Transcript Federal Facilities Council Initial Research: Buildings: The Gifts that Keep on Taking Current Research: Implementing TCO in Higher Lander Medlin Education APPA – Executive VP Doug Christensen Brigham Young University Jack.

Federal Facilities Council
Initial Research:
Buildings:
The Gifts that Keep on Taking
Current Research:
Implementing TCO in Higher
Lander Medlin
Education
APPA – Executive VP
Doug Christensen
Brigham Young University
Jack Dempsey
US Coast Guard
© Doug Christensen
1
NRC: Scope of Committee Work:
Predicting Outcomes
from Investments in the
Maintenance & Repair of
Federal Facilities
© Doug Christensen
2
Focus: Annual M&O
NRC Committee’s Task is to develop:
Methods
Strategies
Procedures
to predict outcomes anticipated from
investments in Federal Facilities’ maintenance
and repair
We Believe Annual M&O must be viewed as part of TCO
© Doug Christensen
3
What is APPA Doing?



CFar Project:
“Implementing TCO in Higher Education”
Scope:

Survey 25 Key Institutions


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
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Gather data needed to make TCO decisions
Only sample 5 kinds of buildings ie: Library, Office, Classroom, etc.
Only sample 5 asset types ie: Roofs, HVAC, Electrical, etc.
Share results with Top Administrators
Seek response on Value of such data
Determine whether to implement TCO
© Doug Christensen
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Why?

Establish TCO in Higher Education

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No room for Deferred Maintenance
No room for Deferred Capital Renewal
Capture the Savings
Manage the Return on Investments
Begin each asset investment with the end in
mind
Mange from a holistic/ Sustainable view point
© Doug Christensen
5
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R 0248795c87ed120e6e3ca6187541e0c6 Thu Feb 04 08:04:07 2010
Utah Legislature: U. seeks funds to keep campus from crumbling
By Wendy Leonard
Deseret News
Published: Wednesday, Feb. 3, 2010 11:26 p.m. MST
| E-MAIL | PRINT | FONT + -
SALT LAKE CITY — Like most state agencies, the University of Utah
is asking lawmakers for money. However, the $15 million it is seeking
for critical infrastructure needs is necessary to keep the school from
further deterioration, at least for the time being, officials said. "We are
at a crisis here," U. President Michael K. Young told the Capital Facilities
and Government Operations Appropriations Subcommittee Monday.
He said that in June 2009, 65 buildings on campus were without heat
and hot water for days due to a line break. In January, 44 buildings
suffered the same fate for four days. In the past two years, 22 electrical
outages have left parts of the university without power for more than 300
hours total, and in 2009, the school witnessed 105 days without heat.
Some of those came during colder months, but the majority happened
in June. Young said such conditions are unacceptable for the highcaliber institution he's running. "In these circumstances and with this
infrastructure, I cannot continue to do what we've been doing," he said.
© Doug Christensen
6
Story continues below
Trouble is, funding for operation and management of state-funded
buildings is set the year they are completed, and 144 of the U.'s 243
buildings were built before 1970, meaning the state is shelling out enough to
power the buildings back then, but not enough to run them now.
Cory Higgins, director of plant operations at the U., said that two weeks
ago the high-temperature water distribution pipes at the school were
losing up to 30,000 gallons of heated and treated water each day. Shortterm repairs, of which there have already been four this year, have cut
the loss to 10,000 gallons a day, but with the pipes continuing to age,
more severe breaks are imminent. The 18 miles of metal pipe, buried
sometime in the 1960s, need to be replaced, he said. The cost to the
state would be $5 million.
A $10 million request to build a new power substation, he said, would
help alleviate some of the problems that have developed over the years.
U. officials weren't asking the committee for any funding to build new
buildings, only money to sustain the old, and as the oldest university in
the system, Young said the school is deserving of that.
© Doug Christensen
7
U of U’s Real Problem

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Is it a Funding issue? –
Is it a Budget issue? –
Is it an Ownership issue? –
Is it an Investment issue? –
Is it a Management Issue? –
Is it a Leadership Issue? –
What is it??
© Doug Christensen
8
Goal of Presentation

To Share




Past Learning
Strategic Vision
Current Research
To Discuss



Questions
Comments
Feedback
© Doug Christensen
9
Enterprise Model
Virtual Database
© Doug Christensen
10
Critical Applications
for
Enterprise Model
Industry and Institutions
Asset
Management
Supply Chain
Management
Enterprise Asset Management
EAM
SRM\SCM
Financials
GL/ERP
Human Resource
Management
HR/ Human Capital Systems
© Doug Christensen
Customer Relationship
Management
CRM
11
Challenges of Enterprise Asset Management



Who will manage the assets at the Enterprise Level?
 Senior Facilities Officer – SFO – Manages the Life of Assets
 Chief Information Officer – CIO – Manages Enterprise Systems
 Chief Financial Officer – CFO – Manages the books
Can all of the assets be managed as ONE Enterprise?
 Critics say – NO – To many silos
 Administrators say – Who they Trust & has Expertise
 Research says – Best managed “cradle to grave” in one place
How does the Senior Facilities Officer WIN?
 Broaden the Business and Leadership skills are required
 Best Qualified to deliver the roles of TCO


Birth & Burial, Maintenance & Operations, and Recapitalization
Takes Ownership of the issue
© Doug Christensen
12
Asset Manager
© Doug Christensen
13
Complexity
Facility Asset
Manager/Officer/Function
Mission Development
Facility
Manager
Program
Coordination
Superintendent
of Buildings
and Grounds
Responsible for 1 or 2
buildings
Operations
Physical Plant
Administrator
Utility
Distribution
Construction
Coordination
Operations
Maintenance
Maintenance
Reported to a Principal
Reported to a
Business Officer
© Doug
PastChristensen
Space Mgmt.
Planning/Design
Business Support
Utility
Distribution
Capital Renewal
Strategic Planning
Funding Options
Lease Options
Program Coord.
Space Mgmt.
Planning/Design
Business Support
Utility Distribution
Construction
Coordination
Construction Coord.
Operations
Operations
Maintenance
Maintenance
Reports to Bus. Officer or
Assist. Vice President
Reports to or “is”
Assistant Vice President
Core Competencies
Future14
Role Addition with Asset Management
Asset Manager = Investment
Manager
 Manages Assets - System Level
 Monitors Asset TCO
 Manages Asset Condition
 Makes Renewal Decisions
 Set Investment Targets
 Reports Asset Performance
 Compare “like” Assets
 Predicts Long-term Cash Flows
 Manages Annual Needs
 Manages Asset Inventory
Goal: Maximize the Asset
Investment
© Doug Christensen
Facility Asset
Manager/Officer/Function
Investment
Decisions
Capital Renewal
Strategic Planning
Funding Options
Lease Options
Program Coord.
Space Mgmt.
Planning/Design
Business Support
Utility Distribution
Construction Coord.
Maintenance
Decisions
Operations
Maintenance
Reports to or “is” Assistant Vice
President
15
Total Cost of Ownership
And
Life Cycle Costing
© Doug Christensen
16
3 Costs to Manage
1.
2.
3.
Birth & Burial (non-recurring)
Example:
New Building
Additions
Maintenance & Operations (annual recurring)
Example:
PM, Work Orders
Utilities
Custodial, grounds
Recapitalization (periodic recurring)
Example:
Remodeling
Code Compliance
Replacements
Capital Renewal
© Doug Christensen
17
Define:
Total Cost of Ownership
A Holistic View of Asset Management
FRAMEWORK
Birth & Burial (non-recurring)
cost A
Concept to Bid
cost B
Financing
cost C
Construction/ Install
cost K
Decommission/Demolition/Disposal
Maintenance & Operations (annual recurring)
cost D
Operations
cost E
Planned Maintenance/Routine
cost F
Repairs/ Breakdowns
cost G
Utilities
Recapitalization (periodic recurring)
cost H
Retrofits/ Improvements
cost I
Programmatic Upgrade
cost J
Replacement/ Renewal
© Doug Christensen
18
TCO vs. LC
Birth & Burial (non-recurring)

What is Total Cost of
Ownership?
cost
cost
cost
cost
A
B
C
K
Concept to Bid
Financing
Construction/ Install
Decommission/Demolition/Disposal
Maintenance & Operations (annual
recurring)

What is Life Cycle
Costing ?
© Doug Christensen
cost
cost
cost
cost
D
E
F
G
Operations
Planned Maintenance/Routine
Repairs/ Breakdowns
Utilities
Recapitalization (periodic
recurring)
cost H
cost I
cost J
Retrofits/ Improvements
Programmatic Upgrade
Replacement/ Renewal
19
TCO & Life Cycle Management
Value
Total Cost of Ownership
Asset
Renewal
+
Birth
Maintenance & Operations
Renewal/
Recapitalization
Useful Asset Life Cycle
0
Time
-
Project
Cycle
Time
Asset
Commission
Asset
Disposal
Asset
Start-up
Design Complete
Ready for bid
© Doug Christensen
20
Investments
and
Questions
© Doug Christensen
21
STRATEGIC INVESTMENT PYRAMID
Capital Plan
M&O Plan
Growth Plan
INVESTMENT
STRATEGY
DECISION
PERSPECTIVES
Economic/
TCO
Mission
Alignment
Financial/
Budget
Facilities Performance Data
Common
Terms
& Definitions
METRICS &
INDICATORS
STRATEGIC
QUESTIONS
Why Invest?
Strategic
Priority
Indices
What can we
Afford?
Periodic
Assessments
Statistical
Assessment
When and
Where to
Invest?
How much
Should we
Invest?
INTEGRATED DECISION FRAMEWORK
© Doug Christensen
22
What are the basic questions that policy
makers ask before investing in facilities?
Investment Questions
When and Where should we Invest?
Why should we Invest?
How much do we Invest?
What can we afford to invest?
How much should we Invest?
© Doug Christensen
23
What factors influence those decisions?
Why Should We Invest?
When & Where To Invest?
Programs & Mission Alignment with Change
Existing Asset Performance
Total Cost of Ownership
Location
Visio
n
Programs & Assets
Program Needs
Growth
Regulatory
Compliance
Retrofits
Improvements
Functional Change
Expansions
Additions
cost A
cost B
cost C
cost K
Portfolio
Property
cost D
cost E
cost F
cost G
Type
cost H
cost I
cost J
Retrofits/ Improvements
Programmatic Upgrade
Replacement/ Renewal
How Much Should We Invest?
Asset Development & Cash Flow Plan
Needs
Average Level
of Funding
Capital Spent
Capital Needs
Operating Spent
Operations
Planned Maintenance/Routine
Repairs/ Breakdowns
Utilities
Recapitalization (recurring)
Locator
Resource Investment Results
Concept to Bid
Financing
Construction/ Install
Decommission/Demolition/Disposal
Maintenance & Operations (recurring)
Structure
What can We Afford to Invest?
© Doug Christensen
Birth & Burial (non-recurring)
Operating Needs
24
Strategic
Planning
© Doug Christensen
25
Strategy

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Define the “Vision” and “Mission”
Establish Principles & Values
Strategic Objectives:




Manage Assets as “One”
Make better “Investment Decisions”
Stretch Limited Resource
Research “Best Practice”
© Doug Christensen
26
To what extent do these decisions rely on metrics
or facilities planning and management models?

Lessons Learned




Metrics = Knowledge
Management
Integrated Decision
Making
Get the Investment
Strategy Right
Strategic Investment
Plans
© Doug Christensen
Knowledge Management
Data Maturity Model
GOAL
Decision
Making
WISDOM
UNDERSTANDING
Right
KNOWLEDGE
Sharing
Gathering
INFORMATION
DATA
Metrics
27
Growth & Impact Plan = Birth & Burial Costs
Operations Plan = Maintenance & Operations Costs
Capital Needs Plan = Recapitalization Costs
STRATEGIC INVESTMENT PYRAMID
Capital Plan
M&O Plan
Growth Plan
INVESTMENT
STRATEGY
Economic/
TCO
DECISION
PERSPECTIVES
Mission
Alignment
Financial/
Budget
Facilities Performance Data
METRICS &
INDICATORS
STRATEGIC
QUESTIONS
Common
Terms
& Definitions
Why Invest?
Strategic
Priority
Indices
What can we
Afford?
Periodic
Assessments
When and
Where to
Invest?
Statistical
Assessment
How much
Should we
Invest?
INTEGRATED DECISION FRAMEWORK
© Doug Christensen
28
Comprehensive Plans Include:
Total Cost of Ownership
“Asset Investment Strategy”
Operations Plan
Capital Needs Plan
•Retrofit Project
•Improvement Projects
•Mandatory/ Compliance Projects
•Capital Renewal/Replacements
•Life Cycle Plan
•Work Hours/ Human Power Needs
•Materials/ Supplies Needs
•Equipment/ Tools Needs
•Systems/Process Needs
•Energy & Utilities Plan
Growth & Impact Plan
•Additions
•Additional Buildings/ Facilities
•Expand Infrastructure
•Space Plan
•Property Expansion
© Doug Christensen
29
Asset Investment Strategy

APPA Research: A collection of comprehensive &
continuous plans that equals the Total Costs of
Ownership includes:

RECAPITALIZATION -Existing Capital Asset Funding Plan -

MAINTENANCE & OPERATIONS - Operation Funding Plan –
Periodic Recurring Funding –Life Cycle & Projects


BIRTH & BURIAL - Growth & Impact Funding Plan –


Recurring Funding - Annual Budgets
Non-Recurring Funding – One-Time Projects
Other Strategic Funding Plans:
 Energy and Utilities Plan
 Space Management Plan
© Doug Christensen
30
Investment Strategy
3 Level Plans
FRAMEWORK
Birth & Burial (non-recurring)
Cost A
Concept to Bid
Cost B
Financing
Cost C
Construction/ Install
Cost K
Decommission/Demolition/Disposal
Growth & Impact
Plan
Maintenance & Operations (annual recurring)
Cost D
Operations
Cost E
Planned Maintenance/Routine
Cost F
Repairs/Breakdowns
Cost G
Utilities
Operating Plan
Recapitalization (periodic recurring)
Cost H
Retrofits/Improvements
Cost I
Programmatic Upgrade
Cost J
Replacement/Renewal
Recapitalization Plan
© Doug Christensen
31
Example : University of
Maryland - Baltimore
© Doug Christensen
32
$50,000,000 Gift
Maintenance ?
New Building
Capital Renewal ?
$___ ?_____
Cost: $50,000,000
$___?______
© Doug Christensen
33
$50,000,000 Gift
Maintenance
Endowment
Cost: $12,500,000
© Doug Christensen
New Building
Cost: $25,000,000
Capital Renewal
Reserve
Cost: $12,500,000
34
University of Maryland/ Baltimore
Example of a New Building
© Doug Christensen
35
University of Maryland/ Baltimore
Example of a New Building
© Doug Christensen
36
University of Maryland/ Baltimore
Example of a New Building
© Doug Christensen
37
University of Maryland/ Baltimore
Example of a New Building
© Doug Christensen
38
University of Maryland/ Baltimore
Example of a New Building
© Doug Christensen
39
Summary: University of Maryland - Baltimore
First Year
Pay me Now
Pay me Later
© Doug Christensen
40
Levels of
Asset Management
© Doug Christensen
41
4 Kinds of TCO Use
Campus Level
Property Level
Building/ Facility Level
Asset Level
© Doug Christensen
42
Investment Practice

Example: Roof needs repair





When do
When do
When do
When do
When do



you
you
you
you
you
Repair?
Stop Repairing?
Retrofit?
not Retrofit?
Replace?
At Life Cycle?
At Useful Life?
At Investment Life?
© Doug Christensen
43
Investment decisions
What is the best Investment Decision?
Additional Data
Stored Data
Example: Roof
Original Cost:
$10,000
Current Repl Cost:
$16,400
Est, Repl at 20 yrs:
$ 20,000
Installed:
1993
Life Cycle:
20 yrs
Remaining Life:
4 yrs
Life/date M&O Costs:
$ 8,000
Retrofit Costs: $ 2,500
Total Life/date: $10,500
Re-Investment Goal =
100%
Options: Repair. Retrofit, or Replace:
Current Repair needed: $ 600
Additional Life Cycle:
4 yrs
Current Retrofit Cost:
$ 1,800
Additional Life Cycle:
6 yrs
© Doug Christensen
Best Investment Decisions?
 Repair
$ 150/ yr
 Retrofit
$ 300/ yr
Replace based on:
 Life Cycle
$1,000/yr
 Useful Life
$1,025/yr
 Investment Life over $ 500
44
Total Cost of Ownership Comparison
Asset Level Business Case
Compare
Asset Type: # 1141 - Boilers
Location:
Heating Plant
Manufacture:
Model:
Make:
Humei
York-Shipley
4 MT Dual
150 HP
Natural Circulation
Cylinder Steam
Year Installed:
Year Replaced:
Actual Life Cycle:
TCO:
Birth & Burial:
M & O:
Recapitalization
Cost
per year:
© Doug
Christensen
Engineering
1963
2003
40
$ 1,359
$ 425
$ 739
$ 195
$
34
SPH150-N/Z95872
1966
2004
38
$ 570
$ 125
$ 309
$ 136
$ 15
Library
Alibaba
WNS-1~20T China
Gas/Oil Fired Steam
1950
2006
56
$1,366
$ 375
$ 756
$ 235
$ 24
Housing
Humei
2 MT Dual
Natural Circulation
Steam
1955
2001
46
$ 798
$ 200
$ 453
$ 145
$ 17 45
Building Business Case Analysis
116.85%
$ 198.46
© Doug Christensen
116.85%46
Capital Needs Plan
Capital Investment Strategy
© Doug Christensen
Next 40 year Capital Cash Flow Needs Strategy
47
Business Model
Execution Stage
Procurement Stage
Construction Documents Stage
Design Stage
Project Delivery Selection Stage
Dollars Expended on Facility
Conception Stage
Utilization
Stage
Closure
Stage
Optimized approach with virtual modeling and analysis
Typical
approach
failing
to do
routine maintenance
with
reduced
change
orders
& delivery
time and lower
andThe
having
replace
earlier and more often
operating
savings
andtosustainment
we areitems
currently
costs
experiencing with faster delivery
Typical
approach
anddesign/build
fewer change
orders with required
maintenance
The yet untapped $avings
2yr
Typical View
© Doug Christensen
100+ Years
1Yr
Savings Wisdom
48
The Model
3 Integrated Parts
Resource Needs
Project Delivery
Life Cycle Management
© Doug Christensen
49
Integrated
Resource Needs
Owner
Asset Investment Plans
Space
Management
Users &
Services
Program Needs &
Scope Approval
Strategic Plan/
Priority Projects
Recapitalization
Plan
Input
Approval
Action
Operations
Plan
The Plan
Growth &
Impact Plan
© Doug Christensen
50
Integrated
Resource Needs
Owner
Asset Investment Plans
Space
Management
Users &
Services
Program Needs &
Scope Approval
Strategic Plan/
Priority Projects
Recapitalization
Plan
Project
Model Base
Operations
Plan
Growth &
Impact Plan
© Doug Christensen
51
Integrated
Project Delivery (IPD)
Owner
Architecture & Engineering
Schematic
Design
Design
Development
Construction
Documents
Construction
Administration
COBie
SPie
LEie
Model Base
Estimating
Detailing
Construction
Construction/ Installation
© Doug Christensen
52
Integrated
Life Cycle Management
Owner
Asset Investment Management
Investment
Learning &
Knowledge
Decisions?
Useful Life
COBie
Life Cycle
Investment
Asset Database
SPie
ELie
Operations
Maintenance
Recapitalization
Life-time Care
© Doug Christensen
53
VISION: Enterprise Asset Management
Total Cost of Ownership
Integrated
Resource Needs
Project Delivery
Life Cycle Management
COBie
SPie
ELie
Life-time Care
© Doug Christensen
54
How do you Put them Together?
Integrate the Integrated
Integrated Master Resource Plans
Integrate
Integrated Project Delivery
Integrated Life Cycle Management
Total Cost of Ownership
Life Cycle
Management
Enterprise
Asset
Management
Master
Resource Plan
Project
Delivery
© Doug Christensen
55
Jack Dempsey
US Coast Guard
© Doug Christensen
56
Next Steps
© Doug Christensen
57