Life Cycle Costing - in Asset Management
‘Unlocking Asset Intelligence’
ISPE 2011 Northwest Region – The Crowne Plaza, Liverpool
on 24th November 2011 - Presented by Andrew Green
Overview of the Presentation
1. Context of maintaining and renewal of assets
• What is happening in the market place!
• Unlocking life cycle asset intelligence
2. Standardising Life Cycle Asset Management:
• Introducing the new rules of measurement
• Key methodology, techniques and metrics
3. Putting the LCAM standards into practice:
• ‘Fit for function’ maintenance standards
• Setting and defending the combined budgets
• Targeting investment and prioritisation works
• Informing wider estate strategies
4. Summing up – key benefits of adopting a:
• Standard, scalable and sustainable solution
5. Questions and answers
1
Life Cycle Asset Management
is not rocket science!
Shifting Thinking – Business Outcomes Focused
Construction
Design
Operate
Maintain
Business
Costs
Business
Outcomes
Delivery Cycle
Operational Life Cycle
2
What is Happening in the Maintenance Market ! ...
Developing
Competence
Knowledge Based
Excellence
Optimized planning
& decision making
Repair as good
as before
Reactive – fix it
when it breaks
A “paradigm shift” in attitude
from ‘cost focus’ to
‘business focus’
Integrated organization,
systems & processes
Proactive predictive
maintenance
Struggling with
management systems
Systems are a valuable tool
- information is an asset
Sound knowledge of
cost, performance &
risk relationships
Proactive, preventive
maintenance
Learning
Applying
Embedding
Maintenance is an expense
Outsourced contracts to
deliver value & cost savings
Integrating
Performance & Reliability
Maintenance & Renewal Spend
Innocence
Optimizing
Maintenance is an investment
Unlocking life cycle asset intelligence ...
‘What can be measured can be
evaluated, improved, directed –
in short managed!’
Lord Kelvin
What it contents:
• Common asset data and cost structure
…. (integrates construct, maintain and renewal)
Maintenance
& Renewals
•
Rules of measurement for R&M works
•
Functional unit costs (analysis/benchmarks)
•
Industry accepted methodology and metrics
3
Standardising Maintenance and Life Cycle Renewals
BCIS
Standard Form of
Cost Analysis
4th Edition
In Q2 2011
(NRM aligned
for construction)
Maintenance
& Renewals
Description
Heating Source
Boiler Plant
Boiler Unit
Shell and tube boilers (steam and hthw)
Water tube boilers (steam and hthw)
Electrode/electric boilers (steam and hthw)
Shell and tube boilers (mthw/lthw)
Water tube boilers (mthw/lthw)
Electrode/electric boilers (mthw/lthw)
Cast iron sectional boilers (mthw/lthw)
Steel boilers (mthw/lthw)
Condensing boilers (mthw/lthw)
Modular boilers
Domestic boiler - condensing
Domestic boiler - combination
Domestic gas fired boilers
Burner
Force Draught Gas Burner
Atmospheric Burner
Oil burners (pressure jet)
Solid Fuel Burner
Water Heater
Electric Water Heater
Instantaneous Water Heater
Unvented Storage Heater
HWS Cylinder (domestic type)
Gas Fired Water Heater
Solar Panel / Solar Thermal
Calorifier & Heat Exchangers
LPHW Calorifier
LPHW Calorifiers - Copper
LPHW Calorifers - Mild Steel
Steam calorifier
Steam Calorifiers - Copper
Steam Calorifers - Mild Steel
Heat Exchanger
Heat Exchanger - Shell and Tube
Heat Exchanger - Plate
Evaporator
Evaporator - Shell and Tube
Evaporator - Coil Direct Expansion
Trace Heating
Cooling Source
Chiller / Refrigeration Plant
Packaged Chiller
Centrifugal chiller
Reciprocating chiller
Screw chiller
Absorption chiller
Blast Chiller
Service Life
Maintainable Assets
20
25
25
20
25
25
25
20
20
15
15
10
10
BCIS Code
HVCA SFG 20 Ref
05-20
Build 5E
Code 05-19;
5E
05-19; 05-20
5E
5E
5E
5E
5E
5E
5E
5E
5E
5E
5E
05-19;
05-14;
05-14;
05-21;
05-14;
05-14;
05-04;
05-11
05-23;
05-29;
05-28;
15
20
15
15
5E
5E
5E
5E
05-(10-12); 07-03
05-(03-04); 07;01
05-13; 07-(04-07)
05-(25-27)
12
8
12
30
12
25
5D
5D
5D
5D
5D
5D
32-15
32-14
32-09; 32-13
32-15
32-13
53-01
25
20
5D
5D
32-(05-07)
32-(05-07)
25
20
5E
5E
32-(05-07)
32-(05-07)
25
15
5E
5E
20
20
20
5F
5F
5D, 5E, 5F
19-01
19-01
40-03
20
20
25
25
20
5F
5F
5F
5F
09-02;
09-02;
09-02;
03-04;
Life
Expectancy
05-20
05-23
05-23
05-22
05-23
05-23
05;10;05-12; 05-13
PPM Tasks
05-30
Including
Task Times
& Skilling
32-(05-07)
29-(06-07)
12-03
12-01
12-02
09-05
4
Putting the LCAM standards into practice
How ‘LCAM can help to set and defend budgets
optimise and maintain the assets sustainably!’
Principles of Life Cycle Asset Management (LCAM)
Holistic
Sustainable
Systemic
Integrated
Knowledge
based
Optimal
Risk based
Source: BS PAS 55: 2008
5
British Standard 8544 - for LCC of Maintenance
Integrated process of LCC of constructed assets
How to ‘Plan, capture, evaluate and then implement
maintenance and renewal programmes sustainably!’
Practice guidance on how to:
1 Set ‘Functional maintenance standards
2 Understand the impact of funding and
not funding life cycle asset investment works
3. Prioritise and optimise the actual spend v
business needs/wants, risks & budget limits
Improve decision making and business plans:
A Setting and defending the total LCC budgets
B Targeting investment and prioritisation works
C Informing wider estate strategies – (e.g. the
estate rationalisation; sustainability agenda)
Functional Maintenance Standards
PROFIT
REVENUE
RUNNING
COST
Business
Critical
Compliance
Renewals
Commercial Use of
Built Environment
6
Functional Maintenance Standards
Admin & Support
Buildings
Building
Fabric
Fire Alarms
General
Infrastructure
SSOW
Perimeter
Fencing
Project
Delivery
HV
Systems
Laboratories
Steam
Packaging
Clean
Rooms
Equipment
The
The
White
White
Powder
Powder
CCTV
Packaging
Clean
Equipment
Rooms
R&D Space by FunctionProcess
1
2
3
4
5
6
7
Asset
Management
GMP
Maintenance
Calibration
Life
Calibration
Support
Product
Product
Pressure
Pressure
Vessels
Vessels
Process
Water
Indirect
infrastructure
Permits
Condition
Reporting
Access
GMP
9% Plant
Systems operations
Systems
Compressed
Process space
5%
Air
AnimalBuilding
space
12%Procurement
Control space
Laboratory
39% & Stores
Management
Office Systems
24%
Energy
Plant
2%
Management
Water
Others
9% Treatment
100%
Voice &
Data
Refrigeration
Roads &
Paths
Lighting
Direct
infrastructure
Functional Maintenance Standards
Virtual Station ‘Customised FMS’ Model
Standardising ‘Applicable’ asset types
• Portfolio categorisation
• Infrastructure elements
• Assets and sub components
Asset management strategy
• Regulatory (minimum)
• Fit for function (optimal)
Defined responsibility for :
• Maintainable assets
• Renewal of assets
Asset assessment rules/ measures
7
Functional Maintenance Standards
Creation of minimum / optimal regimes
(Customisation of SFG20/SFG30 tasks)
Compliance and Fit for function models:
1
Agree ‘Applicable asset types’
2
Regulatory; legal assets
(C)
3
Criticality ranking assets
(C)
4
Energy focused assets
(C)
5
Proactive task schedules
(C)
6
Mothball tasks -vacate sites (C)
How Well Are Our Assets Performing ?
SPACE UTILIZATION
ENERGY/CARBON &
ENVIRONMENTAL
PERFORMANCE
FUNCTIONAL
SUITABILITY
PHYSICAL CONDITION & REMAINING LIFE
SAFETY,
SECURITY &
COMPLIANCE
FINANCIAL
OTHER FORMS
8
How Well Are Our Assets Performing ?
FUNCTION CONDITION INDEXING (FCI):
FCI =
Excellent
£3m
total cost of identified actions
-------------------------------------------------------current reinstatement value (CRV)
Good
Fair
£20m
Poor
Refurb/De-invest trigger?
0%
5%
10%
15%
20%
25%
50%
100%
How Well Are Our Assets Performing ?
9
Identifying the Risks of the LCAM works P1,2,3
RISK RANKING:
P1 – Regulatory
P2 – Function Critical
P3 – Other Criteria
Transparency of Assessment Prioritises – P1 list
10
Impact of Funding P1’s – Compliance Works!
Impact of Funding all P1, P2 and P3 Works
11
How Well Are Our Assets Performing ?
Tonbridge
R&D
Site
4
Unknown
Derelict
WareSite
R&D
Poor
4
Fair
Unknown
Good
Derelict
Pilot Plant
Plant
Solvent Store
Warehouse
lC
or
e
c ia
St
lu b
an
Pl
So
ac
e
Sp
ss
ce
ra
y /P
ro
bo
to r
La
ra
e/
bo
f ic
Of
fic
e/
La
Of
Of
fic
e/
La
bo
La
ra
bo
to r
to r
y/
yS
An
pa
im
ce
al
fic
e
pa
Of
ce
e
ac
ry
S
al
im
An
p
0
t
Offices
Building Function Type
rat
o
Laboratory Space
1
s
Conferencing
Facilities
Excellent
en
Amenities
Good
2
or
ks
ho
0
Fair
Sp
1
Poor
iti e
2
3
W
N u m b e r o f B u ild in g s
Excellent
Am
N u m b e r o f B u ild in g s
3
Building Function Type
FCI Estate Profiling by Function
12
FCI’s and other Building Performance Ratings
Asset Performance Ratings
Asset performance indicators have been tested to measure asset
condition at an Establishment and Building level and inform investment planning
Facility Condition Index
Building Performance Ratings
Excellent
Business Impact
Good
Fair
Poor
A
[No loss of
places]
Refurbishment Trigger
0%
5%
10%
15%
20%
50%
B
[Loss of
regime]
C
[Loss of prisoner
places]
100%
Safety & Security
• The current condition of the facility can be quantified using
the total estimated cost for all identified maintenance
actions and the current replacement value (CRV) of the
facility.
• The facility condition index, or FCI, is defined as follows;
A
B
C
[Complies
[Minor actions
[Identified
with
to comply] contraventions]
regulations]
Capacity
A
[Capacity
Available]
Value of identified maintenance actions
Current replacement value
D
[Seriously
at risk]
B
[Approaching
capacity]
C
[At capacity]
D
[Beyond
capacity]
LCC Indexation of the Total ‘Cost in Use’
Ratio e.g. 0.1; 1; 10+
Fees to Capital Building
Works to the Total Cost
Occupancy Cost (TOC)
Write
Down
Occupy
Costs
Key
O&M = Operations
& Maintenance Cost
Churn
Build
Cost
1.0
2 to 3 % per annum – business usage
(Depending on type of functional use)
1 to 1.5 % per annum on business moves
Renewals
1 to 2 % per annum on asset investment
Maintain
1.0 to 1.5 % per annum
Design Fees
0.1
Asset depreciation / finance provision
(dependent on value of capitalised assets)
5.0+
TOC RATIO to CAPITAL BUILD COSTS
(Based on a 60 year life corporate facility)
13
Key Performance & Cost Indicators
Facilities
Assessments,
Inspections
& Audits
Functional
Life Cycle
Investment
Planning
ASSET
INTELLIGENCE
Annual Operating Costs
Plan, Optimise
and Manage
the Budgets
Sustainably
Cyclical Asset Investment
Integrating the Capital and Revenue Costs
Capital and Maintenance Programmes
Annualised
Repairs and
Maintenance
Regime
Integrating the Capital and Revenue Costs
Portfolio by Region – Q3 2008
30%
Average
25%
Functional
20%
Life Cycle
15%
Investment
10%
Planning
FCI range
Plan, Optimise
and Manage
the Budgets
Sustainably
Cyclical Asset Investment
Facilities Condition Index (FCI)
5%
0%
UK
Sites
Key Performance & Cost Indicators
ASSET
INTELLIGENCE
US
Sites
EMEA
Sites
ASIA
Sites
Capital and Maintenance Programmes
Cost £ per annum /sq ft
Facilities
Assessments,
Inspections
& Audits
Annual Operating Costs
Maintenance Cost Per Annum
UK
UKWest
Corporate
London
& Real
R&D Estate
Sites – Q3 2008
30.0
Annualised
Repairs and
Maintenance
Regime
Average cost per annum
25.0
20.0
15.0
10.0
5.0
0.0
Pilot
Plants
Labs
Buildings
A/C
Offices
Support
Facilities
14
Innovative Use of Technology and Systems
Capital Planning
Asset
Management
Plans
Informing
Budgeting
&
Optimising
Life Cycle Spend
Data Repository,
Fund Modelling &
Optimise Spend
Programming (CAIP)
Funding
Strategies
Facilities Condition
Assessment
Standardise
Asset Reviews
(Forms & Use of IT)
Life Cycle
Costing
Prioritisation
Assets Status and Life Cycle Data
Repairs &
Maintenance
Resources
Service Models
Maintenance
Management
(CMMS)
Transforming How to Integrate the Process and Create a Sustainable Model
Capture
Cyclical Asset Investment Planning (CAIP) Tool
Portfolio Data
Report
Client
Specific
Outputs
Assessment Data
(Condition + ANO)
Analysis
Occupancy Data
(Costs /energy data)
Actions
Review
Decide
Control
Data Repository
Fund Modelling
(Impacts v Risks)
Planned Items
(Strategies &
Timescales
1,5.10 year +)
Performance
Ratings
(FCI/RII etc )
KEY FEATURES & FUNCTIONALITY
Monitoring
& Optimise
Programmes
of Works
Programming
Do/Defer/Not Do
Project delivery
(Rescheduling)
15
Evidence Based – Unlocking Asset Intelligence
Assurance of Compliance
• Legal and mandatory compliance
• Not under or over maintaining the estate
Target investment spend
• Quantified risks & liabilities v funds
• Fund modelling (by function/ assets)
Drive maintenance plans
• Setting and defending budgets
• Prioritised / risk based (P1 to P3)
• Inform strategic estate planning:
- (rationalisation/ closure studies)
- (capital project programming)
- (sustainability commitments)
Opens up the possibility to do BIM
Maintenance
& Renewals
16
Summing Up – Benefits of LCAM
Benefits of LCAM
LCAM provides a structured, integrated and agile
approach to managing, over time, the Business’s
requirements of Infrastructure & Property assets to
meet corporate business objectives and drivers.
Evidence knowledge based model, to inform:
Strategic decisions: focus on the medium to long
term requirements for investment in Property and
Facilities to meet longer term corporate objectives.
Operational decisions: focusing on the ongoing
management of the portfolio and individual
properties within agreed budgetary limits as
identified within the strategic estate plans.
Any Questions?
17