form of reserve study
that is sometimes prepared for the benefit of mortgage underwriters as part of the loan
A CNA is another form of a capital plan that is common in the commercial property sector.
The primary objectives of a capital needs assesment are listed below:
outcome of the CNA is to enable the owner to make an informed
decision regarding risks and stewardship of the property.
- To identify "keep-up" costs over a specified planning horizon (typically at at 10 years).
- To provide a strategic plan and a tactical plan for the owners.
- To establish the funding liabilities and unfunded liability of the owners.
- To provide a compelling business case to support the establishing of an adequate capital reserve.
One of the many decision support tools to assist owners, managers and operators.
Scope of Services
Listed below is a summary of some of the deliverables that are tuypically included and excluded from a CNA.
I n c l u d e d:
O p t i o n a l:
- An inventory of assets.
- Realistic forecasts of the remaining service lives of the assets.
- Identification of capital projects associated with the end of life of the assets.
- Estimation of the capital expenditures (capex) associated with the capital projects, aggregated into a capital load, and organized into an expenditure analysis.
- Bundling of certain near-term projects into a tactical plan.
- Disclosure of financial assumptions, such as inflation rate.
E x c l u d e d:
- An estimation of "catch-up" costs - that is, the deferred maintenance backlog. No Facility Condtion Index is provided.
- Estimation of "get-ahead" costs- that is upgrades and adaptations to address the forces of obsolescence.
- Development of an asset replacement policy.
- Maintenance strategies to preserve the assets and help them in "reaching" life or "extending" life.
Listed below are some of the attributes of a capital needs assessment:
Listed below is a summary of the data collection procedures that are included or excluded from a capital needs assessment:
I n c l u d e d:
O p t i o n a l:
E x c l u d e d:
- Survey questionnaires.
- Facility staff interviews and operator evaluations.
- Contractor interviews.
- No destructive testing on the assets.
- No recommissioning test on the assets.
- No review of codes and standards
Level of Study
reserve studies should evolve into a Reserve Management Plan.
Listed below are the four
different grades of reserve study:
Listed below are the key steps in the process of preparing a capital needs assessment:
- Mobilize the consulting team
- Collect the data - document review, field visits, etc
- Analyze the data
- Peer review the data
- Submit the draft report
- Submit the final report
- Present to the owner group
Methodology & Domain Knowlege
below are some of the concepts taken into consideration by the
consulting team when making evaluations and analysis for the capital needs assessment:
Further information on each of these concepts is included in the respective pages of this asset management glossary.
- Capex vs. opex.
- Optimistic vs. pessimistic vs. realistic
- Strategic vs. tactical planning.
- Funding vs. funded.
- Like-for-like renewal vs. upgrade renewal
The reserve study contains two parts: physical analysis
and financial analysis,
- Compiles an
inventory of the assets
the remaining useful life of each
- Projects the
replacement costs in future year dollars and
records these in a cash flow
table that displays opening and closing
balances in each fiscal year.
are four methods for identifying which assets should be included in thee
scope of a reserve study:
While reserve studies provide complete
analysis of the timing, costs and funding for renewal projects, they
should ideally be supported by a maintenance plan
assists the owners in arranging for adequate maintenance to achieve the
predicted service lives of the assets.
Listed below are some of the merits and advantages of a capital needs assessment:
Listed below are some of the limitations of a capital needs assessment:
- Sometimes it is cheaper to procure than a full multi-disciplinary condition assessment.
- The CNA can serve as a screening tool to identify the need for further study (see: mixed scanning)
- A CNA is heavier on the financial analysis than it is on the physical analysis.
does not provide any information on the backlog of deferred maintenance
other than an indirect statement on the effective age of the assets.
- The report becomes staledated after 1-3 years and needs to be updated periodically (see: update study).
Fig. Capital needs assessment (CNA) as part of the triad of three classes of assessments.
Fig. Matrix of assessment tools for vertical assets, linear assets and portable assets.
Fig. Matrix of datas associated with each of the three classes of assessment
Fig. Cycles of assessments and re-assessments for PNAs, CNAs and FNAs over a 40-year planning horizon.
Fig. Surveys, questionnaires and interviews being carried out as part of the data collection for a capital needs assessment.
The alignment of the different types of assessments to each asset (the
mix) and the register those that have been commissioned to date (the
Fig. The capital needs assessment submitted to the owner in hard copy format.
I. Care is figuring out the right balance of assessments for his
assets, including: physical needs assessment (PNA), capital needs
assessment (CNA) and functional needs assessment (FNA)
Fig. Field inspections
one of the primary data collection methods used in a facility condition
The relationship between the long-range strategic plan and the shorter
range tactical plan.