Changing the Conversation around Facilities

April 8, 2014
Changing the Conversation
around Facilities Management…
A Step Towards Total Campus Engagement
y
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University of Missouri - St. Louis
University of Nebraska at Kearney
University of New Hampshire
University of New Haven
University of North Texas
University of Notre Dame
University of Oregon
University of Pennsylvania
University of Portland
University of Redlands
University of Rochester
University of San Diego
University of San Francisco
University of Southern Maine
University of Southern Mississippi
University of St. Thomas (TX)
University of Texas at Dallas
University of the Pacific
University of Toledo
University of the Sciences in
Philadelphia
University of Vermont
Upper Iowa University
Utica College
Vassar College
Virginia Commonwealth University
Virginia Department of General
Services
Virginia State University
Wagner College
Washburn University
Wellesley College
Wesleyan University
West Chester University of
Pennsylvania
West Virginia Health Sciences Center
West Virginia University
Western Connecticut State University
Western Oregon University
Westfield State University
Wheaton College (MA)
Whitworth University
Widener University
Williams College
Williston Northampton School
Presenters
Jay Pearlman
Associate Vice-President
[email protected]
Karen Gumin
Regional Account Executive
[email protected]
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
Sightlines is proud to
announce that:
Sightlines advises state
systems in:
•
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
•
•
•
•
•
•
•
•
•
•
•
•
•
* U.S. News 2014 Rankings
3
56 new institutions
became Sightlines
members in 2013
•
•
•
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.
The Sustainability of Higher Education is in Question
“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
Your Largest Asset
Balance Sheets Understate Importance of Physical Assets
80%
70%
% PPE
% Net Asset Value
60%
50%
40%
30%
20%
10%
0%
Selective Liberal
Arts
Private Large
Univ.
Comprehensive
Univ.
Public Univ.
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
Capital Budgets Have Not Recovered
Substantive Difference Between Public & Private Annual Capital Budgets
Private Average
Public Average
$4.50
$4.00
$/ Gross Sq. Ft.
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
2007
2008
2009
2010
2011
2012
2013
2007
2008
2009
2010
2011
2012
2013
Facilities Backlogs Continue to Rise
Current Capital, At +/-$5 per GSF, is Not Slowing Backlog Growth
$/GSF
Backlog $/GSF
$100
20%
$90
18%
$80
16%
$70
14%
$60
12%
$50
10%
$40
$77
$79
$80
$82
$84
$87
$90
8%
$30
6%
$20
4%
$10
2%
$-
0%
2007
2008
2009
Backlog/GSF
2010
2011
Percentage Change of Backlog
2012
2013
Waves of Construction Hitting Major Life Cycles
Built between 1975 and
1990
Quick-flash construction
Low-quality building
components\
Complex
Built between 1951 and
1975
Lower-quality
construction
Already needing more
repairs and renovations
Modern
Built before 1951
Durable construction
Older but typically lasts
longer
Post-War
Pre-War
First wave of buildings are now 50 years old; second wave nears 20 years old
Built in 1991 and newer
Technically complex
spaces
Higher-quality, more
expensive to maintain &
repair
Total GSF of Database (Millions)
Constructed Space Sightlines Database (1880-Present) = 1.3 billion GSF
50
45
40
35
30
25
20
15
10
5
0
GSF Constructed (5 Year Cohorts)
12
Changing the Conversation
13
We Need to Change the Conversation
Language that Drives Effective Policies for…
Space
Capital $
Release The
Hidden Value in
Balance Sheets
Multiyear Plans
that Align to
Mission, & Risk
Operations
Improve
Effectiveness &
Lower Facilities
Overhead Impact
We Need to Change the Conversation
Language 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.
Create Engagement on Campus
Adopt a
Common
Vocabulary
Create
Alignment
Influence
Institutional
Policy
Make
Lasting
Change
16
An Effective Common Vocabulary
Use Terms that Engage - Repeat
The annual
investment needed
to ensure buildings
will properly
perform and reach
their useful life
“Keep-Up Costs”
The accumulated
backlog of repair /
modernization
needs and the
definition of
resource capacity
to correct them
“Catch-Up Costs”
The effectiveness
of the facilities
operating budget,
staffing,
supervision, and
energy
management
Annual
Stewardship
Asset
Reinvestment
Operational
Effectiveness
Asset Value Change
17
The measure of
service process,
the maintenance
quality of space
and systems, and
the customers
opinion of service
delivery
Service
Operations Success
Now that You Speak the Same Language…
Arm Yourself with Knowledge to Create Change
Data
Information
Knowledge
Action
18
Now that You Speak the Same Language…
Arm Yourself with Knowledge to Create Change
Data
Information
Knowledge
Action
19
Data
Having the Right Numbers
Now that You Speak the Same Language…
Arm Yourself with Knowledge to Create Change
Energy Consumption
140,000
120,000
Information
BTU/GSF
100,000
kWh/GSF
Data
Electric Consumption
160,000
80,000
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
FY2009
60,000
FY2010
FY2011
FY2012
FY2013
Fossil Consumption
120,000
40,000
-
BTU/GSF
Knowledge
20,000
100,000
80,000
60,000
40,000
20,000
FY2009 FY2010 FY2011 FY2012 FY2013
Action
20
Information
Having the Numbers Right
Now that You Speak the Same Language…
Arm Yourself with Knowledge to Create Change
Data
Information
Knowledge
Action
21
Three Different Scenarios of Engagement
Create Support for a New Direction
Changing Support for an Already
Accepted Direction
Create Confidence in a New
Paradigm
22
Creating Support for a New Direction
Reexamining Building Policies
23
Example 1: Daily Service Costs
Increasing Daily Service Costs – Budget Cuts Lead to Reduced Service
From Data to Knowledge
Daily Service Costs Significantly Higher than Peers
A Multitude of Small Buildings
Building Count By Size & Age
400
350
Count Of Buildings
300
250
200
150
100
50
0
Over 50,000 GSF
0-10 Years Of Age
26
15000-50,000 GSF
10-25 Years Of Age
25-50 Years Of Age
0-15,000 GSF
50+ Years Of Age
Significantly More Small Buildings
The Real Culprit
Number of smaller & older buildings on campus affecting PSU’s daily service spending
Labor Cost by GSF Category
3.50
3.00
$/GSF
2.50
2.00
$3.20
1.50
1.00
$1.18
0.50
$1.30
$0.99
0.00
Under 10K
28
10K - 25K
25K - 50K
GSF Category
50K and above
New Policy through Engagement
> 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
Changing Support for an Already
Accepted Direction
Construction of New Building
30
Example #2: Insufficient Classroom Space
Difficult Scheduling
During Most of Day
Room Utilization – General Classrooms
%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Room Utilization
Proposed Solution
> 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
From Data to Knowledge
Misaligned Quantity and Size
Room and Position Utilization
100%
90%
80%
70%
%
60%
50%
40%
30%
20%
10%
0%
Room Utilization
33
Position Utilization
A Need for Smaller Rooms
Room Size
# of Classrooms
40
35
30
25
20
15
10
5
0
Under 30
31-45
46-80
Room Size
Design Capacity
34
Actual Enrollment
Over 80
Conversation Focused on Benefits
Faculty, Facilities & IT Engaged to Create New Policies
>
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
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
+4
+12
+1
+6
33
-8
+1
+1
14
Under 30
10
31-45
20
46-80
3
+1
Over 80
1
+3
+1
5
Cumulative
Total
34
Cost
4
38
42
48
56
56
$800/Student =
$2.5M
$150/Square Foot =
$1.5 m
$0
$0
+/- $4M
Create Confidence in a New Paradigm
Capital Planning and Budgeting
37
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
38
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
Building Portfolio Process
40
Adding Value to Each Project
What is the
Work?
Define Work
Classification
• Repair/Maintain
• Modernization
• Infrastructure
Define Project
Classifications
• Reliability
• Asset Preservation
• Space Improvement
• Economic Operations
• Safety / Code
What is the
Impact?
Define Project
Priority
• A: 1 - 3 years
• B: 4 - 6 years
• C: 7+ years
What is the
Priority?
Building Portfolios
Total Needs
New
Construction
???
Grounds
Infrastructure
Academic
1.5 M GSF
21 Buildings
Utility
Infrastructure
Science
Research
0.3 M GSF
3 Buildings
Building
Athletics
0.2 M GSF
2 Buildings
Residence &
Student Life
0.8 M GSF
10 Buildings
• Option 1: Functional
Assumes investment is dictated by building function (ie. academic,
administrative) and prioritization of investment can be determined by
associated use.
42
Administrative
0.4 M GSF
5 Buildings
Talk About Outcomes – Not Inputs
NAV of Index
(Replacement Value-Building Needs)
NAV
Index =
Replacement Value
X 100
100%85%
85%70%
70%50%
Below
50%
Example NAV
43
Peer NAV
Group NAV
Investment Strategy
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.
Planning Options Summary
$20M Plan
$25M Plan
$30M Plan
Academic /
Admin
$
2,118,600
$
3,368,600
$
3,497,100
Student
Life
$
4,891,000
$
6,540,600
$
7,754,900
Repair
$
$
$
Infrastructure
7,555,600
8,055,600
7,555,600
$
$
$
Renovation
1,384,700
1,734,700
2,055,800
$
$
$
3,405,555
Houses
$
$
$
271,514
319,094
819,094
$9
$8
$7
Millions
$6
$5
$4
$3
$2
$1
$$(1)
Academic /
Admin
Student Life
$20M Plan
44
Repair
Infrastructure
$25M Plan
Renovation
$30M Plan
Houses
Planning Options Detailed
$20M Plan
$25M Plan
$30M Plan
$
$
$
Academic /
Admin
2,118,600
3,368,600
3,497,100
$
$
$
Student
Life
4,891,000
6,540,600
7,754,900
$
$
$
Repair
7,555,600
8,055,600
7,555,600
$
$
$
Infrastructure
1,384,700
1,734,700
2,055,800
$
$
$
Renovation
3,405,555
$
$
$
Houses
271,514
319,094
819,094
Houses
Economic Operations
Safety/Code
Space Improvement
Asset Preservation
Reliability
Infrastructure
Renovation
Economic Operations
Safety/Code
Space Improvement
Asset Preservation
Reliability
Economic Operations
Safety/Code
Space Improvement
Asset Preservation
Reliability
Repair
Economic Operations
Safety/Code
Space Improvement
Asset Preservation
Reliability
Student Life
Economic Operations
Safety/Code
Space Improvement
Asset Preservation
Reliability
Acad/Admin
Economic Operations
Safety/Code
Space Improvement
Asset Preservation
Reliability
$(1)
$-
$1
$20M Plan
45
$2
$3
Millions
$25M Plan
$4
$30M Plan
$5
$6
$7
Talk Strategy – Not Projects
Current Challenge
Full Inventory of
Projects
?
Proposed Solution
Electrical,
Plumbing, HVAC,
Mechanical,
Exterior, Interior,
Safety…
Full Inventory
of Projects
Integrate
Modernization,
Infrastructure, &
New Space
46
Pick
Projects
How Do You
Target Projects
Apply
Building Portfolio
& Timeframe
Apply
Investment
Criteria &
Timeframe
MultiYear
Project
Plan
Do it Again
47
Questions & Discussion
Adopt a
Common
Vocabulary
Create
Alignment
Influence
Institutional
Policy
Make
Lasting
Change
48