spring 2014 research publication the asset management...
TRANSCRIPT
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Asset management provides an
organization the opportunity
to understand the strategic
value of its assets, while improving the
efficiency and effectiveness of their use. It
also provides an ideal framework for the
coordination of asset related programs
in energy, environment, safety, and
security. The public demand for effective
organizational performance in these areas
is strong. Seventy percent of adults in
the United States favor overall higher
standards for pollution control, 65% favor
mandatory controls on greenhouse gasses,
69% favor spending more federal money
on solar and wind power..1 From 2006
to 2009, concern over global warming
declined as the economy overshadowed
all other issues, but such concern is now
steadily rising.2
Hurricane Sandy and the confluence
of public opinion guarantee that
greenhouse gas emissions will now be
a top governmental priority. U.S. adults
rank national security third in importance
behind job creation and the economy,
with 69% seeing the threat of physical
attacks and cyber attacks to be a major
priority for political and business leaders.3
The “resilience” of buildings and
infrastructure in the face of natural
disasters began as a topic in discussions
of aid to developing countries.4 This
topic has now been brought home to
academic and governmental meetings in
the U.S.5 Building owners in many areas
are beginning to re-examine their reliance
on standard practices, which may not have
kept pace with rapidly changing events.
Public opinion strongly influences the institutional environment in which an organization
will operate. The state of California’s carbon Cap and Trade law, modeled on European
standards, went into effect in late 2012.6 The Net-Zero energy movement continues to
grow, with the National Research and Engineering Laboratory (NREL) taking a leading role.7
This movement is now mature enough to receive some constructive criticism,8 and many
equipment vendors are entering this market in a serious way.9 Energy codes, standards,
and guidelines continue to tighten. As a result of these and other changes, environmental
performance and life cycle cost issues are moving to the forefront of corporate real estate
SPRING 2014 RESEARCH PUBLICATION
The Asset Management FrameworkPart 2 of 2
Using Asset Management to Coordinate Programs in Energy, Environment, Safety, and Security in Real Estate and CommerceA research report prepared for the Steven L. Newman Real Estate Institute, Baruch College, CUNY by Thomas W. Smith, Program Director, College of Engineering, University of Wisconsin-Madison.
1Gallup, Americans Endorse Various Energy Environment Proposals, (April 2012). http://www.gallup.com/poll/1538032Pew Research Center. (October 2012). More Americans Say There is Solid Evidence of Global Warming. http://www.pewresearch.org3Pew Research Center. (June, 2012). Debt and Deficit: A Public Opinion Dilemma. http://pewresearch.org.4Larsen, L., Rajkovich, N., Leighton, C., McCoy, K., Calhoun, K., Mallen, E., Bush, K., Enriquez, J., Pyke, C., McMahon, S., and Kwok, A. (2011). Green Building and Climate Resilience: Understanding Impacts and Preparing for Changing Conditions. University of Michigan; U.S. Green Building Council, Washington, D.C.5NIST. (2011). Strategic Goal: Disaster-Resilient Buildings and Communities, National Institute of Standards and Technology, Engineering Laboratory, Washington, D.C.6Barringer, Felicity. (November, 2012). A Market in Emissions is Set to Open in California, New York Times, Business. York, New York7NREL8NBI/CBC9Nestler, Clay and Palmer, Anne Shudy. Absolute Zero: Net Zero Energy commercial buildings – an inspiring vision for today
Two-Thirds Say the Earth is Warming
Figure 1: Public Attitudes Toward Global Warming
Source: “More Say There Is Solid Evidence of Global Warming,” October 15, 2012, the Pew Researh Center for the People & the Press, a project of the Pew Research Center
100
90
80
70
60
50
40
30
20
10
02006 2009 2012
Warning mostly because of human activityYes, solid evidence the earth is warning
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THE ASSET MANAGEMENT FRAMEWORK SPRING 2014
sector concerns (Figure 2).10 The broader real estate community is also quite aware that
“green” sells, and is investing in research as well as promotion.11 Effective asset management
can position an organization out in front of current needs and concerns and provide the basis
for staying ahead of the curve.
Definition
A useful and frequently quoted definition of asset management comes from the text of the
British Standards Institute Publically Available Specification (PAS) 55: Optimal Management
of Physical Assets.12 Asset management is the:
“Systematic and coordinated activities and practices through which an organization
optimally and sustainably manages its assets and asset systems, their associated
performance, risks and expenditures over their life cycles for the purpose of
achieving its organizational strategic plan.”
A condensed version of this definition is included in the International Standards
Organization (ISO) International Standard for Asset Management (ISO 55000: 2014).13 Asset
management is:
“The coordinated activity of an organization to realize life cycle value from assets.”
This standard draws from the success of PAS 55 and was released in January of 2014. It,
like the familiar ISO 9000, is a management systems standard. The structure around the
management system is not defined, but left up to the organization; as will the decision
whether to implement a separate system for asset management or to combine the asset
management function with other management systems. The scope of the system will
be flexible and registration will be based on a self-declaration of conformity. Since the
ISO Standard 14000 for environmental management and the ISO Standard 50000 for
energy management are also management systems standards, an integrated approach
is well supported. To further encourage integration, ISO has developed a new guide for
management systems standards14 and a
handbook for an integrated approach that
includes case studies.15
Why Asset Management is an Ideal Framework
Asset management is a well-established
concept in infrastructure, utilities, and heavy
industry. Asset management activities in
these sectors have produced a sound set
of business processes and procedures,
educational programs, products, and services
that can be translated to the commercial
sector. The development of a broad
international standard will further enhance
the tools and services available to all sectors.
Furthermore, the ISO management systems
approach provides a solid foundation for
asset management, whether or not an
organization decides to register under an
ISO Standard.
Asset management is a permanent
organizational function, which requires
a life cycle view of physical assets and a
strategic perspective. Because most of an
organization’s energy use and environmental
impact flows through its physical assets, asset
management provides an ideal framework
for managing these issues, along with
increasingly important security concerns.
Using asset management to integrate
programs in energy and environment
allows the organization to change the way
Executive Attitudes Toward Sustainable Buildings
Figure 2:
10Turner Construction Company. (2012). Green Building Market Barometer. http://www.turner.com11CBRE. (2012) Real Green research challenge. http://www.cbre.com12BSI/PAS 55-1:2008 Asset Management: Specification for the Optimized Management of Physical Assets, British Standards Institute, London, United Kingdom13International Organization for Standardization. (2014). Asset Management --Overview Principles and Terminology (ISO 55000:2014). Geneva, Switzerland. 14ISO/IEC Directives Part 1 and Consolidated ISO Supplement, Annex SL, Appendix 2. (2013, Fourth Edition). Retrieved November, 12, 2013 from: http://www.iso.org/iso/home/standards_development/resources-for-technical-work/iso_iec_directives_and_ iso_supplement.htm Geneva, Switzerland. 15ISO. (2008). The Integrated Use of Management System Standards. International Organization for Standardization, Geneva, Switzerland. ISBN 978-92-67-10473-7
Belief that it’s “the right thing to do”
Impact on brand/reputation
Cost savings
Customer requirements
Expectations or current employees
Expected future legislation & regulations
Ability to hire qualified new employees
Current legislation regulations
Investor requirments
Risk mamnagement considerations
Source: “Green Building Market Barometer 2012,” Turner Construction Company
0 10 20 30 40 50 60 70 80
Reasons for Commitment to Environmentally-Sustainable PracticesPercent Extremely or Very Important
68%
67%
66%
61%
45%
40%
40%
38%
36%
34%
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it approaches these issues. It replaces the audit and fix (inspect and repair) approach to
energy programs with a life cycle management system, in which audits are just one of
many tools. Asset management also enhances the special affairs/public relations approach
to environmental programs by providing a strategic view of assets and the environmental
impact of their construction, use, and disposal.
Asset management requires top level support and is therefore able to bridge the functional
management silos which interfere with many improvement programs. It also requires
strategic and tactical planning at the organizational level. These regular planning efforts
are the basis for innovation and development in response to changes in the organization’s
environment and goals. These might be changes in facilities’ use and operation in response
to tenant demand; the implementation of a new business process, such as Showrooming, in
response to customer demand; or the adoption of a new technology such as an integrated
monitoring and control system.
Greenhouse gasses are a major and growing environmental concern. CO2 emissions are directly tied to energy use, and the reader of this paper may assume that any discussion of energy efficiency also applies to CO2 reduction.
Asset management plans deal with the supply of energy, water, and materials – as well
as the demand side of efficient use and conservation. Assessing costs and risks related to
supply assurance and demand reduction is an inherent part of asset management, and not an
add-on. Asset management requires a life cycle view of building construction. It begins with
the site impacts of construction and includes the life cycle impacts of the materials used. This
view follows through to renovation and renewal and ultimately deconstruction and disposal.
Asset management requires performance measurement. These measurements may be
specific to a single asset or asset system, but they must be “rolled up” or totaled to evaluate
the value of the asset to the organization’s overall goals and objectives.
Assets are at the center of many current national security challenges. Up-to-date and
reliable asset data may be needed quickly in times of emergency. Physical security is quickly
becoming an important factor in asset system design, operations, and maintenance. Asset
data management systems contain crucial information about the organization, including
the location, condition, and operation of
its assets. The ISO Standard 27000 for
Information Security is another management
systems standard that should be considered
for integration with other asset related
standards.16
The business case for asset management is
quite strong. In the short term, the business
case rests on standards compliance; proven
cost savings in operation and maintenance;
and increased reliability and availability. In
the longer term, it involves the strategic
alignment of physical assets with business
needs, leading to improved utilization.
Enterprise level asset management is
considerably more complex than separate
programs for energy and environment. This
approach will take time to develop, but is
also more efficient and effective at meeting
organizational goals.
The Framework
To be effective, asset management
must be comprehensive, systematic, and
integrated across three dimensions:
• Length – lifetime of the assets managed
• Breadth – span of the assets managed
• Depth – level of detail/granularity of asset
management
This level of integration is likely to take
years to accomplish and represents a
significant challenge. However, a phased
approach is possible with the potential of
specific benefits at each phase.
Figure 3, from the Institute of Asset
Management BSI PAS 55:2008,17 is
commonly used to illustrate comprehensive
asset management. Working through this
diagram from left to right, and from bottom
to top, provides a structured way to see
how asset systems can be integrated with
each other and with non-asset solutions
across time and function. The bottom level
THE ASSET MANAGEMENT FRAMEWORK SPRING 2014
Figure 3: Comprehensive Asset Management
Corporate/ Organization Management
Manage Asset Portfolio
Manage Asset Systems
Manage Assets
Create / Acquire
MaintainUtilize Renew / Dispose
Typical priorities & concerns
Organizational Strategic Goals
Capital investment optimizationand sustainability planning
Sustained performance,cost & risk optimization
Optimizedlife cycleactivities
PAS 55 AssetManagement
System
Source: © IAM 2008 www.theIAM.org
16ISO 27001. (2005). International Organization for Standardization, Geneva, Switzerland
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addresses building components and individual systems. The whole building is represented
on the level of asset systems. A set of buildings or a campus enters on the portfolio level. In
a few cases where asset systems are centrally managed, the portfolio may be composed of
functional systems, rather than buildings.
Life Cycle Activities – Managing Assets
There are many approaches to asset management, representing different countries,
industries, economic sectors, and time periods. Recognition of the problems caused by first
cost decision-making and the need for life cycle management is common to all of them.
The asset management pyramid, shown in Figure 3, puts the longitudinal or life cycle
management of assets at the base, with functionally integrated activities above. Integration
along the life cycle is implied and requires data sharing and decision-making across
organizational silos. Top management support is essential. The asset management function
coordinates and supports these activities.
The lowest level of the diagram addresses the life cycle of an individual asset (rooftop
HVAC unit), a tightly integrated system (unit plus ductwork and controls), or a building shell.
Energy use at this level includes embedded and delivered energy. Embedded energy is the
input of energy through the building materials and construction activities. Delivered energy is
the energy used by building operations. Power must also be included in this discussion, since
demand charges and power factor correction charges may make up a substantial portion of
a building’s utility bill. Delivered energy is addressed in the utilize stage of the life cycle, but
the options for efficient utilization and effective maintenance are determined at the create/
acquire stage. Embedded energy is a consideration at the create/acquire stage and at the
disposal stage. Sustainability analysis tools and procedures, such as LEED and Green Globes,
require an accounting of embedded energy.18
Environmental impact at the lowest level includes site and construction impacts, which
are extended to renovation and deconstruction/disposal. It also includes the materials
that flow through the building during operations and the products used in maintenance.
Environmental impact can also include occupant activities, as well as commuting and supply-
chain related transportation impacts.
A key tool for implementing life cycle management is a life cycle cost analysis. This well-
known procedure allows two points of view: the owner’s view (commonly expressed as “total
cost of ownership”) and the asset’s view (the whole-life of the asset, whether theoretical or
pragmatic). Modern theories of sustainability require that the asset developer and initial
owner have some responsibility for the asset through the end of its life, whether they continue
to own it or not. There are several tools available to assist in the life cycle assessment of an
asset, whether assessing a building or a system within a building. The tools include:
• U.S. Department of Defense (DOD): Defense Acquisition Handbook19
• Association for Testing and Materials (ASTM) E917-05 (2010) Standard Practice for Measuring Life Cycle Costs of Buildings and Building Systems20
• U.S. National Institute of Standards and Technology (NIST): Building for Environmental and Economic Sustainability (BEES)21
• U.S. Environmental Protection Agency (EPA) Life Cycle Assessment: Principles and Practices (LCA 101)22
• International Association for Standardization, ISO 14040:2006 Environmental
management –Life cycle assessment – Principles and
framework23
The first two tools focus on economic
cost, while the others include environmental
externalities. These procedures are complex,
however, and the Los Alamos National
Laboratories LANA Sustainable Design
Guide cautions, when discussing life cycle
impact of building materials:24
“Ideally, materials choices would
be made based on a rigorous
THE ASSET MANAGEMENT FRAMEWORK SPRING 2014
17,18UBSI/PAS 55-2:2008 Asset Management: Specification for the Optimized Management of Physical Assets: Requirements and Guidance for Use, British Standards Institute, London, United Kingdom19U.S. Department of Defense. (2010). Defense Acquisition Guidebook, Chapter 3 Affordability and Life Cycle Resource Estimates, Washington, D.C.20ASTM E917 – 05(2010) Standard Practice for Measuring Life-Cycle Costs of Buildings and Building Systems. American Society for Testing and Materials. Conshohocken, Pennsylvania21NIST. (2010). Building for Environmental and Economic Sustainability (BEES). U.S. National Institute of Standards and Technology, Engineering Laboratory, Applied Economics Office. Washington, D.C.22EPA. (2006). Life Cycle Assessment: Principles and Practice. U. S. Environmental Protection Agency, National Risk Management Research Laboratory, Cincinnati, Ohio23ISO 14040:2006. Environmental management –Life cycle assessment -- Principles and framework. International Organization for Standardization. Geneva24LANL. (2002). Sustainable Design Guide. Los Alamos National Laboratory, Los Alamos, NM
assessment of environmental
burdens throughout the entire life
of the product or material. This
practice, known as environmental
life cycle assessment, is rarely
feasible for most building
procurement decisions. It is
possible, however, to use life
cycle thinking to compare what is
known about the environmental
performance of products and make
informed choices.”
A full discussion of life cycle economic and
environmental assessment is beyond the
scope of this paper. A useful starting place
for a beginner is a guide authored by the U.S.
Forest Service, regarding the management
of its buildings: Life Cycle Cost Analysis for
Buildings is Easier than You Thought.25
Create/Acquire
The create/acquire stage extends from
needs assessment through design and
construction, or retrofit and remodeling.
Choices in this stage affect the energy use
and environmental impact of the asset over
its lifetime. For a commercial facility, the
lifetime cost of operation, including energy
use, will be considerably more than the initial
cost of construction.
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Much of the lifetime environmental impact
of a building, including water use, surface
runoff, and transportation, is determined
at this initial stage. Other costs, such as
custodial, maintenance, and security, will
also be impacted by design and equipment
choices in this stage.
In the case of new construction, or
significant remodeling, the construction
process has significant environmental
impacts. These include site impacts such
as erosion, and construction impacts
such as noise and dust. Impacts on the
neighborhood include construction staging,
traffic congestion, and street wear. Energy
use in construction activities and materials
transport may also be considered.
There is no shortage of advice and
discussion on how to design energy efficient
and environmentally friendly facilities and
equipment in the commercial sector. Codes
and standards address many of the problems
that develop from building decisions based
on lowest first cost. These were originally
life-safety standards, but were expanded
after the first energy crisis in the 1970s to
cover energy efficiency. In addition to formal
codes, there are a number of voluntary
guidelines and certification programs, such
as LEED for energy and environment,26
the Green Building Initiative (GBI) “Green
Globes,27 and the American Society of Civil
Engineers Building Security Council (ASCE
BSC) Building Rating System for security.28
Sorting through all of the information
on building design is difficult. The Whole
Building Design Guide29 from the National
Institute of Building Sciences provides an
excellent framework for this effort, including
a discussion of design issues, relevant codes,
and standards, and a list of resources. It
aligns nicely with the asset management
paradigm. A building adhering to the NIBS
guide would be:
• Accessible
• Aesthetic
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THE ASSET MANAGEMENT FRAMEWORK SPRING 2014
Figure 4: Comparative Costs
Source: 2006 Study: “Re-examining the Costs and Value of Owning and Occupying Buildings
• Cost-effective
• Functional
- Operation
- Maintenance
• Historic
• Productive
• Secure
• Sustainable
The resources listed in the guide include
energy cost data and environmental impact
data for most of the design features, material
components, and equipment choices made
at the create stage. Modeling and analysis
tools are also listed, so that energy efficient
equipment can be incorporated into energy
efficient systems.
One critical addition to the list just
mentioned is “flexible.” The design of the
space and systems will influence future
use. Acoustical problems, for example, are
notoriously hard to fix in a retrofit. Design
choices in the create/acquire stage or in the
renew/recreate stage will affect the ability to
control space conditioning and other costs,
such as security in the utilization stage. The
arrangement of spaces and the design of the
systems will determine whether large sections
of a building can be turned down during
unoccupied hours. Design choices also affect
the potential for alternative energy, including
day lighting, as well as the ultimate cost and
performance of alternate energy measures.
Utilize
In the commercial sector, utilize has two
meanings: 1) in real estate, it means that the
space is leased or assigned; 2) in operations,
25U.S. Forest Service, Life Cycle Cost Analysis for Buildings is Easier than you Thought.26USGBC. (2009). LEED Green Building Rating Systems. United States Green Building Council. Washington, D.C. http://usgbc.org/leed27GBI. (2012). Green Globes environmental assessment and certification programs for commercial buildings. Green Building Initiative. http://thegbi.org28ASCE. (2007). Building Security Certified Professional. American Society of Civil Engineers. Reston, VA. http://ASCE.org29NIBS. (2012). Whole Building Design Guide. National Institute of Building Sciences. http://nibs.org.
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it means that there is actually someone in the primary space. One of the most common
performance improvement tactics used by energy auditors and shared savings providers is
changing environmental conditions and equipment schedules to match the actual occupancy.
Changes in room temperature or ventilation rates results in direct savings, but more
importantly these savings can cascade back through the system as changes in hot deck/cold
deck temperatures and circulating water temperatures. These changes can also reduce fan
and pumping energy. Managing systems to reduce or eliminate simultaneous heating and
cooling is another operational savings tactic. The total HVAC savings can be impressive.
Energy management programs will produce savings in peak demand and therefore demand
charges, which are often a substantial portion of a commercial organization’s electric bill.
Demand charges may also be attacked directly, with savings estimated at 25% in one study
by Lawrence Berkeley Laboratories.30 Matching light levels and timing to meet safety and
productivity needs, and operating conveyances (elevators and escalators) at an appropriate
speed and schedule to meet needs, will also produce energy and demand savings.
The U.S. Environmental Protection Agency (EPA) has produced a Lean, Energy & Climate
Toolkit, which advocates Lean and Six-Sigma approaches to identifying operational
improvements.31 Operational Excellence is a widely accepted performance improvement
method in the industrial community. The U.S. Department of Energy has applied this
concept to its own operations, and it is also being applied to building operations in the
commercial sector.32
Setting back temperatures, throttling back outside air, and turning off lights during
unoccupied hours produces energy cost savings from 10%-25%.33 It should be realized,
however, that energy costs are only a fraction of total operating costs.34 From an asset
management perspective, adding productive hours to the building schedule can provide a
significant improvement in utilization, rents, or sales, which can support greater investment
in building and systems improvements.
Operating hours in the commercial sector are increasing for a number of reasons.
• Office buildings need to support workers in a global environment, where customers and suppliers cross many time zones.
• Workers increasingly demand flexible hours to match their own lifestyle preferences. In urban areas, extended operating hours can allow flexibility that decreases commute time.
• In urban areas, extended operating hours can allow flexibility that decreases commute time.
• The virtualization of work means that office workers may not need physical access on a daily basis.
• Adding a “second shift,” or partitioning an office building based on time, as well as space, can decrease lease costs in high-
cost areas.
The cumulative result of these trends
is that many offices are operating 16, or
even 24, hours a day. The “building within
building” concept is growing to provide
even more flexibility.35 Many food and
service establishments have altered their
hours to match office worker needs. Retail
establishments also offer longer hours for
shopper convenience and to take advantage
of times when these buildings are already
occupied for stocking or cleaning.
Efficient operations in this new environment
will focus on a more precise meeting of
the functional needs of the occupants in
space and time. Performance controls for
temperature, lighting, and ventilation replace
system presets.36 Reducing outside air, while
maintaining indoor air quality through CO2
monitoring and control, is a leading example
of this tactic. In some cases, “procedural”
solutions are encouraged to identify and
isolate sources of heat/cold, noise, and
THE ASSET MANAGEMENT FRAMEWORK SPRING 2014
30Yin,Rongxin; Kiliscote, Sila; Piette, Mary Ann and Parrish, Kristien. (2010). Scenario Analysis of Commercial Buildings with Thermal Mass in California. 2010 ACEEE Summer Study on Energy Efficiency in Buildings. American Council for an Energy Efficient Economy. Washington, D.C.31EPA. (2012). Lean, Energy & Climate Toolkit. U.S. Environmental Protection Agency. Washington, D.C. 32McDonald-Miller Facility Solutions. (2010). Achieving Operational Excellence: Energy Efficient Operations in a Shrinking Budget Environment. 2010 Energy/Facilities Connections Conference. University of Washington. Seattle, Washington33Murphy, John and Maldeis, Neil. (2009). Using Time-of-Day Scheduling to Save Energy. ASHRAE Journal. American Society of Heating, Refrigeration and Air-Conditioning Engineers. Atlanta, GA34BOMA. (2011). Experience Exchange Report. Building Owners and Managers Association. Washington, D.C. http://BOMA.org35Gregor, Alison. (2012). “Buildings in Buildings” Benefit Renter and Landlord. New York Times. New York, New York36Stipe, Marty. (2003). Demand-Controlled Ventilation: A Design Guide. Oregon Office of Energy. Salem, Oregon
Source: http://blog.plaxo.com/2007/07/all_new_plaxo_t/
contamination, rather than masking them.37
Building occupants and operators have a role
in this new, performance-oriented approach,
as noted in the EPA’s Office Building
Occupants Guide to Indoor Air Quality.38
More complex systems require more robust
design and more reliable maintenance,
which are supported by asset management.
Custodial operations are recognized as
part of the utilization phase as opposed to
the maintenance phase. Custodial costs
are generally equal to energy costs in large
buildings.39 There are many opportunities
for savings as custodial operations are
integrated with other operations and
maintenance efforts.
Building operators and control systems
are responsible for occupancy parameters,
such as temperature, humidity, light, and
sound levels, and indoor-air quality. These
parameters, along with cleanliness, affect
productivity, customer and employee
satisfaction, and health. Training and support
of operating personnel are necessary to
meet energy and environmental guidelines,
as well as the organization’s continually
developing requirements for more intense
and efficient asset utilization. In the asset
management literature, this is termed
“asset care.”40 Lean methods can be
borrowed from the manufacturing sector
and applied to asset care. The 5S system,
which is a first step in many Lean efforts,
is particularly appropriate to the crowded
and hectic conditions that confront many
building operators.41 The steps involved,
Sort, Set-in-Order, Shine, and Standardize,
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are easy to understand and apply, though the sustained implementation of this system is
more difficult than it first appears.
A recent survey of corporate executives shows the importance of operations and
maintenance considerations, along with occupancy rates and building value.
From an asset management perspective, the materials that flow through the asset (e.g.
goods through a store, food through a restaurant, and cleaning supplies through the
custodian) are all part of utilization, but are accounted for separately from the operation
of the asset itself. The energy and environmental impact of these materials can be
significant, and there are resources available to aid in assessment and impact reduction.
The EPA publishes Comprehensive Procurement Guidelines for Federal Agencies to
support the Resource Conservation and Recovery Act.42 The sustainability chapter of the
Whole Building Design Guide provides many references. LEED also contains guidelines on
building utilization and materials flow.
There are obvious interactions between materials used and other asset systems.
Reduced packaging reduces waste, but also allows for reduced shelf space, material
handling, and transportation. These interactions are considered more fully in the “systems
view” discussed in the next section.
THE ASSET MANAGEMENT FRAMEWORK SPRING 2014
Figure 5: Evaluating Green
37ASID. (2007). Indoor Air Quality. Interior Design and Global Impacts 2007. American Society of Interior Designers. Washington, D.C. http://asid.orgEPA. (1997). An Office Building Occupant’s Guide to Indoor Air Quality. U.S. Environmental Protection Agency. Indoor Environments Division. Washington, D.C.38EPA. (1997). An Office Building Occupants Guide to Indoor Air Quality. U. S. Environmental Protection Agency. Washington, D.C. 39BOMA. (2011). Experience Exchange Report, New York, New York. Building Owners and Managers Association. Washington, D.C. http://BOMA.org40EMS. Operator Asset Care: Ten Top Tips to Improve Equipment Reliability. Engineering Maintenance Solutions. http://www.engineeringmaintenace.info Retrieved December 2012.41EPA. (2008). Lean Thinking and Methods. Cited from: http://www.epa.gov/lean/environment/methods/fives.htm. March 2013.42EPA. (2004). Comprehensive Procurement Guidelines. U.S. Environmental Protection Agency, Resource Conservation. Washington, D.C. http://www.epa.gov/epawaste
Source: http://www.google.com/about/datacenters/gallery/_-_/tech
Ongoing operations & maintenance costs
Energy efficiency
Building value
Health & well-being of occupants
Indoor air quality
Total 10-year costs
Occupancy rates
Asking rents
Source: “Green Building Market Barometer 2012,” Turner Construction Company
0 10 20 30 40 50 60 70 80 90
Importance when Evaluating Costs & Benefits of Green Features in 2012Percent Extremely or Very Important
73%
74%
74%
74%
74%
75%
84%
84%
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Maintain
Maintenance programs are generally
categorized as:
• Reactive
• Preventive
• Predictive
• Reliability Centered
Reactive maintenance is the most common
type of program, with some studies estimating
that more than half of all maintenance
activities are reactive.43 Preventive
maintenance is common in systems, such as
conveyance where safety is an issue, and it is
often tied to inspection programs. Reliability
Centered Maintenance (RCM) is generally
recognized to be the most efficient and
cost effective form of maintenance from the
perspective of asset management, and there
are many studies to support this view. RCM
incorporates many features from other types
of programs and provides a higher level of
performance measurement and assurance.
However, RCM requires more support and
is relatively rare in the commercial sector,
but that may be changing. NASA has issued
a Reliability Centered Maintenance Guide
for its facilities,44 which provides a useful
benchmark. Areas of the commercial sector,
which are most likely to adopt RCM, include
high-volume, high-cost facilities such as
terminals, distribution centers, convention
centers, casinos, and data centers. Large
office and retail operations may also consider
RCM, particularly if functional management
is centralized. NASA’s Reliability Centered
Maintenance Guide provides a sample
comparison of the costs of each type of
maintenance program for electric motor
maintenance, showing a considerable cost
advantage:
• Predictive = $ 16/HP/YR
• Preventive = $ 12/HP/YR
• Reliability Centered = $4/HP/YR
From an asset management perspective,
the maintenance stage is judged by its impact
Renew/Dispose
Buildings and equipment may go through
many changes over a fifty to a hundred
year life cycle. Changes are driven by the
environment, economics, and fashion.
Decisions regarding what, when, and how
to renovate can be complex. Building
components and equipment may wear out
or become obsolete. An energy audit may
show that building or equipment upgrades
will save money, but these upgrades
must be coordinated with other design
THE ASSET MANAGEMENT FRAMEWORK SPRING 2014
43FEMP. (2010). Operations and Maintenance Best Practices: A Guide to Achieving Operational Excellence. Federal Energy Management Program. U.S. Department of Energy. Washington, D.C44NASA. (2008). Reliability Centered Maintenance Guide: For Facilities and Collateral Equipment. National Aeronautics and Space Administration. Washington, D.C.45Hunt, W.D. and Sullivan, G.P. (2002). Assessing the Potential for a FEMP Operations and Maintenance (O&M) Program to Improve Energy Efficiency. Pacific Northwest National Laboratory. Richland, Washington. 46Institute for Building Efficiency. (2012). Energy Savings from Maintenance. Johnson Controls. Milwaukee, Wisconsin.47Hastings, Nicholas A. (2010). Physical Asset Management. Springer-Verlag. London. ISBN 978-1-84882-750-948Mitchell, John S. (20007). Physical Asset Management Handbook – Fourth Edition. Clarion. Houston, Texas. ISBN: 0-9717945-4-5.49CII. (1999). Design for Maintainability Guidebook. Construction Industry Institute. Cockrell School of Engineering, University of Texas at Austin.50Crowe, Dana and Feinberg, Alec. (2001). Design for Reliability. CRC Press. Lowell, Massachusetts. ISBN: 0-8493-1111-X
on asset risk, reliability, and availability. From
an energy perspective, effective maintenance
improves device efficiency, which also
influences system efficiency. Annual energy
savings from effective HVAC maintenance
are variously estimated at 5-20%,45 with some
estimates even higher.46 Actually achieving
these savings, however, requires a systematic
approach, effective training, and spares
management, which are all part of effective
asset management. From an environmental
perspective, maintenance has positive effects
on resource use, and potential negative
effects on the toxicity of supplies and
materials used in the maintenance process
(cleaning compounds, oil, grease, etc.).
Asset management activities in
infrastructure and heavy industry are largely
weighted toward the maintenance stage of
the life cycle, and maintenance activities are a
focus of the most popular asset management
handbooks.47, 48 Lessons learned from the
industrial sector can speed up adoption and
reduce the costs of asset management in the
commercial sector.
Effective asset management requires
a maintenance policy and plan, and the
training of maintenance personnel. It also
requires the integration of the utilization and
maintenance stages of the asset life cycle.
The increasing use of building automation
systems, along with the increasing use of
computerized maintenance management
systems, provides an opportunity to support
this integration with real data. Other industrial
practices, which have focused on developing
effective spares inventories, the use of
predictive analytics, and the integration with
enterprise resource management, are also
increasingly well documented and available
to the commercial sector.
Design for maintenance and
maintainability49 is critical to the asset life
cycle, and is supported by other processes,
such as Design for Testability and Design for
Reliability.50
decisions required by changes in use. The
rapid downsizing of office and retail space,
for instance, will affect many aspects of
the building layout and utility services.
Asset management will help to avoid the
trap of simple “like-for-like” replacement.
Coordination of facility upgrades with
changes in use will reduce cost and improve
performance, and the method for this
coordination is the asset management plan.
Commercial enterprises and the buildings
they occupy are subject sale and trade
on a much more frequent basis than
manufacturing assets. The dispose phase
for one owner is often the acquire phase
for another. An effective asset management
system will guarantee that the seller is aware
of what is being sold, its specifications, and
its condition. This information, which is part
of the asset data, may be transferred to
the new owner, speeding up the process.
This information will also aid the owner in
understanding and managing any residual
liabilities that accompany the asset.
The American Society for Testing and
Materials (ASTM) standards for Property
Condition Assessment51 and Building
Energy Performance Assessment52 provide
guidelines and incentives for this transaction.
Life cycle management concepts have
placed a new concern on the renew/dispose
phase of an asset’s life. The environmental
impact of the construction process and the
disposal of construction waste is now a major
public concern. This concern applies to
remodeling or demolition, as well as to new
construction. Air and water quality impacts
of construction equipment, site disturbance,
and materials are part of this consideration,
as is noise.53 Up to 90% of construction
waste can be recycled; considerable
research has gone into the development of
recycling methods, and the EPA’s website
for the Resource Conservation and Recovery
Act (RCRA) provides access to this work.54
Many codes, standards, and guidelines
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THE ASSET MANAGEMENT FRAMEWORK SPRING 2014
require recycling and other environmental impact controls.55 Design for disassembly56 is a
requirement for many industrial products, and has been proposed for the building industry.
Careful utilization and effective maintenance prolong the asset life and promote its orderly
disposal.
Integration Across Life Cycle Stages
In most organizations, the life cycle stages of an asset are notoriously separated or “siloed.”
If operation is difficult or expensive, problems may often be traced to design. If maintenance
is encumbered by production activity, problems may be traced to operations. Integration
across the life cycle is very difficult, because each stage of the asset life cycle is likely to have
its own business systems and structures. The benefits, however, are significant:
• Integrating operation and maintenance reduces downtime and improves
overall efficiency and personnel utilization.
• Integrating maintenance and disposal increases longevity and potential for
reuse of assets.
• Integrating creation/acquisition with operation and maintenance provides for
testability, predictability of operations, and ease of maintenance.
• Integrating creation/acquisition with renewal/disposal increases potential for
reuse and reduces cost and impact of disposal.
Integration must also cross the gaps that exist between life cycle stages, which are
separated in time and distance. Assets may be used in ways not intended by the designer.
51ASTM E2107 – 06 Standard Practice for Environmental Regulatory Compliance Audits. American Society for Testing and Materials. Conshohocken, Pennsylvania.52Buonicore, Anthony J. and Watson, Robert. (2011). Using the New ASTM BEPA Standard in Energy Auditing and ECM Performance Evaluation. Critical Issues Series: Green Building and Sustainable Development in the Commercial Real Estate Industry. Building Energy Performance Assessment News. Buonicore Partners, LLC. Milford, Connecticut. 53Environmental Protection Authority. (1996). Environmental Guidelines for Major Construction Sites. Australian Environmental Protection Authority. Victoria, Australia.54EPA. RCRA inFocus: Construction, Demolition and Renovation. U.S. Environmental Protection Agency. Washington, D.C. http://www.epa.gov/wastes/inforesources.55Lennon, Mark. (2005). Recycling Construction and Demolition Wastes: A guide for Architects and Contractors. The Institution Recycling Network. Boston, Massachusetts.56Guy, Brad and Ciarimboli, Nicholas. (2006). Design for Disassembly in the Built Environment: a guide to closed-loop design and building. King County Washington, Department of Natural Resources.
Source: http://www.futureagenda.org/pg/cx/view#415
(1)Industry
(2)Business Category
(3)Installation
(4)Plant / Unit
(5)Section / System
(6)Equipment Use
(7)Subunit
(8)Component / Maintainable Item
(9)PartEq
uipm
ent S
ubdi
visi
onU
se /
Loca
tion
ISO 14224:2006
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THE ASSET MANAGEMENT FRAMEWORK SPRING 2014
The requirements, which drove the design
and the knowledge that shaped the design,
may have been lost over time. Operational
decisions are often separated in time from
maintenance decisions. A standard caution
in business process analysis is to mind the
“white spaces” between stages as carefully
as the processes within a stage.
A number of assessment and planning
tools exist to support integration across
stages. These include the life cycle
assessment tools described earlier, as well as
a concept of “spanning projects,” which are
created to demonstrate how integration can
be accomplished. Information dashboards
may be created to allow executives to assess
the performance of individual asset systems
and to roll up performance measures across
systems. The science of cross-functional
teams can be applied to asset management.
A few organizations have even elevated
the asset management function above
engineering and operations areas in their
organizational chart.
Managing Asset Systems – Performance, Cost, and Risk
The concept of “asset systems” is useful,
but can also be confusing. The asset
taxonomy is used to clarify the definition of a
system, through system boundary diagrams.
A rooftop HVAC unit, for example, could be
considered as a single asset or as a system of
motors, pumps, filters, coils, and fans. This
unit, in turn, fits into an HVAC system, which
adds ductwork, diffusers, and controls, and
then further fits into a building system and
perhaps also a campus. Whether any piece
is an asset, an asset system, or a system of
systems depends on the taxonomy in use
and the desired level of control. It is common
to consider a building to be a system of
systems.
Asset Data Management
Asset management is not possible without
asset data. Asset data management is not
the same, however, as asset management (though many vendors will stretch this definition).
The management system determines the need for asset data and the uses of asset data.
Due to its importance, asset data integrity is a major issue, including both the availability
and the accuracy of data. In many older facilities, basic construction data is unavailable and
must be developed through audits or the monitoring of work-orders. These processes are
subject to inaccuracies, inconsistencies, and delays, and must be carefully implemented. Any
data entered manually has potential issues, and therefore data entry training is a critical issue.
Metering, monitoring, and control systems provide generally reliable data, but often too
much data. The challenge is to decide what data to collect and how to use it. Lawrence
Berkeley National Laboratory has produced a guide titled the Energy Information Handbook:
Applications for Energy Efficient Building Operations.58 This handbook provides detailed
guidance on how to collect and use energy data to improve building operations. The current
asset management standards, as well as those under development, will strengthen the tools,
processes, and technologies available for managers of asset data.
Taxonomy
The most commonly used asset taxonomy includes information on the business, location,
function, and equipment attributes of any significant asset. This information is stored in a
relational database, so that many views of the data can be provided. In the retail sector,
for instance, the business information may include whether the asset is in the warehouse,
distribution center, or a retail outlet. The location would include physical coordinates and
perhaps a record of jurisdictional information. Typical functional categories might be:
landscape, shell (exterior), interior, HVAC, lighting, conveyance, and access/egress. The
function is physically realized in bricks, mortar, and equipment, and classified in standard
architectural and engineering terms. Many industries and infrastructures have their own
taxonomies and standards.
Taxonomies can be used in many ways. The top levels are normally the basis for business
process and financial analysis, while lower levels are tied to operational analysis. Taxonomy
Figure 6: Standard Asset Taxonomy
57DiStefano, Robert S. and Thomas, Stephen J. Asset Data Integrity is Serious Business, 2010, Industrial Press, New York, New York58Granderson, J, Piette, MA, Rosenblum, B, Hu,L, et al. (2011). Energy Information Handbook: Applications for Energy–Efficient Building Operations. Lawrence Berkeley National Laboratory. LBNL-5272E
Source: ISO Standard 14224
will support maintenance and reliability data sharing within an organization. It can also
support an organization level spares inventory.
Energy and environmental impact may be assessed at any level. Security considerations
may also be applied at any level. The taxonomy is a critical component in a risk analysis or
criticality analysis. It supports consistency in data gathering across time and across asset
systems, which reduces the cost and improves the accuracy of all analyses. As security issues
become even more critical in the commercial sector, many organizations will be required to
assess risks more frequently and perhaps continuously.59 This will not be possible without a
sound taxonomy and asset data management system.
The National Infrastructure Protection Plan now includes 18 critical infrastructure categories, many of which intersect the commercial sector. These categories include banking, commercial, government, healthcare, shipping, and information technology. Threat assessment and planning is supported by asset taxonomies and asset information systems. In many cases, quick response will be necessary, but is not possible without an existing system.
ISO Standard 14224, for the oil and gas industry,60 uses an effective taxonomy. This
standard provides a consistent classification of equipment to support sharing maintenance
and reliability data within this industry and across companies and locations. The general
taxonomy is now accepted in many sectors. The U.S. Department of Energy also supports
data sharing through its Commercial Buildings Consortium.61
One of the most difficult aspects of constructing taxonomy is drawing the boundaries
around systems. Assets generally cost money, are run by people, and have networked control
systems. It is therefore difficult to completely separate asset management from financial,
human resource, and information technology management, and their supporting systems.
The section regarding implementation of ISO 14224 contains 200 pages of appendices to
provide specific equipment listings, system diagrams, and boundary drawings.
Measuring Asset Performance
“You get what you measure. Measure the wrong thing, and you get the wrong
behaviors.”62
Performance may be measured at any level of the taxonomy. At the portfolio level,
occupancy levels and lease rates are common measures for office and residential, while sales
per unit area are common for retail. Broad financial measures, such as return on assets, are
difficult to apply to physical assets but may be useful in some cases. At the systems level,
building energy performance (or even overall utility performance) is reported along with
financial performance. Asset performance can be measured directly. Elevators and escalators
may be measured against reliability and safety, building interiors on cleanliness, and HVAC
and refrigeration on temperature control precision. Energy management programs and
environmental management programs are generally evaluated on a building level, though
they may be broken down by system or space within the building.
In the commercial sector, costs and revenues are traditionally related to space and reported
on a per square foot basis. The Building Owners and Managers Association Experience
Exchange Report (BOMA EER) breaks down ownership, operation, and maintenance costs
per square foot. Energy use, water use, and environmental impact are also typically reported
by square foot. The U.S. Department of Energy’s Energy Star guidelines63 and the American
Society of Heating Refrigeration and Air-conditioning Engineers’ (ASHRAE) guidelines64
also use floor-space in the denominator. The
American Society for Testing and Materials
(ASTM) Building Energy Performance
Assessment (BEPA) is designed to provide
buyers and sellers with energy usage
information and is too based on per square
foot data.65
Performance assessment based on
square footage has two major problems
stemming from recent changes in building
use. The measurement does not account for
occupant density or operating hours. What
is the baseline is for occupancy? Is it 9am-
5pm Monday through Friday, or 7am-6pm
with a half day on Saturday, or some other
measure? Average office building operating
hours vary from 50 hours/week in smaller
cities to 80 hours/week in Chicago and 90+
hours/week in New York.66 Discussions of
operating hours are a normal part of setting
standards and guidelines, with no universal
agreement. As retail, office, and distribution
extend their hours, it is becoming apparent
that the only universal baseline is 24 hours a
day, seven days a week. Measuring building
performance against this baseline offers a
dramatic new perspective on utilization.
Changes are equally dramatic when
one examines density. Office space has
dropped from around 400 square feet per
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59U.S. DHS. (2009). National Infrastructure Protection Plan. U.S. Department of Homeland Security. Washington, D.C.60ISO 14224:2006: Petroleum, petrochemical and natural gas industries--Collection and exchange of reliability and maintenance data for equipment. International Organization for Standardization, Geneva, Switzerland61U.S. DOE Commercial Buildings Consortium, http://www.zeroenergycbc.org62Schieman, William A. and Lingle, John S. Hitting Your Strategic Targets Through High-Impact Measurement, 2005, The Free Press, New York, New York.63http://www.energystar.gov64ASHRAE. (2008). ASHRAE Vision 2020: Producing Net Zero Energy Buildings. American Society for Heating, Refrigeration and Air-Conditioning Engineers. Atlanta, Georgia65ASTM E2797 – 11 Standard Practice for Building Energy Performance Assessment for a Building Involved in a Real Estate Transaction. American Society for Testing and Materials. Conshohocken, Pennsylvania. 66BOMA. (2011). Experience Exchange Report. Building Owners and Managers Association. Washington, D.C. http://BOMA.org
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person to less than 200 in the last decade.
New developments often target around
100 square feet per person.67 Retail space
is dropping rapidly from 40 square feet
per person in the U.S. towards 20 square
feet, the average in Europe.68 It is likely to
continue to decrease as more and more
retail enterprises strive to conduct a greater
percentage of their business online. Effective
asset management requires new measures of
performance, based on costs or revenue per
employee or customer, with some measure
of operating hours included.
A reverse scenario has unfolded in the
single-family residential sector, where large
increases in floor space per occupant have
easily overcome improvements in energy
efficiency. Costs and energy use per square
foot have decreased, but overall costs per
occupant have increased.69
Measuring Cost
Cost, like performance, can be measured
at any level of the pyramid. In many
organizations, assets are assigned to cost
centers that often cut across asset systems.
Office space versus common space in an
office building, or guest room, laundry, and
food service in a hotel, are common ways
to divide costs. New data, and an asset
management systems approach, could allow
costs to be assigned to asset systems as
well a business’ functions, providing a direct
input to the determination of asset value.
Measuring Risk
Risk in the commercial sector is somewhat
different from other sectors. A large
component of risk in this sector is related to
the actions of individual occupants, users,
or consumers. Large-scale system failures
have been relatively rare, and risk analysis
has typically focused on a few critical assets,
such as swimming pools or conveyance
systems, where tools such as FMEA (Failure
Mode and Effects Analysis) are commonly
used. This risk profile is changing, however:
severe weather events are increasing in frequency and impact, and threats from terrorism
continue. Large offices and retail spaces, passenger terminals, stadiums, and auditoriums
are vulnerable to contamination of air or water systems. They are also vulnerable to failure of
HVAC, power, or control systems, presenting inherent risks, as well as crowd control issues.
The National Infrastructure Protection Plan provides a framework for industry wide
planning, but individual businesses, neighborhoods and municipalities must also plan for
disaster. These plans must be comprehensive, including risk identification, analysis and
mitigation, as well as disaster remediation and recovery. And they must be comprehensive
at the system level and address the primary, secondary, and tertiary effects of disruption and
disaster. The primary damage to buildings and infrastructure from a large storm may be less
that the secondary effects of lost business, or the tertiary effect of needing to renew leases.
The opposite of risk is opportunity. An asset management system, with expanded asset
knowledge and control provides an organization with: the ability to expand output to meet
increased demand; the ability to modify facilities to provide new services or support new
products; and the ability to take advantage of trading opportunities in changing markets,
along with many other opportunities.
Integration Within Systems
A typical systems breakdown within the commercial sector would include parking,
landscape, exterior, access/egress, interior, conveyance, lighting/electrical, HVAC,
refrigeration, security, and specialty functions. Controls might be treated with each system
or as a separate asset.
Integration within systems begins at the create/acquire stage, where it often includes
configuration management and sometimes systems engineering. In our HVAC example,
configuration means getting the right motor and fan to match the distribution system. At
the utilize stage, systems engineering means having adequate control to avoid simultaneous
heating and cooling of the same space. The integration of area lighting, task lighting, and
decorative lighting might be another configuration example. Adding the interior materials,
furnishings, traffic patterns, security needs, and controls brings lighting into the realm of
systems engineering.
67CoreNet Global. (2012). Office Space Per Worker Will Drop to 100 Square Feet or Below Space Within Five Years. News Release, February 28, 2012. CoreNet Global. Atlanta, Georgia68Niemera, Michael P. (2005). The U.S. Retail Space Market. Research Review, V12, NO.2. The Federal Reserve Bank of Boston. Boston, MA. Walker, Rob. (2009), The Repurpose-Driven Life. New York Times, June 8, 2009. New York, New York.69U.S. Census. (2010). Average Square Feet of Floor Area in New Single-Family Houses. U.S. Bureau of the Census, Washington, D.C.
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THE ASSET MANAGEMENT FRAMEWORK SPRING 2014
Integration Across Systems
Integration across systems is a major issue
of asset management. An asset system may
span separate organizational units, which
each have their own budget, structure, and
interests. Operating schedules must be
set to support maintenance, for example,
and integration across systems may require
escalation to the executive level. The “line of
sight” principle is often mentioned in asset
management discussions for this reason.
The “line of sight” from top management, through operations and maintenance, to asset performance and back, from users and operators to organizational strategy, is a cornerstone of asset management. It is discussed directly in the literature of PAS 55 and is implicit in the ISO Standard.
Non-Asset Solutions
Another term which comes into asset
management discussions is non-asset
solutions. This term is specifically addressed
in ISO 55000, which states that: in planning
to meet its goals, an organization should
consider assets in a systematic way in terms
of their interactions across the life cycle,
among systems, within systems, and with
non-asset solutions.70
Non-asset solutions, both short-term
and long-term, are common and powerful
alternatives to the deployment of new assets.
A water utility may impose lawn-watering
restrictions to avoid constructing new supply
facilities, and in the process develop new guidelines and subsidies for xeric landscaping.
A retail owner may support point of sale online ordering to avoid devoting floor-space to
inventory. Banks discovered a long time ago that it was cheaper to support online banking
than to build walk-up teller facilities in urban areas. Building owners may encourage walking
in high-traffic areas to avoid adding escalators. Many other examples are available. Clearly,
non-asset solutions can play a significant role in asset management.
Understanding Operating Costs – Integrating Across Functions
The Building Owners and Managers Association (BOMA) collects data on building
operation and maintenance expense for major metropolitan areas on an annual basis. This
data is published in the organization’s Experience Exchange Report (BOMA EER).71 The table
in Figure 7 shows categories of expense and average expense per square foot in 2011 for
large office buildings in Chicago and New York.
Anyone with experience in commercial building construction and operations can look
at this chart and see opportunities for improvements in efficiency and effectiveness across
functional pairs. Utilities and custodial expenses (A), for example, are large expenditures
where we find combined savings in daytime cleaning, or utilities and security expenses (B),
where dark-building security comes into play. Maintenance impacts on utility expenses (C)
were discussed earlier in this paper. Reviewing the interaction of custodial and maintenance
practices (D) can provide cost savings, as well as improvements in customer satisfaction.
In addition to pairwise interactions, there are also clusters of interaction, such as those
around security, controls, and communications (E). New technology, including mobile device
integration, provides many opportunities in this area.
Further breakdowns of revenue and expenses may reveal more opportunities for integrated
action. The operating measures noted above have strong interactions with expenses, such as
70ISO/TC 251. (2012, September). Draft International Standard 55000: Asset Management--Overview Principles and Terminology. International Organization for Standardization, Geneva, Switzerland71BOMA. (2011). Experience Exchange Report. Building Owners and Managers Association. Washington, D.C. http://BOMA.org.
Source: http://inhabitat.com/nyc/new-yorks-helmsley-building-unveils-gorgeous-led-light-show-set-to-the-sound-of-violins/
Figure 7: Asset System Interactions
Aquire Utilize Maintain
Fixe
d C
ost
Uti
litie
s
Cus
tod
ial
Secu
rity
Co
mm
unic
atio
ns
Par
king
Bui
ldin
g
Gro
und
s
Chicago $5.85 $1.60 $1.65 $0.80 $0.05 $0.20 $2.15 $0.10
New York $8.80 $3.90 $2.45 $0.90 $0.20 $0.40 $3.00 $0.10
Fixed Cost
Utilities A B
Custodial
Security
Communications E
Parking
Building Maintenance C D
Grounds Maintenance
Source: BOMA Experience Exchange Report 2011
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insurance. Most organizations have detailed measures of customer satisfaction, which can be
displayed against these expense categories. This type of analysis is at the base of integrated
asset management, and a team of asset owners and managers should be challenged to find
the opportunities for improvements in performance, cost, and risk across their systems.
An environmental systems approach may look at siting effects. The indirect energy and
environmental impact of a facility, through transportation of customers and workers to and
from the facility, is a measureable and controllable aspect of the asset.
The physical composition of supplies moving through a commercial facility is a significant
sustainability concern, as is the movement of people. If a systems view is taken, both can be
linked to the operation and maintenance of the asset. In a large organization, data analytics
tools and support systems will be necessary. This field is rapidly developing along with data
collection and storage. The systems view of the asset considers all phases of the life cycle
and all interactions among assets. It must be forward-looking, since these interactions may
cross life cycle stages. That is, individual assets within a system may be at different stages in
their lives as assets.
Asset management provides an effective and efficient method for integrated management
of the environmental impact of an organization’s physical assets. Data is collected at each
phase of the asset life cycle, and incorporated into an integrated management system so
that tradeoffs can be considered. Effective asset management procedures require that a
significant change in an asset will trigger an analysis of the larger system. The adoption of
LED lighting will significantly reduce internal heat-gain, but may also require a resetting of
controls and even a redesign of the HVAC system. Major changes may be accomplished
most cost effectively in the renewal stage of a system’s life cycle.
This integrated systems view also provides the financial modeling and reporting that is
critical to energy considerations and the environment. Aside from specific costs, such as
carbon tax and disposal fees, asset environmental impact is difficult to quantify. Integrating
with asset management makes risks and tradeoffs more visible and easier to track and
manage.
The management systems and structures associated with modern asset management may
also be integrated with similar structures that address quality, safety, and security. This can be
particularly useful when integrated control systems and strategies are put in place.
Systems Engineering
Systems engineering was originally developed within the military to address design
integration problems caused by multiple stakeholders, requirements, and contributors. In
the military, if stakeholders do not work
together, a plane may be loaded with so
much equipment that it is too heavy to fly, or
a soldier’s backpack may be packed with so
many items that it is too heavy to carry.
A standard reference in this field is the
NASA Systems Engineering Handbook.72
Chapters in this handbook address:
• Principles
• Program management
• Product realization
• Cross-cutting technical
management
Cross-cutting technical management is a
concept often used in military organizations,
and has a lot in common with asset
management, including elements of:
• Planning
• Requirements analysis
• Risk analysis
• Configuration management
• Multi-attribute analysis
• Multi-criteria decision-making
Crosscutting technical management
has been used to support ISO quality
management efforts.73 It also provides a
foundation for an integrated management
systems approach to asset management.
Multi-attribute analysis and multi-criteria
decision-making are key tools used in systems
engineering. These tools are also critical to
asset management, since simple optimization
is not possible in complex systems, nor in
systems of systems. The developing ISO
standard for asset management recognizes
this issue and has eliminated references to
simple “optimization” that existed in earlier
standards.
72NASA. (2007). NASA Systems Engineering Handbook. National Aeronautics and Space Administration. Washington, D.C. NASA/SP-2007-6105 Rev 173Arnold Engineering Development Center. 2008 Annual Report. Arnold Air Force Base. Tennessee. Washington, D.C. http://BOMA.org.
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Managing the Asset Portfolio for Results and Sustainability
The asset portfolio sits at the highest level
of asset management and at the boundary
between organizational goals and asset
goals. In other words, it is the portfolio
manager who is directly responsible for
business goals. In smaller organizations, the
asset systems level and portfolio level may
be the same, though the functions are still
separate.
An asset portfolio can refer to the total
assets of an organization or to a subset of
those assets. In ISO terms, the portfolio is
defined as those assets that are managed
by the asset management system.74 A
portfolio or sub-portfolio can also provide
a number of ways of organizing assets for
management purposes. An organization
with multiple buildings can manage all assets
within a building at the building level, or can
manage all or some assets as systems, across
buildings. HVAC, plumbing, and electrical
systems might be looked at either way.
Specialty functions, like conveyance, are
often managed across buildings.
The portfolio approach provides an
organizing principle and focus for data
collection. Financial and other impact
information is gathered and managed at the
portfolio level.
Notably, the portfolio view supports
financial and management accountability.
“Return on Assets” is a portfolio level
measurement. The portfolio view also
supports effective change management
in the case of outsourcing, and effective
negotiation and implementation in the case
of mergers and acquisitions. The portfolio
manager’s job is much more productive
when supported by an asset management
system. The system supports detailed
knowledge of assets including: location,
utilization, and condition. This knowledge
enables effective decision making on asset
risk and opportunity.
Serving Organizational Strategic Goals
The top of the pyramid (in Figure 3) is the organization’s strategic goals. The organization
needs to ask how assets contribute toward these goals, especially in times of social, economic,
and environmental change.
• What is the contribution of a sales floor in an Internet driven marketplace?
• What is the contribution of bricks and mortar in an online education environment?
• What is the contribution of the cubicle in a world of telecommuting and virtual work?
• What is the contribution of an examination room in a world of telemedicine?
• What is the contribution of office space, when many office services are being outsourced?
• What is the contribution of additional storm sewers in a period of episodic rainfall?
• What is the contribution of an extra lane of concrete in a transportation system constrained by congestion and rising fuel prices?
This list could go on, and the issues raised are critical. If the specific contribution expected
from an asset cannot be identified, then that asset is likely to be misused, ignored, or held
in limbo and ultimately a waste of resources. The first whitepaper in this series describes this
approach as the New Asset Paradigm.
The organizational strategy drives asset management policies and plans, which should
cover all stages of the asset life cycle. Periods of rapid change are likely to generate emphasis
on the first and last stages: acquisition and renewal; but also require more effective tactical
efforts in middle stages: “utilize” and “maintain.” These tactical efforts need leadership
direction and support. The asset management literature speaks of a “line of sight,” from top
management down through asset utilization. This line of sight is two-way, implying that asset
Figure 8: Asset System Interactions
74ISO Standard 55000:2014 Asset Management--Overview Principles and Terminology. Chapter 3, Terms and Definitions. International Organization for Standardization, Geneva, Switzerland
Source: Thomas W. Smith, University of Wisconsin-Madison
P: 646.660.6950 / 137 East 22nd Street, New York, NY 10010www.baruch.cuny.edu/realestate
– 16 –
THE ASSET MANAGEMENT FRAMEWORK SPRING 2014
© 2014 The Steven L. Newman Real Estate Institute, Baruch College, CUNY. Do not copy or distribute without written permission. The Newman Real Estate Institute gratefully acknowledges the support of the sponsors who make possible our efforts to promote critical thinking on topical issues for the real estate industry. Also gratefully acknowledged is the University of Wisconsin for contributions to the development of this paper.
The views expressed in the research report are those of the authors and not necessarily those of Baruch College, City University of New York, or any of its affiliated organizations, foundations, and sponsors. Please address inquiries to Jack S. Nyman, Executive Director, at:
Baruch College, CUNY137 East 22nd StreetBox C-0120New York, NY 10010
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William Newman, Founding Chair
Richard Pergolis, Co-Chair
Jack S. Nyman, Executive Director
Emily Grace, Associate Director of Research
operators understand the strategic value of
the asset and the executives understand the
importance of operation and maintenance.
Corporate Real Estate Asset Management
is an excellent textbook, which addresses
asset management strategy and tactics in
alignment with organizational strategy. This
textbook provides the following goals for
asset management:75
“In providing corporate real estate
asset management (CREAM)
strategic solutions, the CREAM
manager has to provide a solution
that supports the organizational
requirements. This requires a
business focus with linkages
between the corporate strategy
and the CREAM strategy being fully
integrated. Providing the linkages
and establishing how the CREAM
provision can add value to the
organization requires the CREAM
manager to be fully conversant
with the principles and application
of the development of corporate
strategy.”
Utilization is the Key
Difficulties in matching asset management
strategy with organizational strategy arise
when an organization is overbuilt, or has
assets that are misplaced that it cannot easily
divest. If an asset is underutilized, it is difficult
to find the budget for effective operation
and maintenance. In this case, those directly
in charge of the asset are often asked to
“do more with less,” and this has become
an all too familiar phrase. The only long-term
answer is a correct balance of assets so that
all assets contribute.
The policies of the U.S. General Services
Administration (GSA) provide an illustration
of how one organization deals with utilization
difficulties. In 2008, the GSA developed
an asset management policy focused on
reducing the amount of office space it owns.
This is to be done through divestment and
utilization improvements, and in a socially
responsive manner. The policy requires its
regions to develop a Real Property Asset
Management Plan, and specifies what that
plan must include.76
Each Real Property Asset Management
Plan must include elements that:
• Support agency missions and strategic goals
• Use public and commercial benchmarks and best practices
• Employ life cycle cost-benefit analysis
• Promote full and appropriate utilization
• Dispose of unneeded assets
• Provide appropriate levels of investment
• Accurately inventory and describe all assets
• Employ balanced performance measures
• Advance customer satisfaction
• Provide for safe, secure, and
healthy workplaces
This policy document provides detailed
descriptions for each element. Case study
illustrations are also included to give added
insight.
Conclusion
Asset management provides an effective
umbrella for coordinating energy and
environmental programs, as well as safety
and security. Among its key features are
strategic alignment and a comprehensive
view.
Asset management is a long-term solution,
moving beyond traditional measures of
asset performance, and raising the question
of asset contribution and asset value. The
rewards of effective asset management
are significant – as are the challenges of
implementation. ■
75Haynes, Barry P. and Nunnington, Nick. (2010). Corporate Real Estate Asset Management. EG Books. Oxford, U.K. ISBN: 978-0-7282-0573-476GSA Bulletin FMR 2008-B5, Real Property Asset Management Guiding Principles, U.S. General Services Administration, Washington, D.C.
Released in the Winter of 2014, the first white paper in this three-paper series is titled, “The New Asset Manage-ment Paradigm, Part 1 of 2 – Understanding the History, Foundations and Benefits of Asset Management.”
Acknowledgment: This material is based upon work sup-ported by the Department of Energy under Award Number DE-EE0003996.
Disclaimer: “This report was prepared as an account of work sponsored by an agency of the United States Government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States Government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States Government or any agency thereof.”