Latest from Building Automation

Modular Building Institute
Hpac 1213 186175514

Integration Intel: Determining the Costs and ROI of a Smart Building

Nov. 3, 2014
With an understanding of total cost of ownership, systems integrators can advise facility operators as to how much technology they can apply and receive a favorable ROI.

Today, integrated buildings are more than facilities with open systems operating HVAC equipment. They are “smart buildings,” facilities with sophisticated automation systems promising unparalleled levels of control and the potential to greatly reduce energy costs. How does an owner achieve these benefits and obtain a favorable return on investment (ROI)? There are several factors to consider before investing in a powerful new system and creating a smart, integrated building.

The Smart-Building Vision

While no two smart buildings are the same, a vision of the ultimate smart building has emerged. In this vision, as the workday begins, the building assesses the weather forecast and predicts energy consumption. Upon arrival, employees swipe access cards; while doors and elevators open for them, lighting and ventilation are activated in their office areas. Later, as people enter a conference room for a meeting, carbon-dioxide (CO2) sensors detect the rise in occupancy, and ventilation is increased automatically; optimum temperature is achieved before anyone has a chance to complain.

While making the rounds, the facility manager is approached by a tenant with a question about building energy use. Using a smartphone, the facility manager accesses recent energy-consumption data and year-to-year comparisons. As the day progresses and sun streams through windows, lighting is adjusted and shades are lowered automatically. As employees leave for lunch, lights are dimmed and ventilation rates lowered until workers return. Throughout the afternoon, occupants use an application on their smartphones and tablets to adjust lighting and HVAC in their personal spaces. These interfaces with the building automation system (BAS) move through the cloud, where system data and software programs are stored.

At the end of the day, the smart building confirms employee departures via access-card reader and checks whether lights and computers are turned off, taking corrective action if they are not. As the evening progresses, lighting and HVAC are shut off, except where janitors and other maintenance staffers are present, as determined by motion sensors or video surveillance. Early the next morning, an automatic scan of the system determines whether fire alarms, CO2 detectors, security sensors, information-technology (IT) systems, and the like are operational and ready for a new day.

As futuristic as it may seem, such a system can be had by almost any facility—for a price, of course. The question building owners must answer is this: Just because a building can do all of this, must it? Systems integrators can help building owners determine how much it will cost to invest in a technology and what the return will be. The goal is not to have the smartest building, but, rather, to automate to the extent the owner is able to manage and can afford. When deciding how smart to make a building, consider the following.

System Complexity

The “brain” of a smart building is the BAS. BAS for smart buildings can be especially complex. The more complex the BAS, the more pronounced the consequences of a BAS failure.

As with any BAS, the potential for problems lies in software, hardware, networking, and user error.

Common software problems involve configuration of data points, poor data management, control-logic errors between equipment, and faulty parameters for setpoints.

Smart buildings are full of hardware, such as relays and sensors, that at some point fail or need to be recalibrated. Network connectivity is essential to smart-building components working together.

Network problems can involve cabling faults, improper cabling, excessive network traffic, or a faulty interface into IT-network equipment.

User error manifests itself in many ways. For example, a technician may override a setpoint and not document the change. Over time, a number of these changes can make a real difference in how a building functions. Facility staff must be trained and retrained to understand and operate the advanced technology found in smart-building controls, if the technology is to be used to its fullest extent.


An important component of a smart building is software that automatically analyzes asset data in real time. This data can include exception reports, summaries of energy performance, and alerts. This information is worthless, however, without adequately trained people to act on it, processes for prioritizing and scheduling corrective measures, and a related budget.

To prioritize corrective actions, facility managers need to weigh the frequency, duration, and cost impact of faults, as well as the type(s) and importance of the space(s) involved. Of course, the most critical problems should be addressed immediately; others can be incorporated into the maintenance plan, while a third group may be addressed as part of long-term strategic improvements. It is important the corrective-action process keep pace with the identification of issues; otherwise, the staff and budget could become overwhelmed.

Energy Savings

Energy information systems (EIS) are the Web-based software, data-acquisition hardware, and communication systems used to store, analyze, and display building energy data. Often including analysis methods such as baselining, benchmarking, load profiling, and energy-anomaly detection, they are especially important in managing and documenting the energy consumption of smart buildings.

A recent study by Lawrence Berkeley National Laboratory (Berkeley Lab)1 reveals both the savings and the costs of EIS. The study examined 28 individual buildings and nine facility portfolios containing 260 million sq ft of space. The facilities are located across the United States in a variety of climates, represent diverse commercial uses, and contain various EIS technologies.

Within the sample, the most frequently reported benefits of EIS were the abilities to identify efficiency opportunities, track and compare performance, manage demand charges, validate utility billing, measure and verify project-specific savings, and collect information useful in setting energy goals. Reported energy savings were as high as 35 percent, with median savings of 17 percent for individual buildings and 8 percent for portfolios, or $56,000 annually per individual building and $1.9 million annually per portfolio.

The study revealed EIS costs vary considerably based on system size and complexity, such as number of monitored points, extent of software features, and configuration needs. The median five-year software-procurement cost for the facility portfolios was $150,000, which breaks down to $1,800 per monitored point, or 6 cents per square foot. Researchers calculated an upfront software cost of $250 per point and an annual median software cost of $200 per point.

When researchers examined the large disparities in upfront and ongoing costs, they saw no difference between on-premises and cloud-based (or software-as-a-service [SaaS]) delivery models. The study did, however, identify economies of scale in dollars per point as the size of an implementation increased. Additionally, researchers observed diversity in vendor pricing models, which often were influenced by market maturity. As a result, the study could not settle on a standard procedure for getting the best value from an EIS. That means to determine the budget for an EIS, a systems integrator must determine the building’s metering needs and the scale of points needed. In three of four cases, the payback of an EIS was two years or less.

Network Protection

With operators and even occupants having the ability to manage buildings and personal spaces via smartphone and tablet, it is crucial that cybersecurity measures, such as firewalls and virtual private networks, be in place to protect networks and data. This means system integrators must work closely with IT departments to coordinate protective measures when designing and installing a smart BAS.

The Future Is Now

Though it may seem like the stuff of science fiction, technology that enables buildings to be responsive to occupants, run precisely while consuming less energy, and provide detailed real-time and historic data to operators exists. An important role for systems integrators is to help operators decide how much of this technology they need and how much it will cost.

To answer these questions, consider the use of the building, the occupants and their expectations, and the anticipated income. Then, evaluate the costs for the smart-building technology. As the Berkeley Lab report shows, the more complex the BAS—that is, the more control points, software, and hardware—the higher the upfront and ongoing cost. It is critical, then, to carefully evaluate both system cost and anticipated savings to get a solid understanding of the investment necessary and the potential payback.

While focusing on numbers, it can be easy to overlook the most valuable resource in a facility: the people. Smart buildings operate with powerful technology, but there must be a staff in place with enough skill to use it properly. Just as building operators invest in technology, they must invest in people. Technicians must have the skills and training to understand how a building’s systems work, how to interpret analytics, and how to implement the changes necessary to keep the facility operating at its peak. If a building’s current staff is not up to this task, consider what it will cost to assemble a staff that is and what it will cost to keep that staff together. Then, determine how that will impact the payback time line for the BAS.

With an understanding of the total cost of ownership, systems integrators can advise facility operators as to how much smart-building technology they can apply and still receive a favorable ROI. After all, that is the sign of a truly smart building.


1) Granderson, J., Lin, G., & Piette, M.A. (2013). Energy information systems (EIS): Technology costs, benefit, and best practice uses. LBNL-6476E. Berkeley, CA: Lawrence Berkeley National Laboratory. Available at

A 30-year veteran of the controls industry, Frank Rotello is chief executive officer of Alpha Controls & Services in Rockford, Ill., and president of InsideIQ Building Automation Alliance, an international alliance of independent building-automation contractors representing common automation- and security-system platforms. He can be reached at [email protected].

Did you find this article useful? Send comments and suggestions to Executive Editor Scott Arnold at [email protected].