Matt Adams is president of The Adams Consulting Group, a management/engineering consulting firm located in Atlanta, Georgia, specializing in facility maintenance and management for higher education, school districts, and other institutions. He is a co-chair of APPA's Trades Staffing Guidelines Task force, and he can be reached at

It has been more than two years since I last reported on new developments and trends in the arena of "facility portfolio management." I am pleased to reveal that there have been changes, and almost all of them are positive. While difficult to see on an institution-by-institution basis, our industry is growing in sophistication and prominence. One of the most positive messages in the field is that facility administrators have reached a new high in acceptance and involvement in the institutional financial planning process. This trend speaks to facility asset management as well. There are many new philosophies and policies being adopted by institution, system, state, and even national administrations that were originally initiated by facility administrators. This is a result primarily of two occurrences. After at least ten years of promotion and education by APPA and other groups, understanding and awareness of the ownership responsibilities associated with new facility construction has increased. In addition, the new "tidal wave" of students, or baby boomlets, has drawn attention to the physical constraints and liabilities associated with facility portfolios.

Just like the "squeaky wheel," the large percentage of educational space delivered during the late 1950s and throughout the 1960s requires "oil." Now between 30 and 40 plus years old, this huge chunk of building stock is no longer just rife with deferred maintenance and grandfathered codes, it is obsolescent. It does not adequately support the educational mission any longer. This new physical reality can't be explained away or ignored any longer. The important development is that non-facilities staff, administration, and faculty are now acutely aware of this issue. They see and experience it every day. This unlikely consensus-building process has demanded an explanation and new policies. No one wants this to happen again. Rather than saying, "I told you so," progressive facility professionals are using this increased sensitivity as a vehicle to introduce new policy and practices. Under these circumstances, any new source of capital is well received.

As reported before, the best facility administrators in the country share a knack for looking in many directions for renewal capital. Few believe that traditional funding sources will satisfy the increasing renewal needs. Two years ago, only a handful of institutions had engaged in negotiated "performance contracts." Even fewer had engaged in supply contracts. This has changed, and the collective industry experience with this form of renewal finance is considerable. APPA, the Department of Energy, and the Environmental Protection Agency have sponsored the Resource Reallocation-Utilities Strategic Assessment (RR-USA) program for a year now.

This daylong briefing, held in seven states so far, has engaged a large number of energy performances contractors as well as facility administrators and business officers. The theme of the seminars is not the question of "if" performance contracts should be used. Instead, it is one of how institutions can "get to go." Two milestones have been reached so that this capitalization vehicle can succeed in this industry: there is a critical mass of solid, professional, and experienced performance contractors, and there is a good spectrum of institutions that have successfully engaged this form of renewal finance. It is not experimental any longer.

As evidenced in the RR-USA program, facility administrators are often working directly in partnership with the business officers of our institutions. This positive trend demonstrates that the two parties are increasingly learning how to bridge what is often a technical terminology gap. In other words, engineering/architecture and maintenance priorities haven't always easily converted to financial management priorities, but there is a growing number of these improved "partnerships" within higher education institutions.

There is a clear perception and demonstration of support from the chief financial officer for facilities management. To achieve this, there is give and take on both sides. Facility managers have learned not to inundate financial planners with seemingly endless needs for capital with little accountability for its expenditure. For example, best practice facility auditing is no longer a process that produces thick reports outlining millions of renewal needs with seemingly no end in sight. More important than the shock value of report after report are scenario plans that illustrate the performance of various levels of capital investment. Specifically, the effects of capital investment packages are described in terms of the overall institutional support mission. This trend is described as a shift of emphasis from the creation of deferred maintenance data to the effective utilization of that data in various business planning processes. Facility administrators are separating themselves from the perception that capital renewal funding is a "black hole" with no end in sight. The new best practice illustrates a mutual understanding by facility administration as well as finance officers that "capital investments must perform."

There is positive activity in facility portfolio management further up the administration hierarchy. Landmark projects for facility capital budgeting have been completed or are in process at both the system- and statewide levels. Derrick Manns, the assistant to the vice president for academic administration at Madonna University, is completing dissertation work on the subject of statewide capital renewal policy. Working with APPA's Lander Medlin to present to the Association of Institutional Research, Manns has identified several nationwide trends. Surveying all 50 states and their financial officers, Manns verified that utilization of new financing sources is on the rise.

The message to facility administrators is that the timing is right for alternative renewal financing proposals. Several states have demonstrated leadership in collecting and using facility renewal data: specifically Ohio, Illinois, Maryland, and North Carolina. Ohio utilizes performance funding measures to reward institutions based on achievement of certain operating and planning goals. On the other hand, there is a desire but not always the ownership of meaningful facility portfolio management data. Derrick Manns revealed that more than 85 percent of his survey respondents had plans to increase facility growth in anticipation of the "tidal wave II," while just under 50 percent had statewide coordinating plans for existing facility renewal. The stewardship message is now more relevant than ever.

There is a new understanding circulating in the industry regarding renewal funding. Eventually, funding for renewal and deferred renewal progresses into more expensive propositions. There are many examples of E&G space that has been "spent down" to levels that require constant reactive maintenance resources while yielding an unsatisfactory educational support service. This 1960s-era space is expensive to operate and it doesn't do the job. Sometime during the last 30 to 40 years, the accumulated deferred maintenance reached a point that exceeded the threshold of grandfathered codes. Deferred renewal eventually ages and exacerbates to trigger code compliance. Even when compliance is not required, wholesale system replacements often mandate code compliance from the institutional standard of care.

It is now recognized that after this long period of inadequate reinvestment a third liability presents itself — functional obsolescence. The configuration and performance of this building stock is often no longer acceptable or competitive. Oddly enough, many of the "Generation Y" students entering college now complain that the classrooms and labs where they attend class are considerably below the standards of their grade schools. This revelation speaks to the entire facility whether intended or not. The basic design and system specification standards of this space have obsolesced and will no longer provide a return on renewal investment. Deferred renewal, code compliance, and functional obsolescence sum up a liability that typically exceeds 50 percent of the current replacement value. At this point, project-based renewal funding is non-productive. Limited renovations are more effective solutions to all three liabilities. More importantly, renovations offer more potential for funding sources.

I have visited many institutions that have a poor record for renewal funding. Despite this, space improvement is still achieved vis-à-vis multi-source funded renovations. The Department of English is not likely to find funds or gifts for a new chiller, but they may for renovation. We know that this is not the best strategy for facility stewardship, but it is one that does have a positive result.

Overall, the facility asset management practice is making good progress. The creativity and sophistication of the industry's leaders are growing. New sources of finance, both external and internal to the institutions, are increasingly utilized. Facility audits are more practical and communicative. The results of renewal investments are clearly defined and answer the question "what will happen if I fund this project." As two million additional students come to college during the next few years, the opportunity to influence facility stewardship policy is stronger than ever.