Professional Development: Is It Time For The Wrecking Ball?
By Ameeta Soni
Published in the April 2012 issue of Today’s Facility Manager
In challenging economic times, the need for the effective management of facilities and infrastructure is crucial. Tight budgets make it more critical than ever for both public institutions and private industry to maintain and improve existing facilities, and in doing so, ensure they efficiently support people and services in concert with organizational goals. But what if aging buildings make up a significant part of the portfolio? How do organizations decide whether to continue investing in those facilities?
It takes a strategic approach based on accurate and current data. If a building is less critical, if it’s no longer serving the purpose or program for which it was built, or if its condition is so poor that the cost of improvements is too high, it is time to plan for disposition.
On the other hand, a key asset could be targeted for investments to improve the condition and proactively renew systems. How should building owners and facility managers (fms) decide a building’s fate? The vital element is understanding, through accurate data and analysis, the condition, function, and usage of the buildings.
It’s important to take a strategic approach, looking at the facility portfolio holistically. Any analysis, in order for it to be valid, must be based on accurate, objective data, including an understanding of current facility condition and remediation costs, functionality, and demographics.
Without access to detailed information regarding these issues, fms and capital planners find it virtually impossible to decide whether buildings warrant further investment or are ready
One important first step is gathering accurate facility condition and cost information; an organization needs to determine the best objective method for data collection. A Facility Condition Assessment (FCA) is the process of collecting detailed data on facility condition and deficiencies, generally with walk-through inspections by qualified professionals (mechanical, electrical, and architectural engineers) to collect this baseline data. These teams survey the buildings, systems, and infrastructure assets in detail using consistent best practice methodologies, visualizing and taking photos rather than disassembling equipment.
Another feasible option for data collection is facility self-assessment that employs a consistent, repeatable process for internal staff. Leveraging existing facility resources to assess assets of all types and portfolios of all sizes, organizations can greatly enhance the management of geographically dispersed facilities. The self-assessment process should be rapid and cost-effective, resulting in data that can identify hot spots within the portfolio, especially those that require a more detailed professional condition assessment. The process can also help develop quick budgetary estimates.
A good facility self-assessment can ensure that data captured in previous assessments is updated so strategic decisions are based on current information. Self-assessment empowers organizations to close the loop on portfolio knowledge gaps and gain immediate insight into their most pressing facility needs.
By employing industry cost standards to estimate spending requirements for each suggested improvement, organizations can associate specific dollar amounts with each potential project. Also, life cycle renewal costs can be a significant percentage of major operational and maintenance expenses, and a detailed understanding of renewal timelines and costs is important to prioritize systems requirements effectively and understand the further investment required to keep aging buildings in good condition.
Accurate facility condition data enables analysis of the investments needed for facility improvements. A commonly used metric developed by industry associations is known as the Facility Condition Index (FCI). The FCI is the ratio of deferred maintenance dollars to replacement dollars. It provides a straightforward comparison of an organization’s key real estate assets.
To calculate the FCI for a building, divide the total estimated cost of deferred maintenance projects for the building by its estimated replacement value. The lower the FCI, the lower the need for remedial or renewal funding relative to the facility’s value. For example, an FCI of 0.1 signifies a 10% deficiency, which is generally considered low, and an FCI of 0.7 means that a building needs extensive repairs or replacement.
The FCI provides the ability to compare similar buildings to each other and to establish target condition ratings. Comparing buildings analytically rapidly highlights the buildings that are in the greatest need for updates, repairs, or replacements.
With insight into current building condition and costs, an organization must also have access to data on demographics and function in order to prioritize its facilities. The most successful prioritization is based on organizational objectives as well as an understanding of the relative importance of assets, the functionality of the buildings, and demographics that may impact use.
For example, most organizations have certain buildings in the portfolio that are strategically critical with a high level of permanence. They serve a specific and highly necessary function, and the population that uses these buildings is growing. These buildings are essentially irreplaceable and a low FCI is important. The strategy for such critical buildings may be to invest to improve—renewing systems proactively, providing redundancy, ensuring regulatory compliance, and addressing deferred maintenance.
On the other hand, many buildings in the portfolio may be operationally redundant, subject to frequent mission change, and easy to replace. They may no longer be satisfying the function for which they were built and may or not be able to be re-purposed. Demographic analysis for the population that uses these buildings may show a decline in future use or a change in who is using them. Depending on what the analysis shows, the strategy for these less vital assets may be to reduce operation and maintenance costs, maintain only critical systems for business continuity, make no long-term investments, and position the buildings for short-term disposition or alternate use.
The benefits of a strategic approach to determining the fate of buildings are numerous. Analysis based on accurate data results in objective prioritization, a clear path to decision making and, ultimately, intelligent investment choices that result in cost savings over time.
Soni is chief marketing officer, VFA, Inc., a provider of end-to-end solutions for facilities capital planning and management.