Using benchmarking to justify your operating budget

Facility managers go through an annual budget cycle where they are often called upon to justify their operating budget. We often receive requests from FMs asking if benchmarking can be used to help in this process. The more forward/strategic FMs set up their cost systems so they can benchmark their performance on an annual basis and be prepared for this question. But what about the FMs who are new to the budget justification process and haven’t yet set up a benchmarking methodology?

There are several ways to benchmark your performance; we’ll present two of them here.

Option one

  • Input of your data into a benchmarking system
  • Identifying filters to establish a peer group
  • Developing output reports
  • Comparing your results

Option two

  • Identifying filters to establish a peer group
  • Developing output reports

There are advantages and disadvantages to each approach. Option one requires some additional time since you’ll need to collect the data that needs to be input into the system. Once the data is input, you’ll easily be able to see your building’s performance. If the costs are high relative to your peer group, then you can develop action strategies to bring down the costs. If the costs are unreasonably low, you can use the benchmarking information to justify additional budget requests. Either way, you’re now in a position to defend the operating budget you are requesting.

Option two, requires less time since you don’t have to input the data, and you are only comparing the results of other peer group members. But you still have to determine what your operating costs are and come up with some way to show it on the comparison charts. Again after you’ve completed this activity you are in a good position to justify and defend the requested operating budget.

What you are really doing in both options is using the data from a benchmarking system, into which other organizations have input their data, to help justify your operating budget. In a typical building, operating costs comprise more than 90% of the life-cycle costs. Using benchmarking is an easy way to show the importance of the FM position in the organization and the impact of construction decisions on operating costs over the life-cycle of the building. With good benchmarking comparisons, you can justify the operating costs needed to manage the building in the most effective way possible. If the operating budget is too low, the building components will wear out early in the life cycle forcing premature capital expenditures. If the operating budget is too high, then funds are being wasted that could be used more productively by the organization.

An example illustrates how easy the process should be. This approach allows you obtain the key output report of total operating costs in the minimum amount of time. Total operating costs include:

  • Utilities
  • Maintenance
  • Janitorial
  • Security
  • Grounds, parking, and paving
  • Waste and recycling

Figure 1 shows the combined operating cost performance compared with a group of office building that most closely matches our own. This allows you to see at a glance how our facility compares with other office buildings that are greater in size than 600,000 gross square feet. The overall performance ranges from about $5.00 to over $10.00 per gross square foot.

Figure 1 — Total Operating Cost per Area.
Filters: Type of facility: office, greater than 600,000 GSF. Provided courtesy of FM BENCHMARKING.

 

Conclusions

We see that our cost performance of our “Test Building” is in the fourth quartile (right side of Figure 1). Unless there are extenuating circumstances, it would appear that our budget is higher than needed to effectively operate the facility. We should very carefully examine the causes of this performance by breaking down the cost details into the major subcategories. Once we understand which components are the causes of our costly performance, we can develop an action plan to deal with it. In any event, we are in a much better position to manage the facility in a proactive way than prior to the benchmarking initiative.

Articles are based on data from FM BENCHMARKING, the online benchmarking tool for facilities managers and CREs. Data tracked by FM BENCHMARKING includes cost data (utilities, maintenance, custodial, security), sustainability data, and best practices. For more information, go to www.fmbenchmarking.com.

FM BENCHMARKING is a collaboration between Facility Issues and FMLink.