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
Plan Design Procure Build Handover Operate & Maintain
Plan Design Procure Build
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
ARC Strategies • April 2010
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
ARC Strategies • April 2010
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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
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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
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
ARC Strategies • April 2010
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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
ARC Strategies • April 2010
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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.
ARC Strategies • April 2010
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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.;
ARC Strategies • April 2010
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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
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
ARC Strategies • April 2010
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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
Plan Design Procure Build Handover Operate & Maintain
Plan Design Procure Build
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
ARC Strategies • April 2010
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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.
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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-
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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.
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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.
ARC Strategies • April 2010
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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
ARC Strategies • April 2010
16 • Copyright © ARC Advisory Group • ARCweb.com
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.
ARC Strategies • April 2010
Copyright © ARC Advisory Group • ARCweb.com • 17
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.
ARC Strategies • April 2010
18 • Copyright © ARC Advisory Group • ARCweb.com
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
ARC Strategies • April 2010
Copyright © ARC Advisory Group • ARCweb.com • 19
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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