5 strategies to keep up with facilities construction backlogs
Higher education is facing a facilities backlog of more than $112 billion, with a B, according to a report issued by APPA in partnership with Gordian. That’s a challenge from every angle. Even with
$36 billion spent annually operating campuses and another $28 billion spent on renovations and new construction, the backlog is far greater than the available resources most schools have to address it today. The scale and intractable nature of this problem can cause inaction. But not acting risks turning the vast built assets arrayed on campuses into financial liabilities.
The following are 5 strategic ideas that must be invested in fully to sustain your built assets:
- Don’t build more than you can afford: A capital AND operating strategy. Sure, don’t spend more than you have on construction activity. But don’t build anything if you can’t afford the incremental cost to maintain it daily and care for the huge costs that arrive in 20-30 years when buildings systems reach their life cycle. If you really want to tackle the challenge, dig into understanding whether you already have more buildings than you can afford to care for properly. Florida State University finance and facilities leaders are revisiting their entire master plan with this very idea in mind and it is dramatically altering the investment strategy going forward.
- Invest operating funds optimally: With the flurry of daily activities to support campus life, it is easy to lose track of where facilities spending is happening and whether it is producing a return. Establishing this understanding is necessary to manage routine investment of resources over time. Creating key performance indicators for your maintenance organization will provide a regular test as to whether the appropriate return is being realized, guiding not only operating decisions but informing capital and space evaluations as well. The Pennsylvania State System of Higher Education has long used KPI’s to monitor the facilities investment on all of their campuses and it is informing their complicated future planning.
- Properly align spending: Through necessity, the pandemic amplified conversations and influenced new ways of learning, teaching and working. We have seen that operating demands evolve and change, space can be realigned or repurposed, and that data should be guiding facilities strategies. And everything isn’t additive. The University of Arkansas Fort Smith used the findings from a detailed space utilization study to determine that right-sizing of their campus classroom space to match need would result in an avoidance of $4.1 million in deferred need.
- Review assets to focus investments: No finance leader is unfamiliar with the simultaneous pressure on facilities dollars to support programs, minimize risk and sustain the existing properties. Pressure on the first two are often drains on the resources available for the third. Yavapai College in Arizona relies on annual measurements of Net Asset Value, essentially the percentage of value left in a building, to help facilities decide where the next incremental investments will be made across their building portfolio. Senior leadership has a measure to understand where buildings are in decline and a benchmark for knowing when to invest.
- Communicate regularly and coherently with the community: Nothing has been made clearer during the pandemic than the value of effective communication. Facilities leaders found themselves informing campus decision-making like never before, sometimes even guiding the process. Skills deployed during a crisis are the same skills that need to be utilized to combat this urgent backlog problem. That means connecting the challenge to the institution’s mission, describing risks and exposure in terms of their impact on learning and research outcomes, assuring all parties have a shared understanding, and holding everyone accountable for providing viable transformative solutions instead of just requests for more money. The University of Nebraska has employed this comprehensive communication to raise awareness about the need to invest resources to effectively support programs all across the system.
Moving beyond acceptance means making actionable the steps necessary to confront this massive backlog facing higher education. Not acting means marching forward into a world where the massive built assets for colleges and universities will become debilitating assets, a wholly preventable situation.
Pete Zuraw is the Vice President of Market Strategy and Development at Gordian, the leading provider of facility and construction cost data, software and expertise. He has spent more than three decades thinking strategically about and leading facilities organizations serving higher education institutions, state agencies and faith communities.
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