259glossary

• Does the facility manager want to manage projects or outsource?

• Are net positive cash flows required?

• Will the equipment be needed for long-term needs?

• Is the facility government or private?

• If private, does the facility manager want the project's assets on or off the balance sheet?

• Will operations be changing?

From the research experience, a Strategic Issues Financing Decision Tree was developed to guide facility managers to the financial arrangement which is most likely optimal. Figure 25.14 illustrates the decision tree, which is by no means a rule, but it embodies some general observations from the industry.

Working the tree from the top to bottom, the facility manager should assess the project and facility characteristics to decide whether it is strategic to manage the project or outsource. If outsourced, the "performance contract" would be the logical choice.* If the facility manager wants to manage the project, the next step (moving down the tree) is to evaluate whether the project's equipment will be needed for long or short-term purposes. If short-term, the "true lease" is logical. If it is a long-term project, in a government facility, the "bond" is likely to be the best option. If the facility is

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