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

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2 Guidebook for Considering Life-Cycle Costs in airport asset procurement transportation, and utilities. It renders quantifiable results, and it is immediately available for use by airport management, enabling them to make informed decisions based on life-cycle costs. The airport industry is well positioned to take advantage of industry experience in the best practices of asset management, TCO technology, and operational efficiency. Current research, as presented in this guidebook, suggests establishing a “systematic view” of asset procurement and ownership. Upfront planning and design-level decisions set the tone for proper asset manage- ment and a full understanding of total ownership costs. Guidebook Content and Organization A research team of industry and asset management experts developed and organized this guidebook on behalf of the airport management industry, based on the knowledge, expertise, opinions, and recommendations of actual airport personnel and other aviation professionals. This guidebook provides a comprehensive collection of case studies and best practices, and a TCO Tool is available for download from the TRB website to facilitate the implementation of a robust and reliable TCO program. The program has been designed to be easily integrated within the airports’ existing and planned asset management programs. This guidebook is intended to be a resource for airport personnel, to support the implementa- tion of their TCO program. It has been organized to allow readers to find and focus on particular areas of information or interest within the guidebook, as needed. Chapter 1 provides the reader with background on the ACRP Project 09-13 research that produced this guidebook, along with the content and organization of this guidebook. Chapter 2 introduces the reader to the new industry asset management standard (ISO 55000), with an emphasis on life-cycle cost. It also discusses how to consider life-cycle cost within an enterprise asset management system. Chapter 3 introduces the reader to procurement strategy and best practices from different industries. It discusses both the benefits and limitations of TCO, the status of TCO at airports, its impact on procurement, and how to encourage its implementation. Additionally, it discusses the impact of TCO on capital and maintenance projects. Chapter 4 discusses the incorporation of sustainability into the airport procurement’s life cycle. It discusses how sustainability is central to airport procurement decisions, and its impact on operations and maintenance. Additionally, the reader is informed about supply chain sus- tainability and airport utility budget management. As part of this chapter, each topic includes a case study to inform the discussion. Chapter 5 introduces the reader to building information modeling (BIM) and how BIM is a valuable concept in assisting airports in the procurement process and in the asset and life-cycle management of the assets. This chapter details what an airport needs to consider when imple- menting BIM and how to successfully implement it. Additionally, it shows examples of airports using BIM. Chapter 6 is about O&M Ready, a concept of filling the gaps between the different phases of the asset life cycle to integrate operations and maintenance (O&M) needs into the procurement process. By implementing O&M Ready, the communication increases between the different business units and allows for a seamless commissioning process of the asset. In this chapter, the reader learns about O&M Ready and how O&M Ready will benefit airports’ operations and maintenance activities.

Introduction 3 Chapter 7 provides a case study of a utility that implemented an O&M Ready asset commis- sioning and turnover process. Chapter 8 presents case studies describing the journey and current status of three airports and two non-airport organizations in the areas of asset management, computerized mainte- nance management systems, TCO, and procurement. These case studies demonstrate examples of organizations that have been successful in implementing TCO, ones that are seeking to imple- ment TCO, and the challenges that they are facing. Chapter 9 describes the TCO Tool in terms of its architecture, elements, features, input, and outputs, and informs the reader about the life-cycle calculation methodologies and analysis that the tool can conduct. Chapter 10 provides a roadmap on how to successfully implement these procurement best practices and successfully launch and navigate through the execution of strategies such as the TCO procurement strategy within an organization, using the DELTA FORCE method. Chapter 11 provides some insight into the future of asset management at airports, to identify what the airports might be facing in managing their assets, especially as airports are becoming “smart” small cities. Chapter 12 summarizes the main points of this guidebook. The back matter includes a glossary of asset management terms; a list of abbreviations, acro- nyms, and initialisms; and a list of references. Appendices A1 and A2 present an excerpt from a recent request for bid package and the test- ing, commissioning, acceptance, and turnover process, respectively, from the Greater Toronto Airports Authority, which manages the Toronto Pearson International Airport. Appendix B presents an example of Network Rail’s contract-specific requirements for the design of key infrastructure. Appendix C is the user’s manual for the TCO Tool developed as part of this research.

4 Asset management is a set of practices focused on making informed decisions that sustain assets throughout their whole life cycle—from ongoing procurement, performance tracking, maintenance, and decommissioning. Taken as a whole, these practices should result in controlled operational expenditures, optimized reliability, and reduced risk. This chapter describes asset management as the overarching framework within which many of the subsequent tools and methodologies described in this guidebook have a role. Asset Management Defined: ISO 55000 The International Organization for Standardization (ISO) developed and produced an international management system standard for asset management. The standard is known as ISO 55000. The main goal of ISO 55000 is to enable organizations to achieve their operational objectives through effective and efficient management of their assets. This implementation assures that these objectives are achieved consistently and are sustained over time. An asset management system “is a set of interrelated and interacting elements of an organiza- tion, whose function is to establish the asset management policy and asset management objec- tives, and the processes needed to achieve those objectives” (ISO 55000:2014). An asset management system consists of the set of tools, policies, plans, business processes, and information systems collectively working together to achieve and deliver the asset man- agement activities. Figure 2-1 shows the relationship between the different asset manage- ment terms. Benefits of Asset Management The implementation of asset management has many benefits to the organization (ISO 55000:2014): • Improved financial performance—There is more informed allocation of capital and operation funds within the organization, optimal O&M of assets to preserve their value, and increased return on investment (ROI). • Informed asset investment decisions—Better data collection, management, analysis, and reporting improve the decision making, reduce risks, and improve performance. • Managed risk—Internal risk is reduced by avoiding financial losses, improving health and safety, and complying with regulations. These result in fewer liabilities, which would reduce insurance premiums and fines. External risk is also managed through environmental steward- ship, and improved relationships with local community stakeholders. • Improved services and outputs—Improved asset performance leads to improved services and products. C h a p t e r 2 Asset Management Systems Implementation—A Catalyst for Life-Cycle Cost

asset Management Systems Implementation—a Catalyst for Life-Cycle Cost 5 • Demonstrated social responsibility—Demonstrated socially responsible and ethical business practices allow for investments in the local community to have a positive impact on the com- munity at large. • Demonstrated compliance—Easy to ensure transparent compliance with legal and regulatory requirements as well as adhere to asset management standards, policies, and processes. • Enhanced reputation—Improved customer satisfaction and relationship with stakeholders build confidence with the organization’s ability to serve. • Improved organizational sustainability—The organization is able to more effectively manage the short- and long-term effects, expenditures, and performance of its activities. • Improved efficiency and effectiveness—The organization is able to better implement, review, and improve its processes, procedures, and asset performance to improve efficiency and effectiveness. Organizational Impacts Implementing asset management practices provides the organization with a robust and struc- tured approach to managing the asset life cycle, relative to risk and organizational goals. Similar to the implementation of any comprehensive business approach, asset management requires the commitment of resources and patience to achieve positive gains at both the functional and the organization levels. Asset management can help an organization to manage complex and voluminous data gar- nered from various sources and in different formats and quality. There are methods for collecting, storing, assuring the quality of, organizing, and analyzing data and producing reports. Having these data management processes in place allows the organization to better understand the inputs and outputs from the system, which positively impacts the quality of the asset decisions made. The implementation process of an asset management system can be a catalyst to the organi- zation in terms of bringing new perspectives and value-added improvements. These improve- ments would inspire and positively impact other functions such as finance, human resources, information technology (IT), and procurement. Source: ISO 55000:2014. Figure 2-1. Relationship between asset management terms.

6 Guidebook for Considering Life-Cycle Costs in airport asset procurement The effectiveness of an asset management system relies upon cross-functional, organization- wide implementation to ensure its focus is on functional integration and life-cycle planning. Enterprise-wide application of asset management allows staff to develop a TCO for assets and identify and present the real cost and value of this asset to the organization. As part of the research informing this guidebook, airport personnel were asked to rate the suc- cess of asset management implementation at their airport. The rating was on a scale of 1 to 10, where 1 is not very successful and 10 is very successful. The majority of the responses indicated that the airports’ asset management programs are at a good to a satisfactory stage. The responses and their distribution per airport classification are presented in Figure 2-2. Asset management also presents an advantage for the financial functions within the organi- zation. Linking the asset information with financial information provides a better outlook and assessment of the funding requirements of the assets. One of the main objectives of any organization is to manage and reduce risk. Asset manage- ment practices provide the needed information to manage assets based on their performance, potential for failure, and consequences resulting from that failure. The organization is able to continually prioritize investments and deliver service in a way that considers various types of risks, allowing the organization to take a long-term and sustainable approach to decision making. Enterprise Asset Management Systems Enterprise asset management (EAM) is the optimal life-cycle management of the physical assets across an entire organization. It deals with every phase of the asset—design, construction, commissioning, operations, maintenance, and decommissioning. EAM uses various software tools as enablers to manage asset data and good decision making. ISO 55002 (Asset Manage- ment Guidelines for ISO 55001) outlines the information management technology part (EAM) GA = general aviation; NH NP = non-hub non-primary; NH P = non-hub primary Airport Type Succ ess R ang N um be r o f Ai rp or ts Figure 2-2. Successful asset management implementation distribution per airport classification.