Consideration of uncertain future demand and decision flexibility in the determination of intervention programs for buildings

One task of building managers is to ensure that their buildings function as required over a defined period of time, while the ability of buildings to meet demands changes over time due to two reasons: (1) The change of the ability of the building to meet fixed demands, normally through deterioration, and (2) the change of demands for the building. Building managers want to determine what they should do with their buildings at present to maximize their net-benefit in the long term. This requires determining the intervention to be executed immediately and estimating the ones that might be executed in the future, i.e. determining an intervention program. This decision making process is supported through the modelling of deterioration and the determination of the optimal intervention program.The used models and methods often do not consider the uncertain future demands on the buildings. Although the assumption of non-changing demands is convenient from a mathematical modelling point of view, it is rarely true in the real world. Uncertain changes in demand make it undesirable to attempt to evaluate intervention programs now and then determine exactly which one to follow over the remaining planning horizon. Instead, uncertain changes in demand can make it desirable to find flexible solutions that consider the possibility to postpone decisions on the actual intervention program to implement to a later moment when more information will be available. Taking into consideration this flexibility of management to decide which intervention program to follow is believed to be a cornerstone of any method to be used to determine optimal intervention programs in management systems where there is uncertainty with respect to future demand.To make a decision about whether to introduce decision flexibility in intervention planning, it is necessary to evaluate the benefits that the flexibility can bring to the building management, in light of the uncertainty it is exposed to. In conditions characterized by high uncertainty, interventions programs developed with consideration of decision flexibility enable building manager to adapt the system to new information and thus avoid losses or even seize opportunities.The main objective of this research is to investigate how to consider the decision flexibility of the decision maker in the determination and evaluation of intervention programs with consideration of the uncertainty in future demand and to identify a method that can support a decision maker in the determination and evaluation of such intervention programs.In this thesis, a Real Options Method for the evaluation of intervention programs with consideration of decision flexibility under uncertainty in changes in demand is presented and applied to a simple example of a fictive office building and a real world example, a clinic of a Swiss university hospital. This method is based on Real Option Analysis and Decision Tree Analysis. To identify eligible intervention projects where the consideration of decision flexibility is relevant, a methodology for the identification and evaluation of intervention projects with consideration of decision and building flexibility is presented and applied to the real world example.The Real Options Method for the evaluation of intervention programs with consideration of decision flexibility and the methodology for the identification and evaluation of intervention projects with consideration of decision and building flexibility are applied by analysing the situation, building adequate models of the uncertain key parameters, establishing the static and dynamic evaluation models, identifying possible intervention projects, and evaluating these intervention projects with the method for the evaluation of intervention programs with consideration of decision flexibility. The decision flexibility about the interventions to be executed over the investigated time period is the focus of this thesis. For the real world example, however, three different design alternatives are also considered, pro iding different levels of decision flexibility over the investigated time period. This design flexibility can also be evaluated with the presented method for the evaluation of intervention programs with consideration of decision flexibility.The ramifications of the results from the application of both the method and the methodology are analysed. The use of the method for the determination and evaluation of intervention programs with consideration of decision flexibility shows that the method allows for appropriate consideration of decision flexibility and, therefore, can lead to an increased benefit for building managers. The expected net benefits and optimal intervention program determined with the method with consideration of decision flexibility are closer to reality, and thus enable better budget planning. The application of the method on this example showed that the Real Options Method required more effort than the Traditional Method without the consideration of decision flexibility before and during the evaluation for the definition of the flexible decision making, the definition of the consequences of the decision making at these decision points and values over the investigated time period, and the calculation of the probabilities of execution for each possible time and value where a decision of execution is beneficial.The method with consideration of decision flexibility does not lead to better intervention programs for all components of a building, and thus should only be applied if management flexibility is a possibility, the uncertainty of key parameters is high, and the intervention costs are high compared to the benefits.The use of the methodology for the identification and evaluation of intervention projects on the real world example shows that it can be applied to a real world situation and can deliver meaningful results. It strongly relies on stakeholder knowledge and requires good and extens-ive stakeholder communication throughout the complete process. Considerable simplifications regarding the selection of key parameters and models must be made throughout the process, to keep the complexity at a manageable level, though the methodology can be adapted to take in the level of complexity that is required for different projects.The results from the application of the method on the simple and the real world example show that, even though the expected net benefits from the evaluation with the method with consideration of decision flexibility are higher than the ones from the Traditional Method, the difference is small for the given examples, within the error margin of the input parameters, which does not justify the additional effort required to consider the flexible decision process. This small difference is mainly due to the reduced impact that the uncertainty considered in the examples have on the expected net benefits of the intervention program, but it is a result that is only possible to obtain through an adequate evaluation method as presented in this thesis. In such a situation, the decision maker can make a choice of which intervention program to follow, either with or without consideration of decision flexibility. Also, during early steps of the methodology, a test can be made whether the considered case will have a significant impact.Future research should also consider a deeper analysis of the probabilistic models used for the evaluation of intervention programs, which were in this thesis based on simplifications. Based on the given classification of influence factors, changes in demand, and effects, suitable methods for the modelling of changes in demands in connection with the changes of connected influence factors should be identified and tested for application. The consideration of decision flexibility in the construction of intervention programs is not applicable for all building components, as the application is only beneficial under certain conditions. It can be assumed that many of the intervention programs constructed for a complete building are det rmined without the consideration of decision flexibility, resulting in inflexible intervention programs. Thus, the method and methodology with consideration of decision flexibility investigated in this thesis have to be applied in the context of the management of related building components without consideration of flexibility.