carpet that appears to be a great deal less expensive at first actually can cost substantially more over the course of several years.

Calculating Life Cycle

To get a firm handle on the real expense of carpeting, facilities managers need to perform what’s known as a life-cycle cost analysis (LCA). This calculation takes into account the up-front purchase price as well as ongoing expenses, such as maintenance.

A life-cycle cost analysis also includes an estimate of the anticipated life of the carpet. The longer a carpet lasts, the greater the return on investment. Not only is the purchase of new carpet postponed, but long-lasting carpet also delays the disruption caused by replacing it.

The goal of a life-cycle cost analysis is to determine which carpet offers the lowest annual cost of ownership, says Dave Kitts, corporate director of safety and environmental initiatives, Mannington Mills.

The results of the analysis sometimes come as a surprise to those who have paid attention only to first costs. “First cost is a poor indicator of the total life-cycle cost, and doesn’t take into consideration hidden costs,” says Pieter van der Toorn, a vice president of global customers, Interface.

To perform a life-cycle cost analysis, identify all the costs associated with a carpet, as well as the expected life of the new carpet.

The latter point is crucial to the life-cycle cost calculation. Some carpets may last more than a decade, while others will look worn several years after they’ve been laid down.

In determining the expected life of the carpet, consider whether the facility can keep the carpet for as long as it looks like it’s in reasonably good shape or whether it will be necessary to replace the carpet in several years to install carpet that’s a little more updated. The life-cycle cost analysis should take this into account.

In tallying up the costs of carpet, the place to start is the price of the carpet itself, as well as the cost of installing it. The purchase cost can be determined by multiplying the cost per yard of carpet, including any taxes, by the number of square yards needed to complete the installation. The cost of installing the carpet also can be calculated on a per-yard basis.

Next are the costs of maintaining the carpet. These will vary with the type of maintenance procedures used, as well as the frequency with which the carpet is cleaned. In addition, because maintenance and cleaning costs are ongoing, the annual expense should be multiplied by the number of years the carpet is likely to remain on the floor.

If the facility outsources janitorial services, the cost of carpet cleaning should be pulled out of the overall cost of the contract.

If carpet is cleaned by in-house staff, it will be necessary to break down the salaries of maintenance personnel and attribute a reasonable portion to the carpet cleaning. Assume, for instance, that three maintenance workers spend three-fourths of their time caring for the carpet in a facility. Salary and benefits for each of the three workers come to $50,000 each. Thus, $112,500 ($50,000 x 0.75 x 3) for cleaning costs should be included in the calculation for each year of the estimated life of the carpet.

The maintenance calculation also should include the cost of supplies and equipment needed to keep the carpet looking new. Here’s a simple example: To clean the carpet in a particular part of the building, the maintenance worker uses 10 bottles of cleaning solution each year, at $20 per bottle, resulting in an annual cost of $200. This cost also should be included in the calculation for each year of the carpet’s expected life. Similarly, if specialized cleaning equipment must be purchased to care for the carpet, this cost belongs in the analysis.

Finally, there’s the cost of disposing of and replacing the carpet. While these are one-time costs, they can be substantial. A facilities managers may be assessed a fee to dispose of or recycle the carpet, and will have to pay to purchase a new floor covering. For instance, disposing of the carpet may cost $2 per square yard and replacing the carpet may cost $20 per square yard. For 10,000 yards, these costs would come to $220,000 ($2 x 10,000) + ($20 x10,000).

There’s also the cost of disrupting employees while the carpet is being removed and replaced. “Disruption costs resulting in lost production come into play, as employees are not able to use the space,” says Jack Fiest, senior account manager, polyurethane floor covering group, The Dow Chemical Co. Depending on the types of workers using this space, it may be difficult to put a number to this cost. However, facilities managers will want to keep it in mind as they compare the costs of different floor coverings.

Finally, the facilities manager may want to consider several ancillary costs that can come into play, says David Vita, vice president of modular products and strategic accounts, Shaw Inc. For instance, if the cost of the carpet is being compared to the cost of hard-surface flooring, the facilities manager may want to account for a lower incidence of slips and falls on carpet. A higher rate of falls can boost the cost of insuring the facility. There’s also the cost of storing furniture that is removed while the carpet is being replaced.

To be sure, these expenses may be difficult to pin down accurately enough to include in the calculation. As a result, the facilities manager may decide to identify the estimated costs in a footnote, but leave them out of the life-cycle calculation.

At times, facilities managers may be presented with LCAs that have been prepared by others, such as potential suppliers. When that’s the case, facilities managers will want to ask how the analyses were prepared. Unless two products are evaluated using the same life-cycle cost calculation, it’s hard to properly compare them, says Tom Ellis, vice president of marketing with Tandus Group. “You need to ask how they determined the life-cycle cost analysis. What were the parameters?”

For instance, one analysis may include the cost of vacuuming an area three times a week, while the other is based on a once-a-week schedule. Trying to compare the two can lead to a decision that’s misinformed. “Life-cycle cost analyses need to be transparent,” says Ellis. That is, the facilities manager should be able to easily tell how the calculation was performed and what the assumptions went into it.

Minimizing Life-Cycle Costs

Of course, the objective of a life-cycle cost analysis isn’t simply to crunch numbers – it’s to highlight different costs and determine potential areas of reductions. One of the first steps in minimizing carpet life-cycle costs is to take note of the saying, “The right horses for the courses,” says Werner Braun, president of the Carpet and Rug Institute.

In other words, facilities managers and owners want to purchase a carpet that’s appropriate for the space. “You don’t want to put a plush polyolefin carpet in a high-traffic area,” says Braun. “It simply won’t hold up as well as it should.”

Similarly, the color and design should fit the space. A solid, light-colored carpet will show dirt more quickly than a darker, patterned one.

Proper installation also is key to finding a carpet that performs well over the long haul. A poorly installed carpet may end up raveling at the edges or showing ripples. Either may prompt the facilities manager to replace the carpet before it would otherwise have been necessary.

Developing the proper cleaning and maintenance system, and making sure employees adhere to it, also is critical to prolonging the life of a carpet, says Fiest of Dow. “This is a key variable in maintaining the appearance of the carpet.”

Although it’s difficult to come up with a single cleaning process that will work for every installation, several factors are common to effective systems. One is “keeping the carpet clean and dry,” says Milliken’s Gregory.

The carpet should be properly vacuumed at appropriate intervals. In high-traffic areas that are located near exterior entrances, it might be necessary to vacuum every day or two. On the other hand, once-a-week vacuuming might suffice in areas that receive less traffic. It’s also critical to treat spots and stains as quickly as possible.

Deep extraction cleaning also comes into play. Again, the frequency will vary with the level of traffic and dirt the carpet encounters, with intervals typically ranging from once every few months to once a year. The key is to develop a system that makes sense for the area and to stick with it.

On the other hand, it doesn’t make sense to overdo cleaning. Over the past decade, the technology behind carpet fibers has advanced, making it possible to remove almost all stains with plain tap water, says Paul Williams, senior contract specialist, Honeywell Zeftron. In fact, with quality carpet fiber, 80 to 90 percent of stains can be removed with plain or heated tap water. This avoids the costs and off-gassing that can occur with the use of chemicals, he says.

Even so, many maintenance employees try to remove stains using the harshest chemicals available to them. In part, this occurs because vendors of cleaning chemicals and equipment often provide much of the training received by maintenance workers. “Often, the training is narrowly focused on the piece of equipment or geared to support future sales,” says Williams. Treating a stain too aggressively actually can damage the carpet.

If a facility will be using a third-party cleaning company, the facilities manager should include in the bid proposal the minimum training and certification that the employees should have. “Make sure the people doing the work are qualified,” says Williams. The facilities manager also can ask the cleaning contractor to test-clean an area of the floor to get an idea of the contractor’s different cleaning processes and skills.

Obstacles

To be sure, it’s often difficult for facilities managers to perform a life-cycle cost analysis of carpet before it’s purchased and to lobby for a carpet with a lower overall cost. For one thing, the budget may have been set before the facilities manager enters the picture.

What’s more, carpeting usually is installed at the end of the construction or renovation process. If construction costs are over budget, the carpet allowance too often is reduced to meet the budget. “This decision may lead to a lower-quality carpet and backing being used, which in turn can result in a shorter life cycle,” says Fiest of Dow.

Finally, facilities managers often are constrained by a budgeting system that splits the initial cost of purchasing carpet from the ongoing cost of maintaining it. “In many cases, the facilities manager will say that these costs come from two buckets,” says Ahrens of INVISTA Antron. Looking at carpet purchased this way often means that too much emphasis is placed on reducing the initial cost, even if that boosts costs long term.

Even so, it’s important that the facilities manager try to assess the life-cycle costs and also get others involved in the purchasing decision to consider these costs. If the facilities manager can shift thinking within the organization, so that those in charge of the checkbook consider both ongoing and initial costs, a substantial amount of money can be saved.

Making the case for investing in a better product that costs more up front has been especially difficult recently because of the tight economy, which has led organizations to focus on costs, not value. As a result, facilities managers sometimes say that they can’t afford to install quality products. “In reality, they can’t afford not to,” says Ahrens. “Otherwise, in three to four years, when the carpet looks tired, they’ll almost certainly have to replace it.”

Nevertheless, a growing economy is an opportune time to get everyone thinking of life-cycle costs. “In the last six months, I have seen more examination of life-cycle costs as the economy has gotten stronger,” says van der Toorn of Interface, Inc. “People again are looking at total costs, and not just purchasing the lowest-cost product over the short term.”

 

Carpet Certification Takes the Next Step

The Carpet and Rug Institute (CRI), headquartered in Dalton, Ga., is a national trade association representing carpet manufacturers, raw material suppliers and service firms. Among facility executives, CRI is perhaps best known for a carpet certification program called Green Label, the latest version of which — Green Label Plus — has just been unveiled.

Green Label Plus represents the fourth time that the 12-year-old program has tightened its carpet testing standard, as manufacturers have continued to reduce product emissions.

Green Label Plus identifies carpet products that meet strict requirements for low chemical emissions. The program was designed for facility executives and others who want greater assurance of good indoor air quality. Every carpet receiving Green Label Plus certification has been tested for emission levels for all chemicals stipulated by California’s stringent indoor air quality requirements, plus six additional chemicals.

The original Green Label program was launched in 1992.

Project Assumptions

   Study Period: 20 years  
   Project Size: 10,000 square yards  
        
   Pricing Assumptions: Product Type 1 Product Type 2
   Material $10.00 per sq. yd. $22.00 per sq. yd.
   Installation $5.00 per sq. yd. $4.00 per sq. yd.
   Removal & Disposal $2.50 per sq. yd. $1.50 per sq. yd.
   Furniture Handling $3.00 per sq. yd. $1.50 per sq. yd.
   Maintenance Cost $0.50 per sq. yd. annually $0.30 per sq. yd. annually
   Life Expectancy: 8 years 12 years
   Initial Cost (No Demo): $150,000 $260,000
   Replacement Cost: $205,000 $290,000
   # of Full Replacements: 2 1
   Annual Maintenance Cost: $5,000 $3,000

Study Results

     Product Type 1 Product Type 2
   Initial Investment $150,000.00 $260,000.00
   Maintenance Costs $100,000.00 $ 60,000.00
   Total Replacement Costs $410,000.00 $290,000.00
   Total Life-Cycle Cost $660,000.00 $610,000.00



Contact FacilitiesNet Editorial Staff »

  posted on 9/1/2004   Article Use Policy

Comments