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2
Facilities Asset Management
BACKGROUND
The field of facilities management is evolving. Once focused on tactical con-
cerns, tasks, and functions that were oriented to the operation of individual build-
ings, it now focuses on the entire portfolio of facilities and integrated resource
management (Figure 2.1).
Tasks and Processes and Resource
Functions Competencies Management
Property Information Property/Estate Management Property Portfolio
Repairs and Maintenance Management
Asset Management
Site Selection, Acquisition Strategic Facilities Planning
Facilities Management
Guidelines
Construction and Handover Corporate Real Estate
Workplace Strategies
Inventory Control and Management
Purchasing Long-term Asset
Management
Lease Management and
Disposal Support Services
Management
Refurbishment and Refit
Optimizing Utilization of
Business Resources
Tactical Concerns Strategic Concerns
FIGURE 2.1 The evolving focus of facilities asset management. SOURCE: Then, 1996;
2003.
30
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FACILITIES ASSET MANAGEMENT 31
Cost Factors
Management and Customer Perception · Competition
· Need to change physical assets from · Energy
overhead to resources · Space
· Image · Need for operational efficiency
· Downsizing
· Focus on core competencies
Employers' Needs and Expectations
· Working conditions Government Policies
Facilities
· Morale · Public-private
Management
· Sick Building Syndrome partnerships
· Repetitive strain injury · Best value
· Liability claims · Health and safety
· Security · Physical security
· Sustainability Change or Business
Re-engineering Factors
Need for Flexibility IT Development
· Communications
· Outsourcing
· Intelligent buildings
· Responsiveness
· Space management
· More intense use of facilities
· CAFM
· Volatile market conditions
· Best Value Service · Corporate governance
· Innovative Services · Stakeholders' influence
· Flexibility · Integrated resource
· IT-based management
· Added Value · Customer-driven strategies
· Environmental Issues · Relationship management
· Sustainability · Market information
· Physical Security
FIGURE 2.2 Factors driving the evolution of facilities management. SOURCE: Adapted
from Okoroh et al., 2002; 2003.
One driver of this evolution is the emphasis by private-sector organizations
on results-driven management strategies for all aspects of their operations. This
shift is also indicative of the increasing recognition of facilities as "mission
enablers" that support organizational goals, work processes, and productivity.
Increased competition, a renewed emphasis on physical security, the outsourcing
of business functions, changing expectations and requirements of employees and
clients, and emerging information and building technologies are also factors (Fig-
ure 2.2). As noted by corporate real estate expert Martha O'Mara,
the organizational emphasis of corporate real estate is shifting from a functional
project management approach based on how buildings are delivered to one which
aligns with the structure of the company and the way work is conducted. This
shift is necessitated not only by the strategic perspective but also by the in-
creased use of service providers outside of the company that assume many of the
routine functions of real estate and facility management (O'Mara, 1999, p. 307).
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32 INVESTMENTS IN FEDERAL FACILITIES
While many factors are driving the evolution of facilities management, new
technologies are enabling it. The development of open platforms and relational
databases allows for the integration of data from disparate sources, including
financial, facilities, and personnel systems. Large quantities of data from geo-
graphically dispersed locations can be gathered and processed quickly to monitor
day-to-day operations, costs, and trends. Decision support tools allow for the
development and evaluation of large numbers of alternative investment scenarios.
The next sections focus on the emerging practice of facilities asset manage-
ment, its components, and the additional skills required of facilities asset manag-
ers. Chapter 2 concludes with a summary of principles and policies from best-
practice organizations.
FACILITIES ASSET MANAGEMENT
Facilities asset management is an evolving discipline. In this report it is de-
fined as "a systematic process of maintaining, upgrading, and operating physical
assets cost-effectively. It combines engineering principles with sound business
practices and economic theory, and provides tools to facilitate a more organized,
logical approach to decision making" (FHWA, 1999, p. 7). A facilities asset man-
agement approach allows for both program- or network-level management and
project-level management and thereby supports both executive-level and field-
level decision making.
Program- or network-level management is associated with a systemwide ap-
proach that involves structured decision-making practices, including the analysis
of trade-offs to identify and execute the best investments for a portfolio of facili-
ties. Such management involves a macroscopic view of the assets being managed
and makes use of aggregated data. Project-level management decisions, in con-
trast, are associated with identifying the best actions to take for specific facilities,
and they typically occur at the field level, using more disaggregated data (Figure
2.3).
The importance of a facilities asset management approach is that it allows
organizations to integrate facilities considerations into corporate decision making
and strategic planning processes. This is a significant shift from past practice,
whereby facilities-related decisions were often made after the organization's stra-
tegic direction had been set. Using a facilities asset management approach allows
organizations to forge a direct link between organizational goals, facilities invest-
ment decisions, and day-to-day operations (Figure 2.4).
COMPONENTS OF A FACILITIES ASSET
MANAGEMENT APPROACH
Facilities asset management is different from asset management in the finan-
cial/legal sense for the following reasons (Tracy, 2001):
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FACILITIES ASSET MANAGEMENT 33
PROGRAM/NETWORK/SYSTEMWIDE LEVEL
Financing · Data (location, inventory, properties, performance,
evaluation, etc.)
Budgets · Deficiencies/needs (current and future)
Agency Policies · Alternative strategies and life-cycle analyses
· Priorities, programs, schedules
PROJECT/SECTION LEVEL
Standards and · Data (materials, properties, demand, DATA
unit costs, etc.)
Specifications BASE
· Detailed design
Budget Limit · Construction
Environmental · Maintenance
Constraints
ONGOING, IN-SERVICE
MONITORING AND EVALUATION
FIGURE 2.3 Components of a facilities asset management system. SOURCE: Adapted
from Hudson et al., 1997.
FIGURE 2.4 Linking organizational goals with facilities investment and operations.
SOURCE: Adapted from Then, 1996; 2003.
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34 INVESTMENTS IN FEDERAL FACILITIES
· It focuses on a subset of corporate balance sheets that are physical in
nature.
· It enlarges the scope of assets to extend to noncapitalized assets such as
leased space, office equipment, human resources, and the like.
· It includes operating assets that require regular maintenance and repair to
retain their functionality and avoid catastrophic failure.
· It includes operating assets that depreciate and wear out over time but that
can also be renewed through investment (renewable assets).
· It involves the use and deployment of assets in dispersed locations and
over the various operating units of an organization.
· It accounts for a return on investment that is often in the form of increased
productivity of a facility's occupants, a difficult value to quantify and measure.
· It recognizes that the facilities program manager may or may not have
authority over the disposition of all or a portion of the assets that he or she man-
ages.
The literature on facilities asset management identifies several components
needed to ensure that investment decisions are aligned with the mission and goals
of an organization:
· Accurate data for the entire facilities portfolio, not just individual build-
ings, to enable life-cycle decision making.
· Models for predicting the future condition and performance obtainable
from these facilities as a portfolio.
· Engineering and economic decision support tools for analyzing trade-offs
among competing investment approaches.
· Performance measures to evaluate the impacts of different types of ac-
tions (e.g., maintenance versus rehabilitation) as well as the timing of invest-
ments on the overall goals for service provision.
· Continuous feedback procedures.
These components are described in greater detail below.
Accurate Data
Facilities asset management data at a minimum include inventory and at-
tribute data. Inventory data describe elements of assets that do not change as a
function of time--for example, the number, location, type, and size of facilities
and the year of acquisition. Inventory data are gathered in a relatively straightfor-
ward manner, even for large portfolios of facilities; once gathered, the time and
cost to update them are minimal.
Attribute data capture characteristics that do change over time, such as the
demand for the facilities, usage, value, age, maintenance history (including treat-
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FACILITIES ASSET MANAGEMENT 35
ment types and timing), operating and repair costs, condition, and so forth. At-
tribute data are more difficult to gather initially than are inventory data. Updating
attribute data may require periodic condition assessment and other programs,
which can be costly. Computer-aided facilities management systems are used to
store, analyze, and update both inventory and attribute data.
Performance-Prediction Models
Performance-prediction models predict the deterioration of building compo-
nents, measured as a composite condition index, as a function of time.1 They are
important because certain components of a facility are particularly prone to dete-
rioration or failure and require relatively frequent maintenance or repairs. Some
mechanical and electrical systems of a facility tend to have numerous moving
parts and are likely to need a great deal of maintenance (they are said to have a
high maintenance need probability). Nonperformance of some of these compo-
nents can have serious consequences for the serviceability of the facility. Simi-
larly, life safety systems generally have interacting parts, such as electrical signal
systems or controls, that have both a high maintenance need probability and very
serious consequences if they do not perform properly.
Building envelopes, for example, may have a relatively high maintenance
need probability, and the effects of nonperformance can range from annoying to
catastrophic. The envelope's exposure to the weather makes it vulnerable, and
hidden deterioration may result if leaks are unknown or neglected. In contrast, the
covered structural system of a building tends to remain unaffected for the life of
the facility (a low maintenance need probability) unless the loading is signifi-
cantly changed, or the structure is modified, or deterioration occurs.2 The conse-
quence of nonperformance of a structural element is almost always serious. Hav-
ing models that can help to identify the differing maintenance need probabilities
of facilities can help facility managers and others determine where resources can
be spent to achieve the most significant returns in terms of supporting the
organization's operations.
Engineering and Economic Decision Support Tools
Engineering-economic ranking and optimization methods can help decision
makers to evaluate trade-offs among different investment approaches. Ranking
1The BUILDER system developed by the Construction Engineering Research Laboratories of the
U.S. Army Corps of Engineers is one example of a performance prediction model; other models have
been developed by private-sector software firms.
2One example of an uncovered structural system is a steel bridge, which has a high maintenance
need probability.
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36 INVESTMENTS IN FEDERAL FACILITIES
methods make use of various decision criteria to prioritize competing needs in an
overall facility portfolio or infrastructure system. Decision criteria might include
the current condition, the predicted condition at some future time, life-cycle costs,
cost-effectiveness (i.e., some measure of effectiveness per unit cost of improve-
ment), and benefit-cost ratio. The relative sophistication of the decision criteria
used for project rankings ultimately impacts the relative value gained per unit
investment.
Optimization methods such as mathematical programming methods are used
to identify the combination of competing investment options that would result in
the greatest return on the investment, given budget constraints. Although several
attributes of the facility or system investment may be quantifiable as benefits or
costs, not all such attributes are quantifiable--for example, the environmental
and social impacts of various facility investment decisions. Such attributes may,
however, be considered qualitatively in various multiattribute decision frame-
works.
Performance Measures
Performance-prediction models to project what may happen are an important
element of a facilities asset management approach. Equally important are perfor-
mance measures to gauge what has occurred or is occurring in respect to a facili-
ties-related operation or activity.
Most organizations, whether private or public, measure the performance of
individual projects or buildings. Typical indicators include project completion in
relation to the original schedule and budget; energy, utility, or other operating
costs per square foot; utilization rate (occupied space as a proportion of usable
area); facility condition; and the like.
Indicators to measure the performance of an entire portfolio of facilities in
relation to organizational goals are less well developed but are fundamental to a
program- or network-level management approach. Performance measures in gen-
eral and program-level indicators specifically are discussed in greater detail in
Chapter 4.
Continuous Feedback
One of the objectives of implementing a facilities asset management approach
is to ensure the alignment of an organization's portfolio of facilities with its mis-
sion and operating objectives. Continuous feedback is required to monitor the
operating condition of facilities that directly support and impact organizational
mission; to identify facilities that are no longer needed due to changing require-
ments; and to identify facilities that are obsolete technologically or otherwise.
This information, in turn, can be used to determine where investments should be
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FACILITIES ASSET MANAGEMENT 37
made to acquire, renew, or dispose of facilities. Continuous feedback and moni-
toring are discussed in greater detail in Chapter 4.
FACILITIES ASSET MANAGERS
The usefulness of a facilities asset management system is closely tied to the
extent to which an asset management culture has permeated the organization, the
quality of data on the asset portfolio, the linkage between the asset management
goals and organizational mission, and the skill level of the people involved in the
management system. Implementing a facilities asset management approach also
requires that facilities staff at headquarters and in the field have the appropriate
background and training to provide strategic information and to make recommen-
dations to senior managers.
The importance of having a competent workforce with the appropriate skills
and training to support an organization's core competencies, goals, and missions
cannot be overestimated. A recent study of private-sector organizations that were
able to "make the leap from good to great" and to sustain their results for at least
15 years found that:
"Who" questions come before "what" decisions--before vision, before strategy,
before organizational structure, before tactics. First who, then what--as a rigor-
ous discipline, consistently applied . . . . The old adage "People are your most
important asset" is wrong. People are not your most important asset. The right
people are . . . . Whether someone is the "right person" has more to do with
character traits and innate capabilities than with specific knowledge, background
or skills. (Collins, 2001, p. 63)
Thus, people, like facilities, technologies, and dollars, are mission enablers,
assets that must be invested in over time.
In a facilities asset management approach, facilities managers can no longer
be regarded only as caretakers who bring unwelcome news about deteriorating
facilities and the need for investments. As facilities management has evolved
from tactical, building-oriented activities to a strategic, portfolio-based approach,
the skills required by facilities management organizations have similarly evolved.
A facilities asset management approach requires not only the technical skills (e.g.,
engineering, architecture, mechanical, electrical, contracting) found in traditional
facilities engineering organizations but also business acumen and communication
skills.
A report by the Center for Construction Industry Studies (CCIS) involving
31 private and public sector organizations found that it is fairly well recognized
in owner firms that the skill set required to manage and work on projects from the
owner's side has changed dramatically and the issue of skill development of
owner personnel is perhaps the most difficult one facing owner firms (CCIS,
1999). In business terms, critical owner skills include technical knowledge of the
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38 INVESTMENTS IN FEDERAL FACILITIES
process, alignment with the business units' goals and objectives, facility defini-
tion, stewardship of the overall project process and objectives, and project con-
trols (Sloan Program for the Construction Industry, 1998). Skills required by fa-
cilities asset managers are outlined in Table 2.1.
A newly released study reinforces the CCIS report and lists 27 business skills
a facility manager should have to be effective in today's operating environment
(Table 2.2). According to the International Facility Management Association
(IFMA), only 34 percent of facility managers have business degrees (IFMA,
1998). Thus,
[it] is not surprising that facility managers are unsophisticated in applying busi-
ness practices to facility management. Most of them have technical education in
engineering, architecture, or administrative management. Their education and
training did not stress business principles or theory. Many of them have little
training in financial management. (Cotts and Rondeau, 2004, p.3)
For these reasons, most organizations adopting a facilities asset management
approach must have staff who are able to use new methods of analysis, who
understand financial concepts and management, and who can communicate ef-
TABLE 2.1 Skills Required by Facilities Asset Managers
Category Skill
Business Writing and managing contracts
Negotiation
Managing budgets and schedules
Communication Coordination/liaison
Conflict management
Cultivate broad network of relationships
Influence Mentoring
Motivating
Change management
Managerial Team building
Delegating
Politically aware/see big picture
Problem solving Continually analyze options/innovation
Planning
Consider all sides of issues, risk management
Technical Understand entire construction process
Multidisciplined (knowledge of several areas of engineering)
Information technology skills
SOURCE: CCIS, 1999.
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FACILITIES ASSET MANAGEMENT 39
TABLE 2.2 Business Skills for the Facility Manager
Know your business Submit an annual report for the department
Know and be able to use the language of Implement strategic facilities business planning
business
Be able to develop, execute, and evaluate
Understand the costs of doing business budgets
Become a skilled business communicator Be a skilled contracting officer and procurer of
goods and services
Identify and use best practices in all functions
of facility management Understand how you should manage, track, and
report the ongoing performance metrics, stated
Focus on cost reduction and on management in financial terms for the success of your
improvements that will lead to cost reduction department and service providers
and cost avoidance
Think of ways to make well-run facilities a
Understand, in detail, how you affect the corporate advantage where appropriate
business. Be able to translate facility
management (FM) needs into FM requirements For major decisions, use life-cycle costing
and to show how FM achievements fit business
needs Implement a regular program to communicate
these metrics and your success to management
Make your annual budget your principal facility and to your customers
management information tool
Understand depreciation and its effects on your
Sign favorable leases and get control of your budgets
leases
Expect to invest in business technologies
In your practice and in your communications,
stress the importance and benefits of good Understand the importance of being able to
facility management project and work to a budget and a schedule
Be able to use capital budget evaluation tools Understand ratio analysis
Actively manage your real estate portfolio Be able to administer chargebacks and
allocations
Be capable of making lease-versus-buy
decisions Reduce churn
SOURCE: D. Cotts and E.P. Rondeau, 2004.
fectively with stakeholders and decision makers with differing technical back-
grounds and at all management levels. Training of existing staff and the recruit-
ment of new staff with such skills is required.
Academic institutions are developing facilities and infrastructure manage-
ment programs and courses to educate both students and practitioners on ap-
proaches and methods for managing facilities and infrastructure as assets. Cornell
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40 INVESTMENTS IN FEDERAL FACILITIES
University, Eastern Michigan University, Ferris State University (Michigan),
the University of Southern Colorado, and Brigham Young University all have
programs in facility management (IFMA, 2003). George Mason University of-
fers a professional certificate in facility management and the Georgia Institute of
Technology offers a master's program in building construction and integrated
facility management. Thirteen of 51 civil engineering and related programs sur-
veyed had at least one course in or related to civil infrastructure management
(Amekudzi et al., 2001). These developments point to a growing demand for
formally trained facilities and infrastructure managers with both the technical
expertise and business acumen to successfully manage facility portfolios and
civil infrastructure systems as assets and to the many resources available nation-
wide that offer full- or part-time training.
EXAMPLES OF FACILITIES ASSET MANAGEMENT SYSTEMS
Included below are two examples of facilities asset management systems in
use. The study committee did not evaluate their effectiveness, and their inclusion
should not be viewed as an endorsement. However, the examples are indicative
of several directions being taken.
The first example of a facilities asset management system is found at Brigham
Young University (BYU). Implementation of BYU's asset management system
began in the early 1980s, after the existing system had resulted in a culture of
competition, confusion, and lack of trust among the various stakeholders. The
search for a new system resulted in a paradigm shift from being a money-driven
system to a requirements-driven system (Campbell, 2000).
The database developed to support this new paradigm tracks requirements
(Figure 2.5), ensures that all assets are included in the inventory, and updates the
assets based on life-cycle costing. Beyond standard maintenance and repair, an
annual inspection is made of all assets that have 1 year of remaining life to assess
whether their life can be extended or if replacement is warranted. Customer re-
quests, one-time projects, and areas experiencing continual maintenance prob-
lems are also reviewed.
This system has led to a clearer understanding and definition of operating
and capital budgets. Operating budgets include operations, maintenance, and re-
pairs and must ensure that assets function and are managed properly, users are
satisfied, and the environment is stable. Capital budgets include replacements,
retrofits, improvements, and new space additions that maximize or extend the
useful lives of facilities (Figure 2.6).
A partnership has been forged with all key stakeholders wherein an annual
funding limit, a 40-year cash flow average of all life-cycle database items, and a
5-year average of all facility master plan items are mutually created. The annual
funding limit in each area is reviewed periodically for required changes. Annual
inspections and reviews are done to determine requirements. If the requirements
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FACILITIES ASSET MANAGEMENT 41
Growth
Needs Asset
Expansion
User Needs
Utilization Space Use
Programming
Planning
Design
Construction Construction
Operations
Assets Existing
Planned Maintenance
Operations
User-Requested Maintenance
Total Asset
Repairs
Management
Retrofits/Upgrades
Improvements Capital
Replacements
FIGURE 2.5 A facilities asset management structure (BYU).
do not exceed the limit, the difference goes into the "bank" for future use on that
asset. If requirements exceed the annual fund limit, then those funds come out of
the bank.
A second example of a facilities asset management system is being imple-
mented at the University of North Carolina (UNC). UNC has a repairs and reno-
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42 INVESTMENTS IN FEDERAL FACILITIES
Capital Needs Analysis Database
Permanent Facility File
Facility
Master
Building Life Cycle Plan
Room File
File File File
(replacements)
Process
Annual Database Needs
Fund
Inspection/Review
· Inspect 1 year remaining life
· Review trouble areas
Permanent Facility
· Review customer requests
File Adjustments
· Propose retrofits
· Propose improvements
ual
Other Project Approvals
Adjustments Management Ann
· List Needs "0"
· Additions · Set Up Projects · Coordinate Items
· Missed · Manage · Determine Funding
· Delete · Close · Bottom-up Review
· Audits · Open Invitation to Challenge
· Corrections · Secure Funding
· Inspections
· Inflation
Defer/Cancel
· Other
FIGURE 2.6 A facilities asset management framework (BYU).
vations reserve fund that provides an annual allocation for repairs and mainte-
nance. To ensure that these funds are effectively spent, the university has devel-
oped a method for measuring the cost of work needed to bring a facility up to
some baseline level of quality. This incorporates data kept by UNC's Facilities
Condition Assessment Program (FCSP) and also goes beyond it. The FCSP iden-
tifies only the work required to bring a facility back to its original condition, as
well as to correct life safety code deficiencies, while the recently developed Fa-
cility Condition and Quality Index (FCQI) also measures the cost to address func-
tional and qualitative obsolescence relative to a desired baseline. This index di-
vides the amount it would cost to bring a facility up to the desired functional level
over the replacement value of that facility. For example, if a facility has a replace-
ment value of $25 million and a cost of $2.5 million to bring it to the desired
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FACILITIES ASSET MANAGEMENT 43
performance level, the FCQI would be 0.1 (Klein et al., 2002). An FCQI exceed-
ing unity indicates that it would cost more to upgrade and modernize the facility
in question than it would to build a new one. Where this occurs, the university
automatically substitutes a replacement building into the 10-year capital needs
plan. In such a case the existing building is not necessarily torn down but might
be modernized to meet less demanding requirements.
To arrive at the FCQI, UNC has a uniform method of compiling facilities
condition data using an online questionnaire about the characteristics of each
building (e.g., structural condition, accessibility, maintainability). The database
that results is also maintained and manipulated online. Beyond quality data,
project implementation data are also entered and tracked via the Web, with access
available to relevant stakeholders.
PRINCIPLES AND POLICIES FROM
BEST-PRACTICE ORGANIZATIONS
Based on a consolidation of research, interviews, briefings, and the commit-
tee members' individual and collective experience, the committee found that best-
practice organizations operate under a number of principles and policies (all 10
principles/policies are repeated in Chapter 6). In matters of facilities manage-
ment,
Principle/Policy. Best-practice organizations implement a systematic fa-
cilities asset management approach that allows for a broad-based un-
derstanding of the condition and functionality of their facilities portfo-
lios--as distinct from their individual projects--in relation to their
organizational missions. Best-practice organizations ensure that their
facilities and infrastructure managers possess both the technical exper-
tise and the financial analysis skills to implement a portfolio-based ap-
proach.
Facilities asset management is an evolving approach that helps to ensure that
an organization's facilities portfolio is aligned with its mission. Required ele-
ments include accurate data about the facilities' portfolio; models for predicting
the future condition of these facilities and the performance obtainable from them;
engineering and economic decision support tools for trade-off analyses among
competing investment alternatives; performance measures to evaluate the impacts
of different types of actions (e.g., maintenance versus rehabilitation) and the tim-
ing of investments on the overall goals for facility provision; and short- and long-
term feedback procedures.
Implementation of a facilities asset management approach requires facilities
and infrastructure managers with the technical expertise found in traditional fa-
cilities management organizations (e.g., engineering, architecture, mechanical,
electrical, contracting) as well as an understanding of financial concepts and
management.
Representative terms from entire chapter:
facilities asset
