Facility Management's (FM) Role in Sustaining Recovery

Investment capital will become more available as global economies emerge from extended malaise .  Competition for that capital will be intense.  Important and challenging business and social issues are present everywhere we turn.  A growing and aging world population, demographic and power shifts, healthcare costs and capacities, geopolitical stress and transition,  the protection and sustaining of natural resources to name just a few.  The list could go on and on, each important on its own merits.

Therein lays the problem.  The list is long, capital is short.  There is not enough money available in all of the world to fix all of the world’s problems.  What are we to do?  What role can FM play in the search for solutions?

FM has a responsibility and a need to lead in the development and implementation of effective solutions.  While we are not charged with saving the world from all of its ills we are the stewards of a large portion of its assets, represented by the existing built environment, new facilities and the natural resources consumed in their development and operation.  How we exercise this responsibility is determined by our day to day actions and the decisions we make. 

How then shall we go about contributing in a manner that informs our organizations, elevates FM’s leadership role, properly preserves and deploys capital, and stewards natural resources for which we are both consumers and interested in sustaining?  Here are a few thoughts.

Recapitalize the built environment:  As recovery makes investment capital available we must make good decisions about where and how to invest.  Much of that investment must be in recapitalizing the existing built environment, including facilities and infrastructure.  It is too large and too important to do otherwise.  Further, recapitalization extends the useful life of assets and avoids unnecessary diversion of funding to new development, which also lessens consumption of resources.  Your job:  Perform condition assessments and develop informed strategies and plans.

Improve FM’s financial skills:  As capital comes available there will be enormous competition as long pent up initiatives in all areas of business reach for the same resources.  New product development and maturation, sales, marketing, research and talent will all be consumers of what is a finite resource for every company.  FM’s ability to understand the business as a whole and develop solutions that solve enterprise problems and make economic sense will be a lever for increased capital flow to projects that make a difference.   Your job:  Improve financial analysis capabilities inside FM and develop strong links with your CFO.

Build effective business cases:  Effective business cases begin with objective analysis of accurate business data which leads you to the right projects and initiatives.  Once you have the right capital investment strategy and portfolio it is up to you to effectively make the case and gain executive approval.  The very best plan and strategy in the world is absolutely useless if not acted upon.  Too often FM fails in gaining project approval because it does not present a balanced and compelling case.  Your job:  Improve or add effective communication and presentation skills to the FM suite.

Develop a long term budget lens:  Not that FM can drive this one, but we can encourage and inform the dialogue on investment return.  The traditional short term focus on investment return marginalizes long term benefit generation.  Investors require a quick return so we build projects and operate in ways that maximize short term return.  Sometimes in doing so we accelerate future capital deployment.  Not paying attention to a growing deferred maintenance backlog is one example.  That backlog will most likely continue to grow, asset condition will continue to deteriorate, and eventually (sooner rather than later) it will need to be replaced.  The short term focus also works against adopting new technologies that improve building efficiency.  In today’s world of rapidly changing technology this issue is not to be discounted.  More efficient buildings provide greater productivity, lower operating costs and higher occupancy rates, each a key competitive lever in its own right.  Your job: Present business options that explain Total Cost of Ownership over the entire life of the asset.

Improve your sustainable profile:  Sustainability has moved deep into the consciousness of the business world primarily because it makes good business sense.  Nearly everyone cares about doing the right thing, but when you can do the right thing and improve competitiveness and the bottom line you have a real winner.  That is why your Board of Directors is putting pressure on leadership (and don’t think they aren’t) to improve sustainability.  You should be doing it for yourself as well.  Sustainable initiatives can improve quality, lower operating cost, allow redeployment of resources, extend life cycles and a host of other good outcomes that you care about because they make your life easier.  FM is one of the biggest levers for sustainable performance and should be one of its biggest champions.  Taking a leadership position on an important issue with executive level visibility which provides social and business benefits improves FM’s credibility and perception as a savvy and visionary partner.  Your job:  Become a Subject Matter Expert in sustainability and how it can be leveraged to improve your business.

Innovate:  Innovation can be a game changer.  Whether it be by integrating technologies in a new way, rethinking your business/service model, developing new space paradigms that improve collaboration, or partnering with other parts of your business to add value – all have potential to improve FM’s performance and value.  Innovating, however, requires taking risks, something that many FM leaders are reluctant to do.  Risk is minimized by thorough due diligence and that should be your approach.  Have a good idea?  Think it through.  Engage others.  Model it.  Run a small pilot project.  Innovate!  Your job:  Be alert and receptive to new ways of doing old things, and new ways of adding value in your area of responsibility.  Be willing to fail on occasion on your way to wins that make a difference.

Getting A Stalled Project to the Finish Line

I’m sure we have all had the experience of working on a project that seems like it will just never end.  When that happens each team member has a responsibility to share in ownership  of the problem and the solution.  In highly analytical environments just getting a project approved or started can seem daunting.  Once it is approved, however, tight execution and driving to the finish line should be everyone’s focus.

Why is it then that some projects, even those with solid work invested in them, can’t seem to finish the last five percent of the course?

When a project is stalled project leadership or organizational management have the primary responsibility to get it back on track.  What can they do to get it reinvigorated?   Let’s start with these…

• Ask the hardest question first:  What am I doing or not doing that is contributing to the delay?  Leadership’s number one responsibility is to remove obstacles to the success of others.  Are you really doing that?  Are you getting past the happy talk and searching for root causes, then taking ownership for those that only you can effectively mitigate?  Better yet, are you the root cause because of indecisiveness or lack of attention?

• Use analysis as a decision tool, not an implementation tool.  Once the project is authorized and funded the time for analysis paralysis is past.  If you did not take the time beforehand to conduct thorough due diligence then it is probably too late to do it now.  When projects are approved they come with a schedule that has consequences for late delivery.  Post-approval is not the time to be developing options – it is the time to get the project done.

• Change the mindset of the project team.  If they are bogged down they know it without you telling them, and they likely aren’t feeling very good about it.  Here you need to be a bit of a cheerleader while also instilling a new sense of urgency.  As a leader you can step in to motivate, assist and remove barriers, but avoid the urge to take over at all costs unless absolutely necessary.  Let the team retain accountability for the outcome but help them get to it successfully.

• Augment skills or knowledge.   You may find that the team has designed a good project but does not have all the skillsets/knowledge it needs to implement it successfully.  For example, solving a vexing process issue may require the intimate knowledge of those closest to the process to investigate, process map and re-engineer a solution.  As good as that solution may be it is useless if not implemented correctly.  If implementation requires technical expertise, say developing or modifying an application, then the team may not have the requisite expertise.  Get it for them.

• Re-plan the project.  Refusing to recognize reality by sticking to a plan that everyone knows is not working only further demoralizes the team and adds unnecessary pressure.  This is where leadership must be candid with itself.  Take a breath.  Recognize reality.  Develop a new plan to complete the project from its current state, communicate and vett the plan with the team to achieve their buy-in, then work the plan…and work it hard. 

• Kill procrastination.  If you were too uninvolved in the initial effort then pick up your game.  If you were indecisive then make this project a priority and move it along when it is in your own space.  Stay better informed and create a sense of urgency by requiring frequent status updates.  Ask what the team needs from you to break current deadlocks and then deliver the goods.

Not every project (at least in my world) runs perfectly.  That does not mean, however, that they must be unsuccessful in the end.  In fact, overcoming the challenges of difficult projects is a big learning tool, experience addition, and character test.  Successfully recovering a project in trouble is a big plus in any project manager’s toolkit.

Business Agility: A Model for Improving Responsiveness – Pt. 1

This post begins a short two part series, continuing the subject of business agility first examined in my March 25 post.  Part One of the series addresses the theory behind agility.  Next week’s Part Two will focus on the practice of agility.

AGILITY IN THEORY

Business agility has long been the hallmark of successful organizations, and its importance in contemporary business is growing.  True agility, however, often requires a mindset and operational dynamic that is counter intuitive given industry’s penchant for quick fixes and control.  Real agility requires a business culture and strategy that is sustainable over the long haul.  Typical business reactions such as reducing headcount and services, de-emphasizing customer service, or deferring projects and initiatives that create capability and capacity will work for the short term, but they are not generally sustainable.  These strategies consume or discard resources that may be better used creating and re-energizing.

Defining Agility – An Elusive Quest

One of the problems with “Agility” is defining exactly what one means when one uses the term.  It is a common term and strategy in the IT world, but focuses almost exclusively on IT systems that improve communication and data sharing to speed processes. Manufacturing types express agility in terms of customization and last responsible moment commitments.  Knowledge management professionals describe it as using knowledge management systems to provide greater or faster awareness of changes.

In their paper “Understanding Organizational Agility: A Work-Design Perspective” Holsapple and Li suggest a homogenized definition that can be applied in most cases, identifying alertness and response capability as key dimensions of agility. 

“Agility is the result of integrating alertness to changes (recognizing opportunities/challenges) – both internal and environmental – with a capability to use resources in responding (proactive/reactive) to such changes, all in a timely, flexible, affordable, relevant manner.”

Another important characteristic of agility is recognized in the statement,

“Business Agility is in the mind of the organization and comprises an absolute willingness to constantly monitor one’s position, in a timely and appropriate manner – not just to respond quickly.” 

This statement makes the explicit and often misunderstood point that agility is not just about speed.

Three Levels of Agility

Strategic, Operational, and Episodic agility comprise the agility spectrum.  Each is achieved intentionally through work design that promotes organizational and cultural drivers which are supportive of agility.

Strategic agility can be identified as maximizing organizational alertness to business changes and integrating response capability.  Its purpose is to structure and govern operational work to assure alignment with organizational mission and strategies, thereby enhancing the organization’s ability to identify and take advantage of business opportunities.

Operational agility derives from this integration of alertness and response capability, governing episodic work by allocating resources and setting schedules in the most efficient manner.

Episodic agility refers to what we may more colloquially describe as transactional or task-specific work.  This is where work processes produce tangible value.  It may be intellectual collaboration in the case of knowledge workers, or the fulfillment of specific service or production processes.  Importantly, it is at this level where alertness to task level environmental conditions may lead to process variance.  There is an interesting dichotomy here between agility, which emphasizes alertness and appropriate response to changing conditions, and process management which generally emphasizes control and stability.

The three levels have definite boundaries, support each other, and when taken as a whole permeate the entire organization. In this manner they provide the combined alertness to changes and response capacities that enable taking advantage of opportunities, or adjusting to threats in a nimble manner.

Next week we discuss three specific strategies that help improve agility.

Connecting the Dots - Why Economic News Matters to FM's

It is never a safe or necessarily wise thing to try to predict the future, and I am not.  Make no mistake about that.  But all of us should maintain an awareness of the world around us as we plan our personal and business lives.  I am generally an optimist and pragmatic, believing that trends are cyclical; when it's bad it is bound to get better, and when it is good a healthy dose of realism when planning is prudent.  That said, I also recognize that some highs are higher, and some lows are lower.
As I listen to the voices around me and filter them through my own biases and experience, some resonate.  A couple of information "dots" that I am now connecting give pause. 

Bill McBride over at the Calculated Risk blog is one of the best I see at giving us hard data coupled with objective information.  If you track his history over the last few years you will quickly understand why he is respected as one of the best in the area of simplifying economic information (why I appreciate him so much) for greater understanding.  He gives us this reality check as it relates to employment numbers.  We all know it has been a rough road.  Looking at this graph makes it clear that this has been a very deep and wide trench.  It is good that we have begun to claw our way up, but last week's employment numbers amplify that we have a long way to go.


Robert Zoellick, departing president of the World Bank offers a sobering summary of world wide economic fragility in this recent Wall Street Journal interview.  The list is long...Europe's issues, lackluster U.S. job growth, general lack of political will to make necessary choices, the impending "cliff" facing the U.S. economy, escalating difficulties in developing nations as they struggle with trickle down effects and their own issues all combine to form a daunting image of the months and year(s) ahead. 


The Conference Board offers supporting albeit more positive analysis, including the following statement on the outlook for advanced economies.  


"Advanced economy growth is expected to slow down from an already meager 1.6 percent in 2011 to 1.3 percent in 2012. For 2013-2016, the outlook suggests some recovery in advanced economies, bringing these countries back to the pre-recession growth trend of a little more than 2 percent."


I am not suggesting doom and gloom here and I note again that I am not a trained or even amateur economist.  However, I do pay attention to the data points as those who are expert talk.  From all accounts this will continue to be a period of increased risk and fragility.  This month and the rest of the summer will be important as Europe makes decisions that will affect all of us for decades.  Those dots have connected and will continue to do so.  They bear watching, closely.


As FM leaders we share a responsibility to guide our organizations through the future.  Keeping our eyes and ears attuned to the outside world as it changes and adapts economically is an important function in forming strategy and capital development plans.  

Construction Activity and Materials Costs Moving Higher

Buildings Magazine reports that non-residential construction activity is up 2% from last year.  Most sectors appear to be on the rebound except public works.  Overall commodity increases are running slightly higher at 3% on average, with steel and carpet (6%) and paint (8%) leading the way.  Lumber and brick are trending down, plywood remains essentially flat.


One can make one's own determination on the future trajectory of this chart.  Some will interpret it as a sign of gathering turn around momentum while others will suggest that the pull back in government spending in the public works sector is likely to create future drag.  Time will tell.


For now, however, activity is up and price increases appear moderate.  Those, at least, are positive signs.

Discovering Differences in Doha

For the last week I have been in Doha, Qatar, a return visit from my first eight years ago.  Boy, have things changed.  What was largely a barren peninsula has been transformed into a vibrant, energetic, and beautiful gem by the sea.  Then it was just a few isolated buildings surrounded by flat desert, now parts of Doha look like a new Manhattan.  The contrasts between old and new, between wealth and working class are obvious but the people are uniformly friendly.

West Bay from the Corniche

The architecture in Doha is as varied as you might expect.  As a metaphor for all societies in general, outward appearance is not the whole story and Doha is no different.  Underneath the façade lies a rich and diverse culture that is much different than what I am used to, and in many ways very appealing.  Not necessarily in all ways, however.  I will take LA traffic and drivers any day.   Just sayin.’

Islamic Museum of Art from Dhow Harbor along the Corniche

For those construction folks among you, concrete and CMU are the materials of choice here.  I am not certain why these materials are the standard but suspect a strong combination of familiarity and availability.  Observing multiple construction sites gives one appreciation for advanced technology and equipment.  Looking at the finished product from the 

outside and experiencing it from the inside of the buildings, however, one would never suspect or wonder what is underneath.

Dhow Harbor

Qatari’s are taking good advantage of a unique opportunity.  The growth they are experiencing is multi-dimensional, not just in the built environment.  The government is aggressively funding large infrastructure projects and leap frogging the country with the aid of private investment. Great attention is being paid to the development of institutions that will underpin and sustain the maturation of society on a broad scale.   It is a country of great contrasts but also one of great promise, energy and enthusiasm. 

Even the streetlights look like cranes

There is a lot going on here and it feels a bit like the Old West of American lore at times.  Entrepreneurship is the driving force.  If you’re looking for energy and opportunity it would be hard to find a better place to hitch your horse….or camel.

You can see my other Doha photos here.

Procurement Diligence Pays Dividends

In today’s business world it is important that FM’s get the maximum value for investment while minimizing risk.  Being a smart customer is a good way to improve both domains.  Many of the business partners you depend upon daily remain under economic duress, which may affect their ability to perform successfully.  When the video store on the corner closes its doors it’s an inconvenience, when your outsourced maintenance provider or sub-leased tenant goes dark it’s a whole different issue.

An informed customer has a much greater probability of making smart decisions.  I am sure you do a lot of research when you prepare for a major personal purchase, such as a car.  You investigate quality and true cost of ownership, and read reviews from experts and other owners.  It is only when you feel fully informed and armed with the best information that you proceed to the dealer’s lot.  Making a major business purchase is no different – information is king. 

Who does the research is also important.  Abdicating this responsibility to your Purchasing group is not a good strategy.  You know the industries, issues and players.  You are prepared to ask telling questions that will reveal a potential partner’s true viability.  And it is you to whom leadership will look should a business partner’s performance jeopardize your operation because they are cutting corners or have failed.

Basic investigation should include a comprehensive evaluation of financial health and risk.  If a major financial or mission dependent decision is at hand then rigorous investigation is needed.  This should include a review of financial health including how well the company is capitalized, a review of their stock price history, independent conversations with clients of your choosing (ask for a full list and make your own judgment on who to call – don’t just call the three or four they recommend), and a SWOT analysis to understand their market vulnerabilities.  At the bottom line it’s about the bottom line.  Capital is the lifeblood of business.  Make sure they have it and know how to use it wisely.

Take advantage of leverage but maintain balance.  There are lots of ways to gain pricing advantage when dealing in a buyer’s market, but it is possible to damage future performance and the relationship by being too aggressive.  Unsustainable terms may look good now but can cause the provider to fail if they are not able to support operations in an acceptable manner due to cost pressures.  While you are busy figuring out how to get the best possible deal, turn the coin over and consider what provides the best possible value.  Aggressive but fair economics combined with performance measurements and penalities/incentives that compensate the provider based on true value enhancements to the customer will help set a win-win environment.

It’s all in the contract.  All the good intentions in the world aside, it is the contract that rules.  For important commitments contract negotiation should be an FM responsibility with Purchasing and Legal in a support role.  It is fair to include penalties and often it is smart to include incentives, as mentioned above.  Importantly, however, there must be a basis for understanding and interpreting performance in a way that minimizes ambiguity.  Performance data, metrics, SLA’s and KPI’s offer essential legal protection but must be well thought out and agreed to, as should the processes for collecting and reporting.  Another key clause is the right to re-bid and/or renegotiate the contract at any point at the customer’s sole discretion, with an appropriate notification period.  This will allow you to take advantage of economic shifts in the customer’s favor should they occur mid-cycle before you would normally have a chance to re-compete, or to replace the provider should performance fail to meet requirements.

A Primer on Project Retrospectives

We've all heard the terms "post-mortem," "lessons learned, and "after action" in reference to project reviews.  If you are like me these reviews are an important learning tool but all too often turn out to be less than they could be.  I like the concept of project "retrospectives" a lot more.  The term itself implies a different kind of experience.  What I like even more is the structured approach demonstrated in Esther Derby's presentation below.  It includes the use of tools that will help pull information and concepts forward, defines an inquisitive approach, and offers good do/don't guidance.

Remember too the value of conducting these retrospectives at the start of a new project.  Take the time to refresh team member memories of learnings from past projects and discuss them in the context of the coming project.

Agile Retrospectives

View more presentations from Esther Derby

Integrated Project Delivery (IPD): Optimize, Collaborate, and Own the Project

Integrated Project Delivery (IPD) projects offer many advantages over traditional project delivery systems, including Design-Build and other fast track methodologies.  Integrated Project Delivery requires that entities which previously worked together on projects but with different goals and incentives now collaborate.  It also requires new behaviors, new attitudes, new contracts and new transparency.  Successful Integrated Project Delivery (IPD) projects recognize and exercise these IPD truisms.

Optimization Requires Collaboration:  The whole purpose of IPD is to optimize the project delivery process.  While there are many ways to collaborate with technology, the interpersonal aspects of IPD teams is critical.  Sharing documentation is one thing, rapid recognition of project issues and the ability to quickly convene and resolve them is another.  Although not an absolute requirement, many IPD project teams find that co-locating project personnel in one office speeds this process, encourages deeper collaboration, and results in faster decisions with greater cross-functional buy-in.

Collaboration Unlocks Creativity:  A natural outgrowth of good collaboration is increased creativity.  The free form flow of ideas and instant feedback feeds and helps to accelerate the creative cycle.  Design issues, constructability issue resolution, and every other facet of the project delivery process benefits from this outcome.

Joint Control Creates Joint Ownership:  Unlike traditional projects where separate contracts set up individual “fiefdoms” inside the project, each with its own set of priorities, incentives and penalties; IPD contracts create a project governance system that increases transparency and participation.  Shared decision making results in shared ownership of those decisions, thereby increasing buy-in and speeding execution. 

Challenge Stimulates Creativity but Fear Creates Defensiveness:  Every coin has two sides and IPD is no different.  As I mentioned at the beginning of this post, IPD requires new behaviors and attitudes.  When project participants are unable to make those shifts then the requisite trust among team members does not develop and the free exchange of ideas is inhibited, resulting in loss of project momentum and benefit.  Choosing IPD team members is a critical first step. 

Much of the benefit derived in successful IPD projects comes from enhanced collaboration.  But “it ain’t always easy,” as a wise man once said.  Participants need to make changes in the way they approach projects.  In traditional delivery systems project team members have individual aspirations.  They know how they define project success in terms of financial and other project outcomes.  But, they are not shared by all and sometimes differ significantly across the team.  Individual contracts do little to help and usually more to hinder.  IPD projects are based more on shared values.  IPD contracts unite all participants under the same set of goals with rewards and risks allocated by consensus.  Behaviors are enforced through rewards and consequences that are jointly agreed upon at the outset.

Characteristics of Successful Integrated Project Delivery (IPD) Projects

The Integrated Project Delivery (IPD) model requires behaviors, collaboration, and alignment of project incentives and risks at a level rarely seen in traditional project delivery systems.  Integrated Project Delivery is a holistic approach to project delivery that seeks to improve project speed, cost and quality.  Successful IPD projects exhibit a common set of characteristics which can be viewed as guidelines to forming your own project environment.

IPD Project Structure Supports Integration:  The project structure is possibly the single most important component in IPD.  Establishing project participants early on and bringing them together with common goals, incentives and risks is critical.  It requires that the Owner decide who all of the team members are long before the project is designed and bid documents are available, and that project control becomes a shared function.  By introducing transparency in control and decision making the group adopts collaboration and consensus as key behaviors, jointly agreeing on incentive/risk sharing and project targets.  This is not to say that the Owner relinquishes all rights.  The Owner establishes primary project outcomes and deliverables, establishes the budget and schedule.  How these targets are reached, however, becomes a much more “engagement centric” exercise than traditional projects experience.

IPD Contracts Serve as an Alignment Tool:  Traditional project structures and contracts create three distinct and often competing agendas.  When an Owner contracts separately with design professionals and Contractors the Owner assumes the responsibility and risk of coordinating project requirements and aligning entities that may be “working toward one common goal.”  At least that’s what we all say.  Reality, however, often suggests a different type of alignment, one in which three separate project teams each have their own set of requirements and definitions of a successful project.  Integrated Project Delivery contracts bring the Owner, Architect and Contractor together in one arrangement with one set of project definitions and goals.  This results in Sub-Consultants and Sub-Contractors also having the same outcomes in mind, as opposed to traditional models where they have more proprietary interests at heart.

Project Participant Mindsets Are Focused on Common Goals:  The transparency required of successful IPD projects engenders increasing trust and collaboration.  It is through these two channels that some of the most rewarding changes come.  Instead of compromising to protect their particular interests in a project all participants must adopt the common (project’s) good as their goal.  While the financial incentive of the shared reward pool is certainly a motivator, the importance and benefits of working together in close collaboration should not be under-valued in this sense.

Synergies Enhance Collaboration and Outcomes:  Technologies such as Building Information Modeling (BIM) and protocols like Lean Design and Construction are perfect bedfellows with IPD.  They accelerate projects while minimizing risk and improving quality.   It is no accident that most IPD projects are fast-tracked.  These tools and strategies are designed to do exactly that.  Greater visibility of design evolution and increased constructability input from the earliest stages contributes to early identification of design conflicts or other issues.  Lean Construction accepts time sensitive inputs and prioritizes design and decision making.

BIM and IPD Making Value Engineering Irrelevant

The effective implementation of Building Information Modeling (BIM) and Integrated Project Delivery (IPD) systems and protocols is replacing Value Engineering (VE).  The payoff of this shift is in higher quality, lower budgets and shorter timelines.  Value is increased, not “engineered out” as is often the case with VE.

Value Engineering’s biggest fault is that it was and is typically implemented too late in the project cycle.  It is most often thought of as a tool to bring project costs back in line.  Doing this late in the design process, as is usually the case, means that the cost of the design itself goes up even as the quality turns down.  Compromises made in late stages to fit the design within budget invariably lead to changes that sacrifice aesthetic, functionality and sometimes even programmatic requirements.

BIM and IPD are changing the model.  The design advantages of BIM coupled with communication principles of IPD bring design and budget conflicts to light much earlier in the design process.  As a result, the team is able to search for and select alternatives that meet all project requirements.  Discovering and solving these issues early on saves time, eliminates rework, improves quality, and allows everyone on the project team to be successful. 

But these new tools are not yet common in the marketplace.  At this point I see them being mainly used on very large projects such as new hospitals, research facilities, institutional buildings and the like.  There are too many owners who have not yet gotten the message.  Their “design-bid-build” mentality is meant to ensure minimum cost.  What it really does is force every entity involved in the process to have a parochial mentality, therefore denying the advantages of transparent collaboration to the project, and the owner.  Projects take longer, carry more risk, cost more and deliver less.

BIM and IPD are tools which actively contribute to and improve the value of projects.  As with any new tool, there is a learning process.  New team models and behaviors, increased trust and collaboration, a willingness to be transparent and a “us” mentality are keys to IPD success.  These don’t come easily to everyone, making the selection of team members more important than ever.

In the old model contracts emphasized constraints and penalties.  Guaranteed Maximum Price (GMP) and Lump Sum contracts along with Liquidated Damages clauses and litigation were used to define and enforce project parameters.  In IPD relationships and shared risk take a much more prominent position.  The emphasis is on Design to a Budget principles where project deliverables  and the allowable maximum funding are established.  The profit buffer between the two then becomes an incentive pool.  In the conventional model design and construction were managed to standard of care and warranty requirements.  In the IPD model design and construction are managed by joint decision making and quality adjustments as the project progresses.  In short, the contract becomes a tool, not a threat.

Creating a Sound Facilities Investment Program

For the last couple of weeks I have been discussing facilities asset management.  Understanding the true Total Cost of Ownership is important, but only a part of the process.  Total Cost of Ownership combines with Life Cycle Management and Integrated Investment Processes to form a complete facilities investment protocol.  Adapting these three elements to your particular situation without invalidating their objectivity will increase your ability to forecast, plan and execute project investments with maximum benefit.  Follow these three steps to form a sound facilities investment program.

Adopt Total Cost of Ownership as Your Investment Strategy

Initial development costs of a typical commercial facility approximate 40% of its Total Cost of Ownership.  Organizations that make investment decisions on the first build cost alone make that decision without 60% of the available information.  Using first build, benchmark Capital Replacement Value ratios, and Maintenance and Operations cost records you can predict to a reasonable certainty the actual cost of the decision over the project’s entire life cycle, thereby informing the decision process to a much higher level.  Stated simply, Total Cost of Ownership illuminates the financial life of the building.

• At the beginning, TCO predicts the overall investment required to build, own and operate, and dispose of a built asset

• Over the life of the project, TCO projects capital investment requirements and cash flow needs

• At the end of the asset’s life, TCO informs best investment decisions on timing and mode of disposal

One note to remember:  Total Cost of Ownership is a valuable tool at many levels.  It can be used to manage portfolio assets such as a large site with multiple buildings and a significant infrastructure investment, the building(s), systems within a building, and even components within a system. 

Establish an Interoperable Life Cycle Database as an Investment Foundation

You are awash in data.  The question is not do you have it, but whether or not you are making full use of it.  Collected continuously throughout the life cycle of a facility, data on all facets of operations and services becomes a treasure mine.   Initial costs, the cost of providing services, preventive maintenance, operating and disposal costs are all available to you with varying degrees of certainty.  A key mistake that many organizations make is modeling the asset only twice in its lifetime; at the beginning when new projects are being conceptualized and planned, and near the end when end of lifecycle or extend options are evaluated.  Failing to maintain a continuous model along the way misses the opportunity to inform decisions throughout the life cycle.  Deciding when to refurbish an interior, to change the use of a facility, to replace a major piece of operating equipment, to expand, make capital investments to improve operating efficiency, or even to sell or retain a property in the portfolio are all decisions that benefit from your data.  Continuously feeding the database over the life of the facility strengthens your understanding of the cost and benefit of investment decisions along the way.   Each incremental save over the life of the facility is compounded over time.  Each better decision that is made along the way grows and increases the value and leverage you have on the bottom line.

Implement a High-Value Integrated Investment Process

This speaks to integrating planning and management tools so that they work in harmony with each other.  By keeping these protocols in synch you once again improve the accuracy of planning and help maximize investment benefit.  Master Planning, Integrated Project Delivery and Life Cycle Management are too often executed as separate activities.  Integrating them to share information increases the accuracy and value of each.  Integrated Project Delivery (IPD), especially when paired with Building Information Modeling (BIM), helps to lower first cost and improve first build quality.  When the BIM model is then kept alive and used throughout the life cycle to model changes and troubleshoot issues the Return on Investment for the system grows as it continues to contribute to the operating and investment efficiency of the project.