Presentation to IFMA NonProfit Facility Summit

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Presentation toIFMA Non-Profit Facility
Summit February 13, 2009
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Agenda

• Speaker bio experience
• What is a FCA
• Myths
• Success factors
• Building the case
• Defining the FCA
• Structuring the FCA
• FCA Database
• Defining the need
• Questions / Comments 

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Experience

• Georgia Tech
• State University of West Georgia
• Emory University
• Georgia State University
• Middle Georgia College
• Piedmont Hospital
• Jasper Hospital
• University of Connecticut
• Middlebury University
• Liberty Mutual Corporate, Boston
• Liberty Mutual Data Center, New Hampshire
• University of Houston
• University of Texas Health Science Center
• Tulane University
• University of Michigan
• Michigan State University
• University of Missouri
• University of Missouri, Kansas City
• University of Nebraska Lincoln

• City of Chicago
• University of Chicago
• Argonne National Labs
• Northwestern University
• City of Phoenix
• University of Southern California
• USC Health Science Center
• CSU Northridge
• Cal Tech
• San Francisco State University
• Stanislaus County
• CSU Long Beach
• Contra Costa County
• Santa Clara University
• Anaheim Memorial Hospital
• Governors Island, New York City
• Pier 34 The Un-Convention Center, NYC
• Paramount Pictures Studios
• University of Washington Medical Center Blue
  Flame Facility

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A Facility Condition Assessment (FCA) is a lot
like eating an elephant
In chunks, hunks and bites!
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What is a FCA?

• A comprehensive review of the facilities
  portfolio identifying all facility related
  renewal needs
• Over a pre-defined period of time
• The industry standard is ten years
• Should include code upgrade issues / facility use
  change needs
• Properly structured FCA program will
• Identify need
• Prioritize need
• Estimate need
• Independent assessment of needs

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FCA Myths

• I already know what is wrong with my
  facilities. There is no need to spend scarce
  resources on an FCA.
• I dont receive adequate funding in the first
  place. Why spend my resources on an FCA when I
  can replace a bad roof instead?

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Keys to a Successful FCA

• For the program to be successful, it must provide
  accurate budget level cost figures
• It must also be viewed as part of the life cycle
  of facilities management
• It is not a one time evolution, but rather an
  on-going process

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The Case for a FCA

• Your facility portfolio is your single largest
  asset
• Do you know the magnitude of the total need?
• Do you have a defensible prioritization process
  for allocation of scarce resources?
• A FCA is an invaluable tool in the management of
  your facility portfolio

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The Case for a FCA

• You may know in general terms the scope of your
  facility renewal needs but
• Do you have an objective, prioritized listing of
  actual needs?
• Do you have budgetary estimates associated with
  all identified needs?
• Do you have a prioritized listing of buildings
  which need renewal?
• Do you have tools/processes in place for tracking
  the needs?
• A FCA provides these answers

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Defining the Condition Analysis

• Classification terminology is crucial
• It must be standardized up-front in the process
• How do you define?
• Capital Renewal
• Deferred Maintenance
• Program / Use Changes
• Funding Responsibility
• Priorities, etc.

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Deferred Maintenance
Deferred Maintenance refers to expenditures for
repairs not accomplished as a part of normal
maintenance, or capital repairs having
accumulated to the point facility deterioration
is evident and could impair the proper
functioning of the facility.
Deferred maintenance projects represent catch
up expenses.
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Capital Renewal
Capital Renewal refers to major repairs or
the replacement/rebuilding of major facility
components at the end of their useful life.
Upgrading of major systems with newer technology
are also considered Capital Renewal items.
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Facility Adaptation
Refers to expenditures required to adapt the
facility to the evolving needs of the institution
and to changing standards (compliance with
changing codes), facility alteration required by
changed teaching or research methods, and
improvements occasioned by the adoption of modern
technology.
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Facility Replacement Cost
FRC is the cost to replace the facility to its
current Functionality not taken into account any
architectural embellishments.
Suggest not using insured values.
Formula Starts with MEANS ¾ costs for use type
- Localizes the cost for the city area
-- Then apply demolition cost, site prep,
and professional fees.
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The Facility Condition Needs Index

• The FCNI is an integral part of process
• Index is an industry standard developed in 1987
  by APPA, SCUP, and NACUBO for higher education
• The FCNI is calculated by comparing total
  facility deficiencies to total facility
  replacement cost
• FCNI can be used to compare one building to
  another, one group to another, or even across
  entire campuses
• Different standards of condition apply based on
  whether a single building or a group of buildings
  are being compared
• In all cases, the higher the index, the more
  diminished the facility condition

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Facility Condition Needs Index
The Facility Condition Needs Index is based on
recommended upgrade costs divided by the Facility
Replacement Cost
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FCA - Priority Class Definitions

• Assign priority class to projects according to
  the definitions below
• Priority Class 1
• Currently Critical (Immediate)
• Priority Class 2
• Potentially Critical (Year One)
• Priority Class 3
• Necessary - Not Yet Critical (Years Two to Five)
• Priority Class 4
• Recommended (Years Six to Ten)

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Examining the Asset
Unbiased examination of your facilities
Inspect the following facility categories
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Site Infrastructure

• Critical capital budget component
• Can be as much as 35 to 40 of overall backlog
• Documents longer life cycle elements that can go
  unchecked if not included
• Identifies capital funding issues

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Structuring the Condition Analysis

• There are many ways to approach an FCA project
• It can be accomplished in bulk
• It can be phased over time
• It can focus on representative samples
• What will the FCA include (buildings or site and
  infrastructure)?

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Comprehensive and Full FCA

• Accomplishing in a complete and comprehensive
  manner yields the biggest result (in terms of
  data)
• Results in the largest up-front investment of
  resources
• All facilities inspected and reported on in a
  short time frame
• Allows for full and fast comparison of all
  facilities in a consistent manner
• Allows use of the data for complete capital
  project planning purposes at an earlier date

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Phased FCA

• Long term goal identical to Comprehensive FCA
• Project is phased over multiple years
• Spreads Resource requirement spread over longer
  period
• Drawback - amount of time necessary to complete
  the study
• Limits ability in early years of comparing
  buildings and sites
• Lessens the effectiveness of the system as a
  capital planning tool until complete

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Representative Sample FCA

• Representative sample buildings are selected for
  study
• Results extrapolated across entire portfolio
• Less expensive and quicker than the full (or
  phased) FCA
• Useful for generating an order of magnitude
  estimate
• Not useful for establishing an accurate
  comparison of buildings,
• Not useful for putting together a capital
  projects plan

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FCA Database

• Useable FCA program must be built around a
  powerful database
• A comprehensive FCA database will have the
  following minimum functionality
• Track separate assets
• Allow grouping of assets
• Have built-in estimatingand prioritization
  systems
• Allow custom reporting
• Allow updating and inflation of the data
• Have built-in financial modelingcapabilities

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FCA Data Reporting

• The primary goal of an FCA is to generate data
  that can be utilized to support your facility
  renewal decision processes
• For the data to be useful it must besortable and
  reportable in a friendly format
• The reporting parameters must be tailoredto fit
  your needs
• The report output should support your budgetary
  and planning processes

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FCA Output
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2

• The summary sorts the need by building systems
• The summary shows the need across the priority
  classes
• The total need is identified
• A Facility Condition Needs Index (FCNI) for the
  entire portfolio is computed

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4
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FCA Output

• From the portfolio summary drill down to specific
  information
• Then drill down within a building to specific
  projects showing discrete prioritized
  recommendations

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FCA Output
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3
4
2

• Each separate project recommendation should have
  a unique tracking identity
• Each project should be sequenced according to
  priority with a building / asset
• Each recommendation should be accurately defined
• Your cost database should include all costs
  including professional fee markups

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FCA Output
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• In this report, each building is reported on
  separately
• The FCNI is shown for each separate building asset

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A summary report of this type allows you to start
prioritizing buildings / assets based on relative
conditions
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FCNI Utilization

• Once the relative conditions (in terms of FCNI)
  have been established for all buildings, you need
  to establish parameters for interpreting the FCNI
  ranking
• The scale above is a standard scale utilized for
  assessing building condition based on FCNI ranking

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FCA Data Application

• Rank all facilities based on FCNI score then
  sub-divide facility assets into three discrete
  categories
• Subdivision based on a combination of the FCNI
  ranking and the mission criticality of the
  facility asset
• Many of clients use the following three
  categories to classify the buildings
• Class One Assets These are facilities that are
  state of the art or landmark facilities in your
  portfolio, which should be maintained to a higher
  standard
• Class Two Assets These facilities are the
  yeoman facilities of the portfolio, serving
  necessary functions, but not housing state of the
  art applications. They can be maintained to a
  slightly lower level
• Class Three Assets These are facilities whose
  function is of such low priority, and / or in
  such poor condition that extensive maintenance
  with limited resources is counterproductive.
  Examples include warehouses, support buildings,
  and older facilities which can no longer be
  economically renovated or facilities that you
  intend to quickly dispose of.

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FCA Data Application

• After you have divided your assets into the three
  classes of facilities, you can then establish
  overall FCNI values for each of these classes
• The next step is to establish target FCNI values
  for each of these classes
• This can be done for smaller grouping also (e.g.
  Office facilities, parking structures, data
  centers, support facilities, etc.)
• Once the target values have been established,
  financial modeling programs built-in to the FCA
  database can establish funding levels necessary
  to achieve the target levels

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Define the Need / Eating the Elephant
Divide Portfolio into Groups
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Setting the Plan
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Financial Modeling
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• Financial model based on variable economic
  parameters
• Can be adjusted for a number of different years
• Model begins with known facility renewal needs
• Model illustrates level of funding necessary to
  reach desired FCNI target

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3
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Typical Model Results
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FCA Data Maintenance

• A critical element in this entire process is data
  maintenance
• The data must be maintained
• Must keep costs current (inflate them each year)
• Completed recommendations must be closed out
• New issues must be added as they arise
• Priorities must be re-evaluated on a periodic
  basis
• Assets need to be periodically re-evaluated
• Re-run financial models to reflect the changed
  conditions

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FCA Database

• The need for a database has been stressed
  repeatedly at this point
• If you elect to pursue an FCA program without a
  database, you are merely purchasing reports which
  will sit on the shelf and be out of date within
  six months
• A database regularly maintained will ensure the
  long term value of your FCA project

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The Elephant Pitfalls
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Questions / Comments