Decision-making in the world of business always includes consideration of two questions: (1) What the tax implications may be and (2) How to best allocate available resources. With respect to these two questions, the purpose in this article is to address the answers as they apply to one particular construction process … dealing with aged/discolored acoustical ceilings in a commercial property remodeling project.
Utilizing the most current technology, ceiling restoration and ceiling betterment are the same. This is true because the ceiling (an asset), once restored, is made better by:

• Extending the ceiling’s life cycle
• Improving the acoustics (sound absorption)
• Increasing fire rating
• Lowering toxicity level
• In white color, increasing the light reflectance levels
• Reducing smoke development (should there ever be a fire)

From an accounting perspective, capital expenses can be spread over time. Therefore, in the commercial sector, it is generally preferable to do so. In what follows, it will be shown that funds spent on the restoration of acoustical ceilings is a capital expenditure.

Technical Definition

First, and using “Investopedia” as a resource, let’s begin with the definition of a “Capital Expenditure – CAPEX.” They define it as:

“Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. This type of outlay is made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building a brand new factory.” It goes on to say:

“In terms of accounting, an expense is considered to be a capital expenditure when the asset is a newly purchased capital asset or an investment that improves the useful life of an existing capital asset. If an expense is a capital expenditure, it needs to be capitalized; this requires the company to spread the cost of the expenditure over the useful life of the asset. If, however, the expense is one that maintains the asset at its current condition, the cost is deducted fully in the year of the expense.”

Another Term

Throughout the literature on this same subject, it is common to see “betterment” used to define the purpose of a capital expenditure. With respect to a particular asset, is the budgeted effort one that results in a “better” condition in terms of the projected life cycle, performance and/or appearance?
With the foregoing in mind, we are able to address the original question: Are funds spent for acoustical ceiling restoration a capital expenditure.

The Apparent Answer

With respect to acoustical ceilings, the restoration technology has continued to be perfected through the years to the extent that it is no longer just a means of avoiding replacement with new materials that is the attraction. To the contrary, the most advanced technology is so well refined that a restored ceiling surface can out-perform that of new materials.

With all of this as background, let’s look closer at the question of whether ceiling restoration is a capital expenditure. When the ceiling was initially installed it became an asset. With respect to the definitions just cited, ceiling restoration improves the useful life of an existing capital asset.” It does that by virtue of the bulleted improvements cited in the second paragraph of this article.

Thus, it would appear the answer is, yes.

Once the capital expense issue is established, other financial benefits of the restoration approach become icing on the proverbial cake. Typically, it costs less than one-half that of replacement with new materials and is completed in one-third of the time. Particularly when considering project time, this can represent a significant budget number. Add to it the positive environmental benefit of not contributing old materials to the land-fills and it becomes a much easier option to adopt.

Author’s Note: This article is providing readily available information as it applies to one specific process and should not be viewed as offering any tax recommendations. Formal accounting decisions should be made in cooperation with one’s tax consultants in light of what has been shared herein. The purpose of the above information is merely to provide additional data to help make an informed decision and evaluation.

Prior to the job, the trainer communicated with the contractor and within that dialogue provided a list of supplies, tools, and equipment that should be on the job site. These items were all considered necessary, if the ceiling was to be restored in the most cost-efficient and professional way. One of these was an extension pole for the sprayer.

The trainer arrived on the project site and immediately took stock of the project itself, which turned out to be a large fully merchandised supermarket. The ceiling in the sales area was in the 35 – 40,000 sq. ft. range. Each aisle had 6 foot high stocking units on each side of a six foot wide open floor space. The work was to be done after the store had been closed to customers for the night.

When the time came, to apply the coating to the ceiling, the same staging that had been used to hang plastic sheeting along the top of the walls, was wheeled into place for the spraying. The member of the crew designated to do the spraying climbed up, with the spray gun in hand, ready to go. The trainer asked whether they had brought an extension pole. He was told, “We don’t use them.”

The spraying commenced and was interrupted periodically so that the staging could be re-positioned. The trainer stood back and observed for a while and when he was ready to prove his point, he waited for the next interruption to move the staging. At that point he asked to make a couple suggestions.

First, he noted that at that point they had sprayed 750 – 800 square feet per hour, from the time they started to that point. He commended them on that amount of production, due to the fact that they had to reach out over the stocking units to coat the ceiling. After all, one’s arm is just so long. Next, he noted that when the staging needed to be re-positioned, it took four people to get it done as quickly as possible so that the sprayer could resume his work.

Next, he showed them that he had brought his own extension pole (this was not the first time that the contractor knew better) and asked if he could conduct a little experiment. While he installed the extension pole between the gun and the spray tip, he asked that the staging be moved out of the area. He then demonstrated a spray rate of over 1,200 square feet per hour.

Spraying from staging imposes limitations. The length of the spray pass is limited by the length of the sprayer’s arm. Spraying with a six (or more) foot pole increases the length of each pass dramatically and the rate at which the product is applied to the ceiling.

Spaying from staging leads to spraying over one’s head. It becomes difficult to see through the spray dust and that leads to (1) greater fatigue and (2) more missed spots. Spraying from the floor with the pole at a 45 degree from the vertical orientation, the sprayer is looking ahead at the product application, not directly overhead.

Climb anywhere (in this case on and off staging) enough times, and eventually one will slip and fall. Accidents will happen, but why invite it if it is not necessary. Safety should be considered a must.

It did not take many words after that demonstration to convince all present that spraying from the floor is more efficient, safer, and importantly, cost-effective. The first time the extensions are used, they pay for themselves and then some.

It has often been said that, “the best job is the one that is turned away.”  This marketing tip is designed to build on that adage by highlighting actual benefits derived from having made such a decision.  An actual experience is used to make the point.

For quite some time, we had worked on adding a particular retail chain to our list of clients and we had met with a continued rebuff.  Their reluctance to buy in was based primarily on the view that ProCoustic is more expensive than cheaper ceiling paint products.  They maintained that it was in their best interest to have their ceilings coated with whatever product/system was the least expensive.

We continued to make contact without becoming obnoxious through our efforts.  Maybe with only the intent of proving their own point, they finally relented and asked that we visit a particular store location (five hour round trip), meet with their project manager, and submit a formal proposal.

The Visit

Within micro-seconds of entering the store, it was apparent that this was not a candidate for ceiling restoration.  And, considering the 2.5 hour drive, it was even more of a disappointment.  A substantial percentage of the ceiling tiles were not structurally-sound (dry, whole, flat, and unscratched).  Without any doubt, these would have to be replaced.  Of the remaining tiles, they consisted of a mixture of styles, sizes, and types.

To make matters even worse, the ceiling has been previously coated with a heavy application of conventional paint. The product had been caked on, filling many of the fissures on the tile surfaces, and permanently bonding the tiles to the supporting t-bars.  To summarize the assessment, it was an “ugly looking ceiling.”

Our Report

Soon after, the client’s project manager arrived and we were faced with making our recommendation.  We could have simply said, “replace it” and head for the car.  Instead we delivered our message in the following way:

1. We walked the store, pointing out the amount of tiles that were candidates for replacement.  It became apparent that there were a lot of them.
2. Of those that remained, we noted the differences between them explained how, no matter what coating material is used, there is no way that they could be made to look alike.  There would be no continuity.
3. The painted appearance of the ceiling was discussed in detail.  The fact that some fissures were filled with paint product and others were not, made for a resulting appearance that was not natural and screamed, “I’M PAINTED AND PAINTED BADLY.” We also explained that these same filled fissures reduced the amount of sound that could be absorbed … hence, a loss in acoustics.
4. Noting the fact that so many tiles had been replaced of random styles, we suggested a logical reason.  Due to the fact that there is always a need to gain access above the ceiling to perform maintenance (HVAC, electrical, etc.); ceiling tiles must be free to be moved.  In this case, the old tiles had to be cut out and then be replaced with whatever was available at the time, new, old or different.
5. Finally, we explained that our company is committed to providing a professional service and that including turning away work when we feel that it is not in the best interest of our client to restore their ceiling.  We explained that as much as we would like the business, this was one of those times.
6. Once the client accepted the need to replace the ceiling, we cautiously suggested that they be prepared to pay more than would have been the case, had the ceiling not been painted.  We went on to explain that this was no longer a matter of lifting old tiles out and replacing them with new ones.  This would be an exercise of cutting the old ones out, cleaning the residue off the grids and then installing the new tiles. This extra work might make it such that it would be faster and less expensive to tear out the grids as well and replace the whole ceiling system.
7. Tile manufacturers offer recycling programs where the old tiles can be turned in for credit.  However, if the tiles have been coated with conventional paint, they are not eligible for recycling programs … hence this is another negative financial by-product of the decision to use a lesser expensive product.

The Result

The project manager was very appreciative of our professional approach.  He then asked us if, while we were in the area, would we care to look at another location that would be coming up for remodel in the near future.  So, the trip was not a total loss.

In addition, we had a more informed client who agreed that he would think twice about using conventional paint as a means of saving money, for he now realized that in the long run, there were no savings.  He thanked us.

Some of the causes of project delays include:

• Contractor does not arrive on schedule
• Required products/supplies are not available
• Contractor does not have sufficient personnel to make the schedule
• Contractor does not have equipment for greatest efficiency

Whether the foregoing become issues or not, depends on the contractor(s) performance. The purpose of this article is to describe a means of avoiding delays through a careful selective process in the naming a painting contractor and the same approach would be appropriate for other skills as well.

The Process Begins with References

The first step is to gather a number of contractor references, at least three. And the best source is the product suppliers. The local paint dealer sells paint to the contractors in the area and they know who is who. They know who pays there bills on time. They know who has problems applying products properly and following the manufacturer’s recommended application procedures. They know which ones take pride in their work and in general, run a professional operation.

And most importantly, they know which contractors have been around long enough to have encountered most issues and have learned how to deal with them. As an example, a contractor may be very good at interior trim work and surfaces but know very little about treating outdoor decks or concrete slabs.

The larger paint companies have many locations throughout the area and it is best to call around in order to determine which one is a commercial store. It is there that contractors do the bulk of their business while other stores will tend to cater more to the do-it-yourself homeowner.

No one wants to look bad in anyone’s eyes. Therefore, when asked for the names of three contractors they would recommend, they will tend to be very careful in responding. What happens if they recommend Pete the Painter and Pete botches the job? That would make them look pretty bad and this is to be avoided. Therefore, they will provide “safe bet” recommendations.

Another source of recommendations is friends and relatives who have had success with a particular painter. These are second tier recommendations because their experience with the contractor will likely be limited to one kind of task. All that one can be sure of from that type of recommendation is that on that particular job, they did well.

Price is not the Only Consideration

While price is important, it cannot be the prime barometer of measure. The old saying, “You get nothing for nothing,” is as appropriate in this context as any other. Usually, the contractor who bids considerably less money than the competition is not including the same materials and/or labor. If they were, the prices would be much closer. Whatever is cut out, can be costly to the property owner long after the contractor is gone.

In interviewing competing contractors, there are a number of issues that should be addressed and then the responses by each of them should be evaluated in selecting the successful bidder.

• Products Used – Which products does the contractor recommend for each surface and why? See if the contractor (without being encouraged) suggests a given product because it holds its color longer and it is easier to maintain. Watch out for the, “It’s just as good as anything else and it is cheaper.” This project is something that should be done as infrequently as possible. That is why better performing products that hold up longer are usually the least expensive over the long haul.

  When the contractor recommends using a given product, does he/she offer technical data that supports the preferred material as being better? Product manufacturers have their products tested and that test data is evidence that the product performs as intended. A professional painting contractor is well acquainted with this information and will be inclined to produce written rationale to support the recommendation.

• Insurance – It is amazing how many contractors are selected for a given project and never asked to provide a Certificate of Insurance before the project start-up. Accidents happen to the best of contractors and that will continue to be the case as long as humans are involved. And when that accident occurs, who is going to pay the bill? If insured, the contractor moves on and the property owner is protected.

  When asked for a Certificate of Insurance, the contractor contacts his/her insurance agent and provides the name and address of the property owner. The agent then produces a Certificate with the property owner listed as the “Holder.” It is not wise to accept a photocopy of a general Certificate of Insurance. There is also the option of asking to be listed as an “Additional Insured” rather than simply a “Holder.”

• Performance Requirements – Each bidding contractor should be able to commit to a start and finish date. These dates should be mutually agreeable and conservative, so as to allow for the unknown. Too many contractors will agree to a start date but not be willing to commit to finishing in a reasonable time-frame. Those people are worth watching out for and should be viewed as less reliable than others who will make a commitment. Ideally, the commitment should be defined in terms of a penalty for non-performance.
• Payment Schedule – It is common for a contractor to expect some type of payment with acceptance of their contract. From their perspective, before they make product purchases and block out time for their crews, they want some assurance that this project is real. The assurance usually takes the form of an up-front payment.

  It can also work the other way, if they ask for too much up-front. Many times, the contractor needs quite a bit in order to purchase the materials. One might ask why they need the client’s money to buy the materials. Often, it is because they do not have credit with their supplier to make purchases on terms. Or, they need money in hand to pay off what is needed to finish the project they are presently trying to finish. Contractors, who are operating on a shoe string, should be viewed as risky.

  There are many horror stories of contractors who took large up-front payments and were never heard from again. These are obviously not professionals and they should be avoided in favor of those who operate more appropriately … all the more reason to ask for recommendations from the commercial paint dealer.

  It is also common to have a second payment due at some mid-point and a final payment made upon satisfactory completion of the project. Care should be taken to pay the greatest amount upon completion. Contractors who question their own ability to perform satisfactorily, will try to get more earlier in the project with a mere 10% at the end. Contractors with confidence in their performance will have no problem looking for at least one-third at the end.

• Employees – Are the crews made up of permanent employees or people picked up when needed? A dependable contractor is one that has been around long enough to have built an operation around personnel he/she has trained to do work at the best level. Those who pick up help as needed do not necessarily perform as well.
• Equipment – Do they have their own equipment or do they rent it as needed? Particularly on commercial projects were lifts and scaffolding may be required, those who have their own are typically those who have made a commitment to their business and are in it for the long term.

Making the Selection

A proposal that includes only the price is an open invitation to problems. The proposals should be compared with grades given to each of the factors discussed earlier. They are:

• Recommended products with documentation
• Certificate of Insurance
• Project schedule
• Payment schedule
• Personnel and equipment
• Total price

Some project managers make out a spread sheet with these criteria listed for each of the bidding contractors. They assign a value of 0 – 10 points for each of them and add up a total. The contractor who scores the highest in all of these areas should be offered the project after checking with the Better Business Bureau and determining that they have a clear record.

While no system is perfect, any system is better than none at all.

Light Absorption

It is commonly known that dark colors absorb more sound than light colors. A black car sitting in the sun will build up more heat inside than a white one. People in South America wear white jackets rather than black ones, because it is cooler. The darker colors attract the light and when the source of the light is the sun, it is felt in the form of heat.

Then it should appear equally obvious, that a dark ceiling will also attract the light and soak it up. To prove the point through a case study, a major banking corporation was particularly concerned about the ambient light in their banks. As a test, new light fixtures were installed in the ceiling of a poorly lit room. After the installation, the old/dark ceiling absorbed the light and it was determined that at the work level, there were 40 foot-candles registered on the light meter.

The new light fixtures remained in place and the ceiling was painted with a high quality product. New readings showed an increase to 80 foot-candles at the same work level. Obviously, the amount of light absorbed by the ceiling was reduced dramatically … a 100% improvement.

This example shows that the color of the ceiling has a major impact on the amount of lighting required in a given space. Trying to overcome excessive light-absorption by the ceiling through more and stronger artificial lighting can be expensive.

Does the Type of Paint Make a Difference

Testing has been done where different types of paint products have been tested simultaneously to measure the whiteness index. There is most definitely a correlation between the quality of the ceiling coating and the amount of light it spreads around the room.

As a rule of thumb, ceiling paints tend to be of a lesser quality than other products. A paint used on surfaces that are subjected to hard wear must be formulated to be scrubbed and resist erosion. Similarly, why should paint manufacturers invest a lot of quality in a material that will not be subjected to wear, etc? That is why the lesser quality product tends not to have the stronger pigments that are required to reflect light and not fade out as quickly.

In order to obtain the desired quality and resulting performance, it is best to seek out a specialty coating that is designed specifically for ceilings. Since many ceilings also absorb sound, an acoustical coating provides the best of both worlds.

Acoustical Coatings

These products were initially developed as a means of restoring an old, discolored ceiling as a cost-effective alternative to replacing with new materials. In order to promote the sale of their product over traditional paints, unique characteristics were built in to the design that sets them apart. Firstly, they protect the ceiling’s ability to absorb sound and also the fire retardant qualities as well. And, to make them even more attractive, they tend to hold their color longer than traditional ceiling paints and distribute light more affectively.

Therefore, in order to identify a quality ceiling product and/or its manufacturer, a good place to start is the internet, where one should look for “Acoustical Ceiling Restoration.”

There, references can be found to more than one product used in this industry. The next step is to determine which of them will provide the desired performance. In this regard, it is not recommended that a selection be made, based only on verbal claims sprinkled within their marketing material.

As part of the product development process, legitimate product manufacturers have their products tested in order to ensure that it is performing as intended. These tests are conducted by independent testing laboratories and their test results are completely unbiased.

In selecting one product over another, one should make that choice based on test results that the legitimate manufacturers make readily available. The results of light reflectance testing are one of those that should be available and if not, that product should not rank as well as others that do. Aging test data can also be used to compare one product against another, in order to see which ones have the greater light index and how well it holds that advantage over time.

The greatest demand for an acoustical coating is to refinish the surface of a product that has an acoustical property (it absorbs sound) and the intent is to apply this new finish without damaging the sound absorbing quality. Again, the greatest demand is for ceilings … hence the term “Acoustical Ceiling Coating” is a common term.

Whatever the case, a distinction should be made between a conventional paint product and an acoustical coating. Further, there should be a concern that if the wrong product is applied to an acoustical surface, it cannot be removed easily and the cost for such a mistake could be considerable. The intent of this article is to provide some insight as to what an acoustical coating is capable of doing and some suggestions on how to go about identifying one with a degree of confidence before it is applied.

What the Acoustical Coating is Able to Do

First, look at the surface of an acoustical material such as an acoustical ceiling tile, or acoustical plaster. Notice that there are little holes or crevices throughout, or often course irregular surface textures. Below the surface there is a softer spongier material that is designed to absorb sound.

There is only one way that the sound waves can pass through the outer surface and be absorbed by the spongy inner material and that is through the holes on the surface. Therefore, any coating that is applied to the surface must be formulated to leave those holes open and not plug them up with paint pigment. The acoustical coating, therefore, is a “non-bridging” material. In other words, the molecules of the product will not link up to span or “bridge” a gap or other open spaces.

How to Select an Acoustical Coating

As stated, once the material is on the surface, it is too late to learn that it is not a true acoustical coating. The research must be done before the purchase, not after it. A label or brochure, produced by the neighborhood printing company, may contain many claims but that in of itself should not satisfy the more discriminating buyer. After all, they will print whatever copy is given to them.

Legitimate acoustical coating manufacturers have their products tested by independent laboratories in order to (1) ensure, from a product development perspective, that the product performs as intended, and (2) support the claims they intend to make in their promotional literature. These laboratories use the appropriate ASTM Test and since they are independent, they produce test data that are impartial. UL and FM Approvals are examples of accredited laboratories in the United States that are highly respected for their independent testing procedures.

If the product manufacturer can produce reasonably current test data that shows that the application of their product has no negative affect on the sound absorbing quality of the surface material, then it is safe to consider its purchase. One must be sure that the testing has been repeated recently, as formulas can be occasionally modified, particularly during harder economic times, when the cost of quality raw materials is on the rise.

Another test that is commonly run on an acoustical coating is a fire test. In other words, if there were a fire, how fast would the flame spread with this coating material on the surface? And further, in the burning of that surface material, how much smoke would be developed? Since people die more of smoke inhalation than heat, this is an essential consideration in selecting a product.

The better the acoustical coating, the slower flame spreads and the less smoke is developed. That is why most quality acoustical coatings carry a Class-A fire retardant rating.

One last word on independent laboratory testing has to do with product approvals. Independent laboratories offer a product approval classification. If a product is “approved” by a laboratory, it means more than they have tested the material. It means that they make periodic visits to the manufacturing facility in order to determine that the formulation remains consistent and that quality control procedures are in place and used.

Therefore, prior to selecting a product to be applied to an acoustical surface, check for independent laboratory testing and if possible, an “approved” product.

The present situation is as follows: An acoustical tile ceiling is discolored from age and contamination. Lighting has been affected and the work environment is less than ideal. But before moving forward with any action, the decision should be based on a series of cost-related considerations.

Decision One: Is the treatment of the ceiling part of a major building renovation project? If so, will the existing ceiling be removed in order to complete other major tasks above it, such as installing a sprinkler system, a HVAC modification, etc? If so, the options are limited and the only choices boil down to deciding what type of new tile/ceiling will best serve the needs and budgets. If the ceiling treatment is not part of a major renovation, there are other alternatives worth looking at before calling the new ceiling installer.

Decision Two: If replacing the ceiling tiles were to be the approach taken, will the same style be selected? Conversely, if the present ceiling consists of 2’ x 4’ fissured tiles, would the preferred new ceiling 2’ x 2’ revealed edge glacier tiles?

If the intent is to change styles, the choices have to do with the style of new tile and the best proposal from a ceiling installer … end of story. But, if the existing ceiling style is perfectly acceptable and the old tiles are still structurally sound, another alternative becomes available for consideration … acoustical ceiling restoration.

Decision Three: Which is the best way to go, replace or restore … that is the question. And the most common denominator in the decision-making process is dollars and cents. Follow the money.

To make the soundest decision, a number of factors need to be taken into consideration and once done; the wiser choice will become apparent. Following are the more logical ones:

Summary
When it comes to acoustical ceilings, there is a popular misconception. New is not always better. Acoustical ceiling restoration offers benefits up and beyond what is typically available through replacement with new materials. Is it the panacea for all occasions? No. Is it the more practical approach in most situations? Most likely.

If nothing more, before replacing a ceiling, at least make contact with a responsible source and schedule a demonstration of the restoration process. It can be an eye-opener.

Is new always better? If you are referring toothbrushes and underwear, the answer is yes. But when it comes to dealing with aged/discolored acoustical ceilings, the answer may surprise you.

As compared to new tiles, and assuming the right product is used, a restored acoustical ceiling has:

• improved acoustics
• better light reflectance and color retention
• greater life expectancy

Retail store remodeling is typically completed between closing time (10 pm) and the morning arrival of store personnel (as early as 6 am). When removing and replacing acoustical ceilings, that envelope of time is seldom adequate to do more than one section per night, until the project is completed. In contrast, ceiling restoration offers:

1. Efficiency – It is common, in fully merchandised facilities, to restore 8 – 12,000 square feet of ceilings in one night, during that envelope of time described above. Larger contractors have been known to complete as much as 20,000 square feet in one night.
2. Appearance – The application of an acoustical coating results in a like-new finish that improves light reflectance and presents the option of designer colors.
3. Economics – Even in the case of inexpensive 2’x4’ fissure tiles, ceiling restoration typically runs less than one-half of the cost of tile replacement and offers the advantage of refinishing the t-bar system and air diffusers at the same time with no additional expense.
4. Environment – By re-cycling the old ceiling, solid waste disposal is avoided as well as its related cost.

Selecting a Product

One must recognize the reasons for installing the ceiling system in the first place and make certain that those are not compromised. An acoustical ceiling tile system offers acoustical properties, a consistent color (usually white), and the ability to gain access above the ceiling by simply removing a tile. Traditional paints typically leave the tiles stuck to the t-bar system, reduce the acoustical values dramatically, and depending on the product used, can make the ceiling
more flammable. Therefore, it is best to specify a particular product in order to avoid the misuse of traditional paint systems, thus retaining a more natural appearance.

Undocumented claims made by manufacturers should not be accepted as necessarily true. If they state that their product will not damage the acoustical value of the ceiling, then the manufacturer should be able to provide supporting laboratory test data. If they suggest that their coating out-performs that of a new tile, results of testing should be available. A quality product of this type should be a Class-A fire retardant material and, if it does burn, should not give off emissions that are dangerous to life. Claims of improved light reflectance should also be substantiated. Of primary importance is that all testing must have been completed by independent testing laboratories and not by the manufacturer. Once a product has been applied to the ceiling, it cannot be removed, so buyers beware.

Ken Woolf
President
ProCoat Products, Inc.
Holbrook, MA