Changing the Conversation in Facilities Management - A Step Towards Total Campus Engagement (PPM...

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)

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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

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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.

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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

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Now that You Speak the Same Language…

Data

Information

Knowledge

Action

Arm Yourself with Knowledge to Create Change

19


Data

Information

Knowledge

Action


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

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Data

Information

Knowledge

Action


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Data

Information

Knowledge

Action


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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

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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

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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

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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

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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

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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

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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

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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

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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



Reliability



Reliability



Reliability



Reliability



Reliability

$(1) $- $1 $2 $3 $4 $5 $6 $7Millions$20M Plan $25M Plan $30M Plan

Houses

Reno

vatio

nAcad/Adm

in

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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

Changing the Conversation in Facilities Management - A Step Towards Total Campus Engagement (PPM...

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