Changing the Conversation around Facilities
Transcription
Changing the Conversation around Facilities
April 8, 2014 Changing the Conversation around Facilities Management… A Step Towards Total Campus Engagement y y 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