In Part I, we examined the impact that slashed budgets were having on State provided services. It was suggested that addressing expenses should not just be with headcount reductions, reducing benefits or and raising taxes but should also include better ways to manage controllable expense items particularly maintenance costs. In Part II, we take a look at government facilities using prisons as an example to demonstrate the effectiveness of using advanced technology and planning to reduce short and
The Lessons to be Learned from State and Federal Prison Systems
The prison population in the US is expected to grow between 1 and 3% over the next few years. Increased crime and general population growth are not the driving
“While crime and a growing resident population play a role, most of the growth, analysts agree, stemmed from a host of correctional policies and practices adopted by the state.”
Regardless of the reason or the State, the issue is still a rapidly dropping budget pool from which to divide monies among education, corrections, social services and other areas. Virtually all governments are now in a position to make do with less. The tables below illustrate the prison budget, inmate population and the percentage change in spending per inmate since 2007.
Selected Prison Statistics
The tables tell us that average spending per inmate is likely to continue to decrease over the next few years but that the demand for space is also going to increase. Obviously, continuing to reduce headcount (corrections staff) is not a viable alternative. In additions, the physical facilities age as all other building and facilities do. The result is inescapable repair and replacement problems. The State and Federal governments must find alternative solutions to help lower the costs of running prisons.
Learning From The Private Sector
With budgets between $100 m and $10 b the Department of Corrections for States are the equivalent of mid-large size businesses. How do businesses survive the economic crisis? Unlike governments, when a business fails to plan and budget adequately they go out of business. As a result, good businesses have a tendency to be a little more flexible and focused on sustainability of assets to reduce unnecessary expenditures.
Company management of real estate and facilities are under increasing pressure to lower operating costs particularly energy, maintenance and space utilization and they need to do so with smaller budgets. The greater focus on facilities is because facility management can easily exceed 10% of company expenditures.
“With nearly 13%of the average enterprise’s spend dedicated to its real estate and facilities costs, the location and business support of locations has a significant impact on financial performance. ….for leading enterprises, the long term value of looking beyond real estate and facilities spend as sunk costs, or simply the cost of being in business, is measurable and pays dividends to those enterprises willing to believe that their competitive position can be affected by where they do business and how they manage their spaces”
With such a large amount of money at stake it is good to see what the industry leaders are doing and their results. These include:
- Standardization of facilities management procedures and policies throughout organization.
- Creating a formal group for real estate and facility management at the enterprise level. This is a formal recognition of the activities importance.
- Collection of real estate and facility data such as asset details, work order history, contract maintenance.
- Make use of technology such as online computer maintenance management systems, handheld technologies and work order management solution.
- Measure performance including the time it takes to fulfill a work order or resolve issues.
What Type of Results Can You Expect If You Can Incorporate Some of the Best Business Practices?
From a maintenance perspective, the cost per work order will decrease sharply. Top companies report work order cost of less than $5 per order. Additional benefits include less overtime, better space utilization, more accurate capital planning, fewer overtime issues, a greater flexibility to manage work orders and sense of professionalism that can impact the image of your company.
“By instituting a work order/maintenance solution, Best-In-Class enterprises have effectively been able to track, monitor and act on various work orders that plaque the modern facilities management team. Aberdeen Research has found that enterprises utilizing this system have achieved a 25% lower cost to process a single work order.”
The most important result of all is the ability to do more for less money. Greater efficiencies mean more work can be done and lower labor costs so staff reductions may not be necessary. Lastly, utilizing best practices will greatly increase the ability to plan capital expenditures and lengthen the life cycle of building and other assets.
We would like to thank the Aberdeen Group for their insightful article Defining a Strategic Process, Driving Significant Valuepublished in December 2009. Real Estate and Facility Management must take the next step to supporting an organizations goals.
Tell us about your successes and challenges.