Integrated Buildings, Integrated Services

Buildings are constructed to serve the needs of both occupants and businesses. And while occupants need facilities with a comfortable, safe and healthy environment, businesses need reliable communication and technical equipment to perform their work. To meet the demands of both, an integrated building system served by reliable and economical energy sources is essential.

02/01/2001


Buildings are constructed to serve the needs of both occupants and businesses. And while occupants need facilities with a comfortable, safe and healthy environment, businesses need reliable communication and technical equipment to perform their work. To meet the demands of both, an integrated building system served by reliable and economical energy sources is essential.

A building system may be defined as a group of electromechanical components connected by suitable pathways for the transmission of energy, materials or information. Energy may take any form, from old-fashioned air, water and steam to common streams of gas and electricity. If a system is to provide optimum performance, its individual components should be well matched, and their contributions to overall system performance should be clearly defined by the designer and builder, and understood by the operator. An integrated-systems approach gives consideration to the overall objectives rather than the individual elements, components and subsystems.

Traditionally, mechanical and electrical coordination in buildings is a matter that only affects mechanical and electrical systems. In the deregulated utilities market, integration of energy, diverse technologies such as computer engineering and wired and wireless networks play important roles in the building systems and the maintenance of a controlled environment. Building systems need an integrated approach to maximize the interoperability of all systems.

Until recently, however, there has been no single provider of consolidated services including design, installation, operation and maintenance of building-system elements, though the need for this service has been evident.

Comprehensive capabilities

A truly integrated building-services firm combines financial, energy and technical services to offer business owners convenience, efficiency-and, hopefully, peace of mind. It can give owners one point of contact, one bill and one price for multiple coordinated services. Integrated services require focus on real issues of risks, reliability, availability and failure probability of building systems. An integrated building-services program should be structured to serve the following areas:

  • Integrated building of mechanical and electrical systems.

 

  • Utilization of thermal storage where economical.

 

  • Financial guarantee of power quality and reliability.

 

  • Interoperable building-automation, access-control and safety systems.

 

  • Energy-demand monitoring and efficiency improvements.

 

  • Management of electricity and natural gas procurement.

 

  • Economical long-term electricity and natural gas supplies.

 

  • Long-term maintenance and support of critical systems.

 

  • On- and off-balance-sheet financing of construction and other investments.

As an assurance to power reliability, the business owner should purchase a maintenance plan from the service provider to mitigate risk. This provides an incentive to the integrated building-services provider and price guarantees and peace of mind to owners.

Why an integrated approach?

The computerization and integration of building-system technologies in the information age have changed the way humans perceive their habitat. Figure 1 on page 21 illustrates the business, health, energy, atmosphere and engineering issues related to a building and its environment. Good performance in these areas is important because today's information-oriented businesses demand quarterly profits and, in turn, optimum efficiency and maximum reliability of building-support systems at a minimal cost to the owner.

The complexity of these building systems contrasts sharply with the relative simplicity of the basic mechanisms: movement of air and water molecules and the driving electrons. Reliable building-support systems are important because of the high costs associated with system shutdowns.

Companies face tremendous pressure to reduce utility costs, improve efficiencies, provide a safe and healthy atmosphere for their workers and meet U.S. Environmental Protection Agency requirements. To achieve all of this, an integrated-systems approach to a building's operation is very effective. Optimally, integrated systems will share information through networks, reducing system size and complexity and allowing for peak performance. In addition, the modern ease of electronic information exchange allows the engineer to create buildings that offer complete power, environmental, safety and illumination control, leading to energy-demand monitoring and reduction.

Building-services reliability is directly linked to a business' financial edge, and is usually measured in terms of time between failures for old systems and time before failure for new systems. In the volatile deregulated-utility environment, building owners, financiers and design-builders are seeking to spot problem areas and achieve the most effective life-cycle cost solutions.

Traditional risk management

In the regulated-utility world, there is much uncertainty and little choice. Similarly, the states that now have deregulated utilities are experiencing unexpected disturbances, while customers still have limited choice when facing utility-related operational risks. This illustrates that in the real world, uncertainties continue to exist and represent a source of risk to businesses.

Traditionally, businesses have struggled to manage, by themselves, the primary risks related to facility design and operation:

Energy. Business owners purchase energy inefficiently. They either rely on a trusted supplier to provide them with the most appropriate product and price, or they-or their consultant-develop what they feel to be the best product and solicit bids. Even reputable suppliers act partially on their own behalf, balancing margin with customer savings. Meanwhile, soliciting bids provides the best price for a selected product. However, the bid process delays savings, does not protect from market volatility and eliminates the potential for identifying a product that will maximize savings. Building owners generally handle price uncertainty by including an escalation factor in their energy budget, but with the deregulated market's volatility, the escalation factor can be off-mark and impact profitability.

Business owners also place a low priority on energy-conservation investments. Typically, businesses give priority to production-equipment capital improvements over energy-efficiency-based projects. They often overlook these projects because a lack of in-house expertise produces a perception of risk in energy-related improvements. At best, building owners work with suppliers to install energy-saving equipment on a shared-savings or performance-contracting basis. These contracts require the owner to evaluate and audit the supplier's claims. Ultimately, the building owner has the risk on payback investment. Fully integrated services, on the other hand, offer the opportunity to invest, take ownership of risk and implement cost-effective energy-efficiency improvements.

Power quality. Mission-critical facility owners are willing to invest the time and money to hire consultants to engineer outage protection through the installation of power-quality products like uninterruptible power supplies, fast transfer switches and back-up generation systems. By installing these types of systems, the owner replaces power-quality risk with the direct cost of capital equipment. Alternatively, building owners can purchase outrageously priced power-quality insurance-when it is available-to cover direct losses associated with an outage. However, outage insurance does not cover the total economic cost of interruptions, and the ultimate cost of outages, unfilled orders and dissatisfied end-users is not covered by the policy.

Mechanical breakdown. Building owners can invest capital to install redundant equipment to address equipment-performance risks. However, installing extra equipment ties up capital that could otherwise be contributing to earnings.

Building owners can implement their own maintenance programs; however, implementing preventive-maintenance (PM) programs requires training and can still leave the building owner susceptible to unexpected repairs. Merely outsourcing PM services does not protect a company from unexpected repairs, and PM-only agreements are often neither accountable for a level of performance nor financially motivated to perform.

Cash flow. Business owners address building-system operation cash-flow uncertainties by keeping additional cash on hand or arranging credit lines. Either option costs the end-user money that a known cash flow would eliminate.

Looking for a better way

Whether they know it or not, businesses are clearly seeking integrated building services and looking to transfer the risk of building services and operation to design-builders, energy-service companies, utilities or an entity that offers the right terms. This extends the management of traditional design, construction and operation risk-of-service projects one step further. While building owners see risks as significant, an integrated building-services provider can control and minimize them through the integration of mechanical, technological and energy products and services.

Building and business owners already transfer general risks through the purchase of insurance and financial products, so they are familiar with the concept. If the building owner can transfer the financial risk associated with a building system's energy supply, performance and operation, it would similarly produce a win-win situation for the buyer and seller of integrated building services. The transferring company can run its business and focus on its core competencies without devoting significant time, capital or other resources to managing building-system and utility services. The integrated building-services provider, on the other hand, can manage each specific risk economically, because it manages these risks on behalf of a diversified portfolio of clients.

Additional owner benefits

Besides mitigating risks, business owners derive additional benefits from an integrated-service approach. These include:

Minimized administration. To obtain nonintegrated services, businesses must spend time away from their core activities to manage relationships with multiple suppliers in order to acquire the same energy, design, construction and operation services that are embedded in an integrated service package. Items that would have normally been acquired and administered separately under traditional business practices can be bundled together, such as:

  • Electricity and natural gas commodities.

 

  • Electrical maintenance services.

 

  • Mechanical maintenance services.

 

  • Electrical/mechanical system retrofits or build-ups.

 

  • Building-automation upgrades and implementation.

 

  • Power monitoring, analysis and solution.

 

  • Technology and energy retrofits.

The primary administrative value is the purchase of a single performance guarantee, not a mixed bag of goods and services.

Maximized equipment and system value. Equipment value reduces to negative when it breaks down or runs inefficiently, and value is lost when equipment must be replaced or repaired prematurely. As companies continue to ask employees to do more with less, equipment maintenance is increasingly neglected. The integrated building-services provider, due to its cost interest, maintains equipment reliability and operability through comprehensive PM because the risks and subsequent costs of breakdown are borne by a service guarantee.

Control expenditures. Whether unexpected maintenance or energy-related expenditures, the average business does not have the resources to adequately address major building-system costs. As a result, clients often leave these costs to chance. Integrated building services address this by fixing the cost over the agreement term; the fixed monthly cost improves budgeting and allows clients to lock in profits from long-term contracts with their own clients.

Building a different approach

Until now, building owners and developers have not been given the option of choosing a truly integrated building-services provider. This project-delivery and building-maintenance method is only recently being fully explored, but the benefits for the client are undeniable.

With the goals of both simplifying service relationships and offering more comprehensive services, energy-services companies and engineering firms alike are beginning to explore and implement their plans to provide power reliability, risk management, fixed-expense operations, maintenance, testing, integration, service, energy optimization and expenditure control-all in one package-to their customers.

In the Midwest, developers and owners of high-rise buildings and complexes are looking at integrated building services with interest. If delivered with sound in-house expertise, they make good business sense.





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