SPEND MANAGEMENT: CONSTRUCTION AND FACILITIES
Construction Spend Assessment
In our experience, there is substantial opportunity for procurement to collaborate with design, construction and facilities teams. If this collaboration is professionally executed then significant value can be created. Construction and Facilities personnel bring a high degree of skill to their work. Procurement must match this professionalism and have a thoughtful plan for how they can add value to the process. The only way to be successful in these areas is to earn respect and create value together. We believe a great place to start is to complete a Construction Spend Assessment. This process will engage the key stakeholders and a high-level review of the major components of construction and facilities spend and through a series of collaborative interviews establish whether there is an opportunity to improve and if so, where that opportunity resides. The Construction Spend Assessment will provide a high-level action plan that prioritizes a long list of potential opportunities down to the most pragmatic and actionable ideas that formulate a Phase 1 of activity. The primary benefit of this review is to establish buy-in and an action plan where all stakeholders are on the same page.
Construction Category Plan
A Category Plan specific to construction and facilities is an ideal way to promote greater collaboration between procurement and facilities professionals. Stepping back from the way things are done today is a useful exercise to determine if a more strategic approach will yield benefits. As with any category plan, data analysis is critical to understanding existing spend patterns and how they might be modified in the future. In our experience, a Construction Category Plan forces the following questions to be addressed: can we improve our procurement of professional services, can we strategically bundle or package more minor capital projects together, can we be smarter about procuring similar engineering assets, should some portion of our multi-year minor project budget be handled by in-house labor instead of contractors or vice versa, can we improve our contracting approach on major capital projects, is there a business case for a greater proportion of materials to be supplied or contracted by the University, are we procuring bonds and insurance in the most strategic way, and many other related strategic questions. The Construction Category Plan can and should answer these questions and place a value on them. In addition, there should be a prioritization of initiatives into an operational plan that is pragmatic and executable.
A conditions assessment of all campus buildings and non-building and information technology infrastructure executed at a best practice level is one of the more pragmatic and strategic activities the Facilities and Procurement teams can collaborate on together. Deferred maintenance is a huge issue for most universities. Often, the deferred maintenance amount has been determined by formulas which have varying degrees of credibility. The Chief Facility Officer and the Executive team need to know the specific impact to buildings and building systems when choices are made to defer maintenance. The role of best practice conditions assessment is to create a database of credible conditions that are based on the knowledge and professionalism of your maintenance and engineering staff. When done right this process yields answers to important strategic questions. Is the condition of my priority campus buildings improving or becoming worse? Am I buying insurance based on the right replacement cost values? Do I know whether I have safety, liability and code issues and the magnitude of them? Can I integrate maintenance conditions information with our strategic plan for re-purposing existing space? Should I continue to invest maintenance dollars in certain older buildings or should we take them out of service or replace them? From a strategic sourcing / procurement point of view, a conditions assessment process yields significant potential to understand a future pipeline of projects and determine how best to contract for those projects. Perhaps a large percentage of the ‘conditions’ relate to HVAC issues. It might be advantageous to address these or a portion of them in a larger capital project, rather than as a series of ‘one-off’ tactical projects. There is significant opportunity to bundle similar projects and present them to the contractor community in a more strategic fashion that will yield increased value.
Strategic Sourcing (Professional Services, Major Capital, Minor Capital, Owner Supplied Materials)
A category plan is a strategic document that helps you understand the return on investment for pursuing alternative courses of action. However, at the end of the day, you must execute initiatives well and collaborate with internal stakeholders in a professional way. Reasonable changes can be made to the University’s contracting methods (Strategic Sourcing) for professional services and major and minor capital projects that will yield significant improvements. The two keys to these alternative approaches involve 1) understanding existing project costs in greater detail and 2) having credible data to understand future project pipelines and how those pipelines translate to procurement activity.
Strategic Contractor Management
The construction of university buildings and the maintenance of these assets over time is strategically important. Annual spending on construction and facilities is often the number one spend category on a university campus. Universities may use hundreds of different contractors to construct and maintain these assets. Many of these key contractor relationships should be thought of as strategic partnerships. There is great value in creating a Strategic Contractor Management program to drive greater value from these relationships. There should be criteria for determining who is a strategic contractor, a discipline for establishing meaningful goals and objectives and a regular cadence of meetings with focused agendas that move the University and contractor forward to achieve the established goals. Contractors have a lot of assets and capabilities to assist the University in various ways if managed appropriately.