The Presentation Paradox

Identical work depicted by differing component presentations produces substantial Fully Funded Balance differences.

Competing component presentations are commonplace and occur without intent. And to be crystal clear, we’re not talking about cost, quantity, or life differences, but rather, we are simply talking about alternative component presentations that all achieve identical reserve work.

In the following example, see how perfectly identical work is achieved by 2 different component presentations. The resulting Fully Funded Balance difference is astounding.

Identical Work with Single Vs Multiple Component Presentations

This example uses 2 different component presentations to accomplish the same gutter replacement task. The annual gutter-replacement expense is $1,000, but the resulting FFBs for the 2 component presentations differ significantly. The first presentation’s FFB is $1,000 per year, while the second’s is $15,500 per year. Despite identical $1,000/year expense forecasts, the 2 presentations generate significantly different FFBs.

The following tables demonstrate the FFB disparity. In the first table, a single component with a 1-year useful life accomplishes gutter replacement. In the second table, 30 individual components, each with a 30-year useful life, accomplish the exact same gutter replacement. Inflation is ignored for simplicity.

In the following example, see how perfectly identical work is achieved by two different component presentations. The resulting Fully Funded Balance difference is astounding.

Why This Matters

The annual gutter replacement expense is only $1,000/year, but the resulting Fully Funded Balances are drastically different.

Single Component FFB $1,000

Thirty Component FFB $15,500

Despite identical yearly expenses, the two presentations generate dramatically different Fully Funded Balances.

Single Component Fully Funded Balance

Component	CRC	UL	RL	2026	2027	2028	2029	2030	2031	...	2055
Bldg	$1,000	1	0	$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	...	$1,000
Total FFB				$1,000	$1,000	$1,000	$1,000	$1,000	$1,000	...	$1,000

Bold = replacement year, CRC = Current Replacement Cost, UL = Useful Life, RL = Remaining Life, FFB = Fully Funded Balance

Thirty Component Fully Funded Balance

This example demonstrates how identical reserve work can produce dramatically different Fully Funded Balances depending on component presentation methodology.

Component	CRC	UL	RL	2026	2027	2028	2029	2030	2031	...	2055
Bldg 1	$1,000	30	0	$1,000	$33	$67	$100	$133	$167	...	$967
Bldg 2	$1,000	30	1	$967	$1,000	$33	$67	$100	$133	...	$933
Bldg 3	$1,000	30	2	$933	$967	$1,000	$33	$67	$100	...	$900
Bldg 4	$1,000	30	3	$900	$933	$967	$1,000	$33	$67	...	$867
Bldg 5	$1,000	30	4	$867	$900	$933	$967	$1,000	$33	...	$833
Bldg 6	$1,000	30	5	$833	$867	$900	$933	$967	$1,000	...	$800
Bldg 7	$1,000	30	6	$800	$833	$867	$900	$933	$967	...	$767
Bldg 8	$1,000	30	7	$767	$800	$833	$867	$900	$933	...	$733
Bldg 9	$1,000	30	8	$733	$767	$800	$833	$867	$900	...	$700
Bldg 10	$1,000	30	9	$700	$733	$767	$800	$833	$867	...	$667
Bldg 11	$1,000	30	10	$667	$700	$733	$767	$800	$833	...	$633
Bldg 12	$1,000	30	11	$633	$667	$700	$733	$767	$800	...	$600
Bldg 13	$1,000	30	12	$600	$633	$667	$700	$733	$767	...	$567
Bldg 14	$1,000	30	13	$567	$600	$633	$667	$700	$733	...	$533
Bldg 15	$1,000	30	14	$533	$567	$600	$633	$667	$700	...	$500
Bldg 16	$1,000	30	15	$500	$533	$567	$600	$633	$667	...	$467
Bldg 17	$1,000	30	16	$467	$500	$533	$567	$600	$633	...	$433
Bldg 18	$1,000	30	17	$433	$467	$500	$533	$567	$600	...	$400
Bldg 19	$1,000	30	18	$400	$433	$467	$500	$533	$567	...	$367
Bldg 20	$1,000	30	19	$367	$400	$433	$467	$500	$533	...	$333
Bldg 21	$1,000	30	20	$333	$367	$400	$433	$467	$500	...	$300
Bldg 22	$1,000	30	21	$300	$333	$367	$400	$433	$467	...	$267
Bldg 23	$1,000	30	22	$267	$300	$333	$367	$400	$433	...	$233
Bldg 24	$1,000	30	23	$233	$267	$300	$333	$367	$400	...	$200
Bldg 25	$1,000	30	24	$200	$233	$267	$300	$333	$367	...	$167
Bldg 26	$1,000	30	25	$167	$200	$233	$267	$300	$333	...	$133
Bldg 27	$1,000	30	26	$133	$167	$200	$233	$267	$300	...	$100
Bldg 28	$1,000	30	27	$100	$133	$167	$200	$233	$267	...	$67
Bldg 29	$1,000	30	28	$67	$100	$133	$167	$200	$233	...	$33
Bldg 30	$1,000	30	29	$33	$67	$100	$133	$167	$200	...	$1,000
Total FFB				$15,500	$15,500	$15,500	$15,500	$15,500	$15,500	...	$15,500
Total CRC	$30,000

Bold = replacement year,
CRC = Current Replacement Cost,
UL = Useful Life,
RL = Remaining Life,
FFB = Fully Funded Balance