As a result of increasing demands for capital renewal investments at a time when resources are limited, we need a new conversation around facilities at our campuses. This conversation needs to engage stakeholders and force a dialogue regarding institutional priorities and facilities initiatives that support them. An institution-wide understanding of space priorities and capital needs must drive operating changes that stick. Facilities leaders need to use a language that creates alignment throughout the institution and drives effective policies. They need to create constituency for a multi-year capital plan. They need to communicate results to drive credibility and maintain support. During this presentation, participants will learn different strategies for engaging with various constituencies on campus in order to create facilities plans that are technically sound and tie to mission and finance. Working together, we can create a dialogue that resonates from the board room to the boiler room.

1. y y
University of Missouri - St. Louis
University of Nebraska at Kearney
University of New Hampshire
University of New Haven
University of North Texas
University of Notre Dame
University of Oregon
University of Pennsylvania
University of Portland
University of Redlands
University of Rochester
University of San Diego
University of San Francisco
University of Southern Maine
University of Southern Mississippi
University of St. Thomas (TX)
University of Texas at Dallas
University of the Pacific
University of Toledo
University of the Sciences in
Philadelphia
University of Vermont
Upper Iowa University
Utica College
Vassar College
Virginia Commonwealth University
Virginia Department of General
Services
Virginia State University
Wagner College
Washburn University
Wellesley College
Wesleyan University
West Chester University of
Pennsylvania
West Virginia Health Sciences Center
West Virginia University
Western Connecticut State University
Western Oregon University
Westfield State University
Wheaton College (MA)
Whitworth University
Widener University
Williams College
Williston Northampton School
April 8, 2014
Changing the Conversation
around Facilities Management…
A Step Towards Total Campus Engagement

2. Jay Pearlman
Associate Vice-President
jpearlman@sightlines.com
Presenters
Karen Gumin
Regional Account Executive
kgumin@sightlines.com

3. Who Partners with Sightlines?
Robust membership includes colleges, universities, consortiums and state systems
Serving the Nation’s Leading Institutions:
• 19 of the Top 25 Colleges*
• 17 of the Top 25 Universities*
• 42 Flagship State Universities
• 8 of the 12 Ivy Plus Institutions
• 12 of the 14 Big 10 Institutions
• 8 of 13 Selective Liberal Arts Colleges
* U.S. News 2014 Rankings
3
Sightlines is proud to
announce that:
• 450 colleges,
universities and K-12
institutions are
Sightlines clients
including over 300
ROPA members.
• 93% of ROPA
members renewed in
2013
• We have clients in 43
states, the District of
Columbia and Canada
• 56 new institutions
became Sightlines
members in 2013
Sightlines advises state
systems in:
• Alaska
• California
• Connecticut
• Hawaii
• Maine
• Massachusetts
• Minnesota
• Mississippi
• Missouri
• New Hampshire
• New Jersey
• New York: CUNY and
SUNY
• Oregon
• Pennsylvania
• Texas

4. A Disconnect between Finance and Facilities

5. Creating Alignment Between
Finance and Facilities:
Trends Affecting Higher Education

6. Challenges Facing Higher Education
Federal and state funding levels for higher education have fallen to historic
lows with no nearterm vision for recovery.
Demographic shifts have led to level or declining enrollments in
traditional students
Affordability of education has expanded student debt, capped tuition
growth, and increased dependency on Pell Grants.
Tuition dependency has grown, operating margins have fallen, and
balance sheets have weakened.
Administrative and support costs have grown compared to education costs.

7. The Sustainability of Higher Education is in Question
“Approximately one-third of
all colleges and universities
have financial statements
that are significantly weaker
than they were several years
ago.”
Denneen & Dretler, The Financially
Sustainable University

8. Your Largest Asset
Balance Sheets Understate Importance of Physical Assets
80%
70%
60%
50%
40%
30%
20%
10%
0%
Selective Liberal
Arts
Private Large
Univ.
Comprehensive
Univ.
Public Univ.
% PPE % Net Asset Value

9. Commentary Does Not Fairly Represent Facilities
“Book value” does not represent replacement or market value of
facilities assets
Deprecation accounting does not fairly represent financial
(“backlog”) or program risk
Capital Pressures on Colleges
and Universities are Often
Understated

10. $/ Gross Sq. Ft. Capital Budgets Have Not Recovered
Substantive Difference Between Public & Private Annual Capital Budgets
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
Public Average Private Average
2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013

11. Facilities Backlogs Continue to Rise
Current Capital, At +/-$5 per GSF, is Not Slowing Backlog Growth
$77 $79 $80 $82 $84 $87 $90
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$-
2007 2008 2009 2010 2011 2012 2013
$/GSF
Backlog $/GSF
Backlog/GSF Percentage Change of Backlog

12. Waves of Construction Hitting Major Life Cycles
First wave of buildings are now 50 years old; second wave nears 20 years old
50
45
40
35
30
25
20
15
10
5
0
Total GSF of Database (Millions)
Constructed Space Sightlines Database (1880-Present) = 1.3 billion GSF
GSF Constructed (5 Year Cohorts)
12
Pre-War
Built before 1951
Durable construction
Older but typically lasts
longer
Post-War
Built between 1951 and
1975
Lower-quality
construction
Already needing more
repairs and renovations
Modern
Built between 1975 and
1990
Quick-flash construction
Low-quality building
components
Complex
Built in 1991 and newer
Technically complex
spaces
Higher-quality, more
expensive to maintain &
repair

13. Changing the Conversation
13

14. We Need to Change the Conversation
Language that Drives Effective Policies for…
Space
Release The
Hidden Value in
Balance Sheets
Capital $
Multiyear Plans
that Align to
Mission, & Risk
Operations
Improve
Effectiveness &
Lower Facilities
Overhead Impact

15. We Need to Change the Conversation
Language that Drives Effective Policies
We need a conversation regarding facilities that:
> Treats physical plant like a core business and not an auxiliary;
> Uses concepts of endowment management to contextualize
investment decisions;
> Aligns facilities operations and capital investment with
institutional mission and finance;
> Focuses on outcomes and not inputs.
How to make this change?
Create common vocabulary for facilities management that can be
articulated from the boiler room to the board room.

16. Create Engagement on Campus
Adopt a
Common
Vocabulary
16
Create
Alignment
Influence
Institutional
Policy
Make
Lasting
Change

17. An Effective Common Vocabulary
Use Terms that Engage - Repeat
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 /
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
17

18. Now that You Speak the Same Language…
Arm Yourself with Knowledge to Create Change
18
Data
Information
Knowledge
Action

19. Now that You Speak the Same Language…
Arm Yourself with Knowledge to Create Change
19
Data
Information
Knowledge
Action
Data
Having the Right Numbers

20. Now that You Speak the Same Language…
Arm Yourself with Knowledge to Create Change
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
-
BTU/GSF
Energy Consumption
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
FY2009 FY2010 FY2011 FY2012 FY2013
kWh/GSF
Electric Consumption
120,000
100,000
80,000
60,000
40,000
20,000
-
FY2009 FY2010 FY2011 FY2012 FY2013
BTU/GSF
Fossil Consumption
Information
Having the Numbers Right
20
Data
Information
Knowledge
Action

21. Now that You Speak the Same Language…
Arm Yourself with Knowledge to Create Change
21
Data
Information
Knowledge
Action

22. Three Different Scenarios of Engagement
22
Create Support for a New Direction
Changing Support for an Already
Accepted Direction
Create Confidence in a New
Paradigm

23. Creating Support for a New Direction
Reexamining Building Policies
23

24. Example 1: Daily Service Costs
Increasing Daily Service Costs – Budget Cuts Lead to Reduced Service

25. From Data to Knowledge
Daily Service Costs Significantly Higher than Peers

26. A Multitude of Small Buildings
26
400
350
300
250
200
150
100
50
0
Over 50,000 GSF 15000-50,000 GSF 0-15,000 GSF
Count Of Buildings
Building Count By Size & Age
0-10 Years Of Age 10-25 Years Of Age 25-50 Years Of Age 50+ Years Of Age

27. Significantly More Small Buildings

28. The Real Culprit Number of smaller & older buildings on campus affecting PSU’s daily service spending
28
$3.20
Labor Cost by GSF Category
$1.18 $1.30
$0.99
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Under 10K 10K - 25K 25K - 50K 50K and above
$/GSF
GSF Category

29. New Policy through Engagement
> Recommend Board set policy to drive
building intensity down approximately
25% to just above pear averages
> Raise many small buildings through
“attrition” and replace with larger new
modern spaces (Reduce 265 Bldgs ~
820 +/- GSF)
> Recommended policy to reduce
operating expenses by between
$1.75M and $2M.
> Recycle savings to annual stewardship
funding to slow rate of deferral and
avoid estimated $10M in project
deferral

30. Changing Support for an Already
Accepted Direction
Construction of New Building
30

31. Example #2: Insufficient Classroom Space
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
%
Room Utilization – General Classrooms
Room Utilization
Difficult Scheduling
During Most of Day

32. Proposed Solution
> Estimated need of 22 general
use classrooms
> Add 50,000 GSF classroom
building
> Building to cost $15M to $20M
> Estimated daily service
expenses of $500k annually

33. From Data to Knowledge
Misaligned Quantity and Size
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
33
%
Room and Position Utilization
Room Utilization Position Utilization

34. A Need for Smaller Rooms
34
40
35
30
25
20
15
10
5
0
Room Size
Under 30 31-45 46-80 Over 80
# of Classrooms
Room Size
Design Capacity Actual Enrollment

35. Conversation Focused on Benefits
Faculty, Facilities & IT Engaged to Create New Policies
> Avoidance of over $10M in
capital costs
> Investment of $1M annually
to slow rate of deferral in
existing classroom buildings
> Creation of small project fund
for faculty appropriation
> Advancement of technology
infrastructure
35

36. Engagement Creates New Policies
Room Size Current
Rooms
Laptop Policy Renovating
Current Rooms
Schedule
Limited Rooms
Schedule Dept
Controlled Rooms
Total
Free up 4 out of 6
Computer Labs
(approximately
2,400 students)
Convert 8 ’31-45’
rooms to 12 ‘Under
30 rooms’
(approximately
8,000 S.F.)
Add 6 rooms by
changing
scheduling policy
Allow for 8 out of 11
Dept Controlled
Rooms to be
scheduled by
changing the
scheduling policy
Under 30 10 +4 +12 +1 +6 33
31-45 20 -8 +1 +1 14
46-80 3 +1 4
Over 80 1 +3 +1 5
Cumulative
Total
34 38 42 48 56 56
Cost $800/Student =
$2.5M
$150/Square Foot =
$1.5 m
$0 $0 +/- $4M

37. Create Confidence in a New Paradigm
Capital Planning and Budgeting
37

38. Why Institutions Complete an FCA?
 Validates fiscal needs
 Supports budget preparation
 Provides data for short term planning (prioritize immediate
maintenance issues)
 Provides data for long term strategic planning
 Facilitates forecasting of scenarios for different investment
strategies
 Establishes confidence in the budgeting and planning phases
of the work
 Launches a baseline for a strategic plan
38

39. What Now?
How do I best move my FCA data to action?
> Get “buy-in” from institutional
facilities and trades staff
> Build constituency by tying
project list to institutional mission
and priorities
> Create flexible and affordable
financial plan
> Build credibility by tracking
success to obtain subsequent
appropriations

40. Building Portfolio Process
40

41. • Repair/Maintain
• Modernization
• Infrastructure
Define Work
Classification
• Reliability
• Asset Preservation
• Space Improvement
• Economic Operations
• Safety / Code
Define Project
Classifications
• A: 1 - 3 years
• B: 4 - 6 years
• C: 7+ years
Define Project
Priority
What is the
Work?
What is the
Impact?
What is the
Priority?
Adding Value to Each Project

42. Building Portfolios
Total Needs
New
Construction
???
Grounds
Infrastructure
Utility
Infrastructure Building
Academic
1.5 M GSF
21 Buildings
Science
Research
0.3 M GSF
3 Buildings
Residence &
Student Life
0.8 M GSF
10 Buildings
Athletics
0.2 M GSF
2 Buildings
Administrative
0.4 M GSF
5 Buildings
• Option 1: Functional
Assumes investment is dictated by building function (ie. academic,
administrative) and prioritization of investment can be determined by
associated use.
42

43. Talk About Outcomes – Not Inputs
43
Investment Strategy
100%-
85%
85%-
70%
70%-
50%
Below
50%
Capital Upkeep Stage: Primarily
new or recently renovated buildings
with sporadic building repair & life
cycle needs; “You pick the projects”
Repair and Maintain Stage:
Buildings are beginning to show their
age and may require more significant
investment on a case-by-case basis
Systemic Renovation Stage:
Buildings may require more
significant repairs; large capital
infusions; “The projects pick you”
Transitional/Gut Renovation/Demo
Stage: Major buildings components
are in jeopardy of failure. Reliability
issues are widespread throughout
the building.
NAV of Index
(Replacement Value-Building Needs)
NAV
Index =
Replacement Value
X 100
Example NAV Peer NAV Group NAV

44. Planning Options Summary
$9
$8
$7
$6
$5
$4
$3
$2
$1
$-
44
Academic /
Admin
Student
Life Repair Infrastructure Renovation Houses
$20M Plan $ 2,118,600 $ 4,891,000 $ 7,555,600 $ 1,384,700 $ - $ 271,514
$25M Plan $ 3,368,600 $ 6,540,600 $ 8,055,600 $ 1,734,700 $ - $ 319,094
$30M Plan $ 3,497,100 $ 7,754,900 $ 7,555,600 $ 2,055,800 $ 3,405,555 $ 819,094
$(1)
Academic /
Admin
Student Life Repair Infrastructure Renovation Houses
Millions
$20M Plan $25M Plan $30M Plan

45. Planning Options Detailed
Economic Operations
45
Academic /
Admin
Student
Life Repair Infrastructure Renovation Houses
$20M Plan $ 2,118,600 $ 4,891,000 $ 7,555,600 $ 1,384,700 $ - $ 271,514
$25M Plan $ 3,368,600 $ 6,540,600 $ 8,055,600 $ 1,734,700 $ - $ 319,094
$30M Plan $ 3,497,100 $ 7,754,900 $ 7,555,600 $ 2,055,800 $ 3,405,555 $ 819,094
Economic Operations
Safety/Code
Space Improvement
Asset Preservation
Reliability
Student Life Repair Infrastructure
Safety/Code
Space Improvement
Asset Preservation
Reliability
Economic Operations
Safety/Code
Space Improvement
Asset Preservation
Reliability
Economic Operations
Safety/Code
Space Improvement
Asset Preservation
Reliability
Economic Operations
Safety/Code
Space Improvement
Asset Preservation
Reliability
Economic Operations
Safety/Code
Space Improvement
Asset Preservation
Reliability
$(1) $- $1 $2 $3 $4 $5 $6 $7
Millions
$20M Plan $25M Plan $30M Plan
Acad/Admin Renovation Houses

46. Talk Strategy – Not Projects
46
Full Inventory
of Projects
Apply
Building Portfolio
& Timeframe
Apply
Investment
Criteria &
Timeframe
Multi-
Year
Project
Plan
Full Inventory of
Projects
Electrical,
Plumbing, HVAC,
Mechanical,
Exterior, Interior,
Safety…
?
How Do You
Target Projects
Proposed Solution Current Challenge
Integrate
Modernization,
Infrastructure, &
New Space
Pick
Projects

47. Do it Again
47

48. Questions & Discussion
Adopt a
Common
Vocabulary
48
Create
Alignment
Influence
Institutional
Policy
Make
Lasting
Change