Sunday, January 23, 2011

Total Cost of Ownership and Life Cycle Management Support Asset Investment Decisions

Master planning, Project Delivery and Integrated Life Cycle Management are three distinct processes which when properly coordinated result in a true understanding of the Total Cost of Ownership of a property or portfolio.  This holistic approach to asset management improves the quality of FM planning and services by objectively comparing development options and modeling various operating scenarios.  Taken as a whole and exercised in an integrated fashion over the course of a facility’s life they present a total picture and inform investment and operating decisions at every step.

The key the achieving the desired outcome of information sharing across the three domains is agile systems integration and cooperative communication between the principals involved. 

Reduced to its simplest state, the model takes bottom up information from each of the three domains.  Each domain then synthesizes its own set of data and needs into its formal output, which is then shared with the other two domains.  That said, there is a closer link between Project Delivery and each of its two partners than they share with each other.  Master Planning and Life Cycle Management communicate with each other through the Project Delivery process.  Master Planning contributes asset investment planning, program needs and approval protocols to inform the design and construction process.  Life Cycle Management contributes operations, maintenance and recapitalization information, as well as learning and knowledge gained over the course of a building or portfolio’s life.  The Project Delivery process uses these inputs to develop designs and provide operating models that help improve resident processes.

Master Planning integrates three distinct planning processes with the resource planning process.  The Growth and Impact Plan, Operations Plan, and Capital Needs Plan ask for resources which must be found and allocated.  Resource planning focuses on priorities, resource alignment, and tracking of results.  It, more than Master Planning, is a constantly shifting environment with potential to significantly alter what is possible based on market realities, as we have all experienced in the last two years.

Total Cost of Ownership
Asset Investment Strategy

Capital Needs Plan                                                                                          
Life Cycle Plan                                     

Operations Plan
Materials & Equipment
Systems & Processes
Energy & Utilities

Growth & Impact Plan
Infrastructure Expansion
Space Plan
Property Expansion

I sometimes run across organizations that fail to understand, appreciate and plan for the real cost of developing new projects.  This leads to under-resourced operations, a growing backlog of deferred maintenance, and financial inability to replace assets when needed.  This is not readily apparent during the grand opening of a new project, but is sometimes glaringly obvious even in the relative early stages of a project’s life cycle.

It is incumbent upon FM’s to understand these issues and their importance, and to communicate and inform decision makers.  It is much easier to do so when one understands financial language and basic principles, and can communicate with decision makers in terms they understand. 

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