Asset Lifecycle Information Management Sid Snitkin ARC STRATEGIES APRIL 2010 Asset Lifecycle...

By Sid Snitkin

ARC STRATEGIES

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 .................. 15

Information Handover Improvements Offer Incredible Payback ........ 17

VISION, EXPERIENCE, ANSWERS FOR INDUSTRY

ARC Strategies • April 2010

2 • Copyright © ARC Advisory Group • ARCweb.com

Successful Handovers Require PPM-APM Collaboration

Information Handover Has Many Data Flows

Plan Design Procure Build Handover Operate & Maintain

Plan Design Procure Build

Create Physical Assets that are “Ready to Operate”

Create an APM Organization that is “Operationally Ready”

Collaboration



D&B Information

O&M Information

O&M Data

D&BDetails

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

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

History• Operating

History• Maint History• Inspection

Records• Incident

Reports• People

Certifications

Reference Data Activity Records


Copyright © ARC Advisory Group • ARCweb.com • 3

Asset-intensive organizations have made substantial investments in information management solutions for project and

asset management. Yet many continue to lose millions of dollars each year

because workers don’t have access to the information they need to do their work

safely, efficiently, and effectively.…

The root cause of many of these problems is poor information handover

and owner/operators need effective strategies to manage the many

challenges in this area.

Executive Overview

Information is fundamental to effective Asset Lifecycle Management1

(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

relationship between information and ALM per-

formance and have made substantial investments

in information management solutions for project

and asset management. Yet many continue to

lose millions of dollars each year because their

workers do not have access to the information

they need to do their work safely, efficiently, and

effectively.

“Begin at the beginning, the King said, very

gravely, and go on till you come to the end: then

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 enorm-

ous, 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: Manag-ing Performance Across the Asset Lifecycle



What Is Handover?

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 respon-

sibility for an asset is formally passed from

the Project Performance Management (PPM)

group to those responsible for Asset Per-

formance Management (APM).

Achieving Handover implies that that all

parties agree that the physical asset is com-

plete, 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 re-

quires 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.

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 responsibili-

ty, 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 Han-

dover is the only way to ensure that everyone’s efforts are

coordinated and synchronized.

ARC Model for Asset Lifecycle Management

Project PerformanceManagement

(PPM)

Asset PerformanceManagement

(APM)

Asset & ProjectPortfolio

Management(APPM)

Handover

ModificationRequestsFunded

Projects

New Facility

Requests

Capital Assets Are More

Than Physical

Human

Virtual

Physical



Successful Handovers Require Coordinated PPM and APM Efforts

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 Handov-

er.

While they clearly address dif-

ferent aspects of an operating

facility, both paths focus on

creating a new asset. And the

major steps they follow are con-

ceptually 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 subse-

quent 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 out-

sourcing, level of automation, role of ALM ecosystem partners, etc.

• Design – the plan is elaborated in this stage to produce a detailed speci-

fication 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 pro-

curement 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

Everyone Has to Prepare for Handover



Create Physical Assets that are “Ready to Operate”

Create an APM Organization that is “Operationally Ready”

Collaboration



maintenance strategies with BOMs for the enabling materials, tools, and

technology.

Project Activities Leading to Operational Readiness

• Procure –this stage focuses on acquiring all materials and services iden-

tified in the design stage. It involves soliciting bids from acceptable

suppliers, evaluating offerings, awarding contracts and issuing pur-

chase 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 con-

tracts 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 re-

quires 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

Physical Assets Organizational Assets

Plan

• Review Scope/Goals, • Conceptual Design - Processes and

Facilities • Establish Budgets/Schedules

• Review Scope/Goals, • Conceptual Design - O&M People,

Processes, and Technologies • Establish Budgets/Schedules

Design • Select Equipment • Detail Design – Systems,

Structures, Piping, Electrical, etc.

• Select People, Technologies • Detail Design – Processes,

Responsibilities, Practices, etc.

Procure

• Establish Installation Contracts • Procure Equipment, Systems,

Construction Materials

• Establish Service Contracts • Procure IT Hardware and Software • Procure MRO Materials and Special

Tools

Build

• Clear Site, Build Structures • Install Equipment and Systems • Commission and Validate

Performance

• Load Systems with Required Data • Train People • Obtain Approval for all Procedures,

Get all Permits



Creating physical assets requires a very different set of knowledge and skills than

those needed to create an effective organizational asset. And this should be reflected when assigning responsibilities:

• the PPM organization should manage all activities involved in developing the physical assets;

• the APM organization has to assume this responsibility for the organizational portion of the asset investment.

equipment, and testing the software against pre-defined scripts to vali-

date that it properly supports O&M processes. Training O&M people is

a second major effort in this phase and includes safety and environmen-

tal, 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 dif-

ferent. 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 develop-

ing the physical assets; the APM organization has

to assume this responsibility for the organization-

al portion of the asset investment. The color

coding in the figure at the start of this section at-

tempts to capture this division of responsibilities.

Saying that the APM organization is responsible

for creating an operationally ready organization

does not fully relieve the PPM organization of

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 prepar-

ing the APM organization is the high level of interdependency between the

two paths. The APM organization completely depends on the PPM organi-

zation 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.



Information handover has many challenges.

Some limit the effectiveness, resulting in problems such as overlooked information

and late transfer of information. These delay startup and limit performance of

operating assets.

Other challenges make the process inefficient and costly, such as massive

volumes of information, variety in information forms, and use of proprietary

formats. These make it difficult to automate electronic exchanges and

quality checks.

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 effective-

ly and efficiently operate and maintain such facilities. Not surprisingly,

owner/operators consider information a key

Handover deliverable and contractors expend

considerable effort meeting these requirements.

But, what may be surprising is that information

handover remains a serious ALM problem.

Information handover has many challenges.

Some limit the effectiveness of the effort: critical

information needed for O&M is overlooked be-

cause it was not needed to build the physical

assets; information is provided too late in the

project to use effectively to prepare the APM or-

ganization; etc. Other challenges make the

process inefficient and costly: the sheer volume of

information makes it difficult to ensure that eve-

rything 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. Organiza-

tions 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 spec-

trum. Some is reference material that informs the organization about

functional capabilities of the facility, the design of the equipment and re-

lated 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 com-

mercial records of purchases and contracts, equipment warranties, etc.;



histories of how the facility

was operated and main-

tained; and asset status

information collected from

real-time sensors or through

periodic inspections. Some

of the commercial informa-

tion originates during the

project, but reference data is

the primary focus for infor-

mation handover.

While it includes many de-

tails about the physical

assets, reference data is not simply the information used to build the facili-

ty. 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 infor-

mation, 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 in-

kind) and every asset will eventually experience modifications and up-

grades that require design & build details (e.g., adding an addition to your

home). The difference is simply one of timing and priority during the hec-

tic handover process and the owner/operator’s options for managing this

information after Handover.

O&M Requires a Lot of Information


Specs • Process


Design• Process


Design, BOMs


• MRO BOMs



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

History• Operating

History• Maint History• Inspection

Records• Incident

Reports• People

Certifications




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 han-

dover processes recognize these needs and ensure that information is

exchanged in a timely and

efficient manner throughout

the project.

Timing requirements de-

pend upon the information

being transferred and how it

is used in the APM organiza-

tion’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, manu-

facture, 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 popu-

late 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.

Information Handover Data Flows



D&B Information

O&M Information

O&M Data

D&BDetails


Specs • Process


Design• Process


Design, BOMs


• MRO BOMs



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

History•Operating

History•Maint History• Inspection

Records• Incident

Reports•People

Certifications




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 facility.

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 as-

set value chain responsible for manufactur-

ing/fabricating equipment and constructing the

facility. If managed properly, it is updated by

all these parties to reflect any changes and devi-

ations that occurred during their project

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 be-

comes 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, regulato-

ry compliance, and incident analysis, and as the basis for designing facility

modifications and upgrades. Detailed design information can be trans-

ferred 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.



O&M Data is different from D&B information in terms of its scope and focus. 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 instructions, maintenance instructions, etc.

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.

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 as-

sume responsibility for collecting certain parts

of this information, particularly vendor informa-

tion.

O&M Data differs from D&B Information in

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

• Material Safety Data Sheets and other envi-

ronmental and safety information that

operators, inspectors, maintenance techni-

cians, etc., might need

Some of this information may be used in its origi-

nal 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-



O&M Information is the information output of the preparatory work done by the APM

organization prior to handover.

To ensure a smooth transition and rapid production of benefits from the investment,

this information has to be complete and fully embedded into O&M workflows and

solutions prior to the handover event.

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 ex-

ecute 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, indi-

vidual 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 va-

riety of forms (documents, spreadsheet, image

files, database data, etc.) and has to be loaded

into a variety of databases to enable the organi-

zation’s various O&M solutions. To ensure a

smooth transition and rapid generation of bene-

fits from the investment, this information has to

be complete and fully embedded into O&M

workflows and solutions prior to the handover

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, warran-

ties and service agreements, certification requirements, permit and

work clearance requirements, etc.



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.

• 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 for-

mal 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, ac-

quire 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 signifi-

cantly limits the benefits the facility ultimately generates.

The Situation for Most Organizations

Everyone involved with PPM understands D&B Information and appre-

ciates 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 organiza-

tions support the effort required to make D&B Information handover

complete and accurate.

Unfortunately, the same cannot be said for the

phased exchange of information needed to sup-

port 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 in-

formation 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.



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.

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 im-

pact 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 complicates its manage-

ment. 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 or-

ganizations 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 in-

formation handover:

• EPC Contractors, (Engineering, Procurement, and Construction), pro-

vide a full range of design & build services including conceptual

design, detail design, procurement, site management, and project man-

agement. EPC responsibilities

vary from project to project, but

can include everything from

conceptual design through in-

stallation and handover of

complete facilities. EPC con-

tracts can vary from simple time

and material (T&M) agreements

to billion dollar “lump sum

turnkey” (LSTK) contracts that

The ALM Ecosystem

EPCs

EquipVendors

ProjectPerformanceManagement(Design & Build)

AssetPerformanceManagement

(Operate & Maintain)

Handover

A S S E T L I F E C Y C L E I N F O R M A T I O N M A N A G E M E N T

Owner/Operator

OperationService

Providers

MaintenanceService

Providers



encompass all of the work required to convert an owner/operator’s re-

quirements 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 as-

sume 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 fa-

cility. 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 Han-

dover. Regardless of their role, automation companies are generally

responsible for providing all information about the facility’s sensors, ac-

tuators and control equipment.

• O&M Service Providers - Some owner/operators also outsource major

APM responsibilities to ALM ecosystem partners. Oil & gas explora-

tion 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 in-

vestments 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 perfor-

mance-based agreements for complete facilities. Like internal APM

resources, O&M service providers require extensive information to en-

sure 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.



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

simplify coordination of information flows between third parties.

Managing Information Handover across the ALM Ecosystem

Given their impact on information handover, contracts with ALM ecosys-

tem 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 ex-

pects from the contractor. For contracts with par-

ties who support the operation & maintenance of

the facility, the focus should be on what the con-

tractor expects from the owner/operator. It is

then the owner/operator’s responsibility to en-

sure that all contractual agreements are

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 Infor-

mation. 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 han-

dover. 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 NIST2 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-04-867, August 2004.



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 life-

time 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.

D&B Info O&M Data O&M Info Total

O/O–PPM ($B) 1.6 0.0 0.0 1.6

O/O-APM ($B) 0.0 4.8 4.2 9.0

O/O–Total ($B) 1.6 4.8 4.2 10.6

Ecosystem ($B) 5.2 0.0 0.0 5.2

Total $B 6.8 4.8 4.2 15.8

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



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 www.arcweb.com/Research/IndustryTerms/

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 Maintain & Improve MAC Main Automation Contractor MRO 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

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