Facility capital planning remains a challenge for 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’d like to do.
The best building managers are able to successfully complete critical projects and perhaps even some value-added projects as well, resulting in a smooth-running, great-looking facility. But how do they do it? These five tips will help you improve your facility capital planning.
Capital Planning Tips for Building Owners and Operators
Tip #1: Prioritize Facility Capital Projects
Capital projects typically include major operations and maintenance projects, such as 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.
A facility condition assessment (FCA) can help you make informed decisions on which projects will get the green light in the next budget cycle. An FCA tells you the current condition of your assets and shines a spotlight on which ones are failing.
Since an FCA is such a vital information source for capital planning, you should consider doing a living FCA vs. the traditional static one. A living FCA is done using special software that allows you to continue updating the condition of your assets in real time. That way, you’ll always have an accurate picture of how your facilities are really doing.
AkitaBox FCA software is a simple add-on to our overall facilities management platform. So whether you conduct your own FCAs or hire an AEC firm to do them for you, your assessment results are fully digital and easy to keep up-to-date.
Once you’ve assessed your property, determine what absolutely must be done in the coming year and the timeline for each of these items.
A quick note here: be careful not to defer too many maintenance needs. 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
Looking at the projects and maintenance you’ve already 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 preventive 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’re not currently tracking what maintenance is performed on equipment and when, you’re at a severe disadvantage from a capital planning perspective. Without this information, it’s easy to unknowingly spend more maintaining an asset than it would cost to replace. A building management platform with capital planning capabilities will track this data and can be easily exported into your budget.
Read More: Capital Budgeting Process: Why Your Data is Failing You
Tip #3: Use Core 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 underlying 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% confidence interval as an example. You may conclude that you’re 95% confident that your operating budget will fall between 1.2 million and 1.5 million dollars. This means there’s a 5% chance your budget is below or exceeds this range. Your capital planning software will help you calculate this number.
When predicting a budget, strive for a number that allows your team to complete all their projects with some money left over for proactive and preventive projects. Make sure you 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.
Calculate your FCI by taking the total cost of existing renewal/repair costs and dividing that by the total estimated replacement value. For example, an FCI of 0.1 signifies a 10% deficiency, which is generally considered low. On the other hand, an FCI of 0.7 is a 70% deficiency and means the building needs extensive repairs and replacements.
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’ll be able to better prioritize your replacement needs.
Tip #5: Present an Optimistic Number for Your Facility Capital Plan
Think about the funding you’d like to have in a best-case scenario. Be bold, but realistic; funds are not unlimited. Budgeting is a negotiation. Asking for more than you need will set a psychological anchor in the head of the person you’re presenting to. This gives you additional room in your budget if they negotiate a lower number than you anticipate.
Don’t be afraid to include non-critical items such as new construction or system replacements. They may not be critical, but they’re still important to your facility’s functioning. It’s likely that you won’t get everything you ask for, but by starting the negotiations with a higher number that covers a wide range of projects, you increase your chances of walking away with the biggest possible budget.
Know Your Costs Before You Budget
Tracking down how much things may cost can be a pain without good capital management software. AkitaBox Capital Management software provides cost estimates for major repairs and replacements based on industry standards and your equipment’s current condition.
But that’s not even the coolest part. AkitaBox has visual reporting dashboards that give you a clear picture into facility data that matters:
- Annual renewal costs
- Building FCI
- Equipment risk data
- Maintenance tasks backlog
These come in handy while you’re preparing your budget AND you can use them to make a compelling case to your organization’s decision makers.
Check out the video below or schedule a demo to see for yourself.