How to make informed ongoing commissioning decisions
OLIVIER ALLARD, a building optimisation expert for ADMS Technologies, explains the KPIs needed to make informed ongoing commissioning decisions: the total cost of ownership, the return on investment and the asset management fund.
Economic recessions are usually a sign of budget cuts, limited resources and job losses. We are still feeling the effect of the previous year’s economy. Energy savings and costs avoidance are prime buzzwords because cost control is becoming the most important challenge.
Today’s leaders are working to optimise their building management with an ongoing commissioning approach using best-in-class fault detection diagnostic systems together with a good preventive maintenance plan and energy monitoring processes. They are juggling the required performance objectives and their limited resources.
But, what are the basic economic key performance indicators (KPIs) that should be used to monitor the ongoing commissioning process?
TOTAL COST OF OWNERSHIP
The total cost of ownership (TCO) looks at the complete cost of an asset from the initial purchase to disposal. It adds the purchase price to other expected costs to be incurred during the life cycle of the product, such as installation cost, energy cost, removal cost and maintenance cost, including manpower and part replacements.
Some side effect costs are hard to identify. For example, buying a new system to use less chilled water to produce the necessary cooling load might send the chiller into an inefficient working zone. The impact on other equipment usage is hard to predict.
The ongoing commissioning process assists in discovering these side effects and fine-tuning the operation to reduce their impact. The process also promotes performance tracking and the creation of the associated knowledge base. This data history helps with future decision-making, assists with the avoidance of repeating past mistakes and enables facilities managers to take full advantage of previous experiences.
Once the TCO is calculated, a comparison can be made between solutions or projects. A dollar spent today may end up saving multiple dollars in the future. The TCO makes sure the decision process reduces the risk by taking all the costs related to an asset into account.
RETURN ON INVESTMENT
The return on investment (ROI) provides a snapshot of profitability adjusted to the size of the asset investments tied up in the enterprise. It is a simple ratio between the expected savings during a period and the TCO. It returns the number of periods to clear the investment. If the asset or project life cycle exceed the ROI period, then additional savings are collected.
Implementing the same system as in the previous example to reduce chilled water production can impact the ROI of the heat exchanger in the loop. Monitoring the ROI of a project is vital. During the ongoing commissioning process it is important to keep track of all active projects in order to verify the impact of adding a new project to the list. Joined with the ROI, a cumulative sum (CUSUM) per project can be built to track the total savings generated per project.
ASSET MANAGEMENT FUND
The asset management fund is there to provide the money to replace, repair, upgrade or simply update assets in order to generate growth in total asset value. A good way to monitor this KPI is to look at each individual critical asset and compare its life cycle to the available fund. The initial calculated TCO can be used to estimate the expected resource use. The idea is to compare the actual status to the expected values.
A smaller available fund leads to a higher operating cost that can be generated by higher maintenance and energy costs or a hidden cost. Higher maintenance costs can be linked to additional repairs caused by a poor preventive maintenance plan or unexpected breakdown.
In order to better control the situation, focus on the root cause of these additional costs and review the preventive maintenance plan frequently. In the case of a hidden cost, adjust the total calculation, including this fee, and readjust the plan. This cost should now be part of the total cost of ownership sum process, avoiding future mistakes.
A replacement fund should also be in place in case a critical asset needs to be replaced during the building’s life cycle. In order to be well prepared, avoid simple linear regression for the saving curve, and take the product cost increase and economic inflation rate in consideration when planning the budget. An asset management fund is the key to creating a proactive management culture.
Today’s decision makers need to look at these economic KPIs in order to manage efficiently. The TCO, ROI and asset management fund have strategic use inside the ongoing commissioning process, helping users to reach high lean management levels. These techniques will significantly help, but will not eliminate all management challenges.