changing the conversation in facilities management - a step towards total campus engagement (ppm...
DESCRIPTION
As a result of increasing demands for capital renewal investments at a time when resources are limited, we need a new conversation around facilities at our campuses. This conversation needs to engage stakeholders and force a dialogue regarding institutional priorities and facilities initiatives that support them. An institution-wide understanding of space priorities and capital needs must drive operating changes that stick. Facilities leaders need to use a language that creates alignment throughout the institution and drives effective policies. They need to create constituency for a multi-year capital plan. They need to communicate results to drive credibility and maintain support. During this presentation, participants will learn different strategies for engaging with various constituencies on campus in order to create facilities plans that are technically sound and tie to mission and finance. Working together, we can create a dialogue that resonates from the board room to the boiler room.TRANSCRIPT
y yUniversity of Missouri - St. Louis
University of Nebraska at KearneyUniversity of New Hampshire
University of New HavenUniversity of North TexasUniversity of Notre Dame
University of OregonUniversity of Pennsylvania
University of PortlandUniversity of Redlands
University of RochesterUniversity of San Diego
University of San FranciscoUniversity of Southern Maine
University of Southern MississippiUniversity of St. Thomas (TX)University of Texas at Dallas
University of the PacificUniversity of Toledo
University of the Sciences in Philadelphia
University of VermontUpper Iowa University
Utica CollegeVassar College
Virginia Commonwealth UniversityVirginia Department of General
ServicesVirginia State University
Wagner CollegeWashburn University
Wellesley CollegeWesleyan University
West Chester University of Pennsylvania
West Virginia Health Sciences CenterWest Virginia University
Western Connecticut State UniversityWestern Oregon University
Westfield State UniversityWheaton College (MA)
Whitworth UniversityWidener University
Williams CollegeWilliston Northampton School
Changing the Conversation around Facilities Management…A Step Towards Total Campus Engagement
April 8, 2014
Jay PearlmanAssociate [email protected]
Jay PearlmanAssociate [email protected]
Presenters
Karen GuminRegional Account [email protected]
Karen GuminRegional Account [email protected]
3
Who Partners with Sightlines?Robust membership includes colleges, universities, consortiums and state systems
Serving the Nation’s Leading Institutions:
• 19 of the Top 25 Colleges*
• 17 of the Top 25 Universities*
• 42 Flagship State Universities
• 8 of the 12 Ivy Plus Institutions
• 12 of the 14 Big 10 Institutions
• 8 of 13 Selective Liberal Arts Colleges
* U.S. News 2014 Rankings
Sightlines is proud to announce that:
• 450 colleges, universities and K-12 institutions are Sightlines clients including over 300 ROPA members.
• 93% of ROPA members renewed in 2013
• We have clients in 43 states, the District of Columbia and Canada
• 56 new institutions became Sightlines members in 2013
Sightlines advises state systems in:
• Alaska• California• Connecticut• Hawaii• Maine• Massachusetts• Minnesota• Mississippi• Missouri• New Hampshire• New Jersey• New York: CUNY and
SUNY• Oregon• Pennsylvania• Texas
A Disconnect between Finance and Facilities
Creating Alignment Between Finance and Facilities:
Trends Affecting Higher Education
Challenges Facing Higher Education
Federal and state funding levels for higher education have fallen to historic lows with no nearterm vision for recovery.
Demographic shifts have led to level or declining enrollments in traditional students
Affordability of education has expanded student debt, capped tuition growth, and increased dependency on Pell Grants.
Tuition dependency has grown, operating margins have fallen, and balance sheets have weakened.
Administrative and support costs have grown compared to education costs.
“Approximately one-third of all colleges and universities have financial statements that are significantly weaker than they were several years ago.”
Denneen & Dretler, The Financially Sustainable University
The Sustainability of Higher Education is in Question
Your Largest AssetBalance Sheets Understate Importance of Physical Assets
0%
10%
20%
30%
40%
50%
60%
70%
80%
Selective LiberalArts
Private LargeUniv.
ComprehensiveUniv.
Public Univ.
% PPE % Net Asset Value
Commentary Does Not Fairly Represent Facilities
“Book value” does not represent replacement or market value of facilities assets
Deprecation accounting does not fairly represent financial (“backlog”) or program risk
Capital Pressures on Colleges and Universities are Often
Understated
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013
$/ G
ross
Sq.
Ft.
Capital Budgets Have Not RecoveredSubstantive Difference Between Public & Private Annual Capital Budgets
Public Average Private Average
Facilities Backlogs Continue to RiseCurrent Capital, At +/-$5 per GSF, is Not Slowing Backlog Growth
$77 $79 $80 $82 $84 $87 $90
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2007 2008 2009 2010 2011 2012 2013
$/G
SF
Backlog $/GSF
Backlog/GSF Percentage Change of Backlog
05
101520253035404550
Tota
l GSF
of D
atab
ase
(Mill
ions
)
Constructed Space Sightlines Database (1880-Present) = 1.3 billion GSF
GSF Constructed (5 Year Cohorts)
12
Waves of Construction Hitting Major Life CyclesFirst wave of buildings are now 50 years old; second wave nears 20 years old
Pre-
War Built before 1951
Durable constructionOlder but typically lasts longer Po
st-W
ar Built between 1951 and 1975Lower-quality constructionAlready needing more repairs and renovations
Mod
ern Built between 1975 and
1990Quick-flash constructionLow-quality building components\
Com
plex
Built in 1991 and newerTechnically complex spacesHigher-quality, more expensive to maintain & repair
Changing the Conversation
13
We Need to Change the ConversationLanguage that Drives Effective Policies for…
SpaceRelease The
Hidden Value in Balance Sheets
SpaceRelease The
Hidden Value in Balance Sheets
Capital $Multiyear Plans
that Align to Mission, & Risk
Capital $Multiyear Plans
that Align to Mission, & Risk
OperationsImprove
Effectiveness & Lower Facilities
Overhead Impact
OperationsImprove
Effectiveness & Lower Facilities
Overhead Impact
We Need to Change the ConversationLanguage that Drives Effective Policies
We need a conversation regarding facilities that:> Treats physical plant like a core business and not an auxiliary;> Uses concepts of endowment management to contextualize
investment decisions;> Aligns facilities operations and capital investment with
institutional mission and finance;> Focuses on outcomes and not inputs.
How to make this change?Create common vocabulary for facilities management that can be
articulated from the boiler room to the board room.
16
Create Engagement on Campus
Adopt a Common
Vocabulary
Create Alignment
Influence Institutional
Policy
Make Lasting Change
An Effective Common VocabularyUse Terms that Engage - Repeat
Asset Value Change
The annual investment needed to ensure buildings will properly perform and reach their useful life “Keep-Up Costs”
AnnualStewardship
The accumulated backlog of repair /modernization needs and the definition of resource capacity to correct them “Catch-Up Costs”
Asset Reinvestment
The effectiveness of the facilities operating budget, staffing, supervision, and energy management
OperationalEffectiveness
The measure of service process, the maintenance quality of space and systems, and the customers opinion of service delivery
Service
Operations Success
17
18
Now that You Speak the Same Language…
Data
Information
Knowledge
Action
Arm Yourself with Knowledge to Create Change
19
Now that You Speak the Same Language…
Data
Information
Knowledge
Action
Arm Yourself with Knowledge to Create Change
Data Having the Right Numbers
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
BTU
/GSF
Energy Consumption
0.02.04.06.08.0
10.012.014.016.0
FY2009 FY2010 FY2011 FY2012 FY2013
kWh/
GSF
Electric Consumption
- 20,000 40,000 60,000 80,000
100,000 120,000
FY2009 FY2010 FY2011 FY2012 FY2013
BTU
/GSF
Fossil Consumption
InformationHaving the Numbers Right
20
Now that You Speak the Same Language…
Data
Information
Knowledge
Action
Arm Yourself with Knowledge to Create Change
21
Now that You Speak the Same Language…
Data
Information
Knowledge
Action
Arm Yourself with Knowledge to Create Change
22
Three Different Scenarios of Engagement
Create Support for a New Direction
Changing Support for an Already Accepted Direction
Create Confidence in a New Paradigm
Creating Support for a New DirectionReexamining Building Policies
23
Example 1: Daily Service CostsIncreasing Daily Service Costs – Budget Cuts Lead to Reduced Service
From Data to KnowledgeDaily Service Costs Significantly Higher than Peers
26
A Multitude of Small Buildings
0
50
100
150
200
250
300
350
400
Over 50,000 GSF 15000-50,000 GSF 0-15,000 GSF
Cou
nt O
f Bui
ldin
gs
Building Count By Size & Age
0-10 Years Of Age 10-25 Years Of Age 25-50 Years Of Age 50+ Years Of Age
Significantly More Small Buildings
28
The Real CulpritNumber of smaller & older buildings on campus affecting PSU’s daily service spending
$3.20
$1.18 $1.30$0.99
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Under 10K 10K - 25K 25K - 50K 50K and above
$/G
SF
GSF Category
Labor Cost by GSF Category
> Recommend Board set policy to drive building intensity down approximately 25% to just above pear averages
> Raise many small buildings through “attrition” and replace with larger new modern spaces (Reduce 265 Bldgs ~ 820 +/- GSF)
> Recommended policy to reduce operating expenses by between $1.75M and $2M.
> Recycle savings to annual stewardship funding to slow rate of deferral and avoid estimated $10M in project deferral
New Policy through Engagement
Changing Support for an Already Accepted Direction
Construction of New Building
30
Example #2: Insufficient Classroom Space
0%10%20%30%40%50%60%70%80%90%
100%
%
Room Utilization – General Classrooms
Room Utilization
Difficult Scheduling During Most of Day
> Estimated need of 22 general use classrooms
> Add 50,000 GSF classroom building
> Building to cost $15M to $20M> Estimated daily service
expenses of $500k annually
Proposed Solution
33
From Data to KnowledgeMisaligned Quantity and Size
0%10%20%30%40%50%60%70%80%90%
100%
%
Room and Position Utilization
Room Utilization Position Utilization
34
A Need for Smaller Rooms
0
5
10
15
20
25
30
35
40
Under 30 31-45 46-80 Over 80
# of
Cla
ssro
oms
Room Size
Room Size
Design Capacity Actual Enrollment
> Avoidance of over $10M in capital costs
> Investment of $1M annually to slow rate of deferral in existing classroom buildings
> Creation of small project fund for faculty appropriation
> Advancement of technology infrastructure
35
Conversation Focused on BenefitsFaculty, Facilities & IT Engaged to Create New Policies
Engagement Creates New Policies
Room Size Current Rooms
Laptop Policy Renovating Current Rooms
Schedule Limited Rooms
Schedule Dept Controlled Rooms
Total
Free up 4 out of 6 Computer Labs(approximately 2,400 students)
Convert 8 ’31-45’ rooms to 12 ‘Under
30 rooms’(approximately
8,000 S.F.)
Add 6 rooms by changing
scheduling policy
Allow for 8 out of 11 Dept Controlled
Rooms to be scheduled by changing the
scheduling policy
Under 30 10 +4 +12 +1 +6 33
31-45 20 -8 +1 +1 14
46-80 3 +1 4
Over 80 1 +3 +1 5
CumulativeTotal
34 38 42 48 56 56
Cost $800/Student = $2.5M
$150/Square Foot = $1.5 m
$0 $0 +/- $4M
Create Confidence in a New ParadigmCapital Planning and Budgeting
37
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Why Institutions Complete an FCA?
Validates fiscal needs
Supports budget preparation
Provides data for short term planning (prioritize immediate maintenance issues)
Provides data for long term strategic planning
Facilitates forecasting of scenarios for different investment strategies
Establishes confidence in the budgeting and planning phases of the work
Launches a baseline for a strategic plan
What Now?How do I best move my FCA data to action?
> Get “buy-in” from institutional facilities and trades staff
> Build constituency by tying project list to institutional mission and priorities
> Create flexible and affordable financial plan
> Build credibility by tracking success to obtain subsequent appropriations
40
Building Portfolio Process
• Repair/Maintain• Modernization• Infrastructure
Define Work Classification
• Reliability• Asset Preservation• Space Improvement• Economic Operations• Safety / Code
Define Project Classifications
• A: 1 - 3 years• B: 4 - 6 years• C: 7+ years
Define Project Priority
What is the Work?
What is the Impact?
What is the Priority?
Adding Value to Each Project
Total Needs
New Construction
???
Grounds Infrastructure
Utility Infrastructure Building
Academic1.5 M GSF
21 Buildings
Science Research0.3 M GSF3 Buildings
Residence & Student Life0.8 M GSF
10 Buildings
Athletics0.2 M GSF2 Buildings
Administrative0.4 M GSF5 Buildings
42
Building Portfolios
• Option 1: Functional Assumes investment is dictated by building function (ie. academic, administrative) and prioritization of investment can be determined by associated use.
Talk About Outcomes – Not Inputs
43
Investment Strategy
100%-85%
85%-70%
70%-50%
Below 50%
Capital Upkeep Stage: Primarily new or recently renovated buildings with sporadic building repair & life cycle needs; “You pick the projects”
Repair and Maintain Stage: Buildings are beginning to show their age and may require more significant investment on a case-by-case basis
Systemic Renovation Stage: Buildings may require more significant repairs; large capital infusions; “The projects pick you”
Transitional/Gut Renovation/Demo Stage: Major buildings components are in jeopardy of failure. Reliability issues are widespread throughout the building.
NAV of Index
NAV Index =
(Replacement Value-Building Needs)
Replacement ValueX 100
Example NAV Peer NAV Group NAV
44
Planning Options SummaryAcademic /
AdminStudent
Life Repair Infrastructure Renovation Houses
$20M Plan $ 2,118,600 $ 4,891,000 $ 7,555,600 $ 1,384,700 $ - $ 271,514 $25M Plan $ 3,368,600 $ 6,540,600 $ 8,055,600 $ 1,734,700 $ - $ 319,094 $30M Plan $ 3,497,100 $ 7,754,900 $ 7,555,600 $ 2,055,800 $ 3,405,555 $ 819,094
$(1)
$-
$1
$2
$3
$4
$5
$6
$7
$8
$9
Academic /Admin
Student Life Repair Infrastructure Renovation Houses
Mill
ions
$20M Plan $25M Plan $30M Plan
45
Planning Options Detailed
Academic / Admin
Student Life Repair Infrastructure Renovation Houses
$20M Plan $ 2,118,600 $ 4,891,000 $ 7,555,600 $ 1,384,700 $ - $ 271,514 $25M Plan $ 3,368,600 $ 6,540,600 $ 8,055,600 $ 1,734,700 $ - $ 319,094 $30M Plan $ 3,497,100 $ 7,754,900 $ 7,555,600 $ 2,055,800 $ 3,405,555 $ 819,094
Economic OperationsSafety/Code
Space ImprovementAsset Preservation
Reliability
Stud
ent Life
Repair
Infrastructure
Economic OperationsSafety/Code
Space ImprovementAsset Preservation
Reliability
Economic OperationsSafety/Code
Space ImprovementAsset Preservation
Reliability
Economic OperationsSafety/Code
Space ImprovementAsset Preservation
Reliability
Economic OperationsSafety/Code
Space ImprovementAsset Preservation
Reliability
Economic OperationsSafety/Code
Space ImprovementAsset Preservation
Reliability
$(1) $- $1 $2 $3 $4 $5 $6 $7Millions$20M Plan $25M Plan $30M Plan
Houses
Reno
vatio
nAcad/Adm
in
46
Talk Strategy – Not Projects
Full Inventory of Projects
ApplyBuilding Portfolio
& Timeframe
ApplyInvestment Criteria &Timeframe
Multi-Year
Project Plan
Full Inventory of Projects
Electrical, Plumbing, HVAC,
Mechanical, Exterior, Interior,
Safety…How Do You
Target Projects
?
Cur
rent
Cha
lleng
ePr
opos
ed S
olut
ion
Integrate Modernization,
Infrastructure, & New Space
Pick Projects
47
Do it Again
48
Questions & Discussion
Adopt a Common
Vocabulary
Create Alignment
Influence Institutional
Policy
Make Lasting Change