Foresight is necessary to help deal with unexpected CapEx projects.
By Scott Mason
Facilities managers (FMs) may think they have everything under control. But even the most well-prepared FMs will likely stumble into significant, unforeseen issues at their facilities. Some of these may be quick fixes, like replacing a part slightly before scheduled. But others fall into a more unsettling category: unplanned capital expenditure (CapEx) projects.
CapEx is defined as funds or financing used by a company to address fixes to their business’s physical aspects, a category that facilities fall squarely under. CapEx projects are usually undertaken with longer-term planning in mind, as their complexity and cost are usually larger than run-of-the-mill maintenance needed to keep a building open and functioning. But every so often, a CapEx project pops up out of the blue.
“The unplanned nature of certain capital expenditure projects sometimes can cause an undue burden on a company because it's not a planned expense,” said Brittany Sandlin, Senior Director of Operations – CapEx Special Projects with Powerhouse.
Them’s the Breaks
Sandlin said that CapEx spending in the facilities industry is usually a value asset replacement of some kind. In her experience, HVAC and plumbing are the two most common unplanned CapEx projects undertaken by FMs. But as FMs know, HVAC and plumbing are must-fix items that relate directly to the comfort of not only the customers who frequent a business but also the people who work within it. This urgent need to address the comfort of employees and customers results in a rapid response from the supplier.
"Often, the unplanned CapEx project comes in through the nature of a break-fix reactive work order," Sandlin said. "Once we send a technician out to assess, it often becomes a situation where a replacement is less costly than the repair. If it's something we have a record of with a long-standing client, we will consider the asset's life and how much has been spent on it to date. Then we have our field partners who know the site come in to assist us in an expeditious turnaround to replace that unit."
Facilities managers are often stretched thin to the point where they’re managing several properties at once, meaning they may not have intimate knowledge of every nook and cranny of every facility in their portfolio. Transparency is absolutely necessary to ensure costs and timelines are clearly communicated between the supplier and the multi-site FM.
At Powerhouse, Sandlin has a team of dedicated project managers to help communicate plans and costs to clients. Behind the scenes, they also have a team ready to help validate a project. "At Powerhouse, we validate and consolidate all of the cost and scope information into an itemized proposal for our clients, and then, depending on the nature of the work, our in-house facilities management team could perform it or, if it hits a threshold, it moves to our CapEx special projects team," she said.
Sandlin said most of her clients fall into one of two camps when it comes to funding for these unplanned CapEx projects: “Some clients will have a discretionary fund for their facilities management team, while others will have a capital expenditure approval process,” she said. “Every client is a little different with how they do things.”
To avoid dealing with unplanned CapEx projects, Sandlin stressed that multi-site FMs have a strong and sound preventive maintenance program in place. “Maintaining your facilities and the systems within them is critical to preventing unplanned expenditures,” she said.
There is no average timeline or cost for these unplanned CapEx projects, largely because every fix is different. “It depends on the size of the job, what manufacturers have in stock and how many other current clients have units on order,” Sandlin said. “If it’s a quick turnaround time, customers may have to pay a premium. That’s just the nature of the beast.”
The good news? Sandlin said supply chain constraints that plagued the facilities management industry over the past three years are easing. This means that parts and machines should become more readily available, alleviating a huge pain point for FMs with unplanned CapEx projects moving forward.