Facility capital planning remains a challenging task among most building managers, owners and operators. Successful capital management and planning requires balancing critical facility needs with desires — the projects that you must do with the projects that you would like to do.
The best building managers are able to successfully complete critical projects and perhaps complete some value-added projects, resulting in a smooth-running, great-looking facility. These five tips will set you up for success by helping you to improve your facility capital planning. By incorporating the tips below, you'll find that your capital planning process goes much easier.
Capital Planning Tips for Building Owners and Operators
Tip #1: Prioritize Facility Capital Projects
Capital projects typically include major operations and maintenance projects. Some examples are system renewal projects, strategic capital projects, and mandated projects. A system renewal project may include replacing the infrastructure of your plumbing or electrical system, making it safer and more efficient.
Strategic capital projects often include constructing a new building. Mandated projects include those that involve complying with local, state, and federal regulations. Once you have assessed your property, you need to determine what absolutely must be done in the coming year and the timeline for each of these items. Deferred maintenance is the enemy of any building manager. If you accumulate too much, you are at risk of equipment failure and will spend substantially more money on reactive maintenance.
Tip #2: Review Past Activities in Your Building Management Software
Past maintenance activities are another benchmark that requires your review of successful facility capital planning. Looking at the projects you completed gives you an idea of what to anticipate in the future based on past performance. You should specifically pay attention to the kind of work you performed. Were you reacting to emergencies and critical safety concerns or did you primarily focus on preventative maintenance? You should also take note of your spending. How much did you spend last year and how much do you intend to spend this year?
If you are not currently tracking when maintenance is performed on equipment and what was done, you are at a severe disadvantage from a capital planning perspective. Without this information, it is easy to unknowingly spend more maintaining an asset than it would cost to replace. A building management platform with capital management planning capabilities will track this data and can be easily exported into your budget.
Tip #3: Use Basic Facility Management Statistics
Although looking at your past budget gives you an idea of where your ideal number may fall, you should not wholly depend on this strategy to plan your budget. Spend some time figuring basic statistics based on past years. Calculate a range for your anticipated budget that takes into account your worst-case scenario.
PRO TIP: Plan for early replacements and premature asset failures. Take this range further by figuring a confidence interval. This number provides a range of likely capital needs. Take a 95 percent confidence interval as an example. You may conclude that you are 95 percent confident that your operating budget will fall between 1.2 million and 1.5 million dollars. This means there is a 5 percent chance that your budget is below or exceeds this range. Your capital planning software will help you calculate this number.
When predicting a budget, you want to strive for the number that allows your team to complete all their projects with some money left over for proactive and preventative projects, but you must also know your lowest acceptable budget. What is the minimum amount that your team needs to survive?
Tip #4: Incorporate a Facility Condition Index (FCI)
When people make judgments about things, they are subjective. This often results in inconsistencies. Creating a facility condition index (FCI) for your building, or using an existing one, allows you to make consistent assessments about your property. An FCI gives you a baseline that you can use to measure things against. Once you know which items are in critical condition and need to be replaced immediately, as well as which items you anticipate will need a replacement in the near future, you will be able to better prioritize your replacement needs.
Tip #5: Present an Optimistic Number for Your Facility Capital Plan
When planning for your facility, you need to think about the funding that you would like to have in a best-case scenario. Be bold, but also realistic; funds are not unlimited. Budgeting often needs to be approached as a negotiation. Asking for more than you need will set a psychological anchor in the head of the person to whom you present your budget. This will allow you additional room in your budget if they negotiate a lower number than you anticipate.
Know the number that could really help your facility by including non-critical items such as new construction or system replacements. This allows you to paint a complete picture when you negotiate during your budgeting meetings. It is likely that you will not get everything that you ask for, so by using this number to negotiate high, you set yourself and your team up for success with the highest available budget.
KNOW YOUR COSTS BEFORE YOU BUY
Looking for an easy way to figure your costs for items such as data collection or facility software? Use our RFP template to solicit bids to incorporate into your plan. You may also find AkitaBox Capital Management software useful, especially if you’re in need of an up-to-date facility condition assessment. Learn more about AkitaBox Capital Management here.