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Strategic Facilities and Infrastructure PlanningJ%lim- DECISION LEN.S. 43on 'AM-s"'IN BC)lJL.` VAIRD 'S-50 P., L N. C, 7 ON v I R C, I KI 1 if', 2 2 2 0 3 C, -s 9 9 - 710 0 Facilities -planning and capital investment decisions are some of the biggest challenges in g planning. Multiple stakeholders are involved & in the decision, from the users of the facilities 0. to the management team, the operations team, maintenance team, construction, engineering planning, etc. There are competing objectives, such as focusing on elements of sustainability vs. transformation to meet future needs and considerations about the environment, safety and security. This white paper covers Challenges of Facilities Planning Decisions the best -practice approach Decisions have a significant and lasting impact that can often span years. Long-term for strategic facilities facilities plans are susceptible to continuous changes, so the planning phase has to not only prioritize the competing objectives but also be flexible to change. planning, prioritization We frequently see organizations that are allowing their metrics to drive facilities and resource allocation decisions, rather than using them to support those decisions. For example, the facility decisions and is vital condition index (FCI), or "state of good repair," is a metric tracked by organizations to for anyone involved in assess the state of repair or need of each facility in the portfolio. It is very often used as the single point justification for the facilities investment priorities, but it doesn't a facilities -planning, represent whether the proposed facilities investments align with or support the facilities management or strategic needs of the organization. capital -planning function. Also, there is a heavy reliance on spreadsheets to track and manage the portfolio. The result is a disconnected labyrinth of manual processes that necessitates a slow budget process. In addition, although spreadsheets are suited for complex calculations by an individual, they are not appropriate for group -enabled multi -disciplinary engagement. So where to begin? Developing a successful facilities capital -planning process requires your organization to link its strategic needs and capital assets in an effective and efficient manner. Long-range planning and a disciplined decision -making process are required for managing a portfolio of assets to achieve performance goals and objectives with minimal risk, lowest life -cycle costs and greatest benefits. It also must promote a multi -disciplinary engagement process —one that combines the needs and considerations from across the organization. The fundamental purpose of a facilities portfolio is to plan, acquire and sustain a facilities infrastructure to support the organization's strategic goals. Key issues include: • How to define the objectives and make the tough trade-offs to determine the relative value of each facilities project to the strategic objectives Study:Case Health Decision Lens worked extensively with the Military Health System's (MHS) TRICARE medical organization to reform its facilities -planning and capital invest- ment process, a long-term multi -billion - dollar resource allocation challenge. The collective vision of the Tri-Service facilities organizations, which brought together Navy, Army and Air Force medical needs under one roof, is to ensure that MHS facilities are avail- able when and where they are needed with capabilities necessary to effectively and efficiently support Department of Defense missions. The MHS Facilities Strategic Plan focused on three major goals: • The right facility -Locate, size and con- figure facilities and associated infra- structure based on readiness require- ments and business -case justification to support the MHS. • The right quality -Acquire, operate, sustain, restore and modernize facilities and infrastructure to provide safe, healthful, responsive, cost-effective, efficient and flexible environments. • How to elicit input from and drive consensus across the facilities or capital -planning evaluation team • How to focus the discussion for efficiency in the evaluation process, while also elevating the group from the hidden agendas and inherent biases that others are bringing to the table • The right resources -Achieve equilibrium between requirements and funding to provide modern, effi- cient and cost-effective MHS facilities and infrastructure. The MHS needed a process to align the facilities investments with its strategic objectives and to enable a framework for the continuous improvement of the MHS facilities portfolio. It also needed to establish a process to directly link facil- ity investments with performance goals articulated in strategic and business planning and enhance joint operations and interagency collaboration. There were a number of factors forcing change on the MHS facilities infrastructure -the global war on terrorism was a constant yet evolving challenge. In addition, base realignment and closure, military transformation, force structure changes, transitions from global theaters to U.S. installa- tions and a national labor shortage for certain clinical specialties were having a direct impact on the MHS. These pres- sures drove transformation across the MHS with significant implications for the entire facility portfolio. • How to identify the key differences among the projects in order to make the "best value' decision • How to know if the project's cost is justified by its benefits • How to best defend the decision with senior management and with the stakeholders Prior to the use of Decision Lens, the MHS focused primarily on the condition of the facility, as measured by the FCI, to determine which medical facilities to invest in. For example, a hospital in Surrey, England, had raw sewage bubbling up in the basement. It ranked very high on the FCI because of the poor state of the physical infrastructure and therefore was one of the top priorities in the capi- tal plan. At the same time, the Ramstein base in Germany was a relatively new and advanced facility, placing it lower on the facilities project priority list. However, the relative priority of the facil- ity investments was not helping the MHS accomplish its key strategic objectives, including the transformation of how health care is delivered in the military, improvement in customer processes, etc. Moreover, the goal of the charter of the MHS and TRICARE is to bring together the various service lines, understand their needs and combine them into a robust solution that would reduce costs and improve efficiencies. The MHS used Decision Lens to evaluate the multiple objectives across the service lines, and a very different set of priori- ties came to light. For example, the hospital in Surrey, England, certainly had a severe sewage problem, but it was very underutilized and out of the way, servicing only 10 patients. In contrast, the Ramstein base, while the most advanced medical care facility, was at the time ramping up to serve soldiers being flown in from the war at the rate of 400 per week, putting enormous capacity constraints on the medical facilities at the base. Within a few months, the MHS transformed its facilities strategy and planning process from top to bottom, making decisions using a collabora- tive strategic approach with the rela- tive priority of each of its objectives clearly defined and quantified. It then used those priorities as the evaluation framework for deciding which facilities provided the "best value" against their strategic needs. The strategic requirements are evaluated and specific criteria are developed. Both quantitative and qualitative factors are consid- ered together in the decision process. (See Figure I.) Mission Objectives Business Plans In-tirye Condition Deficiencies � i..o?i'3�?ld�a's'�cE with Code aandF Policy Directives Collaborative _yner i.es in-piprove roduc tirriy /S rice Utilization Business Case Figure 1: Hierarchy of criteria E.dicip.rde kJolp q," 2Eki> . P - - 0 —mgPmPamd" r. 41. w.'"y cobio mmdd— tled— Gd� To P- ve c­We— ro, r, erred. I To build a model, dick AddChIld i em',.2 ­dWalted, into thededlonpu inesx Plans Est odd,—didid—tode C ... e, Centered Nd". therm -Rolm — FCI ri tt 8-m-c— Figure 2: Development of strategic criteria shown in Decision Lens F.I. View ABack § Next In ClidAdd Altenlative .. i 3 dWarrenC Vicenza " options b—,S-1. GA., to'Wright.feddh I'H.-a WoenCt, alterr.",. add m ole'ovo deimid—Ckkth, .o r0�.Od"'dlC, umbers lotbe.rdd, 1—. 6 Ft burin DImel Cl ,h­j.flheo,mdm­­d­ der Ae-d— 7 CHPPM Figure 3: Example project alteratives to be evaluated N The group defines the relative impor- tance of the criteria through a set of pair - wise comparisons, asking not only if one criterion is more important than another, but also by how much. Through this pro- cess, the priorities of the criteria relative to one another are derived through the pair -wise comparisons, by trading each element off against all of the others. This is a proven, powerful methodology that follows human thinking in how deci- sions are made. If each member of the evaluation team were asked simply to assign numbers, the team would arrive at very different priorities. Why? Not every- one agrees on the value of the base unit (a „I„ ). When assigning numbers on a scale, one person's perception of how important a "I" is might be very different than another person's viewpoint. By using pair -wise comparisons to make the trad- eoffs directly between the elements, a much more refined and accurate quanti- fication of the priorities relative to one another is achieved. Moreover, it enables you to trade off the importance of quan- titative criteria, such as FCI, with more qualitative evaluation elements such as deficiencies. 0 Eile Yew .21ep Qedicipante help-.,Sa.+eY c +ra.ee.;w.;, wat,mua campariwnAll �, .. -�' Priori[y Graph -'% Irxonsls[enq AnalYsh " Strategic :. Affgnment I-p a C..- er Cente-d Prot.. wcl Er. f*�s Decisean Goal TC PrleeiefzeC-w L _ L used to a s he at onh, 'Mh "k3czuve mit Se usad to a¢ess tsta'.wst s - - - At Forcel m���� 'v Dell esyy ��F; # n: �F--- A . E t 1'nd9 Is to eacl carer, f TMA I h dl k to move ethe nettco.Nd in Vic—Glck TMA2_ I �'� - � Gal lateto see PAontles.leh � t h ] W 1 f' S t p tis; hs tl S n Ir,- „;9 G v�AYeaags '."- I 12.7 Figure 4: Pair -wise comparisons of criteria using 9-point relative scale Decision Lens can be used to build the criteria, define them, prioritize them and then use the priorities to evaluate all of the alternatives to assess which ones most closely align with the criteria. Why isn't "cost" a criterion? A project's costs and budgeting is handled at the back -end of the process during resource allocation. First, the rel- ative benefits or merits of each facilities project are assessed against the criteria. Once the rating of all of the projects is complete, the quantified relative value of each project relative to the others emerges, and it is clear which ones most closely align to the strategy. However, this doesn't mean that the top projects will necessarily be funded. A project at the top that provides the most value might also be so exorbitantly expensive that the company is better off not funding it and instead should use that investment to fund a series of other 1r 1 projects farther down the list, which may have less direct alignment and benefit, but together provide more overall value than the top project. The actual capital investment budget is completed through cost analysis of the relative benefit scores versus the costs of the projects and then optimizing for the best mix of projects to be funded and not funded. ,$lap Eadicipanis tielp i Cv"rpueCe# . _„ Patrwise Comp rison : rG rtenry Analys's f Ei P 03's j Strat,fc Ai;g �t 9.568X,nslan pb'x. , �j U431 ', Buzntss Plan w ¢3391mprove Custom Oti3i; Ptmcliondi ll� ± 0.3e]ImPrava,re,u .. �; 9,t ip lmprevcln(rastw - H 0401 ifmprwe Cone 9S IKl rr GlobalR"wrrrao r Loral R ties; v Click Sort Oe;ceMimdt sort the + p mi sin des endl g dar. Click ( thetree radio button to see the vmighted tre icw. Cllckthe ` Figure 5: Priorities graph of criteria (top level shown here) `*Evaluation of projectsfacilities Once the priorities have been defined and compared, each criterion is then assigned a scale with which the projects will be rated. The ratings scales are much more sophisticated than a simple 1-5 numeri- cal assignment. Each scale has ratings levels that correspond to the value that a project will deliver under each criterion. For example, the Facilities Condition Index is an example of a scale that rates from 1 to 100. But in actuality, only those facilities that score in the 90+ range are considered of a critical level. Below that level, the severity of the situation is more subjective. So on the quantitative ratings scale for the FCI, the 90-100 scale has much more weight than the increments beneath it. C) Char „)Asy 1 1 ;.. For qualitative criteria, scales are devel- oped to indicate the qualitative assess- ment of how well the project delivers to the criterion. For example, the criterion "Mission Objectives" can range from "Excellent" to "Poor' with correspond- ing rating values for each increment that reflect the actual value. (See Figure 6, in which a marginal rating provides hardly any value at all just a 0.1 towards the overall value of a project.) MTAV%' Maryland Transit Administration Maryland The Maryland Transit Administration (MTA) faced numerous and complex decisions about which facilities and infrastructure investments to make. With multiple modes of transportation (Bus, Rail, Subway, Light Rail, Mobility), competing objectives (grow ridership, preserve the system, etc), and budgets that would often change at a moment's notice, it was extremely challenging to address future needs. MTA used Decision Lens to bridge the gap. They defined their objectives across the modes, quantified the value of each project, and allocated resources for an optimal budget that met the needs of the MTA across a six -year budget cycle. "We are driving our capital planning process for 2009-2014 through the Decision Lens platform. Decision Lens is helping us to prioritize our capital needs and ensuring that our resources are being optimized to meet state objectives." Henry Kay, MTA Deputy Administrator for Planning and Engineering Elle Yaty $IeP Eadwipanlstl Help _m_ u jsa'.. - 14h JU ,,�, - _ e Evalwce &9esemtWas 3 .. a ... .i. %;P.� CMC Arync iSelil �E' 6 -� Rvll3Ra0ing5calps G—P Ravings „,.y RdHMj55CMe51u+et ' 42 YettltivEy analysis 4 �"t Oe<If3on Goal TP PdSd[Ve E �= ilrate9¢Alyrvmmt �s"' R ones PWns [� y' IinProve Cus[emer Len[. �� (unabnal Modemlz 'r �i ImpraremntatExss 5` �_. ImP[a�elnfmiiraciure =- ai ImPrave Cortlrtinr. � FCI 9 tllrxatltl Ratlng dd ratlig 1 ti ach [ G o I, group ratings [o enter mtings Into 'tth seOrres—.RaLDgs les can U Figure 6: Evaluation scales for each criterion Once the ratings scales have been developed, the group uses them to evaluate each project. The question is asked, "How much does Facility X contribute to achieving Mission Objectives," and each participant votes.�Each project is rated across all of the criteria to assess the benefits that it provides in alignment with the organizations objectives: CO[k tlre<ells urxl a I—fia g_.. column [o en[errerbal wtezw J di k ft ccil by a particle, name -, aM'type numeri'alrocesiFthe Figure 7: Group ratings of projects against each criterion When all of the projects have been rated, the benefit scores are reviewed to evaluate how each project has performed against the goals. The project ratings are quantified numbers between 0 and 1, indicating not only the ranking of the projects but also more importantly the specific relative value of each project. A project with a rating of 0.8 is not only more valuable than a 0.4 but also exactly twice as valuable. These ratings are used down the line for the cost/benefit tradeoffs that drive resource allocation. US Department of Defense Military Health System health mil Once the relative value of each project has been defined, the project ratings are reviewed and often need to be justified to senior management. This is where many decision processes fail. In most decision frameworks, there is an inability to introduce ad -hoc changes or objections late in the process. Senior management may have a slightly differ- ent view of the problem. Rather "Decision Lens has dramatically improved our facilities planning process. It has enabled us to align our invest- ments with our strategic objectives, reduce the time and expense needed for planning, and have the flexibility to quickly change and react to new needs as they arise." Clay Boenecke, Military Health System, U.S. Department of Defense than having the ability to test the new assumptions, the team often has to throw out the portfolio and start again. Decision Lens is designed to eliminate this problem and address the "what -ifs" through powerful sensitivity analysis. For example, what if the impor- tance of the criterion is increased dra- matically? Does that change the overall "rack -and -stack" value of the projects? What if the criterion is removed entirely? Management may wonder why a certain project received such a high rat- ing. The team is able to go back and evaluate the group's judgments on that project. Did the team forget to consider something? The team can then add in a new criterion, compare it to the others and rate the projects against it. Whatever the reason may be, adjustments can be made throughout the process to ensure a robust, repeatable process. (See Figure 8.) file YIM $tep eadicipanis help ::., $ra .`S ro +�-�. EraSvata AFtuvnativn � ., z - 'ChaC ASYnc (SeNI `-Id¢ating xales .oy'. Group Patin, matlw355[oreshcet Ei <, Smatcyic AEgrment ib:isaion Obkztive, �l ¢mtness vkrts � tmprs+e Cusrcme, Cent t .� f�:nccbnal bRaAcmix iLnpravemern a'Ezie ! C z� Imprmve inFrastr4Rum Imprm'e yf I tll6 the mows chc � of the � � Iv halge afted weights. Vop can sortUe s<or.Yheetand i Wrdla� rC with thWsorc buttonx �,, Figure 8: Sensitivity analysis showing top-level criteria Step 5: Budgeting resource allocation A -decision is not really a decision until' resources have been committed to it At this point, the benefits of each project have been defined in relation to the eval- uation criteria. What about the costs? Often, there are multiple funding sources, projects run over the course of several years and there are interdependencies among the projects where one project cannot be started until a supporting project is funded and completed. Spreadsheets are frequently used to track project budget estimates. Projects are moved around manually in an attempt to gain the highest value out of the portfo- lio, but with little actual analytical vali- dation behind the changes. Decision Lens is designed to very pre- cisely fund those projects that provide the highest value per dollar (or other resource on which they are being evalu- ated, such as engineering time). Rather than going down the project ratings list from top to bottom, a more robust approach is to find the optimal portfolio for the given funding level. Even though a project is at the top, it may not be funded if it is extraordinarily expensive relative to the other projects. At the same time, a project at the bottom of the ben- efits ratings may get funded if it is very inexpensive and easy to execute. Project dependencies are taken into account. Certain projects are force -fund- ed because they have to be completed. Other projects have hard minimums, investments to which the company has already committed. Yet other projects have soft minimums, in which case there is a range of funding with which the proj- ect can be completed, and anything below that range is of no use. Facilities are not funded over a long time period, not in a one-year snapshot. It is very important that facilities investments are not only optimized by benefit, but also sequenced to meet the expansions and contractions of the budget sources. The ability to evaluate facilities over a multi -year budgeting process is criti- cal. The facilities investments must be sequenced so that each year provides the optimal use of funds -and a tool with powerful analytics can help. With an integrated tool that has aligned the facilities investments with the stra- tegic objectives, budgeting scenarios can be considered as well. What if the project was handed an extra $10MM of funding? Where should it be applied? What if the budget is cut by 20%? Then what gets funded? Each budget scenario can quick- ly be developed so that the organization is prepared for whatever changes arise. (See Figure 9.) E;., 6 ds _� seer op# MIZer Rasa 5tmnario: ., r<ra«1 Back F Nezi ` St 91AIgn * Projen Name Pdodty Requested Total Default Pool � - Budget Funded Requested Funded + USAMRICD 0.939 $MMO,000.00 $44,000,000.00 544,WODG0M S44,D00,000A0'. hutinast Alatt Ft Richardwn 0.867 $26,000,000.00 $26,O00,00OA0 $26,WWA0 O,O526,000.0040' Improve Curtwrmr Cen USAMRIID 0.834 $30,000,000.00 $3D,DW,WD.00 S30,WOAW.W. $30,W0,0000 - Vkenxa Wanes Ctr _. 0.784 $33,OOO,000.00 533,0W,WG.OD -. --. $33,0W,000A6 $33,00.000A0. �°�'' povrrr�ent NFxi Ramstein Clinic Replacement 0,707 $51,000,00O.00 50.00 $51,000,000m SOAD' H im, Improve inrtasmaurt I . Peterson Dental Clinic Rpmt 0 OS $90,000,000.00 $0.00 $90,000,WUD 50DO 5 prove CCMnion ' NH G,um replacement 0,64G $45,000,000.00 $0.00 545,W0,0W00 $OAO i�'.. FCI '� Ft Banning Hnsp kept 0.63 $93,000,000.00 $0.00 593,000,DWA0 SOW'' - Tinker Clinic Repla-tonat 0.622 548,000,000.00 50.00 548,00O,OW.W SODO Langley Hospital AReration 0,617 139,11O,M.00 531OW000.00 $39,000,0D000 $39,000,MDO CIQtM1. ptlmimbutt to Spangdahlem CllnitlDental Clinic Rpmt 0.604 $74,WD,OOD.DO $O.W $74,W0,9WW SO.00 pnmimthe pordollo The .,��r CHPPM 0.584: $59,000,00DDO $0.00 559,0M,OW.00 50.00'. pordoho value is thesum the POodtles otali tha fuMetl ProJcc[5 „{ ,,e, e, •• a ,r a,v, a Figure 9: Budgeting and resource allocation CONCLUSION A formalized capital investment meth- odology supports more effective facil- ity capital -planning decision making. A framework must be used which accom- modates multi -disciplinary input, is focused on objectives first followed by how the projects meet those objectives, can in very specific terms quantify both the value of the projects and how the investments should be made across all of the projects, and is flexible to address the inevitable changes that occur. In our case study, the MHS Capital Investment Decision Mode (CIDM) was designed to address the need of mod- ernizing the facility infrastructure to address the significant gaps that nega- tively impact mission performance, while also rewarding facility capital investment initiatives that provide innovative solutions for more efficient and effective healthcare delivery, medi- cal education and medical research and development in a changing national security environment. The outcome was a process directly linking facility investments with perfor- mance goals articulated in strategic and business planning and enhancing joint operations and interagency collaboration. It effectively transformed the Medical Military Construction (MILCON) planning, acquisition and recapitalization processes.