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FACILITIES MANAGEMENT Planning in an uncertain economy


By Paul Gatland, UK Sales Director for VFA


T


he nature of facilities and the critical requirements of operating time are generally extremely


expensive to operate and maintain, however, functional facilities are crucial to an organisation’s overall success. Especially given the current economic climate, it has become more and more important for organisations to streamline their facilities capital planning and budget processes to ensure the efficiency and effectiveness of their overall capital plan.


With capital becoming increasingly


scarce, commercial organisations now have to deploy resources as effectively and efficiently as possible, which includes finding the most cost-effective process for ensuring that their facilities are running smoothly over the short-term, while planning for the long term. It is also important to ensure that not only


do they not spend valuable funds on the wrong projects, but also work towards avoiding costly emergency repairs and downtime that inevitably affects critical operations. By streamlining their capital planning and budgeting processes, organisations can ensure the efficiency and effectiveness of their overall capital plan while, crucially, maintaining operations and business continuity within the required health, safety and other regulations.


Prioritise your projects


Continued wear and tear of infrastructure is common with aging facilities, and it often happens that when one system is fixed, another is due to be replaced and so on. Investment in improvements to the overall facilities is continuous, resulting in a constant drain on resources and budgets. In order to ensure continuous operations of a plant, critical items must be prioritised to the top of the list. These critical projects need to be identified in order to be prioritised, and defensible data is needed to get the projects funded.


It is important for organisations to maintain a comprehensive understanding of the entire portfolio when developing an effective long-term capital plan. The plan will help determine what improvements are required, prioritise those improvements to align with the overall goals of the company, and ensure that the budget is justified. By employing a capital planning and management software tool to view this information in aggregate from a variety of perspectives (for example, by cost, priority and category) organisations can make better informed spending decisions and begin to convert facilities data into action plans with achievable deadlines.


Building a case


Most organisations have a five-to-ten year horizon for reviewing their capital


requirements. Prioritising capital projects begins with categorising identified requirements in this time horizon into major buckets, which may also affect funding sources. These categories typically include major operations and maintenance projects including system renewal, strategic capital projects such as construction of a new facility, and mandated projects such as those involving regulatory compliance. The next step in implementing a repeatable, defensible process for identifying which capital project to fund is creating consistent evaluation criteria and a consistent process for applying those criteria.


Identifying criteria and ranking them by


importance can limit the sometimes political nature of the capital allocation process. Some of the common criteria organisations use in prioritising requirements, which they may weigh based on relative importance, include impact on mission delivery, relation to code compliance, strategic importance, and accreditation or licensing requirements.


Evaluate spending


Another common measure used in evaluating spending priorities across different facilities is the Facility Condition Index (FCI), an industry-standard parametric tool used to relatively compare building conditions. The FCI is the ratio of deferred maintenance or problem budget to replacement budget. The FCI is typically applied at the building level, but institutions can develop similar indices at the systems or portfolio level to help prioritise maintenance activities and capital investments. FCI = Deferred Maintenance Cost ÷ Replacement Value of the Asset Therefore, the lower the FCI, the lower the


need for remedial or renewal funding relative to the value of the facility. An FCI of 0.1 signifies a 10% deficiency. An FCI of 0.7 means that a building needs extensive work or that it needs replacing. Different sectors target different FCI levels. As an example, a facility with a £25 million


32 BUILDING SERVICES & ENVIRONMENTAL ENGINEER OCTOBER 2011


replacement value and £5 million worth of deferred maintenance has an FCI of 0.20. It may have several types of deficiencies, including building code compliance, for example doors that are not fire rated and deficiencies related to electrical outlets, electrical receptacles and the entry vestibule. There may also be deficiencies in the building integrity such as an aged canopy, aging and operational problems with entry doors, aged exit doors, wear and rust on the exterior stairs, aged water pipes, ceilings, water heater deterioration, etc. The overall site may also have energy issues such as lack of control system integration and there may also be problems with emergency lighting which needs upgrading or with inadequate directional signage.


Identify opportunities


The capital planning process also often identifies opportunities to bundle similar capital projects together. Bundling can take multiple forms and an organisation may bundle projects based on the building system affected. For example, if multiple buildings need roof replacements, grouping these projects together can yield economies of scale that can result in cost and labour savings.


An organisation may also choose to


bundle projects based on physical location. For example, bundling multiple smaller requirements in one building or wing into a larger renovation project may enable an organisation to increase efficiency and minimise business interruption. Finally, an organisation may choose to bundle projects by trades involved to take advantage of available staff. This bundling enables organisations to obtain better prices for materials and more competitive fees for labour.


When organisations have a basis for making informed decisions about project prioritisation and capital budget allocation, they are less vulnerable to emergency failures. Emergency repair projects typically result in hefty premiums for labour during


non-standard work hours, rushed shipments, and unplanned but necessary one-off purchases. It is not uncommon for organisations to purchase duplicate materials to make purchase on a per site basis rather than buying in bulk. Without the proper planning tools, materials and services are not bid out to multiple vendors, resulting in a lack of competitive pricing. Trying to do more with less is a primary goal of most facility managers and asset planners. As budgets are slashed to a fraction of what facility managers require, facility managers are challenged to find ways to address deferred maintenance requirements and make capital renewal projects more cost-effective.


Maximising assets


Most organisations have multiple goals for the capital planning process, including ensuring the most effective asset utilisation, justifying expenditures to various constituencies, smoothing spikes in spending requirements, and making optimal use of finite funds. It is important to go into the process with both a clear view of the end goals and the realisation that a strategic capital plan is a fluid document that needs ongoing review against organisational objectives and budgetary realities. Successful capital plans, and their effective execution, enable organisations to reduce both risk and cost, provide facilities that are less expensive to operate, and better serve the overall organisational mission. Facility managers and capital planners


must find ways to automate and streamline all workflow that is associated with the collection, storage and reporting of facilities and infrastructure condition information, as well as the quantification of deferred maintenance costs and capital renewal justification.


Organisations without


consistent data collection methodologies, centralised databases, and tools for funding scenarios analysis are at greater risk for non-compliance, higher insurance premiums, and overall exposure to liability.


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