3/3: Value Points of Strategic Consulting Services for Facilities Management Enterprises
Facilities are a cost center for almost all organizations. Unless the business model is designed to leverage physical assets to generate revenue, organizations only spend money on the development, operations, and maintenance of buildings. K-12 school systems spend to maintain and modernize existing school buildings. Public agencies and private corporations spend money on workplace facilities to house workers. And health care institutions spend money on ongoing operations of critical facilities. Furthermore, the need (in terms of dollars needed for investment) often far outpaces the available resources. At Page, we help facilities managers, capital program managers, and executives make the right decisions about facility investment through our strategic consulting practice.
Oakland Unified School District, for example, passed Bond Measure B in 2006 worth $435 million, but had a system-wide need of $1.5 billion dollars for modernization and maintenance of school buildings at 86 sites across the city1. This disparity meant that facilities managers had to make difficult tradeoffs when deciding how to spend their limited resources. Through a process of quantitative and qualitative analysis, stakeholder engagement, scenario modeling, and strategy development, Page provides value for organizations facing challenges like this in three important ways:
Cost Avoidance Through Asset Optimization: As organizations grow, they often identify a need for new facilities to house employees, teach students, or treat patients. Investing in the development of new facilities requires a large investment of resources and an ongoing liability as construction costs are amortized over decades. Organizations have to consider the return on that investment, which can affect cash flow, profitability, and future growth. Often though, companies can avoid the costs of building a new facility by better using the ones they already have. For corporations, office buildings can be optimized by updating workstation standards to increase the capacity of existing workspaces. Educational institutions can manage how they enroll classes to increase occupancy of instructional spaces. And health care institutions can optimize their scheduling processes to increase utilization of exam and treatment rooms. Asset optimization can help organizations reduce their facility investment need and avoid new construction costs.
Reducing Operating Costs by Increasing Efficiency: Ongoing operations of existing buildings is another major cost for all organizations. Expenditures rise year over year as building systems age and utility prices escalate. For organizations with large asset portfolios, these costs can represent a significant portion of their total operating budget. San Francisco International Airport, for example, spent $43.1 million on light, heat, and power in fiscal year 2015-2016, representing 4.5% of its annual budget2. A 5% decrease in energy consumption would be worth over $2 million in this case, equal to the amount the airport spent on equipment. Through ongoing monitoring and evaluation of existing building operations, strategic consultants at Page can identify opportunities for resource conservation that can reduce an organization’s operating costs.
Targeting Investment by Building to Need: When existing buildings have been fully optimized, some companies may still have a need for new facilities. In this case, it is important to define exactly what that need is so that organizations can target their investments by building only what is required. At Page, our strategic consulting services include a current state assessment that synthesizes qualitative insights from stakeholder engagements and quantitative findings from data analysis. We conduct a gap assessment to identify the deficiencies between an organization’s current state and future need. We then develop data-driven models to evaluate a variety of scenarios for possible future development. And we ultimately provide recommendations for targeted investments based on the findings of the models as compared with the needs, goals, and priorities of the organization.
Investment in facilities is an important and ongoing consideration for all organizations, and the stakes and costs can be high. Strategic consulting services provide value for facility management enterprises by identifying the optimal use for limited resources. At Page, we are committed to working with our clients to collaboratively create the strategies that are most aligned with their organizations and will position them for future success.
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