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

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20 Sustainability is material to airport procurement decisions because it helps integrate infrastructure decisions with the broader business objectives of the airport, including its role and reputation with the community. This chapter continues the discussion about procurement processes, this time showing how the financial, social, and environmental impacts of the airport on the community can be taken into consideration as part of asset plan- ning and procurement decisions in order to ensure an airport’s asset management program incorporates the costs and risks of resiliency and resource management concerns. Sustainability Defined Sustainable actions—reducing environmental impacts; maintaining high, stable levels of eco- nomic growth; and supporting social progress—represent a broad set of activities that together ensure organizational goals are achieved in a way that is consistent with the needs and values of the local community (Figure 4-1). Airport Sustainability Programs The FAA Voluntary Airport Low Emissions Program helps airports achieve sustainability goals. Airport sustainability plans take these efforts a step further by fully integrating sustain- ability into airport planning. FAA further supports airport sustainability planning by providing C h a p t e r 4 Incorporating Sustainability into Life-Cycle Costs in Airport Procurement Sustainable Airport Development Source: FAA (2016). Figure 4-1. Sustainable airport parameters.

Incorporating Sustainability into Life-Cycle Costs in airport procurement 21 eligible airports across the United States with Airport Improvement Program grant funds to develop comprehensive sustainability planning documents. These documents include initiatives for reducing environmental impacts, achieving economic benefits, and increasing integration with local communities. To date, FAA has provided grants to 44 airports (FAA 2016). Sustainability is material to airport procurement decisions because it helps develop and inte- grate infrastructure around the broader vision of what airports can be, capturing public support. Evaluating TCO is about closing gaps in the asset procurement process by informing capital asset planning and procurement decisions. Traditionally, the systems boundaries are the physi- cal boundaries of the airport or the sub-asset being repaired or replaced. However, the financial, social, and environmental impacts of the airport on the community it serves must be taken into consideration as part of asset planning and procurement decisions because issues like cli- mate change, globalization, and growing population pressure are creating economic challenges related to energy, water, and waste along with driving political and social actions as they pertain to equity, investments, and action on pollution. All three areas that historically drive change—economics, government regulations, and social demands—point to increasing complexity when it comes to planning, developing, and operat- ing airports. Closing procurement gaps by incorporating sustainability into the asset procure- ment process benefits current airport stakeholders as well as future generations. This section highlights several areas where additional processes, governance, and tools may be considered by airports for tailoring and adapting to each airport’s unique situation. The objec- tive is for multipliers and variables included in TCO decisions to be recalibrated as correctly as possible to best inform decision makers by including not just financial, but also environmental and social, impacts. As decision makers, airport managers are able to incorporate sustainability principles into TCO tools that inform decisions and drive investments. The following sustainability areas that may influence TCO decisions are described in greater detail in the rest of this section: • Resource conservation • Critical systems modeling • Impact on O&M • Supply chain sustainability • Airport utility budget management Systematic Approach to Resource Conservation Airport systems consume vast amounts of energy, water, and materials and output heat, emis- sions, wastewater, noise, and waste materials to name just a few broad examples. Traditional procurement practices focus on the cost and quality of the resources along with the most cost- effective means to dispose of waste. This traditional practice fails to capture additional financial, social, and environmental impacts on the broader airport community. TCO in airports must evolve to include these variables to account for the “true cost” even when that cost may be shifted to other entities. For resources, a systematic approach to measure, monitor, and manage usage is essential to both running efficient operations and informing TCO decision makers for procurement deci- sions. Resource conservation is a management system that requires roles and responsibilities, procedures, governance, information management systems senior management buy-in, strat- egy, and goals. By developing a resource management program for energy, water, materials, and waste, airports will be able to systematically identify projects that are more sustainable for recommendations to a capital review process that funds planning and procurement activities.

22 Guidebook for Considering Life-Cycle Costs in airport asset procurement A systematic resource management program (RMP) is operated by a central manager that assists operational departments to develop baseline and behavior-over-time metrics on, for example, energy, water, and waste resources to provide visibility and the opportunity to nomi- nate resource conservation measures (RCMs) to reduce or conserve resources. RCMs may con- sist of capital projects, maintenance, procedures, set points, and behavior changes that result in resource savings. Across airports, operations, departments, and other business units may produce multiple RCMs, and, over time, a portfolio of RCMs would become available for budget review and informing more sustainable procurement decisions. In addition, an RMP provides baseline data to evaluate the performance of procured assets versus the prior status quo. A systematic RMP operates when the airport has two organizational factors in place: (1) a sustainability strategy plan with senior leadership responsibility and visible goals for improve- ment over time and (2) a public relations or marketing sustainability plan that reports annually on the environmental, social, and economic impacts of the airport. This serves several purposes by educating and informing stakeholders while recognizing and celebrating employees, carriers, and suppliers who make sustainable progress possible. Example: Seattle–Tacoma 5-Year Environmental Strategy Plan 2008–2014. The Seattle– Tacoma Environmental Strategy Plan served as a roadmap for achieving Seattle–Tacoma Inter- national Airport’s environmental vision. It provided a framework for annual planning, budgeting, and accountability by identifying the measurable environmental outcomes targeted in 2014. The plan was organized around three themes: moving people and goods efficiently, managing natural resources wisely, and promoting sustainable communities. Within each focus area, the plan did the following: • Identified key environmental indicators • Summarized ongoing environmental improvement efforts • Established aspirational goals for continued environmental improvement • Identified performance metrics for each environmental indicator area The initial environmental strategy plan and summary reports from 2011 to 2014 are on the Port of Seattle’s website (Port of Seattle 2016). Critical Systems Modeling to Effectively Estimate Impact on Systems Resources flow through assets and traditionally this flow is not optimized; for example, the US Environmental Protection Agency (EPA) has reported that organizations waste 30 percent of the energy they consume (USEPA 2010). Wasted energy includes that used to heat, cool, and light buildings but also to condition and move fresh water and wastewater or the energy embodied in waste materials shipped to landfills. Airports are overspending as well as having a negative impact on the natural and social environment by wasting resources. A traditional model (Figure 4-2), where the sources of inputs and outputs are not viewed as a system, leads to waste. In contrast, the sustainable model (Figure 4-3) reduces the output flow stream by reclaiming materials energy (as heat), water, and other resources. Systems modeling assists in informing choices in procurement decisions. The system method- ology captures and balances competing values that include environment, water use, energy use, materials, emissions, financial, and social impacts to inform procurement decisions. Sometimes these values are complementary and sometimes they compete. A common main point of discussion is energy savings of a given project. There are many possibilities for energy conservation at airport facilities, each with its own magnitude of benefits

Incorporating Sustainability into Life-Cycle Costs in airport procurement 23 versus implementation difficulties. Therefore, there needs to be a method to analyze the benefits. For example, basic analysis of exhaust systems would show savings in fan energy with reduced exhaust load, but when systems are interrelated, as in a modern facility, reductions in one area affect others. Here, a reduction in exhaust load will reduce makeup air requirements, which would reduce the load on the chiller and boiler plant, pumps, cooling towers, etc. There are savings beyond simple fan energy. A simulation tool and a methodology are needed to properly calculate savings associated with energy conservation measures applied to integrated systems, and these calculations are crucial to inform life-cycle cost calculations. Example: Critical System Modeling Tool. Airports often consume large amounts of elec- tricity, natural gas, and water for heating, ventilation, and air conditioning (HVAC) duties; thus, energy and resource conservation measures can provide significant benefits if they are properly designed, configured, analyzed, and implemented. A Visual Energy & Resource Optimization (VERO) modeling platform is one option to be considered to quantify and optimize the value of RCMs. This platform aims to quantify energy and water consumption of a site holistically by capturing annual operation of integrated sys- tems. This approach allows stakeholders, architects, and engineering disciplines to get quantified feedback on decisions made at every point in the design process on through to post-occupancy operation. Examples of quantification/optimization of RCM value are as follows: • Chiller-less cooling during cool climate periods. Chilled water plants typically make up the majority of energy consumed by mission-critical facilities such as airports. This RCM essentially eliminates this heavy energy consumer for a large portion of a typical year in many climates but involves integrated system modeling to properly characterize and opti- mize its value. Source: CH2M HILL Figure 4-2. Traditional system model. Source: CH2M HILL Figure 4-3. Sustainable system model.

24 Guidebook for Considering Life-Cycle Costs in airport asset procurement • Heat source alternatives to boilers such as solar hot water heating, airside heat recovery, or chillers configured with heat-recovery features. Performance of these kinds of RCMs is dif- ficult to quantify using traditional hand calculations, really requiring an integrated modeling solution. Figure 4-4 illustrates the balance of resources across an integrated view of critical systems. Impact on Operations and Maintenance The benefits of incorporating sustainability in projects may be negated by an unintended increase in costs and resource consumption of energy, water, waste, and materials during opera- tions. O&M departments maintain systems, equipment, and procedures as part of their daily tasks. Therefore, this operating expense must be considered when evaluating life-cycle costs during design and procurement decisions. These cost increases may be in the simplest form of increased work orders, poorly integrated systems, incorrect set points, or misunderstanding and compounding efforts during day-to-day operational activity. For this reason, O&M repre- sentatives should be part of evaluating capital and maintenance projects during the review and approval process. O&M managers must participate in the life-cycle analysis process prior to procurement deci- sions. This provides input on changes to functions and activities to keep airport assets operating efficiently and in good condition. In practice, when the operational knowledge of O&M per- sonnel is included in design and purchasing decisions, the overall decision is more sustainable. This increased sustainability arises from the ability to consider re-purposing or recycling owned assets or making changes to existing processes and procedures instead of starting over or pur- chasing new equipment. O&M managers are adept in their ability to solve challenges with the resources and budget available, and this creativity translates well into better planning and design and ultimately bears out in more sustainable results in the total costs during life-cycle analysis. Source: CH2M HILL Figure 4-4. Balance of resources across an integrated view.

Incorporating Sustainability into Life-Cycle Costs in airport procurement 25 Example: ACRP Report 110: Evaluating Impacts of Sustainability Practices on Airport Operations and Maintenance: User’s Guide and Research Report. An evaluation process and tool was developed to help airport management consider the O&M impacts of implementing sustainability practices. The user’s guide discusses the evaluation process and how to navigate the cost–benefit tool. It also provides information from the case studies that were conducted in the development of the evaluation process and cost–benefit tool. The evaluation process and cost–benefit analysis tool is designed to evaluate life-cycle costs of sustainability practices in water conservation, energy conservation, waste management, consumables and materials, and alternative fuels. However, the tool can also be used to evaluate any two practices, sustainable or otherwise. An instructional video that demonstrates how to use the evaluation process and cost– benefit tool using data from an example project (also provided with the tool) is on the Trans- portation Research Board website (www.trb.org/main/blurbs/170580.aspx) and the National Academies of Sciences, Engineering, and Medicine site on Vimeo (vimeo.com/116156429). Supply Chain Sustainability TCO requires looking upstream from airport operations into the services and life-cycle char- acteristics of products of suppliers and vendors. For airports that successfully embrace sus- tainability, the largest opportunities for improving sustainability performance such as reducing carbon emissions, water use, material waste, toxic chemicals and addressing social concerns lie within their supply chain. As a result, airports should consider increasingly promoting sustain- ability principles across their supply chain as this also may help mitigate risks in procurement decisions. Supply chain risks—such as regulatory non-compliance; increasing cost of material inputs, energy, or transportation; or human rights, labor, and ethical violations—inherited from suppliers and vendors can result in disruption, financial losses, reputation damages, or stake- holder dissatisfaction for airports. By managing and seeking to improve environmental, social, and economic performance and good governance throughout supply chains, airports may uncover opportunities related to resources conservation, process optimization, innovation, cost savings, labor productivity, and promoting sustainability values. To be effective, airport management should develop and com- municate a vision and guidelines for sustainability with suppliers and vendors along with desig- nating meaningful KPIs, implementing monitoring and audits, and, in some cases, supporting organizational learning, culture change, and continuous performance improvement. This effort with suppliers helps address and mitigate the upstream risk in procurement decisions not just based on the cost and quality, but also the embodied elements in procured goods and services. Example: Pilot Supply Chain Audits for a Global Manufacturing Company. A major US-based manufacturing company conducted a series of supply chain audits based on procure- ment guidelines that included a code of conduct for suppliers. The audits were performed accord- ing to the supply chain code of conduct and included health and safety, labor and human rights, environment, compliance/ethics, and management systems. Auditors leveraged technical knowl- edge in the areas covered by the supply chain code of conduct along with industry expertise in order to identify potential risks and opportunities in the supply chain with suppliers. The overall objective was to encourage and improve the sustainability of approved suppliers over time to also decrease supply chain risk in TCO in procurement decisions. Airport Utility Budget Management By managing utility budgets differently, airports may conserve resources, which has an envi- ronmental and social impact, but more directly, managers may apply those savings to affect

26 Guidebook for Considering Life-Cycle Costs in airport asset procurement the TCO by using utility savings to pay for more efficient infrastructure (assets). This section discusses how this can be implemented and accomplished. Generally, operating budgets are set annually and during the budgeting review process. Bud- gets for utilities are set for the upcoming year based on the amount spent the prior year adjusted for anticipated operational changes in the upcoming year that may require more or less electric- ity or water, for example. After which, utility bills are paid and reported under a general ledger code commonly named something like “utilities and other.” In short, the utility budget is man- aged like a fixed amount, when in fact it is variable. During the year, several factors impact the actual amount spent versus the budgeted amount: • Efficiency efforts that lead to cost savings • Warmer or colder weather that influences energy spending • O&M managers being incentivized to come in under budget Year-on-year, operations teams work hard to stay under budget by being more efficient while dealing with the realities of changing weather, economies, and operational demand. In addition, year-on-year, the difference between the actual amount spent on utilities versus the budgeted amount, which is usually a savings, is stripped from the budget. Organizations, such as the University of Washington and Distributed Energy Management (Jia 2016), are approaching the amount spent on utilities differently to drive more resource conservation and to pay for capital upgrades through utility cost avoidance. To capture the cost avoidance, a utility revolving fund is set up either directly with a bank or virtually in an account- ing system. The monthly utility budget is paid into the fund from which the monthly utility bills are paid. In some cases, a “markup” of the monthly utility operating budget is put in place to help save for future capital projects. The funds not spent on utility costs are then earmarked to offset or pay for more efficient retrofits or new equipment, which, in-turn, pays for new projects with their savings. Figure 4-5 highlights the process. Example: University of Washington “Green Revolving Fund.” The University of Wash- ington Facility Services supports a 643-acre campus with 243 buildings (13 million gross square feet), a central steam and chiller plant, a 13.8-kilovolt power distribution system, and 7 miles of utility tunnels to support a daily population of 60,000 consisting of 42,000 students. The aver- age annual amount spent on utilities is $38 million. Through a coordinated effort, from 2005 to 2015, metering, audits, the revolving fund, and project execution resulted in $21.5 million in projects with $9.1 million in rebates and $1 million in cost avoidance (Angelosante 2015). Source: Distributed Energy Management (2014). Utility Opex Costs Utility Money Management Captured Utility Capex Savings Figure 4-5. Utility money management.

27 Up-to-date and complete information is the lifeblood of asset management. The more information the orga- nization can have about any particular individual asset, as well as its criticality and relationship to the overall system, the better decisions the organization can make in terms of procurement, maintenance, decommissioning and more. This chapter discusses BIM and how this methodology can assist the organization in making good decisions throughout an asset’s life cycle. BIM complements the TCO program implementation; however, it is not a requirement for a TCO program. Building Information Modeling Defined BIM has been used within the design phase of construction for well over a decade. Some countries have developed countrywide standards on the use of BIM for construction projects, each using its own interpretation of those standards. The application of BIM focused initially on the construction of vertical buildings and has since widened its scope to include infrastructure. The US definition of BIM is as follows: a digital representation of physical and functional characteristics of a facility. As such, it serves as a shared knowledge resource for information about a facility, forming a reliable basis for decisions during its life cycle from inception onward (National Institute of Building Sciences 2015). In the UK, the BIM Task Group (2013) defines BIM as follows: value-creating collaboration through the entire life cycle of an asset, underpinned by the creation, collation, and exchange of shared 3D models and intelligent, structured data attached to them. All UK government departments have mandated the use of BIM to a locally defined Level 2 standard starting in April 2016 on construction projects over $1.4 million. The Level 2 standard for BIM for the UK is defined as having a central repository for documents with a defined check– review–approve process and federated models linked to data and documents. In both the US and UK, BIM centers on creating digital representation and structured data connected to it. “Structured data” is data that is in alignment to a data standard (e.g., ISO 15926, life-cycle data for process plants) and thus produces a consistent output from modeled appli- cations. The term “information model” will be used in this document to represent a graphical model with associated structured data that can be used throughout the entire life cycle of an asset. The production of an information model, when taken in its broadest life-cycle sense, starts from a conceptual model that outlines the requirements of a new asset or infrastructure and then progressively builds upon acquired information from various disciplines, which are then combined to form a more complete visual representation. Figure 5-1 depicts the federation of a graphical model to form a visual representation of the information model. This is only part of the model, as non-graphical portions of the model as well as documentation also forms the C h a p t e r 5 Building Information Modeling in the Asset Management Life Cycle

28 Guidebook for Considering Life-Cycle Costs in airport asset procurement information model. Through the process of applying structured information, the documentation and the non-graphical (data) portions of the model can also be attached to the model. Figure 5-2 shows the linkage of a graphical model to (from top, clockwise) drawings, docu- mentation, data and asset management applications. Thus, the potential of BIM is to harness an information model for further use downstream from design. This leads to potential BIM uses for construction, commissioning, operations, and maintenance. Whole-Life-Cycle Building Information Modeling To maximize the use of an information model, consideration must be given to the end-user organization’s needs. Figure 5-2 shows the potential for deriving data from an information model and linking the information to asset management systems. To facilitate this integra tive process, the creators of the information model must understand the final uses to which the model will be placed so that appropriate data fields, metadata, and formats are chosen at the start. This whole-life view of information is what the UK government set out to realize in its strategy for BIM Level 2 by outlining the end-user organization’s information needs from the supplier. Figure 5-1. Federated model produced by combining discipline-specific intelligent models.

Building Information Modeling in the asset Management Life Cycle 29 This ability to define and request information in formats that align with organization needs cre- ates a framework that can be used for various functions such as planning applications, operations review, and update of asset inventories/systems. An asset will go through many stages in its life cycle and some understanding of the typical stages is required so that the impact of BIM can be optimized. A typical life of an asset may start with a need identified from a system owner, as a result of inspection, maintenance, or new/altered functions. This may generate initial or outline ideas and a procurement process derived for a new asset. This leads to design, construction, commissioning, and O&M through to end of life whereby the final step is decommissioning or demolition (Figure 5-3). At the end of each stage or gateway, there is usually a decision point that may decide if the development of a solution will continue or can be discarded. The decision-making process will Figure 5-2. Linkage of the graphical model to structured data and documentation. Figure 5-3. Life cycle of an asset.