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WACUBO 2012 Presentation: How the Oregon University System is Attacking Deferred Maintenance
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WACUBO 2012 Presentation: How the Oregon University System is Attacking Deferred Maintenance

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Viewers will learn how Oregon University System (OUS) made the case for a 500% capital budget increase from 2001-03 to 2009-11 to attack deferred maintenance. Representatives from OUS, Portland State …

Viewers will learn how Oregon University System (OUS) made the case for a 500% capital budget increase from 2001-03 to 2009-11 to attack deferred maintenance. Representatives from OUS, Portland State University (PSU) and Sightlines will discuss they used performance measurement and analysis, developed a political strategy for securing resources, and are implementing a plan for rapidly enacting capital projects at the campus level.

Additionally, Portland State University (PSU) will provide an excellent case study on the impact of the new funding. With a very densely populated urban campus, one of the oldest space profiles in the system, and the largest backlog of deferred projects, the additional funding significantly impacted PSU. PSU will discuss their strategic selection of renovation projects, which both greatly benefited academic programs and improved the overall condition and appearance of campus.

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  • 1. How the Oregon University System is Attacking Deferred Maintenance Jim Kadamus, Bob Simonton, & Robyn Pierce May 7, 2012 Denver, CO
  • 2. Jim Kadamus- Vice President, Sightlines LLC NATIONAL TRENDS IN HIGHER EDUCATION FACILITIES
  • 3. Campuses are getting older More high risk space (over 50 years renovation age) on campus 30% 25% 20% 15% 10% 5% 0% (%) Square Footage over 50 years old (Renovation Age) 2007 2008 2009 2010 2011
  • 4. New space investment falls with recent economic downturn 2010 and 2011 investment in existing space exceeds investment in new space $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 2007 2008 2009 2010 2011 est $ in Billions Capital Investment on New Space
  • 5. Capital investment moves in cycles over time $7 $6 $5 $4 $3 $2 $1 $0 Recurring capital investment remains steady Capital Investment in Existing Space $/GSF 2007 2008 2009 2010 2011 $/GSF Annual Stewardship Asset Reinvestment
  • 6. Capital Investment Mix since 2005 Proportionately less investment in space as overall capital funding grows Total Project Spending Mix 14% 28% FY2005 14% 35% 9% FY2011 14% 30% 17% 33% 6% Building Envelope Building Systems Infrastructure Space Renewal Safety/Code
  • 7. “Backlog of needs” are increasing Backlogs up about $10/GSF over last five years Total Backlog $/GSF $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 2007 2008 2009 2010 2011 $/GSF
  • 8. Case Study: State System Institutions with lower backlogs have lower operating costs $3.95 $4.42 $0.24 $0.22 $5.00 $4.80 $4.60 $4.40 $4.20 $4.00 $3.80 $3.60 $3.40 $3.20 $3.00 Backlog less than $100/GSF Backlog more than $100/GSF Operating Expenditures, $/GSF Comparing Cost of Facilities (High vs. Low Backlog of Need) Daily Service Planned Maintenance
  • 9. National trends creates issues for Higher Education More buildings are crossing over into higher risk age profile and will increase campus backlog unless addressed Shrinking capital and increasing debt will make setting clear priorities for capital renewal critical Projects are shifting away from space and programmatic projects and more into building enhancing type work Backlog is growing and has grown by $10/GSF over the last 5 years
  • 10. Sightlines Profile Common vocabulary, consistent methodology, credibility through benchmarking The annual investment needed to ensure buildings will properly perform and reach their useful life “Keep‐Up Costs” Annual Stewardship The accumulated backlog of repair and modernization needs and the definition of resource capacity to correct them. “Catch‐Up Costs” Asset Reinvestment Asset Value Change The effectiveness of the facilities operating budget, staffing, supervision, and energy management Operational Effectiveness The measure of service process, the maintenance quality of space and systems, and the customers opinion of service delivery Service Operations Success 310+ Campuses in 42 States 54% Public; 46% Private Database of 23,500 buildings and 835 million GSF Tracking $5.9 billion in operating budgets… …and $8 billion in capital projects
  • 11. Bob Simonton – Assistant Vice Chancellor for Capital Programs, OUS OREGON UNIVERSITY SYSTEM
  • 12. Oregon Space in Context FY11, 69% of space over 25 years old, compared to 71% in FY07 Over 50, 35% Over 50, 40% 25 to 50, 36% 25 to 50, 29% 10 to 25, 14% 10 to 25, 16% Under 10, 15% Under 10, 15% Oregon 2007 Oregon 2011 Total Oregon Square Footage: 12.5M # of Buildings: 405 # of Developed Acres: 1,200+ 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Renovation Age Distribution
  • 13. OUS Total Backlog of Need Recent capital investments have started to decrease backlog $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 FY2007 FY2008 FY2009 FY2010 FY2011 $ in Millions OUS AR Backlog Total FY07‐FY11
  • 14. $250 $200 $150 $100 $50 $0 State Project Investment FY07‐11 The system invested over $850 million over the past 5 years FY2007 FY2008 FY2009 FY2010 FY2011 $ in Millions Total Capital Investment into Space Projects in Millions Existing Space New and Replacement Space
  • 15. Stewardship Falling Short of Target, One‐Time Helping Sustain Value In FY11, one time capital helps to increase NAV for the first time $140 $120 $100 $80 $60 $40 $20 $0 2007 2008 2009 2010 2011 Millions Oregon System Target FY07‐FY11 Annual Stewardship Asset Reinvestment Target Need Increasing Net Asset Value Sustaining Net Asset Value Decreasing Net Asset Value
  • 16. FY07 FY08 FY09 FY10 FY11 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Understanding the NAV NAV is in “Balanced Portfolio” stage “Keep Up” Stage: Primarily new or recently renovated buildings w/ sporadic building repair & life cycle needs Balanced Portfolio Stage: Buildings are beginning to show their age and may require more significant investment and renovation on a case‐by‐case basis “Catch Up” Stage: Buildings require more significant repairs; major building components are in jeopardy of complete failure; large‐scale capital infusions or renovations are inevitable NAV Index FY07 – FY11 (Replacement Value – Building Needs) NAV= Replacement Value
  • 17. OIT U of O OSU EOU WOU PSU SOU 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Understanding the NAV by Institution Campuses distributed across stages; multiple capital strategies needed “Keep Up” Stage: Primarily new or recently renovated buildings w/ sporadic building repair & life cycle needs Balanced Portfolio Stage: Buildings are beginning to show their age and may require more significant investment and renovation on a case‐by‐case basis “Catch Up” Stage: Buildings require more significant repairs; major building components are in jeopardy of complete failure; large‐scale capital infusions or renovations are inevitable NAV Index FY11 (Replacement Value – Building Needs) NAV= Replacement Value
  • 18. Oregon System FY07 Mix of Spending 16% 24% 16% 39% 5% Capital mix of spending OUS’s mix of spending shifted towards infrastructure and seismic projects Oregon System FY11 Mix of Spending 5% 17% 34% 25% 19% Bldg. Envelope Bldg. Systems Infrastructure Space Code
  • 19. OUS Longitudinal Energy Consumption OUS institutions decreasing consumption with the help of infrastructure projects 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2007 2008 2009 2010 2011 BTU/GSF Average Energy Consumption / GSF Fossil Electric Top 3 Energy Reductions (since FY07) PSU 29% WOU 11% SOU 8% PSU, WOU and SOU spending since FY07 5% 17% 33% 26% 19% Bldg. Envelope Bldg. Systems Infrastructure Space Code
  • 20. Oregon University System Investments at the right places – Big Impact! OUS’s campuses are aging Up until FY10, backlog was growing annually With the increase of funding and putting investments into the right projects (building systems and infrastructure), OUS was able to stabilize and reduce the backlog  NAV started to increase due to a combination of annual investments and one‐time capital infusions Big impact on energy consumption with new infrastructure project, decreased total consumption by 5% since FY09
  • 21. Robyn Pierce – Director of Facilities, PSU PORTLAND STATE UNIVERSITY
  • 22. Age profile Decreasing the space over 25 years old over time 17% 3% 56% 25% 13% 9% 52% 26% 20% 21% 36% 23% 60% 50% 40% 30% 20% 10% 0% Under 10 10 to 25 25 to 50 Over 50 % of GSF GSF by Reno. Age Category PDX 2007 PDX 2011 Peers 2011
  • 23. Recent investments address historical underfunding Stewardship spending has increased with reinvestment growth $35 $30 $25 $20 $15 $10 $5 $‐ Peers PSU FY2007 FY2008 FY2009 FY2010 FY2011 FY2007 FY2008 FY2009 FY2010 FY2011 $/GSF Total Project Spending Annual Stewardship Asset Reinvestment Peers’ Longitudinal Average: $4.04/GSF PSU’s Longitudinal Average: $12.78/GSF
  • 24. Asset reinvestment is increasing net asset value Increasing annual funding combined with one‐time capital having an impact $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 Increasing Net Asset Value Sustaining Net Asset Value Decreasing Net Asset Value 2007 2008 2009 2010 2011 $ in Millions Total Project Spending vs. Target FY07‐FY11 Annual Stewardship Asset Reinvestment Target Investment Range
  • 25. FY07 FY08 FY09 FY10 FY11 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Understanding PSU’s NAV over the years NAV is in trending upwards “Keep Up” Stage: Primarily new or recently renovated buildings w/ sporadic building repair & life cycle needs Balanced Portfolio Stage: Buildings are beginning to show their age and may require more significant investment and renovation on a case‐by‐case basis “Catch Up” Stage: Buildings require more significant repairs; major building components are in jeopardy of complete failure; large‐scale capital infusions or renovations are inevitable NAV Index FY07 – FY11 (Replacement Value – Building Needs) NAV= Replacement Value
  • 26. Smith Memorial Student Union, 93% URBAN CENTER , 83% WEST HEATING PLANT , 61% SIMON BENSON HOUSE , 57% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Bringing up the campus NAV Newer buildings are in “Keep Up” stage; many buildings in “Catch Up” stage “Keep Up” Stage: Primarily new or recently renovated buildings w/ sporadic building repair & life cycle needs Balanced Portfolio Stage: Buildings are beginning to show their age and may require more significant investment and renovation on a case‐by‐case basis “Catch Up” Stage: Buildings require more significant repairs; major building components are in jeopardy of complete failure; large‐scale capital infusions or renovations are inevitable PSU By Building (Replacement Value – Building Needs) NAV= Replacement Value
  • 27. Large investment into infrastructure and seismic upgrades Shift into building and energy enhancing projects PSU FY07 Mix of Spending 7% 23% 12% 54% 4% 1%6% 42% 17% 34% PSU FY11 Mix of Spending Bldg. Envelope Bldg. Systems Infrastructure Space Code  $15.5M spent on seismic projects  $22.8M spent on utility infrastructure upgrade projects
  • 28. Asset reinvestment need versus peers Recent investment has decreased backlog by 20% since FY09 2007 2008 2009 2010 2011
  • 29. Facilities operating budget Daily service budget is over $1.00/GSF below peers 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
  • 30. Energy cost and consumption Infrastructure investment has major impact on consumption in high cost market Since FY09, PSU saved a total of $1.87M due to reduction of energy consumption 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
  • 31. Portland State University Shifting in the right direction PSU had an aging campus with not a lot of capital resources After receiving a large influx of money starting in FY09, PSU has increased both keep up and catch up investments With the capital and type of investments, they were able to decrease the project backlog by 20%  Seismic projects and infrastructure projects were large projects that contributed to energy efficiency and safety/code compliances With the utility infrastructure upgrade project, PSU’s total energy decreased by 40% since FY09 Limited operating budget has required hard choices on allocation of staff
  • 32. Investment strategy and project selection based on facts Using the detailed analysis for multi-year investment planning 100% 90% 80% 70% 60% 50% 40% Net Asset Value vs. Program Value By Building High Program Value, High NAV Low Program Value, High NAV Focus on system work, minimal space 4 5 6 7 8 9 10 Building Condition (NAV) Value of Facility to Program 1‐10 scale, 1= low, 10 = high Maintain & protect High Program Value, Low NAV Repairs & Space Improvement Low Program Value, Low NAV Emergency work only
  • 33. Questions or Discussion Thank you!

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