What Is a Capital Improvement Plan?

A capital improvement plan (CIP) is essential for public and private organizations undertaking large-scale physical investment projects. 

These long-range documents help organizations manage infrastructure, facilities, and assets. 

They help public and private institutions prioritize projects, allocate funding, and ensure effective capital management. 

But what exactly is a capital improvement plan? And how do organizations create and implement them?

In this guide, we’ll explore CIP fundamentals, their significance, and how organizations apply them.  

CIPs are necessary for effective fixed asset management and capital projects. They give organizations a roadmap to maintain existing assets, address capital improvement needs, and prepare for future growth.

A CIP balances short-term needs with long-term goals in a master plan. They help organizations plan a capital budget with major expenditures without overwhelming budgets and resultantly address high-priority projects. 

Why is capital improvement important?

A capital improvement program is needed for growth. Every organization must undertake capital improvement projects if it wants to scale. Capital improvement sustains organizational functionality and improves facilities. It’s an essential part of managing the asset lifecycle.

What are capital improvement projects? 

These projects take place over multiple fiscal years and typically focus on high-cost, long-lasting improvements. Here are some common types of capital improvement projects. 

Facilities upgrades

Facilities require significant capital investment and are some of an organization’s most important physical assets. Capital improvement projects in this are centered around:

• HVAC system replacements
• Roofing repairs
• Electrical system modernizations

Infrastructure projects

Municipalities are responsible for public goods like infrastructure. These serve their constituents and provide cities, towns, and villages with what they need for modern life. Infrastructure assets routinely degrade and need improvement investment. 

The Infrastructure Report Card, issued by the American Society of Civil Engineers (ASCE), underscores the urgency of such investments. With the U.S. earning a C- grade overall, the need for capital improvements plan is apparent to address aging facilities, outdated infrastructure, and increasing regulatory demands.

Municipalities must invest in improvements of: 

• Roadways
• Water and sewer systems
• Utility line replacements

Large equipment purchases

Many organizations need equipment for their operations. These assets need to be replaced relatively frequently. Expect companies and public organizations to make capital improvement investments in:

• Backup generators
• Elevators
• Construction equipment like excavators, plows, and cranes

Key components of a CIP plan

A capital improvement project is complex and has many inputs. It’s critical to include the following: 

Project identification 

Before creating a CIP, document creators must identify their projects. Not all long-term projects fit the definition of a capital improvements program, and determining which projects qualify is foundational for a capital improvement plan. 

Prioritization 

Prioritization is important throughout all business or public organization functions. It determines where employees in all functions should devote bandwidth. For capital improvement plans, it’s critical to rank projects based on urgency, impact, and budgetary constraints.

Cost estimation

To successfully create a capital improvement plan, stakeholders must accurately forecast expenses. Budgeters should estimate material, labor, and contingency costs.

Scheduling

Capital improvement plans are long-term documents. They require document creators to estimate timelines that span multiple years.

Funding strategies for CIP capital improvement   

A CIP budget relies on funding. In the private sector, companies raise capital through revenue, loans, or private equity. In the public sector, organizations use bonds, grants, subsidies, taxes, or special assessments. Before creating a capital project, plan creators must identify tangible funding sources. These can use a combination of multiple channels but must correctly allocate funding. 

Capital improvement plan process

To create and implement a capital improvement plan, organizations must follow the capital improvement plan process. It includes the following:

Budget development

Organizations must utilize their funding sources to create and develop a proposed budget.

Stakeholder engagement

Those creating a CIP should look for stakeholder engagement and include those who the capital improvement will impact in the process.

Budget approval

After creating the budget, creators need to have it approved. With the funding correctly allocated, stakeholders bring the budget up the approval chain.

Budget communication

After a budget gets approved, creators must communicate budgets and timelines to the remainder of the organization.

How organizations use capital improvement plans

Capital improvement plans cross sectors. From municipalities to private businesses, here’s how they’re applied:

Municipalities

Cities and towns use CIPs to manage large-scale public works projects. These include repairing roads and bridges, building public parks, and upgrading water and sewer systems. CIPs aim to keep communities functional, safe, and attractive for residents.

School systems

K-12 schools often implement a comprehensive plan to construct new facilities, expand classrooms, and renovate gyms or cafeterias. These investments are critical for accommodating growing student populations and meeting modern educational standards.

Private industry 

Companies use capital improvement plans to align investments with business objectives. Enterprises and SMBs use capital improvement plans to upgrade facilities, construct new real estate, improve utility systems, and invest in large-scale equipment. 

Examples of capital improvement projects

To provide additional context for why CIPs are important, here is a look at the projects they support. Common examples include:

Infrastructure and utility upgrades

• Water systems
• Power lines
• Roads and bridges
• Sidewalks
• Telecommunication infrastructure

Facility renovation

• Upgrading municipal offices
• Expanding administrative buildings
• Adding a new wing to a hospital
• Repairing warehouses

New construction

• Recreation centers
• Parking garages
• New schools
• Warehouses
• Additional real estate construction

Public improvements

• Enhancing parks
• Playground renovations
• Municipal landscaping projects

Capital improvement plan template

Organizations can benefit from a structured approach to capital improvement planning. A CIP template typically includes the following sections:

• Introduction
• Project inventory
• Prioritization criteria
• Funding sources
• Implementation schedule
• Monitoring and reporting

Here is a template you can use as a starting point:

How fixed asset management software helps with capital improvement

Technology plays a crucial role in simplifying and optimizing a strategic plan. Fixed asset management software offers tools for planning, monitoring, and maintaining assets.

Monitoring progress

Track project milestones, task completions, and schedules. Dashboards and reporting features provide visibility into project status, ensuring accountability.

Allocating funding

Allocate budgets efficiently by analyzing cost data and forecasting expenditures. Capital planning tools help prioritize projects and prevent overspending.

Preventive maintenance and asset management

Maintain current assets while preparing for future needs. Facilities management software supports a capital plan with preventive maintenance scheduling, asset tracking, and lifecycle management.

FMX for capital improvement plans

FMX offers a comprehensive suite of tools tailored for capital improvement planning. By leveraging FMX, organizations can create actionable, data-driven CIPs that deliver projects from ideation to completion. 

The platform can aid in the entirety of asset management from procurement to disposal. When it’s time to purchase or upgrade your assets, rely on FMX to help implement effective CIP. Create an effective operating budget and CIP with FMX.