Financing your organization's infrastructure: Innovative ways to win the funding game

David Raffin
Director of Business - State/Local Government
VFA

Finding the necessary funds to keep an organization running smoothly is a challenging game of financial hide-and-seek-organizations are constantly looking for new ways to bring in additional funding from undiscovered avenues. However, aggressive, upfront management of an organization's structures-usually the most valuable physical assets of an organization-can reduce the need for large annual budget increases. How these assets are maintained, repaired, and planned for over their lifespan greatly impacts an organization's funding and budget development.

Facility managers across the country face several obstacles in funding their organization's infrastructure. In addition to dealing with aging facilities, deferred maintenance, new technology, and ongoing program changes, current sources of revenue are often insufficient while competition for new funds increases daily. Thus, securing innovative sources of funding for an organization's buildings and effectively allocating these funds have become integral pieces of today's capital facility planning process.

The majority of maintenance budgets are based on historical averages and "rules of thumb." Facility conditions are often difficult to measure, and thus, budget needs are difficult to demonstrate. But, in today's funding game, the only way for facility managers to obtain an adequate budget for their buildings is with a convincing argument-one that is based on quantitative evidence and technologically-supported methodologies.

Ultimately, proactive facility management enables organizations to avoid emergency line items for building repairs that can break a budget. However, facility emergencies will arise, and when they do, well-researched data supporting facility needs and deficiencies are crucial in building a budget request that funding sources will be unable to diminish. Only a technology-based solution provides the level of depth and detail facility managers require.

Using a combination of data collection, benchmarking, and technology-based funding tools lays the foundation for a forceful and convincing argument for adequate funds to maintain buildings, as well as increase returns on earlier invested funds.

Data Collection Tool
The first step in building the argument for adequate funding is gathering a solid, accurate information baseline by means of a facilities condition audit. This audit of the existing infrastructure, both physical and programmatic, will determine the current state and needs of those facilities. In-house staff, an outside consulting firm, or a combination of both can complete a facility audit.

Benchmarking Tool
By leveraging information collected in the audit, facility managers can establish benchmarks for accurate building-to-building comparisons. To create benchmarks, a common industry term is used-the Facility Condition Index (FCI). The FCI is the repair cost over the replacement cost of the building. FCI transcends the traditionally used building condition descriptions of "good" and "poor" and provides a quantitative benchmark or metric. A building with an estimated replacement value of $25 million with an FCI of 0.1 would mean that $2.5 million is needed to repair the building. This now becomes a defensible figure that lends more credibility to budget requests and provides a better understanding of the building's true condition.

Funding Scenario Tool
Combining the forces of accurate baseline facilities condition data and the FCI empowers facility managers to develop long-range "what-if" funding scenario analyses for prioritizing and optimizing corrective actions for infrastructure. This is a powerful aid in the construction versus renovation decision-making process. For example, if a company intended to replace a building at an estimated cost of $24 million, a scenario analysis would demonstrate that, if the company spent $14 million on repairs and renovations over the next five years, it would have a building with a very similar FCI-leaving the organization an extra $10 million!

As demonstrated in the above example, the creation of funding strategies by using facilities conditions data enables the development of concise reports to help justify capital needs. With the support of such funding scenarios, facility managers are also able to communicate the consequences of under-funding to key decision makers.

By applying a strategic combination of methodology, process, and software tools, facility managers can effectively get ahead of the "budget battle" curve by assessing infrastructure, gathering and updating data on facility conditions, and using that data to both secure and appropriately allocate funding for infrastructure.

One powerful tool that integrates these valuable features is Capital Planning and Management Solutions (CPMS). A CPMS approach enables facility managers to benefit from living, defensible data, which is key to backing up budget requests for your infrastructure needs.

CPMS combines physical and functional assessments with the latest in web technology and financial analyses for the most effective capital planning tools. Prior to the availability of CPMS, no method existed for quantitatively establishing a baseline of infrastructure issues or updating that information to determine budget requirements. Although organizations spend budget dollars on an annual basis, there was little in place to gauge if facilities were getting better or worse.

The use of a CPMS tool in winning the budget battle proved true with the ninth largest school district in the nation, Nevada's Clark County. With many schools built from the 1940s through the 1980s, Clark County School District (CCSD) found it difficult to measure its infrastructure needs. CCSD needed to take a new and strategic approach to quantify its capital renewal and deferred maintenance requirements in order to obtain additional funding. By using a CPMS solution, the district was able to assess the condition of school buildings with respect to current and educational building standards, intelligently gauge facilities renewal needs, and determine accurate funding requirements. The CPMS tool assisted CCSD with generating presentation-quality analyses and reports facilitating communication of facilities renewal funding requirements. Equipped with such defensible data, CCSD was able to obtain approval for a $2.5 billion bond referendum as well as $1 billion in funds derived from local hotel and real estate transfer taxes.

"By looking to a CPMS approach and software, we have a system that not only brings a comprehensive solution to our facilities renewal and maintenance needs, but provides the tools to obtain the necessary resources to address those needs," stated Dale Scheideman, director of facility planning and engineering at CCSD. "The information and reports generated as a result of the facilities assessment give us all the ammunition we need to justify our funding requests."

Linking facility planning to the master plan and organizational mission
The power of a technology-based facility planning solution in the funding game is clear. The success of Clark County demonstrates the importance of taking on strategic approaches, such as CPMS, to gain necessary funding for infrastructure needs and to allocate that funding most effectively. Organizations also have a better chance of securing the money for carrying out deferred maintenance, renewal, and replacement initiatives if they are able to approach funding sources with a comprehensive outline for facilities capital planning. Today's innovative facility managers are able to link their capital infrastructure plan to the organization's master plan and overall mission.

A case in point is the U.S. Army Health Facility Planning Agency (HFPA), headquartered in Falls Church, Virginia. HFPA's master planning efforts toward proactive building management were designed to establish the best and most cost-effective use of space and capital resources. By applying a CPMS approach and facilities assessment methodology to eight Army locations, HFPA was able to accurately inspect and review the physical state of its medical facilities and compare each building through the use of quantitative benchmarks.

The detail of the information gathered by means of this strategy equipped HFPA with tools that are critical for the development and analysis of funding plans used for maintenance and repair throughout a building's lifecycle. By performing thorough, consistent, and precise facility assessments at Army installations across the nation, HFPA was empowered with reliable information on the distribution of assets for current and future repairs and renovations.

"Our efforts to determine a corporate standard for maintenance have been reinforced by the information our facility inspections and reviews have provided," said Thomas Kurmel, Lt. Colonel, U.S. Army Commander of the U.S. Army Health Facility Planning Agency. "The reports have provided us with a very consistent condition assessment of our buildings. It is evident where funding for repairs and upkeep should be allocated."

In order to be successful players in the funding game, organizations must adopt a fundamental change in business methods in order to raise and then administer requisite funds for infrastructure. The implementation of technology-based decision support tools, such as CPMS, provides quantitative building analysis that is a valuable asset in earning the support of key funding sources. Organizations that strategically examine their own facilities as way to achieve needed funding will reap the financial benefits.

For more information, please contact David Raffin at 617-956-4838 or www.vfa.com.