“We Can Save You Utility Dollars” — (At the Detriment of…)

A consultant is someone who saves his client almost enough to pay his fee.

Arnold H. Glasow

Graphs, charts, and reports converge on a single project offering — if you purchase this special piece of equipment to replace some 30-year-old monster in the mechanical room, you will save 50% in utilities. The analysis in front of you says you will realize a 25% average annual return on investment which should be a 4-year payback. Just $149,999.99 to purchase. It should be a no-brainer, right?

Ask yourself where is the consultant going to be in 1 year when you are comparing year over year expenses? Where is he or she going to be in 4 years when you are expecting to finally pay back your initial capital investment? What utility cost assumptions were made? What is this latest/greatest equipment going to cost in excess maintenance and repairs? And were the consulting fees figured into the analysis?

I hate to address this topic. I am a consultant. But I have been dead wrong on procurement analyses before. No consultant has a crystal ball, no matter how detailed and impressive the financial analysis may be. We are all trying to put decision together without having all the details. Consultants capitalize on their client’s lack of understanding and lack of data. This usually isn’t done nefariously; it is another bi-product of management practices surrounding “dirty” equipment — properly referred to as fixed investments.

Beyond The “Savings”

I have never had a client not ask the magic question: “How much is this going to save me?” This really is an improper question and the answer is inherently loaded. That forces engineers and consultants to focus solely on the only readily measurable variable — utility consumption. But there are other variables that must be considered. What is the life expectancy of the old versus proposed fixed asset? What is the reliability of the existing asset, along with maintenance and repair costs, versus the maintenance requirements of the proposed? What are the warranties and guarantees that come with the proposed procurement? What is the tax deduction benefit of the proposed asset? Does this replacement provide any redundancy or failover protection? Is this replacement going to be a net benefit or a detriment to the revenue production of the facility?

Therein lies those pesky details again. Some of these questions cannot be answered by the consultant. This is data the client should have accessible. Unfortunately, this information is fragmented. One or two pieces of the data are in the monthly Income reports. Part of the data is in the accounting software’s vendor report — the repair invoices. The labor allotment for maintenance is split between 2 or 3 maintenance engineer’s timecards. The revenue this asset serves is a mixture between the sales department, financial department, and an allocation based on blueprints (more than one asset normally serves an area). The utility consumption for this particular asset is probably not submetered. How many work orders, service calls, repair orders… The list continues.

No Silver Bullet

There is no, one size fits everyone, cure-all for the above data management issue. However, there are platforms that allow the majority of this information to be stored, categorized, and analyzed on a real-time basis. This requires an investment in cloud technology to digitize as much information that is possible for all fixed assets. It must be a one-stop-shop repository. Iron Man has J.A.R.V.I.S. (Just A Rather Very Intelligent System), the engineering department requires an intelligence package to empower them to manage all fixed assets efficiently.

“J.A.R.G.A.S.” (Just A Really Good Asset Solution) can assist all the departments, especially the maintenance and engineering teams, in making the best capital decisions. This turns the internal staff into your own personal consultants. It will allow probabilities to be calculated using not only the specific historical data for that particular asset, but also enable a portfolio-wide comparison of similar assets. By tying together mobile users to cloud-based database and storage, all this otherwise overlooked big-data can provide useful calculations.

What calculations? We will discuss that next.

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Originally published at roireports.com.