8.00 Life Cycle and Residual Risk

8.00 Life Cycle and Residual Risk - The cost base for this category is the maintenance portion of the contract value
8.01	General Capital Maintenance / LCC Schedule	Risk that capital maintenance to the structure and systems of the building is not performed when appropriate to sustain the capital value of the property. Often in the private sector the landlord has no incentive for providing quality maintenance towards latter period of the term where a special purpose built and single tenancy is involved. Under DBFM the risk and responsibility is transferred to Project Co. and Project Co. has an incentive to maintain the asset to meet their handback obligations. An example of general capital maintenance is a scheduled roof replacement.
8.02	Preventative / Periodic Maintenance	Risk that periodic maintenance of the building is not adequate to sustain the service requirements. This type of risk increases the probability that the building under performs, causing higher utility costs, and the residual value depredates more than if it was properly maintained. Government has a tendency to under-fund budgets for building maintenance and improvements, while the private sector tends to do the appropriate repairs to protect its investment where market alternatives exist. An example of preventative / periodic maintenance would be annually servicing mechanical and electrical systems and major equipment.
8.03	Unscheduled Emergency Maintenance	Risk that emergency maintenance is required that affects the life safety & immediate operation of the facility. The impact of this risk impacting the project is lower under DBFM because the Proponent is more likely to carry out general capital maintenance and preventative maintenance due to performance obligations.
8.04	Overlooked Defects	Risk associated with design errors related to project details. Risk that overlooked design, construction, and manufacturing defects or design elements will cause unexpected problems, such as roof leaking, and as a result increased capital repair expenditures/costs.
8.05	Technology Changes	Risk involving technology changes that could impact the delivery of building automation systems. Variance from operational budget due to changes required to address technology changes that will enhance systems, including mechanical, electrical, life safety, building automation systems, conveying systems, security systems. This risk is typically accounted for in the structural reserve.
8.06	Major Building Reconfiguration and Improvements	Risk associated with required technology changes, safety and security, and any other changes required by the Government that may lead to major alterations to the building structure, including mechanical and electrical components.
8.07	Occupancy Requirements	Risk associated with legislative and/or government occupancy requirements. Changes to requirements may require changes to the base building and/or tenant improvements. This could impact capital repairs and/or tenant improvement costs. Government has an obligation to ensure that required changes are implemented immediately; however may be less willing to pay for the changes for leased premises. In DBFM, the Proponent is responsible to ensure occupancy requirements are met.
8.08	Life Cycle	Life cycle maintenance costs are higher than projected. The risk and associated costs of maintaining the building interior, exterior and building systems in good working order and in a mode of delivery of service or function required. This is the risk that sub-systems identified for life cycle maintenance would require renewal costs higher or sooner than estimated or fail before renewal. This risk includes variance from operational budget due to request changes to address revised codes and/or local authority requirements, change in material, change in service delivery requirements, deferral of replacement schedules. Includes building exterior and site: building envelope, landscaping, irrigation, storm and sanitary, exterior signage.
8.09	Default of Property Management	Risk of bankruptcy or default of building maintenance company.
8.10	Incomplete RFP Tender Documentation	Risk that the RFP tender documentation is not complete. This will result in increased addenda and could give a sense of uncertainty to bidders, resulting in reduced tolerance to risk resulting in higher tenders.
8.11	Uncoordinated Information	Risk that tender documentation is uncoordinated. This will result in increased addenda and could give a sense of uncertainty to bidders, resulting in reduced tolerance to risk resulting in higher tenders.
8.12	Asset Residual	Risk in connection with residual value of the asset at the end of the term. Under the DBFM model the contract provision calls for very stringent requirements for handover procedure, hence the probability of it posing a financial risk to the proponent is greater. However, through the AFP model the impact would be less due to the mandatory LCC plans.