Life-Cycle Funding for Capital Assets

This Business Officer article by Douglas Christensen of BYU, is subtitled "Brigham Young University’s long-term view for monitoring and funding capital assets achieves significant savings, keeps things in good repair, and attracts other institutions to the model."

Little did we know the future impact of a capital assets study requested of the board of trustees of Brigham Young University Provo’s facilities division back in 1981. In fact, the study results would spur a transition to a comprehensive capital needs management system for not only the university but the entire worldwide Church of Jesus Christ of Latter-Day Saints, including all of the LDS Educational System of which BYU in Provo, Utah, is a part.

The advantage of the resulting capital needs analysis (CNA) approach is that it is part of a holistic, data-driven system that allows us to make effective decisions about resource allocation. On a micro level, it establishes a comprehensive, life-cycle inventory of current assets and incorporates them into a listing of all retrofits, repairs, or additional projects that need to be completed. The integrated approach creates a complete capital plan that can project the total cost of asset ownership for the institution. In dollars and cents, this life-cycle approach to asset monitoring has saved millions of dollars each year by maximizing length of asset use and managing the decisions needed to optimize return on investment. Another major benefit is that, after the cost of an initial inventory, the only additional cost is for keeping the inventory database valid. This initial investment has paid for itself many times.

One of the most important aspects of CNA has been the ability to leverage the concept. All institutions use the same program to deal with annual and projected capital needs. However, since the software program is based on general principles, it allows each institution to adapt CNA to its culture and management style. Detailed documentation of revenues and auxiliary support divisions’ assets also allows each institution to view all its capital needs as well as those of the entire system.