One significant takeaway from The National Facilities Management and Technology Conference & Exposition (NFMT) last week in Baltimore was this – reducing energy costs ranks extremely high for most facility managers (93% of survey respondents).
While the event had over 500 vendors highlighting technologies that could help achieve that goal, the same study also described a common barrier. The survey noted that 69% of facility managers chose the “cost of implementation” as their greatest challenge.
The Energy Alliance Group of Michigan’s president, Scott Ringlein, described the situation many facility managers are faced with in this 30 second video clip:
During his presentation on Property Assessed Clean Energy that Ringlein gave at NFMT Baltimore, he discussed one specific financing solution for overcoming the “cost of implementation”. During his participation on a Panel Discussion later in the week, other strategies for funding facility projects were spelled out in greater detail. The presentation answered the question many of the attendees were mentally asking themselves as they viewed the new technology on display:
“how will I get the the funding approved?”
Here are 8 strategies Facility Managers will find helpful in answering that question:
1 Consider non-cash alternatives.
If a company’s financial team has to pay for your proposed project out of existing cash, or with added debt, the approval rate is dismally low (2% by some measures). It’s important to consider all options that don’t require up-front cash. These can include rebates, vendor financing, energy specific financing, leasing, tax and provider incentives or some of the other strategies outlined below.
2. Be ready to communicate the non-financial benefits of your project.
As you prepare the pitch for your project don’t simply focus on the financial benefits. Many times the non-financial benefits have a much greater appeal and can increase the likelihood of approval. Countless studies describe the benefits of green and energy efficiency upgrades as they relate to improved productivity, tenant satisfaction, building value, rental rates, etc. It’s also important to highlight any reduction in maintenance or end of life replacement costs. Being able to describe those benefits in relation to the proposed project can create greater perceived value than just the cost savings. As an example – when lighting in a retail operation can be illustrated to improve sales as well as save energy, it’s one more reason for the decision makers to say yes!
3. Open up the lines of communication with utility providers.
If your company is spending a significant amount of money on utilities, you should be on a first name basis with the customer representative of the utility. Invite him or her to your facility or meet for coffee or lunch. Let them know what upgrade projects you’re considering, and ask about any incentives, vendors, or rebates that make the proposed project more affordable or productive. When you nurture this relationship, over time, it will help guide the most economical upgrades.
4. Vendor strategies
Vendors are keenly aware of the up-front cost hurdle and how it halts a great number of facility upgrades. Increasingly, vendors now make it possible to install new technologies they own and maintain while allowing the company to only pay for the EXACT amount of use of the equipment. With no upfront costs, and clearly defined expenses (including maintenance, repairs and replacement), it makes it an easy decision for CFOs interested in predictable cash flow.
5. Maintain a relationship with the CFO.
If you don’t know the benchmarks the company uses to approve capital expenditures, your project could be DOA before it even has a chance at being considered. The CFO or company accountant plays a leading role in the decision making for most projects. Taking the time to learn from them the financial benchmarks the company uses to approve projects (IRR, ROI, Payback period, etc.) can greatly increase your success rate if they are applied to your calculations and project parameters.
6. Negawatts – reduce energy use FIRST.
Before you propose any efficiency project, begin by reducing the amount of energy the company is presently using. Using education and awareness programs allows your “team” to become aware of the most common wastes of energy and focus on negawatts – the amount of energy SAVED through conservation and efficiency. Those reductions can result in a less robust system being needed when upgrade or renewable energy projects are being considered. If the project costs less it has a greater chance of passing.
7. Upgrade your knowledge base.
We are in a period marked by an unprecedented rate of change regarding technology. Even new construction frequently ends up with systems or products decades out of date because “that’s just the way we’ve always done things”. Technology is often selected simply because it meets minimum local or state codes for energy efficiency – without considering the lower overall operating costs tied to more efficient approaches. Having a knowledge strategy for your personal education results in cutting edge projects that can achieve dramatic savings – it’s more expensive to do nothing than it would cost to undertake an upgrade! Projects that are cash flow positive get approved!’
8. Develop a network of outside experts.
While your own education is crucial you don’t have to become the expert on every aspect of a proposed project. Make it a point to develop a network of outside experts who are willing to give advice on the solutions that create project success. As one facility manager shared: “we have lots of people wanting to sell us stuff! We’re looking for solutions!”
One of the greatest opportunities an event such as the NFMT Baltimore conference offers is the ability to interact with those people who can form the network often required for comprehensive upgrade projects. When your network has a deep understanding of the latest technologies, incentives, and financing options, it will help guarantee approval of your next project proposal!