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What’s the Difference Between a Project and a Program – Part 2

What’s the Difference Between a Project and a Program – Part 2

Building prioritized, multiyear capital plans is an exercise in juggling all the priorities that are competing for your limited renewal dollars. In my last post, I provided a breakdown of the advantage of building projects, one of the key strategies to finding the best value in your planning process. Today I will focus on the second strategy, building programs.

When we talk about programs, we mean combining the replacement of like elements across multiple buildings in a single year, and ideally on a single or bundled (depending on the geographic diversity of your portfolio) contracts.

Once again, when you get an FCA dataset for your portfolio, the development of the dataset was focused on single element replacement in isolation. No consideration was given to bundling (either as projects or programs) as those are business decisions that only you, as the steward of the assets can make.

In building a program, you need to first look at your needs relative to a specific element (e.g. roofing, HVAC, windows, etc.) or a few related elements in the near to mid-term. Once you have a sense of your needs, you need to look at when you want to put the program together. Is it possible to defer needs over the next couple years and create a program two to three years out, if there are a lot of needs in Years 3 through 5? Are there needs that you want to consider “pulling forward” and doing them earlier than recommended to take advantage of the scale of the program?

Next you have to consider the market(s) in which you are operating. How much capacity does the market have to deal with a larger program? If you are in a second or third tier market, capacity of contractors can be an issue. There is no sense in building a program that is too large for your market to respond to. If you operate in multiple markets, you should also consider if there are larger contractors that service some or all of your regions, or if a regional program approach is preferred.

One way to deal with market capacity is by building a multiyear contract. You may give back some of the economies of scale, but you may be able to lock in prices (critical in this high inflation environment) and not overload the market’s capacity to get the work done.

Building programs can provide many benefits to your capital planning process:

  • Economies of scale can allow you to address more needs for the same budget;

  • Large contracts may attract larger contracts for outside your market;

  • Smaller internal Project Management teams can generally manage fewer, larger projects easier than managing many smaller projects, across multiple buildings – it is generally easier to manage a single $1 Million project than ten $100,000 projects;

  • They can attract interest from larger contractors, potentially outside of your market, to bid on the program given its size; and

  • Multiyear programs can lock in pricing over time (although this is difficult in today’s high inflation environment).

Maximizing the value of limited capital renewal funding is always a challenge, even more so over the last two years, with supply chain issues and inflation. Building Projects (last week) and Programs provide two different ways to achieve your asset management goals, do more with less (both funding and staffing resources) and achieve your asset management goals.