Earlier this week, Paul North, Head of Solutions at AssetFuture presented at the Asset Management Council’s weekly webinar series #amtues on Establishing a ‘New Normal’. This was the second of a 2 part series on where we might end up as restrictions start to ease on movement. Paul discussed the changing landscape, some easy to follow steps for getting your asset portfolio ready for the future, and some potential challenges to look out for.
The Acceleration of Existing Plans
No matter where you are, there has been a significant impact on the built environment during the lockdown and social distancing caused by COVID-19. In many city centres, there has been a fundamental change in infrastructure. Glasgow city centre has repurposed car parking spaces to be cycle paths and pedestrian walkways, this re-greening of areas accelerating a different model of human interaction with the built environment. For many cities, this is embraced as an opportunity to reduce emissions and speed up the longer term views and plans on liveability. We are also seeing vast changes across all industries in digital transformation where accelerating existing plans has now become a massive priority.
Building Usage - the dichotomy
Last week, as an IKEA store reopened, there were unbelievable scenes where people queued to get into the store while adhering to social distancing guidelines, transforming an entire carpark into an enormous queue.
We are seeing the use of buildings in a really unusual way, and until we have eliminated or controlled COVID-19, we are going to see a shifting relationship with buildings and people.
Many of us are working from home, so we current don’t need our workplace buildings, but as we return to work, and in complying with social distancing guidelines, we may in fact need more space for workers to safely operate.
An instability in revenue coupled with an uncertainty in how to plan for your assets, the future grows confusing, especially with all the mixed predictions on what the ‘next normal’ may look like.
We also need to address the psychological effect on the people queueing up to enter this facility - would you want to queue up outside in winter, potentially in the rain, knowing that you are entering an enclosed environment with a higher risk factor of catching COVID-19? This human to building relationship has fundamentally changed, and we need to understand what this might mean for the use of our buildings in the future. This also obviously affects the strategies we deploy in the upkeep of the building - the degradation and how we can monetise it. All of these decisions we make will be driven by the customer.
Recently, two traditional giants of the retail industry, Myer and David Jones were overtaken in value by a relatively new e-commerce retailer, Kogan. The trends point towards the physical environment being constrained for utilisation considerably into the future. Again behaviour has changed in an accelerated manner - demographics who weren’t comfortable with online purchases have been forced into shopping in this way, and now realising how easy it is. We really don’t know if people will go back to the mall shopping experience or carry on as they are online shopping. This of course will affect all factors around accurate and strategic purpose, funding and performance planning.
What are businesses doing?
So apart from encouraging customers to queue all day at IKEA, how are businesses reacting?
One path we have seen is to cease everything apart from critical activity that has a high level of risk associated with it, and/or compliance implications. While details of legislative requirements vary between states, the Building Code of Australia (BCA) requires that fire detection and suppression systems are installed and maintained. So, this work must continue, but beyond that you basically keep the lights on only where necessary.
A second approach is to cut maintenance spend across the board. Although building repairs and maintenance are considered an "essential" service, this may be an attractive short-term option, with staff furloughed. But it could lead to significant issues in the long-term. There are also issues with regard to higher hygiene standards required due to COVID-19, such as the disinfection of high-touch surfaces and ventilation systems. For buildings that are still in use, a higher budget for cleaning services may be required.
The biggest challenge is uncertainty. As Australia emerges from lockdown, the nation could still be forced back into a situation with restricted movement again. There are also businesses that may never reopen, and/or default on rent. With uncertainty around revenue, we all need to prioritise.
Right now, you might be looking at very tactical information and addressing immediate issues as a crisis evolves. A smarter approach is to take a wider view of the longer-term perspective for your business, and how you can re-prioritise your goals to be flexible if circumstances change again.
Industry perspectives
Different industries have been impacted in profoundly different ways. Our parent company, AssetLink works across multiple different industries for soft Facilities Management services such as cleaning. For example airports, where cleaning services are deployed, have seen a major decrease in the amount of cleaning required, mirroring the decrease in utilisation due to shutdown.
In Schools, we have seen the need for more cleaning services than before. This is not due to increased utilisation, but because schools are regarded as highly sensitive areas where we need to protect both young children and teachers.
In the Health space, some hospitals were entirely reconfigured. Not so much in consultation, where telehealth took over much of the non-essential patient-doctor interactions (another example of accelerated digital transformation), but more in capacity in Intensive Care Units. When you change entire floors of a building to perform different functions in a matter of weeks, that also affects the overall strategic use of a portfolio of buildings.
In Tertiary education the profile is different again, as maintenance is considered as essential in this sector. Education has evolved to online learning, and the future revenue streams for international students is uncertain. Repurposing university buildings may become a reality.
For Aged Care, obviously the major risk factor here is the vulnerability of the residents, and the transient nature of the care workers coming into the facilities. The exposure of the residents was very high, as we saw in a care home in NSW where many residents died from exposure to an infected care worker. Although the utilisation didn’t change, the risk profile did. People entering the building with a fever would dramatically change the risk profile - and looking beyond a simple view of Occupational Health & Safety was critical.
Traditional Methodology for Asset Strategy
The traditional viewpoint for Asset Strategy is different from how it is today. Risk was seen as a compliance task, a tick box exercise for items such as operational fire extinguishers, signage for fire exits and clear routes of escape; a baseline investment.
Facilities were designed for maximum leverage; to fit as many people into the facility as possible, which would drive higher revenue. Obviously this isn’t relevant at the moment. Looking at the risk profile we have had to drastically change the way we operate within the buildings. We would then sweat the assets as much as possible and ensure cost suppression for optimised margin.
It is clear that these attributes are no longer the drivers of how we would use a building today or even in the future.
Let’s take a look at a formulated approach to getting your facility up and running again.
STEP 1 - TAKE A RISK-BASED APPROACH
Normally for Asset Management we look at Cost, Risk and Performance as the key indicators in that order for leveraging the most out of an asset. With COVID-19, RISK is the much more prevalent factor and flips as the number one priority for utilisation. Risk factors still need to be maintained for anyone to enter your facility - and you may have had a restriction on people entering to perform this work, so the priority is compliance-related activities.
Critical infrastructure is the next aspect to look at and the ways it could be adapted. Electricity, plumbing and all infrastructure will still be needed, but now at social distance. There could be opportunities to close off areas with a lowered utilisation, however we are seeing that there are potentially the same or just slightly lowered FM costs.
Operational fit for purpose is key here - the facility has to be able to be used as intended. The requirements for people to keep social distanced is critical, and if this can’t be done, the building simply isn’t operationally fit for purpose.
For high risk areas such as Aged Care, the presence of biometric testing such as Thermal Imaging solutions are becoming normal, where the areas of entry and exit are now considered high risk. Capturing people with elevated body temperature (EBT) can be an indicator of more serious conditions, and can be picked up by Thermal Imaging. Read more about Thermal Imaging here.
RISK
Critical Infrastructure
Pivoting areas of risk
Operational fit for purpose
As we saw before with the example of people queuing at IKEA, the behaviour of people will be driven by the ability to make those risk factors comfortable for the people using the facility. If we can’t offer this, they won’t enter, we won’t be able to use the building for the original use it was meant for, and they will do what they need to digitally as their new normal.
STEP 2 - STABILISE THE MAINTENANCE BACKLOG
As a result of deferred maintenance you will have an increase in your backlog, and this will affect your Facility Condition Index (FCI). Following on from compliance, you will need to prioritise and stabilise your backlog so your FCI doesn’t move too far away from being able to allow people back into your facility.
If buildings haven’t been able to be maintained during lockdown, there are probably a range of unforeseen maintenance activities that need to be performed. There may be assets that weren’t maintained at the right level and have fallen down a threshold that is acceptable or compliant with your internal standards. Do you know what has missed its scheduled maintenance, do you know what strategies you can tweak to reduce the backlog pressure in the short term?
Risk may have also increased, as you don’t necessarily know where assets are that need attention. If you are not able to create that safe environment, the building’s ability to generate revenue will suffer.
STEP 3 - BENCHMARK FOR FCI
If you have a Facility Condition Index (FCI) that has been adhered to, and deemed appropriate of your facility, it is worthwhile re-examining this. Utilisation may have fallen, revenue might not be as it was, and there may not be the budget to maintain the building to the previously helped standard.
It may take a reconfiguration of the overall FCI of the portfolio to make sure the budgets are now aligned to the risk profile to remain operational. A facility condition assessment is, by its nature, time sensitive and needs to be regularly updated to reflect changing conditions and circumstances.
STEP 4 - RUN SCENARIOS
Your backlog priorities will have changed and you will be able to run a few scenarios on your business expectations. Scenarios could include changes to utilisation by factors, revenue expectations, and how those revenue changes affect the facility as a whole. Reduced utilisation in the airport has the knock on effect of reducing revenue for all retail and food businesses within the airport, and viability of revenue streams for the facility owner.
Changes in utilisation will affect how fast an asset degrades, and this degradation rate will impact the maintenance strategy deployed across the facility. The maintenance strategy keeps the FCI stable to the level that is acceptable for your business.
Running scenarios effectively arms you with knowledge for the ‘what if’. Understanding how to tweak the levers to get the right strategy will be an ongoing activity for a while as the uncertainty continues.
STEP 5 - DOES MY SAMP REFLECT MY “NEW BUSINESS”?
The previous steps will feed directly into your SAMP (Strategic Asset Management Plan). Once you have decided on the maintenance strategy or the investment profile of your facility, that might have ramifications on the building in five, ten or 20 years out from now. If the assets are kept at the bare minimum of maintenance right now, will that mean that the building will need to be demolished rather than refurbished in the future? Replacing an entire building is obviously a major financial commitment, so you may want to make a smaller commitment today to avoid that situation.
The important thing to remember is that the strategy drives the outcome, and the right data will help you do this.
Building the Right Foundation through data
A number of problems will emerge from going through this process. You’ll be running scenarios for changed business models based on utilisation, revenues and your compliance requirements. The first and most critical one will be "can I trust my data?"
This can be the ideal time to review your Data Maturity and look at what you need to do to increase your ability to create clear, evidence-based decision making for your business outcome. High quality data is key to making data-driven decisions. Low quality data, whether it’s inaccurate, outdated or not relevant, has a major ripple effect across an organisation.
Having accurate building data enables asset managers to make evidence-based decisions to restore or replace defective assets, as well as prioritising maintenance projects. Getting accurate data involves mobility solution, the regular transfer of data (real-time where possible) and integrating the systems that store this data. Asset managers who are able to do this will be much better placed in the post-COVID world.
About Paul North
Paul has a degree in Engineering with business management and has worked in some of the largest international technology companies as well as locally grown Australian startups during his career. Drawing on nearly 20 years’ experience, he specialises in software and technology driving high-level business outcomes across both government and private sectors.
As Head of Solutions at AssetFuture, Paul brings a unique perspective to drive value through innovation. By combining business drivers with a vision for commercial viability, he blends technical agility with tangible outcomes.
About AssetFuture
AssetFuture’s technology works behind-the-scenes to make complex decisions simpler. Our software platform integrates data sources including CMMS, EAM, ERP and BI data.
Asset Intelligence is the merging of data, information, and technology to forecast the lifecycle of built assets. Set up performance parameters, forecast lifecycle costs, identify risks and plan alternate scenarios within the platform.
AssetFuture gives you the intelligence to enable robust decision-making, empowering individuals and organisations to achieve outstanding business outcomes.
Watch the webinar at the Asset Management Council