Sustainability and Total Cost of Ownership Strategies for ...

Sustainability and Total Cost of Sustainability and Total Cost of Ownership Strategies for Higher Ownership Strategies for Higher

EducationEducation

SustainabilityWhat Is Sustainability

Sustainable SeattleSustainable SeattleSustainability is the "long-term, cultural, economic and environmental health and vitality" Sustainability is the "long-term, cultural, economic and environmental health and vitality"

with emphasis on long-term, "together with the Importance of linking our social, financial, and with emphasis on long-term, "together with the Importance of linking our social, financial, and environmental well-being"environmental well-being"

http://www.scn.org/sustainable/susthome.html

Webster's New International Dictionary"Sustain - to cause to continue (as in existence or a certain state,"Sustain - to cause to continue (as in existence or a certain state,

or in force or intensity); to keep up, especially without interruption diminution,or in force or intensity); to keep up, especially without interruption diminution, flagging, etc.; to prolong."flagging, etc.; to prolong."

““Forum for the Future”Forum for the Future”"A dynamic process which enables all people to realize their potential and to "A dynamic process which enables all people to realize their potential and to

improve their quality of life in ways that simultaneously protect and enhance the improve their quality of life in ways that simultaneously protect and enhance the Earth's life support systems." Earth's life support systems."

SustainabilityFor Higher Education

Sustainability for Higher Education is Focused on the Sustainability for Higher Education is Focused on the Overall, Comprehensive Balanced Interaction of the Overall, Comprehensive Balanced Interaction of the

Academic, Social, Physical, Environmental and Academic, Social, Physical, Environmental and Economic Health of the University Over It’s Lifetime.Economic Health of the University Over It’s Lifetime.

What Is It?

A Strategic Asset Management Process Which Considers A Strategic Asset Management Process Which Considers ALLALL Costs and Requirements of Acquisition, Planning, Costs and Requirements of Acquisition, Planning,

Design, Construction, Operations and Maintenance, Design, Construction, Operations and Maintenance, Renewal, Disposal, and Replacement Incurred over the Renewal, Disposal, and Replacement Incurred over the

Life of a Facility (typically 30 to 50 years).Life of a Facility (typically 30 to 50 years).

Total Cost of Ownership

Sustainability & Total Cost of Ownership

Balanced Sustainability Modeling

Principles of Sustainability for Higher Education are Principles of Sustainability for Higher Education are Focused on the Overall, Comprehensive Value of the Focused on the Overall, Comprehensive Value of the Academic, Natural and Physical Environment Over Their Academic, Natural and Physical Environment Over Their Lifetime.Lifetime.

To be Successful, These Principals Must Address 5 (Not To be Successful, These Principals Must Address 5 (Not 3 or the “Triple Bottom Line”) Specific Components: 3 or the “Triple Bottom Line”) Specific Components: Mission, Economic, Environmental, Social and Mission, Economic, Environmental, Social and Operations.Operations.

Mission SustainabilityFundamentally, the Reason for Being. Understanding the Fundamentally, the Reason for Being. Understanding the Core Goals, Responsibilities and “Mission” of the Core Goals, Responsibilities and “Mission” of the Institution. In This Case, Education of Students. This is Institution. In This Case, Education of Students. This is the Overriding Component. Mission Sustainability the Overriding Component. Mission Sustainability Revolves Around Three Specific Components:Revolves Around Three Specific Components:

• The Academic ProgramThe Academic Program

• Student Recruitment & RetentionStudent Recruitment & Retention

• High Caliber Faculty and StaffHigh Caliber Faculty and Staff


Economic Sustainability:An Understanding of Investment Requirements and Life-An Understanding of Investment Requirements and Life-Cycle Costs in a Total Cost of Ownership (TCoO) Cycle Costs in a Total Cost of Ownership (TCoO) Framework. A Fundamental Responsibility to the Ensure Framework. A Fundamental Responsibility to the Ensure that Dollars are Leveraged to Achieve the Most Efficient that Dollars are Leveraged to Achieve the Most Efficient Result. Revenue Sources Include but are Not Limited to:Result. Revenue Sources Include but are Not Limited to:

• State & Private Allocations, Tuition and Student FeesState & Private Allocations, Tuition and Student Fees

• Donations and Foundation / Auxiliary RevenuesDonations and Foundation / Auxiliary Revenues

• Equitable and Balanced DistributionEquitable and Balanced Distribution


•Social Sustainability An Integration of the Social Ramifications to the Facility Management An Integration of the Social Ramifications to the Facility Management Process with an Emphasis on Implementing Management Practices Process with an Emphasis on Implementing Management Practices that Develop a Long-Term Approach in Support of the Educational that Develop a Long-Term Approach in Support of the Educational

Process for the Success of the Campus and the Community.Process for the Success of the Campus and the Community.

• Policy and LeadershipPolicy and Leadership

• Integration of the Learning Experience & Campus Integration of the Learning Experience & Campus ManagementManagement

• A Strategic Approach to Integrated PlanningA Strategic Approach to Integrated Planning


Environmental Sustainability:A Conscious Consideration and Strategy to Minimize the Initial A Conscious Consideration and Strategy to Minimize the Initial and Long-Term Impacts on Natural Resources Through all and Long-Term Impacts on Natural Resources Through all Elements of a Facilities Design and Operation. Elements of a Facilities Design and Operation.


• Commitment to Use of Environmentally Neutral Commitment to Use of Environmentally Neutral Processes and Materials in ConstructionProcesses and Materials in Construction

• Commitment to the Development of Polices Commitment to the Development of Polices Involving Environmentally Responsive Strategies Involving Environmentally Responsive Strategies

Operational Sustainability: An Understanding of the Operational Efficiencies, Impacts on Facility An Understanding of the Operational Efficiencies, Impacts on Facility

Stakeholders (Faculty, Students & Staff), Ability of the Organization Stakeholders (Faculty, Students & Staff), Ability of the Organization to Sustain and Maintain the Investment or Initiative Throughout the to Sustain and Maintain the Investment or Initiative Throughout the Projected Service Life of the Facility or Complex. Key Components Projected Service Life of the Facility or Complex. Key Components Include:Include:

• Formalized Asset Management PlanFormalized Asset Management Plan

• Trained, Adequate Staff & FundingTrained, Adequate Staff & Funding

• Balanced Portfolio of In House and Contracted ServicesBalanced Portfolio of In House and Contracted Services



These 5 Components Are Inherently Linked…

OPERATIONSOPERATIONS

MISSIONMISSION

ECONOMICECONOMIC

SOCIALSOCIAL ENVIRONMENTENVIRONMENTLI

VA

BLE

EQUITABLE COMPATABLE

VIAB

LE

SUSTAINABLESUSTAINABLE

AFFORDABLE



Formalizing TCoO• Balanced Sustainability (Policy)

• Relational Investments (Fiscal Management)

• Capital Asset Acquisition Program (Process)

• Annual Life Cycle Analysis Modeling (Assessment)

• Asset Management (Operational)

Relational Investments

Principles of Relational Investment Dictate that Principles of Relational Investment Dictate that Operating Cost be Linked to Capital Investment.Operating Cost be Linked to Capital Investment.


What Are Relational InvestmentsRelational Investments Include Capital Projects, Maintenance & Operations and Associated Staffing and Material Cost. Specific Components Include:

• Design & ConstructionDesign & Construction

• Routine, Deferred & Preventive MaintenanceRoutine, Deferred & Preventive Maintenance

• UtilitiesUtilities

• Materials & EquipmentMaterials & Equipment


Life Cycle Costs (M&O)

60%

Design & Construction

Costs 25%

Client Costs 5%Utility Costs

10%

Categories of Relational Investments


HYPERLINK



HYPERLINK

When Should Total Cost of Ownership be Implemented?

• As Early As Possible

• Become Part of the Overall Capital Planning Program

• Implementation of the Total Cost of Ownership Process MUST Begin at the Policy Making Level


Simply Put, Without the Support of Senior Simply Put, Without the Support of Senior Management and Most Importantly, the VP for Management and Most Importantly, the VP for Finance and Accounting or CFO, it is Difficult to Finance and Accounting or CFO, it is Difficult to

Establish a Mandate to Incorporate the Requirement Establish a Mandate to Incorporate the Requirement as Part of the Daily Management Processas Part of the Daily Management Process


Who Needs to Support This Effort?

Failure to Adequately Establish an Asset Management Program, Budget for Operations, Maintenance and

Renewal of Capital Assets Jeopardizes Realization of Full Investment Value, Accelerates Cost of Ownership

and Increases Deferred Maintenance Resulting in Devalued Assets. This Condition Impacts Cash Flow,

Bond Ratings and Cash Reserves or Profits.


Impacts?

CO

ST

TIME

30

Performance With Capital Renewal

$10,000,000 Facility

Million100

50

10

0 15

PlanDesignConstruct Cost (25%)

Operating Cost (75%)

45 Years

Performance Without Capital Renewal

75 percent of the cost of ownership occurs AFTER design and construction

75 percent of the decisions that drive cost of ownership occur BEFORE design

Lost Capital Investment

Accelerated Capital Investment

$$$

$$$


• Cross-Training and Staff Exchange of Design and Cross-Training and Staff Exchange of Design and Operations and Maintenance Management PersonnelOperations and Maintenance Management Personnel

• Understanding of How Life Cycle Cost is Controlled at all Understanding of How Life Cycle Cost is Controlled at all Stages in the Facility's Service LifeStages in the Facility's Service Life

• Maintain O&M Data and Design Decisions for Future Maintain O&M Data and Design Decisions for Future Facility Design Facility Design

Requirements


• Assure Adequate Resources are Available to Implement Assure Adequate Resources are Available to Implement Life-Cycle Cost Management Decisions Life-Cycle Cost Management Decisions

• Architects and Engineers Must Include Holistic Architects and Engineers Must Include Holistic Sustainability Goals in Their Design Criteria and Sustainability Goals in Their Design Criteria and ConsiderationsConsiderations

• Owner's MUST Consider the Long Term Economic Owner's MUST Consider the Long Term Economic Impacts of Their Short Term DecisionsImpacts of Their Short Term Decisions

Requirements


• Assuring that Value Engineering Programs and Assuring that Value Engineering Programs and Construction Contract Incentives and Other Procurement Construction Contract Incentives and Other Procurement Mechanisms Demonstrate Savings in Expected Life Cycle Mechanisms Demonstrate Savings in Expected Life Cycle Rather than Construction Cost OnlyRather than Construction Cost Only

• Requirement for Architects and Engineers to Document Requirement for Architects and Engineers to Document Clearly Their Design Decisions Made to Control Life Clearly Their Design Decisions Made to Control Life Cycle Cost and the Subsequently Expected Operating Cycle Cost and the Subsequently Expected Operating Consequences for Each FacilityConsequences for Each Facility

Requirements


Sustainability and Total Cost of Sustainability and Total Cost of Ownership Strategies for Higher Ownership Strategies for Higher

EducationEducation

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