INSTIUTE OF HOTEL MANAGEMENT, KOLKATA

INTRODUCTION TO FACILITY MANAGEMENT-

Definition and Meaning of Facility Management

Facility Management can be defined as an organizational function integrating the 3Ps i.e., people,
place and process of a built environment working towards improving the productivity at the
workplace and the quality of life.
The British Standards Institution defines facilities management as: “The integration of processes
within an organization to maintain and develop the agreed services which support and improve the
effectiveness of its primary activities”.

The International Facility Management Association (www.ifma.org) defines facility management as

“a profession that encompasses multiple disciplines to ensure functionality of the built environment
by integrating people, place, process and technology”.
Facility management is an organizational function. The main purpose of facility management is to
improve the quality of life of people and increase the productivity of the organization. The purpose of
this profession is to support people in an efficient way. As defined by ISO and adopted by IFMA “it
ensures the functionality, comfort, safety, sustainability of efficiency of the buildings in which we
live and a work as also the surroundings”.

Role and importance of Facility Management

Management of facilities in any organization is must in the competitive world. The reasons for this
are varied from safety to employee motivation and from reducing maintenance costs to improving
productivity. The following reasons will further explain why facility management is not only
necessary and important in the fast competitive world:

 Increased efficiency: Properly managed facilities is a must for any organization as it helps very
little disruption of work. This ultimately exponentially increases the efficiency of the
organization. The organization can concentrate on its main business. The specialized facility
management agencies not only help in recognizing and predicting problems beforehand like
ordering stationery items or other material and helps if there are going to be any issues regarding
the malfunctioning of equipment.
 Save on cost: It is always economical to outsource the services to specialized facility
management agencies as they know how to optimally utilize the resources as also reduce costs.
The experience indicates that generally when such task is handled by any organization directly it
results in high costs, including the human resource cost. Managing equipment and premises will
reduce maintenance issues and thereby helping on costs significantly. It also ensures that the
organization gets value-for-money service that meets all required standards.

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 Quality and Performance: Facility management helps in creating quality standards and increase
in performance which also includes benchmarking, assessment methodology, best practices. This
also helps in redundancy of services and overlapping which will be visible in efficiency.
 Risk Management: It helps in analyzing the risk factors in the given organization structure and
designs and manages emergency testing and simulation to assure emergency preparedness. FM
also ensure compliance of regulatory bodies in the running and maintenance of different services
and submission of required documents to ensure that the safety and security aspects as per SOPs
are being taken care of by the organization.

Major provisions of Facility Management include:

 Servicing of Air-conditioners
 Servicing of RO for clean water
 Maintenance of heating equipment
 Monitoring smoke and fire detection equipment
 Proper ventilation of the premise
 Cleaning of the entire premise with appropriate tools and required lubricants
 Maintenance of fabric e.g., replacement of worn and torn office furniture’s, carpets, towels.
 Maintenance of uninterrupted power supply in the entire building.
 Regularly inspecting the built premise for any kind of leakage (e.g., gas) or hazardous discharge.

Duties & responsibilities of facility manager:

This may range from a small to a bigger role depending on the size and location of the organization.

 Stacking the requisite resources-An organization to work effectively largely depends on the
availability of the resources at the right time and place, which can be maintained only after
proper analysis of the daily operational requirements and planning it in advance.
 Acting as an information Manager: -any shortage or a problem at the workplace to be analyzed
by a manager and disseminating the information appropriately in the workplace.
 Acts as a risk taker: -Facilities Manager is the first one to face any risk arising at the workplace
which may be fire, smoke, hazardous gas, short circuit etc.
 Taking care of the natural surroundings: - Acting as an environmentalist to adhere to the
norms and standards prescribed by the regulatory bodies, hence, facilitating the organizational
functions without any hindrance.

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 Always act as an Innovator: - Acts as a person who is open to accept the changing trends and
applying the same in their own organization. It is vital for any organization to sustain in the
rapidly changing world to be innovative in their services, upgrading the standards time to time
and sharing the knowledge with other organizations.
 Managing the overall property: -The structural management (Hard) of the premise as well as
maintaining the cleaning & catering (Soft)
 Operational Management: - Managing the day-to-day resources.
 Overall maintenance of the built environment
 Managing the human resource: Assigning right kind of people at the right task.
 Managing the financial affairs: - Managing partial or complete financial affairs of the
organization.

The Facilities Manager organises, controls and coordinates the strategic and operational management of buildings
and facilities in order to ensure the proper and efficient operation of all its physical aspects, creating and sustaining
safe and productive environments for residents. In residential buildings this is typically conducted at all times of the
day, every day of the year.
The Facilities Manager can consist of a single individual or a team, with services able to be delivered by dedicated
‘in-house’
professionals or ‘out-sourced’ in whole or part to external providers. An important role of the Facilities Manager is
to provide services, meet varying expectations, support, information, be a good listener, and deal with conflict to
create a community environment residents are willing to call home. Their role includes dealing with various
contractors and suppliers in
carrying out maintenance and upgrades, and providing services such as security, cleaning, and property
maintenance.
In larger buildings the Facilities Manager may be required to manage staff and be part of the recruitment and
induction process. Therefore, they are again required to have excellence people management skills. Their
relationship with support staff and contractors is critical in ensuring the building is a great place to live and work. In
many areas the actual title of Facilities Manager is not commonly used, however as the wider industry moves toward
greater consistency and standardisation more providers and professionals are adopting it.

Staying updated on building codes & regulations

 As a facilities manager, it's essential to stay up-to-date with the latest regulations and compliance
requirements in your industry. From building codes to safety regulations, environmental
regulations, and legal requirements, there are many rules and regulations to follow to ensure that
your building operates safely and efficiently. Compliance is not just about avoiding penalties; it
is about ensuring that the building is safe for occupants and visitors.
 Building codes are one of the most important regulations that facilities managers need to adhere
to. These codes are designed to ensure that buildings are constructed safely and meet minimum
standards for structural integrity, fire safety, and other essential factors. As a facilities manager,
it's your responsibility to ensure that your building complies with all applicable building codes,
and that all necessary permits and inspections are obtained.
 Safety regulations are another critical area of compliance for facilities managers. These
regulations cover a wide range of areas, including emergency preparedness, hazard identification

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and mitigation, and security protocols. By implementing safety measures such as fire safety
plans, evacuation procedures, and security protocols, facilities managers can ensure that their
building is safe for occupants and visitors.

 The consequences of non-compliance with safety regulations can be severe for businesses. Not
only can it result in financial losses, but it can also lead to harm or even death of employees or
customers.

 Non-compliance can also lead to reputational damage. In today's interconnected world, news of
accidents and safety violations can quickly spread through social media and other channels,
damaging the company's image and reputation. This can result in lost customers, lost business
opportunities, and a damaged brand that can take years to repair.

 Environmental regulations are also becoming increasingly important in facilities management.

From reducing energy consumption to minimizing waste and using environmentally friendly
products and materials, there are many ways that facilities managers can contribute to a more
sustainable future. By following environmental regulations, facilities managers can reduce their
building's environmental impact and create a healthier, more sustainable environment for
occupants and visitors.

Ensuring compliance with local and national standards

 Facilities management standards serve as a guiding framework that helps organizations to

comply with local, national, and international regulations. From fire safety regulations to
environmental preservation standards, facilities managers have a responsibility to ensure their
properties meet all relevant legal requirements.
 Implementing technology in facilities operations to digitize documentation and improve
processes results in more robust and accurate compliance reporting. Adhering to these standards
helps organizations avoid penalties, legal complications, and reputational damage while also
fostering a culture of compliance within the industry.

The facility manager, as the person in charge of the facilities, plays a key role in ensuring
compliance. The following are some of the best practices of facilities management:
o Implementing and enforcing compliance protocols.
o Collaborating with legal and compliance teams.
o Training staff on regulatory requirements.
o Auditing and monitoring compliance performance.
o Managing and mitigating compliance risks.
o Reporting and documenting compliance activities.
o Leveraging technology for compliance management.

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The facility manager also needs to communicate effectively with internal and external
stakeholders, such as senior management, employees, customers, suppliers, regulators, and
auditors.
 Developing Compliance Protocols: To ensure compliance, the facility manager must create and
implement standard operating procedures (SOPs) that align with regulatory requirements. SOPs
are written documents that outline how to carry out specific tasks or processes in a consistent and
compliant manner.
SOPs should cover all aspects of facility management, such as maintenance, cleaning, security,
waste management, energy management, and so on. The facility manager should also train staff
on the SOPs and ensure that they follow them.

Auditing and Monitoring Compliance: Another important role of the facility manager is to
audit and monitor compliance performance. Auditing is the process of verifying that the SOPs are
being followed correctly and effectively. Monitoring is the process of measuring and tracking
compliance indicators, such as key performance indicators (KPIs), metrics, or benchmarks.
The facility manager should conduct regular compliance audits and monitor compliance data
using various tools and systems. The audit and monitoring results should be analyzed and
reported to identify any gaps or issues that need to be addressed.

Risk Management and Mitigation: Compliance risks are the potential negative consequences
that may arise from non-compliance with regulatory requirements. Why facility businesses have
lower margins? One of the main reasons is non-compliance. Non-Compliance can reduce your
bottom line severely. Non-compliance risks may include:

o Fines
o Penalties
o Lawsuits
o Reputational damage
o Operational disruption
o Customer dissatisfaction
Organizations that have a robust compliance program in place are more likely to be successful in
mitigating the risks of non-compliance. The facility manager should identify and assess the
compliance risks that may affect the organization and implement proactive risk mitigation
strategies to prevent or minimize them. Risk mitigation strategies may include risk avoidance,
risk reduction, risk transfer, or risk acceptance.

Maintaining documentation & records for a facility audit

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Reporting and documentation are essential aspects of facility management that support
compliance management. Reporting and documentation refer to maintaining comprehensive
compliance records that document and demonstrate the compliance activities and performance
of the organization.
Compliance reports
o Audit reports
o Monitoring reports
o Risk assessments
o Compliance certificates
o Compliance training records
o Compliance policies and procedures
These are just some examples of the types of reporting and documentation that may be required
for compliance. The specific requirements will vary depending on the organization and the
industry in which it operates. The facility manager should ensure that the facilities maintain
accurate and complete compliance records that are readily available for regulatory inspections
and reporting.

The core responsibilities of a facility manager encompass a wide range of functions to ensure the
optimal operation of a facility's physical assets and services. Here are the primary duties:
 Maintenance and Repair: Oversee and ensure that the facility's infrastructure, equipment, and
systems are in good working condition. This includes periodic maintenance, addressing
immediate repair needs, and setting up long-term maintenance plans.
 Space Management: Optimize the utilization of space. This can involve planning layouts,
overseeing relocations or renovations, and ensuring that spaces fulfill their intended function
efficiently.
 Health and Safety: Implement, monitor, and maintain health and safety standards. This
involves conducting regular safety audits and risk assessments, ensuring compliance with
regulations, and setting up emergency response procedures.
 Environmental Management: Ensure that facilities comply with environmental laws and
regulations. Promote sustainable practices, waste management, energy efficiency, and other
eco-friendly initiatives.
 Budget Management: Prepare, allocate, and oversee facility budgets. This includes forecasting
expenses, tracking costs, ensuring cost-effective operations, and managing contracts and vendor
relationships.
 Security Management: Develop and oversee security protocols to protect the facility, its
assets, and its occupants. This can involve coordinating with security personnel, monitoring
surveillance systems, and setting up access controls.
 Stakeholder Communication: Serve as the primary point of contact between the organization
and service providers, contractors, and other external entities. Also, communicate internally
with employees, executives, and other departments to address facility-related needs and
feedback.

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 Emergency Planning and Crisis Management: Develop and implement plans for
emergencies such as fires, floods, power outages, or other unforeseen events. Coordinate
response and recovery efforts.
 Technology Integration: Stay updated with the latest facility management technologies and
tools. Implement systems that enhance facility operations, such as building management
systems, energy management systems, or space utilization tools.
 Vendor and Contract Management: Select, manage, and evaluate vendors and contractors.
Ensure that services are rendered per contractual agreements and seek opportunities for better
terms or quality of service.

Financial planning for facility operations

 Facility management budget planning focuses on the efficient allocation of resources to
improve operations. It ensures cost efficiency, supports decision making, and minimizes risk
through careful financial allocation.
 Distinguishing between operating and capital budgets helps allocate resources effectively and
stay within budget, which fosters positive relationships with management and enables facility
managers’ goals to be achieved.

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 Strategic budgeting is critical to financial optimization and requires constant attention and
collaboration. Best practices include setting priorities, analyzing historical data, tracking trends
and, of course, building in flexibility for unforeseen costs.
 To gain approval for the proposed facility management budget, the facility manager must
demonstrate value, transparency, stakeholder alignment and solution-oriented proposals.

Many facility management professionals view financial planning merely as an exercise in preparing
the annual operating budget and nothing more. However, the term financial planning has more to do
with predicting the return on an investment and preparing an investment strategy than with allocating
the existing budget to existing needs.

In general, facilities financial performance means how well a facility performs as a financial asset.
Measuring this performance will hinge on the approach you take to financial planning. Your
approach well help you establish a set of assumptions about what constitutes good financial
performance; these assumptions must relate to the facilities function as well as to the financial
structure of your company. Even slight changes to these assumptions can create large differences in
overall performance and how it is measured.

The approaches described below are not always mutually exclusive and can often be used in
conjunction with each other. Planning any major facilities proposal should include an analysis of
each method to see how it performs from each perspective.

Lowest First Cost Analysis

While other approaches to financial planning are based on the criterion of time, the lowest first cost
approach entails finding the lowest-priced item that meets your specifications at the time you need it.
This approach works best for a narrow set of circumstances.

 Many vendors supply the commodity you need and most brands are identical in all major
respects, such as size and quantity of pieces per package (for example, white latex paint).
 Many vendors compete in a fairly stable market to ensure a steady source of supply.
 Substitution of one brand for another can be made easily (for example, several brands of
paper towels fit in the same model of dispenser).
 An item can be precisely specified.
 The economic life cycle of the desired item is short or nonexistent. If an item needs to last no
more than two years but is built to last for 10 or 15 years, that extra durability may not be of
any value for its probable higher cost.
 There are no maintenance or operating costs associated with the item.

Common sense tells you when the lowest first cost strategy is the best choice. However, it is not
sufficient for all planning needs. Virtually any activity involving the provision of human services
involves quality issues that are almost impossible to quantify into an ironclad specification. If quality
matters, the lowest first cost approach cannot be relied on to provide satisfactory results. Therefore,

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the specifications for such a facility must be well defined and accepted to maintain a certain
minimum standard of performance.
Yet, in a slow economy this approach becomes very appealing. If operating cash is scarce, corporate
executives may consider this the only viable approach. However, it almost always results in higher
long-term operating costs and higher total life cycle costs. For example, buying the cheapest paint
may justify lowest first cost from an accounting standpoint, but buying higher-priced, more durable
paint that will lower future maintenance and housekeeping costs may make more sense functionally.
These considerations are part of life cycle cost analysis, which is discussed below.

Life Cycle Cost Analysis

Life cycle cost analysis (LCC) is a construction-based decision method, not an accounting method.
There are three major cost categories in a life cycle cost analysis.
 Initial costs of acquisition of the asset — such as purchase, design, delivery, installation,
testing, reconstruction, and moving
 Ongoing expenses — such as utility, servicing, and maintenance costs — that continue
throughout the life of system operation
 One-time future expenses — such as system calibration after commencing operation, and
major upgrades or overhauls — that occur infrequently and predictably during the life of the
asset
Life cycle cost analysis should account for all costs and returns associated with an item over its entire
(economic) life cycle, including cost of removal and any salvage value obtained when the asset is
disposed of. It should also address associated personnel, energy, maintenance, replacement, and other
costs affected by the investment.
In addition to total costs, the life cycle cost approach considers the effect of time. It considers the
effects of inflation and the cost of any funding borrowed to acquire the asset if the ROI (return on
investment) is to be predicted accurately. (Methods of calculating the time value of money are
described below and explained in further detail in the BOMI International course Real Estate
Investment and Finance.) This approach works best when you compare the total lifetime costs of
several options for solving a problem. Therefore, this approach is valid for analyzing investments
when long-term payback is a major factor. The shorter the asset life, the less useful this method
becomes.
When calculating life cycle costs, many factors are considered:
 determine the life expectancy of any product or project
 assess all costs and discounts, plus tax ramifications
 identify costs that are capitalized and those that are expensed
 estimate the inflation rate that will occur during the life of the project
 estimate the real interest rate during the life of the project

Because assumptions may vary widely, the best approach is to predict outcomes based on a range,
such as an inflation rate of a minimum of 3 percent and a maximum of 8 percent annually.
Installing complex or compound assets such as energy management systems can best be justified by
using life cycle costing. The cost of an energy management system is added to standard electrical and
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mechanical equipment costs. To justify the additional cost, quantify the savings that are produced in
associated areas. Energy management systems and other such products produce cost avoidance or
cost savings after the payback period (explained below).
Life cycle costing is also useful for producing documented information about longer-term savings.
Most products require some amount of maintenance to operate effectively over the long term.
Therefore, such costs must be considered when making a final product decision.

Cost-Benefit Analysis
Cost-benefit analysis asks: “Are the benefits of a project worth its costs?” Cost-benefit analysis
should be the method of choice if you must compare quantifiable (measurable) with qualitative
factors. It is not difficult to see that decisions made on the basis of quantifiable costs or savings
(avoided costs) are easier. This method is useful when analyzing projects that involve physical
improvements to tenant space but do not affect the market or asset value of the property as a whole.
It can even be used to support trade-offs between cost related and qualitative factors. It should not be
confused with life cycle cost analysis, in which costs are assessed over an investments useful life, but
not against its benefits.
Not every quantifiable issue relates to cost. For example, specifications for computer systems include
many measurable elements that do not relate directly to cost, such as amount of RAM, megabytes of
disk space, and the clock speed of a chip, as well as software features, such as the inclusion of
automatic spell checking or advanced graphing capability.
To conduct a numerical comparison of hard and soft costs, you will need to apply relative-weighted
numeric values to qualitative factors and to costs. These numbers can be manipulated to derive an
overall score that indicates how well a given project or proposal fulfills the department or companys
stated objectives.
When you begin any cost-benefit analysis, consider the following issues:
 Specifically, what is the project intended to accomplish?
 What conditions constrain or affect the project?
 What conditions might exist after the project is completed?
 Which conditions are controllable and which are not?
 What performance requirements or time and cost criteria will be used to evaluate effective
project performance?
 What is the minimum acceptable level of performance in each category?

Hard Costs and Soft Costs

Hard costs are those associated directly with actual construction, leasing, maintenance, and upkeep.
Hard benefits are savings on revenues generated directly from these activities. Soft costs and benefits
are those related to the management of construction, leasing, and maintenance and upkeep, such as
overhead, fees, and management time. These distinctions are not accounting or budgetary
conventions, but may figure prominently in the thinking of executives who may be reviewing the
project. As you plan for facilities projects, keep in mind that the argument for some costs is more
persuasive than for others.

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 Most persuasive are hard costs or benefits that can be measured and attributed directly to a
specific activity, account, or client and charged and reimbursed (for example, tenant
improvement construction costs or savings for a specific space or lease), especially if charged
against gross sales to reduce tax liability.
 Also persuasive are hard costs or benefits that can be measured and are billable but are not
attributed directly to a specific project or customer and therefore are allocated on a prorated
basis and reimbursed (for example, overhead costs).
 Less persuasive are tangible but unmeasurable soft costs or savings (for example, projected
savings in staff time that cannot be tracked or verified in a practical way).
 Least persuasive are intangible and unmeasurable soft costs or savings (for example,
improved quality of service) because evaluations are often subjective or inconsistent.

It is more difficult to compare hard (quantitative) costs/savings to soft (qualitative) costs/savings than
to compare hard costs and savings to each other. The less measurable something is and the more one
mixes bases for evaluation (cost vs. time vs. quality, for example), the more difficult comparison
becomes. Consequently, project justifications often present the strongest possible case in cost
numbers first and treat other justifications as secondary arguments. The evaluation process is often
structured into three levels:
 Quantitative vs. quantitative factors
 Quantitative vs. qualitative factors
 Qualitative vs. qualitative factors

The emphasis placed on the importance of hard or soft costs/savings depends on the attitude of senior
management. All cost analysis studies must be conservative. Even so, many managers, while
acknowledging that some projects do have soft costs and savings associated with them, will discount
them entirely because they are not as concrete as hard costs or savings.
Facility managers must understand many important financial concepts in order to communicate
effectively with corporate executives. Along with a thorough understanding of the core business,
these financial concepts are vital if facility managers are to speak the language of business and gain
the confidence of corporate executives as genuine contributors to corporate profitability and well-
being.

Financial management

Financial management is the management of the finance of the company through proper planning,
monitoring, and control. As already said that without funds operating the business is not possible.
Businesses have short-term and long-termgoals. To achieve these goals finances should be managed
and a control mechanism should be in place. Even facilities management requires the application of
financial management so that quality resources are made available in the right quantity at right time.
Financial management applies the principles of management in managing the funds of the business.

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Importance of financial management

Finance is needed to meet the operating as well as long-term finance requirements of the business.
Therefore, it is required to maintain sufficient finance for the smooth running and achieving goals.
For the management of finance, an understanding of financial systems and processes is required. The
relevance or the importance of financial management can be put as under:
Planning-Financial management assesses the financial need of the business organization for
different activities. It can be for buying assets, constructing a building, paying salaries, or payments
to suppliers. For any activity where funds are involved, it is required to forecast such requirements in
advance.
Acquiring the requisite funds-Financial management deals with the arrangement of the funds
from the best possible source. The best source from the available should be selected. Every source of
financing has a cost and risk. So, the source with the minimum cost and risk should be selected for
arranging the funds.
Best utilization of the funds-Only arranging the funds is not going to solve the purpose.
Arranging and then best utilization for the purpose for which funds were acquired is also important.
The finance department or the division is also responsible to ensure that there is no misutilization of
the funds.
Better decision-making-Understanding the financial management concepts helps the manager
including the facility manager to take sound financial decisions. Forecasting the risk and the returns
of the projects and improving the organization’s productivity and efficiency are facilitated by
financial management.
Value of firm and reduced- Financial concepts helps cost- managers to reduce cost. It also helps
to improve the overall value of the firm.

Profitability and savings- Better decision-making leads to more value for the money spent. It
increases profitability and cost savings.

Objectives/ Goals of Financial Management

Effective financial management leads to proper utilization of finance. The financial manager must
understand the objectives. The basic objective of financial management is to increase the profits and
the wealth of the shareholders. Basically, the objective of financial management is divided into two
such as:
1. Profit maximization
2. Wealth maximization

Profit maximization- It is always supported that profit earning is the main objective of any business.
Therefore, one of the main objectives is profit maximization. The finance manager should try to
maximize the profits. All decisions are taken by making sure whether or not it gives maximum profit.
But it cannot be the only objective.

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Wealth maximization
Wealth maximization is considered a better way to taking decisions. Wealth is the result of the cost
and the time value of money. A financial proposal with a positive net present value creates wealth
and should be selected. A proposal or decision with a negative net present value should be rejected.
Net present value is the difference between the present value of the benefits and the present value of
the cost associated with the proposal. The present value of benefits and the present value of cost are
adjusted to time and risk which is called as time value of money. Net wealth maximization considers
cash flow and not the accounting profit as in the case of profit maximization. The concept considers
the time value of money.

Budget

When the budgets are planned the following points are considered.
 Objectives or the purpose of the budgets should be clear.
 Forecasting the future expenditure or targets
 Budgets are the acceptable standard expenses
 Managers’ desired skills in forecasting and planning budgets.
 Information from all departments
 Information on the organization’s future strategy
 The declaration of assumptions made in budgets
 Capital and revenue planning
 Depreciation

Budget planning needs to be done in advance. Budgets can be prepared for a month, quarter, half-
yearly, or for a longer period depending on the purpose of making the budgets. In established
organizations, budgets are prepared on a routine basis. The budgets are based on proper reasoning
and forecast for the future. Once the budgets are prepared, they need to be reviewed, controlled, and
changed if required to meet the objectives of the budgets.
The budget planning process depends on the manager’s competency in forecasting along with the
quality of information available. The manager should control the quality of information in an
efficient management information system. During the process of budget planning, the following are
important issues:

Cost centres
A cost centre is a group of activities where the cost is incurred. Each facility or project can be a cost
centre. Budgets are prepared according to the income and expenditure for each cost centre. This way
the financial viability can be checked for each cost centre by recording the income and expenditure
of each cost centre separately. Cost centres are separate heads of expenditure. These are expenditures
where the quality has to be maintained and budgets have to be allotted. The management should

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decide on appropriate cost centres for forecasting expenditure and quality. Examples of cost centres
in facility management can be cleaning, security, maintenance, catering etc.

Zero-based budgeting
Zero base budgeting is a budgeting technique that does not use the previous year’s data or previous
budget for forecasting. In zero-base budgeting, the budgets are prepared from scratch. No previous
data or budgets are used as the base for further plans. The traditional way of budgeting uses previous
budgets and marks a percentage to balance the changes in current settings. Zero-base budgeting is
preparing the new budget for each activity or facility on the concept of no base of previous years is
called as Zero-Base Budgeting.
According to the Chartered Institute of Management Accountants (CIMA) , “a method of budgeting
whereby all activities are re-evaluated each time a budget is set. Discrete levels of each activity are
valued and a combination chosen to match funds available.”

Analyzing & optimizing operational expenses

One of the primary benefits of facility optimization is its ability to drive cost efficiency within a
facility management department. By identifying areas of waste and inefficiency, such as
underutilized spaces, redundant equipment, or excessive energy consumption, organizations can
reduce operational costs significantly. Facility optimization can lead to strategic decisions regarding
resource allocation, thereby saving money for the organization. This newfound cost efficiency can be
reinvested in other critical aspects of facility management, such as maintenance, upgrades, or staff
development.

Key Metrics for Cost Analysis

When evaluating cost savings through Integrated Facilities Services, several key metrics come into
play. These metrics provide insights into the effectiveness of the integrated approach and help
identify areas for improvement.
1. OPERATIONAL EFFICIENCY METRICS
Operational efficiency is a critical factor in determining cost savings. Metrics such as response time
to service requests, downtime reduction, and the overall effectiveness of day-to-day operations
provide valuable insights. A decrease in downtime, for example, can directly translate into cost
savings by maintaining productivity levels.
2. RESOURCE UTILISATION AND ALLOCATION
Examining how resources, both human and material, are utilised and allocated is essential. Integrated
Facilities Services aims to optimise resource allocation by ensuring that each service complements
the others. This can lead to a reduction in idle time, efficient use of personnel, and better inventory
management, all of which contribute to cost savings.
3. ENERGY CONSUMPTION AND SUSTAINABILITY METRICS
Energy costs form a significant part of the operational expenses for many facilities. Integrated
Facilities Services often incorporate sustainability measures, such as energy-efficient systems and

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waste reduction programmes. Metrics related to energy consumption and sustainability efforts can
demonstrate not only cost savings but also environmental responsibility.

Strategies for cost reduction in facility management

1. Analyzing and optimizing energy usage : Analyzing and optimizing energy usage is a
fundamental strategy for cost reduction in facilities management. Energy is a significant
expense for organizations, and finding ways to minimize usage can lead to substantial
savings.

One way to analyze energy usage is by conducting an energy audit. This involves evaluating
the energy consumption patterns of different areas within the facility and identifying areas of
waste or inefficiency. By understanding these patterns, organizations can develop targeted
solutions to optimize energy consumption.

Implementing energy-efficient technologies and practices is another way to reduce energy

usage. This can include installing energy-efficient lighting, utilizing smart HVAC systems,
and incorporating sensors to regulate energy usage in unoccupied areas. By investing in these
technologies, organizations can not only reduce energy bills but also contribute to
sustainability efforts.

2. Implementing preventive maintenance programs: In addition to analyzing and optimizing

energy usage, another effective strategy for cost reduction in facilities management is
implementing preventive maintenance programs. Preventive maintenance involves regularly
inspecting and servicing equipment to prevent breakdowns and costly repairs.

3. Streamlining procurement processes: Efficient procurement processes play a crucial role in

cost reduction in facilities management. By streamlining procurement, organizations can
optimize their purchasing activities and negotiate favorable terms with suppliers.

One way to streamline procurement processes is to centralize purchasing. This involves

consolidating purchasing responsibilities to a single department or individual, eliminating
duplicate orders and reducing administrative costs. Additionally, organizations can establish
strategic partnerships with preferred suppliers, negotiate volume discounts, and leverage
economies of scale to maximize cost savings.

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4. Outsourcing non-core functions: Outsourcing non-core functions is a strategic approach to

maximize efficiency and reduce costs in facilities management. By delegating tasks that are
not central to the organization’s core competencies, businesses can focus

5. Embracing technology and automation: In today’s digital age, embracing technology and
automation is crucial for facilities management to maximize efficiency and reduce costs. By
implementing the right technological solutions, businesses can streamline their operations,
improve productivity, and achieve significant cost savings.

One way to leverage technology is by utilizing a Computerized Maintenance Management

System (CMMS). A CMMS allows facilities managers to centralize and automate tasks such
as work order management, preventive maintenance scheduling, and inventory control. By
digitizing these processes, organizations can eliminate manual paperwork, reduce human
errors, and optimize resource allocation.

6. Continuous improvement and performance monitoring: Continuously striving for

improvement is essential in facilities management to maximize efficiency and reduce costs.
By implementing a culture of continuous improvement, organizations can identify areas for
enhancement, optimize processes, and achieve significant cost savings.

Performance monitoring plays a vital role in this strategy. By closely monitoring key
performance indicators (KPIs) such as energy consumption, maintenance costs, and customer
satisfaction, facilities managers can gain valuable insights into their operations. This data
enables them to identify inefficiencies, set realistic targets, and track progress towards their
cost reduction goals.

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References:

Books: IGNOU BFO 003

Internet:

https://www.safetymint.com/safety-compliance.htm
https://www.safetymint.com/facilities-
management.htm#:~:text=Skills%20and%20roles%20of%20facility%20managers%3A&text=Planning%
20and%20overseeing%20building%20maintenance,safety%20regulations%2C%20and%20environment
al%20standards

https://medium.com/@suyashkaushik/the-role-of-facility-management-in-ensuring-regulatory-
compliance-cca933c55adb
https://www.facilitiesnet.com/facilitiesmanagement/article/5-Reasons-to-Adopt-Facility-
Management-Standards--20256

https://www.cryotos.com/blog/responsibilities-of-facility-manager

https://www.yarooms.com/blog/facility-management-budget-
planning#:~:text=Facility%20management%20budget%20planning%20focuses,risk%20through%20car
eful%20financial%20allocation.

https://www.linkedin.com/pulse/enhancing-facility-management-operations-through-herman-j-
herbert#:~:text=By%20identifying%20areas%20of%20waste,saving%20money%20for%20the%20orga
nization.

https://silagroup.co.in/6-strategies-for-cost-reduction-in-facilities-management/

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