Capital Planning is one of the 19 functional FM knowledge areas that are categorized into four key knowledge domains.

Definition: Capital planning is the integral part of the strategic planning process. It is the process of budgeting resources for the organization’s long-term plans. It allocates funds dedicated for capital expenditures—such as obsolescence, operational excellence, and new facilities—to meet future organizational needs.

The decision to invest in a facility is usually made in the context of the company’s strategic plan and capital budget development process. A capital budget covers the entire facility and serves as a means to evaluate its physical condition, pinpoint existing and anticipated needs, determine upkeep/modernization costs, and find ways to address these needs within financial limits. Abiding by these principles when developing a capital plan can help ensure that the facility manager’s capital budget is more thorough, accurate, and meaningful.

Organizations need to determine the level of fixed assets that will give the organization’s strategy the best chance to succeed. Too many fixed assets become a drain on profitability. They also require more funds to acquire and maintain, which will either drain cash holdings, dilute the investment of owners, or increase debt. However, too few fixed assets will limit opportunities and can endanger the organization’s mission. A capital planning assessment includes a review of the condition of existing facilities and consideration of financial and life-cycle costs and strategic benefits. Good information on the current status of facilities helps facility managers justify retention, disposal, or alteration decisions. This evaluation will consider the degree to which existing facilities align with strategy—or could align, given changes.

Key Concepts:

• Definition of capital planning.
• Facilities asset management cycle.
• Capital planning to project initiation process.
• Facility condition assessment (FCA).
• Facility condition index (FCI).
• Portfolio review and analysis criteria.
• Total cost of ownership (TCO).
• Life cycle assessment (LCA).
• Inventory analysis.
• Life cycle cost analysis (LCCA).
• Financial discounting and interest.
• Capital investment criteria.
• Facility planning.
• Feasibility analysis
• Due diligence analysis.
• Developing a facility plan.
• Elements of a business case.
• Capital budget inputs and process.

Capital Planning Proficiency Indicators (Task Statements)

• Performs a facility condition assessment (FCA) to set performance goals for facilities asset management and create long-term plan.
• Gathers data using facility condition index (FCI) performance indicator to create a baseline and benchmark current condition of facility.
• Uses a life cycle assessment (LCA) to estimate the environmental impacts of a material, product, or service through its entire life cycle.
• Calculates the basic costs required for a life cycle cost analysis (LCCA).
• Demonstrates knowledge of the difference between a life cycle assessment (LCA) and a life cycle cost analysis (LCCA).
• Calculates the total cost of ownership (TCO) and other economic analysis methods.
• Performs evidence-based decision-making process.
• Prepares a business case for capital projects, gathering information from other functional business units.
• Identifies, develops, and implements capital planning initiatives in accordance with the strategies of the facility master plan.

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