The Value Proposition of IWMS - AssetWorks

The Value Proposition
of IWMS
JULY 2012
Dave Mosby
ASSETWORKS INTEGRATED WORKPLACE MANAGEMENT SYSTEMS

Table of Contents
Executive Summary 1
SECTION 1: 2
Purpose
SECTION 2: 2
Definitions
SECTION 3: 2
IWMS Provides a Systems View of Facilities
Management
SECTION 4: 3
IWMS Decision-making: The Value Added
Crisis management—real time information
and knowledge
Day to day operations—visibility,
transparency and accountability
Tactical planning—within the budget year
Strategic planning—planning for future
budgets
SECTION 5: 5
IWMS Dollar Savings/Cost Avoidance
SECTION 6: 7
Calculating the Return on Investment
SECTION 7: 7
Statewide Return on Investment Calculation
(Table)
SECTION 8: 7
Conclusion
About the Author 8
Copyright © 2012 AssetWorks LLC. All rights reserved. All trademarks, trade names, service marks and logos referenced herein belong to their respective companies. This document is for your
informational purposes only. To the extent permitted by applicable law, AssetWorks provides this document “As Is” without warranty of any kind, including, without limitation, any implied
warranties of merchantability or fitness for a particular purpose, or non-infringement. In no event will AssetWorks be liable for any loss or damage, direct or indirect, from the use of this
document, including, without limitation, lost profits, business interruption, goodwill or lost data, even if AssetWorks is expressly advised of such damages.

Executive Summary
Challenge
Between 2000 and 2005, one US state witnessed dramatic increases in
energy costs, escalating real estate costs, and growing deferred
maintenance backlogs. Real estate portfolio costs were growing
unabated, with the state facing a $1 billion shortfall and no free cash
reserves to address the problem. To address the shortfall, the state
implemented a four-step program that leveraged technology control
costs and document processes with the goal of saving the state over $30
million annually.
Opportunity
What was needed was “ERP for Facilities,” but in 2005, no such system
existed. The state attempted a patchwork quilt of multiple niche
systems and databases using an “IT integrator.” In one sense, this
solution was visionary in that it managed a portfolio of facilities and real
estate globally from a Total Cost of Ownership (TCO) perspective, but it
was limited by software integration issues and vendor infighting over
who actually “owned” the data.
Benefits
By implementing an IWMS, the state was able to provide executives,
managers and field workers with the right information at the right time
to make informed business decisions about space, energy, operations,
construction and capital costs. The state also enjoyed ancillary benefits
derived from vendor consolidation, maintenance cost reductions, and
improved business processes.
WHITE PAPER: THE VALUE PROPOSITION OF IWMS 1

Purpose
For the purposes of this white paper, the goal of senior management is
to maximize the value of the facilities portfolio by optimizing the natural
bundles of space, energy, operations, maintenance and capital
expenditures. Integrated Workplace Management Systems (IWMS) are
integrated knowledge base tools that leverage business applications to
provide a higher level analysis of the facilities system and prioritize
between decision alternatives.
Definitions
Key definitions to consider throughout this white paper include:
Data – the lowest level of abstraction from which information and
knowledge are derived
Information – data put into the form of reports and records
providing a snap shot of system/organizational performance
Knowledge – information put into a dynamic process to provide a
higher level of analytics and a near real time picture of the current
system
System – a set of interacting or interdependent entities forming an
integrated whole
IWMS Provides a Systems View of Facilities
Management
Traditional facilities management has focused on efficiency within the
silos of the natural bundle. Each silo manager seeks to bring maximum
efficiency to their area of expertise, often to the determent of the
overall facilities portfolio. Silo managers often are not aware of the
impact the decisions they are making on the other silos and are focused
on the data and information being generated and collected by their
specialized applications (e.g., energy management, CAFM, CMMS, etc.)
IWMS recognizes the value of the information being generated by the
specialized applications and pulls it to a higher level of knowledge
where a greater number of alternatives can be evaluated and optimized
decisions can be made. As a result, the overall value of the facilities
portfolio is maximized.
IWMS also reduces risk and uncertainty in decision making by providing
knowledge about the current state previously unknown and delineates
the alternatives with the highest probability of success or effectiveness
and the best fit with the organizational goals and values.
WHITE PAPER: THE VALUE PROPOSITION OF IWMS 2

IWMS Decision Making: The Value Added
Crisis management—real time information and knowledge
In a natural or man-made disaster, the need for accurate real time
information and knowledge is critical to the successful handling of the
situation. For example, in a geographically dispersed portfolio, knowing
real-time if a site has electricity can be a life or death matter (nursing
home, prison, etc.) so that the proper resources can be deployed to
mitigate the situation. IWMS provides this real time capability by
leveraging geospatial mapping and real-time device reporting from
across the portfolio.
Day to day operations—visibility, transparency and
accountability
Visibility at all levels to information, key performance indicators (KPI’s)
and analytics is critical to breaking down natural silos that develop.
When the entire operation is working from the same set of information
and knowledge, staff becomes engaged in making sure the source data
is accurate. This works particularly well if they do not fully embrace the
system, because they will be naturally more critical and skeptical of the
data and results. This results in scrutinizing the data to correct inputs,
and processes that have long been out of date. Another simple use of
IWMS is the cross-referencing of CMMS hot and cold trouble call
information with the continuous retro-commissioning of BAS data
points. Cross-referencing provides insight into hidden equipment issues
(stuck dampers, set point errors, etc.) that are the root cause of trouble
calls. Many issues are discovered utilizing these strategies that are low
cost/no cost fixes.
Transparency into current operations will provide managers at higher
levels in the organization a much needed view and understanding as to
how systems are performing. For example, central plant operators are
notorious for hiding behind the veil of reliability at the expense of the
facilities which they support. Their ability to hide information makes it
possible for their system to be maximized while the facilities operators
struggle to maintain the cooling and heating of their facilities. Other
silos tend to hide behind their processes to maintain control at the
expense of the organization’s overall goals. IWMS provides a tool to
break into these silos of control and knowledge and allow the executive
team to layout the overall game plan for the organization. At the end of
the day, “knowledge is power.”
With visibility and transparency in place, accountability will follow.
Executive leadership can use the IWMS tool to establish measurable and
verifiable goals for each of the silo managers as well as high level goals
and KPIs for stakeholders. For example, energy consumption goals can
WHITE PAPER: THE VALUE PROPOSITION OF IWMS 3

e established for each site. This will result in the building managers
making the reduction of energy use a high visibility effort. IWMS kiosks
placed in the common areas of a facility can help drive behavioral
change with the tenants/users of the facility. Managers can expect an
additional 15% energy reduction from the use of IWMS behavioral and
continuous retro-commission strategies. Those stakeholders who
control funding want simple and accurate performance measures that
demonstrate that the facilities portfolio is being managed well. IWMS
provides real-time access to predetermined KPIs based on role and
security through any web browser.
Tactical planning—within the budget year
Facilities operations are dynamic and the ability to respond
appropriately is based on proper risk assessment. In an ideal world, the
situation decision-makers would have access to all possible
information—all of it accurate—and a list of every possible alternative.
However, both information and alternatives are constrained because of
time limits imposed by the situation. In setting up IWMS, great care is
taken in the development of analytics. KPIs and information are
reported such that risk and uncertainty are minimized. For example,
staff discovers that an underground fuel tank that supports an
emergency generator for a data center is leaking at a rate of 100 gallons
of diesel fuel each week. The executive team is faced with a myriad of
questions:
1. Is this an emergency
2. What are the environmental reporting requirements
3. Can this be fixed with in-house staff or will it need to be
contracted
4. Are funds available to fix this
5. What is the available history of this problem
6. How to approach the IT department
7. Is there a public relations problem How is this managed
8. How many underground fuel tanks are there
9. How many are currently leaking
10. Do they have leak detection devices in place Why not
11. Is there a plan
12. What is the first step
To the extent we have planned ahead when we set-up the IWMS
system, we can answer many of these questions. IWMS can provide
answers to numbers, types and condition while the executive team
develops a strategy to handle the political aspects of the problem. In
this example information allows the team to be proactive vs. reactive.
Again, “knowledge is power.”
WHITE PAPER: THE VALUE PROPOSITION OF IWMS 4

Strategic planning—planning for future budgets
The key to maximizing the value of the facilities portfolio lays in proper
strategic planning. To the extent that the natural bundles are optimized,
the overall value of the portfolio is increased. Specifically, this involves
the art of balancing capital expenditures with the increased life cycle of
facility assets. Maintenance, operation, energy and space decisions have
a direct impact on capital spending. Understanding the true priority for
capital funds is a complex prioritization process. The majority of
facilities managers default to a proration based on square footage, the
squeaky-wheel or the historical funding patterns. IWMS provides the
analytical tools to create multiple prioritized scenarios based on
objective maintenance, operations, and energy and space indices. The
system is flexible enough to handle political realities and saves weeks of
manual labor in crunching numbers and projects.
IWMS Dollar Savings/Cost Avoidance
Establishing accurate benchmarks of expenditures is necessary for
evaluating actual savings and cost avoidances. Within the typical
facilities portfolio, cash is spent on four major budget areas: real estate,
energy, maintenance, and capital. Savings are easily measured in the
expense categories of real estate and energy. Facilities managers work
to minimize these expenditures, and software programs are set up to
capture these costs. However, facilities mangers view maintenance and
capital expenditures as investments. Typically, these budget areas are
underfunded, and any savings are plowed back into the budgets to
reduce deferred maintenance and to increase the lifecycle of
equipment. As a result, indirect measures of performance must be used
to measure success.
For each budget, area I will describe what savings can be expected
based on my experience of deploying IWMS over a large number of
facilities (16.3 million square feet, 169 sites and over 1000 buildings).
Real Estate: One US state realized an annual real estate savings of
$14.3 million. This was realized in two major areas. First, $6.5 million of
general revenue fronted each year by the state to cover a manual backoffice
process to allocate federal and other funds to rent payments.
Because the allocation of these funds was more than 12 months in
arrears the state had to cover the rental short falls until the proper
allocation were made. By automating the manual process through the
use of a space management system, the proper funds were debited on a
real time basis and the $6.5 million was no longer needed each year.
Second, $7.8 million a year was saved by reducing the number of office
leases and increasing the occupancy rate of state owned facilities from
95% to 98%. These savings occurred on an annual combined
WHITE PAPER: THE VALUE PROPOSITION OF IWMS 5

(leased/owned) real estate budget of $93.7 million or a 15% reduction.
When evaluating a client for potential real estate savings I will use a
conservative estimate of 3% to 7% of the combined real estate spend.
Expense
Real Estate (program space)
Energy (consumption)
Investment
Maintenance (operations)
Capital (construction)
Energy: Through the continuous retro-commissioning of HVAC systems,
the state was able to realize energy consumption (Kwh/mmbtu) savings
of 16%-28% per site. The dollars associated with energy savings were
$3.0 million, 16% of the $18.75 million energy spend. When evaluating
the potential energy cost reduction for a client, I utilize 15% of the past
12 month’s energy expenditures as an estimate.
Maintenance: The state budgeted $1.68 per square foot for
maintenance. This included all labor and fringe benefits, supplies,
service contracts and small construction projects under $25,000. The
maintenance budget for the 16.3 million square foot of facilities was
$27.4 million. Savings from utilizing a Computerized Maintenance
Management System (CMMS) was $1.6 million per year in reduced
inventory (supply chain management), telecommunications
expenditures (utilizing web based communication vs. DLS lines) and
traditional maintenance labor that was reallocated to the newly created
energy management office (7 FTE). All these savings were reinvested in
the maintenance program. When evaluating the savings potential for a
client I estimate a 5% savings that will be reinvested in the maintenance
program when deploying a CMMS.
Capital: The 10-year statewide capital plan I established was to reduce
the Facility Condition Index (FCI) from 15.5% to 5%. (FCI is the deferred
maintenance backlog divided by the replacement value of the portfolio.)
By combining a reduction in the deferred maintenance backlog with an
increase the replacement value of the FCI will be reduced. Reducing the
deferred maintenance backlog is a direct result of maintaining a
disciplined spending plan. However, an indirect way of improving the
FCI is to extend the lifecycle of building systems. One can estimate the
value associated with extending the life cycle (continuous retro
commissioning, keeping the existing HVAC systems at or near design
intent) of the HAVC systems (20% of the replace value) times one tenth
of the annual reduction of FCI (.001). For the state, the increase in CRV
associated with the ESM was $440,000 per year. When estimating this
value for a client utilize the replacement value if known, or estimate it
at a conservative $135 per square foot times 5% (HVAC system value)
times a planned FCI reduction of 1%. These figures can be adjusted
based on the client input and facility type.
WHITE PAPER: THE VALUE PROPOSITION OF IWMS 6

Calculating the Return on Investment
Calculating a ROI for ESP is based on the standard ROI calculation used
to evaluate real estate performance 1 . Put simply, the annual change in
value of the real estate assets (as reflected in a reduction of deferred
maintenance) plus increased income from savings resulting from
efficiencies and cost avoidances is divided by the cost of the solution.
Return on Investment = (Annual Change in Asset Value+ increase in
Income)/cost of the ESP
The changes in value and income are determined by evaluating each
budget area separately and then aggregating the results.
Statewide Return on Investment
Calculation (Table)
Year
Initial
Investment
Annual Cost
Portfolio
Value
Increase
Real Estate
Savings
Maintenance
Cost
Avoidance
Energy
Savings
Return On
Investment
1 $17,930,000 $0 $220,000 $7,150,000 $800,000 $1,500,000 53.93%
2 $0 $815,000 $440,000 $14,300,000 $1,600,000 $3,000,000 2373.01%
3 $0 $815,000 $440,000 $14,300,000 $1,800,000 $3,000,000 2397.55%
4 $0 $815,000 $440,000 $14,300,000 $1,600,000 $3,000,000 2373.01%
Total $17,930,000 $2,445,000 $1,540,000 $50,050,000 $5,800,000 $10,500,000 333.20%
Conclusion
Recognize that at any given point in time, the facilities organization is
engaged in crisis management, day-to-day operations, tactical planning
and strategic planning. This dynamic environment requires advanced
tool of IWMS to maximize the allocation of all resources. Maximum
value of the facilities portfolio is driven by good decision making based
on accurate data and information starting at the strategic level all the
way down through the crisis situation (an executive function).
Conversely, the accurate data and information needed to make
strategic decisions is controlled and validated at the working level.
IWMS is a tool that empowers the entire organization to validate the
data and push it up so that good decisions can be made and translated
into goals and objectives that are pushed down through organization to
answer the question: “What are we doing and where are we headed”
The speed and the accuracy of this cycle will directly impact efficiency,
effectiveness and profitability of the overall organization.
1 Real Book of Real Estate
WHITE PAPER: THE VALUE PROPOSITION OF IWMS 7

The calculation of Return on Investment is dependent on collecting
accurate financial data. When estimating a ROI for a client there are
standards that can be applied based on our experience. As our body of
work increases care must be taken to collect the proper data to allow
further refinement of calculations.
About the Author
Dave Mosby is a Senior Product Manager for the Integrated Workplace
Management Systems (IWMS) practice with AssetWorks LLC. Dave
served in the United States Air Force as a pilot and base commander for
18 years, followed by 16 years within the administration of a US state
where he retired as the Director of Facilities Management, Design and
Construction in 2007. He was the executive leader and innovation
driver of the state’s technology and energy optimization program which
produced a state wide information dashboard system, over $100 million
in self-funded upgrades and over $30 million in annual savings while
overseeing 30 million square feet of facilities. Most recently, Dave was
a Business Development Director for Enterprise Technology Solutions
with Johnson Controls. Dave is a graduate of the University of Missouri
where he earned a BS in Forestry and earned his MSBA from Michigan
Technical University.
WHITE PAPER: THE VALUE PROPOSITION OF IWMS 8