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Project Selection 6 Ways to Make Smarter Investment Decisions

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Page 1: Project Selection - Gordian › uploads › 2019 › 12 › Project... · Examine your historic spending patterns and how they align with current and projected needs. This analysis

Project Selection6 Ways to Make Smarter Investment Decisions

Page 2: Project Selection - Gordian › uploads › 2019 › 12 › Project... · Examine your historic spending patterns and how they align with current and projected needs. This analysis

Budget pressures and other financial constraints facing higher education institutions continue to cause widespread challenges.

For facilities decision-makers, that means balancing

underfunded needs, aging facilities that weren't stewarded

effectively, pressure to build new and enticing space and

aggressive deferred maintenance growth. Institutions

nationwide are looking for ways to make smarter investment

decisions into their facilities and as a result, project selection

is more critical than ever. It’s imperative to be strategically

selective with your project planning process to ensure

funding is being allocated appropriately and effectively

supporting institutional priorities.

Conversely, sometimes the best investment decision during

times of financial uncertainty is choosing where not to

invest. Challenging times are ahead. Understanding that

capital need will always outpace available funding, this guide

is designed to offer practical strategies for optimizing the

funding you do have and ensuring you get the best return on

the assets you serve.

Page 3: Project Selection - Gordian › uploads › 2019 › 12 › Project... · Examine your historic spending patterns and how they align with current and projected needs. This analysis

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1. Match Investment Capacity with Need

2006-2011 2012-2018

Distribution of All NeedsHistorical Investment

Space Renewal

59%Space Renewal

49%Mechanical

38%

Envelope

13% Space Renewal

25%

Mechanical

56%

Envelope

19%

Mechanical

27%

Envelope

14%

Examine your historic spending patterns and how they align with current and projected needs.

This analysis is a tool to measure and monitor your progress as you continually reassess your investment decisions to meet the needs of the institution.

An outright shift in investment strategy is not an overnight change and this approach doesn’t imply you need to match your distribution of needs exactly, it simply gives a framework to track performance against credible investment targets.

Investment Disconnect

© 2019 The Gordian Group, Inc. All Rights Reserved.

Page 4: Project Selection - Gordian › uploads › 2019 › 12 › Project... · Examine your historic spending patterns and how they align with current and projected needs. This analysis

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0.000.00 0.10 0.20 0.30 0.40 0.50 0.60

5.00

10.00

15.00

20.00

25.00

Total Work Order Hours ( / GSF *1,000) vs. Building Condition Score

WO

Hou

rs/G

SF*1

,00

0

Building Condition Score

4

2. Link Operational Costs to Deferred Maintenance (DM)

Look at total work order hours spent on buildings against their overall condition to help link day-to-day operational costs to deferred maintenance.

The buildings in the shaded region are buildings of opportunity. These are buildings with greater deferred maintenance needs and a high volume of operational need or are simply building

clusters that may need to be examined independently from the rest of campus. Rather than investing time and money daily on work orders, consider replacing entire building systems for a better return in the long-term.

On the other end of the spectrum are buildings in better physical health, with lower amounts of daily operational need. These buildings are operating more efficiently and should be stewarded as needed to prevent decline into the shaded regions.

© 2019 The Gordian Group, Inc. All Rights Reserved.

Page 5: Project Selection - Gordian › uploads › 2019 › 12 › Project... · Examine your historic spending patterns and how they align with current and projected needs. This analysis

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Weigh the costs of construction solutions against their potential drawbacks.

The constant pressure to add new space is often felt by higher education institutions either to relieve the sentiment of campus being too cramped or to make a good impression among potential recruits. However, new

3. Space Tradeoff – Invest or Divest?

construction doesn’t positively impact current backlog, it can actually skew the number by actively adding future needs and making it more challenging to confront. Sometimes the best investment strategy is to not invest at all. And if you can remove poor quality space, you can free up resources to maintain the rest of campus.

© 2019 The Gordian Group, Inc. All Rights Reserved.

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Demolition

Major Renovation

Minor Renovation

New Construction

Dollar-for-Dollar Impact on

Backlog

L E S S

M O R E

» Changes campus character» Reduces available space on campus» Politically unpopular

Drawbacks:

» Di�cult to secure funding» Perception is that it’s still an “old” building

» Doesn’t necessarily address keyinfrastructure issues

» Less e�cient than a major renovation

» Actively adds to future needs» Doesn’t actually reduce current backlog» 2-3x less impactful dollar for dollar

than other options

Project Impact on Backlog

© 2019 The Gordian Group, Inc. All Rights Reserved.

Page 7: Project Selection - Gordian › uploads › 2019 › 12 › Project... · Examine your historic spending patterns and how they align with current and projected needs. This analysis

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4. Pair Need with Program Value

ProgramValue

Building Condition

H I G H

LOW

LOW H I G H

Major Capital RenovationsPoor Building Condition,

High Program Value

StewardshipExcellent Building Condition,

High Program Value

Transitional BuildingsPoor Building Condition,

Low Program Value

Maintain/RepurposeExcellent Building Condition,

Low Program Value

Tie facilities projects and funding to institutional priorities.

In order for your investment decisions to be supported by your institution as a whole, consider their program value. But how do you define program value? Is it space utilization? Is it mission-driven? If you need to secure buy-in from stakeholders, this framework can provide the rationale required to help campus constituents understand why projects are being selected in the sequence they are. When utilized correctly and with patience, this strategy is one of the most effective ways to prioritize and select projects.

© 2019 The Gordian Group, Inc. All Rights Reserved.

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5. Breakdown Campus Needs into Segments

Group buildings as a portfolio of assets based on similar functions, campus priority or strategic direction.

The Building Portfolio process helps to define areas of emphasis and distribute funding across campus facilities with a rationale for sequencing investments. With guidance from campus leadership, this plan tends to reflect university goals and objectives. This approach to setting priorities for resource allocation does not suggest that one project is less important than another on an individual basis but rather that another project’s “turn” will come further down the road.

© 2019 The Gordian Group, Inc. All Rights Reserved.

Page 9: Project Selection - Gordian › uploads › 2019 › 12 › Project... · Examine your historic spending patterns and how they align with current and projected needs. This analysis

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Total Campus Need$609M

Academic, Admin & Research Need$494M

Auxiliary Buildings$115M

DivestmentTransition

$53M$134/GSF

Historic$151M

$146/GSF

Academic$83M

$87/GSF

Stewardship$41M

$25/GSF

HistoricStewardship

$83M$97/GSF

MaintainRepurpose

$25M$34/GSF

Housing$110M

Parking$5M

Central Allocation$233M

$118/GSF

Program Funding and Capital Renewal$149M + $47M

$47/GSF

Building Portfolio Strategy

© 2019 The Gordian Group, Inc. All Rights Reserved.

Page 10: Project Selection - Gordian › uploads › 2019 › 12 › Project... · Examine your historic spending patterns and how they align with current and projected needs. This analysis

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6. Don’t Forget About Your Customers

HighestImpact

Projects

CustomerViews(Survey)

Condition of Building

(AR Need)

Value to Program

OperationalBurden

(Work Orders)

Link all factors together to see where you will receive the highest impact and then verify your results with relevant customer feedback.

Survey on the condition of buildings, general experiences with different spaces and first impressions.

© 2019 The Gordian Group, Inc. All Rights Reserved.

Page 11: Project Selection - Gordian › uploads › 2019 › 12 › Project... · Examine your historic spending patterns and how they align with current and projected needs. This analysis

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Don’t go it alone

These frameworks are examples of how institutions can

make better investment decisions that strategically allocate

insufficient funding to projects in alignment with critical

campus needs and institutional priorities.

But how do you ensure the message is heard? How do you

break through the noise and remove the bias of project

selection that inevitably infiltrates decision-making? The

short answer - data and objectivity. You need a foundation

of data that objectively examines longitudinal investment

patterns and performance to better understand where

your campus has been and where it needs to go. Armed

with this data, finding the right path to a solution with

stakeholders often requires patience and calculated,

informed conversations. Removing subjectivity through a

third-party perspective and focusing on broadly verified data

will help you reach the best outcome for the institution and

the community you serve.

© 2019 The Gordian Group, Inc. All Rights Reserved.

Page 12: Project Selection - Gordian › uploads › 2019 › 12 › Project... · Examine your historic spending patterns and how they align with current and projected needs. This analysis

About GordianGordian is the world’s leading provider of facility and construction

cost data, software and services for all phases of the building

lifecycle. From planning to design, procurement, construction

and operations, Gordian delivers groundbreaking solutions to

contractors, architects, engineers, business and financial officers

and facility owners in local, state and federal governments,

education, healthcare and other industries. A pioneer of Job

Order Contracting (JOC), Gordian’s offerings also include our

proprietary RSMeans data and Sightlines Facility Intelligence

solutions. We develop and maintain the largest collection of

labor, material and equipment data and associated costs for all

areas of construction. Gordian’s solutions are accessed through

our innovative software platforms and supported by a team of

industry experts proven to help clients maximize efficiency,

optimize cost savings and increase building quality.

Changing the Conversation in Facilities ManagementDiscover more at gordian.com