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Transcript of Ivan Graff, PE, CFM, CCE, LEED AP Office of Management Office of Engineering and Construction...
Defered Maintenance Reversing the Trend
Ivan Graff, PE, CFM, CCE, LEED APOffice of Management
Office of Engineering and Construction Management
Look at the notes too.
2011 FIMS / RE Workshop 2
Why deferred maintenance matters Understanding terminology and
requirements Current trends (2007 – 2010) Finding deferred maintenance contentment Forthcoming changes
June 14, 2011
Agenda
3
What’s Our Motivation? Executive Order 13327 Federal Real
Property Asset Management◦ Sec. 4(b): “The [Federal Real Property] Council
shall consider, as appropriate, the following performance measures . . . (i) life-cycle cost estimations associated with the
agency‘s prioritized actions . . . (iv) the operating, maintenance, and security costs
at Federal properties, including but not limited to the costs of utility services at unoccupied properties”
June 14, 20112011 FIMS / RE Workshop
4
What’s Our Motivation? 41 CFR 102-84 Annual Real Property Inventories
◦ Establishes the reporting requirement and its applicability
Federal Real Property Profile Guidance for Real Property Inventory Reporting◦ Based on EO 13327 and 41 CFR 102-84◦ Updated annually◦ Defines reporting element “Repair Needs”
Repair Needs: the amount necessary to ensure that a constructed asset is restored to a condition substantially equivalent to the originally intended and designed capacity, efficiency, orcapability.
June 14, 20112011 FIMS / RE Workshop
2011 FIMS / RE Workshop 5June 14, 2011
EO 13514 and Maintenance
Section 2 Goals for Agencies(g) implement high performance sustainable Federal building design, construction, operation and management, maintenance, and deconstruction including by:
(v) managing existing building systems to reduce the consumption of energy, water, and materials, and identifying alternatives to renovation that reduce existing assets’ deferred maintenance costs;
EntireLifecycle
2011 FIMS / RE Workshop 6June 14, 2011
“Why bother maintaining
assets?”
Answer: to sustain the mission
“[M]aintenance will be used to ensure real property asset availability for planned use . . .” – O430.1B § 4(d)(5)
Perception: “Deferred maintenance
makes us look irresponsible”
2011 FIMS / RE Workshop 7
O 430.1B, § 4(d)(1) states:
◦ The maintenance program will include: Condition assessments of real property assets, A work control system, Management of deferred maintenance, A method to prioritize maintenance projects, and Cost accounting systems to budget and track
maintenance expenditures.
June 14, 2011
Deferred Maintenance in O 430.1B
8
What’s Our Motivation? DOE O 430.1B Real Property Asset
Management◦ Section 4(d) Maintenance and Recapitalization
“Real property assets will be maintained in a manner that promotes operational safety, worker health, environmental protection and compliance, property preservation, and cost-effectiveness while meeting the program missions.”
◦ Section 4(g)(2) Performance Goals and Measures “Asset Condition Index . . . is the Department’s
corporate measure of the condition of its facility assets. The ACI reflects the outcomes of real property maintenance and recapitalization policy, planning, and resource decisions.”
June 14, 20112011 FIMS / RE Workshop
9
Is there still a Problem? GAO now seems
less concerned with condition only because FRPP tracks it.
Condition remains a concern
High Risk since FY 2003.
June 14, 20112011 FIMS / RE Workshop
2011 FIMS / RE Workshop 10June 14, 2011
Where the Data Goes
2011 FIMS / RE Workshop 11
2010 Financial Report of the United States Government
◦See page 77 for property, plant, and equipment value
◦See page 183 for deferred maintenance data June 14, 2011
Where the Data Goes
2011 FIMS / RE Workshop 12June 14, 2011
What is Maintenance and Repair?
Maintenance and repairs are activities directed toward keeping fixed assets in an acceptable condition. Activities include preventive maintenance; replacement of parts, systems, or components; and other activities needed to preserve or maintain the asset.
Maintenance and repairs, as distinguished from capitalimprovements, exclude activities directed towards expanding the capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater than, its current use.
- FASAB SFFAS No.40 (May 11, 2011)
2011 FIMS / RE Workshop 13June 14, 2011
What is Maintenance?
The recurring day-to-day work that is required to maintain and preserve PP&E in a condition suitable for it to be utilized for its designated purpose. It differs from repair in that it is normally worked [SIC] to correct wear and tear before major repair is required, and it is usually less involved than repair work. - DOE Accounting Handbook
14
What is Maintenance?Day to day work that is required to sustain property in a condition suitable for it to be used for its designated purposes, including preventive, predictive, and corrective maintenance. – DOE O 430.1B
Does NOT include -1. Operations like cleaning, material handling, grounds2. Betterments like upgrades or in-house construction3. Conversions or facility replacements
Does include replaced systems that –4. Conserve energy and water5. Have lower emissions6. Contain renewable components
June 14, 20112011 FIMS / RE Workshop
15
Maintenance Vs. RepairThe restoration or replacement
of a deteriorated item of
PP&E, such that it may be
utilized for its designated purpose.
- DOE Accounting Handbook
The restoration of failed or
malfunctioning equipment, system,
or facility to its intended function or
design condition. Repair does not
result in a significant extension of
the expected useful life.
– DOE O 430.1B
Repair DefinitionsLet’s agree that for
this discussion that a repair is a type of
maintenance
June 14, 20112011 FIMS / RE Workshop
2011 FIMS / RE Workshop 16June 14, 2011
Operations ● Maintenance ● Betterments
Expense TypeTypical of Activities that . . . Examples
Operations Support the use, but do not affect the function or longevity, of systems or assets
CleaningGrounds careSnow removalWaste disposalUtilitiesPest management
Safety equipmentSecurityAudio / visualMaterial handlingFleet managementIT / telecom
Maintenance Impact systems or assetsAND
Occur on a scheduleOR
Address unexpected or impending failures
Periodic or occasional testing and inspectionRoutine repair or replacement of parts including belts and lampsAdjustment; lubrication; painting; or resurfacing
Betterments Upgrade, expand capacity, renew, or introduce, in whole or in part, systems or facilities
Replacing a sliding door with a roll-up doorIncreasing electric service to a buildingConstructing a storage structure for use by occupants in an existing adjacent building
Note: Underlined operations example expenses tracked in FIMS
17
Which is the Asset?Somewhere in
here is my asset
“Record Unit”Which is more valuable?
<
Leaves from the tree
“Retirement Units” “Record Unit”
awaiting new “Retirement Units”
Answer: It’s the Tree!
A bare tree
June 14, 20112011 FIMS / RE Workshop
18
Where Do I Draw the Box? Record Unit
◦ An accounting convenience: You choose but . . . choose wisely Hint: Think real property assets
Retirement Unit◦ A property record unit may be composed of one or more
retirement units.◦ Costs to extend the life of or replace the retirement
unit shall be capitalized. ◦ All other costs related to the retirement unit shall be
expensed.
June 14, 20112011 FIMS / RE Workshop
19
Maintenance Becomes Deferred When … FASAB SFFAS No.40
◦ “[It] was not performed when it should have been or was scheduled to be performed but was put off or rescheduled for a future period.”
◦ Reporting entities receive “maximum flexibility
◦ Not audited
DOE O 430.1B◦ “[It] was not performed when it should have been or was
scheduled to be and which, therefore, is put off or delayed beyond its optimum period.”
◦ DOE expects repeatable and logical maintenance program
◦ Accurate (FRPP) and verifiable (annual validation)
June 14, 20112011 FIMS / RE Workshop
20
Optimum Period “That time in the life cycle of an asset when
maintenance actions should be accomplished to preserve and maximize the useful life of the asset. The determination is based on engineering/maintenance analysis and is independent of funding availability or other resource implications.”
You have a narrow band of time to catch
the train
The prudent manager effectively predicts the
scheduleJune 14, 20112011 FIMS / RE Workshop
21
Do I Ever Use Service Life? Condition assessments tell you when you have reached the
optimum period.
Inspections must occur at least once every five years.
Increasing the frequency thoroughness of inspections as the item approaches its “service life” increases the likelihood that you will catch the train.
DOE Accounting Handbook Chapter 10
June 14, 20112011 FIMS / RE Workshop
22
Do I Have to Assess all Units?
DOE does not accept sampling methods for estimating deferred maintenance (FASAB: “life-cycle cost analysis”). Why?◦ Do not assume a future condition.◦ One is rarely representative of all.◦ Seeing is believing – DOE O 430.1B requires
technical evaluation and reporting of real property condition by professionals.
Models with condition-based inputs will provide a better target than text book service lives.
June 14, 20112011 FIMS / RE Workshop
2011 FIMS / RE Workshop 23June 14, 2011
When do I Have a Problem?
24
Identify the deficiency and determine optimum period.◦ Many deficiencies are not at their optimum
period!
No need to report a deficiency that will not reach its optimum period for correction.
However, deferring specific classes of deficiencies (for example painting)seems short sighted.
If We Won’t Fix It, Is It Deferred?
June 14, 20112011 FIMS / RE Workshop
2011 FIMS / RE Workshop 25June 14, 2011
If It Is Obsolete, Is It Deferred?
Deferred Maintenance?
A Real Property Record (record unit) No
Components (retirement units) Yes
Does obsolescence have a role in determining optimum period?◦ Yes, especially when failure impacts mission.
Active Classic LimitedObsolet
e Product, parts
and related lifecycle services have been released for sale
Spare parts made and manufacturer support available
Repair services and parts are available through 3rd party
No support or parts available
Failure results in long outages and sub-optimal repair practices
Courtesy of: ABB Inc.
26
When Does Deferred Maintenance Disappear?
We can close deferred maintenance when:◦ The work needed is complete or obviated, ◦ The facility is demolished, or,◦ The facility is permanently transferred
out of DOE or no longer leased
There is no need to zero deferred maintenance on assets ready to be archived◦ Let FIMS do the work for you
Note: if the facility remains, then the extant deferred maintenance follows, and DOE should disclose its maintenance logs to the extent practicable.
June 14, 20112011 FIMS / RE Workshop
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-$1,000,000,000.0
$0.0
$1,000,000,000.0
$2,000,000,000.0
$3,000,000,000.0
$4,000,000,000.0
$5,000,000,000.0
DEPARTMENT OF ENERGY DEFERRED MAINTENANCE TRENDS
Deferred Maintenance Growth Inflation of Existing Deferred Maintenance Reported Deferred Maintenance
Fiscal Years 1998-2010
Trend of real backlog growth turned negative since FY02 - an indication that requiring maintenance funding at industry standard levels and implementing efforts at backlog reduction are yielding results. FY08 spike mainly due to additional utility requirementat Los Alamos.
$222M Increase
$235MIncrease
June 14, 20112011 FIMS / RE Workshop 27
2011 FIMS / RE Workshop 28June 14, 2011
What you are about to see . . .
A whole lot of
charts
Assumptions Owned Operating status Buildings, trailers, and structures Not programmatic structures (3000 series)
1 Operating2 Operational Standby3 Shutdown Pending Transfer6 Operating Pending D&D7 Operating under an Outgrant
Deferred Maintenance: FY 2010
Item “Up” Side “Other” Side
DM increases by $222M from FY 09 . . .
5 of 10 programs reduced DM by $72M
5 of 10 programsincreased DM by $294M
Bottom Line: Reported to CFO a DM total of $4.098B
with 70% in acceptable conditionJune 14, 20112011 FIMS / RE Workshop 29
ACI decreases (0.314%) from FY 09 . . .
Assets with compliant inspection dates increased by 5.5%
DM increased by 5.7%RPV decreased by 1.2%
Joining and leaving the list (FY10 / FY09) . . .
1,968 assets (11%) resolved their DM, recorded as $242M in FY09
1,363 assets (8%) recorded DM of $185M in FY10 where none existed in FY 09
2011 FIMS / RE Workshop 30June 14, 2011
2007 2008 2009 2010$3,000,000,000
$3,500,000,000
$4,000,000,000
$4,500,000,000
$0
$500,000,000
$1,000,000,000
$1,500,000,000
DM vs. AM Over Time
DM AM
DM AM
2011 FIMS / RE Workshop 31June 14, 2011
2007 2008 2009 2010$60,000,000,000
$65,000,000,000
$70,000,000,000
$75,000,000,000
$80,000,000,000
$3,000,000,000
$3,500,000,000
$4,000,000,000
$4,500,000,000
RPV vs. DM Over Time
RV DM
RPV DM
2011 FIMS / RE Workshop 32June 14, 2011
3.00% DOE RPV
2.96%CPI
4.69%CCI
Financial Indices vs.
Average Annual RPV Growth
FY 2007 - 2010
2011 FIMS / RE Workshop 33June 14, 2011
EM12%
NE10%
NNSA65%
SC13%
FY 2010 Deferred Main-tenance
EEEMFELMNENNSANRPARWSC
DM De-creased
18%
No DM Change
53%
DM In-creased
29%
FY 2009 - 2010 Changes to Asset DM
June 14, 20112011 FIMS / RE Workshop
Some DM increased
Some DM decreased
By How Much?
1.00E+00
1.00E+01
1.00E+02
1.00E+03
1.00E+04
1.00E+05
1.00E+06
1.00E+07
1.00E+08
0
200
400
600
800
1,000
1,200
1,400
ΔDM+ (FY 2009 - FY 2010) Histogram
Order of Magnitude Differences (# or less)
Count
of
Valu
es
-1.00E+
07
-1.00E+
06
-1.00E+
05
-1.00E+
04
-1.00E+
03
-1.00E+
02
-1.00E+
01
-1.00E+
00
0100200300400500600700800900
ΔDM- (FY 2009 - FY 2010) Histogram
Order of Magnitude Differences (# or less)
Count
of
Valu
es
June 14, 20112011 FIMS / RE Workshop
2011 FIMS / RE Workshop 36June 14, 2011
2007 2008 2009 2010$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
$3,500,000,000
$4,000,000,000
$4,500,000,000
64% 59% 59% 60%
35%
41% 40%39%
DM by Property Type Over Time
TrailerOSFBuilding
2011 FIMS / RE Workshop 37June 14, 2011
2010
2009
2008
2007
17 19 21 23 25 27 29 31 33
Age by Property Type Over Time
Building OSF Trailer
2011 FIMS / RE Workshop 38June 14, 2011
20
07
20
08
20
09
20
10
20
07
20
08
20
09
20
10
20
07
20
08
20
09
20
10
20
07
20
08
20
09
20
10
20
07
20
08
20
09
20
10
20
07
20
08
20
09
20
10
20
07
20
08
20
09
20
10
0 - 10 11 - 20 21 - 30 31 - 40 41 - 50 51 - 60 61 - 70
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Age Trends by Property Type Over Time
Building OSF Trailer
Age Ranges (Years)
Asset
Count
2011 FIMS / RE Workshop 39June 14, 2011
0 - 10 11 - 20 21 - 30 31 - 40 41 - 50 51 - 60 61 - 70$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
$700,000,000
$800,000,000
$900,000,000
$1,000,000,000
$1,100,000,000
$1,200,000,000
$1,300,000,000
$1,400,000,000
DM by Recorded FY and Asset Age
2007 2008 2009 2010
Age Ranges (Years)
2011 FIMS / RE Workshop 40June 14, 2011
Asset Ct. DM Sum Asset Ct. DM Sum Asset Ct. DM Sum Asset Ct. DM Sum Asset Ct. DM Sum Asset Ct. DM Sum Asset Ct. DM Sum0 - 10 11 - 20 21 - 30 31 - 40 41 - 50 51 - 60 61 - 70
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
34%
7%
42%
72%
55%
82%
36%
53% 58%
85%
56%
70%
43%51%
47%92%
36%
23%
31%
14%
52%
46% 39%
15%
43%
30%
57%49%
Fair Share of DM by Age (Average 2007 - 2010)
Building OSF Trailer
2007 2008 2009 2010 2007 2008 2009 2010
% To-tal As-sets Where DM = 0
0.607035290106268
0.563134160090192
0.530307382935937
0.534992503748126
% 'DM = 0 Where Inspec-tion Date Com-plies
0.484366223553643
0.559659659659661
0.559263271939328
0.6120390090797
45%
49%
53%
57%
61%
Trends for the Most Common DM Value: Zero
June 14, 20112011 FIMS / RE Workshop
2011 FIMS / RE Workshop 42June 14, 2011
2007 2008 2009 20100%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
70% 72% 73% 84%
% of Compliant Inspection Dates
NY
2011 FIMS / RE Workshop 43June 14, 2011
2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010Building OSF Trailer
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
81%81%84%91%
55% 64%64%75%
79%70%66%86%
% of Compliant Inspection Dates
NY
2011 FIMS / RE Workshop 44June 14, 2011
DM Sum Asset Ct. DM Sum Asset Ct. DM Sum Asset Ct.Building OSF Trailer
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
17%10%
Impact of Physical Barriers on DM(FY 2010)
Yes PBPINo PBPINot Used
2011 FIMS / RE Workshop 45June 14, 2011
NYU Medical Center
2011 FIMS / RE Workshop 46June 14, 2011
DM Sum Asset Ct. DM Sum Asset Ct. DM Sum Asset Ct.Building OSF Trailer
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
18% 18%
80%74%34%
16%
4%
3%
13%
29%
9%12%34% 36%
6% 11%
5% 9%
59%
28%
11% 33%
21%12%
DM in Buildings by Usage by Property Type
(FY 2010, Typical)Transportation OSFs
Storage and Industrial OSFs
Storage and Industrial
Service OSFs
Service
R&D
Other OSFs (incl civil)
Distribution OSFs
Communications OSFs
Admin., Housing & Support
2011 FIMS / RE Workshop 47June 14, 2011
2007 2008 2009 2010$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
$3,500,000,000
$4,000,000,000
$4,500,000,000
42% 38% 42%33%
38% 36%34%
34%
20%
27% 24% 34%
DM by Mission Over Time
Mission Critical Mission Dependent, Not CriticalNot Mission Dependent
2011 FIMS / RE Workshop 48June 14, 2011
2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010MC MD NMD
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
74% 68% 74% 89%
86% 89% 88% 90%
53% 62% 60% 75%
% of Compliant Inspection Dates
Y N
2011 FIMS / RE Workshop 49
We have learned to live with deferred maintenance, but . . .
◦ We still conduct condition assessments at least quinquennially,
◦ Even for leased assets when we maintain them,
◦ We seek out the technologies that allow for better inspections,
◦ We focus on mission critical and mission dependent before non-mission dependant,
◦ We wish age were just a number, but
◦ Fully funding maintenance will stabilize backlogs.
June 14, 2011
Finding DM Contentment
2011 FIMS / RE Workshop 50June 14, 2011
2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010MC MD NMC
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
$1,600,000,000
$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
DM, AM and Mission Depedency
DM AM
2011 FIMS / RE Workshop 51
Federal Accounting Standards Advisory
BoardExposure drafts expected on: Measurement and Reporting Recording Impairments
June 14, 2011
2011 FIMS / RE Workshop 52
What’s bothering FASAB?
◦ Not all agencies report DM for General PP&E (that’s real and
personal property) Heritage Assets Stewardship Land
◦ Not distinguishing between active and inactive
◦ Not distinguishing between funded and unfunded DM
Funded M&R for DM –◦ I obligate the
money but I don’t expend it
Unfunded M&R for DM –◦ I need but I
have no money
June 14, 2011
Measurement and Reporting of DM
2011 FIMS / RE Workshop 53
What does FASAB want?
◦ Narrative Summary of agency: Policies for prioritizing maintenance and repair Factors considered in determining acceptable
condition Changes to prior year reporting methods, if any
◦ DM reported by (minimum) Asset category Status
June 14, 2011
Measurement and Reporting of DM
Not by• Critical / non-critical• Low / High Estimates• Funded / Unfunded• Acceptable condition• Ownership
2011 FIMS / RE Workshop 54June 14, 2011
Concept: “Had the money, didn’t spend it”
“Year 1” “Year 2”
2011 FIMS / RE Workshop 55
When the service utility of the asset decreases significantly and unexpectedly
Would accelerate depreciation when◦ Full or partial loss of use occurs◦ NOT when the loss is temporary
What was the asset worth? (choose one)1. Replacement Plant Value2. Carrying value3. Output value –or - Cash flow value
June 14, 2011
Impairment: ED Highlights
2011 FIMS / RE Workshop 56
What would facilities management do?◦ Work with accountants and customers to:
Distinguish between full, partial, permanent and temporary
Select an approach to diminished value
Validate replacement plant value or initial acquisition cost plus improvements & adjustments
Key benefit◦ Institutionalize the separate tracking of
suddenness and degradation or obsolescence
June 14, 2011
Impairment: FM Role & Benefits
2011 FIMS / RE Workshop 57June 14, 2011
On the road to the Nevada National
Security SiteEstablished in 1951
Questions & [email protected]
202-586-8120