Buildings…The Gifts that Keep on Taking

Buildings…The Gifts that Keep on Taking  

APPA’s Buildings…The Gifts that Keep on Taking: A Framework for Integrated Decision Making was published in 2007. APPA is a professional organization that supports educational facility professionals providing a wide range of products, services, and training for this community.  Buildings was the product of a four-year research project performed by APPA’s Center for Facilities Research (CFaR). The problem this research sought to overcome was summarized by the following, “Seven Top Facility Issues.”

• “Misunderstanding of the initial and long-term costs,
• Unpredictable results, matching facilities with both needs and desired outcomes,
• “Squeaky wheel” or political pressures on facility priorities,
• Lack of accountability to trustees, regents, legislatures, and the public,
• Increasing cost of deferred maintenance and capital renewal,
• Increased cost of construction and renovation because of technological advances, new material, or unique program requirements, and
• Inflexibility of space or systems, inability to adapt in order to accommodate program changes or technology.”

The title of the book was also meant to call attention to a problem many higher educational institutions faced. This problem was when wealthy donors sought to maximize the impact of their donation by building as big and grand a facility as possible and then leave the institution to find money through other sources to support the facility's operations, maintenance, and renewal.

The outcome was the institution gets a nice new building and no money to support it over its life cycle. This is a quintessential asset management problem that Buildings sought to bring attention to and resolve. The problem is ensuring downstream benefits are greater than initial and sustaining ownership costs before investments are committed. Buildings’ approach begins to solve the problem through a set of strategic questions. These questions are:

• Why should we invest?
• What can we afford?
• How much should we invest? And
• Where and when should we invest?

The purpose of these questions was to temper enthusiasm for acquiring or constructing new buildings. These questions sought to first ensure that the new building would generate a positive return-on-investment and that its total cost of ownership could be afforded. Building on these questions, Buildings presented a common vocabulary and asset management concepts that were organized into a “Framework for Integrated Decision Making“. This was needed because enterprise level asset management was new to the industry and not a customary practice.

Buildings’ Framework for Integrated Decision Making employed the strategic questions listed earlier using a “Needs,” “Standards,” “Performance,” and “Opportunities” matrix designed to align facility asset management strategies, maintenance and renewal strategies, and investment (capital) strategies with the organization's overall strategy and purpose.

A valuable tool developed within this framework was a “Strategic Investment Pyramid.” This investment pyramid builds off the strategic questions and employs the asset management context and framework developed in Buildings to define a coordinated “Asset Investment Strategy” for the organization.

The purpose of the Asset Investment Strategy was to inform decision makers of the full extent and implications of investment decision making. Foundational to making this work was the following cost accounting structure published in Buildings. This cost accounting structure is:

• Birth and Burial Costs
• Planning and Design
• Financing
• Construction
• Demolition/Disposal
• Maintenance and Operations
• Planned/Routine Maintenance
• Breakdown/Repairs
• Operations
• Utilities
• Recapitalization
• Retrofits/Improvements
• Programmatic Upgrade
• System Replacement / Capital Renewal

This approach was well received by APPA members and other organizations. The terms and concepts published in Buildings that defined total cost of ownership became a standard of practice that led to the development and publication of the ANSI/APPA

1000-1 – Total Cost of Ownership for Facilities Asset Management (TCO) – Part 1: Key Principles first published in 2017. I  was honored to be on the team that developed 1000-1.

If you are interested in learning more or need assistance with your TCO journey, R Ledbetter & Associates can help - Let’s Start a Conversation. We were honored to participate in developing the American National Standards Institute (ANSI) Standard for TCO.

Contact me at: Randy@rledbetter.com