|Facilities that are
governed/operated in the public good rather than motivated by profit.
The municipal sector is comprised of the following asset classes:
- Roads and Bridges
Municipalities form part of the MUSH Sector (municipalities, universities, school and hospitals)
- The MUSH sector operates in the public interest rather than shareholder
interest. Cost-benefit analyses are therefore quite different.
- LVP Ratios - Linear assets (such as roadways, sewers, etc) are generally treated
with higher priority than vertical assets (such as buildings). The
former are administered from the engineering department and the latter
from the facilities department.
- Since the
introduction of PSAB 3150 (public sector accounting board of Canada) a
few years ago, many municipalities across BC have endeavoured to
improve upon their reporting on tangible capital assets. This led to a
wave of RFPs across BC starting about six years ago and is still
continuing to this day.
- PSAB 3150 was driven by
the City finance departments and not by the facility management
departments. The focus was, therefore, principally on funding
trajectories at the facility-level rather than the system-level or
operate with serious budget constraints and each department (parks
& recreation, fire, police, etc) compete for these resources based
on tactical needs (short-term) rather than strategic needs (long-range)
- Many municipalities contain buildings of an older vintage with
hazardous materials and grandfathered non-conforming uses.
- Deferred maintenance is rampant in many municipal portfolios and condition drift is a perennial headache
- The local press and research literature contain many estimations of the
huge infrastructure deficit in municipalities across Canada, which is
in the order of billions of Dollars
- One could
argue that responsible stewardship of a civic portfolio would focus on
“catch-up” to retire the backlog of deferred maintenance before
entertaining the luxury of “get ahead” energy upgrades.
- However, energy is real sexy stuff and City councils sometimes get caught up in
the buzz. As a result, they sometimes makes decisions on political
merit rather than technical merit. For example, I have observed
councils approve millions in ECMs when their backlog FCI is in the
- There is always a chasm between
the needs of city staff operating in the trenches (who are maintaining
the buildings) and the policy/decision makers who approve the budgets.
- Many cities have commissioned energy studies only to put the results on
hold pending a facility condition assessment (example: DNV and
Squamish). Similarly many municipalities have commissioned FCAs and
then immediately embarked upon on an energy audit (example: City of New
West, Granville Island)
municipalities do not have a replacement reserve for their facilities,
except perhaps in a very limited way for their flagship buildings.
- City staff in the facilities departments are generally not
sophisticated and only rarely have a CMMS or FMS to assist them. On the
other hand, the engineering departments have SCADA for supervision and
control of their linear assets across the GIS.
- The quality of maintenance varies dramatically across municipal
facilities – for example, the animal welfare shelter is operated at a
lower standard than the municipal hall
municipalities, depending on their union structures, are more
autonomous in their maintenance and utilize in house forces with
contractors reserved for the bounded assets, such as elevators and fire
- It is important to recognize
the varying degrees of mission critically for the various facilities
across the municipal portfolio
- Fire halls,
police services and municipal hall and the public works yard are always
deemed mission critical (level 1)
centres (particularly natatoriums and ice arenas) and libraries are
generally considered mission-dependent (level 2)
- Animal welfare, storage sheds, etc are often deemed mission independent (level 3)
- Municipalities need help with the prioritization of the deficient
conditions on their facilities so that they can make resource
allocation decisions. This is particularly challenging since they have
an accumulated backlog that requires a major infusion of capital.
- City staff in the facilities department always express appreciation for
the empirical evidence gathered by an FCA, which provides them with a
compelling business case to request additional funding from council and
- Municipalities need a holistic understanding of their short-range, mid-range and long-range needs.
- They need impartial an unbiased prioritization of deficient conditions
and upgrade opportunities based on defensible merits.
- They needs a means to reconcile and optimize the balance between their
three reinvestment categories of: catch-up, keep-up and get ahead.
- They need realistic, pragmatic solutions.
- They need key performance indicators (KPIs) to help them benchmark
facilities and to track and monitor the changing condition of
individual facilities. They need to be able to report on the results of
their reinvestment efforts. As they say: “if you cannot measure it you
cannot manage it.”
- Municipalities generally take
18 months to absorb the plethora of data (mostly deficient conditions)
articulated in our FCAs. They need this time to align our KPIs to their
facility governance and to prepare for the next budget cycle.
- Our FCAs have been very helpful in securing additional funding for the
facility groups. Unfortunately, the incremental funding increases are
generally not sufficient to offset the condition drift in the portfolio.
- It is imperative that energy efficiency measures recognizes the
realities of civic governance. In my opinion, statements of deemed NPV,
NPV*, IRR, etc should include the opportunity cost of keeping the
defender asset in service for as long as practicable before upgrading.
- The “challenger” asset must justify why it is to replace the “defender” and why that replacement must occur now.
- The most common question we get from our civic clients: “Should we
build a new facility or continue to reinvest in the current facility?”.
“What KPIs can inform us to this end?”
Fig. A fire hall is an example of a
municipal facility operating within the MUSH sector.
Fig. Comparison of the L-V-P Ratios across different real estate sectors.
Fig. I. Care trying to integrate the linear assets, vertical assets and portable assets in his portfolio.
Fig. Natural assets (N) as part of the N-L-V-P asset classification scheme in a municipal setting.