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THESIS

Defining a few steps for Strategic Facilities Capital Planning and Management

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1. Motivation/ Preface
This report is called Defining a few steps for Strategic Facilities Capital Planning and Management. The reason for the name of this project was to let people know that there is an upcoming development. We as facility managers need to focus on this.

Hopefully, this project helps todays Facility Managers to deal with perception management, expectation management, and staging experiences in the future. Thanks for reading this document, if there are any questions about the project please do not hesitate to contact me. I will be more than happy to answer all of your questions.

2. Methodology: Strategic Facilities Capital Planning and Management

Maintain and improve existing facilities to ensure that they efficiently support people and services in concert with organizational goals.

Importance of Facilities Capital Planning and Management

An organization's property portfolio is commonly the second largest item on the balance sheet, following only employee salaries and benefits. Business operations are dependent on the facilities and infrastructure managed and operated by the facilities team. Successful capital plans and their effective execution enable these teams to reduce risk and cost, provide facilities that are less expensive to operate, promote a better working environment, and better serve the overall organizational goals and objectives. In this sense, the facilities capital plan needs to be integral to the organization's overall strategic plan, or at a minimum, facilities capital planning should be carried out in tandem with strategic planning activities. Organizations with strong processes and systems for assessing capital assets, prioritizing capital requirements, and documenting the impact of alternative funding scenarios are best positioned to advance their objectives in a changing environment.

The Process of Facilities Capital Planning and Management

With Facilities Capital Planing and Management it is important to have a structured and consistent approach. Ideally, a facilities manager has a process in place to gather objective analytical information regarding facility condition, enabling the organization to: Pinpoint exactly where repairs and upgrades need to be made Calculate estimated costs of those requirements Prioritize requirements according to organizational objectives Run funding scenarios that demonstrate the impact of different spending levels Develop a capital plan and budget that will sustain the facilities and support their function for years to come

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This type of robust and strategic Facilities Capital Planning and Management process should incorporate the following seven steps: Step 1: Define the Process Step 2: Gather Data Step 3: Analyze Benchmarks Step 4: Prioritize Capital Projects Step 5: Demonstrate Impact of Funding Step 6: Create Defensible Budgets Step 7: Develop Process for Continuous Update

Define the Process

Initially, a facilities management team must agree upon the key strategic goals that will guide the capital planning and management process, based on organizational objectives and expectations about the future. Such goals must articulate specific objectives with which the capital plan and budget will align. The team should agree on the process by which goals will be defined, evaluation criteria established, relevant data collected, and results communicated. It is also important to understand and agree on how success will be measured. According with pr EN 15221-5 : 2008 Guidance on the development and improvement of processes CEN/TC 348 a structures of FM processes it is should be like this.

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Gather Data
A critical aspect in developing credible capital plans is the validity of the underlying data. Accurate cost and detailed condition information forms the basis of the strategic Facilities Capital Planning and Management process and is paramount to developing defensible budgets and obtaining funding. It's crucial for organizations to be proactive in determining required facility investments by understanding: The composition of their facility portfolio The existing physical condition of their facilities The required remediations and their costs

For organizations with numerous facilities, it's important to categorize buildings based on organizational mission. Those essential to operations and should be managed as longer-term investments. With a prioritized building list established, an organization needs to determine the best objective method for building data collection. A Facility Conditions Assessment (FCA) is the process of collecting detailed data on facility condition and deficiencies, generally with walk-through inspections by qualified professionals (mechanical, electrical and architectural engineers) to collect this baseline data. These teams survey the buildings', systems and infrastructure assets in detail using consistent best practice methodologies. Another option for data collection is facility self-assessment that employs a consistent, repeatable process for internal staff. Leveraging existing facility resources, organizations can improve the management of geographically dispersed facilities. The self-assessment process should be rapid and cost-effective, identifying "hot spots" within the portfolio that require a more detailed professional condition assessment, and developing quick budgetary estimates.

Data Types Gathered:

Building Profile size, age, construction type, location, etc. System Renewals HVAC, roof, exterior, etc. Condition Data Urgent issues, code violations, etc. Non-condition Data strategic, risk, programmatic, criticality, etc.

Employing industry cost standards to estimate spending requirements for individual improvements, organizations can associate specific dollar amounts with each project. A detailed understanding of lifecycle renewal timelines and costs also is important to effectively prioritize systems requirements and avoid unanticipated spikes in required funding over time.

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Analyze Benchmarks
Accurate facility data also results in a benchmark to analyze the effect of investing in facility improvements. Developed by industry associations, this benchmark is known as the Facility Condition Index or FCI. The FCI is the ratio of deferred maintenance dollars to replacement dollars and provides a straightforward comparison of an organization's key facility assets. To calculate the FCI for a building, divide the total estimated cost to complete deferred maintenance projects for the building by its estimated replacement value. The lower the FCI, the lower the need for remedial or renewal funding relative to the facility's value.

The FCI gives the facilities team the ability to compare similar buildings to each other and establish target condition ratings. Comparing buildings analytically highlights buildings with the greatest need.

Condition standards for various asset classes are determined by facility management. Certain types of buildings, such as data centers in the example above, are crucial to the organizational mission and call for an improved target FCI. FCI analysis provides the true cause and effect of investment decisions. When gathered in a software database, this data provides a complete view of necessary and recommended maintenance items, their cost, and expected replacement dates and costs for major building systems. This can then serve as the basis of an organization's strategic facilities capital plan.

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Prioritize Capital Projects

Turning a strategic facilities plan, which often has a five- to ten year horizon, into an actionable annual budget can be challenging. Few organizations are able to fund all identified capital requirements. The process of prioritization begins by categorizing identified requirements. These categories typically include major operations and maintenance projects, including system renewal, strategic capital projects, and mandated projects such as those involving regulatory compliance or lease obligations. With projects categorized, organizations must create consistent criteria for evaluating and applying those criteria. Applying weights based on overall organizational objectives yields a comprehensive picture of how projects should be prioritized for budget allocation. After each capital request is enumerated individually, all requests for a funding source can be ranked by score. The capital planning process often identifies opportunities to bundle similar capital projects, based on the building system affected, physical location, or by the trades involved. This bundling enables the facilities team to obtain better prices for materials and more competitive fees for labor. When organizations have a basis for making informed decisions about project prioritization and capital budget allocation, they are less vulnerable to the hefty premiums of emergency repair projects.

Demonstrate Impact of Funding

With requirements prioritized and FCI data in place, it's possible to justify both short- and long-term budget requirements by demonstrating the impact of different funding levels on the condition of an individual facility or entire portfolio. With funding scenarios, organizations can pinpoint risks and highlight financial consequences if the work is not completed. In the what-if analysis example shown below, FCI data is used to produce three twenty-year funding scenarios.

Scenario 1 maintaining the current condition over the twenty-year life. The dark blue
horizontal line shows a constant FCI of 40% over a twenty-year period. The dark blue horizontal bars demonstrate the funding required each year in order to maintain the FCI of 40%.

Scenario 2 improving the condition over the first ten years, then maintaining at that level for
the remaining ten. The red horizontal line highlights the improvement in the FCI from 40% down to 20% over the first ten years, then maintaining at 20% for the remaining ten years. The vertical red bars show the funding profile for this strategy, with the surprising results that a moderate increase in funding over Scenario 1 improves and maintains the building's condition at a much higher level.

Scenario 3 only a fixed budget is available and the only increase is inflation. The light blue
vertical bars show this static level of funding, while the variance in the light blue horizontal line shows the FCI increasing to around 80% over the twenty-year period. With an FCI of 80%, the condition of the building is likely to have deteriorated to the point that safety is an issue and building replacement, rather than repair, would be a consideration.

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For any type of organization, funding scenarios can be used to provide accurate budget forecasts and demonstrate the impact on condition for any time frame while pinpointing specific risks and the consequences for life safety or business continuity.

Create Defensible Budgets

A major cause of under-funding is the lack of budget credibility. Accurate data and predictive tools enable development of realistic and defensible multi-year capital budgets. With a ranking strategy for prioritization in place, funding can be applied to all or part of a portfolio based on established variables such as budget years, inflation rate, overhead costs, assumptions about budget constraints, etc. The ultimate result is a budget based on an objectively ranked list of capital needs, with clear funding and cost assumptions. If available funding levels change, the budget scenario may be reapplied to determine the impact, and if organizational priorities change, ranking strategies can be modified.

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Capital Planning Strategic Planning Management Policy

Budget Projections Scenario Planning Facility Disposal

Executive Management

Financial Planning

Facility Management
Condition Management Project Planning Needs Priorization Workload Projection

Divisional Management
Cost Accounting Cost Recovery Target Attainment

Develop Process for Continuous Update

Sustaining and maintaining the program is a critical final phase in developing an accurate budget that reflects current priorities. The first factor to be addressed is data maintenance. Organizations must implement processes to ensure data is continually updated, collected and centrally stored. Industry best practices for reassessments are to gather data on 25% of the facility portfolio each year so that the entire portfolio is assessed over four years. Prioritization strategies should be reviewed annually to ensure that they remain in sync with organizational objectives. Finally, the team should provide regular updates to senior management and administration, helping to deepen awareness and commitment over the long run.

3. Conclusion:
With the right Facilities Capital Planning and Management process in place, an organization is able to: Develop a long-term view of capital planning with accurate multi-year forecasting Have a consistent approach to evaluating the property portfolio across campuses, regions and geographies Make investment decisions based on objective, analytical and transparent information Reduce financial, operational and legal risks

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Deliver substantial cost savings and efficiency gains Ensure that facilities are meeting the organization's evolving needs

When facilities capital planning efforts align with an organization's mission and objectives, capital investments are optimized to deliver value. Strategic facilities capital planning and management leads organizations to far superior and more defensible results.

4. List of references:

Facility Manager course ( ROFMA) Internet base

Abbreviations:

Term
FCA FCI FM

Explanation
A Facility Conditions Assessment (FCA) is the process of collecting detailed data on facility condition and deficiencies. The FCI (Facility Conditions Index) is the ratio of deferred maintenance dollars to replacement dollars and provides a straightforward comparison of an organization's key facility assets. Short for: Facility Management

Management Summary:
As shown in this thesis, when facilities capital planning efforts align with an organization's mission and objectives, capital investments are optimized to deliver value. Strategic facilities capital planning and management leads organizations to far superior and more defensible results. In other words, maintain and improve existing facilities is that key to ensure that they efficiently support people and services in concert with organizational goals.

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