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.

Mission Statements as a Strategy Alignment Tool

One of the ways to align FM strategy with enterprise strategy is by making sure your FM Mission Statement is aligned with the organization’s mission statement and strategies.  As I look at mission statements from various FM groups I often see them focus more on FM operations than they do on the mission and strategies of the entities they serve.  When this is the case FM can become isolated and be perceived as not relevant to the core goals of the enterprise.

The process used to develop mission statements can support or hinder the quality of the end result.  There is no one right answer as each mission statement must be culturally aligned as well as strategically aligned.   Some may choose to develop a mission statement through consensus while others will choose to be more top down.

I recall one instance when an entire department was engaged in developing its mission statement.  Predictably, a lot of time was spent negotiating specific elements and the language of the statement.  Also predictably, we ended up with a statement that embodied a series of compromises needed to reach consensus.  After all the effort the new mission statement was quickly forgotten and became irrelevant.  It had all the right buzz words and met everyone’s needs, but it didn’t do what it was supposed to do – establish our core purpose in concise language and inspire us to that end.

A better model, I believe, is the top down approach.  Defining the organization’s purpose and core values is one of the central roles of leadership.  Leaders are accountable for the outcomes and have a closer perspective of corporate strategy, putting them in position to set the performance agenda.  I have been part of many mission statement development initiatives.  The very best ones I have seen are those which are articulated by strong leaders who have thought strategically about the organization and where it needs to go, and who use the mission statement to define its “True North.”

Assessing Facility Management Performance

Providing workplaces that meet organizational needs and services that support business operations is what FM’s do.  Sometimes, however, it seems like that is the easy part.  Knowing exactly what to do and how to go about it can sometimes be a challenge.  Even more perplexing at times is understanding how well you are doing and what your customers think of your performance.  To help us we have all kinds of performance analysis and management systems, balanced scorecards and the like. 

Sometimes I think we over complicate it.  What we really want to know can be revealed by the answers to a few simple questions.  By properly structuring these questions and aligning them with core principles and tools we open the door to knowledge that improves our processes and increases our value.  These simple questions and their affiliated processes are the heart and soul of performance management and improvement.

Who do you serve and what do they do?  Understanding your customers and stakeholders is the foundation that supports everything you do.  Here is a key fact to always keep in mind:  You cannot understand your stakeholders if you don’t know what they are concerned about, and you can’t know that unless you ask.  So ask.  Be intentional about your relationships with key stakeholders.  Their business is your business.  Learn it.  Start to think and talk in terms of their strategies and goals.  Demonstrate to them that you both know and understand their business.

What services do they need?  Now that you understand their business, ask what services you can provide that will help them be successful.  This is your chance to do the expected well and to surprise with the unexpected.  While everyone needs the basics you will find customers who need something else, maybe even something they haven’t realized yet.  Knowing your customer’s business at a fine level gives you the ability to see their needs from your perspective.  Providing options to improve their value demonstrates FM’s strategic importance and leverage.

What is the best way to provide those services?  Evaluating your workflow process is a critical step in making sure that your processes are aligned to maximize benefit across the enterprise.  Too often we design and evaluate FM processes and workflow from a FM perspective only.  Because of the breadth of our reach our workflow processes touch virtually every nook and cranny of our organizations.  It behooves us then, to assure that our workflow is efficient, thorough, and well-aligned.  Also, FM sometimes needs to be more assertive in driving workflow alignment throughout an organization.  Yes, we serve every nook and cranny; but we also are served by many.  We need information and process outputs from others to do our jobs well.  When we aren’t getting it we have a responsibility to speak up.

How can you know you are doing a great job?  Sustainable metrics are the protein in your FM diet.  Metrics provide data, knowledge and eventually, wisdom.  Metrics tell you what you are doing, how often, how fast, how well, and how efficiently and effectively.  Understanding what is important to your organization, how to measure it accurately, how to analyze the data and glean operating intelligence from the data is a core FM skill set.  Some of this information will come from your customers, as it should, but only a small fraction.  Those who rely on a limited number (usually less than 5%) of survey returns to portray their operational health do themselves and the enterprise a disservice.  You should be tracking and reporting basic numbers and trends for all segments of your FM operation as a minimum.  You should also be using metrics to investigate operational alignment with key organizational goals, to troubleshoot when necessary, and to help make the business case for projects and initiatives. 

What is the best way to organize?  The correct organizational structure is the foundation upon which your strategy and execution capabilities rest.  Depending on your company’s size, services/product, complexity, geographical arrangement and the market sector you are in, you may elect to provide all services in-house, out task discreet elements, or outsource the bulk of the FM effort.  If outsourcing you might elect different providers for different FM elements, or select one provider per region, or even one global provider.  The options here are almost endless and most likely more than one will work for you.  But some will work better than others.  Understanding the service and competitive advantages and disadvantages of the various organizational models and how they relate to your specific requirements and culture are important steps to knowing your best option.  This is truly a foundational issue and getting it right is critical.  Do not make changes to your structure without a strong due diligence effort to identify risks and mitigation strategies. 

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.  

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                                                                                          

Retrofits                                              

Renewal/Replacements                         

Compliance                                          

Life Cycle Plan                                     

Operations Plan

Labor

Materials & Equipment

Systems & Processes

Energy & Utilities

Growth & Impact Plan

Additions

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.