OMB Circular
No. A-94
TABLE 2 -- COSTS ASSOCIATED WITH PURCHASE ALTERNATIVE
TABLE 1 -- BASIC DATA
User completes shaded portions as appropriate.
Project:
MISSOULA T & D CENTER
Location:
MISSOULA MONTANA
Mar-97
Date:
Purchase Price- Building
Land
Imputed Costs
Ancillary Costs/yr
To determine the time period to use in an analysis, choose
Lease Period + Lease Renewal Option Period if it is of shorter
duration than the economic life of the other alternatives
(Remember, the analysis must be for 10 years or longer). In this
example, the time period is 20 years.
$6,000,000
$123,500
$178,500
These numbers should be available from your
engineer or architect.
10 years
Lease Period:
Gross Sq. ft.
53,150
Net Usable sq. ft.(about 80-70% of gross)
43,000
Lease Rate sq. ft.
$15.00
Lease Rate Renewal Period
Ancillary Costs
Us e OM B Cir cular No. A -9 4 , S ect ion 13
f or guidance in det er mining appr opr iat e
cos t s f or each of t hes e Pur chas e
A lt er nat ive f igur es . It is impor t ant t o
include imput ed cos t s f or buildings
and/ or land t hat is alr eady gover nment -
10 years
$16.00
Local GSA rates or
Lease Purchase Rate sq. ft.
private sector rates.
Lease/Pur Renewal Period
Interest Rates:
Nom U.S. Treasury Rate
(See OMB A-94, App C)
Any costs associated with preparing the lease property that
WASN'T included in the lease. Typically, these costs are a
one-time occurrence.
$3,000.00
This Alternative is not allowed at this time, but could be a
feasible option in the future. Rather than eliminate it from
the spreadsheet, just plug in rates high enough to assure
that it wouldn't be chosen.
$20.00
$20.00
20 Yr
6.20%
3 Yr
5.80%
3
Design & Construction period (years)
Economic Life (Construction)
50
Economic Life (Purchase)
30
LEGEND
OMB Circular A-94 has Appendices
attached with current nominal
interest rates to be used for
analyses of this type; (Note: For a
20-year nominal Treasury rate, take
an average of the 10-year and 30year rates).
20
Analysis Period (in Years)
Table 4 -- ANNUAL EXPENDITURES AND REVENUES
TABLE 3 -- CONSTRUCTION AND INTEREST DURING CONSTRUCTION (ESTIMATED)
LEGEND
User completes shaded portions as appropriate.
Interest Rate
Construction
$5,599,107
Design Costs (6—10% of construction $)
$335,946
Contract Supervision (4—8% of construction
$335,946
$)
Land Cost
$0
Land Value
$200,000
Total Construction
$6,271,000
All design + land purchased in Yr 1
% Constr & Supv in Yr 2:
% Constr & Supv in Yr 3:
60.00%
40.00%
5.80%
Even if you build on gov't land there is a
land cost. This would be an "imputed" cost
as described in OMB A-94, Section 13.
Federal
Appropriation
$335,946
$3,561,032
$2,374,021
Year
1
2
3
Total
One-Half
Annual
Funding
$168,000
$1,781,000
$1,187,000
$6,271,000
Your Forest Engineer or Architect
should be able to provide estimates
of these percentages.
Typically, design costs are 6—10% of construction costs, while COR and
contract supervision costs are 4—8% of construction, depending generally on
the size of the project . If the project is relatively small (several hundred
thousand dollars), use a percentage at the higher end of the range. If the
project is larger (millions of dollars), use a lower percentage. In this example,
each was estimated to be 6% of construction costs, but any percentage can
be easily used. The formula used in cells C44 and C45 is "=0.06*$C$43", so
editing the percentage can be accomplished by changing the "0.06" to the
desired decimal. However, if the actual costs are known, those figures should
be used (Simply delete the formulas in cells C44 and C45, then enter the
actual figures).
Prior
Years
Funding
$0
$335,946
$3,896,978
User completes shaded portions as appropriate.
These are included in the
Lease payment, so they
Lease
must be considered when
Lease
Construction Purchase
calculating the costs
Borrowing Term or
associated with
20
3
20
Lease Term (yrs) construction or purchase
alternatives. If they aren't
$797,250
$1,063,000
Lease payment included, they must be
$1,063,000
Renewal Period added to the yearly cost of $850,400
*
$5,000
*
Real Estate Taxes
Bldg Maintenance is
*
$10,000
*
Insurance
*
$111,982
*
Building Maintenance typically 1-3% of
Construction or
*
$22,500
*
Utilities
Purchase cost. 2%
*
$11,500
*
Operations Costs
$1,750.00
N/A
$1,750.00
Lease Administration was used for these
$799,000
$160,982
$1,064,750
Total Annual Costs costs.
Residual Value
Federal
Amount for
Interest
Computing
During
Interest
Construction
$0
$168,000
$9,740
$9,740 $2,126,686
$123,350
$133,090 $5,217,068
$302,590
Prior
Years
Interest
Total:
$435,680
These yearly totals can be thought of as the
"opportunity cost" of using Federal funds.
For the purpose of this analysis, these costs
are factored into the Net Present Value
formula used in the Summary below in Table
6.
$5,000,000
* =Included in Lease Contract
By listing items that are included in the Lease
and Lease/Purchase alternatives, the user can
ensure that comparable ancillary services are
addressed for the Build and Purchase
alternatives. Remember, the validity of this
analysis rests on the user's ability to
compare "apples to apples" and "oranges to
oranges".
$5,000,000
Purchase
N/A
$5,000
These may be "imputed"
costs. Refer to OMB A94, Section 13.c for
further clarification.
$13,500
$120,000
$25,000
$15,000
N/A
$178,500
$7,500,000
OMB A-94, Section 13.c.7 provides several
options for determining Residual Value.
Important: The Residual Value can greatly
influence the net present value, so give it careful
consideration.
A-94
Spreadsheet
This PowerPoint demo is a quick
overview of how to:
Answer common questions
about the spreadsheet model
A-94
Now onto the Spread Sheet
Remember…
Sheets can be changed. . .
on purpose or accidentally.
Please be aware you can
change the formulas
To determine the time period to use in an
analysis, choose Lease Period + Lease
Renewal Option Period if it is of shorter
User completes shaded portions as appropriate.
duration than the economic life of the other
alternatives (Remember, the analysis must be
M ISSOULA T & D CENTER
for 10 years or longer). In this example, the
M ISSOULA M ONTANA
time period is 20 years.
M ar- 97
TABLE 1 -- BASIC DATA
Project:
Location:
Date:
These numbers should be available from
your engineer or architect.
Lease Period:
10 years
Gross Sq. ft.
53,150
Net Usable sq. ft.(about 80-70% of gross)
43,000
Lease Rate sq. ft.
$15.00
Lease Rate Renewal Period
10 years
Ancillary Costs
Local GSA rates or
Lease Purchase Rate
sq. ft.
private
sector rates.
Lease/Pur Renewal Period
$16.00
$3,000.00
$20.00
$20.00
Interest Rates:
Nom U.S. Treasury Rate
(See OMB A-94, App C)
20 Yr
6.20%
3 Yr
5.80%
Analysis Period (in Years)
Design & Construction period (years)
20
3
Economic Life (Construction)
50
Economic Life (Purchase)
30
Any costs associated with preparing the
lease property that WASN'T included in
the lease. Typically, these costs are a onetime occurrence.
This Alternative is not allowed at this time,
but could be a feasible option in the future.
Rather than eliminate it from the
spreadsheet, just plug in rates high enough
to assure that it wouldn't be chosen.
OMB Circular A-94 has
Appendices attached with current
nominal interest rates to be used
for analyses of this type; (Note: For
a 20-year nominal Treasury rate,
take an average of the 10-year and
30-year rates).
TABLE 2 -- COSTS ASSOCIATED W ITH PURCHASE ALTERNATIVE
Purchase Price- Building
Land
Imputed Costs
Ancillary Costs/yr
$6,000,000
$123,500
$178,500
Use OMB Circular No. A-94, Section 13.c.(6),
for guidance in determining appropriate costs
for each of these Purchase Alternative figures.
It is important to include imputed costs for
buildings and/or land that is already
government-owned for the purpose of this
analysis.
TABLE 3 -- CONSTRUCTION AND INTEREST DURING CONSTRUCTION (ESTIMATED)
LEGEND
User completes shaded portions as appropriate.
Even if you build on gov't land there is a
5.80%
landInterest
cost. Rate
This would
be an "imputed" cost
as described in OMB A-94, Section 13.
Construction
$5,599,107
Design Costs (6—10% of construction $)
$335,946
Contract Supervision (4—8% of construction
$335,946
$)
Land Cost
$0
Land Value
$200,000
Total Construction
$6,271,000
All design + land purchased in Yr 1
% Constr & Supv in Yr 2:
% Constr & Supv in Yr 3:
60.00%
40.00%
Year
1
2
3
Federal
Amount for
Interest
Computing
During
Interest
Construction
$0
$168,000
$9,740
$9,740 $2,126,686
$123,350
$133,090 $5,217,068
$302,590
Your Forest Engineer or Architect should be able
Federal
to provide
estimates of these percentages.
Appropriation
$335,946
$3,561,032
$2,374,021
Total
One-Half
Annual
Funding
$168,000
$1,781,000
$1,187,000
$6,271,000
Typically, design costs are 6—10% of construction costs,
while COR and contract supervision costs are 4—8% of
construction, depending generally on the size of the
project. If the project is relatively small (several hundred
thousand dollars), use a percentage at the higher end of the
range. If the project is larger (millions of dollars), use a
lower percentage. In this example, each was estimated to
be 6% of construction costs, but any percentage can be
easily used. The formula used in cells C44 and C45 is
"=0.06*$C$43", so editing the percentage can be
accomplished by changing the "0.06" to the desired
decimal. However, if the actual costs are known, those
figures should be used (Simply delete the formulas in cells
C44 and C45, then enter the actual figures).
Prior
Years
Funding
$0
$335,946
$3,896,978
Prior
Years
Interest
Total:
$435,680
These yearly totals can be
thought of as the
"opportunity cost" of using
Federal funds. For the
purpose of this analysis,
these costs are factored into
the Net Present Value
formula used in the
Summary below in Table 5.
Table 4 -- ANNUAL EXPENDITURES AND REVENUES
These may be
"imputed" costs.
LEGEND
User completes shaded portions as appropriate.
Refer to OMB AThese are included in the Lease
94, Section 13.c.(6)
payment, so they must be considered
for further
Lease
when calculating the costs
clarification.
Lease
Construction Purchase
Purchase
associated with construction or
Borrowingalternatives.
Term or
purchase
If they aren't
20
3
20
N/A
Lease
Term
(yrs)
included, they must be added to the
yearly cost of the lease.
Lease payment
Renewal Period
Real Estate Taxes
Insurance
Building Maintenance
Utilities
Operations Costs
Bldg Maintenance is
Lease Administration
typically 1-3% of
Total Annual Construction
Costs
or
Residual Value
Purchase cost. 2% was
$797,250
$1,063,000
$850,400
$1,063,000
*
$5,000
*
$5,000
*
$10,000
*
$13,500
*
$111,982
*
$120,000
*
$22,500
*
$25,000
*
$11,500
*
$15,000
$1,750.00
$799,000
N/A
$1,750.00
N/A
$160,982
$1,064,750
$178,500
$5,000,000
$5,000,000
$7,500,000
used for these costs.
* =Included in Lease Contract
By listing
thatincluded
are included
the Lease
By listing
itemsitems
that are
in theinLease
and Lease/Purchase
and
Lease/Purchase
alternatives,
the
user
can
alternatives, the user can ensure that comparable ancillary
services
ensure that comparable ancillary services are
are addressed for the Build and Purchase alternatives. Remember,
addressed for the Build and Purchase
the validity of this analysis rests on the user's ability to compare
alternatives. Remember, the validity of this
"apples to apples" and "oranges to oranges".
analysis rests on the user's ability to
compare "apples to apples" and "oranges to
oranges".
OMB A-94, Section 13.c.(7)
provides several options for
determining Residual Value.
Important: The Residual
Value can greatly influence
the net present value, so give
it careful consideration.
TABLE 5 -- CASH FLOW AND NET PRESENT VALUE
annual payments
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Lease
ConstructionLease PurchasePurchase
Totals From Table 4
The accompanying
"User's Guide" explains
how these summary net
present values were
calculated.
Net Usable X Lease Rate
($802,000)
($160,982)
($1,064,750)
($178,500)
($799,000)
($160,982)
($1,064,750)
($178,500)
($799,000)
($160,982)
($1,064,750)
($178,500)
($799,000)
($160,982)
($1,064,750)
($178,500)
($799,000)
($160,982)
($1,064,750)
($178,500)
($799,000)
($160,982)
($1,064,750)
($178,500)
($799,000)
($160,982)
($1,064,750)
($178,500)
($799,000)
($160,982)
($1,064,750)
($799,000)
($160,982)
($1,064,750)
($799,000)
($160,982)
($1,064,750)
Net Present Value:
($9,110,657)
Lease
($178,500) Construction
($7,395,420)
($178,500)
($10,515,419)
Lease / Purchase
($178,500)
($5,886,037)
Purchase
($799,000)
($160,982)
($1,064,750)
($178,500)
($799,000)
($160,982)
($1,064,750)
($178,500)
($799,000)
($160,982)
($1,064,750)
($178,500)
($799,000)
($160,982)
($1,064,750)
($178,500)
($799,000)
($160,982)
($1,064,750)
($178,500)
($852,150)
($160,982)
($1,064,750)
($178,500)
($852,150)
($160,982)
($1,064,750)
($178,500)
($852,150)
($160,982)
($1,064,750)
($178,500)
($852,150)
($160,982)
($1,064,750)
($178,500)
($852,150)
($160,982)
($1,064,750)
($178,500)
SUMMARY
PREFERRED OPTION:
PURCHASE
Option years' rate change is reflected here.
Conclusions
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