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In Focus: The Need for a Strategic Approach to Facilities Capital Planning

As vice president in VFA's Consulting Services group, Ray Dufresne is responsible for management and direction of projects for customers across VFA's market base. Prior to forming the Consulting Services group in 2004, Dufresne led Assessment Services within VFA for 12 years.

Ray Dufresne, Vice President, VFA, Inc. (Winter 2012)

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The need for the effective management of facilities and infrastructure has never been greater. Tight budgets make it more critical than ever for private industry to maintain and improve existing facilities and, in doing so, to ensure that they efficiently support the people and functions in concert with organizational goals.

Strategic Importance of Facilities
A corporation's property portfolio is usually the second-largest item on the balance sheet, following only employee salaries and benefits. Business operations are dependent on the facilities and infrastructure. Increasingly, facilities departments are taking a more sophisticated approach to long-term facilities capital planning. Successful capital plans - and their effective execution - enable these teams to reduce both risk and cost, promote a better working environment, and better serve the overall organizational goals.

It's imperative that the facilities capital plan is integral to the organization's overall strategic plan, or at a minimum, that facilities capital planning is carried out in tandem with strategic planning activities. Companies with strong processes and systems for assessing facility condition, prioritizing requirements, and documenting the impact of alternative funding scenarios are best positioned to advance their objectives.

The Process of Facilities Capital Planning and Management
It is important to have a structured and consistent approach. Ideally, a facilities manager has a process in place to gather objective facility condition data, enabling the company to:

Pinpoint exactly where repairs and upgrades need to be made

Calculate the estimated costs of those requirements

Prioritize the requirements according to company priorities

Run funding scenarios that demonstrate the impact of different spending levels

Identify and address risks to business continuity

Develop a capital plan and budget that will sustain the facilities and support their function for years to come

The Benefit of Benchmarks
The greatest benefit of accurate facility data is that when data is analyzed, the result is an objective benchmark regarding necessary investments in facility improvements, as well as the impact future levels of investment will have on facility condition. Developed by industry associations, this benchmark is known as the Facility Condition Index (FCI), and is the key to a strategic facilities capital plan. The FCI is the ratio of deferred maintenance dollars to replacement dollars and provides the ability to compare similar buildings to each other, highlighting the buildings that are in the greatest need for updates, repairs, or replacements. Certain facilities are crucial to the organizational mission and call for an improved target FCI. FCI analysis demonstrates the true cause and effect of investment decisions.

Reaping the Rewards of Strategic Capital Planning
With the right facilities capital planning and management process in place, companies are able to:

Develop a long-term view of capital planning with accurate multi-year forecasting

Make investment decisions based on objective, analytical, and transparent information

Reduce financial, operational, and legal risks

Deliver substantial cost savings and efficiency gains

When facilities capital planning efforts are aligned with a company's objectives, investments can be optimized to deliver value. Proactive analysis based on accurate data results in objective prioritization, a clear path to decision-making, and, ultimately, intelligent investment choices resulting in cost savings over time. Strategic facilities capital planning and management leads industry to far superior and more defensible results.

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About the Author

Ray Dufresne, Vice President, VFA, Inc.
As Vice President in VFA’s Consulting Services group, Ray Dufresne is responsible for management and direction of projects for customers across VFA’s market base. Prior to forming the Consulting Services group in 2004, Dufresne led Assessment Services within VFA for 12 years. During his tenure, VFA assessed over half a billion square feet of property in government, educational, healthcare, and corporate markets. It was through his contact with clients over this period that Dufresne recognized firsthand the customer’s need for expanded services that integrates capital planning with operational and building process review, financial planning, and data integration and analysis. Throughout his career, Dufresne has pursued computer solutions to complex managerial and computational issues, using a wide variety of software and database systems. Prior to joining VFA in 1992, Dufresne was a practicing architect working on the design and construction administration of office, medical, retail, and transportation facilities. He speaks at industry conferences and has authored articles on the value of effective capital planning and facility management. Dufresne received a Bachelor of Architecture from Virginia Polytechnic Institute and State University.

More articles by Ray Dufresne

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