In my previous post, I focused on some of the significant challenges that face organizations when they get an increase (especially a one-time increase) in funding for capital renewal, and specifically some of the challenges faced in today’s volatile market. In this post, I want to provide some strategies that have helped other clients achieve enhanced value for their limited renewal dollars.
The strategies that I am going to present are only really possible if you have control over what renewals you are able to do and when you are able to do them. If your funding is tied tightly to specific projects within specific time frames it becomes more difficult, but not impossible to start to use these strategies.
The easiest way to get more value for money when you are competing with other groups for limited resources (contractors, materials, etc.) is to go where others aren’t. There are a few key building elements that people tend to focus on right away when they get an influx of renewal money: roofing, HVAC, and asphalt. These are critical elements within a building for sure. However, we have seen significant price increases when every school, college, university and/or hospital is trying to replace the same elements. If you can, through proper maintenance and longer-term planning, delay the work on these highly sought after elements so you can find savings opportunities (or at least avoid overpaying) by focusing first on replacing or repairing other building elements such as surface or subsurface infrastructure, windows, electrical, plumbing, etc.
Once the rush for roofing, HVAC and asphalt has passed, you can come back to the market seeking work in these areas and hopefully find some willing contractors who are coming off the peek from your peers. If the contractors staffed up to meet the market demand, you may even be able to save some money if you get to the market early in the year as they may have more resources than normal to keep busy. Getting out early, after a rush can get you great value.
The second strategy that we have seen work but is generally more difficult, is to collaborate with those in your market to strategize your renewal plans. Many organizations that we work with are hesitant to share their plans with those that they see themselves “in competition with” when it comes to limited market resources. This approach only works when you have two or more partners who are fully transparent and not playing (political) games.
If you are willing to share your plans and adjust your timing so that each organization is focusing on different types of projects in different years, you can avoid competing for the same contractors and materials. A simple example would be for one group to focus on roofing and lighting this year, while the other does HVAC and electrical. The next year you can switch.
The process is very simple, however, overcoming the resistance to sharing information is the harder part. Where institutions are willing to be open with each other and approach a market in this strategic way, we have seen the demand shocks be blunted through collaboration as opposed to competition.
In all cases, there will be critical elements in critical condition that need attention no matter what. We are not suggesting that you defer these replacements and risk facility or campus shutdown. That is poor risk management. However, if you have the ability to extend the life of an element in a building to avoid buying at the peak of a market, you can find extra value and stretch your limited renewal dollars further.