In the largest higher education restructuring in the nation’s history, the facilities group at Rutgers, The State University of New Jersey, was elevated to a leadership role, taking its place alongside the offices of finance and research as part of an administrative troika whose heads now report directly to the president. The strategic alignment among these three functions was instrumental in allowing Rutgers to meet a legislative mandate that saw the university grow to 27 million sf in 1,009 buildings with a $3.7 billion operating budget and five different campuses in less than a year.
“Facilities today is no longer about turning wrenches,” states Antonio Calcado, Rutgers vice president of university facilities and capital planning. “That is the easy part. Today it is about being a business. It is married to research, it is married to finance, and it is part of the troika of a successful university.”
Raising the Research Profile
In July 2012, the New Jersey legislature passed a bill transferring almost all units of the University of Medicine and Dentistry of New Jersey (UMDNJ) into the Rutgers organization. The governor signed the legislation late in August 2012, and Rutgers was given 10 months to implement the restructuring, and directed that there be no adverse effects on students or patients.
UMDNJ, the nation’s largest freestanding academic medical center, was the only provider of medical and dental degrees in the state. The merger would provide the missing piece in Rutgers’s quest to become “one of the most comprehensive public research universities in the country” by adding an academic medical component to its already extensive undergraduate and graduate programs.
“The absence of medical education, its clinical components, hospital affiliations, clinical trials, and resultant limitations on biomedical and clinical research set Rutgers behind its peers,” says David Schulz, Rutgers executive director of program development. “Without it, we would be perpetually hindered by a lack of medical education research opportunities, and research funding would be just out of reach.”
Given the scale of the merger, Calcado and his colleagues recognized that the mandate presented an extraordinary opportunity to create an overarching vision and realign functions within the university.
“The existing casual relationship among facilities, finance, and research would have to be strengthened to allow for effective use of facilities and growth of research funding,” he says.
The restructuring act was the catalyst for numerous systemic changes at Rutgers, many taking place in parallel. Schulz compares the exercise to “changing a tire while driving 60 mph down the turnpike.”
Path to the Future
The addition of the healthcare lines of business, including biomedical research and clinical trials, propelled Rutgers into the top 30 universities in the country for research spending, with $744 million annually in R&D expenditures and $550 million in annual sponsored research grants.
The next step, confirmed in the strategic plan emanating from the president’s office and adopted by the university’s board of governors in 2014, was a move into the top 25 within five years.
Where would the money come from to meet that ambitious goal?
The integration team crafted a double-pronged approach, divided into the categories of “less” and “more,” to reduce expenditures while redirecting and expanding the funding pool.
On the “less” side, economies could be achieved by a trio of measures: increasing efficiencies throughout the university to lower administrative costs, decreasing the overall university footprint, and driving effective space use through responsibility-centered management (RCM).
Initiatives on the “more” side included: increasing grants and contracts, increasing participation with private enterprise, increasing the indirect cost recovery rate (facilities and administration, or F&A), focused philanthropy, and redirecting existing resources to strengthen research.
Facilities Group Rebuild
In the administrative arena, the merger signaled the need to rebuild and reposition the department of facilities and capital planning, centralizing a fragmented operation that was often in reactive mode.
Previously, pockets of facilities units around the state had overlapping areas of responsibility and “lacked a common goal and vision,” according to Schulz. Processes were neither customer friendly nor supportive of effective decision-making and capital planning efforts.
“The largest administrative unit of the university, with slightly more than 1,700 people, did not represent a good business model,” says Schulz. “Rebuilding—not reorganization—of the department was needed to forge a common vision, promote efficiencies, and collect and maintain critical facilities data statewide that could be used to drive informed decisions.”
Rutgers’s new version of facilities, put in place in 2014, integrates master and capital planning, financial and budget modeling, and facilities and space management. Four interdependent subgroups—planning, design, and construction; operations and utilities; business and support; and space management—are now aligned in philosophy and priorities in one well-coordinated statewide department.
The consolidation made it possible to standardize all business practices and deliver the same levels of service regardless of campus location. It also reduced costs by eliminating duplicate functions, realigning the workforce, improving purchasing power, and adopting outsourcing practices.
“Seizing opportunities and realizing efficiencies resulted in fiscal year 2014 savings of almost $1 million, with an additional $6 million in cost avoidance and budget cuts anticipated over the next five years,” says Schulz.
Integrating the Troika
With the redefined role of facilities determined, the need to become more closely aligned with the other two branches of the troika—finance and research administration—became clear. At the time of the merger, the various leadership groups of the three entities were scattered over a dozen locations in multiple cities.
“This was not a good model to support execution of the strategic plan and drive significant research growth,” says Schulz.
Rutgers made the decision to colocate the central leadership of the three groups in an off-campus office building, giving up space at the academic core. Roughly 600 people settled into the new 150,000-sf headquarters, just 10 minutes from the flagship New Brunswick campus, in the fall of 2015. The co-location was pivotal in establishing ongoing coordination among the key administrative functions. A fresh open-plan layout, a departure from the university’s conventional office-based scheme, supports the underlying philosophy of integration and communication for effective planning.
The relocation also improved the financial picture. According to Schulz, “The dominoes associated with the move allowed for demolition of a number of tired old buildings on campus.” Undertaken in a highly favorable real estate climate, the move offered a six-year payback on the building purchase and renovations.
The university’s two most valuable assets—human capital and space—also accounted for its largest expenditures. While the former was beyond the scope of facilities, the latter was very much under its control. Significant changes in the planning and management of space were obviously in order.
A key priority Calcado and Schulz identified was accurate and current portfolio data, encompassing space, condition, and financial details. As a long-time user of AiM software from Assetworks, the university was able to move from passive space-reporting to a true space management system. The 22 AiM modules deployed go far beyond simply recording square footage data to include an integrated work management system that provides information on operations and maintenance costs, utilities consumption, facilities condition index, deferred maintenance, character of use, capital project management, external real estate, and related functions.
“Data counts,” says Schulz. “We use the power of this integrated system to the greatest degree we can.”
The space and facilities costs database enabled Rutgers to move its budget model to RCM, driving transparency and the understanding of the cost of space. With net assignable square footage the key metric for cost, individual schools that improve their space practices can spend less of their budgets on facilities. For example, a school that cedes control of its classrooms to central academic scheduling, making them available for other disciplines to book, does not have to pay for the space.
“Responsibility-centered management creates a different feel as to how that space should be used, especially when the program is incentivized,” says Schulz. “This turns the paradigm on its head. RCM promotes financial responsibility at the unit level where each unit is responsible for activities and held accountable for direct and indirect expenditures.”
One of the guiding principles of the merger was that growth in research should be supported by a parallel reduction in plant. Most universities, especially those of Rutgers’s size, tend to have a space surplus, observes Calcado.
“That doesn’t mean we have all the right space, but we have too much,” he says. “In some way, shape, or fashion, Rutgers needed to start reducing that space. We took the position that as new research buildings were brought online, older, inefficient facilities should be retired, even demolished.”
“Each leaky roof or aged air handler that comes offline represents not only operational and capital savings but a reduction in deferred maintenance, as well,” adds Schulz.
Whether adding or deleting space, it was imperative to establish a framework for sound decision-making on capital and operational spending.
Formed over the past two years, the Capital Planning Advisory Council (CPAC)—chaired by the president, with seats for his four chancellors, the CFO, and Calcado—is charged with reviewing and prioritizing capital projects within the context of the strategic plan and the recently formulated physical master plan, Rutgers 2030. The Advisory Council serves as the key organizational framework for a rigorous decision-making process.
For a project to advance beyond CPAC, it must be supported by a solid business plan. The financial criteria by which the plan will be evaluated depend on the type of project, explains Schulz. For example, in academic departments it would be tuition revenues; in healthcare, clinical revenues; in research, where the metric for effective use of space is research dollars per square foot, overhead plays a large role.
While it may take up to five more years to reach the targeted increase in research income of more than 10 percent, the “new” Rutgers now has the administrative structure, decision-making framework, and tools to pursue the course.
“Big change needs bold strategy,” says Calcado. “University facilities should be considered business leadership. We are ready to do our part to keep Rutgers moving in its new direction.”
By Nicole Zaro Stahl