Managing overhead expenses
Higher education facility managers are under pressure to reduce operating expenses. This is part of a national trend for all non-academic departments to reduce overhead expenses in order to keep spending down and tuition stable and we’re seeing this trend among both private and public campuses.
As a facilities manager, you are probably asking yourself: “I’ve already reduced staff and contracts, and cut expenses to the bone. How can I do more?”
Here are some steps you can take to examine your current facilities budget and find ways to do even more with fewer resources.
1. Know where you stand
It’s critical to have a good handle on maintenance, custodial and grounds staffing, cost of materials, contract costs and utility costs. However, simply knowing the historical trends of these numbers on your campus over time is not enough. You need to be able to benchmark your costs for these items against peer campuses and industry trends. Having that context will enable you to better understand if the belt tightening you have already done is comparable to other campuses. If it is, you can make the case that you done more than other campuses. If not, the comparative data provides insight into where you might be able to reduce overhead even further.
Knowing historical trends on your campus is often not enough; institutions must get a more solid understanding of their situation by comparing to peers. The chart above shows the operational spending of an institution versus its peers. While campus leaders felt they were spending more than their peers, the numbers showed they were below the peer spending average. This helped make the case for an increase in daily service spending from FY14 to FY15.}
2. Define facilities overhead in a comprehensive way
Typically facilities overhead is measured by looking only at the operating budget of the campus facilities department. That is a pretty narrow definition. We suggest adding in the cost of utilities, the annual capital costs and the cost of debt service. This more comprehensive definition gives you more variables to work with and means that the facilities operating budget for staff is not the only area to be targeted. For example, taking steps to reduce the backlog of deferred maintenance will lower capital costs and reduce the cost of borrowing more money and using a comprehensive definition of facilities overhead, reduce costs.
3. Mine Your Work Order System
Good work management systems should be able to give you a wealth of data on where your staff is spending their time. Is your staff returning to the same building over and over again in order to repair the same broken system? Would a capital investment to update or replace that system be a more cost effective solution and free up time for your staff to do more proactive work? Are there work orders where a longer response time will meet customer expectations? Are you doing capital work as part of your daily service budget and not classifying it properly?
Mining work order data helped this campus validate their concerns about their most technically complex buildings driving maintenance costs.}
4. Understand your backlog of deferred maintenance and how it affects work assignments
An analysis of the backlog of deferred maintenance when tracked against the work order analysis should provide you further insight into how your staff is spending time. Our analysis of hundreds of colleges and universities shows that campuses with lower backlogs are able to be more proactive and do more planned and preventive maintenance. Campuses with high backlogs, in excess of $100/gsf, become much more reactive. They have no choice, but this is a costly situation. High backlog campuses spend as much as $1/gsf more because of the constant demand for repairs and higher utility costs. Even on a small campus that can add up to a lot of money.
5. Take a hard look at utility costs
What drives your utility costs? Is it old HVAC systems, inefficient air handlers, poor windows, campus users who leave computers and lights on or a combination of the above? Your backlog analysis and work orders should pinpoint problem buildings even if you don’t have building level metering. Add in a comparative analysis of the cost structure of electricity and fossil fuels and you can see where you stand again other campuses in your region. If you are paying too much for utilities, look at ways to renegotiate rates. Your campus is a big customer and you have some leverage because of buying power.}
The institution depicted above looked for opportunities to make improvements in their utility systems and policies. Over this 10 year period, they were able to avoid more than $7 million in energy costs by focusing on ways to reduce consumption.
The institution depicted above looked for opportunities to make improvements in their utility systems and policies. Over this 10 year period, they were able to avoid more than $7 million in energy costs by focusing on ways to reduce consumption.}
6. Develop a plan to address problems where capital investment can free up operational resources
Many campuses are increasing their capital budget as they reduce operational budgets. Ask yourself if you are trying to solve a capital problem with operational dollars. If the answer is yes, prepare a dollars-and-cents case on how much operational time can be freed up if a significant capital investment is made.
7. Reinvest savings to become more proactive with maintenance
Of course, if you are successful getting capital dollars, the campus leadership will expect to reduce your budget. Be ready to make the case that shifting reactive maintenance dollars from fixing problem buildings to planned and preventive maintenance will save even more dollars in the long run.
8. More preventive maintenance can help you get ahead of the deferred maintenance beast
Many campuses have spent a lot of money to fix or replace aging buildings, but have not followed that action up by changing from a reactive to proactive maintenance philosophy. Sightlines has data that shows that being more proactive is much less costly in terms of operational and capital dollars over time. Use that data to support your case for a change in the way you do business that will ultimately lower overhead expenses.
Campuses that use data-driven tools – such as Sightlines’ Return on Physical Assets (ROPA+) and Building Portfolio Solutions — have been able to implement all of these steps. The result is lower backlog of deferred maintenance, lower utility costs, and the ability to become more proactive in order to reduce facilities overhead expenses.
—Jay Pearlman is associate vice president of marketing for Sightlines, a subsidiary of The Gordian Group, Inc., and a leader in facilities intelligence and analysis for higher education institutions. For more information, please go to www.sightlines.com.