Don't Put Off Til Tomorrow...
When a small college realized that deferred maintenance projects had piled up to the point that they totaled half the annual budget, it was time for a new system.
By Jon C. Strauss and Andrew R. Dorantes
Harvey Mudd is young by higher education standards, having just celebrated a 50th anniversary. And we’re relatively small, a member of the Claremont Consortium with only 730 students, 80 faculty, and 21 buildings on 32 acres. While you might expect youth and size to limit the complexity of our deferred maintenance issues, five years ago we identified $12 million in deferred projects—that’s about half the annual operating budget. This caught the attention of some trustees, who argued for more funding in response. The approach we ultimately used was developed to better understand the relative urgency of the various projects in the backlog and to assist in making better decisions about correcting existing problems and preventing future accumulations. Fortunately, high-priority projects that need to be completed expeditiously typically comprise only half the backlog, obviating the need for heroic funding measures. Overall, our new approach has worked well for Harvey Mudd; and, at present, 335 deferred maintenance projects remain, representing a total cost of $5.7 million.
Slating Specific Funds
Earlier planning set the stage for what would become a more deliberate, effective system. For example, as the college began to plan for a regular regional accreditation review in 1995-96, it became apparent that facilities constructed early in our then 40-year history were aging and required more than regular maintenance. With the strong support of the trustees, we started to budget operating funds for a renewal and replacement reserve. This budgeted annual amount began at $400,000, was increased gradually to $1 million in 2000-01, and thereafter has increased at the same rate as the annual operations-budget increase. Currently, the annual funding is $1.087 million, or 3 percent of the operating budget. Also, as Figure 1 illustrates, additional sums were added to the reserve from year-end surpluses from time to time. Eventually, the college plans to budget the full annual facility depreciation (now approximately $1.7 million). The balance and activity of the reserve are maintained in a discretionary account on the college’s general ledger, and the unspent funds are kept in a short-term liquid investment. The figure shows the amount added, the total expenditures, and the running balance of the reserve by year.
As of June 2006, Harvey Mudd had slightly more than $3 million in the renewal and replacement reserve. The growing balance in the reserve since 2003 reflected a conscious decision to defer all but the highest-priority projects to manage cash flow for a major building project. That project has now been funded from other sources, so progress on deferred maintenance projects is being accelerated.
Evaluating the Backlog
It soon became apparent that funding was only part of the deferred maintenance story. We also needed to understand what individual deferred maintenance projects involved, how much they would cost, and the urgency of completion. Toward this end, the college created a log of individual projects including description, priority, status, estimated cost, and dollars spent and when. Each project is assigned a numerical priority based on likely consequences of action or inaction related to the categories of human safety, asset preservation, and academic program support as shown in Table 1.
Taking Deliberate Action
In addition to funding the reserve and keeping a project log, it is important to develop a dynamic process for identifying new projects and managing existing ones. Our process includes activities that take place in established timeframes.
Monthly activities. Our assistant vice president for facilities maintains renewal and replacement project data using a Microsoft Access database with a linked Excel workbook for project reporting and graphs. On a monthly basis, the AVP uses internal financial reports to update the project data. Once the database has been updated, the customized workbook is capable of producing various reports, graphs, and charts (including those shown in this article) used primarily by the offices of the treasurer and the president. A list of all pending, completed, or removed projects is a key report, and on a monthly basis the AVP for facilities works with the treasurer’s office to review this and other reports necessary to reconcile the balances in the workbook to the general ledger.
Annual review. At the end of each calendar year, the facilities department solicits from faculty, staff, students, and trustees suggestions for new facilities projects or for modification or priority changes in existing projects. The solicitation process usually reveals a number of regular maintenance issues that have gone unreported as well as some new ideas for future capital projects. Suggestions are also made by various constituents throughout the year.
Two recent and very helpful suggestions involved a new landscape master plan and the addition of exterior campus signage. Consequently, we recently modified our high-gallon sprinkler system to include more drip irrigation and transitioned from a hydraulic to an electronic valve system. We also replaced several lawn areas and plants that required significant water with California native plants, requiring less water and resulting in savings. Additionally, various constituents suggested that campuswide signage would be helpful to prospective students, new students, and other visitors. As a result, we installed attractive, well-designed signs—a great improvement to the campus. Other suggestions received from constituents include dorm renovations, elevator renewal, and asphalt and concrete renewal.
Ongoing analysis. Several times each quarter, the AVP for facilities updates project priorities and estimated costs and proposes new repair and replacement projects to be added to the log. Projects may also be removed from the log, such as when an activity is no longer needed due to the completion of another related project. For instance, a new dining commons may result in the removal of a logged renovation project related to the old kitchen. The reserve fund is also adjusted for variances between actual and budgeted costs for completed projects, the overages and shortfalls of which relate to the budgeted amount for remaining projects. The treasurer reviews in detail with the facilities AVP all changes, which are then discussed with the college president and the chair of the Physical Plant and Campus Planning Committee (Plant Committee) of the board of trustees.
Tracking Project Progress
The Plant Committee is a hands-on panel of 8-10 members, several of whom have significant facilities- and construction-related experience. The committee is responsible to the board of trustees for long-range campus planning, design, construction, landscaping, operations, and maintenance of the physical plant; and it considers questions of safety, energy conservation, and sustainability. The committee meets three times a year and other times as needed. The charts included in this article, along with various other data and summaries, are provided to the Plant Committee on an annual basis at minimum. The committee reviews the progress of renewal and replacement projects and approves proposed revisions to the log, in addition to approving projects to be undertaken and committing funds from the renewal and replacement reserve.
Figure 2 summarizes by year the total estimated dollar value of new projects identified, the actual cost of projects completed and removed, and the estimated dollar value of projects remaining. (Note: The first three columns shown for each time period present annual data; and the last column, “Remaining Balance,” presents cumulative data.) This figure differs from the first one, “Renewal and Replacement Reserve Summary,” which presents the activity and balance in the reserve that is used to fund the projects.
When the renewal and replacement program was initiated in 1995-96, more than $4 million worth of projects were identified. Fewer projects were proposed in subsequent years until 1999-2000, when approximately $5.5 million worth of new projects were added to the log. Key among them were three large projects: two dorm renovations and the renovation of the building that housed the dining hall. As Figure 2 illustrates, fewer additions to the log were added in the years following 1999-2000, while various projects were completed or obviated during that time. In the meantime, the process now in place has resulted in the college more consistently soliciting and receiving requests for new items to be added. Additionally, since the college is beginning a strategic planning process, the number of additions to the log is expected to grow significantly in the coming years.
Unfortunately, the relatively large size of some lower-priority projects has sometimes obscured very real progress with higher-priority projects. To highlight progress for these key projects, we prepare and review summary charts similar to Figures 1 and 2 for urgent projects in each of the priority categories. Figure 3 illustrates a combination of these high-priority summary charts, using the same format as the Project Log Annual Summary presented earlier, except that it displays only data for projects with priorities greater than 9, 8, and 3 for human safety, asset preservation, and academic program service, respectively. (Duplicate projects with high priorities in more than one category are eliminated).
It is encouraging to observe that progress is now being made on high-priority projects. It’s even more heartening to note that the funds in the reserve (as portrayed in the Renewal and Replacement Reserve Summary) are sufficient to complete all the remaining high-priority projects.
Harvey Mudd’s administration developed a system years ago to prioritize projects and has used a process for managing renewal and replacement projections for some time. However, the college struggled to find software or another type of system to easily manage and report on the status of projects. Although over-the-counter software options were numerous, none of them appeared to support our specialized reporting needs. After much discussion, we determined that the best approach would be to create a customized system. The business affairs, facilities, and president’s offices all worked together with the assistance of an IT consultant to design a system that would meet the college’s needs. It took approximately a year to design and implement the system, but the result of our efforts was a customized system that works well for Harvey Mudd.
However, only recently have we fully implemented a program that allows us to prioritize projects and provides the tools to report project status, resulting in better management of the renewal and replacement process. In addition, we’ve set standards that facilitate quicker action on high-priority projects. For example, the new methodology and reporting capabilities resulted in a change in procedures allowing the administration to act on any project with a human safety priority of 9 or higher without first consulting the Plant Committee. The status of these priority projects is now reported to the committee after initial action has been taken.
Although the system is functioning well, there’s always room for improvement. During recent committee meetings, trustees have discussed what should be covered by renewal and replacement funds. Should the fund only address deferred maintenance issues, or should it also be used for new facilities projects? Throughout the year, the facilities office also receives various requests from faculty and other constituents for repurposing offices or for other projects that do not meet the current definition of renewal and replacement. Trustees have made the suggestion to increase funding and then bifurcate the reserve fund for deferred maintenance issues and for these kinds of new projects, respectively. The college is currently grappling with how best to respond to these issues to refine our renewal and replacement program and to determine its relationship to the capital budgeting process.
While increased funding for deferred maintenance at Harvey Mudd would allow more rapid progress on the backlog, significant progress has been made on the highest-priority items. Our methodology for managing and reporting renewal and replacement projects is helping various constituencies to be productively involved in facilities-related issues. Moreover, administration and trustees now better understand the nature of the deferred maintenance challenge and are actively engaged in appropriate steps to correct it.
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