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Suggested Citation:"Foreword." 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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Page 7
Page 8
Suggested Citation:"Foreword." 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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Page 8

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asset Management Systems Implementation—a Catalyst for Life-Cycle Cost 7 as support to the asset management system implementation. The implementation of EAM and support systems provides many benefits (Reliabilityweb.com 2011): • Informed asset life-cycle and replacement forecasting • Increased system reliability • Improved maintenance records and history • Reduced maintenance work and its related cost • Reduced equipment downtime • Reduced reactive maintenance work • Effective and efficient preventive maintenance program • Improved relationship between O&M • Enhanced maintenance, repair, and operation, and purchasing control • Improved health and safety • Improved stewardship • Regulatory compliance • Improved reliability • Reduced emergencies and improved relationship with stakeholders • Cost savings • Life-cycle approach to better manage capital expenses EAM Data Management Systems There are many organization asset management systems in the market that can be used. These systems range from a simple spreadsheet to a complex system that includes maintenance plan- ning and scheduling, assets’ analytics, and geospatial and real-time information. Some of the most familiar systems are CGI, Mainsaver, Ventyx, SAP, IFS, ORACLE (Work and AM), Infor, Schneider (Invensys), and IBM (Maximo). IBM’s Maximo system is used in this guidebook as an example of an EAM system. Maximo has been integrated into many organizations worldwide. It has a core solution and many add-on modules. The core solution is Maximo Asset Management. The add-on modules include Spatial, Scheduler, Linear Asset Manager, Health Safety and Environment (HSE), and Calibration. Maximo affects the organizations’ asset management and customer service business areas in many ways. From an asset management perspective, Maximo helps with the following: • Asset inventory • Condition assessment • Priority and risk analysis • Preventive maintenance • Capacity planning • Infrastructure life-cycle planning • Predictive maintenance From a customer service perspective, Maximo helps with the following: • Call center operations • Service management • Construction management • Contractor management • Fleet management • Regulatory compliance

8 Guidebook for Considering Life-Cycle Costs in airport asset procurement Maximo adds value to businesses through the following: • Risk and compliance management – Regulatory – HSE • Operations excellence – Implementing best practices – Reliability • Business agility – Standardization – Ability to adapt • Business alignment – Supporting strategic goals – Capital expenditures and operational expenditures • System consolidation – One data source – Cost and complexity Table 2-1 presents some examples where EAM systems provided measurable efficiency gains for a variety of business functions in numerous industries and applications. Implementing Maximo, or any asset management system, should increase functional integra- tion, ensure reliable operations, increase resiliency, reduce redundancy, and effectively allow the organization to manage its assets in a way that is aligned with its financial and service goals. The following are some of the functional areas where an EAM system can benefit the organization: • Process improvement – Work management – Asset management program development – Supply chain management improvements Business Scenarios ROI Points Customer Examples Labor Utilization Up 8%–20% An electric distribution utility achieved a 14% productivity improvement while reducing the workforce 7% through attrition. Tracked increased work against historical accomplishment. Asset Utilization Up 2%–5% A large original equipment manufacturer reduced overhauls from 56 days to 21 days. Equipment Purchases Down 3%–5% A fleet management company saved US $9.5 million by meeting 100% availability with fewer vehicles. Warranty Recoveries Up 8%–50% A consumer products company with a medium-sized fleet increased warranty recovery 50%. Plant Downtime Down 3%–18% A power generation utility achieved a 5% reduction in planned overhauls and eliminated 5% of forced outages, saving US $4.6 million annually. Inventory Needs Down 12%–30% A large passenger railroad was able to identify US $18 million in excess or obsolete inventory. Inventory Costs Down 8%–30% A power company reduced inventory by 26% and an electric and water utility achieved 25% inventory reduction and saved US $33 million. Material Costs Down 7%–30% A rail maintenance service company reduced cost 20% by optimizing material purchases. Purchasing Labor Down 6%–20% A fleet management company reduced purchasing staff by 20%. Source: IBM (2015). Table 2-1. Value added through implementing an asset management system.

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Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement Get This Book
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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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