Asset Lifecycle Managing Information Handover PDF

ARC STRATEGIES
By Sid Snitkin
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
Create Physical Assets that are

Ready to Operate
Plan
Design
Procure
Build
Operate &
Maintain
Handover
Collaboration
Plan
Design
Procure
Build
Create an APM Organization that is

Operationally Ready
Successful Handovers Require PPM-APM Collaboration
D&B Information
Plan
Design
Procure
D&B
Details
Build
Handover
Operate &
Maintain
Functional
Design
Procedures
Commercial
Status
History
Process
Specs
Process
Models
Process Calcs
Flow Diags
Equip Calcs
Equip Specs
Func Designs
Process
Design
P&ID
Equip Layout,
Design,
BOMs
System
Detail Design
MRO BOMs
Descriptions
of Operation
Operating
Insp & Maint
Certification
Reqs
Lockout &
Safety Reqs
Financial Analysis
CAPEX
Depreciation
OPEX
Purchasing
Records
Warranty &
Repair Records
O&M Service
Agreements
Project & Site

Procurement
Operational
Status
MRO
Inventory
Training
Operating
History
Maint History
Inspection
Records
Incident
Reports
People
Certifications
Reference Data
Activity Records
O&M Data
Plan
Design
Procure
Build
O&M Information
Information Handover Has Many Data Flows
2 Copyright ARC Advisory Group ARCweb.com
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.
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
Leading owner/operators appreciate the critical

relationship between information and ALM performance and have made substantial investments
in information management solutions for project
and asset management.
Yet many continue to
because workers dont have access to the
lose millions of dollars each year because their
information they need to do their work
workers do not have access to the information
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.
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 enormous, 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.
See ARC August 2009 Strategy Report - Asset Lifecycle Performance Management: Managing Performance Across the Asset Lifecycle
Copyright ARC Advisory Group ARCweb.com 3
What Is Handover?
Handover is a major event in every assets lifetime. In the context of ARCs
model for Asset Lifecycle Management (ALM), it is the time when responsibility for an asset is formally passed from
the Project Performance Management (PPM)
Project
Performance
Management
(PPM)
Handover
Asset
Performance
Management
(APM)
group to those responsible for Asset Performance Management (APM).

Achieving Handover implies that that all
Modification
Requests
Funded
Projects
Asset & Project

Portfolio
Management
(APPM)
New
Facility
Requests
parties agree that the physical asset is complete, 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
ARC Model for Asset Lifecycle Management
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 requires 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
Physical
Human
project scope and assess project performance.
Creating an
operationally ready organization may be an APM responsibility, but it has to be included in every project plan. It requires
Virtual
extensive collaboration between APM and PPM organizations

and recognizing that this is part of the critical path to Handover is the only way to ensure that everyones efforts are
Capital Assets Are More

Than Physical
coordinated and synchronized.
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
Create Physical Assets that are

Ready to Operate
Plan
Design
Procure
Build
equal prerequisites for HandovOperate &

Maintain
Handover
Collaboration
Plan
Design
Procure
While they clearly address different aspects of an operating
Build
facility, both paths focus on

creating a new asset. And the
Create an APM Organization that is

Operationally Ready
major steps they follow are con-
Everyone Has to Prepare for Handover
er.
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 subsequent 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 outsourcing, level of automation, role of ALM ecosystem partners, etc.
Design the plan is elaborated in this stage to produce a detailed specification 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 procurement 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
maintenance strategies with BOMs for the enabling materials, tools, and
technology.
Physical Assets
Plan
Design
Procure
Build
Organizational Assets
Review Scope/Goals,
Review Scope/Goals,
Conceptual Design - Processes and

Facilities
Conceptual Design - O&M People,

Processes, and Technologies
Establish Budgets/Schedules
Establish Budgets/Schedules
Select Equipment
Select People, Technologies
Detail Design Systems,

Structures, Piping, Electrical, etc.
Detail Design Processes,

Responsibilities, Practices, etc.
Establish Installation Contracts
Establish Service Contracts
Procure Equipment, Systems,

Construction Materials
Procure IT Hardware and Software
Clear Site, Build Structures
Load Systems with Required Data
Install Equipment and Systems
Train People
Commission and Validate

Performance
Obtain Approval for all Procedures,

Get all Permits
Procure MRO Materials and Special

Tools
Project Activities Leading to Operational Readiness
Procure this stage focuses on acquiring all materials and services identified in the design stage. It involves soliciting bids from acceptable
suppliers, evaluating offerings, awarding contracts and issuing purchase 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 contracts 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 facilitys 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 requires 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
equipment, and testing the software against pre-defined scripts to validate that it properly supports O&M processes. Training O&M people is
a second major effort in this phase and includes safety and environmental, 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 different. 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
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:
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.
The color
coding in the figure at the start of this section at-
the PPM organization should manage

all activities involved in developing
the physical assets;
tempts to capture this division of responsibilities.
the APM organization has to assume

this responsibility for the
organizational portion of the asset
investment.
for creating an operationally ready organization
Saying that the APM organization is responsible

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 preparing the APM organization is the high level of interdependency between the
two paths. The APM organization completely depends on the PPM organization 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 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 effectively and efficiently operate and maintain such facilities. Not surprisingly,
Information handover has many
challenges.
Some limit the effectiveness, resulting in
problems such as overlooked information
and late transfer of information. These
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.
delay startup and limit performance of
Information handover has many challenges.
operating assets.
Some limit the effectiveness of the effort: critical

information needed for O&M is overlooked be-
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
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 organization; etc.
Other challenges make the
automate electronic exchanges and
process inefficient and costly: the sheer volume of
quality checks.
information makes it difficult to ensure that everything 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. Organizations that ignore this will likely find themselves overwhelmed with
information they dont 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 spectrum.
Some is reference material that informs the organization about
functional capabilities of the facility, the design of the equipment and related 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 commercial records of purchases and contracts, equipment warranties, etc.;
histories of how the facility

was
operated
tained;
and
and
main-
asset
status
information collected from

real-time sensors or through
Functional
Design
Procedures
Commercial
Status
History
Process
Specs
Process
Models
Process Calcs
Flow Diags
Equip Calcs
Equip Specs
Func Designs
Process
Design
P&ID
Equip Layout,
Design,
BOMs
System
Detail Design
MRO BOMs
Descriptions
of Operation
Operating
Insp & Maint
Certification
Reqs
Lockout &
Safety Reqs
Financial Analysis
CAPEX
Depreciation
OPEX
Purchasing
Records
Warranty &
Repair Records
O&M Service
Agreements
Project & Site

Procurement
Operational
Status
MRO
Inventory
Training
Operating
History
Maint History
Inspection
Records
Incident
Reports
People
Certifications
Reference Data
Activity Records
O&M Requires a Lot of Information
periodic inspections.
Some
of the commercial information originates during the

project, but reference data is
the primary focus for information handover.
While it includes many details
about
the
physical
assets, reference data is not simply the information used to build the facility. Most of the information used in building the facility is not needed for
the day-to-day O&M (e.g., you dont 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 dont 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 information, 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 inkind) and every asset will eventually experience modifications and upgrades that require design & build details (e.g., adding an addition to your
home). The difference is simply one of timing and priority during the hectic handover process and the owner/operators options for managing this
information after Handover.
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 handover processes recognize these needs and ensure that information is
exchanged in a timely and
D&B Information
Plan
Design
Procure
efficient manner throughout
D&B
Details
Build
Handover
the project.
Operate &
Maintain
Functional
Design
Procedures
Commercial
Status
History
Process
Specs
Process
Models
Process Calcs
Flow Diags
Equip Calcs
Equip Specs
Func Designs
Process
Design
P&ID
Equip Layout,
Design,
BOMs
System
Detail Design
MRO BOMs
Descriptions
of Operation
Operating
Insp & Maint
Certification
Reqs
Lockout &
Safety Reqs
Financial Analysis
CAPEX
Depreciation
OPEX
Purchasing
Records
Warranty &
Repair Records
O&M Service
Agreements
Project & Site

Procurement
Operational
Status
MRO
Inventory
Training
Operating
History
Maint History
Inspection
Records
Incident
Reports
People
Certifications
Reference Data
Activity Records
Timing
pend upon the information

is used in the APM organizations
Design
de-
being transferred and how it
O&M Data
Plan
requirements
Procure
Build
preparation
Handover.
for
ARCs research
indicates that the following

O&M Information
three
categories
provide
good structure for analyzing

Information Handover Data Flows
the
required
information
flows:
D&B Information the information created by the PPM organization

during the project. This includes everything needed to design, manufacture, 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 populate 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.
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 asset value chain responsible for manufacturD&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.
ing/fabricating equipment and constructing the

facility. If managed properly, it is updated by
all these parties to reflect any changes and deviations
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 becomes 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, regulatory compliance, and incident analysis, and as the basis for designing facility
modifications and upgrades. Detailed design information can be transferred 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
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-
O&M Data is different from D&B
sume responsibility for collecting certain parts
information in terms of its scope and focus.
of this information, particularly vendor informa-
O&M Data is information about the physical
tion.
assets that is needed for its use and care,

such as details about its internal structure,
consumables and parts, operating
O&M Data differs from D&B Information in
instructions, maintenance instructions, etc.
terms of its scope and focus. D&B Information

is needed to create and build the physical assets
and provides details about an assets 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
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.
Material Safety Data Sheets and other environmental
and
safety
information
that
operators, inspectors, maintenance technicians, etc., might need

Some of this information may be used in its origi-
Handover of O&M Data packages can
nal form for O&M, some may be transformed to
impact the projects critical path to
other formats for distribution to various O&M
operational readiness, so they need to be
systems, and some may only be used to create
identified as unique activities in the

overall project schedule.
other, more specific information for operators,

technicians, and others. Regardless of the ulti-
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 execute 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, individual 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 projects 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 vaO&M Information is the information output
of the preparatory work done by the APM
organization prior to handover.
riety of forms (documents, spreadsheet, image

files, database data, etc.) and has to be loaded
into a variety of databases to enable the organizations various O&M solutions.
To ensure a
To ensure a smooth transition and rapid
smooth transition and rapid generation of bene-
production of benefits from the investment,
fits from the investment, this information has to
this information has to be complete and
be complete and fully embedded into O&M
fully embedded into O&M workflows and
workflows and solutions prior to the handover
solutions prior to the handover event.
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, warranties and service agreements, certification requirements, permit and
work clearance requirements, etc.
Material masters and supplier data bases for direct and MRO materials
fully initialized in the facilitys procurement software
Operating, inspection and maintenance procedures
The APM organization develops the O&M Information, so there is no formal 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, acquire 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 significantly limits the benefits the facility ultimately generates.
The Situation for Most Organizations

Everyone involved with PPM understands D&B Information and appreciates 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 organizations support the effort required to make D&B Information handover
complete and accurate.
Everyone involved with PPM understands
Unfortunately, the same cannot be said for the
D&B Information and appreciates the
phased exchange of information needed to sup-
importance of this valuable asset.
port the APM organizations efforts to prepare for
Despite variations in the parties involved
handover. D&B personnel are not very familiar
in PPM, D&B Information handovers are
with O&M, so they dont understand what in-
generally managed well.

Unfortunately, the same cannot be said
for the phased exchange of O&M Data
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
needed by the APM organization to
top level ALM managers, who frequently come
prepare for Handover. Poor preparation
from a PPM background, share this attitude and
of APM groups still results in many
this contributes to poor preparation of APM
startup problems and asset performance
groups and the resulting startup problems which
suffers throughout the life of the asset.
plague many asset investments.
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 impact 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 extends the
The introduction of external organizations into

information handover complicates its manage-
scope of the challenge from the
ment. It extends the scope of the challenge from
development of a good set of internal
the development of a good set of internal
processes for a few major events to the
processes for a few major events to the ongoing
ongoing governance of information
governance of information handovers across a
handover across a multitude of contracts.
multitude of contracts.
Key Players in the Owner/Operator ALM Ecosystem

An owner/operators ALM ecosystem consists of all of the third-party organizations 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 information handover:
EPC Contractors, (Engineering, Procurement, and Construction), provide a full range of design & build services including conceptual
design, detail design, procurement, site management, and project management.
EPCs
Owner/Operator
Project
Performance
Management
(Design & Build)
Handover
Operation
Service
Providers
can include everything from

stallation
(Operate & Maintain)
ASSET LIFEC YC LE I N FO R MATI O N MAN AGEMEN T
vary from project to project, but

conceptual design through in-
Asset
Performance
Management
Equip
Vendors
EPC responsibilities
and
handover
complete facilities.
Maintenance
Service
Providers
of
EPC con-
tracts can vary from simple time

and material (T&M) agreements
to billion dollar lump sum
The ALM Ecosystem
turnkey (LSTK) contracts that
encompass all of the work required to convert an owner/operators requirements 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 assume 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 facility.
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 Handover. Regardless of their role, automation companies are generally
responsible for providing all information about the facilitys sensors, actuators and control equipment.
O&M Service Providers - Some owner/operators also outsource major

APM responsibilities to ALM ecosystem partners. Oil & gas exploration 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 investments 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 performance-based agreements for complete facilities.
Like internal APM
resources, O&M service providers require extensive information to ensure 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.
Managing Information Handover across the ALM

Ecosystem
Given their impact on information handover, contracts with ALM ecosystem partners have to include a clear definition of each partys information
handover responsibilities. For contracts with parties supporting the design
& build of the facility, the focus should be on what the owner/operator exSmart owner/operators will ensure that
their information handover strategies
include the development of contracts that
pects from the contractor. For contracts with parties who support the operation & maintenance of
the facility, the focus should be on what the con-
leverage external parties to ease their
tractor expects from the owner/operator.
own information handover efforts and
then the owner/operators responsibility to en-
simplify coordination of information flows

between third parties.
sure
that
all
contractual
agreements
It is
are
coordinated and aligned to support these needs.
In developing these contracts, smart owner/operators will also consider

how they can leverage each contractors 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 Information. This might ease the burden on the owner/operators 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 handover. 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.
D&B Info
O&M Data
O&M Info
Total
O/OPPM ($B)
1.6
0.0
0.0
1.6
O/O-APM ($B)
0.0
4.8
4.2
9.0
O/OTotal ($B)
1.6
4.8
4.2
10.6
Ecosystem ($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/OTotal (%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
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 lifetime 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 CIOs agenda in every asset-intensive organization.
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
IT
ALIM
Asset Lifecycle Information
LSTK Lump Sum Turnkey
Information Technology
Management
M&I
Maintain & Improve
ALM
Asset Lifecycle Management
MAC
Main Automation Contractor
APM
Asset Performance Management
MRO
Maintenance, Repair, and
APPM
Asset and Project Portfolio

Management
BOM
Operations
NIST National Institute of Standards
Bill of Materials
and Technology
CAPEX Capital Expenditures
O&M
Operations & Maintenance
D&B
Design & Build
O/O
Owner/Operator
EAM
Enterprise Asset Management
OPEX Operations Expenditure
EPC
Engineering, Procurement,
PIM
Construction
PM
Preventive Maintenance
PPM
Project Performance
HAZOP Hazard and Operability

HVAC
Heating, Ventilation, Air

Conditioning
Project Information Management
Management
T&M
Time and Material
Founded in 1986, ARC Advisory Group is the leading research and advisory
firm for industry. Our coverage of technology from business systems to product and asset lifecycle management, supply chain management, operations
management, and automation systems makes us the go-to firm for business
and IT executives around the world. For the complex business issues facing
organizations today, our analysts have the industry knowledge and first-hand
experience to help our clients find the best answers.
ARC Strategies is published monthly by ARC. All information in this report is
proprietary to and copyrighted by ARC. No part of it may be reproduced without prior permission from ARC.
You can take advantage of ARC's extensive ongoing research plus experience
of our staff members through our Advisory Services. ARCs Advisory Services
are specifically designed for executives responsible for developing strategies
and directions for their organizations. For membership information, please
call, fax, or write to:
ARC Advisory Group, Three Allied Drive, Dedham, MA 02026 USA
Tel: 781-471-1000, Fax: 781-471-1100, Email: info@arcweb.com
Visit our web pages at www.arcweb.com
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ARC STRATEGIES

Asset Lifecycle Information Management

Executive Overview .................................................................... 3

VISION, EXPERIENCE, ANSWERS FOR INDUSTRY

ARC Strategies April 2010

Create Physical Assets that are

Create an APM Organization that is

Successful Handovers Require PPM-APM Collaboration

Project & Site

Information Handover Has Many Data Flows

2 Copyright ARC Advisory Group ARCweb.com

ARC Strategies April 2010

Leading owner/operators appreciate the critical

Yet many continue to

because workers dont have access to the

lose millions of dollars each year because their

information they need to do their work

workers do not have access to the information

safely, efficiently, and effectively.

they need to do their work safely, efficiently, and

Copyright ARC Advisory Group ARCweb.com 3

ARC Strategies April 2010

group to those responsible for Asset Performance Management (APM).

Asset & Project

ARC Model for Asset Lifecycle Management

Ready for operation is certainly a major accomplishment, but it does not

project scope and assess project performance.

extensive collaboration between APM and PPM organizations

Capital Assets Are More

coordinated and synchronized.

4 Copyright ARC Advisory Group ARCweb.com

ARC Strategies April 2010

Successful Handovers Require

Create Physical Assets that are

equal prerequisites for HandovOperate &

While they clearly address different aspects of an operating

facility, both paths focus on

Create an APM Organization that is

major steps they follow are con-

Everyone Has to Prepare for Handover

ceptually quite similar:

people/processes/technology that will be used to implement these

Copyright ARC Advisory Group ARCweb.com 5

ARC Strategies April 2010

Conceptual Design - Processes and

Conceptual Design - O&M People,

Select People, Technologies

Detail Design Systems,

Detail Design Processes,

Establish Installation Contracts

Establish Service Contracts

Procure Equipment, Systems,

Procure IT Hardware and Software

Clear Site, Build Structures

Load Systems with Required Data

Install Equipment and Systems

Commission and Validate

Obtain Approval for all Procedures,

Procure MRO Materials and Special

Project Activities Leading to Operational Readiness

Build - this is stage where everything is assembled, commissioned and

involve fewer people, analogous activities occur with respect to the IT

6 Copyright ARC Advisory Group ARCweb.com