Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement (2017)

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56 Guidebook for Considering Life-Cycle Costs in airport asset procurement which reduced the risk on the airport. Additionally, through the TCO process, the relationship between the airport and the vendor personnel has become stronger at multiple levels within both organizations. This makes operating and maintaining the system easier and more efficient. Procurement The finance business unit is leading the procurement process at GTAA. The airport procure- ment function process is mainly structured according to the following: • Functional manager develops the scope • Scope gets reviewed and posted by the finance procurement team • Procurement team manages the process and makes sure everything is documented properly and communicated clearly between internal and external teams The procurement methods that are implemented at GTAA depend on the product and service. For example, if an important service is being procured with a high value, then the vendor is evaluated as follows: • 50 percent for price • 50 percent scope details and services provided – Like work – Experience – Bid quality • Safety structure The procurement evaluation team consists of the functional manager, supervisors, pro- curement representative, operations, and an outside entity. Each person ranks the submission independently and the team meets and decides. The recommendation goes to senior management for approval and execution. The airport industry is a very tight market in procurement and faces many challenges to have a robust procurement process, including the following: • Vendor diversity • Highly qualified vendors GTAA uses TCO in its procurement processes, especially for large assets such as elevators and escalators. One procurement example at GTAA is when TCO helped modify the future procurement approaches of large systems. As part of the procurement package, the airport wanted the vendor to install, operate, and maintain the asset. There was a 7-year O&M agreement attached to the service agreement. The vendor that was chosen did not have a service arm as part of its operations. After the system was installed, many operational and maintenance challenges occurred for airport personnel and the vendor because of its lack of experience and not having that service capability within its organization. This made GTAA revisit its procurement approaches within TCO. This event triggered the procurement team members to pay closer attention to the submittals from vendors and expand their knowledge about the market and the capabilities of the different vendors. The procurement business unit has specific and quantifiable written cost objectives, such as the following: • Improve and continually grow • Obtain value for the money • Mitigate and reduce risk

Case Studies 57 • Maintain a good supply chain • Improve vendors’ lead times The preceding objectives are mainly at the procurement functional level. However, the specifications are the ones that manage the service level. These objectives are evaluated mainly according to the asset that is being procured, whether it meets the specifications and the cost or not. An excerpt of a recent tender (bid) package for maintenance and repair services of elevators, escalators, and moving walks is presented in Appendix A1. O&M Ready at Toronto Pearson International Airport GTAA has a process in place to include the different business units in the planning, design, commissioning, and O&M of its assets. The forms of interaction include but are not limited to plans review, specification development, and provision of as-built drawings and asset details. During the commissioning phase, a team from different business units get together to get on the same page. GTAA has a robust acceptance process and standard in place called TCAT (Appendix A2). Additionally, the airport has a business case evaluation process in place that facilitates project- related communication between these business units. With these different processes in place, silos can be broken down and more communication happens. Some of the biggest gaps in the turnover process of assets at GTAA that need more attention from the contractor’s side concern documentation, where the following documents are not always provided: • Complete set of as-built drawings • Warranties • Special tools • Specifications Currently, as part of the procurement process at GTAA, the project manager and procure- ment are making sure contractors understand and acknowledge that this information is part of the deliverable during the procurement and commissioning process of assets. Phoenix Sky Harbor International Airport The City of Phoenix owns and operates the Phoenix Airport System, which includes, in addition to Phoenix Sky Harbor International Airport (PHX), airports at Deer Valley, Phoenix–Mesa, and Goodyear. PHX is dubbed “America’s friendliest airport” and is the main airport for the Greater Phoenix area. PHX serves more than 100 domestic and international destinations and is Arizona’s largest and busiest airport. In 2015, PHX served 44 million passengers, making it one of the 10 busiest airports in the United States by passenger count. PHX is a hub for American Airlines and is a focus city for Southwest Airlines. With 1,200 daily flights—about 500 of them nonstop—PHX is one of the most convenient airports in the United States, with 17 competitively priced carriers serving PHX. The airport is located in the middle of Greater Phoenix, less than 10 minutes from downtown. The airport provides a free electric people mover from downtown to the airport. Commis- sioned in 2013, the PHX Sky Train is an automated train to transport Valley Metro Light Rail passengers from the 44th Street / Washington Street light rail station.

58 Guidebook for Considering Life-Cycle Costs in airport asset procurement PHX employs 800 full-time equivalent employees, with about one-half of these in the Facilities and Services Division. A total of 14,000 employees work for the City of Phoenix. The airport is managed as a department of the City. The current aviation director manages the Aviation Department. Three assistant aviation directors report to the aviation director; each is responsible for a set of business units. In addition, the assistant chief counsel, the corporate strategic business planner, and the human resources supervisor report directly to the director. Each of the three assistant aviation directors has a stake in the asset management process at PHX. One assistant manages the Technology Division and the Planning and Environmental Division, both of which are involved currently in the asset management program; the second assistant man- ages the Facilities and Services Division, one of the largest stakeholders in the asset management program; and the third assistant has the Operations Division, Design and Construction Services Division, and Financial Management Division, all with large stakes in asset management. Synopsis FAA classifies PHX as an international, large hub airport. The airport is operating a mature systems, applications, and products (SAP) system that is widely accepted and used by diverse stakeholder groups. The functional use of the system has expanded to include some asset management functionality. The system is used to manage a wide list of assets: • Energy management systems • Specialized hardware and security cameras • Automated Critical Asset Management System • IT equipment • FAA Part 139 assets • Common-use equipment, buses and fleets, generators, elevators, escalators, and moving walkways • Inventory • Jet bridges • HVAC • Gates and wedge barriers • Airfield lighting (lighting vault, control system, sensors and accessories, conduits, cabling, and light fixtures) • 400 Hz ground power • Roofing and flooring • Fire systems • Central plant • Air handling equipment • People-mover equipment and other equipment associated with aircraft parking, ramp area, roadways, runways, taxiways, bridges, people-mover vehicles, shuttles, drainage, fuel infra- structure, lighting, tanks, baggage, HVAC, plumbing, elevated bridges, parking garage/lots, passenger terminals, passenger loading bridges, administration buildings, maintenance facilities, pump stations, wastewater treatment facilities, and signage While SAP provides a warehouse for a great deal of data for thousands of the airport’s assets, it does not provide much of the functionality that the airport would like to have to manage its assets proactively. SAP at PHX History. PHX began using SAP under a city-wide mandate to facilitate integration with finan- cial systems. Originally developed as an organization-wide database for multiple applications

Case Studies 59 (i.e., financial, assets, operations, procurement, inventory, administration, and human resources applications), SAP was first used centrally at the City of Phoenix in the early 1990s. It was sub- sequently rolled out to the City’s different business units. The Airport Department began using SAP in the mid-1990s. The SAP system is data rich, with 20 years’ worth of data. The collection of asset data began early in the implementation. The collection of condition data has been ongoing since the mid-2000s under a contract with Faithful and Gould, for the rental car facility project. The database currently holds many thousands of asset records. Usage. PHX uses SAP to generate and track work orders, schedule proactive and preventive maintenance, track maintenance history, and monitor asset condition. Other applications, dis- cussed in the following section, are used to track FAA Part 139 discrepancies and maintenance history and provide safety management entries and workflow for maintenance. Business process and workflow for asset decision making and maintenance are not generally implemented in SAP, although some business units do store maintenance plans in the integrated document management system. Maintenance supervisors use an 80/20 rule in prioritizing their maintenance activities. The maintenance supervisors conduct scheduling and planning of maintenance activities and produce work orders from the SAP system. Maintenance cost tracking is also conducted through SAP. Data in SAP is tied to the GIS. The asset database connects these different assets based on their location. (This is one of the challenges PHX has in its asset management program; it can- not roll the assets from a child to a parent system of assets.) Each of the various asset elements (children) has a quick response code. This code links the asset’s metadata to that specific asset or element. PHX has in its asset database in excess of 18,000 data lines. (These data lines are static and are not updated in real time.) The collected data is checked for quality assurance and quality control in house prior to being entered into and updating the SAP system. Additionally, whenever the GIS data is updated, these updates automatically get reflected in SAP. In addition to SAP, the airport uses web-hosted fleet asset management software, FASTER Asset Solutions. Related Software The Facilities and Services Division’s energy business unit manages the airport’s specialized hardware and implemented Honeywell’s Enterprise Buildings Integrator (EBI) building auto- mation software to manage it. Those specialized systems include closed-circuit television, fire alarm systems, automation, security systems, and variable frequency drives. EBI provides an integrated platform for these systems, and PHX uses the following modules: • Digital video manager to improve operational efficiencies and performance • Energy manager to monitor, validate, and optimize energy usage • Life safety manager to monitor and control fire alarm systems • Security manager to integrate information from security, access control systems, and surveillance devices The cost of managing and updating EBI is high and requires more resources than are available to the airport. Because of this, only specific functionalities of EBI are in use and updated. There is an effort to integrate EBI with SAP, but that status is not known. PHX uses the document management module within the Primavera Unifier capital management system to manage asset documents such as budget, specifications, and requests for information.

60 Guidebook for Considering Life-Cycle Costs in airport asset procurement Unifier is integrated with SAP. Commissioning documents provided by vendors (e.g., asset manu- als, lists of critical assets, maintenance schedules, etc.) are also stored in Unifier and linked to the assets stored in SAP. PHX developed an in-house mobile work order application for SAP that is called FieldPort. The Part 139 tracking entries are not tied directly to work orders in SAP. There is reporting capability for FAA compliance within the FieldPort application. One of PHX’s plans is to implement a predictive maintenance program by installing a command wall that will provide the users with real-time condition of the assets. Additional Needs While SAP holds many years of data for many of the airport’s assets, it is not an asset manage- ment system nor a maintenance management system. It lacks some basic functionality that would make it a better tool for the airport. Assets in SAP are not in a hierarchical catalog by system, nor are they geo-located, although a location description is given for each asset. Generally, workflow is not included for processes, and metadata is not standardized for each asset. Naming conventions (general ledger codes) are loosely standardized, with some departments using more stringent standards than others do. It is widely perceived that SAP is not user friendly. It was intended that SAP would provide cost data to allow managers to make decisions. The perception that SAP data is not reliable pre- vents its use for that purpose. That perception may stem from SAP’s user-unfriendliness instead of actual data unreliability. PHX does not have a formal, accredited management process in asset management such as ISO 55000 (asset management standards), ISO 9000 (quality management standards), and ISO 14000 (environmental management standards). However, there are plans to adopt and implement these accredited management processes, especially ISO 55000, in the near future. Procurement PHX is financially independent from the city, as the airport-generated revenue is used for its capital and operational budgets. Airport-generated funds must be consumed by the airport and cannot be used outside the airport system. However, the City largely governs procurement. The independent procurement authority at the airport is typically $5,000, depending on the department and contract. Purchases above the designated authority require City Board approval. The City Finance Department handles the Aviation Department’s procurements and accounts payable. For those procurements, the airport works with Finance to develop an RFP for city- wide procurements. There are some airport-specific procurements, however, that are handled entirely within the airport division. PHX implements various procurement methods including low bid, RFQ/RFP, approved vendor lists, and on-call contracts. It is possible for the airport to purchase from vendors outside the provided list based on quality, specifications, requirements, or other factors. The airport has published guidelines for purchasing available online. eProcurement The City has recently implemented a new procurement system, eProcurement. The eProcurement system is used across the airport and was implemented to facilitate and improve purchasing

Case Studies 61 city-wide. With the new system, the procurement process has changed so buying is done primar- ily by the City. The procurement process starts with entry by airport staff into SharePort to request a purchase. After purchase approvals, Aviation Supply enters the request into eProcurement. If the procure- ment is over $5,000, the request goes to a City buyer; aviation staff purchases procurements under $5,000. Within the eProcurement system, the airport has less control over procurements. The approval process has fewer checks on payments to vendors. All procurements for warehouse supplies (inventory) are done in the eProcurement system. That system is integrated with SAP. A module in SAP, inventory manager, automates replacement of inventory. Inventory manager tracks movement of supplies. When movement of a particular item slows down, the inventory manager orders fewer of that item (i.e., there is a lower minimum number on hand). Capital Projects Projects are chosen for funding by a committee of airport deputies. This committee meets to prioritize projects 6 months out. The mandates for prioritization are typically safety, security, and failures. A business case is drafted to determine the costs, scope, and schedule for the project. Within the airport, a panel reviews bids received from procurement requests. That panel has the flexibility to determine procurement criteria used to select the successful bid based on specific project needs. After selection, the City Streets Department handles contracts for the airport. A section within the Financial Management Division analyzes all capital assets. When a project is 90 percent complete, assets are capitalized. To help in tracking capital costs, the airport uses a capital management system called Primavera Unifier. Within that system, the most common source of error is estimated costs. Total Cost of Ownership PHX has data, tools, resources, and personnel that will allow it to have a successful imple- mentation of a TCO system throughout the entire airport; however, TCO is not fully adopted at PHX. Nevertheless, there are pockets of excellence within the airport that utilize parts of TCO. Currently, the main challenges toward implementing a full TCO system throughout PHX are the following: • Silo processing of data • Lack of a good hierarchy in the asset catalog within SAP PHX decided to go down the path of TCO in procurement because data is available, and the airport will be able to manage and operate the assets more efficiently and reduce the cost of ownership. This better procurement process will translate into saving future O&M funds and will direct these saving to other capital projects. Additionally, to achieve a comprehensive procurement process, various stakeholders within the different levels of the organization provide input and report back to senior management, business unit heads, facility management teams, etc. Through its data-rich system, PHX has the ability to search and allocate various data through- out assets’ life cycles. PHX implements a form of TCO approach in its procurement processes. However, in the next strategic plan, TCO will become an official initiative, with resources assigned.

62 Guidebook for Considering Life-Cycle Costs in airport asset procurement The airport tracks KPIs and performance, weekly, monthly and annually. Implementing per- formance measures allows the airport to focus on results, not the activities required to achieve them. While performance measures are not a complete picture for success, they do serve to change processes that are stuck in old and nonproductive ways, if the right measures are chosen. Hartsfield–Jackson Atlanta International Airport Hartsfield–Jackson Atlanta International Airport (ATL) is the world’s busiest and most effi- cient airport, serving an average of 275,000 passengers and handling 2,500 aircraft arrivals and departures on a daily basis. ATL is also a major US hub for domestic and international travel, offering service to more than 150 US destinations and nearly 70 international destinations in more than 45 countries. With more than 63,000 employees on campus, ATL is the largest employer in Georgia. In 2015, ATL became the first airport in the world to host more than 100 million passengers in a single year, and in 2016, at the time of writing, it was on track to top 105 million guests. As a result of this continuous growth, ATL could face challenges related to facility conditions, aging infrastructure, and capacity requirements. Increased usage also boosts the demand on maintenance and facilities services. Fortunately, ATL is continuously improving its facilities and operations to keep pace with the demand and quality of services provided to its passengers. Recently, ATL completed its 2030 Master Plan. The plan includes development of and upgrades and additions to the airfield, terminals, gates, landside, cargo, and support facilities. A sustainable management plan was also developed to accompany the Master Plan and will be integral in both the short- and long-term projects at the airport. Both plans will have a direct impact on asset management and procurement processes. TCO Module At ATL, TCO has been defined by the asset management business unit as the annual cost to maintain an asset for the intended life of that asset per square foot. The annual cost includes vari- ous life-cycle expenditures, including utilities, O&M, capital projects, rent, and most recently insurance associated with airport assets. The TCO module is also used for renewal and replacement scenarios to allow asset managers, planners, and senior leadership to visually assess the impact of “doing nothing” versus imple- menting an improvement. This scenario-based analysis provides an outlook on the cost impact over a specified period of time, and it even demonstrates the ROI after implementation. The inception of TCO at ATL began by increasing its overall visibility, including its features and benefits. Although the City of Atlanta has a policy that considers the life-cycle analysis of products and services in development, manufacturing, use and disposal at the end of product life, TCO was not fully implemented throughout the airport. The adoption of TCO was conducted through the Department of Aviation’s asset management business unit. Senior leaders wanted the airport planning process to include the TCO perspective to make better financial capital decisions, thus began an airport-wide initiative. Frequent meetings were conducted to explain its importance. As a result, various airport division representatives came to understand that successful TCO implementation relies upon cross-departmental infor- mation, especially in ensuring accuracy of input and output information. The asset management business unit, through its continuous TCO messaging and coor- dinating of cross-airport efforts, is currently developing a communication plan to promote

Case Studies 63 efficiency and sustainability in the areas of procurement, design, operations, maintenance, and decommissioning. The associated costs for each asset reside in different databases throughout the organization: • Utility costs for the airport’s assets reside in the City of Atlanta’s utility management system. • Maintenance costs for the airport’s assets reside in Maximo, a software program used for managing ATL work orders and capturing material and labor costs. • Life-cycle replacement costs are hosted in a database by VFA, asset management software that models data later verified by the organization for accuracy. • Capital cost data is maintained within the enterprise project management system, which captures all project-related information. With the necessity to begin capturing these costs, the enterprise project management system was deployed with a specialized module for TCO. ATL now has the line-of-sight to life-cycle costs associated with many of the assets within the ATL portfolio. ATL considers TCO to be a supplemental resource that allows all business units to have a synonymous view of the actual costs of owning assets. This form of information sharing will help determine costs beyond procurement and construction, assist in better decision making, and forecast estimated costs for major renewal and replacement initiatives. Sustainable Procurement Policy ATL is also working closely with the City of Atlanta to develop a sustainable procurement policy. Through this policy, the City and airport seek to become a model for sustainability for its customers, suppliers, employees, and the community at large. The purpose of this policy is to encourage the use of recycled and environmentally preferable products and services whenever practical, provided the products perform satisfactorily and are available at a reasonably competitive price. This policy encourages the use and reuse of recycled or recyclable supplies and materials as a City goal to minimize environmental impacts related to City practices and operations and to divert items from landfills. Within ATL, the policy will be communicated from a “top-down” delivery from senior man- agement and carried out by decision makers within each department. The policy is expected to be directly communicated to vendors through contracting requirements. The main objectives of the sustainable procurement policy are as follows: • Identify materials for which a life-cycle approach can be applied before procurement • Develop comprehensive sustainable procurement guidelines for all Department of Aviation divisions • Develop a comprehensive listing of environmentally friendly products available locally and regionally that are comparable to conventional materials currently procured and that are economically feasible and suitable for ATL • Develop a list of suppliers and vendors that provide local/regional, environmentally friendly products • Make recommendations on how to update the procurement system to encourage bidders to include environmentally sustainable products in all bids, such as a requirement for a specific percentage of environmentally friendly products • Establish protocols for supply chain sustainability validation surveys and audits Sustainable Construction Manual The airport’s new $6 billion capital improvement program consists of new construction as well as renovations and repairs to existing buildings. Although there have been project-specific

64 Guidebook for Considering Life-Cycle Costs in airport asset procurement sustainable construction requirements on some projects such as the pavement recycling program, a comprehensive manual that outlines sustainable construction requirements for all projects is being developed. The sustainable construction manual will establish guidelines for all construction work conducted at ATL. The sustainable construction manual will include research on Leadership in Energy and Environmental Design (LEED) green building standards as well as other recognized sustain- able building industry standards and guidelines used by other airports. Researching sustainable construction practices, costs to implement these practices, and the savings realized will provide a basis for the guidelines presented in the manual. From a procurement standpoint, building with viable products will allow more sustain- able ways to decompose or reuse building material at the end of its useful life. The sustainable construction manual will allow for disposal costs to be calculated in the TCO in advance of procurement. Through the implementation of TCO, adoption of a sustainable procurement policy and having a sustainable construction manual in place, ATL can review the entire life cycle and its impact to the airport’s social, environmental, and financial bottom lines. Aligning these policies and procedures encourages ATL to make conscious decisions on sustainably maintaining its infrastructure and realizing its impact on surrounding communities. Non-airport Organizations Two non-airport organizations are included in this chapter: Network Rail and KONE Corporation. The case of Network Rail is relevant because the railroad company functions much as an airport in terms of passengers and facilities, and has also had extensive experience in implementing TCO. It is one of the pioneers in asset management and TCO worldwide. As one of the preferred suppliers for installing and maintaining people-moving systems, KONE provides dedicated, on-site, call-out and maintenance teams 24 hours a day, 365 days a year at airports worldwide. Its practices are highlighted in the included case study. Network Rail Network Rail (NR) in the UK is the owner, operator, and infrastructure manager for the railway network in England, Scotland, and Wales. NR maintains and develops the physical infra- structure of the rail network. Additionally, NR ensures the efficient management of the assets over the short, medium, and long term, while taking into consideration the future expansions and development throughout its service areas. As the owner of the rail infrastructure, NR provides the operating companies access to the rail network. It is funded through a mixture of access revenue, paid to it by train operating companies, and through government grants. It is licensed under the British Department of Transport. The main responsibilities of NR are as follows: • Operating the network • Managing performance • Directing service recovery • Setting timetables • Allocating capacity • Leading industry planning • Maintaining, renewing, and developing the network

Case Studies 65 NR has a diverse set of assets, including 20,000 miles of track, 40,000 bridges and tunnels, and 2,500 railway stations (however, only 19 of them are managed by NR; other stations are managed by other operating companies), in addition to the signals, wires, and level crossings. NR also employs around 35,000 employees. Over the past 20 years, the passenger numbers have doubled. It is estimated that around 4.5 million passengers use NR daily. There are around 1.7 billion passenger journeys taken on the railway every year. Currently, NR is investing more than £25 billion ($US36 billion) to grow and expand its infrastructure between 2014 and 2019. However, through these global financial challenges, NR is working on maintaining the value for money in its decision-making process. Asset Management NR is one of the most progressive organizations when it comes to asset management through- out the world. It implements PAS 55 UK asset management standards (equivalent to ISO 55000) throughout its planning, engineering, projects, and operating routes functions. NR’s main asset management message to its stakeholders is that it “supports the delivery of [its] promise [to its customers] by planning, delivering, and making available an infrastructure that supports the current and future timetable safely, efficiently and sustainably” (Network Rail n.d.). NR has an asset management policy that describes the overall approach for a sustainable asset management. Additionally, NR has an asset management strategy that serves two purposes: identifies the high-level objectives and targets for the infrastructure and provides a roadmap to improve on NR’s asset management capability. NR’s asset management strategy and objectives, and the relationship with other key documents in the asset management system and key overarching documents are illustrated in Figure 8-12. NR’s purpose, vision, strategy, behaviors, and strategic themes are presented in Figure 8-13. Source: Network Rail (2014). Network Rail Asset Information Strategy Route Asset Strategy Infrastructure Projects Business Strategy Network Operations Business Strategy Asset Management Policy Asset Management Strategy and Objectives Route Plans Delivery Schedules/Programmes Safety Management System Regulatory, Contractual and Legislative Commitments Role, Purpose, Vision and Strategic Business Plan Organisational Objectives A sset Policies Figure 8-12. Asset management strategy and objectives, and the relationship with other key and overarching documents in NR’s asset management system.

66 Guidebook for Considering Life-Cycle Costs in airport asset procurement Even though NR has an established and robust asset management program, it is continuously working on integrating the business functions such that they work toward a common goal. One of the main challenges NR envisions is the consistency and depth of implementation across a functionality and geographic diverse organization. Computerized Maintenance Management System NR has implemented more than one CMMS for more than 10 years. For example, there is one for the operational assets (trains) and another one for the properties (stations). The system that NR has in place is named “ELLIPSE.” ELLIPSE is managed through both NR and third parties. NR uses multiple separate asset data systems. However, there is an initiative underway to integrate the asset information known as “Asset Data Store” with the GIS/logical model known as “Railway Infrastructure Network Model.” Most of the inventory data from the assets is entered manually in the data management system. The condition data is mostly uploaded in real time from equipment such as handheld devices or from measurement trains. Source: Network Rail (2014). Our purpose (Why we exist) To generate outstanding value for taxpayers and customers Our role (What we do) A better railway for a better Britain Our vision (What we want to be) To be a trusted leader in the rail industry Our strategy (How we are going to do it) To work with our partners and use our full potential to improve safety, reliability, capacity and value for customers and taxpayers Our behaviours (How we need to work) Customer driven Accountable Challenging Collaborative • Safety • Sustainability Key enablers • Technology and innovation • Organisational change • People • Transparency and public information Our Strategic Themes Corporate capabilities • Asset management • Cap acity and performance management • Project development and delivery Funding and affordability Figure 8-13. NR’s purpose, role, vision, strategy, behaviors, and strategic themes.

Case Studies 67 NR implements a whole-life-cycle costing (WLC) approach in managing its assets. WLC refers to TCO over the asset’s life cycle. WLC is used in managing capital and operational expenditures of the assets. At NR, the CMMS is used to track costs such as labor, plant, material, etc. However, the system is not used to charge back costs to other functions within the organization. Whole-Life-Cycle Costing NR utilizes WLC in procuring all major railway infrastructure assets. The following list pro- vides some of the breadth of decisions that are currently, or could be in the future, supported by WLC: • Selection of assets for installation on new or existing infrastructure • Comparison of product designs, new technologies • Assessment of suppliers, warranties • Timing of renewal versus continued maintenance • Alternative renewal options (e.g., conventional renewal, refurbishment, upgrade) • Costs and benefits of remote monitoring • Optimization of inspection/maintenance regime • Make or buy (e.g., design, maintenance) • Comparison of timetable changes • Impact of vehicle characteristics on infrastructure (e.g., bogie stiffness) • Application of operational restrictions (gauge, route availability, line speed, etc.) • Selection of access regime (e.g., blockade) • Determination of inventory levels for spares holdings • Capacity/capability improvements in enhancement schemes • Optimization of local decisions on specific assets (e.g., timing/type of next intervention) • Improvements in weather resilience / climate change adaptation • Prioritization of work linked to service provision (e.g., improvements in safety, punctuality, environmental performance, etc.) WLC is part of the proposals submitted by vendors. The main objectives of WLC are to balance risks, costs, and performance over a minimum period of 35 years. An example of contract-specific requirements for the design of key infrastructure is presented in Appendix B. Before implementing WLC as part of NR procurement processes, the organization faced many challenges such as lack of information about its assets’ life costs and performance (including lack of framework for undertaking the asset and evaluating it). Senior management believed that implementing WLC would assist in informing the organization about the assets’ financial performance throughout their life cycles. Additionally, regulators in the UK started requesting/ mandating it as part of the reporting and analysis. WLC development included the different business units within NR such as financial, procure- ment, engineering, planning, O&M, and facilities management. The main initiators were the executive directors of planning, engineering, and finance. WLC is an independent business unit within NR. The head of WLC is the owner of the overall approach and methods. The introduction and implementation of WLC at NR was not an easy task throughout the organization. For example, the implementation in central functions was relatively straight- forward. On the other hand, the implementation in projects and maintenance was more difficult because of the number of teams and personnel involved, and the competencies required. Over- all, the WLC principles have been widely accepted throughout NR and are rarely challenged. Furthermore, the implementation of WLC has resulted in consistency in decisions with a strong evidence base.

68 Guidebook for Considering Life-Cycle Costs in airport asset procurement The main success factors behind this effective implementation of WLC were the buy-in from the employees, ease of implementation, external stakeholders’ support, commitment to competency development, and mandating the WLC process. However, the most important factor for success was securing funding “internally and externally” (linking investment approvals to WLC). WLC has been widely implemented across NR, and it has positively affected the relationship between the different functions within NR. The main user of the WLC outputs is the procure- ment function. At the beginning of the implementation, the process was slower; however, now it has caught up and got up to speed. In part, the procurement function had to modify require- ments and update policies. One set of requirements that were affected was the vendor/supplier requirements, and this change was based on the WLC data. NR used WLC to justify a shift from vendor conventional renewal to partial renewal in some circumstances that delivered significant cost savings. KONE Corporation Founded in 1910, KONE is a manufacturer and worldwide supplier of elevators, escalators, passenger conveyors, auto doors, and turnstiles. KONE provides both maintenance and technical support for all of its products. The company provides innovative and eco-efficient solutions to its airport clients, under the core goal of enabling people to move safely, smoothly, comfortably, and without interruptions. Experience with Total Cost of Ownership The procurement division at KONE is structured and aligned to respond to airport equipment supply and technical support needs. This alignment has been created through both structured communication and proximity of KONE and airport personnel, as they work together to provide the expected level of service to stakeholders. Airports and other clients KONE serves, especially in the UK, heavily consider life-cycle costs and reliability of the assets as they are procured. Developing and using a life-cycle-based equip- ment selection process has created collaborative relationships between airports and KONE, which has enabled airports to continually address their needs and levels of service. KONE has similarly collaborated with its other clients, such as the London Underground, to develop a TCO tool for their assets. KONE has discovered that in order to have a successful implementation of TCO and provide expected value and desired outcomes to its airport clients, service contracts need to be long term (10–20 years) and to include planned asset upgrade and replacement programs. The advantage of having these longer-term service agreements is that they provide the ability to strategically plan for interventions, upgrades, or replacements, prolonging the life and performance of the assets over a longer period of time. Historically, the investments in these areas have been slow and have not adequately addressed the growth, expansions, and types of services that the airports are currently experiencing. Total Cost of Ownership in Proposals One of the challenges that KONE faces when responding to calls for proposals or qualifica- tions is the life-cycle expectations by the owner. For example, the London Underground runs a 40-year asset life expectation for its escalators. From the first day of providing service to this client, a vendor must consider and plan for a 5-year component upgrade/replacement intervention to meet expectations. Table 8-1 is an example of the life-cycle strategy for escalators that London Underground uses.

Case Studies 69 KONE collects TCO data from assets it manages and uses it to calculate life-cycle costs, and could use it to improve asset reliability and passenger experience. The collected data includes: planning and design, installation and commissioning, operation, maintenance, and disposal. This information, however, is not shared with the clients unless requested as part of the pro- posals. Although this currently-collected data is being fully utilized in work for the London Underground, it is not being fully leveraged in day-to-day O&M activities completed on behalf of airports. Discussion Case study subjects undertaken for this project were three airports, a non-airport transportation organization, and a vendor with a mature program in TCO/WLC: • Toronto Pearson International Airport, Canada • Phoenix Sky Harbor International Airport, US • Hartsfield–Jackson Atlanta International Airport, US • Network Rail, UK • KONE Corporation The case studies were conducted over 1 or 2 days on-site at PHX and YYZ, and remotely with ATL, NR, and KONE. Asset management implementation practices within each organization were examined, as well as the benefits to the organization from the program. Also evaluated were the business objectives, technical and business problems and challenges, the solution that was implemented, and ways that the asset management program benefited organizational efficiency, procurement practices, and total cost of asset ownership. The primary purposes of the case studies were to evaluate the following: • Implementation process • Lessons learned • Best practices • Benefits of the program • Impact on decision making • Future plans Asset Life Cycle Affected Asset Element Installed: Year 1 Modification 1: Year 5 Handrails, tracking systems, clean Modification 2: Year 10 Handrails, tracking systems, clean, non-destructive testing inspections, motors and bearings Modification 3: Year 15 Handrails, tracking systems, clean, non-destructive testing inspections, motors and bearings, refurbish motor gear box, renew chains, controller upgrade Modification 1: Year 20 Handrails, tracking systems, clean Modification 2: Year 25 Handrails, tracking systems, clean, non-destructive testing inspections, motors and bearings Modification 3: Year 30 Handrails, tracking systems, clean, non-destructive testing inspections, motors and bearings, refurbish motor gear box, renew chains, controller upgrade Modification 1: Year 35 Handrails, tracking systems, clean Replaced: Year 40 Table 8-1. Life cycle of London Underground escalators.

70 Guidebook for Considering Life-Cycle Costs in airport asset procurement All of the airports in the studies are large hub airports. Attempts to engage small and medium airports in case studies failed. It is a conjecture of the research team that the research topic requires a more mature asset management program and that there are fewer small and medium airports with mature programs, thus more difficulty in finding study subjects. The compromise was to engage small and medium airports in validating the TCO Tool. Although NR is a railway network in England, Scotland, and Wales, and not an airport, the organization deals with passengers and journeys in a similar fashion. There are stations from which passengers embark, and those passengers journey through stations to final destinations. Statistics showing the number of flights/journeys and passengers annually are in Table 8-2. The implementations of the asset management programs are mature in each instance, with the newest being about 10 years old and the oldest dating from the 1970s—nearly 40 years ago. That program is in GTAA, where the Canadian government developed software internally for use at all its airports. When the airports were privatized, that software was turned over to the airports for their own further development. Because of the longevity of the program and the commitment of the airport to it, the GTAA program is used across the airport for business decisions, risk man- agement, procurement, operational, executive, and TCO decisions. It is integrated with many of the airport’s other applications. The success of the program continues with a transition to a com- mercial off-the shelf software currently in implementation process. The program resides within facilities, engineering, and IT. However, all the business units collaborate with one another. A gov- ernance model for asset management ensures good decision making and all-airport engagement. PHX’s success in capturing data for its assets airport-wide puts them in an excellent position to leverage a full-blown asset management system. The airport is using software mandated by the City of Phoenix, but it does not have the full functionality of an asset management system with workflows and decision-making tools. The focus of executive leadership at the airport is pushing toward better decision-making tools for financial responsibility and to implement a robust and reliable asset management program. The program at ATL is continuously working on improving the facilities and operations to keep up with the increasing number of passengers. To keep up with this fast pace growth, the airport looked into adopting and implementing TCO to make better financial decisions. Addi- tionally, to allow the business units to be on the same page in terms of the actual cost of owning the assets, ATL is linking the implementation of TCO with a sustainable procurement policy and a sustainable construction manual. The policy will assist in driving the incorporation of sustain- ability in the procured products and services. The manual will establish sustainable construction guidelines for all work at ATL. KONE as an international provider of mechanical people-moving systems has dealt with dif- ferent types of clients and different types of procurement methods. Every client is different in their needs and their approaches toward procuring, operating, and maintaining their assets. Considering life cycle and TCO improves the quality of services provided by the vendor and the Toronto Pearson International Phoenix Sky Harbor International Hartsfield–Jackson Atlanta International Network Rail Flights/Journeys (thousand) 400 438 912.5 1,700 Annual Passengers (millions) 41 44 91.25 16,425 Table 8-2. Annual number of flights/journeys and passengers at case study transportation facilities.

Case Studies 71 services provided to the stakeholders. The reliability of the systems increases, and the capital and operational budgets can be better managed. Synthesis of Results Every case study was unique in its TCO, procurement, and asset management journey. The participants had a common goal, which is striving to become more efficient and effective in managing their assets throughout their entire life cycle. There are many lessons that can be learned from these case studies. The participants through- out their journey did not get things right the first time. However, they are learning from their experiences and are introducing adjustments to their processes and technologies. This section will highlight these main lessons. Toronto Pearson International Airport • YYZ, like any other airport, has many challenges, especially financial. These challenges include future budgetary allocation, competing capital priorities, and lack of highly trained technicians. • KPIs were established and adopted by the leadership. These KPIs ensured alignment throughout the organization with a focus on performance goals. • YYZ has a governance model that integrates both the land and the air sides. This model is divided into asset management boards and the maintenance improvement teams. The main goal for this model is to make sure that there is continuous communication between the different business units. Also this model gets people on board and drives efficiency in implementation. • TCO has been in place since 1999/2000. It is mainly used for key large assets such as people- moving systems, transportation systems, and baggage-handling systems. • The development of TCO was across the airport’s business units. There were barriers during the initial implementation from operations; however, through communication and joint collaboration these issues were overcome. • TCO currently resides in engineering, facilities, and IT. However, every business unit has a seat at the table and cross collaborates with one another. This collaboration gets everyone on board and allows everyone to understand the challenges that everyone is facing. • One of the procurement challenges that faced the airport before implementing TCO was knowing the market and the services provided by the vendors in addition to the quality of these services. • YYZ has a robust acceptance process and standard in place called TCAT. Also there is a business case evaluation process in place that facilitates communication between the business units. • The main benefit of TCO is that it assures the quality of the services provided by the vendors. Additionally, it makes sure that the vendors understand the project, the deliverables, and that they follow the TCAT process. • The procurement evaluation team consists of the functional manager, supervisors, a procure- ment representative, operations, and an outside entity. Their evaluations are done independently and then the team meets to decide. • The airport industry is a very tight market in procurement and faces many challenges to having a robust procurement process in terms of vendor diversity and highly qualified vendors. Phoenix Sky Harbor International Airport • PHX operates a mature SAP system that is widely accepted and used by diverse stakeholder groups. This system includes a wide range of assets such as energy, security, IT, inventory, jet bridges, people-moving systems, and HVAC.

72 Guidebook for Considering Life-Cycle Costs in airport asset procurement • While the SAP system provides a warehouse for a great deal of data for thousands of the airport’s assets, it does not provide much of the functionality that the airport would like to have to manage its assets proactively. • The airport is financially independent from the city, as the airport-generated revenue is used for its capital and operational budgets. • The City largely governs procurement. The independent procurement authority at the airport is typically $5,000, depending on the department and contract. Purchases above the designated authority require City Board approval. • The airport implements various procurement methods including low bid, RFQ/RFP, approved vendor lists, and on-call contracts. • The City has recently implemented a new procurement system, eProcurement. The eProcurement system is used across the airport and was implemented to facilitate and improve purchasing city-wide. • Projects are chosen for funding by a committee of airport deputies. This committee meets to prioritize projects 6 months out. The mandates for prioritization are typically safety, security, and failures. • TCO is not fully adopted at PHX. Nevertheless, there are pockets of excellence within the airport that utilize parts of TCO. • The airport decided to use TCO in procurement because data is available and the airport will be able to manage and operate the assets more efficiently and reduce the cost of ownership. This better procurement process will translate into saving future O&M funds and will direct these saving to other capital projects. Hartsfield–Jackson Atlanta International Airport • ATL is facing many challenges such as aging infrastructure along with continuous growth in the number of passengers. The facilities’ condition and capacity is not growing at the same pace as the number of passengers, which impacts the services provided to the passengers and does not meet the levels of service set by the stakeholders. • The TCO journey at the airport started with getting the airport’s leadership on board through educating them about TCO and its benefits. Although the City of Atlanta already has a policy in place that considers life-cycle analysis, it was not fully adopted at the airport. • The adoption and implementation of TCO throughout the airport was conducted through the asset management business unit. • The airport considers TCO as a supplemental resource that allows all business units to have a synonymous view of actual costs of owning assets. Decision making will still be prioritized in a manner that benefits particular business units, in which competing priorities remain. • The airport is developing a sustainable procurement policy. The purpose of this policy is to incorporate sustainability criteria into how and what products and services are procured. • Through the implementation of TCO, adoption of a sustainable procurement policy, and having a sustainable construction manual in place, the airport can take into account the TCO and its impact on the airport’s social, environmental, and financial bottom lines. Network Rail • NR is a progressive organization when it comes to asset management throughout the world. It implements PAS 55 UK asset management standards (equivalent to ISO 55000) throughout its planning, engineering, projects, and operating routes functions. • Even though NR has an established and robust asset management program, it is continuously working on integrating the business functions such that they work toward a common goal.

Case Studies 73 • NR utilizes WLC in procuring all major railway infrastructure assets. Many decisions are based on WLC. • Before implementing WLC as part of NR procurement processes, the organization faced many challenges such as lack of information about the assets’ life costs and performance. To overcome these challenges, senior management implemented WLC to assist in informing the organization about the assets’ financial performance throughout their life cycles. Additionally, regulators in the UK started requesting/mandating it as part of the reporting and analysis. • WLC principles have been widely accepted throughout the organization and are rarely challenged. Also decisions became consistent with a strong evidence base. • NR used the WLC to justify a shift from vendor conventional renewal to partial renewal, which delivered significant cost savings. KONE Corporation • KONE utilizes TCO data in the procurement, operations, and management of its installed assets. It has developed a tool that would assist in achieving this. • Long-term agreements between airports and vendors are key for the success of implementing TCO and to achieve the expected value and outcomes from the assets. • One of the key challenges for the vendors when providing TCO information during proposals is not knowing the clients’ life-cycle expectations. • KONE collects TCO data from its assets to produce comprehensive life-cycle costs. This data would provide better asset reliability and passenger experience. • TCO information provided by KONE complements the TCO implementation discussion provided by YYZ, such as having long-duration contracts between the airport and the vendor.

74 There were two components to the ACRP project “Considering Life-Cycle Costs in Airport Asset Procure- ment.” The first part is this guidebook, and the second part is development of a systematic TCO approach to asset procurement (in the form of a software tool) to improve decision making and optimize the use of capital and operating funds. This chapter discusses the development, methodology, parameters, assets, and operating system of the tool, as well as the accompanying user’s manual and video tutorial series. Principles The software tool requirements emerged from the compilation and syntheses of the industry- leading practices that started with the literature review and was further defined throughout the survey and airports’ interviews. The team’s TCO modeling experience, in addition to input from a focus group of airport staff, assisted in identifying a framework that leverages the collective knowledge of the industry in developing the TCO Tool. The framework for the tool focused on usability and applicability to airports of all sizes and needs. The TCO Tool was developed to attain the following principles: • Easy modification to accommodate any size airport (additional complexity can be introduced by increasing granularity) • Applicability to the entire procurement process from project planning through decommissioning • Capability to inform yearly capital (repair and replacement) budgetary decisions • Ability to run “what if” scenarios regarding the timing of asset procurement and intermediate repair and replacement interventions The developed spreadsheet-based TCO Tool can be customized to any set of airport-driven scale parameters—large, medium, or small. Methodology In developing the TCO Tool, a step-wise methodology was employed, as described in the following points: • Predefined Assets. The tool is populated with a list of 18 assets and includes the common life-cycle phases of each asset class: pre-procurement, procurement, operations, maintenance, and disposal. Each phase of the life cycle is divided into different parameters. These param- eters are based on related activities within each element. • Inputs. Inputs for the tool include the asset hierarchy of each primary asset down to parent and child for each class. Additionally, there is input for the analysis period and the expected C h a p t e r 9 Total Cost of Ownership Tool

total Cost of Ownership tool 75 asset life. Each asset element life cycle is divided into capital and O&M to reflect the differ- ences in the cycle (number of years) for each of them. The capital reflects the expected age of the element and the O&M reflects the annual or other periodic activities that are conducted on the asset. From the research effort, it was found that input values are unique to each airport and so the tool allows for manual input of this information. • Combined Dashboard. The combined dashboard brings together all the primary asset classes into a single rolled-up management tool. The dashboard includes summaries by primary asset class, life cycle with and without smoothing, histograms that show the cost per life-cycle phase, and sensitivity analysis. The TCO Tool methodology data flow diagram is presented in Figure 9-1. TCO Parameters The life cycle of the assets is divided into five main phases: • Pre-procurement • Procurement • Operations • Maintenance • Disposal Table 9-1 breaks down the parameters related to each phase. TCO Assets Table 9-2 lists the considered (prepopulated in the tool) assets and their elements. The TCO Tool inputs are provided from across the organization, such as from Facilities and Infrastructure and Project Management. The asset data inputs include condition, age, and his- torical spending patterns of facilities for the ability of airport managers to make capital decisions such as repair, rehabilitate, and/or replacement. The TCO Tool enables the following tasks: • Developing and vetting development alternatives • Running different funding scenarios • Estimating all-inclusive costs related to the assets’ life cycles • Estimating the impacts of variations of asset management strategies • Estimating the amount of energy/utility consumed per component use System Requirements The TCO Tool was developed in Microsoft® Excel™ 2013. Excel is part of Office 2013 and Office 365 ProPlus. The standard system requirements to operate the tool (Excel 2013) are as follows: • Computer and processor: 1 GHz or faster x86- or x64-bit processor with SSE2 instruction set • Memory: 1 GB RAM (32-bit); 2 GB RAM (64-bit) • Hard disk: 3.0 GB available • Display: Graphics hardware acceleration requires a DirectX10 graphics card and a 1024 × 576 or higher resolution monitor • Operating system: Windows 7 or higher

Figure 9-1. Data flow diagram of TCO Tool methodology.

total Cost of Ownership tool 77 Parameter 1 Pre-procurement 1.1 Consulting Fees 1.2 Business Case Development 1.3 Design Cost 1.4 Procurement Process/Documentation 1.5 Permits/Fees 2 Procurement 2.1 Site Preparation 2.2 Asset Cost (equipment, material, etc.) 2.3 Processing Cost 2.4 Shipping Cost 2.5 Insurance Cost (shipping) 2.6 Taxes 2.7 Warranty Cost 2.8 Installation, Configuration, and Testing 2.9 Health, Safety, Environment 2.10 Temporary Arrangements (during installation activities) 2.11 Training & Professional Development 2.12 Annual Insurance (equipment) 2.13 Disposal Fee of Old Equipment—if applicable 2.14 Salvage Value of Old Equipment—if applicable 2.15 Update in-House Shop Drawings Parameter 3 Operation 3.1 Energy Consumption 3.2 System Upgrades (software, hardware, firmware) 3.3 Capital Improvements (building enhancement costs) 3.4 Personnel (management/operator/engineer) 3.5 Health, Safety, Environment 3.6 Training & Professional Development 3.7 Operational Impact 4 Maintenance 4.1 Personnel (management/operator/engineer) 4.2 Spare Parts 4.3 Health, Safety, Environment 4.4 Training & Professional Development 4.5 Preventive Maintenance 4.6 Corrective Maintenance 4.7 Predictive Maintenance / Testing Equipment / Facilities 4.8 Extended Warranties 4.9 Temporary Arrangements (during maintenance activities) 4.10 Lost Revenue 5 Disposal 5.1 Decommissioning Cost 5.2 Shipping Cost 5.3 Disposal Fee of Old Equipment—if applicable 5.4 Salvage Value of Old Equipment—if applicable Table 9-1. TCO Tool parameters. Asset Elements 1 Roofing 1.1 Roof structure 1.2 Roof material 1.3 Drainage system 1.4 Expansion joints 1.5 Sealing material 2 Flooring (Terrazzo) 2.1 Base material 2.2 Terrazzo 2.3 Expansion joints 2.4 Manage existing material (asbestos, lead, hazardous material) 3 Flooring (Marble) 3.1 Base material 3.2 Marble 3.3 Expansion joints 3.4 Manage existing material (asbestos, lead, hazardous material) 4 Flooring (Carpet) 4.1 Base material 4.2 Carpet 4.3 Expansion joints 4.4 Manage existing material (asbestos, lead, hazardous material) Asset Elements 5 HVAC (at terminal/buildings) 5.1 Control system 5.2 Furnace 5.3 Heat exchanger 5.4 Evaporator Coil 5.5 Condensing unit 5.6 Refrigerant lines (chill water distribution system) 5.7 Condensing water distribution system 5.8 Cooling tower 5.9 Chill water pumps 5.10 Evaporative coolers 5.11 Air-handling equipment Table 9-2. Considered assets and their elements. (continued on next page)

78 Guidebook for Considering Life-Cycle Costs in airport asset procurement Asset Elements 13 IT Systems 13.1 Servers, workstations and displays 13.2 Network equipment (including switches and routers) and cabling 13.3 Mobile devices including tablets and mobile phones 13.4 Scanners and other devices 15.4 Servers, workstations, and displays 15.5 Network equipment (including switches and routers) and cabling for distributing video 16 Video Surveillance System 16.1 Cameras 16.2 Network equipment (including switches and routers) and cabling for distributing video, and/or legacy analog devices for distributing signal to analog cameras 17 Access Control System 17.1 Software 17.2 Servers, workstations, and displays 17.3 Network equipment (including switches and routers) and cabling for distributing signal, and/or legacy analog switches for distributing signal to legacy analog devices 17.4 Field equipment, including contacts, power supplies, controllers, readers, portal hardware, biometrics, offline readers, keypads, request to exit buttons, battery backups, locks, gates and turnstiles, etc. 18 Airside Pavement 18.1 Surface (asphalt/concrete) 18.2 Subsurface (base material) 18.3 Joint seals 18.4 Surface painting 14 15 Video Management & Storage Systems 14.1 Mobile data terminals (handheld devices) 14.2 Emergency call stations 14.3 Servers, workstations, and displays (including large displays for video walls) 14.4 Video management software 14.5 Network equipment (including switches and routers) and cabling for distributing video Video Storage System 15.1 Video recorders 15.2 Video storage (DAS, NAS, and SAN) 15.3 Video storage software 13.5 Storage devices [direct attached storage (DAS), network attached storage (NAS), and storage area network (SAN)] 13.6 Software 13.7 Power backup and distribution systems Asset Elements 7 Escalators / Moving Walkways 7.1 Control system (electric) 7.2 Mechanical system (motor, chain/pallets, guides/rollers) 7.3 Accessories (e.g., hand rails) 8 Elevators 8.1 Control system (electric) 8.2 Mechanical system 8.3 Passenger car 9 Baggage-Handling Systems 9.1 Control system / programmable logic controller 9.2 Mechanical system 9.3 Electrical system 9.4 Accessories 10 Rolling Stock 10.1 Light-duty vehicles 10.2 Monorail 10.3 Baggage transport 10.4 Tug truck 10.5 Shuttles 10.6 Electric carts 10.7 Aircraft rescue and firefighting emergency response equipment 10.8 Snow removal 10.9 Dump trucks (heavy equipment) sweepers, water trucks, bucket trucks, fuel trucks 10.10 Tractors (off road / rubber removal) 11 Fueling Systems 11.1 Transport pipelines 11.2 Vehicles 11.3 Fuel storage tanks and trucks 11.4 Filtration 11.5 Pumps 11.6 Dispensing equipment 12 Jet Bridges 12.1 Ground power (electric) 12.2 Mechanical system (control system) 12.3 Tunnel 12.4 Accessories 12.5 Potable water system 12.6 HVAC 6 Lighting (at terminal/buildings) 6.1 Control system (electric) 6.2 Conduits 6.3 Wiring/cabling 6.4 Light fixtures 6.5 Sensors/accessories Table 9-2. (Continued).

total Cost of Ownership tool 79 More information is available on the Microsoft TechNet website (https://technet.microsoft. com/en-us/library/ee624351.aspx). Tool Instructions The TCO Tool user’s manual is presented in Appendix C. Additionally, a video tutorial series is available on the Vimeo website (https://vimeo.com/academies). This series comprises a gen- eral tool overview and a step-by-step example. In total, there are five tutorial videos: 1. Introduction to the tool 2. Input information about the project, assets, and analysis assumptions 3. Input asset procurement information 4. Results 5. Example

80 After deciding to adopt any new asset management program, methodology, or tool comes the implementa- tion process. This chapter describes the means to ensure that an organizational initiative is successful and has sustainable benefits. Introduction Success in the implementation of best practices rests mostly on the organization having committed executives and leadership teams. The end goal from these initiatives, in addition to improving performance and productivity, is a timely ROI. Unfortunately, whenever a new initiative is introduced within an organization, studies have shown that around 70 percent of these change initiatives fail to meet expectations. This is a very high percentage for initiatives to fail, taking into consideration its financial impacts on the orga- nization as well as a potential impact on the employees in terms of morale and their relationship with leadership. The leading root cause for these initiatives’ failure is the lack of establishing an execution strategy from the leadership. This execution strategy is the main force behind launching a suc- cessful initiative. It is considered the roadmap that will assist every team member to successfully navigate the change effort to achieve the intended outcomes and expectations. A recent execution strategy publication, Why Execution Fails and What to Do About It (Fortin 2016), outlines a proven methodology for successful program implementation: DELTA FORCE. The methodology defines the strategy and execution process steps, as well as the critical success factors necessary to achieve desired results. Execution Process Methodology There are many execution process methodologies in the industry that could be employed to ensure a procurement best practices program will deliver value. The main focus of these meth- odologies is mainly to define “what” needs to be improved. Once the “what” is defined, usually the “how” to make the change stick and sustain it, is missing. The DELTA FORCE methodology attempts to fill this void by providing a framework for execution (Fortin 2016): • DELTA – Strategic Execution Process – Define the problem – Envision the future C h a p t e r 1 0 Procurement Best Practices Implementation

procurement Best practices Implementation 81 – Lead by example – Task management – Active monitoring • FORCE – Strategic Execution Imperatives – Follow through – actions and activities – Organized – Treat initiative as a capital project – Respect among team members – Culture awareness – Entrepreneurial spirit encouraged The DELTA is an effective execution strategy that can be utilized when leaders decide to shift from an existing condition to one that is considered more efficient and effective. This process is presented in Figure 10-1. The FORCE should be used in conjunction with the DELTA to estab- lish the critical success factors for the new project or program. These execution imperatives are presented in Figure 10-2. The DELTA FORCE life cycle (Figure 10-3) illustrates the interaction between the DELTA and the FORCE elements and their interaction. Strategic Plan If a procurement best practices strategic plan is not in place, the DELTA five-step planning process can help develop a strategic plan. The process helps in identifying the gaps and the methods to close these gaps. The strategic plan is developed by including stakeholders from across the organizational func- tions (engineering, financial, procurement, technology, services, operation and maintenance, etc.) and different levels of employees (senior, mid, and junior level) from within each function. The strategic planning process is presented in Figure 10-4. Source: Fortin (2016). Figure 10-1. DELTA execution process.

82 Guidebook for Considering Life-Cycle Costs in airport asset procurement Source: Fortin (2016). Figure 10-2. FORCE execution excellence imperatives. Source: Fortin (2016). Figure 10-3. DELTA FORCE life-cycle view.

procurement Best practices Implementation 83 Governance A senior management representative should be assigned responsibility for the change initia- tive as the executive sponsor. This person represents corporate commitment to the project, is held accountable for success/failure to peers, and ensures appropriate resources are made avail- able to the implementation team. Once the strategic plan has been approved and actions detailed in an improvement plan, it is strongly recommended that both a cross-departmental steering committee and an overall proj- ect manager be assigned to the effort. The steering committee is usually made of middle to upper management to provide general direction and cross-departmental coordination, and support individual actions and task teams assigned to execute the strategic plan. Assignment of a full-time project manager to be respon- sible to the executive sponsor and steering team to execute all elements of the plan is a critical success factor. Actions can be assigned to individuals and in some cases task teams, which can also be cross- departmental. This team-based implementation model is presented in Figure 10-5, which illus- trates that team members are assigned to a task team from different departments. The organizational structure of task teams is presented in Figure 10-6. In addition to subject matter experts, each team should have efficient meeting management roles such as leader, facili- tator, and a scribe to capture meeting outcomes. A regular review of accountability should be established such as monthly progress reporting. Source: Fortin (2016). Gap Analysis Best Practices Assessment Gap Analysis Recommended Actions Strategic Plan Improvement Plan/Road Map Goal Alignment and Expectations Focused Action Figure 10-4. Strategic planning process. Source: Fortin (2016). Figure 10-5. Team-based implementation model.