4 Tips for Setting Priorities in your Capital Improvement Plan
Consider, for example, a small college that — for the first time — makes a deep run into the NCAA basketball tournament. They’ve got a great coach who has a knack for finding talented players where nobody else is looking. Flush with pride and the tantalizing possibility of alumni donations, does the school invest in a new arena and practice facilities? After all, this might be their moment to build a sports program for the ages. On the other hand, they have aging dorms and classrooms that badly need refurbishments. What to do?
When faced with conflicting priorities in a capital improvement plan, business officers need to put each project in perspective by considering it from a variety of angles.
1. Understand the overall strategic objectives of the institution
- Enrollment goals: Does the institution want to increase the number of students or maintain current levels? Are additional facilities needed to support a larger student body, or does the university want to replace aging facilities with more modern ones?
- Student diversity: Will new facilities improve recruiting among certain demographics?
- Curriculum goals: How do current facilities meet planned curriculum needs? For example, if a university aspires to be a research leader in the next five years, will existing lab space meet that need?
- Project scope: Be clear from the outset what objective the project is intended to address and how it will meet that need. Makes sure all decision makers and influencers understand that any change in project scope may have a significant impact on the budget. Also consider any related needs that may arise from the project, such as additional parking.
2. Understand the condition of current facilities
- Age of facilities: Are existing facilities modern enough to be reconfigured easily, or were they built in a way that changing their layout and bringing them up to code will be prohibitively expensive?
- Renovation age: What’s the remaining life expectancy of existing facilities? For instance, if you know that three major buildings will need to be substantially renovated or demolished and rebuilt over the next five years, that may siphon away capital from high-profile new projects that the leadership team wants to build.
- Utilization: Are there underutilized spaces in current buildings that could be adapted to meet the institution’s needs?
- Geographic configuration: Are the schools and facilities grouped efficiently to support easy interaction between related departments? Could reallocation of facilities replace new construction?
3. Understand deferred maintenance and what resources are needed to catch up
- Current status: Every campus puts off at least some maintenance. So before initiating new capital improvements, an institution must determine which deferred maintenance projects can’t wait any longer.
- Available resources: Are resources available to pay for deferred maintenance and fund the new capital project under consideration?
- New maintenance demands: In the excitement of constructing and opening a new building, many executives often overlook that the new facility will add new maintenance demands over the next 20 years. What will those demands be? And how can the school plan now to make sure they don’t get added to the deferred maintenance backlog? Will you need to hire people with new skillsets to take care of these facilities?
- Replacement of existing facilities: Will the proposed new project replace a building that currently contributes to the maintenance backlog? What positive impact, if any, will the new construction have on your maintenance workload?
4. Understand the funding sources, controls and systems needed to manage capital expenditures effectively
- Funding: Will this project be funded by new debt, and if so, does the institution have access to the necessary credit? Will any funds be needed from operating resources? If donor-funded, are the capital campaign organizers onboard with the project?
- People: Are the right human resources in place to make effective decisions about costs and quality? Does everyone understand the scope of their authority — the decisions that are within their purview and those that must be made higher up?
- Process: Is there a communication process in place to keep information flowing freely between the administration and the board of directors? What role, if any, will alumni play in the process? Does the process support timely decision-making when someone identifies an issue that needs to be resolved at a higher level?
- Technology: Does the institution have the hardware, software and skills needed for design and construction, or will these be outsourced? Have your financial controls and accounting systems worked well during similar projects in the past or will you need to make improvements? Can the university support the communication process described above with existing hardware and software or is some type of upgrade needed?
When all of the resources line up properly, a new capital project can be a source of excitement and pride for a university. By asking — and honestly answering — these questions, you should be well prepared to plan, fund and execute the next project in your capital improvement plan.
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