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

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

90 Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement RFP request for proposals RFQ request for qualifications RMP Resource Management Program ROI return on investment SAN storage area network SAP systems, applications, and products TCAT testing, commissioning, acceptance, and turnover TCO total cost of ownership UK United Kingdom USEPA United States Environmental Protection Agency VERO Visual Energy & Resource Optimization WLC whole life-cycle cost WWT wastewater treatment YYZ Toronto Pearson International Airport

91 A Acquisition—The process by which the airport comes into possession and ownership of a fixed asset (examples: purchase, donation, construction, eminent domain, or foreclosure). Acquisition Cost—Cost incurred in getting the product/service to the point of use (inbound freight, sourcing, receiving, inspection, storage, etc.). Adequate Facility/Structure/Space—A facility/structure/space that is fully capable of support- ing its current use without modification or repairs (beyond currently funded routine mainte- nance) and has an acceptable level of reliability. Airport Asset Management Plans—Activities and investments in infrastructure and assets required to achieve and maintain service outcome standards in the short and long term, according to the airport master plan or strategic plan for servicing customers, the community, and other stakeholders. Airport Cooperative Research Program (ACRP)—An industry-driven, applied research pro- gram that develops near-term, practical solutions to problems faced by airport operators. Airport Improvement Program (AIP)—Provides grants to public agencies—and, in some cases, to private owners and entities—for the planning and development of public-use airports that are included in the National Plan of Integrated Airport Systems. Airport Master Plan—A concept of the long-term development of an airport. The plan displays this concept graphically and documents the data and logic upon which the plan is based. Airport Property—All property owned by the airport, whether purchased, leased, confiscated, donated, received by eminent domain, constructed, or annexed. Airport property may include supplies, real property, police property, capital assets and controlled items. Alteration—Work required to adjust interior arrangement or other physical characteristics of an existing facility/structure so that it may be more effectively adapted to or utilized for a new or changed use. Annual Annuity—Annual payments required to cover the cost of future planned investments. Annual Plan—A document produced annually by an organization to inform stakeholders of its objectives, intended activities, performance, income, and expenditure required for a period of one financial year. It may also indicate anticipated future short-term income and expenditure. Area—The way the airport subdivides the airport campus into areas. The combination of campus designation and area designation may define the general location of a facility. Glossary

92 Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement Area/Gross Square Footage (GSF)—A unit of measure representing the cumulative total of an organization’s building(s) inclusive of all floors to the outside faces of exterior walls. Defined as the sum of the floor areas on all levels of a building that are totally enclosed within the building. Measure exterior building gross area to the outside face of exterior walls, disregard- ing canopies, cornices, pilasters, balconies, and buttresses that extend beyond the wall face and courtyards that are enclosed by walls but have no roof. The building exterior gross area of basement space includes the area measured to the outside face of basement or foundation walls. Exterior bridges and tunnels that are totally enclosed (constructed areas connecting two or more buildings) are included in building exterior gross area. This measurement indicates total constructed space and is useful for building efficiency and construction cost comparisons. Asset—An item of plant, equipment, or infrastructure that contributes to the function of a “system” so that the “system” can provide a service to a community or group of customers. An “asset” is continually maintained, refurbished, replaced, or upgraded so that the system provides an ongoing, minimum level of service. An asset has a capital replacement value and is depreciated over its useful life. OR A physical component of a facility that has value, enables services to be provided, and has an economic life greater than 12 months. Dynamic assets have some moving parts, while passive assets have none. OR Capital investments maintained by the airport’s accounting system. The maintenance depart- ment typically refers to an asset as any item of physical plant or equipment. It is used to describe items such as buildings, facilities, systems, and components that are controlled by the airport and from which a benefit is derived. For industry purposes, these items are considered fixed assets deployed, or intended to be deployed, in an operational environment. Asset Accounting—Recording and tracking of asset-related incoming and outgoing cash flows. Asset Group—A group of like assets (e.g., valves) or a group of assets that compose a system (e.g., pump system). Asset Hierarchy—A framework segmenting an asset base into appropriate classifications. The asset hierarchy can be based on asset function, asset type, or a combination of the two. Asset Life Cycle—The asset life cycle is the time span from when the asset is placed in service through its eventual replacement or disuse. How the asset’s life cycle is managed is dependent on the strategies and goals of its management. These strategies normally include training, maximizing utility, preventive maintenance, evaluation, and when use will stop. Asset Management (AM)—As defined by NAMS, a systematic approach to the procurement, maintenance, operation, rehabilitation, and disposal of one or more assets. Asset manage- ment integrates the utilization of assets and their performance with the business requirements of asset owners or users. Asset management is all about the continuous alignment of asset performance to meet service delivery outputs to deliver the desired outcomes. A manage- ment paradigm and a body of management practices that is applied to the entire portfolio of infrastructure assets at all levels of the organization, which seeks to minimize the total cost of acquiring, operating, maintaining, and renewing the organization’s assets within an environ- ment of limited resources while continuously delivering the service levels customers desire and regulators require at an acceptable level of business risk to the organization. Asset Management (AM)—As defined by PAS 55, systematic and coordinated activities and practices through which an organization optimally and sustainably manages its assets and

Glossary 93 asset systems, their associated performance, risks, and expenditures over their life cycles for the purposes of achieving its organizational strategic plan. Asset Management Framework—System of processes, procedures, practices, support systems, organizational roles and responsibilities, and policies used to enable sound management decisions for the optimal management of physical assets. Asset Management Information System (AMIS)—Computer-based software system for col- lecting and analyzing data, and extracting meaningful information on the performance of existing assets and their operating costs to aid in asset management decision making. AMIS is often also referred to as an enterprise asset management system (EAMS). Asset Management Plan (AMP)—Document that identifies the short- and long-term service delivery requirements of the portfolio of assets belonging to an organization. It provides a framework for managing an asset, or group of assets, from within the asset portfolio. Asset Management Policy—Sets the framework for the management of airport infrastructure and assets. Most policies include the following: • Organizational context and importance of asset management • Overall vision and goals of the organization and supporting asset management vision and goals • Executive and key position roles and responsibilities • Audit and review procedures Asset Management Steering Committee—Committee of people who have come together within the organization to design and build the asset management program. These people establish the program and enforce the ideas and practices within the organization. Asset Management Strategy—Strategy for asset management covering the development and imple- mentation of plans and programs for asset creation, operation, maintenance, rehabilitation/ replacement, disposal, and performance monitoring to ensure that the desired levels of service and other operational objectives are achieved at optimum cost. Asset Performance—Measurement of the achievement of predetermined outputs arising from the existence and operation of assets using a range of performance targets that measure the individual and collective contribution an asset makes toward service delivery and/or business outputs. Asset Registry—A record of asset information considered worthy of separate identification including inventory, historical, financial, condition, construction, technical, and financial information about each. Asset Rehabilitation—Work performed on an existing asset to ensure that its performance capacity and capability meets its predetermined performance target. It does not refer to work that transforms the asset to an “as new” condition. Painting a room and replacing its floor covering, milling and repaving a section of road, all fall within this category. Asset Renewal—Replacement or reconstruction of an existing asset with a new asset. The resultant asset is transformed to an “as new” condition. Demolishing and rebuilding new classrooms or a hospital ward fall within this category. Renewal comprises the following: • Repair: normal periodic maintenance, minor in nature, anticipated in the normal operation of the asset; no enhancement of capabilities • Refurbishment/rehabilitation: replacement of a component part or parts or equivalent intervention sufficient to return the asset to a level of performance above minimum accept- able level; may include minor enhancement of capabilities; typically funded out of capital budgets

94 Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement • Replacement without enhancement: substitution of an entire asset with a new or equivalent asset without enhancement of capabilities • Replacement with enhancement: substitution of an entire asset with a new or equivalent asset with enhanced capabilities Asset Replacement Cost—Full replacement costs associated with a given asset expressed in cur- rent dollars. Asset Strategic Plan (ASP)—This plan (developed at the asset level) along with the asset port- folio strategic plan are the only organizational strategic plans. In the areas of acquisition/ refurbishment, operations, maintenance, and disposal, proposed annual programs are devel- oped. Long-term strategies addressing all proposed asset life-cycle issues and objectives are fundamental to the ASP. The ASP is “rolled-up” in summary format to form the portfolio strategic plan, which enables the asset planner to prioritize performance improvement initia- tives, and to level-out peaks in planned expenditure. It simply provides a big picture overview of the asset portfolio. Assignable Square Feet—A term used to describe areas that may be occupied and is acceptable for a designated purpose or function. It does not include walls, stairways, corridors, rest- rooms, parking facilities, or mechanical space. Attribute—A data item related to an asset. B Best Appropriate Practice—A method or technique that has shown results superior to those achieved with other means and that is used as a benchmark (business dictionary). Best Value—Achieving the nearest possible match to the functional requirements for the best price. It is not about taking the lowest-priced option. It is the optimum combination of whole life cost and quality (or fitness for purpose) to meet the user’s requirement. Building Core and Service Area—The floor area of a facility that is necessary for the operation of the facility and is not available for general occupancy. This may include the following: building lobbies, mechanical rooms, electrical rooms, telephone (communications) rooms, restrooms, custodial rooms, loading docks, and utility tunnels that are not used for any other purpose. Building Projections—A convector, baseboard heating unit, radiator, or other building element located in the interior of a building adjacent to a wall that prevents the use of that space for furniture, equipment, circulation or other functions. Business Improvement Plan—Plan produced by an organization that translates the objectives contained in an annual plan or asset management plan into detailed work plans for a particu- lar, or range of, business activities. Activities may include marketing, development, opera- tions, management, personnel, technology, and financial planning. Business Risk Exposure (BRE)—A metric to expresses risk. BRE is determined as the product of the probability of failure and the consequence of failure. C Common Support Areas—Facility assignable area includes the area devoted to common sup- port services. Common support area is the portion of the facility usable area not attributed to any one occupant but provides support for several or all occupant groups. Examples of common support areas are cafeterias, vending areas, auditoriums, fitness facilities, building mailrooms and first aid rooms. These may be separately identified as a sub-category of facility assignable area if required.

Glossary 95 Computerized Maintenance Management Systems (CMMS)—Act as a focal point of informa- tion systems supporting best practice asset management. Condition Assessment—Technical assessment of an asset based on a physical inspection, for the purpose of determining its condition and remaining useful life relative to a defined standard. Consequence of Failure (CoF)—The resultant consequence of an asset failure expressed in triple bottom line terms (social/community, economic, and environmental/regulatory). Construction—All constructed facilities, buildings, and infrastructure. A construction is defined as a physical setting used to serve a specific purpose. A construction may be within a building, or a whole building, or a building with its site and surrounding environment; or it may be a constructed facility, which is not a building, such as a bridge, road, or railway for instance. The term encompasses both the physical object and its use. Cost–Benefit Analysis—Analysis that quantifies in monetary terms as many of the costs and benefits of a proposal as feasible, including items for which the market does not provide a satisfactory measure of economic value. Critical Assets—Assets for which the financial, business, or service-level consequences of failure are sufficiently severe to justify proactive inspection and rehabilitation. Critical assets have a lower threshold for action than non-critical assets. OR Assets and/or asset systems that are identified as having the greatest potential to have an impact on the achievement of the organizational strategic plan. Current Replacement Cost—Cost of replacing an existing asset with an appropriate modern equivalent asset. D Decay Curve Development—The process by which asset time-to-failure data records are ana- lyzed to develop a graph of the deterioration in asset condition time. Decision Support Tools—Used by asset managers to determine the best alternative among a set of feasible alternatives. The alternatives may be potential solutions to a range of questions related to strategic planning, airport development, outsourcing, and asset renewal or replacement. Decommission—Activities required to take an asset out of service. Demand Capital Plan—The capital projects that have been identified for the purposes of meet- ing the predicted growth and demand requirements over the planning period. Depreciated Replacement Cost—Replacement cost of an existing asset less an allowance for water or consumption having regard for the remaining economic life of the existing asset. Design Life—Service life intended by the designer or provided by the vendor for an asset. Design Life Options—The design life is positively or negatively affected by operational and maintenance activities and environmental conditions such as warm and cold weather. The user may increase or decrease the design life for the asset based on previous knowledge and experience with the asset or by implementing maintenance best practices that increase the asset’s service life. Discounted Payback—Like the payback approach, except it considers the present value of cash flows. Disposal—Activities necessary to dispose of decommissioned assets.