Posted on 11/13/2015
By Lora Mays, Product Marketing Manager
This is the fourth blog post in our series that shares the seven steps to better capital planning. In case you missed it, check out our previous three blog posts:
Last week, we talked about the importance of taking your data and leveraging it to create information that you can use by developing a facility condition index (FCI), which tells you the exact condition of facilities in your portfolio.
Once you’re armed with this number, you have the information that you need to prioritize your capital projects. Turning an organization’s strategic facilities plan, which often has a five- to 10-year horizon, into an actionable annual budget can be challenging at best. If you’re like most organizations, you are unlikely to have the funding for all of the identified capital requirements.
At this point, you need to focus on prioritizing your capital projects, which is often done by categorizing identified requirements, such as system renewal, strategic capital projects and mandated projects that involve regulatory compliance or lease obligations.
So, how do you prioritize the lengthy list of capital projects that are in front of you? First, you must create consistent criteria for evaluating each one. Often times, the squeaky wheel – or the person that complains the loudest – gets the fix. However, if you list consistent criteria for evaluation, you eliminate bias and ensure that the projects that are at the top of the list for funding should be there.
Using the FCI serves as a great start to understanding the projects that need the most attention. If you have a building with a FCI of .10 compared to one with FCI of .70, it’s clear where you should be spending the majority of your investment.
There are other factors that you can take into consideration. Using statistical ranking methods, such as pair-wise comparisons, you can leverage the condition data you have and rank it by taking into consideration your organizational objectives. If there’s a building that requires capital investment, but you are planning to sell in the next few months, it shouldn’t rise to the top of where you should invest your funds.
In addition, there’s still a case for the human factor. Once you have your priorities ranked, your team should evaluate the ranking to make sure they make sense, given your available investment and what the priorities are for your organization. This will ensure that you are funding the projects that make the most sense for your capital plan and available budget.
In addition, evaluating the priorities that rise to the top may help you identify opportunities to bundle similar capital projects, which may result in significant cost savings instead of doing them one at a time. For example, if multiple buildings need roof replacements, grouping these projects together can yield economies of scale that can result in both cost and labor savings. Projects may also be grouped based on physical location to increase efficiency and minimize business information.
Sound complex? Facility capital planning for organizations, whether you have two buildings or a dynamic portfolio, serves as one of the areas with the most complexities for asset, real estate and facilities planning. Leveraging a software solution like VFA tied with industry-leading assessment services can transform your capital planning process, helping you align your capital projects with the organization’s mission and validating where you are spending your capital dollars.
Interested in learning more? Contact us or stop by next week for the next post in this series, which covers step five – how to demonstrate the impact of funding.