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Life cycle investment planning - Sustaining the effectivity of buildings

EUPHN 13-15 June, 2005 Oulu, Finland. MULTICONSULT. Multidisciplinary Consulting Services. Life cycle investment planning - Sustaining the effectivity of buildings. competent - creative - complete. R&D-Manager, professor II Svein Bjørberg, sb@multiconsult.no

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Life cycle investment planning - Sustaining the effectivity of buildings

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  1. EUPHN 13-15 June, 2005 Oulu, Finland MULTICONSULT Multidisciplinary Consulting Services Life cycle investment planning- Sustaining the effectivity of buildings competent - creative - complete R&D-Manager, professor II Svein Bjørberg, sb@multiconsult.no and M.Sc. Anne Kathrine Larssen, akl@multiconsult.no Multiconsult AS / Norwegian University of Science and Technology

  2. Outline • History and experience • State of art – the Norwegian LCC model • Nordic LCC-Project – cost classification • Strategic building analysis - MultiMap Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 2

  3. Background • Professor Svein Bjørberg • 30 years as civil engineer in Company of Consulting Engineers • Mainly working with existing Buildings: • Refurbishment, Rehabilitation, Heritage Buildings • Condition Survey, Building Failures, Maintenance Program • Life Cycle Costs, Life Cycle Planning • Responsible for R & D in Multiconsult • Professor II at The Norwegian University of Science and Technology • M.Sc. Anne Kathrine Larssen • 6 years in Multiconsult, several years with large public real estate owner and developer. • Mainly working with: • strategic analysis (asset-, property-, FM) • Lifecycle cost/profit analysis (LCC/LCP), technical values, rent - principles and calculations • KPI’s and benchmarking • functionality/usability and adaptability of buildings. • PhD student at The Norwegian University of Science and Technology Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 3

  4. Historical milestone one: 1276: King Magnus the Lawmaker said in his law: All farmers who live near the Church must tar their Church every third winter He defined the law of Maintenance: • Who is responsible • What to do • How often Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 4

  5. Historic milestone two: 1978: Association of Consulting Engineers desided to develop competence on consquence of an investment. Annual Costs were introduced Working groups, data on cost figures 1988: Norwegian Standard NS 3454 ”Annual Costs for Buildings” 1998: Demands from Directorate of Public Construction and Property (DPCP): Calculation of MOM-cost in design phase Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 5

  6. Historic milestone three: • 2000: Revised and exstended NS 3454 • 2001: New §6 in Legislation on Public Procurement (”You shall take LCC and environmental aspects into account when planning a new construction”) • 2004: Common Nordic LCC Classification System Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 6

  7. New demands -authorities -market -core business Sustainable construction Gap of expectation Quality / Function CD 0 CD 1 CD 2 CD 3 Building failure / - damage Developementupgrading Replacement Possibility of influence Preventive Maintenance Repare Accumulated need for maintenance Consept developement CD = Condition Degree (NS 3424) Finish Idé, Program Our Life Cycle definitions Ref.: S. BjørbergMulticonsult AS Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 7

  8. What is LCC ? All the costs throughout a constructions life cycle • Investment costs (capital) • Management costs • Operation costs • Maintenance costs • Development and upgrading costs • Demolishment costs Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 8

  9. Some definitions • Annual expence • What you have to pay every year. Will differ from year to year • Life Cycle Cost (LCC) • Investment+annual expence+residual costs (demolition • Lifetime Costs • Net present value of LCC • Annual Costs • Annuity of lifetime costs Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 9

  10. NS 3454 The Model: • Consider: • Cost of action • Intervals of action • Real rate of return • Lifetime of building Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 10

  11. Important to remember • The lowest possible LCC is not an aim in itself, but the calculations should demonstrate the consequences of the choices made • It should be a duty of the design / construction teams to set up LCC of the choices made, but it is the privilege of the owner to choose alternative. Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 11

  12. LCC or Annual Costs analysis is used: • to prepare budgets for investment and MOM-costs (Management, Operating, Maintenance) throughout the planning and construction process • to evaluate alternatives • to estimate consequence cost of rebuilding, improvements or changing in operation or in other words • to choose among alternatives, provide arguments, check profitability, provide budgets etc Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 12

  13. # Suggestion of additional account:Interruption of operation • Interruption of the core activities in the building caused by technical failure. 2 Management cost 21 Taxes 22 Insurance 23 Administration 3 Operation cost 31 Operation and minor maintenance 32 Cleaning services 33 Energy 34 Water and sewage 35 Refuse collection 36 Security 4 Maintenance cost 41 Regular maintenance 42 Replacements 5 Development cost 51 Current refurbishment 52 New demands 53 Upgrading 1 Capital cost 11 Project cost NS3453 -Mutual costs .1 -Building .2 -HVAC and plumbing .3 -Electricity .4 -Telephone, automation .5 -Other installations .6 -Outdoor .7 -General costs .8 -Sepecial costs .9 12 Residual cost (- or +) 7 Service and support costs for the core activities 71 Administrative office management 72 Swichboard and receptionist services 73 Canteen and/or catering services 74 Furniture fixtures and fixings 75 Moving workplaces and/or job rotation 76 Telecommunications and IT-services 77 Postage and messenger services 78 Supplies and copying services 8 Potential of the property 81 Rebuilding 82 Additions/extentions NS 3454, representing all the lifecycle costs Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 13

  14. Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 14

  15. Two Nordic Projects on LCC Preliminary Project(2000 – 2001) • State of art in Nordic Countries and basis for further common main project • Appr. 2.100 million m2 floor area in the Nordic Countries • Appr. 27 million m2 additional floor area each year Main Project (2002 – 2004) • Nordic network • Common Nordic classification system on LCC • Establish active network within each country • Input to international standardisation works • ISO 15686 ”Service Life Planning” Part 5 ”Life Cycle Costs” • CEN TC 348 ”Facility Mannagement” Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 15

  16. Nordic Classification System Definition of Main Items • Capital all investments incl demolishing • Administration incl consultancy, insurance etc • Operation daily, weekly and monthly within yearly period • Maintenance activities in period of more than a year (planned, replacement) • Developing demands from core activities, authorities etc • Consumption energy, water, waste handling • Cleaning inside and outside • ServiceAll non-building related activities for support corebusiness Classification of cost Main items are subdivided Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 16

  17. Nordic Classification System Main principle for dividing into subcategories: • One-figure level states a main item, ex: 6. CONSUMTION • Two-figure level states a service, ex: 63. Waste handling • Three-figure level states an activity, ex: 63.1 Internal transport • Four-level figures states a resource, ex: 63.1.1 Equipment 63.1.2 Salary Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 17

  18. Nordic Classification System sub Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 18

  19. Nordic Classification System sub Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 19

  20. The challenge: functionality and value ”in the long term” The buildings, with their physical limitations, are a deciding factor for continuous efficient operation of the core business. The goal must be to achieve optimal total economy in the long term, meaning: • Costs related to the buildings should contribute to increased profit and productivity in the core business • The values which the buildings represent should be continuously maintained Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 20

  21. MULTICONSULT Multidisciplinary Consulting Services competent - creative - complete Multi MapStrategic building analysis Are your buildings suitable for their purpose? What purposes are your buildings suitable for? What is the need for technical upgrading in your building portfolio?

  22. Analysis of building portfolios, what is that? Typical characteristics are: • Standardized classification systems and definitions • Cost efficiency through use of existing data and knowledge in each organization • A simultaneous and consistent”scanning” of the building portfolio Diagram: Process in accordance with Norwegian Standard for Condition Surveying (NS 3424) Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 22

  23. The model is module based and could be used for several purposes: • Portfolio and management strategies • Long term development plans • Relocation considerations • Documentation of technical values, space costs and accumulated need for maintenance • Future use of buildings, and which ones are survivors • Economical estimates for upgrading and long term investments Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 23

  24. Are your buildings suitable for their purpose - now and in the future? Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 24

  25. Are your buildings suitable for their purpose - now and in the future? Adaptability describes the ability to meet new requirements and is a function of: • Flexibility (possible change of space plan) • Generality (possible change of function) • Elasticity (possible change in volume) Functionality • how the building meets core business demands regarding space functions • how the space and the rooms are suited for the various functions (size, shape, effectiveness) • the internal and external logistics • how the building is suited for co-use, lease etc. Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 25

  26. The importance of good functionality/usability • Productivity could suffer badly frombad functionality/usability • Rent and related costs often represent approx 10 % of the turnover in an organization. An improvement resulting in 10% increased rent could be justified if it gives increased productivity by 1 % - This is optimal total economy. Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 26

  27. What functions are your buildings suitable for? Two essential questions would be asked: • What functions (core business) fit into the existing buildings? • Where could a certain core business find good premises in my portfolio? 1) Define the tenants’ requirements of the buildings (requirement profile) 2) Map the buildings characteristics (performance profile) 3) Search in your portfolio to identify the best alternatives for (re)location MultiMap, Multiconsult AS Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 27

  28. Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 28

  29. Do your buildings need technical upgrading? • The buildings represent a major part of our capital value. In the long term technical condition and value will deteriorate. Maintenance and upgrading are means to slow down the deterioration and secure economic and other values. • Neglected maintenance often leads to damages deeper into the construction. This gives accumulatedneeds and more costly maintenance. • Mapping of the buildings’ technical condition gives a basis for estimating technical values and total need for upgrading. Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 29

  30. Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 30

  31. Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 31

  32. Example part of matrice – grades of demand Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 32

  33. Example demand profiles, absolute demands Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 33

  34. Adaptability Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 34

  35. How well is the buildings suited for the core business? Case: 159 schools, 687 buildings Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 35

  36. How well is the building suited for the core business? Example case nn hospital Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 36

  37. Absolute demands Economic issue Multiconsult AS Results, example nn hospital Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 37

  38. Results, example - case nn hospital Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 38

  39. Advantages • Expedient approach for larger building portfolios or as a first scan of a single building. • Systematic and effective/efficient process with regard to time, costs and resources. • General methodology – can be adapted to different core activities and types of buildings • Flexibility in level of detailing • Easy to use Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 39

  40. Further development: • Evaluation of functionality/usability and adaptability – especially related to health care/hospitals • Adaptability in a LCC-perspective • Demand profiles – verification. Differ between new and existing buildings. • Site and area (external and global logistics) • New modules? Bjørberg and Larssen - EUHPN Oulu, Finland, June 14 2005 Side: 40

  41. Relevant links to LCC-tools Calculation model LCC developed by Multiconsult for ”Mursenteret” (in Norwegian only): http://www.byggutengrenser.no/index.php?struct=21 Statsbygg’s calculation-program LCProfit (free to use): http://www.lcprofit.com/default_en.asp

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