Rethinking Your Capital Planning Process: Focusing on the Student Experience

The key opportunity for chief academic officers, chief financial officers, and capital planners is to establish a data-informed prioritization process for capital planning efforts -- one in which campus projects are prioritized based on how academic, residential, and recreational facilities on campus can be best used to improve enrollment and retention.

We recently spoke with capital planning consultant Neil Calfee and had a deep conversation about how the capital planning process is changing (and how it needs to change) and what institutional leaders may want to rethink going forward. Currently the principal of NPC Group, specializing in the creation and negotiation of public/private partnerships, Neil Calfee previously served as Arizona State University's director of real estate development. He has over 15 years of experience in development and management of complex development projects involving partnerships between government entities and the private sector.

What follows are some key takeaways from our conversation:

How the Capital Planning Process is Changing

When asked what key factors he sees driving the capital planning process now that weren't so critical 5-10 years ago, Calfee drew attention to three in particular:

Calfee: "Students can now take core classes via the web which might take some pressure off of traditional classroom spaces. That capacity may allow for enrollment growth in the existing campus footprint without the need for additional building space. However, additional capital expenditures related to information technology may be growing exponentially to support your on-line learning environment."

Critical takeaway: Work to understand your online footprint and how it may grow in your planning horizon; it may give you capacity and flexibility in your buildings that you never knew you had.

Calfee: "The 'duct tape' approach isn’t working anymore. For countless schools, the great recession meant getting by with severely constrained capital budgets that could address only the direst of needs on a campus. Those in the campus facilities business knew this trend was unsustainable and the costs would only get higher the longer facilities were limped along. Now better financial times are here and many capital budgets are forced to address the decade of building and systems neglect rather than planning for that next great research building or library (much to the chagrin of many a university president)."

Critical takeaway: Addressing deferred maintenance and renovation isn't necessarily "sexy," but it is essential to the long-term viability of your campus assets. To see how several institutions have adopted innovative approaches to budgeting maintenance, see our past articles "Taking a Proactive Approach to Energy Savings and Deferred Maintenance" and "Getting Buy-in for Deferred Maintenance."

Calfee: "Public/private partnerships, or P3s, have been around for a decade, but they were in their infancy a decade ago and much was yet to be learned about whether they would be a viable option for capital facilities on college campuses. Today, P3s are common throughout higher education and have proven themselves viable options when structured correctly.  Student housing and parking are the most common applications, but academic and research space are emerging markets as well. P3s are not just for the flagship-public institutions either; these deals come in all shapes and sizes and there are finance options and developers to fit virtually any institution."

Critical takeaway: Take the time to evaluate whether a public/private partnership may be a good fit for your campus--as a successful partnership might let you spread your scarce resources further. Also, work to understand what ensures the strongest partnership with a third-party entity. This may require deep evaluation and articulation of campus cultural values and financial parameters in the planning process, to ensure stronger integration of P3 facilities into the existing capital suite on your campus. For a look at critical considerations in approaching a P3, see our article "Funding Facilities and Facilities Improvements in the Current Market," later in this edition.

How the Student Experience Can Drive Capital Planning Decisions

"So many campuses have been designed to zone or separate learning, living, recreating and socializing," Calfee remarks. "Yet now you can see numerous examples of buildings that have been constructed and have found tremendous success in blurring these distinctions, resulting in far more engaged students and better institutional efficiencies.

"How does this multi-use concept relate to your capital planning? Whereas you may have been planning separate capital projects related to classrooms, student engagement spaces, or recreation; have you considered how any of those functions may cross over to be utilized as something else? The growing prevalence of Living Learning Communities and Residential Honors Colleges showcase the effectiveness of combining uses and how student engagement and success can be enhanced by doing so.

"For example, a new classroom within a residence hall can serve a learning purpose during the day, and at night converts to student meeting space. It is a matter of applying flexibility to your thinking and assumptions that may give your spaces more flexibility and functionality. Try combining categories in your capital plan and see what happens. If done correctly, you may find a powerful tool that enhances student engagement that also multiplies the effectiveness of your capital investments."

Critical takeaway: To increase student engagement and success, think multi-use and flexibility -- not Lazy River. Combining living, learning, socializing, and recreation can be powerful in engaging students while giving you better efficiencies of space and more flexibility over time.

Balancing Mission and Market

Third, we discussed with Calfee what data sets about external realities (both threats and opportunities) are key to establishing effective capital plans. Calfee offered several cautionary notes on this topic -- namely, to improve your market base by allowing your capital plans to reaffirm your mission. "Your capital plan needs to reflect the goals and priorities of your institution," he stressed, "not the laundry list of external factors that divide an institution's attention and blow it off course. Theoretically, externalities such as sustained enrollment growth or large increases in research funding should be the result of your institution realizing its goals, and the capital plan should be in lock step to facilitate that success. Yet what happens all too often is that the capital plan and institutional goals are not aligned, or even checked against each other. It's not uncommon to find an institution scrambling to meet the needs of the very thing it proclaimed quite publicly that it wanted to achieve!

"For example: If an institutional goal is to revolutionize the way math is taught to college students through small group learning and reliance on technology, your capital plan probably shouldn’t include an addition of a 400-seat lecture hall to the math building.Yes – that building addition has probably been in the capital plan for a decade and it’s finally ready to be funded, but it’s now obsolete based on your institution successfully achieving its goal of revolutionizing the instruction of math – a self-made externality is now affecting your capital plan.

"There are certainly unforeseen factors outside of your institution's control which will impact your capital plan, and for those cases you should include contingencies and be willing to make tough choices. But oftentimes capital plans are created in a way that does not sufficiently align with the institution's goals and either the implementation of that plan and/or achieving an institutional goal causes a conflict in your capital allocation process – because the time and effort wasn’t taken to ensure these institutional elements were in alignment."

Critical takeaway: Above all, create your capital plan to support your institution's goals and mission directly. If the goals or mission change, so must the capital plan.

Key Stakeholders to Include

"What stakeholders must be a part of the process in 2015?" we asked.

"Your graduating class of 2025," Calfee remarked. "Okay, a fifth grader may be a bit young to bring into your capital planning process -– but that's who you should be planning for.  By the way, if you are gearing your long term capital plan to meet the needs of millennial students you are already behind the curve in 2015! The millennials are your next generation of professors, not students. By 2018 the next generational wave will be on your campus; they are affectionately referred to as "Generation Z." There is a growing body of work which attempts to define the characteristics of this particular cohort of now-children, but suffice it to say that the expectations and needs of these students will be different than those of the millennials.

"So what is a capital planner to do in the face of yet another generational shift? A good first step is to acknowledge it's coming and then seek to understand how that next group might impact your campus. The conjecture thus far is that this group might be more grateful and accommodating for what they have than previous generations did, as these are kids of the Great Recession. Technology will continue to be ubiquitous as it is today but the delineation of spaces for living, learning, working and playing will be vastly different -- so think flexibility in everything you plan.

"So when you're putting together your stakeholder group for the next capital plan, include the expansive list of the usual suspects, but you may want to bring in that fifth grader for a little while, too, to remind the group who they are really planning for."

Critical takeaway: Who are you planning for in your long-term capital plan? Hint: It shouldn't be the freshman millennial who is on your campus today. Generation Z is coming. Will you be ready? Similarly, in what ways could capital planning for new learning spaces integrate a new, more technology-savvy -- and technology-dependent -- generation of faculty? How will your capital planning efforts reflect the pedagogical wishes of the most sought-after academic faculty?

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