core question 1: what is the current state of my...

PARSONS / GHD

Core Question 1: What Is The Current State Of My Assets?

AMPLEAsset Management Program

Learning Environment

2PARSONS / GHD

Bottom Line: Emergent Industry Profile• Increasing aggregate demand – water and wastewater• Diminishing available water resources • Leveling of “production efficiencies”• Increasing output restrictions • Aging infrastructure

Result: Increasingly expensive treatment options

• Aging customer base – more and more on fixed income• Diminishing technical labor pool running larger and more

sophisticated plants and facilities• Outflow of knowledge with retiring labor base• Increasing resistance to rate increases

Result: Increasingly complex management environment

3PARSONS / GHD

The Changing Utility Business Environment

• Demands to do more with what we have got• Need to better focus our capital & recurrent

budgets• Move from reactive based activities to a greater

planned and predictive work environment • Transition from being really good at building

and operating assets to being really good at managing assets:

– Extending asset life and achieving acceptable reliability

– Optimizing maintenance, non-asset solutions– Developing accurate long term funding models

4PARSONS / GHD

The Consequences of Asset Failures Can Be Severe

5PARSONS / GHD

All Assets Deteriorate and Eventually Fail…

Sediment buildSediment build--up up increasingly restricts flowincreasingly restricts flow

. . . Unless they are properly maintained and renewed or replaced

Cleaning & relining adds Cleaning & relining adds 50 years life50 years life

6PARSONS / GHD

Advanced Asset Management helps make…

better acquisition, operations, maintenance, and

renewal and replacement DECISIONS

7PARSONS / GHD

The AAM ModelC

ontinuous Learning/Know

ledge Managem

ent“A

AM

University”

Sustained performance @ lowest life-cycle costFailure management: capacity, compliance, reliability, renewal, efficiency

“Best Appropriate AAM PracticesEnterprise Asset Management System (EAMS)

AAM Techniques & ToolsAdva

nced

Asse

tM

anag

emen

tCapital Program Management

Project ManagementConstruction Management

Permit Management

MetricsCost controlReporting

Outcomes managementCorrections & adjustments

CIPProjectContent

Capital Planning

CIPFinancial

Model

Final CIP Strategic Business Plan

Workshops

Initial CIP Strategic Business Plan

CIP Execution CIP Control

Operations & Maintenance Program ManagementO&M Planning O&M Execution O&M Control

Corrective- Planned

- Unplanned

PreventivePredictive

O&M Tactical Plan

SchedulingProcurementMaterials mgt

Skills teamsInfo & knowledgeContinuous improvement

Right work, right time, done right

RecordingTrackingCostingMonitoringEvaluating

8PARSONS / GHD

The AAM “Paradigm”• The capacity to produce output of value to a customer is directly

related to sustained performance of the system of capital assets.• Failures in the asset base directly affect system performance.• Sustained system performance is the result of successfully managing

failure within the asset base.• The management of failure in the asset base is highly constrained by

cost; that is, customers are not typically willing to pay for zero likelihood of failure.

• Different assets have different likelihood of failure as determined largely by materials used, operating environment, usage and maintenance.

• Failures vary substantially in consequence to the organization, that is, in terms of the production of valued output to the customer.

• Investment in capital (acquisition, operation, maintenance and renewal), then, should be directed by the likelihood of failure and its consequence to the customer and regulator.

9PARSONS / GHD

By the end of this workshop you should be able to address these five questions:

What is AM?

Why doAM?

What “deliverables”

do I get?

How to do it?

How do Imove

forward?

10PARSONS / GHD

The Nine Fundamental “Building Blocks” of AAM

1. Definition2. The asset life-cycle3. How assets fail4. Risk-consequence 5. Cost/valuation6. Asset demand7. Level of service8. Business risk9. Confidence in decision-

making

Asset Mgt Plans

Strategic Initiatives

Budgets

CIP

O&M

11PARSONS / GHD

Our Definition of AAMAdvanced Asset Management (“AAM”) is

a management paradigm and a body of management practices that is applied to the entire portfolio of infrastructure assets at all levels of the organizationthat seeks to minimize the total cost of acquiring, operating, maintaining and renewing the assets within an environment of limited resourceswhile continuously delivering the service levelscustomers desire and regulators requireat an acceptable level of business risk to the organization.Lowest-c

ost sustainable performance

12PARSONS / GHD

This Workshop Focuses on Three Fundamental Management Decisions:

• What are my work crews doing and where are they doing it – AND WHY!!?

• What CIP projects should be done and when?

• When to repair, when to rehab and when to replace?

These decisions typically account for at least 80% of a Utility’s annual expenditures!

13PARSONS / GHD

Lifecycle AM Functional ElementsAUDIT &REVIEW

DISPOSE

REPLACE/AUGMENT

RENEW/ REHABILITATE

MONITORCONDITION &

PERFORMANCE

PLANNINGSTRATEGIES

CREATION orACQUIRE

ACCOUNTING &ECONOMICS

OPERATE

MAINTAIN

ASSESS RISKS &

INVESTMENTS

LEVEL OF SERVICE

DEMANDANALYSIS

COST OF SERVICE

14PARSONS / GHD

Total Cost of Ownership- “A Dollar Spent is A Dollar Spent”

Maintain Acquire

Operate Renew

15PARSONS / GHD

Key to Sustainability – Understanding How Our Assets Fail

The yin-yang of asset failure

Stress

Resistanceto

Stress

16PARSONS / GHD



Physical Loads

Internal Corrosion

Soil Characteristics Groundwater

Galvanic Action

Bedding Condition

Pipe Attributes

17PARSONS / GHD



Perf

orman

ceTime

Initial “Design” Capability

Minimal Performance Level“Inherent” Deterioration Curve

“Managed” Deterioration Curve

ManagementZone

“Failure is defined as the inability of any asset to do what its users want it to do.”

John Moubray

18PARSONS / GHD



Per

form

ance

Time

P1 Vibration

X P2 OilX

P3 Audible NoiseX

F FailureX

P4 Tactical HeatX

PX

“P to F”IntervalMonitoring

19PARSONS / GHD

Per

form

ance

Time

P1 Vibration

X P2 OilX

P3 Audible NoiseX

F FailureX

P4 Tactical HeatX

PX

“P to F”IntervalMonitoring

“Failure Mode” Analysis, Condition-based Monitoring,Predictive Maintenance &

“Reliability Centered Maintenance”

Findings:• Only a moderate

relationship between preventivemaintenance and failure

• 30 to 70% of equipment maintenance is misdirected!

AM is all about

“managing the potential to fail”


20PARSONS / GHD

• Renewal:– Repair – normal periodic maintenance, minor in nature,

anticipated in the normal operation of the asset; no enhancementof capabilities; typically funded by operating budget

– Refurbish/Rehabilitation– replacement of a component part or parts or equivalent intervention sufficient to return the asset to level of performance above minimum acceptable level; may include minor enhancement of capabilities; typically funded out of capital budgets

– Replace• Without enhancement – substitution of an entire asset with a new or

equivalent asset without enhancement of capabilities• With enhancement - substitution of an entire asset with a new or

equivalent asset with enhanced capabilities

• Non-Asset Solutions

Definitions

21PARSONS / GHD

Failure-mode Based Management Logic

Some failures

Are significant

Some of these

Cannot be prevented by maintenance

Redesign, replaceoverhaul

Program thesefor

maintenance

Repairfailures &monitor

Are notsignificant

Can be prevented by maintenance

Is preventive maintenance

effective?

Run to failure,repair

Yes No

22PARSONS / GHD

Ris

k/Li

kelih

ood

Consequence

High

LowHigh

A

B

C

• What is the likelihood of failure ? (risk)• What is the cost of failure? (consequence)

Determining “Significant” Failures: The Risk – Consequence Trade-off

DRisk/Consequence Relationships Drive Work Program (O&M & CIP)

23PARSONS / GHD

Strategic vs Tactical Levels

Big picture viewLonger time frameAggregated data

Operations viewDay to day perspectiveDetailed asset unit (MMI) view

Treatment optionsOptimal renewal/replacement policies

Decay curvesLife cycle costs

Asset Ops/Maintenance plansFailure analysisAsset functionality statementsCondition-based monitoring

Condition assessmentAsset registry

Asset Management PlansLOSCapEx & OpEx BudgetsRenewal annuities

Strategic Level

Tactical Level

24PARSONS / GHD

The Big Picture

LOS

Cost ofService

Risk -Consequence

Customer Capital Needs

O&MNeeds

Growth (New Assets)Augmentation

System Renewal

System Improvements• Environmental• Levels of Service

MaintenanceProgram

Operations & Admin

25PARSONS / GHD

Executive Mgt

Asset Management Tools

Asset Management Thinking

Performance = “AMORe” Acquire, Maintain, Operate & Repair

Customer Service Demands

Executive Mgt

CapitalAcquisition Operations Maintenance

AM Oriented Structure

26PARSONS / GHD

Better Decisions Produce Real Savings

20% to 30% Future Life Cycle Cost Savings for US Wastewater Utilities

Assessment of Australia’s advanced asset managements practices suggests:

27PARSONS / GHD

OCSD’s AAM Business Case

28PARSONS / GHD

AAM PayoffsReal reduced life cycle costs - better focused (redirected) resources

“Right work, right investment,at the right time, for the right

reasons done right.”

Best “value per dollar spent”

Confidence in decision making

Opt

ion

1

Opt

ion

2

Opt

ion

3

Opt

ion

4

Opt

ion

5

2002

Tod

ay

2005

2015

2025

2030

2035

Treatment options M M RH RP RPDirect Cost 270 72 360 610 630

Indirect Cost 0 10 20 40 130Benefit 200 75 480 780 320

Option Ranking 4 3 1 2 5

Decay Curve

Catastrophic Failure

100% Level of Service

Minimum Level of Service

Benefit/Cost Ratio 0.7 0.9 1.3 1.2 0.42

Poor

Fair

Good

Poor

Fair

Good

Backlog Funding Model

-20

-10

0

10

20

30

40

50

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Renewal Year

Back

log

in M

illio

ns

Base Funding- $550,000 Funding Level 1- 1,050,000Funding Level 2- 1,250,000 Funding Level 3- 1,500,000Funding @ 2% of Construction Cost- 2,516,000

FCI = 10%

FCI = 5%

FCI = 10%FCI = 10%

FCI = 5%FCI = 5%

Poor

Fair

Good

Poor

Fair

Good

Backlog Funding Model

-20

-10

0

10

20

30

40

50

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Renewal Year

Back

log

in M

illio

ns

Base Funding- $550,000 Funding Level 1- 1,050,000Funding Level 2- 1,250,000 Funding Level 3- 1,500,000Funding @ 2% of Construction Cost- 2,516,000

FCI = 10%

FCI = 5%

FCI = 10%FCI = 10%

FCI = 5%FCI = 5%

“Making a business case”

29PARSONS / GHD

Realistic Expectations

Will take several years of

detailed, “nitty-gritty”

work to fully deploy

Will eventually require

“buy-in”/commitment of

the whole organization

Requires “upfront”

investment to get started,

with “hidden” return for

several years

30PARSONS / GHD

The Five Core AM Questions

5. Given the above, what is my best long-term funding strategy?

4. What are my best “minimum life-cycle-cost” CIP and O&M strategies?• What alternative management options exist?• Which are most feasible for my organization?

3. Given my system, which assets are critical to sustained performance?How does it fail? How can it fail? What is the likelihood of failure? What does it cost to repair?What are the consequences of failure?

2. What is my required sustained Level Of Service?• What is the demand for my services by my stakeholders?• What do regulators require?• What is my actual performance?

1. What is the current state of my assets?• What do I own?• Where is it? • What condition is it in?• What is its remaining useful life?• What is its economic value?

Core Questions

core question 1: what is the current state of my...

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