Capital Renewal and Deferred Maintenance

• Introduction
• Deferred Maintenance and Capital Renewal
• Capital Asset Management
• Cost of Owning Facilities
• Strategic Capital Investment Model
• Improving the Capital Planning and Budgeting Process
• Strategic Capital Development Model
• Estimating Capital Renewal/Deferred Maintenance
• Setting Priorities for Capital Renewal/Deferred Maintenance
• Funding Strategies for Capital Renewal/Deferred Maintenance
• Capital Renewal/Deferred Maintenance Program Management
• An Action Plan
• References

Introduction

Historical Perspective

The vast expansion of higher education in the 20th century and a relentless pace of new construction left a legacy of unmet capital needs for renewal and replacements. Two forces converged to present higher education with a substantial maintenance backlog: normal aging of capital facilities and the subsequent need for cyclical renewal of building and infrastructure subsystems; and the obsolescence of facilities to meet dynamic needs of the academic enterprise, including changing pedagogy, information technology, and a shift from traditional college-age students to a more diverse student profile.

Today's buildings, grounds, infrastructure, and equipment amassed to house and support academic programs are the legacy of the dramatic growth of new and existing campuses. More than half of the current campus facilities organizations were developed after World War II, when enrollment grew 600 percent, from 2.3 million students in 1950 to more than 20 million students projected by 2016. During the same period, the number of institutions grew from 1,800 to more than 4,000. New institutions, primarily publicly supported two-year colleges, opened at a rate of one every two weeks from 1955 to 1974.

Facilities also expanded dramatically during this period. Buildings were opened annually, sometimes several in the same year, and construction cranes on the skyline and mud-covered walkways were common campus experiences. Driven by financing demands for capital construction and tight delivery schedules, many of the new facilities evidence a lack of durability and adaptability for alternative uses.
The major share of construction was for new facilities, with little reinvestment allocated for existing facilities. The glamour of planning new facilities and the excitement of ribbon-cutting ceremonies overshadowed the obsolescence and decay of earlier campus buildings. "Old Main" was slowly fraying at the edges while newer facilities entered their own cycle of deterioration. Currently, many institutions not only are facing the challenge of an increasing debt burden due to an aging facilities organization, but are also planning to replace or renew their facilities using debt.

The burdensome problems of major maintenance and capital renewal/replacement have troubled higher education since the 1970s. The term deferred maintenance emerged in the early 1970s as college and university administrators began to recognize the serious nature of plant problems on their campuses. The deteriorated plant conditions produced by ignoring older facilities during higher education's post-World War II expansion were compounded by the following: 

• Poor designs for institutional durability
• Cost cutting that rapidly produced space with inferior construction techniques, and innovative materials that showed early failures
• Soaring utility costs
• Inflation-induced reductions in operations and maintenance budgets
• Inadequate funding for capital renewal and major maintenance
• Increased government regulations, resulting in reallocation of resources and further deferral of maintenance

After many years, these factors produced a legacy of deferred capital renewal and the accrual of backlogs for major repairs, replacements, and renovations to facilities and infrastructure. By failing to fund renewal for building subsystems and infrastructure with expired life cycles, higher education began its slide on the slippery slope of failing facilities. Today, the problem is acute for the many institutions that may have as much as 75 percent of their facilities in the range of 30 to 40 years old –– and be past a first cycle of major renewal expenditures.

An awakening to the loss of value, utility, and building appearance in an increasingly competitive environment for students, faculty, and donor attention began to emerge in a substantial way in the 1970s. In the early 1970s, a few voices among higher education advocacy organizations began to call attention to the plight; that is, failure to plan and fund facilities renewal could have serious consequences. In 1980, national attention was drawn to the problem in a feature Time Magazine article titled “Dilapidation in Academe.” The opening sentence declared, “Under all that ivy, costly college walls are crumbling.”

The graphic portrayals of scaffold-protected exterior walls, students huddled in overcoats in unheated classrooms, and laboratories with "Closed for Repair" signs introduced an awareness of the issues. Studies published by higher education associations in the late 1970s and early 1980s identified rapidly accruing backlogs arising from the shortfall for maintenance, capital renewal, and modernization that reached many billions of dollars. And our higher education national infrastructure was not the only problem. Simultaneously, the national public infrastructure was defined in America in Ruins: The Decaying Infrastructure.¹ A national debate on the infrastructure crisis illustrated by crumbling bridges, collapsing utilities, and disasters involving loss of life reinforced higher education's problems.

The transition from a largely random and episodic process of selecting and funding one-off renewal projects to early forms of comprehensive renewal planning occurred with the first wave of deferred maintenance backlog planning in the late 1970s. It began to be noted that the backlog accumulation bore significant implications for subsystem and infrastructure reliability, health and safety issues, and functional use of space. Some troubled campus administrators took stock of conditions and began to use the term deferral of major maintenance.