In part two of a four-part blog series, Dan Lowry discusses his top six steps for successful capital project management.
Written by Dan Lowry
EDITOR’S NOTE: This article originally appeared on LearningFM’s blog.
I routinely get asked how to begin prioritizing capital projects. To be fair, this is can be a really daunting task for anyone to undertake, especially a facility manager that is in charge of a large facility with various operations. There is good news, however: these six steps in prioritizing capital projects are very methodical and can be applied to any industry. So, please feel free to ask me any questions that you have at the end. Enjoy!
Step 1 – Real Property Inventory
So where do you start? The real property inventory, or RPI.
The RPI tells you “where your facilities have been.” As a facility manager (FM), you must know what you have in order to know where you go from there.To even begin to know what direction your facilities will go, FMs must have a firm understanding of what their facilities consist of, which is everything the FM will be responsible to manage.
Here is the minimum information you need to keep track of in the RPI for each fixed asset:
- Asset name
- Size (square footage of building, linear feet of sidewalks/utilities, tonnage of HVAC, etc)
- Placed-in-service dates
- Estimated useful life (discussed below)
- Initial costs
- Costs assigned to the asset during its life
- Identifying information (location, model number, serial number, etc)
As you gather the pertinent information, make sure your RPI is kept in a secure environment that is easily updated.I’ve seen everything from spreadsheets to complex cloud-based asset inventory systems.The bottom line: use what will work for you and what your organization can afford.
Step 2 – Facility Condition Assessment
Now that you understand what you have, you need to understand what condition it is in. But how do we do that for every asset in every facility? For everything within the RPI, you need to compare its current condition with the baseline condition of when it was first put into service (when it was new, regardless of if that is when your organization first put it into service). This will give you a record of its condition and a working knowledge of what needs to be done to maintain the equipment over the course of its useful life. This will also tell you when that equipment might need to be replaced.
The result is your new baseline, and the process is called a Facility Condition Assessment. A Facility Condition Assessment (FCA) is a thorough inspection of the facility or group of facilities to determine current condition. The FCA is only a snapshot of the condition of all facilities at one point in time, because conditions constantly change with continued use. The moment you “take the snapshot,” each asset’s condition begins to change, so keep that in mind.
Step 3 – 20-Year Capital Plan
The FCA should include a recommendations section. The format is not as important as the information it contains. There should be a list of short-term recommendations, which are facility systems that must be addressed, typically within the next year. This should be followed by a list of long-term recommendations. The FCA should cover an estimation of repair and replacement activities (timeframe and cost) of all building systems over a period of time in the future with which you are comfortable. I use a 20-year timeframe, and it will directly feed my 20-year capital plan.
While you’ve planned in advance, this plan will need to be updated every year. When you go to make your capital budget, pull this out and go down the list.Every cell that has a dollar amount in it under the next fiscal year should be evaluated for replacement and possibly included in next year’s capital budget.
Step 4 – Lifecycle Evaluation, Costs and Projections
As we discussed, every asset has a lifecycle, which is its useful life from acquisition to disposal.Inevitably, the facilities we manage will outlive their building systems. The FM is responsible for managing not only the maintenance, but also the replacement of these systems. Additionally, FMs replace components and systems for the purpose of improving performance or efficiency, which might occur prior to the end of the asset’s useful life. There are three stages in the lifecycle:
- Acquisition – Begins the lifecycle of the asset. Once the asset is designed, procured, and installed according to specifications, it is placed in the RPI. Here, it is tracked through its useful life
- Useful life – This stage encompasses the vast majority of the lifecycle based on condition of service and intended use of the asset. All O&M activities are performed and tracked during the useful life stage in the lifecycle. When the asset has reached the end of its useful life, whether by failure or a change in operations, it is disposed of
- Disposal – At the end of the asset’s useful life, it is removed from service and sold, repurposed, thrown away or recycled. If there is still an operational need for the disposed asset’s purpose, the life-cycle begins again with acquisition of a replacement
Every asset has an estimated useful life (EUL). One easy reference for determining the EUL of building assets is by using EUL tables. These are often used by accountants to determine how long to depreciate assets. FMs can use the EUL in conjunction with other tools to determine when assets will likely need to be replaced. This process is called lifecycle analysis.
Step 5 – Major Project Recommendations from Within
Employees know their facilities inside and out. These occupants that work in the facilities daily are your experts. Start there. Ask them what is and isn’t working as part of the facility and what could stand to improve. Some of the best projects we have accomplished that get the highest reviews from our customers and guests have come from recommendations from the employees. Sometimes the end user just doesn’t know what they want until you tell them.
Start by interviewing individual employees and recording their comments. Look for trends in recommendations and feedback, but resist the urge to fix every problem. Then, move to include managers and department heads in brainstorming sessions where you go through employee recommendations and come up with solutions to solve the issues at hand. Finally, present those recommendations to senior management for approval.
The goal for step five is to consider ways to improve existing operations. Your goal here is not to drive the strategic direction of the company – that comes in Step 6.
Step 6 – Master Planning with Strategic Decision Makers
The Facilities Master Plan (FMP) is a long-term plan that describes the vision and direction of the organization, specifically in terms of facilities. The FMPs I have worked on projected one to two decades into the future. These plans are not created in a bubble or vacuum, however. The direction of the FMP will be steered through a larger vision (such as a strategic plan) at the organizational level.
Remember that the FMP is an evolving document and will change as requirements change.No matter what the scope of the master plan is, there has to be representation from all stakeholders during the planning process.This is typically accomplished by establishing a leadership team that meets during each stage of the FMP process.
These six steps in prioritizing capital projects are universal. Every facility manager must understand what they have (step 1), what condition it is in (step 2), develop a plan for current assets (step 3), evaluate that plan (step 4), recommend larger projects outside of asset replacements (step 5), and then be involved with the strategic plan of the organization (step 6). I truly hope you have gotten something out of these six steps that you can take with you in your role in FM. Please feel free to leave comments below or send any questions to email@example.com. Thanks!
ABOUT DAN LOWRY
Dan Lowry is a published author and the Director of Facilities at Southern Hills Country Club. In addition to his civilian work, Dan has served in the Oklahoma Army National Guard as a Major for over fifteen years, utilizing his facilities and operations expertise as an engineer. With an MBA in finance, he’s a certified Project Management Professional® through the Project Management Institute® and maintains his credentials as a Facility Management Professional through the IFMA. Dan currently shares his insights on both his LearningFM site as well as his podcast.