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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Suggested Citation:"Glossary." National Academies of Sciences, Engineering, and Medicine. 2017. Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement. Washington, DC: The National Academies Press. doi: 10.17226/24764.
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Glossary 101 relate aspects such as safety, responsiveness, cost, comfort, asset performance, reliability, and sustainability. Performance Management Framework—The component of the asset management system that monitors and manages performance from a strategic, whole of government, level down to asset level. The performance management framework links performance goals, through appropriate performance measures, to activities for monitoring performance and actions to improve performance where monitoring indicates a need. Performance Monitoring—Continuous or periodic quantitative and qualitative assessments of the actual performance compared with specific objectives, targets, or standards. Physical Effective Life (PEL)—The length of time (with no rehabilitations to extend life) from when an asset is commissioned and put in service until it physically stops working, collapses, or is otherwise non-operational. For an asset that cannot be rehabilitated, the PEL is equal to the maximum potential life. Primary Circulation—The portion of a building that is a public corridor or lobby. Further defined as space required for access by all occupants on a floor to stairs, elevators, restrooms, and building entrances or tenant-space entry points on multi-tenant floors. Preventive Maintenance—A schedule of planned maintenance actions aimed at the prevention of breakdowns and failures. Probability of Failure (PoF)—The likelihood that an asset will fail based on an assigned condi- tion score. The PoF for this asset management plan is expressed as a score between 1 and 10 determined using a direct relationship between condition and probability. Procurement—Activities required to obtain goods and services from suppliers. It is needed to ensure that purchases are made at reasonable prices and from reputable suppliers. It is particu- larly important for the procurement group to focus on obtaining materials and services that are in short supply, and which could interfere with the operations of the business. Public–Private Partnerships (PPPs)—Relationships formed between the private sector and public bodies for introducing private-sector resources and/or expertise in order to deliver public- sector assets and services. This involves a long-term contractual arrangement lasting typically for 25 to 30 years between a public body and a private-sector provider, where resources and risk are shared. PPPs can include different working arrangements from loose, informal, and stra- tegic partnerships to design–build–finance–operate (DBFO) type service contracts and formal joint venture companies. PPP is primarily based on the Private Finance Initiative, which was introduced in 1992 in the UK. Purchase Requisition—A written request that is issued internally to the purchasing department to purchase items, materials, or services. R Rate of Depreciation—Accounting practice that aims to distribute the cost or other basic value of a tangible asset less salvage value, if any, over the estimated useful life of the assets in a systematic manner. Rehabilitation—Project to rebuild or replace parts or components of an asset to restore it to a required functional condition and extend its life, which may incorporate some modification. Generally, involves repairing the asset to deliver it to original level of service without resorting to significant upgrading or renewal, using available techniques and standards. Reliability—Probability that a system performs a specified function or mission under given conditions for a prescribed time.

102 Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement Remaining Life—Time remaining until an asset ceases to provide the required service level or economic usefulness. Renewal—Project to upgrade, refurbish, or replace existing assets with assets of equivalent capacity or performance capability. Repair—Action to restore an item to its previous condition after failure or damage. Replacement—Complete replacement of an asset that has reached the end of its asset life, so as to provide a similar or agreed alternative level of service. Replacement Cost—Cost of replacing an existing asset with a substantially identical new asset in current dollars. Requisition—A request for an asset, item, tool, or service. The requested entity can be procured from a vendor, or it can be acquired by an inter-departmental transfer. Residual Life—Time left until failure; particularly important for managing high-cost and high- risk assets. Residual Value—The net market or recoverable value that would be realized from disposal of an asset or facility at the end of its life. Return on Assets (ROA)—A ratio that considers annual average savings, compared to change in assets required. Return on Investment (ROI)—A ratio that considers average annual savings, compared to ini- tial investment value. Risk—The likelihood of a specific outcome, at some time in the future, combined with conse- quences that will follow in a particular context. Usually the outcome is defined as an unwanted event, but it could be an unintended benefit, which is an opportunity to add value. Risk Assessment—Process of establishing information regarding acceptable levels of a risk and/or levels of risk for an individual, group, society, or the environment. OR A technique for identifying targets of importance to a business and construction, which enables an estimation to be made of both likelihood and consequences of failure to meet them. Risk Cost—The assessed annual benefit or cost relating to the consequence of an event. Risk cost equals the costs relating to the event multiplied by the probability of the event occurring. Risk Exposure—Extent of risk faced by an organization that is expressed in terms of a numerical formula representing the product of the likelihood and impact of a loss. Risk Profile—Describes how risk exposure is evaluated and identifies at-risk assets. Risk Management—The systematic process of identifying and managing risks and opportuni- ties for a project or business. OR A structured approach to identifying, assessing and controlling risks that emerge during the course of the policy, program, or project life cycle. OR The systematic application of policies, procedures, methods, and practices to the tasks of identifying, analyzing, evaluating, treating, and monitoring risk.

Glossary 103 OR The application of a formal process to the range of possible values relating to key factors asso- ciated with risk in order to determine the resultant ranges of outcomes and their probability of occurrence. S Service Life—The period of time after installation during which a building, or its parts, meets or exceeds the performance requirements. Service Life Planning—Also known as service life design, the preparation of the brief and design for the building and its parts to achieve the desired design life. Service Potential—The total future service capacity of an asset. It is normally determined by reference to the operating capacity and economic life of an asset. Small Hub Airport—Commercial service airport that has more than 10,000 passenger board- ings each year and at least 0.05 percent but less than 0.25 percent of total passenger boardings within the United States in the most current calendar year ending before the start of the cur- rent fiscal year. Space Planning—The process of analyzing current and future requirements relative to physical assets (i.e., type, condition, size, capacity) with respect to their ability to support and advance programs and activities at a level deemed appropriate by appropriate parties in concert with associated regulations, codes, mandates, and acceptable levels of performance. Space planning typically involves identifying each distinct type of activity covered by the program and defin- ing the appropriate values relative to size, capacity, utilization rates, etc. Stakeholders—All members of society who have an interest in an organization’s performance, success, or the impact of its activities. Everyone is a stakeholder, and there are many ways in which stakeholder status is experienced, for instance as the following: • General public • On-site and off-site employees • Travelers • Bystanders affected by nearby activities Strategic Plan—A plan containing the long-term goals and strategies of an organization. Stra- tegic plans have a strong external focus, covering major portions of the organization, and identify major targets, actions, and resource allocations relating to the long-term survival, value, and growth of the organization. Suppliers—Construction providers that include designers, consultants, building contractors, and manufacturers of components. T Terminal Area Forecast—Official forecast of aviation activity at FAA facilities, prepared to meet the budget and planning needs of FAA and provide information for use by state and local authorities, the aviation industry, and the public. Total Cost Analysis—A technique used to develop a total cost for a purchased item/service, including purchase price, paperwork, quality costs, and so on. Total Cost of Ownership (TCO)—All costs associated with the acquisition, use, and mainte- nance of a good or service.

104 Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement OR A purchasing tool and philosophy aimed at understanding the true cost of buying a particular good or service from a particular supplier. Triple Bottom Line—Triple bottom line accounting refers to expanding the traditional reporting framework to take into account ecological and social factors in addition to finan- cial factors. U Utilization Rate—An indicator used to determine how efficiently available space is being used. Usually time-based in terms of month, quarter, or year. (utilization rate = occupied space/ facility usable area) V Value—The final output value from a business or personal activity, which results from a busi- ness process, such as manufacturing a product or delivering a service, or a personal activity such as running a home. It has three essential characteristics: • Value can only be defined by the ultimate customer or user. • Value is created by the provider. • From the customer’s point of view, providers exist in order to create value. Value Analysis—A technique used to analyze the functional requirements of a given item in order to achieve the lowest costs given the performance needs. Value Engineering—A technique used to analyze the functionality of the design and manufac- turing techniques for a given item. OR Incorporated into value management as a systematic approach to delivering the required func- tions at lowest cost without detriment to quality, performance, and reliability (CIRIA 1996). BS EN 12973:2000 also defines value engineering as the application of value analysis to a new product that is being developed. Value Management (VM)—A structured approach to defining what value means to a client in meeting a perceived need by establishing a clear consensus about the project objectives and how they can be achieved (CIRIA 1996). BS EN 12973:2000 also defines VM as a “style of management, particularly dedicated to motivating people, developing skills and promoting synergies and innovation, with the aim of maximizing the overall performance of an organiza- tion.” Applied at the corporate level, VM relies on a value-based organizational culture taking into account value for both stakeholders and customers. At the operational level (project- oriented activities), it implies, in addition, the use of appropriate methods and tools. W Whole-Life-Cycle Cost (WLC)—An economic assessment considering all agreed projected sig- nificant and relevant cost flows over a period of analysis expressed in monetary value. The projected costs are those needed to achieve defined levels of performance, including reliability, safety, and availability. Whole Life Costs—The costs of all the items/activities that need to be considered in a WLC exercise.

Glossary 105 Whole Life Value (WLV)—The optimum balance of stakeholders’ aspirations, needs and requirements, and whole life costs for an asset. OR The benefits and costs associated with a built asset over its whole life taking account of the interests of all stakeholders affected by its construction and existence and its wider economic, social and environmental impact. There will be trade-offs between the various short-term project constraints (such as time, costs, and quality) and the conflicts in stakeholders’ longer- term interests and objectives. Workstation—Any type of space designated for occupant usage (either open or enclosed area), where an occupant can be seated.

106 Angelosante, J. A. 2015. Resource Conservation @ UW. Presented at the panel “The Business of Energy Efficiency: Achieving Deep Retrofits” at The Future of Energy Conference. Northwest Environmental Business Council. Berger, D. 2010. “The Growing Value of a CMMS.” Plant Services. www.plantservices.com. Accessed March 2016. Blascovich, J., S. Easton, and A. Ferrer. 2014. “Procurement-Powered Business Performance.” Assessment of Excellence in Procurement Study. A. T. Kearney. Building Information Modeling Task Group. 2013. “Frequently Asked Questions.” www.bimtaskgroup.org. Accessed February 2013. Chartered Institute of Procurement and Supply (CIPS). 2013. “Whole Life Costing: The CIPS Position, and What the Buyer Needs to Know.” CIRIA. 1996. SPU SP 129: Value Management in Construction: A Client’s Guide. Clearview Procurement Business Services. 2016. Web content. Accessed 2016. Computer Integrated Construction Research Program. 2013. “BIM Planning Guide for Facility Owners.” Version 2.0. The Pennsylvania State University, University Park, PA. Available at bim.psu.edu. Crain, M. 2003. “The Role of CMMS.” White paper. Northern Digital, Inc. Distributed Energy Management. 2014. “The Seven Steps to Utility Money Management.” www.de-mgmt.com. Federal Aviation Administration (FAA). 2016. “Airport Sustainability.” www.faa.gov/airportsenvironmental/ sustainability. Accessed March 2016. Federal Highway Administration (FHWA). 2010. “Life-Cycle Cost Analysis: The Colorado Experience.” Trans- portation Asset Management Case Studies. US Department of Transportation. Fortin, J. W. 2007. “The Fifth Construction Metric: Designing and Building for O&M Readiness.” New England Real Estate Journal. Fortin, J. W. 2016. Why Execution Fails and What to Do About It. Reliabilityweb.com. Frost & Sullivan. 2014. “Procurement Best Practices of Power Generation Utilities.” Market research report. SKU EG00040-GL-MR_00535. IBM. 2015. “Facilities and Asset Management.” Jasen, Georgette. 2011. “Economic Cost of 9/11: Three Industries Still Recovering.” Fiscal Times. www.thefiscaltimes. com/Articles/2011/09/09/Economic-Cost-of%209-11-Three-Industries-Still-Recovering. Accessed March 2016. Jia, J. 2016. “Companies That Don’t Manage Their Utilities Strategically Are Throwing Their Money Away.” Harvard Business Review. www.hbr.org. Local Government Victoria. 2013. Best Practice Procurement Guidelines. Department of Planning and Community Development. Melbourne, Australia. Maintenance Maven. 2015. “Five Ways CMMS Can Save You Money.” www.maintenancemaven.com. Accessed March 2016. National Institute of Building Sciences. 2015. “About the National BIM Standard-United States®.” www.national bimstandard.org/about. Accessed February 2016. Network Rail. n.d. “Asset Management.” www.networkrail.co.uk. Accessed 2016. Network Rail. 2014. 2014 Asset Management Strategy. O’Brien, J. 2010. “The 19 Reasons to Invest in a CMMS.” Maintenance Assistant Inc. http://cdn2.hubspot.net/ hubfs/433051/19-reasons-to-invest-in-cmms-software-1.pdf. Port of Seattle. 2016. “Environment.” www.portseattle.org/EnvironmentalPages/default.aspx. Accessed March 2016. Reliabilityweb.com. 2011. “CMMS Best Practices Study Report.” White paper. Reliabilityweb.com. 2015. “The (New) Asset Management Handbook: The Guide to ISO 55000.” Swift, K. G. and N. J. Brown. 2003. “Implementation Strategies for Design for Manufacture Methodologies.” Proceedings of Mechanical Engineers, Part B: Journal of Engineering Manufacture, 217: 827–833. US Environmental Protection Agency. 2010. “A Better Building, a Better Bottom Line, a Better World.” EPA 430-F-09-077. Office of Air and Radiation. References

A1-1 A p p e n d i x A 1 Excerpts from a GTAA Bid Package

A1-2 Guidebook for Considering Life-Cycle Costs in Airport Asset procurement

excerpts from a GTAA Bid package A1-3

A1-4 Guidebook for Considering Life-Cycle Costs in Airport Asset procurement

excerpts from a GTAA Bid package A1-5

A1-6 Guidebook for Considering Life-Cycle Costs in Airport Asset procurement

excerpts from a GTAA Bid package A1-7

A1-8 Guidebook for Considering Life-Cycle Costs in Airport Asset procurement

excerpts from a GTAA Bid package A1-9

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TRB's Airport Cooperative Research Program (ACRP) Research Report 172: Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement explores how other industries use the total cost of ownership (TCO) approach for initial procurement, and how to integrate this into future airport procurement practices. A

TCO Tool

and five

instructional videos

on how to use the TCO Tool accompany the report.

Airports, as well as other governmental entities, usually are required to take the lowest bid when procuring assets. This approach tends not to take into consideration the life-cycle costs, such as the operation and maintenance (O&M) costs, which can result in higher than anticipated costs from the O&M budget. Since the purchase of assets is allocated from capital funds that are managed by a person typically different than the person responsible for the day-to-day management of O&M funds, there can be a disconnect on what is considered “better” when considering two bids. Taking a life-cycle, also known as a TCO approach, to the initial procurement may ensure a more fiscally responsible use of funds.

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