Master Plans Are More Important with Persistent Inflation and Looming Recession
Two years ago, updating your master plan was a good idea because the world was getting back to normal and to position your organization for public funding in the aftermath of COVID-19.
Today, it is still a good idea but for different reasons.
Capital Programs Are a Wreck
Many capital programs were delivering between 60 and 80 percent of their budgeted funding before the pandemic. The world was booming, few organizations had sufficient human capacity to manage the projects, and it was difficult to provide multiple contractors to bid (and deliver) the work.
Today, the facilities and infrastructure are still not in the ground but the capital budgets are now over-spent. It is amazing how 40 percent escalation in construction costs produces unexpected surprises. And that is especially true if your project controls program was sleepily (and ineffectively) benefiting from an underperforming budget.
Recession Is Upon Us
Most of us on the front lines appreciate that we have actually been in a recession for the latter half of 2022. Now with the US mid-term elections over, just about everyone now admits that the economic outlook is less than optimal. Costs are still high but stable, but tens of thousands of layoffs are on the way in the first quarter of 2023. New growth in the facilities and infrastructure markets will be markedly slow.
Understanding Current Needs
Organizations have struggled for several decades with allocating enough money for assets they already own. If there is a bright spot in 2023, it will provide organizations with the opportunity to evaluate how much money is needed for new growth and expansion and how much is needed to take care of what they currently own. Of course, the opportunity only exists if organizations update their master plans.
Keep It Simple
Data used to update the capital program and criteria for project prioritization can be simplified. Short-term priorities can focus on the demand for services trends that existed prior to COVID, new projects that are needed and can be realistically permitted projects, and current condition assessments of existing facilities and infrastructure.
That is not to say that traditional approaches and criteria such as net present value, sustainability, and economic expansion are not important in some markets. However, the belt will be tighter, the project management personnel will continue to be limited, and the decision-making more intuitive over the next few years.
The Time is Now
The time for an updated master plan is now. There is no need to overthink it. Simply keep it simple – use existing data and master plans, engage a knowledge facilitator, and make sure the right internal staff are participating. Opportunity comes to those who are prepared.
JD Solomon Inc provides project development, asset management, and facilitation for facilities and infrastructure. Contact us for more information on our services related to master planning, capital programs, asset management, and organizational capacity.