What Goes Down, Must Come Up – Reinvest Savings for the Future

savings-piggybankThe recent falling energy prices have been welcome news to many within higher education.  Not only do we see lower prices at the gas pump, but increased domestic gas and oil production has led to lower utility costs across the board for most regions.  Since the sharpest decline has occurred mid-fiscal year, we forecast that the favorable market conditions will lead to budget surpluses come year-end.  However, do not take these gains for granted as what goes down must come up. With capital budgets still below 2009 levels, infrastructure renewal and replacement has fallen behind and led to the growth of backlogs in both primary and building systems. As utility funds go unspent, now is a good time to use this surplus for cost-reducing projects within critical utility systems. Completed BTU saving initiatives when unit costs are down puts institutions on the right footing for when costs eventually rebound.  Even though calculations based on current rates will push payback out several years, remember that these rates will likely not be this low forever.

Ron Mesaros, Vice President of Facility Services at Aramark agrees.  “The recent decline in  fossil fuel rates provides an opportunity for institutions to capture budget savings. At Aramark, we are advising our clients and prospects to use these savings to reinvest in projects that not only reduce deferred maintenance backlogs, but also drive additional cash flow. We believe this is an opportune time for institutions to create a fund to address deferred maintenance long term and without increasing costs.”

For further insight into this initiative, click here to learn how California State University, San Bernardino’s facilities organization was able to retain their utility savings for use in further reduction projects and asset enhancing project work.

 

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