As IPD prepares to launch the latest edition of its renowned Cost Code, Hermen van Ree explains how the Code's latest additions bring it even more in line with the needs of corporate property estates.

A new, enhanced version of the IPD Cost Code will be launched at an event in London (free registration) on the 3rd December (sponsorship opportunities). The Code has won a number of awards and is now the best-established global framework for the collection, measurement and analysis of property cost information. 

One of the key elements in the new and updated version of the Code is an instructive, clear and comprehensive worked example of the Code in use – including an illustration of all the major cost ratios.

For instance, in a worked example, based on the occupational portfolio of an insurance company with 67 office buildings throughout the UK. The net internal area of the entire portfolio totals some 95,000 m2, covering over 8,000 workstations and accommodating in excess of 7,000 staff. The costs are shown based on the Cost Code’s categories of expenditure and are drawn from the 2009 IPD Occupiers Database.

This illustrates how the estate’s total occupational costs can be expressed as three primary cost  ratios; 1) based on the number of employees (full time equivalent), 2) the floor area occupied, and 3) per workstation in use.  These makes up the top-level headline results for property cost benchmarking, which may then be broken down into finer cost categories, such as those for property occupation, adaptation and equipment, building operation, business support, property management and information technology.  These ‘secondary cost ratios’ can then be broken down in their turn based on the Code definitions, so that the costs of property occupation are split into net rents, rates, parking costs and so on, all shown on the same ratio basis.

The image below  illustrates how all of the secondary cost categories are broken down into this tertiary and final level, using a property performance tree, to show the depth of analysis which is opened up.  Many organisations use property performance dashboards or trees based on company specific cost measures, the cost categories identified in the Code can easily be clustered and/or re-attributed into any chosen reporting structure, like that shown in this example:

The fifth edition of the IPD Cost Code will also contain improvements to a number of areas:

A clearer distinction between operating expenses (OPEX) and capital expenses (CAPEX).

To clarify the distinction between OPEX and CAPEX, IPD has brought in the help of accounting firm Deloitte.  This has led to the inclusion of a new category of one-off expenses less than £10,000 which are analysed as operating expenses, but distinguished from annually recurring elements of OPEX.  One-off expenses over £10,000, which are depreciated over time, are defined as CAPEX.

The inclusion of a new cost measure to capture IT costs.

The new category of Information Technology Costs includes the costs of IT infrastructure, hardware, software, and support. For infrastructure, the capital expenditure associated with information and communication technology in the building is to be collected. This includes the costs of hardwired cables and wires as well as wireless components and the costs of usage and service charges.

Hardware costs are to the costs of desktop phones, mobile phones, blackberries, MDAs as well as PCs, laptops and both on-site and off-site servers and the annual periodic usage and service charges.  Software costs include the costs of operating systems and user software, but exclude alarm software and building management software. Support covers the annual operating expenditure on managing all activities associated with IT infrastructure, hardware and software.

Three new case studies: Office of Government Commerce (OGC), Centrica - and you?

These new case studies are being developed to show how the IPD Cost Code is being used by large organisations to improve their understanding of the building cost base and thereby improve occupational efficiency.  Two of the studies relate to the insurance and public sectors, with the third intended to reflect a different kind of office user.  Perhaps this could be you!  If you are interested in sharing your experience of implementing the Code, please get in touch with Hermen van Ree at IPD Occupiers (hermen.van.ree@ipd.com).

Updated reconciliation guide to other national standards

With the increasingly global reach of many organisations, IPD recognise that it is important for the industry to be able to reconcile Cost Code outputs with measures generated by others worldwide. Therefore the Code complies with industry standards such as the BOMA Chart of Accounts (US), NEN Terms for Facilities (Netherlands), and the RICS Service Charge Code (UK).

To find out more about the IPD Cost Code, sponsorship opportunities, or to register for the launch event, please contact Hermen Van Ree, Hermen.van.ree@ipd.com, +44 (0)207 336 9232.