The Ultimate Guide to Facilities Capital Planning

Any organization with a large portfolio of facilities and other physical assets must take regular, strategic steps to ensure those assets meet the needs of the communities who rely on them. Consider a state government or a Canadian province with highways and parks to maintain, and a plethora of departments that need physical homes. Or the higher ed campus that provides residential spaces, lecture halls, laboratories, basketball arenas and more. These are merely two examples of complex and evolving asset portfolios that are being paid for and worked on every day.

Organizational leaders are under immense pressure, both internally and externally, to make smart facilities investments that meet community needs and position the organization to meet its goals. This important work is called facilities capital planning. In this comprehensive guide, we’ll dig into the nitty-gritty of facilities capital planning, including how to approach the activity, the steps in the process and how Gordian can help you optimize your efforts.

What is Facilities Capital Planning?

Facilities capital planning is a strategic and systematic process used by organizations to plan, prioritize and manage financial investments in their buildings, infrastructure and other physical assets, including the structures and equipment required to support the organization’s operations and objectives.

A public school district, for instance, needs to maintain structures beyond school buildings where children learn, play and eat. They also have depots for storing and repairing the bus fleet and offices where administrators and other professional staff members work.

Facilities capital planning is a critical function for any organization that relies on physical infrastructure to deliver services because it helps them make informed decisions about spending capital and using resources. Further, the work enhances operational efficiency and supports long-term sustainability. Yet it transcends a prescribed set of tasks that end in a project list. Effective facilities capital planning requires leaders to make their organization’s current circumstances as successful as possible while simultaneously working towards a strategic vision. It’s asking your organization to be the best version of itself today — and an even better one tomorrow.

What Are the Benefits of Facilities Capital Planning?

The ultimate outcome of a facilities capital plan is to put leaders in a position to make the best possible decisions for their organization. It is a tool for clearly understanding the asset portfolio so they can spend their capital effectively and achieve their goals. The benefits often extend beyond the organization itself.

When done correctly, facilities capital planning results in community improvement. Buildings, roads and shared spaces are made safer, services are made more efficient and opportunity is made more accessible.

See all of Gordian’s facilities planning solutions, from condition assessments to cost estimating solutions.

Who Participates in Facilities Capital Planning?

In any organization or institution, facilities capital planning brings a lot of roles, functions and stakeholders to the table. Creating a successful outcome requires capturing a spectrum of perspectives and a variety of experiences. The specific roles involved vary from one organization to the next. A hospital network with a dozen healthcare facilities clustered in a specific region will include a different set of professionals and stakeholders than, say, a sprawling federal government agency with a presence in every state.

Here are some roles that may be involved in facilities capital planning, depending on an organization’s needs and the size and complexity of its facilities portfolio.

1. Executive Leadership: This includes the CEO, the President or any other high-level executives who establish the vision, set the strategic direction and provide final approval for capital projects. They ensure that the plan aligns with the organization’s mission and long-term goals.
2. Board of Directors or Trustees: In some organizations, especially non-profits and educational institutions, board members may have a role in reviewing and approving major capital expenditures and ensuring they align with the organization’s objectives and financial responsibilities.
3. Facilities Leadership: Facilities executives, directors and managers are responsible for the day-to-day operations and maintenance of buildings, infrastructure and grounds. They have a deep understanding of the current facilities conditions and limitations and can provide valuable insights into what these assets need to function reliably, meet user expectations and deliver strategic outcomes.
4. Financial Leadership: The CFO and other members of the finance department play a crucial role in assessing the financial feasibility of projects, securing funding and budgeting.
5. Planning and Development: This team, which may include the planners and development officers who cultivate and manage fundraising activities, is often responsible for the coordination of the capital planning process, including conducting needs assessments, crafting project proposals and planning for the long term.
6. Operations Management: These individuals are tasked with maximizing the efficiency and effectiveness of an organization’s everyday operations. They can provide insights into how facility changes might impact workflow and productivity.
7. Real Estate Department: Representatives from this department would be involved in decisions related to property acquisition, disposal and management.
8. Engineering and Technical Staff: Engineers and technical experts assess the technical feasibility of projects with a special emphasis on major structural, mechanical and electrical systems.
9. Information Technology (IT) Department: IT staff ensure that the technological infrastructure meets the current and future needs of the organization. They are chiefly concerned with data storage, network capacity and smart building technologies.
10. Procurement and Contracting: This team oversees the entire bidding process for construction and renovation projects, including vendor selection and contract compliance.
11. Legal Department: Attorneys and other legal advisors ensure that all aspects of the facilities capital planning process comply with relevant laws, regulations and contractual obligations. They also run point on any legal disputes that may arise during the process.
12. Risk Management: Professionals in this specialized area assess and address the potential risks associated with capital projects, including safety, insurance and liability issues.
13. Sustainability and Environmental Officers: These roles contribute to the organization’s commitment to environmental stewardship by ensuring that projects meet sustainability goals and applicable environmental standards.
14. Human Resources: HR may be involved in assessing the impact of facility changes on staff and planning staffing changes that result from capital projects or divestments.
15. External Consultants and Architects: Often, organizations engage external experts such as architects, design consultants, construction managers and facilities capital planning advisors to provide specialized expertise in crafting and executing long-term plans.
16. Stakeholders and User Groups: Representatives from various user groups can provide input on how the facilities are used and what improvements are needed.

If you’re thinking this is a lot of voices in the proverbial room, you’re right. The number of people involved and perspectives to gather speaks to the enormous impact of facilities capital planning. It’s a high-stakes activity, one that touches many lives and creates new trajectories for entire communities.

Before Facilities Capital Planning

A facilities capital plan is a roadmap to an organization’s goals. It’s a bridge from where the organization is to where it wants to be. Thus, the success of any facilities capital plan is directly related to the existence of, and adherence to, clear organizational goals and objectives. When all stakeholders understand and embrace a long-term mission, a facilities capital plan catalyzes achievement. Without a shared strategic vision to strive for, even the most thorough plan is doomed to fail.

Download this eBook for a complete overview of how to collect data for a strategic facilities capital plan.

What is the Facilities Capital Planning Process?

The facilities capital planning process consists of several key activities. The degree to which a given organization engages in these activities depends on a variety of factors, including, but not limited to, the length of time since it last developed a capital plan, legal requirements and financial outlook.

1. Assessment of Current Facilities: The first step is to evaluate the current condition of facilities, infrastructure and other assets to determine maintenance needs, compliance with regulations and suitability for ongoing operational requirements. Existing facilities data, including results from past assessments, add helpful context to new assessments.

Conventional wisdom holds that all assets require the same level of assessment. At Gordian, we believe that is a misconception. Our reasoning is simple: Physical assets vary in their age, use and strategic importance, so they should vary in assessment granularity as well. Some aspects of a facility portfolio need only a high-level assessment, while others require component-level data. Others still call for something between those two ends of the spectrum. Thinking flexibly about how much detail an asset requires allows organizations to allocate their time, energy and financial resources most effectively. That’s why we offer a variety of assessment options organizations may match to their assets.

Gordian’s Assessment Options

The Engineering Assessment is the most comprehensive assessment we offer. Our version of the traditional facilities condition assessment is conducted by our engineers and/or experienced assessors. These professionals create a thorough accounting of an asset’s every component, system and subsystem. It requires the most time and effort, making it a suitable assessment for strategically important assets.

For facilities and other assets just outside the top tier of strategic value, we have the Detailed Assessment. While this evaluation will bring a Gordian assessor on-site to look at major systems like HVAC and plumbing, it is not as granular as an Engineering Assessment.

Moving down the spectrum of detail we have the Core Systems Assessment. Conducted by an organization’s in-house staff using Gordian’s tools, they provide an accurate baseline of major systems performance.

Some assets require only a general idea of conditions. For these cases, we offer the Life Cycle Assessment. This option uses statistical modeling to estimate the replacement and renewal costs of building systems at a given age. It does not produce estimates for specific facilities.

Hear more about taking a strategic approach to facility assessments in this free, on demand webinar.

2. Identification of Needs: Using data gathered by assessments, organizations identify required work in accordance with their goals and strategic initiatives, safety requirements, technological advancements and a host of other factors.

3. Prioritization: Once needs are identified, renovations, replacements and other projects are prioritized. Most organizations prioritize their required work within a five-year window. Requirements that must be met within a year are given priority one. Those due within two years are considered priority two, and requirements that must be met within five years are given priority three. Projects that are not time-based are assigned priority four.

To help set a schedule, prioritized projects are funneled into one of three categories: Integrity, Regulatory, or Optimization.

Projects under the Integrity umbrella include major system renewal requirements and building lifecycle needs plus the repair of broken or malfunctioning assets. A roof that has reached the end of its useful life, for instance, would be classified as an Integrity project. Regulatory projects are those that refer to building codes, accessibility compliance, Hazardous Materials abatement and life safety issues. Finally, projects classified under Optimization may be important to an organization for many reasons but do not affect a facility’s safe and/or legal operation. Think technology upgrades, sustainability and energy efficiency efforts, capacity improvements and the like.

Leaders may be tempted into thinking they can tackle their priority one projects first, then their priority two projects, and so on. However, this approach runs into several difficulties, including the fact that hardly any organization can afford to do all their priority one projects within a year’s time. Further, a lower priority requirement may be more strategically important to meeting the organization’s goals. For these reasons, leaders weigh requirements and categories to create a priority schedule that meets their long-term needs.

4. Budgeting and Funding: Many organizations have established budgets for tackling their projects and no mechanism for acquiring more capital. Others will identify potential funding sources, which may include rerouting internal funds, borrowing, grants, bond measures or public-private partnerships. Those in the second group often present their assessment data to make a compelling case for funding and the negative outcomes of leaving identified requirements unfunded.

Learn how a community college used assessment data and benchmarking analysis to make a successful case for investment into energy efficiency initiatives.

5. Long-Term Planning: Organizations must take care to accurately project capital expenditures over a multi-year horizon, typically ranging from five to 10 years or more. In this step in the facilities capital planning process, leaders use planning software, like those offered by Gordian, to locate spending spikes and run different funding scenarios to identify the relative strengths and weaknesses of investment strategies.

This is also a time for conducting lifecycle cost analysis to determine an asset’s total cost of ownership, including initial capital costs, ongoing operational costs, maintenance and eventual decommissioning or disposal.

6. Performance Monitoring: Once projects are complete, leaders track and report on the performance of capital investments to ensure they deliver the expected benefits and to inform future planning cycles.

Browse this collection of resources to see how leaders in the healthcare industry are elevating the conversation around facilities capital planning.

Facilities Capital Planning Mistakes to Avoid

Several mistakes can occur in the facilities capital planning process. Avoiding them can be the difference between developing and implementing a successful plan and making unwise investments. Here are a few:

1. Poor Integration with Strategic Goals: Facilities capital planning should be closely aligned with the organization’s strategic goals. Overlooking this alignment can result in facilities that do not support long-term objectives.
2. Lack of Stakeholder Engagement: Failing to involve all impacted stakeholders can result in a plan that does not fully address the needs and concerns of those who use and maintain the facilities.
3. Inadequate Assessments: Improperly assessing the current and future needs of the organization can lead to wasting resources on facilities that quickly become obsolete or insufficient. This only puts more distance between leaders and their goals.
4. Neglecting Lifecycle Costs: Focusing on initial capital costs without considering the total cost of ownership, including long-term operating and maintenance expenses, can lead to facilities that are expensive to maintain and operate. Inaccurate lifecycle costs are only marginally better than non-existent ones. At Gordian, we use our industry-standard RSMeans™ Data to accurately estimate total ownership costs.
5. Miscommunication: Unclear communication throughout the planning process can lead to misunderstandings, a lack of buy-in and conflicts among stakeholders.

Good Data. Good Process. Good Plan.

Ultimately, organizations engaged in facilities capital planning must collect reliable data and follow proven processes to create a successful plan. It doesn’t hurt to have  help from those who have done it before, either. Gordian has decades of experience assessing facilities and other physical assets, and a team of experts ready to help you set priorities and take informed action.

See how we can help you sharpen and execute your facilities strategy.