SPRING 2014 RESEARCH PUBLICATION The Asset Management ...baruch.cuny.edu/.../AssetManagementwhitepaper2.pdf · SPRING 2014 RESEARCH PUBLICATION The Asset Management Framework Part

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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


– 2 –

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%


– 3 –

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


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


– 4 –

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


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.


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

– 5 –


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.


– 6 –

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


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,


– 7 –

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.


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%


– 8 –

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


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


– 9 –


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


– 10 –


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


– 11 –


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



– 12 –

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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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


– 14 –


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.


– 15 –


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


– 16 –


© 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

Tel: 646.660.6950 • Fax: 646.660.6951www.baruch.cuny.edu/realestate

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.”

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