Asset Lifecycle Information Management. Managing All of Your Information Handover Challenges. Part I Issues and Opportunities. Executive Overview...

Transcription

1 ARC STRATEGIES By Sid Snitkin APRIL 2010 Asset Lifecycle Information Management Managing All of Your Information Handover Challenges Part I Issues and Opportunities Executive Overview... 3 What Is Handover?... 4 Successful Handovers Require Coordinated PPM and APM Efforts... 5 Information Is Part of Every Handover... 8 Managing Information Handover Is a Value Chain Issue Information Handover Improvements Offer Incredible Payback VISION, EXPERIENCE, ANSWERS FOR INDUSTRY

2 Functional Design Procedures Commercial Status History Process Process Descriptions Financial Analysis Project & Site Operating Specs Design of Operation CAPEX Procurement History Process P&ID Operating Depreciation Operational MaintHistory Models Equip Layout, Insp& Maint OPEX Status Inspection Process Calcs Design, Certification Purchasing MRO Records Flow Diags BOMs Reqs Records Inventory Incident Equip Calcs System Lockout & Warranty& Training Reports Equip Specs Detail Design Safety Reqs Repair Records People Func Designs MRO BOMs O&M Service Certifications Agreements ARC Strategies April 2010 Create Physical Assets that are Ready to Operate Plan Design Procure Build Handover Operate & Maintain Collaboration Plan Design Procure Build Create an APM Organization that is Operationally Ready Successful Handovers Require PPM-APM Collaboration D&B Information D&B Details Plan Design Procure Build Handover Operate & Maintain Reference Data Activity Records O&M Data Plan Design Procure Build O&M Information Information Handover Has Many Data Flows 2 Copyright ARC Advisory Group ARCweb.com

3 Executive Overview Information is fundamental to effective Asset Lifecycle Management 1 (ALM). It has to be complete, accurate, and seamlessly integrated with all workflows for an asset-intensive organization to reap the full benefits from their massive investments in physical assets. Leading owner/operators appreciate the critical Asset-intensive organizations have made relationship between information and ALM performance and have made substantial investments substantial investments in information management solutions for project and asset management. Yet many continue in information management solutions for project to lose millions of dollars each year and asset management. Yet many continue to because workers don t have access to the lose millions of dollars each year because their information they need to do their work workers do not have access to the information safely, efficiently, and effectively. they need to do their work safely, efficiently, and effectively. The root cause of many of these problems is poor information handover Begin at the beginning, the King said, very and owner/operators need effective gravely, and go on till you come to the end: then strategies to manage the many challenges in this area. stop. This idea is just as true for operators of capital facilities as it was for Alice in Alice in Wonderland. But too many in O&M see their journey beginning with the facility Handover from the project team, while the real beginning for ALM information has to be far in advance of this event. Successful handovers only occur when O&M teams are prepared, with every O&M system loaded with all necessary information and people trained to use this in their work. This is challenging and demands good information handover processes. This is the first of two reports on strategies that owner/operators can use to ensure good information handover. This report begins with a discussion of the many challenges that owner/operators have to address to effectively manage information handover. It concludes with an analysis of the enormous, ongoing costs that owner/operators currently pay for lack of attention to this critical issue. With a compelling business case established, Part 2 will review the actions that owner/operators can take to avoid these losses and establish a solid information foundation for ALM excellence. 1 See ARC August 2009 Strategy Report - Asset Lifecycle Performance Management: Managing Performance Across the Asset Lifecycle Copyright ARC Advisory Group ARCweb.com 3

4 What Is Handover? Project Performance Management (PPM) Handover is a major event in every asset s lifetime. In the context of ARC s model for Asset Lifecycle Management (ALM), it is the time when responsibility for an asset is formally passed from the Project Performance Management (PPM) Handover group to those responsible for Asset Performance Management (APM). Asset Performance Management (APM) Funded Projects Asset & Project Portfolio Management (APPM) Modification Requests New Facility Requests ARC Model for Asset Lifecycle Management Achieving Handover implies that that all parties agree that the physical asset is complete, meets design criteria, and is ready for operation. As this generally marks the end of project activity, getting the physical assets to this state is a major goal for every PPM organization. Ready for operation is certainly a major accomplishment, but it does not mean that the asset has achieved true Operational Readiness. Functional assets are more than physical equipment and Operational Readiness requires that the APM organization is also ready to use and care for the costly investment. Furthermore, this has to be achieved by Handover to avoid costly delays in the generation of benefits and lingering problems that can forever plague asset performance. Physical Virtual Human Capital Assets Are More Than Physical Operational Readiness is the goal that investors have in mind when they set the schedule for handover. It must therefore be the definition of Handover that everyone uses as they define project scope and assess project performance. Creating an operationally ready organization may be an APM responsibility, but it has to be included in every project plan. It requires extensive collaboration between APM and PPM organizations and recognizing that this is part of the critical path to Handover is the only way to ensure that everyone s efforts are coordinated and synchronized. 4 Copyright ARC Advisory Group ARCweb.com

5 Successful Handovers Require Coordinated PPM and APM Efforts Create Physical Assets that are Ready to Operate A proper capital asset project schedule includes two parallel paths: one for creating physical assets that are ready for operation; and, one for creating an APM organization that is operationally ready to accept and use the facilities. These paths come together as equal prerequisites for Handover. Plan Design Procure Build Handover Operate & Maintain Collaboration Plan Design Procure Build Create an APM Organization that is Operationally Ready Everyone Has to Prepare for Handover While they clearly address different aspects of an operating facility, both paths focus on creating a new asset. And the major steps they follow are conceptually quite similar: Plan during this stage the objectives of the project are reviewed and a conceptual design is established for how these goals will be achieved. For physical assets, this includes selecting the physical processes and the kinds of equipment that will used to support those processes. All this is summarized in a facility design (e.g., a 3D model), an estimate, and a schedule that drives stakeholder approval and informs the subsequent detailed engineering. For organizational assets, Plan includes selecting operating and maintenance strategies and the people/processes/technology that will be used to implement these strategies. Major considerations in this effort include the use of outsourcing, level of automation, role of ALM ecosystem partners, etc. Design the plan is elaborated in this stage to produce a detailed specification of everything that needs to be procured and installed to create the envisioned asset. For physical assets, this includes selecting all equipment and performing detailed engineering, analysis, and design of all of the systems, structures, and interconnecting assets needed to support process and equipment operation. This culminates in a set of detailed specifications and bills of materials (BOMs) to drive the procurement effort. For organizational assets, design includes creating a detailed organization chart, selecting people for key roles, identifying the specific O&M processes, and developing associated operating and Copyright ARC Advisory Group ARCweb.com 5

6 maintenance strategies with BOMs for the enabling materials, tools, and technology. Plan Design Procure Build Physical Assets Review Scope/Goals, Conceptual Design - Processes and Facilities Establish Budgets/Schedules Select Equipment Detail Design Systems, Structures, Piping, Electrical, etc. Establish Installation Contracts Procure Equipment, Systems, Construction Materials Clear Site, Build Structures Install Equipment and Systems Commission and Validate Performance Organizational Assets Review Scope/Goals, Conceptual Design - O&M People, Processes, and Technologies Establish Budgets/Schedules Select People, Technologies Detail Design Processes, Responsibilities, Practices, etc. Establish Service Contracts Procure IT Hardware and Software Procure MRO Materials and Special Tools Load Systems with Required Data Train People Obtain Approval for all Procedures, Get all Permits Project Activities Leading to Operational Readiness Procure this stage focuses on acquiring all materials and services identified in the design stage. It involves soliciting bids from acceptable suppliers, evaluating offerings, awarding contracts and issuing purchase orders with appropriate terms and conditions to ensure acceptable supplier performance. For physical assets, this results in contracts with equipment contractors, material suppliers, fabricators, logistics providers and various installation contractors. Similar contracts are developed for creating the organizational assets, but here, the suppliers will be software vendors, system integrators, O&M service providers, MRO material distributors, etc. Recruitment and interview processes are also used in this stage to acquire the remaining people to complete the facility s O&M staff. Build - this is stage where everything is assembled, commissioned and verified with respect to all performance criteria. For the physical assets this is the point when the actual facility takes shape and the effort requires close coordination of thousands of craftsmen. While they involve fewer people, analogous activities occur with respect to the IT that was acquired for O&M. This includes installing all IT equipment, loading all necessary information, integrating with other site support 6 Copyright ARC Advisory Group ARCweb.com

7 equipment, and testing the software against pre-defined scripts to validate that it properly supports O&M processes. Training O&M people is a second major effort in this phase and includes safety and environmental, O&M processes, and, using the newly installed IT systems. Receipt and warehousing of MRO materials is another key effort performed in this stage to prepare the APM organization for Handover. Physical and Organizational Assets Are Interdependent While there are clear similarities in these two paths, they are still quite different. Creating physical assets requires a very different set of knowledge and skills than those needed to create an effective organizational asset. This must be considered when assigning responsibilities: the PPM organization should manage all activities involved in developing Creating physical assets requires a very the physical assets; the APM organization has different set of knowledge and skills than to assume this responsibility for the organizational portion of the asset investment. The color those needed to create an effective organizational asset. And this should be reflected when assigning responsibilities: coding in the figure at the start of this section attempts the PPM organization should manage all activities involved in developing the physical assets; to capture this division of responsibilities. Saying that the APM organization is responsible the APM organization has to assume for creating an operationally ready organization this responsibility for the does not fully relieve the PPM organization of organizational portion of the asset investment. responsibility for this part of the project schedule. On the contrary, PPM will always have overall responsible for achieving Operational Readiness by the target date and this includes establishing an operationally ready organization. The difference is in the extent to which they are expected to manage the actual activities, not in their responsibility for a timely, quality outcome. Another reason for holding the PPM organization accountable for preparing the APM organization is the high level of interdependency between the two paths. The APM organization completely depends on the PPM organization for the information it needs to make decisions, initialize systems, etc. The project schedule must reflect these information requirements. With the PPM organization held responsible for the outcome, it will work diligently to ensure that these needs are respected as internal and external resources develop the physical assets. Some information handover will invariably be on the critical path, so PPM project planners need to reflect this in the project schedule to keep these specific handover requirements visible to all parties. Copyright ARC Advisory Group ARCweb.com 7

8 Information Is Part of Every Handover Enormous volumes of information are needed to design and build complex capital assets. It also takes an enormous amount of information to effectively and efficiently operate and maintain such facilities. Not surprisingly, owner/operators consider information a key Information handover has many Handover deliverable and contractors expend challenges. considerable effort meeting these requirements. But, what may be surprising is that information Some limit the effectiveness, resulting in problems such as overlooked information handover remains a serious ALM problem. and late transfer of information. These delay startup and limit performance of Information handover has many challenges. operating assets. Some limit the effectiveness of the effort: critical information needed for O&M is overlooked because it was not needed to build the physical Other challenges make the process inefficient and costly, such as massive assets; information is provided too late in the volumes of information, variety in project to use effectively to prepare the APM organization; etc. Other challenges make the information forms, and use of proprietary formats. These make it difficult to automate electronic exchanges and process inefficient and costly: the sheer volume of quality checks. information makes it difficult to ensure that everything is accurate and transferred; variety in the forms of information and the use of proprietary formats make it difficult to automate information quality checks; etc. Aligning Content with Real Information Needs To develop effective information handover processes, everyone must first understand the kinds of information the APM organization needs and how it will use that information to operate and maintain the facility. Organizations that ignore this will likely find themselves overwhelmed with information they don t need and starved for vital information. Asset Information, which we define to be all of the information the APM organization uses to operate and maintain a facility, covers a wide spectrum. Some is reference material that informs the organization about functional capabilities of the facility, the design of the equipment and related structures, and procedures to ensure safety, efficiency, and effectiveness. The second part of asset information is the activity records of things that have occurred during the operation, including things like commercial records of purchases and contracts, equipment warranties, etc.; 8 Copyright ARC Advisory Group ARCweb.com

9 Functional Process Specs Process Models Process Calcs Flow Diags Equip Calcs Equip Specs Func Designs Design Process Design P&ID Equip Layout, Design, BOMs System Detail Design MRO BOMs Reference Data Procedures Descriptions of Operation Operating Insp& Maint Certification Reqs Lockout & Safety Reqs Commercial Financial Analysis CAPEX Depreciation OPEX Purchasing Records Warranty& Repair Records O&M Service Agreements Status Project & Site Procurement Operational Status MRO Inventory Training Activity Records History Operating History MaintHistory Inspection Records Incident Reports People Certifications histories of how the facility was operated and maintained; and asset status information collected from real-time sensors or through periodic inspections. Some of the commercial information originates during the project, but reference data is the primary focus for information handover. While it includes many details about the physical O&M Requires a Lot of Information assets, reference data is not simply the information used to build the facility. Most of the information used in building the facility is not needed for the day-to-day O&M (e.g., you don t need the construction drawings of your home to live in it). In addition, a lot of information about the assets is needed for O&M, but not for design & build (e.g., the contractor did not need the maintenance manual for your furnace to buy it and install it). This latter information carries the most risk during information handover as it can be easily overlooked by designers who don t understand O&M. Some of this information must also be developed by the APM organization itself to adapt standard vendor information to internal practices and to fill-in any gaps that they believe are necessary for their workers to fully understand and use the information. While asset information excludes a lot of the detailed design & build information, this does not mean that this is not an important part of information handover. Problems will arise that can only be resolved through the use of detailed engineering information (e.g., the need to replace something inkind) and every asset will eventually experience modifications and upgrades that require design & build details (e.g., adding an addition to your home). The difference is simply one of timing and priority during the hectic handover process and the owner/operator s options for managing this information after Handover. Copyright ARC Advisory Group ARCweb.com 9

10 Functional Design Procedures Commercial Status History Process Process Descriptions Financial Analysis Project & Site Operating Specs Design of Operation CAPEX Procurement History Process P&ID Operating Depreciation Operational Maint History Models Equip Layout, Insp& Maint OPEX Status Inspection Process Calcs Design, Certification Purchasing MRO Records Flow Diags BOMs Reqs Records Inventory Incident Equip Calcs System Lockout & Warranty& Training Reports Equip Specs Detail Design Safety Reqs Repair Records People Func Designs MRO BOMs O&M Service Certifications Agreements ARC Strategies April 2010 Aligning Information Handover with Operational Readiness Most organizations appreciate the importance of information handover and have established processes to carefully manage this as part of the official Handover. But this approach ignores the fact that certain information transfers are required far in advance of Handover for the APM organization to prepare for the transfer of the physical assets. Good information handover processes recognize these needs and ensure that information is exchanged in a timely and efficient manner throughout D&B Details the project. D&B Information Plan Design Procure Build Handover O&M Data Plan Design Procure Build O&M Information Information Handover Data Flows Operate & Maintain Reference Data Activity Records Timing requirements depend upon the information being transferred and how it is used in the APM organization s preparation for Handover. ARC s research indicates that the following three categories provide good structure for analyzing the required information flows: D&B Information the information created by the PPM organization during the project. This includes everything needed to design, manufacture, and build the physical asset. O&M Data the information about the physical assets needed by the APM organization to develop O&M strategies and processes, select technology, produce procedures and training materials, etc. Some is D&B Information, but much is additional information created by the PPM team and collected from equipment vendors O&M Information the information created by the APM organization as a result of what they receive as O&M Data. The purpose is to populate the O&M systems and staff with information they need in a form that enables them to understand the operation and the tasks they have to perform to safely, efficiently use and care for the facility. 10 Copyright ARC Advisory Group ARCweb.com

11 D&B Information D&B Information is created by a variety of engineering groups involved in the facility design, and consumed by many other parties in the physical asset value chain responsible for manufacturing/fabricating equipment and constructing the D&B Information is created by a variety of engineering groups involved in the facility facility. If managed properly, it is updated by design, and consumed by many other all these parties to reflect any changes and deviations that occurred during their project parties in the physical asset value chain responsible for manufacturing/fabricating equipment and constructing the facility. activities. Information in this category includes things like: Process specs, models, and calculations Facility level drawings and 3D models Equipment specs, drawings, calculations, and BOMs Civil drawings, specs, and calculations (foundations, roadwork, etc.) Structural drawings, specs, and calculations Instrumentation diagrams, specs, and calculations Piping drawings, specs, and calculations Electrical drawings, specs, and calculations HVAC drawings, specs, and calculations Purchase orders and contracts used in building the facility Environmental and Safety Analyses and Permits Equipment Certifications and Material Safety Data Sheets The APM organization frequently uses some of this information, and it becomes Asset Information Reference Data. It must be transferred to the APM organization as O&M Data. Other information, generally the design details, is only used infrequently for replacing equipment in kind, regulatory compliance, and incident analysis, and as the basis for designing facility modifications and upgrades. Detailed design information can be transferred at the same time as the physical assets, or even shortly thereafter to ensure that all information reflects the true as-built status of the facility. While handover is the focal point for D&B Information Handover, most owner/operators still prefer a phased transfer of this information to give them time to handle the enormous volume of material involved. Copyright ARC Advisory Group ARCweb.com 11

12 O&M Data Ideally, the O&M Data is created or collected by engineering groups and equipment vendors as part of their normal D&B workflows. However, this is often viewed as disruptive to established business processes, which are optimized to efficiently build physical assets, and becomes a separate PPM effort. At times the APM organization may assume responsibility for collecting certain parts O&M Data is different from D&B information in terms of its scope and focus. of this information, particularly vendor information. O&M Data is information about the physical assets that is needed for its use and care, such as details about its internal structure, consumables and parts, operating O&M Data differs from D&B Information in instructions, maintenance instructions, etc. terms of its scope and focus. D&B Information is needed to create and build the physical assets and provides details about an asset s physical size, weight, connection geometry, power requirements, etc. O&M Data is information about the physical assets that may only be needed for its use and care, such as details about its internal structure, consumables and parts, operating instructions, maintenance instructions, etc. Information in this category includes things like: Equipment lists at an O&M level of granularity (versus a system or skid level of granularity, which is all that is needed for groups building the facility) Descriptions of all equipment with associated equipment arrangement and detail drawings, schematics, calculations, etc. Descriptions of Operation for individual equipment and systems Recommended maintenance and inspection practices Recommended MRO materials and parts lists Timing requirements for O&M Data dictate the need for a series of small, individual O&M Data handover packages to be transferred throughout the Design and Procure phases of the project. Handover of O&M Data packages can impact the project s critical path to operational readiness, so they need to be identified as unique activities in the overall project schedule. Material Safety Data Sheets and other environmental and safety information that operators, inspectors, maintenance technicians, etc., might need Some of this information may be used in its original form for O&M, some may be transformed to other formats for distribution to various O&M systems, and some may only be used to create other, more specific information for operators, technicians, and others. Regardless of the ulti- 12 Copyright ARC Advisory Group ARCweb.com

13 mate role in O&M, all this information has to be transferred far in advance of Handover to enable the APM organization to make decisions and execute other preparatory tasks. Actual timing requirements for exchange of O&M Data depend upon the APM preparatory activity a given piece of information supports and the schedule for that work. This results in the need for a series of small, individual O&M Data handover packages to be transferred throughout the Design & Procure phases of the project. These exchanges form a large part of the coordination needed between PPM and APM teams during the project and can impact the project s critical path to Operational Readiness. Therefore, each of these information handovers needs to be carefully planned and identified as unique activities in the overall project schedule. O&M Information O&M Information is the information output of the preparatory work done by the APM organization prior to Handover. It consists of information in a variety of forms (documents, spreadsheet, image O&M Information is the information output files, database data, etc.) and has to be loaded of the preparatory work done by the APM into a variety of databases to enable the organization s various O&M solutions. To ensure a organization prior to handover. To ensure a smooth transition and rapid smooth transition and rapid generation of benefits from the investment, this information has to production of benefits from the investment, this information has to be complete and be complete and fully embedded into O&M fully embedded into O&M workflows and workflows and solutions prior to the handover solutions prior to the handover event. event. O&M Information includes things like: HAZOP and other safety and environmental analyses with associated documentation, strategies for inspection, training, certification, etc. Control system, historian, and alarm system configuration information (hardware addresses, conversion parameters, loop parameters, etc.) Production planning information (capabilities, capacities, color wheels, etc.) Reliability analysis for all critical equipment including all information and strategies for inspection and preventive maintenance (PM) EAM asset hierarchies and supporting databases fully initialized with required inspection and PM programs, MRO material BOMs, warranties and service agreements, certification requirements, permit and work clearance requirements, etc. Copyright ARC Advisory Group ARCweb.com 13

14 Material masters and supplier data bases for direct and MRO materials fully initialized in the facility s procurement software Operating, inspection and maintenance procedures The APM organization develops the O&M Information, so there is no formal information handover of this information before, during or after the facility Handover. However, the timing for production of this information is still critically important. Handover of physical assets can be delayed if the APM organization is not operationally ready and this directly depends upon the availability of O&M Information in time to train personnel, acquire tools and materials, create necessary contracts with O&M service and material providers, acquire necessary permits, etc. Addressing problems due to incomplete or poor quality O&M Information after Handover is a costly, time-consuming effort and most organizations find that they have to live with these problems throughout the life of the facility and this significantly limits the benefits the facility ultimately generates. The Situation for Most Organizations Everyone involved with PPM understands D&B Information and appreciates the importance of the owner/operator preserving this valuable asset. Despite large variations in the parties involved in PPM, D&B processes are relatively the same and D&B Information handovers are generally managed well. While there are still many inefficiencies in this area, PPM organizations support the effort required to make D&B Information handover complete and accurate. Everyone involved with PPM understands D&B Information and appreciates the importance of this valuable asset. Despite variations in the parties involved in PPM, D&B Information handovers are generally managed well. Unfortunately, the same cannot be said for the phased exchange of O&M Data needed by the APM organization to prepare for Handover. Poor preparation of APM groups still results in many startup problems and asset performance suffers throughout the life of the asset. Unfortunately, the same cannot be said for the phased exchange of information needed to support the APM organization s efforts to prepare for handover. D&B personnel are not very familiar with O&M, so they don t understand what information is required or when it has to be delivered. Often, they simply assume that D&B Information handover is all that is needed. Many top level ALM managers, who frequently come from a PPM background, share this attitude and this contributes to poor preparation of APM groups and the resulting startup problems which plague many asset investments. 14 Copyright ARC Advisory Group ARCweb.com

15 Managing Information Handover Is a Value Chain Issue PPM and APM organizations have ultimate responsibility for their portions of the asset lifecycle, but often delegate much of their work to third parties in their ALM ecosystems. Recognizing these organizations and their impact on effective information handover is critical to develop strategies that can address all of the owner/operator challenges. The introduction of external organizations into information handover extends the scope of the challenge from the development of a good set of internal processes for a few major events to the ongoing governance of information handover across a multitude of contracts. The introduction of external organizations into information handover complicates its management. It extends the scope of the challenge from the development of a good set of internal processes for a few major events to the ongoing governance of information handovers across a multitude of contracts. Key Players in the Owner/Operator ALM Ecosystem An owner/operator s ALM ecosystem consists of all of the third-party organizations it relies upon to support designing, building, operating, and maintaining their complex capital assets. These organizations provide a broad palette of products and services and their contractual relationship with PPM and APM organizations can take many different forms. Certain parties have a particularly noteworthy impact on the management of information handover: EPCs Equip Vendors EPC Contractors, (Engineering, Procurement, and Construction), provide a full range of design & build services including conceptual design, detail design, procurement, site management, and project management. EPC responsibilities Operation Service Providers Owner/Operator vary from project to project, but can include everything from conceptual design through installation Asset Performance Management and handover of Handover complete facilities. EPC contracts (Operate & Maintain) can vary from simple time Maintenance Service Providers and material (T&M) agreements to billion dollar lump sum The ALM Ecosystem turnkey (LSTK) contracts that Project Performance Management (Design & Build) ASSET LIFECYCLE INFORMATION MANAGEMENT Copyright ARC Advisory Group ARCweb.com 15

16 encompass all of the work required to convert an owner/operator s requirements into a ready to operate facility. Regardless of contract form, handover of EPC deliverables represent major project milestones. In many cases, they are given responsibility for the handover of all D&B Information to the APM organization. Some owner/operators also ask EPCs to assume responsibility for developing O&M information when internal resources are limited. Equipment vendors are always important, but in some cases their role extends far beyond the traditional supplier-customer relationship. For example, in the metals industry, major machinery builders often assume the EPC LSTK responsibilities described above. In continuous process manufacturing industries, like refining, automation system suppliers can likewise have LSTK relationships with owner/operators or EPCs that include all products and services needed to control the facility. They may also have long-term strategic partnerships with owner/operators where they act as the main automation contractor (MAC) supporting all project automation needs before and after Handover. Regardless of their role, automation companies are generally responsible for providing all information about the facility s sensors, actuators and control equipment. O&M Service Providers - Some owner/operators also outsource major APM responsibilities to ALM ecosystem partners. Oil & gas exploration and commercial property management are examples of industries that frequently outsource responsibility for asset operation. Full service maintenance outsourcing is a growing trend in many industries, like pulp & paper and mining, and common practice for infrastructure investments like airports, college campuses, etc. Agreements for O&M services can take a variety of forms including simple T&M, unit rates for service calls, LSTK responsibility for certain assets, and performance-based agreements for complete facilities. Like internal APM resources, O&M service providers require extensive information to ensure that facilities are operated well. Owner/operators have a vested interest in their success, so their O&M Information requirements have to be considered in every information handover. 16 Copyright ARC Advisory Group ARCweb.com

17 Managing Information Handover across the ALM Ecosystem Given their impact on information handover, contracts with ALM ecosystem partners have to include a clear definition of each party s information handover responsibilities. For contracts with parties supporting the design & build of the facility, the focus should be on what the owner/operator expects from the contractor. For contracts with parties who support the operation & maintenance of Smart owner/operators will ensure that their information handover strategies include the development of contracts that leverage external parties to ease their own information handover efforts and the facility, the focus should be on what the contractor expects from the owner/operator. It is then the owner/operator s responsibility to ensure simplify coordination of information flows that all contractual agreements are between third parties. coordinated and aligned to support these needs. In developing these contracts, smart owner/operators will also consider how they can leverage each contractor s capabilities to improve the overall flow of information across all parties. For example, O&M service provider contracts might include their participating directly in creating O&M Information. This might ease the burden on the owner/operator s internal APM resources and simplify coordination of information flows between third parties. Information Handover Improvements Offer Incredible Payback No specific studies have been made of the costs of poor information handover. However, studies on the costs of poor interoperability across the asset lifecycle provide some useful insight into how better information handover can improve project and asset performance. The most popular study in this area is the one published by NIST 2 in 2004 and we analyze its findings relative to our three major data flows in part 2 of this report. As the figure below shows, the annual losses in are staggering and clearly indicate a need for immediate improvement in every aspect of information handover. 2 Cost Analysis of Inadequate Interoperability in the U.S. Capital Facilities Industry, National Institute of Standards and Technology, NIST GCR , August Copyright ARC Advisory Group ARCweb.com 17

18 D&B Info O&M Data O&M Info Total O/O PPM ($B) O/O-APM ($B) O/O Total ($B) Ecosystem ($B) Total $B O/O-PPM (%CAPEX) 0.4% 0.0% 0.0% 0.4% O/O-APM (%CAPEX) 0.0% 1.3% 1.1% 2.4% O/O Total (%CAPEX) 0.4% 1.3% 1.1% 2.8% Ecosystem (%CAPEX) 1.4% 0.0% 0.0% 1.4% Total (%CAPEX) 1.8% 1.3% 1.1% 4.2% *Inconsistencies in the figures are due to rounding errors NIST Report Cost by Data Flows The Opportunity Is Clear Regardless of how you look at this issue, one thing is perfectly clear poor information handover is a major problem for asset-intensive organizations. It results in a significant premium in the costs that owner/operators incur for their facilities. And its impact can persist throughout the extensive lifetime of a complex facility in terms of poor efficiency, poor throughput, and poor safety management. Addressing this issue should clearly be one of the highest items on the CIO s agenda in every asset-intensive organization. 18 Copyright ARC Advisory Group ARCweb.com

19 Analyst: Sid Snitkin Editor: Paul Miller Distribution: EAS and MAS Clients Acronym Reference: For a complete list of industry acronyms, refer to our web page at AIM Asset Information Management ALIM Asset Lifecycle Information Management ALM Asset Lifecycle Management APM Asset Performance Management APPM Asset and Project Portfolio Management BOM Bill of Materials CAPEX Capital Expenditures D&B Design & Build EAM Enterprise Asset Management EPC Engineering, Procurement, Construction HAZOP Hazard and Operability HVAC Heating, Ventilation, Air Conditioning IT Information Technology LSTK Lump Sum Turnkey M&I MAC MRO Maintain & Improve Main Automation Contractor Maintenance, Repair, and Operations NIST National Institute of Standards and Technology O&M Operations & Maintenance O/O Owner/Operator OPEX Operations Expenditure PIM Project Information Management PM Preventive Maintenance PPM Project Performance Management T&M Time and Material Founded in 1986, ARC Advisory Group is the leading research and advisory firm for industry. Our coverage of technology from business systems to product and asset lifecycle management, supply chain management, operations management, and automation systems makes us the go-to firm for business and IT executives around the world. For the complex business issues facing organizations today, our analysts have the industry knowledge and first-hand experience to help our clients find the best answers. ARC Strategies is published monthly by ARC. All information in this report is proprietary to and copyrighted by ARC. No part of it may be reproduced without prior permission from ARC. You can take advantage of ARC's extensive ongoing research plus experience of our staff members through our Advisory Services. ARC s Advisory Services are specifically designed for executives responsible for developing strategies and directions for their organizations. For membership information, please call, fax, or write to: ARC Advisory Group, Three Allied Drive, Dedham, MA USA Tel: , Fax: , info@arcweb.com Visit our web pages at Copyright ARC Advisory Group ARCweb.com 19

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