Application of Asset Application of Asset ManagementManagement

Principles During Asset Creation Principles During Asset Creation and Designand Design

Presented By Pervaiz Anwar

at:

CWEA, San Francisco Bay SectionAsset Management Seminar

September 17, 2003

What is Asset Management?What is Asset Management?

“Asset management is a structured approach to delivering desired service levels at lowest life cycle costs”

A simple definition!

Life Cycle of an AssetLife Cycle of an Asset

Plan / CreatePlan / Create

AcquireAcquire

MaintainMaintain

RefurbishRefurbish

ReplaceReplace

My Focus

Ken’s Focus

Representation will Focus on Representation will Focus on Two Key TopicsTwo Key Topics

Business Case Evaluation: A powerful process for validation Capital Investments

Incorporating Asset Management into design

Business Case Evaluation:Business Case Evaluation:A Powerful Process for A Powerful Process for

Validating Capital Validating Capital InvestmentsInvestments

What is Business Case What is Business Case Evaluation (BCE)?Evaluation (BCE)?

BCE is a rigorous analytical process for validating capital investments

For optimum value it is initiated at the early planning stages — but it must “live” as the project proceeds

It repeatedly revisits the drivers for a project

It validates the need for a solution in terms of customer value

It seeks the lowest life cycle cost solution consistent with risk

And most important… It involves owner's cross-functional staff

BCE Focuses on the Following BCE Focuses on the Following QuestionsQuestions

What is the objective of the project?

Does the project do more than required to satisfy the desired function?

Does it cost more than it is worth in terms of benefits?

Are there other ways of doing it?

What are impacts and benefits to customer?

BCE ExampleBCE Example

Existing interceptor was surcharging in heavy rains, causing upstream spills

Client planned a new 36” relief interceptor with pump station midway

30% design completed, RFP for final design was about to be issued

Capital cost was $13.8 million

Running costs averaged $167K/year (2003 dollars)

Total PV of ownership costs (50 years) was $17.5 million

The BCE Team Goes to Work…The BCE Team Goes to Work…

Client established a BCE Team from Engineering and Field O&M

The team defined 15 alternative approaches!

Several were “fatal flawed” out but seven remained

Timing, capital costs, O&M costs, and refurbishment costs were estimated for each of the seven

BCE ResultsBCE Results

Team determined need to eliminate existing surcharging was valid

Four new alternatives were cheaper than the planned approach

Project concept changed from pipe and pump station to simple gravity pipe

Required lowering the receiving interceptor by several feet

BCE Benefits are Substantial!BCE Benefits are Substantial!

Capital cost was $3 million lower

Total 50-year ownership cost was $7.5 million lower – a 40% savings

Project risk profile was improved

Project could be in place a year sooner!

Asset Ownership: Some Asset Ownership: Some Valuable lessonsValuable lessons

Asset ownership costs are forever

O&M costs are bigger than generally perceived

On-going capital refurbishment costs are often ignored

The point being…Total costs of Asset ownership are difficult to identify and usually underestimated

BCE is a Powerful Process for BCE is a Powerful Process for Validating Capital InvestmentsValidating Capital Investments Once initiated projects tend to take a life of their own

– BCE repeatedly refocuses on basic drivers

It engages utility staff responsible for asset ownership and O&M

It is much more rigorous in establishing true costs of asset ownership than typical economic analysis

It is a process — not a singular event (e.g. VE) – a project can be modified, deferred, or killed at any phase

Incorporating Asset Incorporating Asset Management Principals in Management Principals in

DesignsDesigns

AgendaAgenda

1. Asset Management context

2. Steps to take during design

3. Current applications

Initiating Asset Management Concepts Initiating Asset Management Concepts During Design Process has Multiple During Design Process has Multiple BenefitsBenefits

Builds asset framework that can be continued during construction and on into operations

Develops performance indicators at the outset

Provides basis for consistent tracking of asset improvements over time

Helps successfully implement process control and maintenance management systems

Understanding Asset Life Understanding Asset Life Cycle Helps Optimize Cycle Helps Optimize Ownership CostsOwnership Costs

Asset Management Concepts Asset Management Concepts Extend From Design Through Extend From Design Through OperationsOperations

Key Asset Management Steps Key Asset Management Steps During DesignDuring Design

1. Develop asset hierarchy

2. Establish performance measures

3. Define interfaces during process design

4. Coordinate O&M elements with the design

Develop Asset Hierarchy Structure Develop Asset Hierarchy Structure to Link Information for Key to Link Information for Key StakeholdersStakeholders Inventory

new andexisting assetsassociated withthe designproject

Organize allassets into a structured hierarchy

Develop a common asset identification structure

Start establishing an asset plan for each asset class and component

Require bid and final pay documents to establish costs at the same level of asset detail

Process

Establish Performance Measures to Establish Performance Measures to Track Assets Against Stated Track Assets Against Stated ObjectivesObjectives Identify units

and measures of information needed to analyze future asset performance

Define condition assessment parameters

Define data-recording requirements and reporting needs

Future Replacement Decisions Future Replacement Decisions

Can Be Made More EfficientlyCan Be Made More Efficiently

Defining Interfaces During Design Defining Interfaces During Design Process Helps Measure Asset Process Helps Measure Asset Performance Over its LifecyclePerformance Over its Lifecycle Process control

system should accommodate asset management objectives and P&IDs should be consistent

Equipment data sheets should follow asset hierarchies and incorporate performance data

Lay out information systems and databases to be compatible with hierarchies and equipment numbering

Coordinating O&M Elements with Coordinating O&M Elements with Design Results in Significant Cost Design Results in Significant Cost SavingsSavings Link draft O&M

manuals with asset management concepts

Asset management framework should guide maintenance management system development

O&M documents should incorporate performance measures developed during design

Where Are These Asset Where Are These Asset Management Concepts Being Management Concepts Being Applied?Applied?

Location

Orange County Water District, CA

King County, WA

City of Hayword, CA

Gwinnett County, GA

Project

Large new reclamation plant

Large new wastewater treatment plant

Expansion of mid-size wastewater treatment plant

Program management for multiple water and wastewater projects

SummarySummary

1. Asset management concepts can be incorporated through some simple yet important enhancements to the traditional design process

2. This approach can save time and money by not having to recreate data bases and systems

3. The asset management approach can be beneficial for projects of all types and sizes

Questions and DiscussionQuestions and Discussion