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Life-cycle Costs and Consequences

This article appears in the January 2015 issue of CAM Magazine
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Life-cycle Costs and Consequences

Building facilities that succeed today and tomorrow
By Kevin Ryan
Senior Vice President, Powerlink

Making design and construction decisions based on the lifetime cost of a facility has become an increasingly important prerequisite for companies who want buildings that not only make sense today, but years (or even decades) from now. Consequently, more our industry is beginning to realize that a detailed, lifecycle perspective and a more thoughtful approach to design, development and construction can pay significant dividends.

Understanding how that process works, however, is critically important. The best strategies for facility development rely on close collaboration between design, construction and management specialists who have a keen understanding of building usage and requirements and other variables. Deploying those strategies begins early, long before the first brick has been laid.

Understanding and engagement

The first step for any organization is to begin by gathering/exchanging information and fully understanding a facility’s uses, projected timeline and key stakeholders. One of the key variables here is the customer itself. Every customer has a different level of understanding of the process. More sophisticated customers can outline their business model with great detail well into the future. They know the space planning and programming requirements, as well as block plans and the basic layout of professional spaces.

At initial high-level meetings, design and construction specialists who specialize in facilities management considerations will meet with key stakeholders of the business, as well as a space planner and/or an architect who can facilitate the information needed for a successful plan. Those specialists not only offer their facilities management experience, by becoming part of the design team they are able to make key recommendations to stakeholders at critical points throughout the design and development process.

Less sophisticated/experienced clients typically require more handholding, and the process may require more front-end time investment in order to elicit the right information. Instead of a few high level representatives, a specialist may need to meet with more members of the client’s team to get the answers they need to deliver impactful advice. For example, these are the type of clients that might not have thought through their growth plans in great specificity—or considered how those plans might impact their facilities needs. While they may need to be walked through the process a bit, these are exactly the clients who may stand to benefit more from the services of a team who understands how to design and develop with lifetime costs in mind.

After those initial meetings, the specialist will bring back an initial draft of a development plan to ensure that all parties are on the same page with respect to the bigger picture. That plan drives the next steps, where it is time to dig into the details and begin reviewing specifics about materials, energy efficiency recommendations and other priorities based on information received in those preliminary meetings.

Bringing facilities management to the table.

After those initial meetings have borne fruit, and some initial plans are in place, bringing the facilities management team to the table is a critical next step. Understanding the subtleties and nuance of how facilities management considerations will impact materials selection as well as design and development decisions differs slightly, depending on whether the circumstances involve a leasing situation or a ground-up development. With the former, establishing a positive and productive relationship with the property ownership and the property management team is essential. The facilities management experts will work with those parties to determine whether they need to maintain key designations (LEED certification, for example) and to communicate and coordinate client goals. Specifics such as energy efficiency and lighting, fire alarms and emergency infrastructure functionality and other details will likely need to be considered.

While the process is similar with a ground-up project, there tends to be less need for coordination and compromise. The communication is more straightforward: identifying the owner’s goals and objectives, understanding the space planning and programming requirements, and coming up with a preliminary plan. No matter what the specific priority may be—eliminating paper usage, achieving a certain environmental certification, implementing a specific water reclamation feature—there will be design and development implications. Whether dealing with a leasing situation or a ground-up build, understanding the client’s business model and function is critically important in order to give them the most value for the duration of their time in the location. Success means identifying the property function and working with ownership and management teams to mold their best interests and the user’s best interests with regard to both form and function.
Another key point to understand here is that the timeframe matters. It might sound self-evident that the lifetime costs and considerations are impacted by how long a particular lifecycle might be, but it is surprising how often that critical detail is left out of the equation. Cost calculations and decisions made for a five-year lease timeframe will be very different from those made with a two- or three-decade ownership time horizon.

Materials difference

Carefully examining and considering the usage/life-span necessary for specific materials is one of the most important steps in an efficient and cost-effective lifecycle-conscious design and development process. Consider the example of a manufacturing facility with a projected 20-year lifecycle. The best design and development experts who specialize in facilities management considerations will meet with client accountants to gain a sophisticated understanding of anticipated depreciation costs for key equipment. Factoring in the costs of depreciation and replacement can be an essential part of making smart decisions for the usable lifetime of the property.

Remember that context matters, and materials considerations can differ wildly from one industry to the next, and from one facility to the next. Specific usage parameters—mandated both by regulatory compulsion and practical utility—drive decision-making here. Everything from flooring to furniture to fixtures should be reviewed. In a heavier-use facility like a busy hospital, for example, sturdier fixtures and more resilient materials may more than pay for themselves over the lifetime of the building. It may cost a bit more on the front end to install more rugged doorknobs or solid cabinets instead of plywood or laminate, but the long-term savings realized by not having to repair or replace those items makes that initial investment more than worth it.

To add another wrinkle, even within the same facility, there can and should be different graduations of material based on usage. For example, an administrative or office wing of the same hospital will most likely have very different usage needs for doors, flooring and many other materials. It is in this area where smart planning can zero in on the items where strategically spending more at the outset will significantly reduce upkeep expenses down the road.

Cost calculations

The basic formula for calculating the long-term cost for specific features or items considers the initial cost for each item and the cost for replacement. The reality is somewhat messier, however. Energy efficiency/inefficiency considerations often loom large, and the need to include the cost of the manpower and equipment required to replace broken or outdated equipment makes that calculation more complex than it might seem at first. The key is identifying opportunities for payback and ROI over a specified length of time (again, coordination with client-side accounting can be valuable here). The savings from even a minor change can be dramatic: in one recent project, replacing traditional stairwell lighting with specialized fixtures equipped with motion sensors that only illuminate above emergency level lighting when needed yielded 85% energy savings, and paid back the higher front-end cost in less than one year!

Think critically about not only the expected lifetime of materials, but the expected lifetime of technologies. If the client knows that they want to be there in 20 years, understand that new technologies will likely make infrastructure and equipment decisions look very different. Whatever the specific features desired by the client, costs can generally be calculated on a macro basis and then plugged it into a more detailed cost model. That model tends to be more a la carte, so clients understand the finite costs of each piece in the plan, how (and whether) it fits into their budget, and what the return on that cost is likely to be in the long run. From facilities management and construction standpoint, one of the biggest challenges is convincing clients to look at their costs through that long-range viewfinder. Companies have an understandable tendency to want to make decisions based on the costs in front of them today, even when established best practices may suggest a more cost-effective long-term plan.

Ensure success

Ensuring that the success of a construction project is not just measured during the grand opening, but over the lifespan of the facility, requires maintaining a close working professional relationship between the client and the consultant throughout the design, development and construction process when possible. At every step, both the client and the lifecycle facilities management and development expert should be asking themselves: What does a successful building look like on day one? What does it look like in a year, in five years, in ten? Clear, consistent, open and honest communication throughout the design and development process is critical. Ultimately, realizing lifetime-scale efficiencies for a facility demands close collaboration, the vast majority of it before a building emerges in brick-and-mortar reality.

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Categories: Business Success, The Industry
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The Motor City Is Revving Its Engine

While it feels like it has been a long time coming, there are some very exciting things happening in Detroit right now. The last few years have seen a steady progression of mostly good news and economic progress, and, as anyone who lives and works in this great city can personally attest, it feels like we have reached a tipping point where the future looks very bright.

The bottom line is that Detroit is a great place to do business right now, and plenty of businesses are growing with the city, not in spite of it. We are seeing new partnerships with and between anchor institutions in Detroit—and there is a growing sense that everyone in the business community here is truly committed to seeing the city grow. Here at Powerlink, and at many of our civic and business partners, that commitment is clearly evident.

There is a fresh wind in the air and a new hope that is already beginning to translate into new business opportunities: companies large and small—including some big national and international names—are moving their businesses to the Motor City. There are also a lot of new companies and strong businesses that are looking at Detroit as a viable and profitable place to do business—Quicken Loans is a sterling example of that dynamic.

Just because the future is looking brighter, however, doesn’t mean we need to ignore the lessons of the past. Far from it. It’s critically important that the new administration continues to do things differently and operate more efficiently. If that keeps up, more businesses will want to do business with the city—and that will translate to more positive momentum in the city.

While the bankruptcy was not our finest hour, I suspect that the long-term structural implications will actually be a tremendous positive for Detroiters. The bankruptcy discharged Detroit from a number of obligations that it held in the past, and enabled the City to redesign and streamline its budget. I know that many in the business community see it as a fresh start—a clean slate—that will help the city build new partnerships and make it a better place to grow our businesses.

Categories: Business Success
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Entrepreneurship Never Gets Old (Part 2)

In my last post I talked a little bit about some of the challenges and advantages that come along with being an entrepreneur “of a certain age.” Today I’d like to give some specific advice to prospective entrepreneurs who may be starting later in life. Some of this I learned as a result of failure, and some as a result of success, but hopefully you can benefit from my experiences and integrate these ideas into your own entrepreneurial adventure.

Be Selective When Choosing Your Team
The older you get, the more friends you have. People have a tendency to rely on the folks they know and are close to. As an entrepreneur, that might not necessarily be the best fit for where you want to go. The result is that you might be faced with some difficult personal and personnel decisions.

Do a Brain Dump
When you start a new adventure, you have to approach it with a fresh passion, and that means letting go of many of your preconceptions. What worked before might not necessarily work with a new business. Frequently, we go to strategies and tactics that have worked for us in the past. It’s human nature—we go with what works! If it’s not your dollars and cents on the line, however, you need to take a different approach. Don’t fall into the trap of recycling yesterday’s approach to solve tomorrow’s problems.

Act Bold, Not Old
As a more mature entrepreneur, you are likely inclined to not be quite as aggressive and to be a little too risk averse. After all, a mistake at 50 is not like a mistake at 30: we only get so many chances to reboot and start all over. There is an awareness there that you need to get this right, and that can lead to an overabundance of caution. Because you still need to succeed, and success rarely (if ever) comes from making safe choices. You need to be smart, but also strategically aggressive.

Embrace Technology
Later in life, it’s critical to be familiar with new technology if you want to be successful. The reality is, you need to be thinking about the next generation—not just today’s technology. There is a learning curve, and you need to retrain your brain to learn and to look forward. When you do that successfully, even as an older entrepreneur, you can learn to not only recognize the important trends that are out there today, but you can begin to get a feel for what comes next—and that is when you can really do some big things.

Categories: Business Success
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Entrepreneurship Never Gets Old (Part 1)

When you think of an entrepreneur, there is a tendency to picture the stereotype of a young and energetic go-getter taking the world by storm with big ideas and bigger accomplishments. While there are plenty of young businessmen and businesswomen out there doing exciting things, I’m pleased to report that you don’t have to be young to be an entrepreneur. I’m living proof of that. While you can start a business and become an entrepreneur at any age, I’ve learned that there are some challenges and advantages specific to doing so when you’re a little further along in life. For anyone considering taking the lead in your career, here are some of the challenges and advantages that I’ve seen in my journey:

Challenges:

  • You have to be mentally prepared for the challenge and the activity of running a business. Depending on what industry or discipline you came from, that can be difficult to get used to. No matter what you do, it’s going to be fast paced, which can also make for a difficult transition if you aren’t used to working at that speed.
  • The older you are, the more set in your ways you can become. When you transition into entrepreneurship, you are almost certainly going to be asked (and expected) to do things very different than you are used to. Adjusting and adapting isn’t always easy.

Advantages:

  • With age comes experience, wisdom and perspective that you didn’t have when you were younger. You’ve been able to see the broad landscape of life, the world and all kinds of people. You also tend to be able to read personalities a lot more accurately, and are consequently oftentimes a better evaluator of people.
  • While there are always exceptions, I’ve generally found that when you’re more mature, you also have more patience. Patience with people and processes, and patience with mistakes. You tend to get rattled less easily. You can be more relaxed, dealing with things calmly and thoughtfully even in a time of crisis.
Categories: Business Success
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Putting it into Overdrive

I was fortunate enough to have an article published on the EO Overdrive blog, an online publication of the Entrepreneur’s Organization (EO). In the piece, entitled The Business Case for Diversity, I make several points that I have articulated more than once in this space, as well.

I discuss what diversity actually means, correct some misconceptions about diversity, explain how and why diversity has been such a core value for us here at Powerlink, and ultimately make what I think is a compelling case for the very real and tangible value of diversity in a professional environment. If you are interested, I encourage you to visit EO Overdrive and read the blog post in its entirety, but the gist of my argument boils down to one thing: perspective.

At its heart, diversity is about sharing and learning from a range of different perspectives, especially with those that come from different cultural backgrounds. As I wrote in the blog post:

“…a focus on diversity can help me surround myself with people, perspectives and insights that will expand my horizons—opening up new opportunities where I may not have looked before.”

I truly believe that “diversity drives business success” in no small part because of how our diverse workforce here at Powerlink enables us to connect and communicate with clients and professional partners in ways that would not otherwise be possible. To me, one of the great values of being a part of an organization like EO is the opportunity to share some of our thoughts and insights.

It gets to the heart of what entrepreneurial organizations are all about—energy and input and the free exchange of ideas—and speaks to the importance of sharing knowledge and best-practices with peers.

Categories: Business Success