cieam apcc assets condition auditing

© 2008 CIEAM

Best Practice in Integrated Engineering

Asset Management

davisj2

New Stamp

davisj2

Draft

AAMCoG Best Practice

© 2008 CIEAM

The Australian Asst Management Collaborative Group (AAMCoG)

The Australian Asset Management Collaborative Group (AAMCoG) was formed in August 2006 by the CRC for Integrated Engineering Asset Management (CIEAM). AAMCoG is a collaboration of several of Australia’s peak bodies interested in work programmes in asset management. AAMCoG’s mission - “Facilitate collaboration between interested organisations to promote and enhance asset management for Australia”. Members of AAMCoG aim to:-

Collaborate nationally on asset management strategies between all asset management groups

Coordinate transfer of technology and knowledge sharing of asset management R&D Promote skills development in asset management Host the annual National Forum for Asset Management Act as a communication channel between member bodies Inform asset owners/custodians of the critical aspects of whole of life asset

management

For further details, please refer to the AAMCoG Website www.aamcog.com

Acknowledgments

The CRC for Integrated Engineering Asset Management (CIEAM) would like to acknowledge the financial support from the Commonwealth Government’s Cooperative Research Centres Programme and the contributions from our industry, government and university participants. CIEAM would also like to acknowledge the following contributions to this project:

Dr. Fred Stapelberg of CIEAM

Mr Graham Carter of the APCC

This project was undertaken under the guidance of Professor Joseph Mathew chair of AAMCoG and Professor Kerry Brown, Executive Officer, AAMCoG.

Confidentiality

In accordance with Australian freedom of information legislation, all information collected as part of this study will be retained for seven years in a safe and secure environment. Paper-based data will be stored in a locked filing cabinet, and electronic data will be encrypted and stored at CIEAM Head Office, Brisbane.

Disclaimer

AAMCoG members make use of this report or any information provided by CIEAM at its own risk. CIEAM will not be responsible for the results of any actions taken by members or third parties on the basis of the information in this report, or other information provided, nor for any errors or omissions that may be contained in this report. CIEAM expressly disclaims any liability or responsibility to any person in respect of anything done or omitted to be done by any person in reliance on this report or any information provided.

Enquiries Communication Officer/ Jane Davis CRC for Integrated Engineering Asset Management Level 7, O Block, QUT Gardens Point campus GPO Box 2434 BRISBANE QLD 4001

Phone: +617 3138 1471 Fax: +617 3138 4459 Email: [email protected]


© 2008 CIEAM

CONTENTS Page: INTRODUCTION 1 1. Assets Condition Assessment and Analysis 4 2. Assessment Criteria for Assets Condition 16 3. Conducting Assets Inspections and Surveys 21 4. Assets Condition Scoping, Profiling and Modelling 47 5. Assets Health Monitoring and Life Cycle Management 58 6. Assets Life Cycle Analysis and Life Cycle Costing 71 7. Assets Usage Life Cycle and Maintenance Planning 76 8. Assets Maintenance Management and Optimisation 88 9. Establishing Assets Condition Auditing Benchmarks 107 10. Assets Condition Audit and Maintenance Reporting 117 REFERENCES 126

P a g e | 1

© 2008 CIEAM


Introduction Collectively the Commonwealth, State, Territory and Local Government Authorities are the largest owners of built assets in Australia. The replacement value of government assets is over $371 billion and each year over $18 billion is spent on maintenance of the assets. These assets are the major element of governments’ balance sheets and underpin their individual credit ratings. Asset maintenance is therefore clearly a key strategic function that must be properly planned and managed. At present there is no nationally accepted regime for condition auditing and maintenance planning. Asset planning and management is a critical issue for the public sector at all levels of Government. The adoption of a consistent, national model for condition auditing and maintenance planning would greatly enhance understanding of this issue and overcome some of the barriers that often result in inadequate funding being provided for asset maintenance budgets. The whole of Government and individual Government Agency maintenance plans for assets needs to be based on a uniform, cyclical assessment of the actual condition of assets, compared to the desired standard of condition for individual asset portfolios. This assessment program must provides consistent, quantitative and qualitative information relating to asset performance in terms of condition and associated risks. The assessments establish the maintenance necessary to meet the standard, and define the base-line for determining the adequacy and effectiveness of maintenance over both the preceding and subsequent cycles. The basic principles of asset management represent current thinking with national asset owners as well as professional organisations representing asset owners. The principle that: “Government Agencies must report on the usage, maintenance and performance of their assets”, is among the important asset management principles that have been developed by the APCC to enable asset management to be integrated into the mainstream of Government and Government Agency business planning. The APCC considers the inter-relationship between an asset’s physical condition, functionality, and compliance, as criteria for integrated condition auditing and maintenance planning, where: • Physical Condition can be considered the physical state of the asset including

the weather-tightness, structural stability/integrity and security that is required. • Functionality can be considered the way in which an asset has been designed,

modified and/or developed and the extent to which it currently meets the contemporary functional needs of the occupants.

• Compliance can be considered the extent to which an asset complies with statutory design and operational requirements.

The assets condition auditing process defines objectives; prioritises assets for which assets condition assessment and auditing is to be carried out; identifies the asset degradation and failure modes to determine condition and end-of life criteria; provides best practices; analyses and assesses asset condition; and verifies/audits that the asset condition assessment results reflect actual field conditions.

P a g e | 2

© 2008 CIEAM


The overall asset condition auditing plan documents the evaluated condition of the organisation’s assets based on condition criteria and end-of-life criteria that are indicative of the status of the asset’s condition. Condition audits are also conducted to establish the condition of physical assets before any decision is made to purchase (such as pre-acquisition surveys for buildings); to assess degradation after a period of use; and to establish the maintenance condition of physical assets before asset owners commit to major maintenance action and/or lump sum maintenance contracts. When considering condition assessments in the assets condition auditing process, it is important to understand the differences between defect maintenance management and regular maintenance planning for assets preservation in contrast to long term maintenance planning for assets rehabilitation. It is this assessment of assets condition in the assets condition auditing process that will provide the appropriate types of assets maintenance, particularly in planning regular maintenance for assets preservation compared to long term maintenance plans for assets rehabilitation. Assets condition assessment is an essential part of managing physical assets. Condition assessment of physical assets can be defined as the technical assessment of the operational and physical conditions of an asset, using a systematic method designed to produce consistent, relevant and useful information. A principal objective of condition assessment is to provide sufficient information on the condition of physical assets for strategic assets planning decision-making in order to capitalise and depreciate physical assets based on residual value, rather than expense them against earnings. Condition assessment assists in reporting changes in physical asset service levels, identifying candidate assets for renewal treatment, selecting the optimum renewal treatment and as an input into modelling of future condition and service levels and funding scenarios. Condition assessment procedures are intended to measure asset degradation, the criticality of the degradation, and asset remaining life. Condition assessment is also often used to assess the useful life of physical assets. Whilst common condition indicators have been in existence for some years, converting these indicators to verifiable remaining life and overall useful life remains a significant difficulty and a source of major variations in practice. Many of the mechanistic models upon which estimates of remaining life of physical assets are based, are far from perfect because of the lack of reliable data available to validate these models. Condition assessment however can be a reliable tool for determining the remaining life of physical assets, where the assets are nearing the end of their life. An understanding of the failure as well as degradation processes of physical assets is necessary to establish sensible condition assessment criteria and to define asset remaining life. The condition assessment process for physical assets should, as a minimum, rate asset operational and physical condition, determine the risks associated with continual usage of an asset in such condition, and identify the type of maintenance needed to retain or restore an asset’s required condition. Condition assessment results, together with asset functionality, utilisation and cost considerations, are used to support a wide range of strategic assets planning decisions particularly in relation to assets operational and physical function performance and assets maintenance strategies.

P a g e | 3

© 2008 CIEAM


An assets condition survey or condition auditing, is a systematic process of evaluating the condition of physical assets. This is to establish whether the physical assets are capable of continually supporting service needs and statutory requirements in the medium and long term. Surveys are also conducted to assess the ability of physical assets to satisfy internal expectations and external benchmarks. An objective of assets condition surveys is also to establish any remedial action required to bring physical assets up to the expected conditions (such as modifications, refurbishment and replacements), to identify their relative priorities and to propose a programme of maintenance action. Assets condition surveys help to plan for the necessary resources to maintain the assets before any functional failure might occur. The assets condition assessment planning process defines objectives; prioritises assets for which assets condition assessment is to be carried out; identifies the asset degradation and failure modes to determine condition and end-of life criteria; provides industry practices; analyses and assesses asset condition; and verifies/audits that the asset condition assessment results reflect actual field conditions. The overall asset condition assessment plan documents the evaluated condition of the organisation’s assets, based on condition criteria and end-of-life criteria that are indicative of asset condition and consistent with industry practices. When considering assets condition assessment, it is important to understand the differences between defect maintenance, as well as routine and preventive maintenance, especially for assets repair, preservation, rehabilitation or replacement. Defects are usually well defined and associated with failed or defective components that affect the use and reliability of the asset well before its end-of-life. These do not normally affect the life of the asset itself, if detected early and corrected. Defects are regularly identified during inspection and dealt with through maintenance activities to repair or replace failed components to ensure continued effective use of the asset. Long term degradation is generally less defined and is not easily determined by routine inspection. The main purpose of asset condition assessment is to detect and quantify long-term degradation and provide some means of quantifying remaining asset life. This includes identifying assets that are of high risk or at their end-of-life, that will require major capital expenditure to either refurbish, replace, or eliminate altogether. Condition assessment procedures are intended to measure asset degradation, the criticality of the degradation, and the remaining asset life. A reasonable understanding of the degradation and failure processes is required to establish sensible assessment criteria or to define appropriate end-of-life criteria.

P a g e | 4

© 2008 CIEAM


1. Assets Condition Assessment and Analysis

Condition Assessment of Physical Assets Condition Assessment of physical assets can be defined as the technical assessment of the operational and physical conditions of an asset, using a systematic method designed to produce consistent, relevant and useful information. A principal objective of Condition Assessment is to provide sufficient information on the condition of physical assets for strategic assets planning decision-making in order to capitalize and depreciate infrastructure assets based on residual value, rather than expense them against earnings. Condition Assessment procedures are intended to measure asset degradation, the criticality of the degradation, and asset residual life. An understanding of the failure as well as degradation processes of physical assets is necessary to establish sensible Condition Assessment criteria and to define asset residual life. The Condition Assessment process for physical assets should, as a minimum, rate asset operational and physical condition, determine the risks associated with continual usage of an asset in such condition, and identify the type of maintenance needed to retain or restore an asset’s required condition. Condition Assessment results, together with asset functionality, utilisation and cost considerations, are used to support a wide range of strategic assets planning decisions particularly in relation to assets operational and physical function performance and assets maintenance strategies. Attributes of Assets Condition: There are a number of attributes that are used to assess the condition of physical or tangible capital assets, such as (PSAB, 2007):

• Physical condition - the condition of an asset that enables it to meet intended service or operational levels. The physical condition of a tangible asset can be compared to its ability to meet original design standards. The assessment of the condition of a physical asset should reference its operational and physical characteristics and technical, engineering and other specifications. It should also take into consideration the asset’s durability; the quality of its design and manufacture / construction; its use; and the asset’s design maintainability and adequacy for required maintenance.

• Demand/capacity - the capacity of the asset to meet existing application requirements. Demand/capacity is related to asset performance. Measuring this attribute would involve establishing subjective baseline service or operational levels against which to measure actual performance. The demand/capacity attribute brings into scope the asset’s efficiency and effectiveness measures.

• Functionality - the ability of the asset to meet service or operational delivery requirements. Functionality is closely aligned with the asset’s whole-of-life performance measures such as early life, useful life, and wear-out or residual life operational performance.

P a g e | 5

© 2008 CIEAM


It is recognized that none of these attributes are mutually exclusive. For example, physical condition may have an impact on an asset’s ability to meet service or operational delivery requirements. Benefits and Risks of Condition Assessment: There are definitive benefits or risks in performing effective or ineffective condition assessment of physical assets. These are (SAM, 2007): • Benefits - The benefits of performing effective condition assessment include;

the adequacy of existing maintenance and capital funding can be established and evaluated;

asset condition trends can be analysed; asset condition can be reported to Government in a consistent format; maintenance programs can be effectively targeted and prioritised; current maintenance liabilities and emerging maintenance requirements can be

identified and quantified; the effectiveness of prevailing maintenance strategies can be assessed and

adjusted if necessary; strategic asset planning processes can be enhanced by information on future

liabilities.

• Risks - The risks associated with non-performance or ineffective condition assessment include;

declining asset condition is not identified and addressed; maintenance planning is not related to asset needs; asset condition cannot be adequately reported; deferred maintenance liability and provisions for future maintenance

requirements cannot be reported in financial statements; maintenance demand is not properly identified; poor quality of data leading to poor decision-making; serious deficiencies can be overlooked; information gathered on asset condition could be misleading; resources are not used effectively.

The Assets Condition Assessment Process: A whole-of-government Maintenance Management Framework (MMF) has been introduced in Queensland, from the second half of 1999. The MMF has established a framework for the maintenance of government assets (i.e. buildings) to ensure consistency in the planning, implementation and reporting of a physical Assets Maintenance Plan. The whole-of-government reporting mechanism is based on input from public assets maintenance performance which flows through to maintenance policy, standards and strategy setting; maintenance strategic planning; and maintenance implementation. Condition assessment, along with budget allocation, stem from the policy, standards, planning and strategy framework, to make up a maintenance works program.

P a g e | 6

© 2008 CIEAM


Figure 1 illustrates the Maintenance Management Framework (MMF) flow diagram.

Figure 1. Maintenance Management Framework Flow Diagram (SAM, 2007)

The condition assessment process can be separated into a series of four phases aimed at providing useful information on the physical condition of an asset. The phases are interrelated and the success of each phase impacts on, and contributes to, the success of succeeding phases. Figure 2 illustrates the four phases of the condition assessment process.

Figure 2. The Four Phases of the Condition Assessment Process (SAM, 2007)

Define Condition Assessment Objectives: Defining the objectives of condition assessment is essential in providing a clear direction for the assessment process. Government Agencies need to have a clear understanding of why the assessment is being undertaken, and how the findings are intended to be used.

P a g e | 7

© 2008 CIEAM


This will allow the outcomes and specific outputs of the assessment process to be properly defined. Well defined assessment objectives will assist in determining;

the type of information required the level of accuracy necessary the assessment method to be used the frequency with which data should be collected the manner in which the assessment will be conducted.

Condition data can be expensive to collect and manage, and has a limited useful life. Therefore, only data essential to the assessment objectives should be collected. Define Condition Assessment Standards:

Government Agency core service strategies enable asset service requirements and future service potential to be determined. Performance standards for an asset can then be established based on the significance that an asset has in supporting core business.

Factors such as criticality, utilisation and functionality are key considerations in determining asset performance standards. Once a performance standard for an asset is

determined, a corresponding minimum standard for asset condition can be defined. Planning for Condition Assessment: Condition assessment is generally a planned activity, involving a number of persons in a systematic review of a physical asset that has been identified for assessment. Planning for condition assessment of physical assets usually includes a determination of the assets to be initially inspected and the inspection intervals. The objectives of the assessment and the type of asset will determine the approach to be employed and the items that need to be inspected. Assets Condition Inspection: Asset inspection is the primary activity undertaken as part of a condition assessment. The level of detail and accuracy of information that can be obtained from an inspection can vary depending on the assessment method used. Assessment methods can range from a survey, which provides fairly broad information, to a detailed audit, which provides a more comprehensive level of detail. The depth of asset inspection will be guided by the assessment objectives and resources available. The assessment method chosen should produce the outputs required as per the objectives, deliver consistent results, and be cost effective. Some of the key activities that need to be considered when planning for assets condition inspection are;

allocating sufficient and appropriately skilled resources; reviewing the asset register, drawings, manuals, etc and outstanding

maintenance tasks; consulting the asset occupants to arrange access at an appropriate time; determining how inspection will be carried out; selecting an appropriate data collection method; choosing the method for data processing and analysis.

P a g e | 8

© 2008 CIEAM


Items to be inspected - Where funds are limited and an indicative assessment is required, a survey of an asset can yield quick results without a detailed inspection of individual components. However, in many instances, assessing the condition of an asset will be more manageable if an asset is broken down into smaller components. The level to which an asset may need to be broken down will depend on the degree of accuracy and detail that needs to be achieved. Items that would normally be individually assessed can be broadly grouped into the physical asset structure and constituency; related support services (electrical, mechanical, hydraulics, etc.); and related infrastructure support/services. These items can then be individually inspected, assessed and the results aggregated to give an overall indication of asset condition. The Cost Control Manual of the Australian Procurement and Construction Council (APCC), formerly known as the National Public Works Council, provides an accepted industry standard for the breakdown of an asset into elements and sub-elements and may be used for this purpose. Conducting trials on sample assets can be a useful means to test proposed inspection and assessment techniques. Results can be compared for quality and consistency, and techniques reviewed if necessary. Inspection intervals - If a number of assessments are to be undertaken over time, an initial inspection should be undertaken as early as possible in the life of an asset, to determine a baseline condition which can be used as a reference point for future comparisons. The interval between subsequent inspections, which can be used to reveal a trend in asset condition over time, needs to be carefully planned. The inspection interval needs to ensure that inspections capture any significant changes in asset condition before they can impact on asset performance. Factors that can affect the required interval include;

complexity; age; location; environmental factors; asset usage.

Government Agencies should formulate asset inspection requirements, taking the above factors into consideration. Since the data from inspections may be used for maintenance work programs, asset life cycle planning, assets strategic planning, assets usage logistic support, as well as reporting requirements, an asset should be assessed on a cyclical basis which supports these needs. Assets Condition Assessment Surveys: A survey usually involves a broad appraisal which produces a relatively fast scan of asset condition. It is generally used where a quick result is required, funding is limited, and assets are less complex. The inspection can be carried out by technical or non-technical personnel. A survey can be conducted using a questionnaire process in which asset occupants or appraisers provide feedback, particularly about the state and maintenance needs of assets. The results of the survey can then be analysed. However, caution is required when using the results of this approach due to the limited depth of the inspection. Survey results can be subjective and inconsistent according to the varying interest and expertise of the respondents.

P a g e | 9

© 2008 CIEAM


Assets Condition Assessment Audits: An audit is a more structured inspection approach which provides consistent, quantitative and qualitative information relating to asset performance in terms of condition and associated risk. The audit involves a detailed appraisal of an asset by competent qualified personnel. Detailed audits are recommended where an asset is complex or when comprehensive information is required. An audit of a complex asset is normally carried out by assessing an asset’s individual elements. Elements are inspected and their actual condition relative to the desired condition standards is then reported in detail. Any deficiencies in asset condition, together with the associated risks, can then be evaluated. Assets Condition Rating: Inspections should be performed to enable a rating for asset condition to be applied. The rating provides an indication of the gap between actual asset condition and that which has been specified. In the case where the condition assessment findings are to be used in the development of an asset maintenance program, the following information should be collected;

the presence of any defect (existing or potentially arising within the period of the maintenance plan, usually three to five years);

the nature of the defect; the location of the defect; how the defect should be corrected (e.g. adjust, repair, replace etc.); the quantity of corrective work (for estimation and specification purposes); the remedial cost for each defect; when the defect should be addressed (i.e. immediately, or when required).

Assessing the Risk of Asset Condition: The direct risks associated with asset condition should also be assessed. This assessment should be based on both the likely impact and the probability of an event occurring as a direct result of asset condition. The need to bridge the gap between existing and desired conditions can then be considered, taking into account the risks associated with leaving an asset to remain in its existing condition. A risk rating is assigned based on an assessment of the risks resulting from the condition of the asset inspected. Risks that must be considered include those that relate to workplace health and safety; security; functionality; financial impacts (including cost of consequential damage); and legal exposure. Condition Assessment Standards: Condition Assessment initially includes a physical inspection of the asset equipment (sub-systems, assemblies and components) using specialised NDT tools such as ultrasonic and laser techniques as well as magnetic field measurements that produce data describing the condition of the equipment providing evidence of various types of wear or damage on a macro- and micro-scale. The data is usually analysed to characterise the variability of operating parameters such as potential, flow, temperature, pressure or capacity fluctuations, from which related physical damage can be assessed.

P a g e | 10

© 2008 CIEAM


Condition Assessments are fundamentally evaluations of a physical asset’s service or operating inefficiency, evaluation of asset equipment damage, and prediction of asset residual life. This includes a determination of what possibly caused the operational inefficiency or physical damage; what exactly the damage is and through which mechanisms the damage developed; if the asset equipment has not yet failed, then what the estimated residual life would be, considering a specific damage mechanism; and what operating recommendations would prevent damage in the future, or allow continued operation in the short term. Condition Assessments also include engineering evaluation of the physical condition of an asset’s equipment in which a flaw has been detected. The focus of such an evaluation is to determine if the asset’s equipment can continue in service, and if so, for how long. Industry standards such as API 579-1/ASME FFS-1 specify a quantitative procedure for determining ‘fitness-for-service’ (FFS) of different types of industrial asset equipment, however not all equipment are covered by such standards. In cases where no standards exist, a semi-quantitative or qualitative approach to residual life prediction is used to determine whether the equipment could continue in service (API, 2007). Assessment methods and procedures in Standard API 579-1/ASME FFS-1 can be used for ‘fitness-for-service’ assessments and/or re-rating of asset equipment designed and manufactured/constructed to recognised codes and standards. The Standard has broad application since the assessment procedures are based on allowable stress methods and plastic collapse loads for non-crack-like flaws, as well as applying the Failure Assessment Diagram (FAD) approach for crack-like flaws. Fitness-for-service assessment procedures cover both the present integrity of an asset’s equipment, given a current state of damage, and the projected remaining or residual life. The assessment procedures in the Standard can be used to evaluate flaws commonly encountered in pressure vessels, piping and tankage. Assessment techniques are included to evaluate flaws including general and localised corrosion; widespread and localized pitting; blisters and hydrogen damage; weld misalignment and shell distortions; crack-like flaws including environmental cracking, laminations, dents and gouges; and remaining life assessment procedures for components operating in the creep range. In addition, evaluation techniques are provided for condition assessment of asset equipment including resistance to brittle fracture, long-term creep damage, and fire damage. The procedures are not intended to provide a definitive guideline for every possible situation that may be encountered. However, flexibility is provided in the form of an advanced assessment level to handle uncommon situations that may require a more detailed analysis. The Standard API 579-1/ASME FFS-1 is intended to supplement and augment the requirements in the following standards;

API 510 - Pressure Vessel Inspection Code; API 570 - Inspection, Repair, Alterations and Re-rating In-Service Piping

Systems; API 653 – Tanks Inspection, Repair, Alterations and Reconstruction;

Post construction codes that reference FFS evaluations such as NB-23.

P a g e | 11

© 2008 CIEAM


Record, Analyse and Report Findings: Recorded data needs to be appropriately stored where it can be readily accessed for analysis, planning and reporting purposes. A suitable method for recording the data would have been established in the planning phase. There is increasing use of electronic devices which enable data transfer to occur quickly and accurately. Data should be stored within a management system capable of handling the quantity of information to be collected both at time of inspection and in the future. If assets condition assessments are being carried out by different persons, particularly in different geographic locations, it is important that data collected is checked for consistency, and any variations or discrepancies rectified. The objectives of the condition assessment will determine the type of data analysis to be undertaken. Examples of analyses include:

• Statistical analysis of condition ratings to identify an average condition across a portfolio of assets, and the range from worst to best condition

• Sorting of data into particular categories, e.g. asset location or type, to enable comparisons to be made

• Analysing condition trends over time to assess the effectiveness of maintenance strategies, detect asset deterioration, or evaluate the adequacy of works program budgets

• Prioritisation of identified remedial works to enable the development of works programs (e.g. maintenance, capital improvements, refurbishment, etc).

Presentation of the assessment results should focus on establishing a priority of the works. Priority ranking should result in works with the greatest deviation between desired and actual condition and the largest risk being allocated the highest priority. Condition assessment findings can be reported on and used in a range of strategic asset planning and management processes. For example, findings are used in the development of maintenance plans, capital investment strategic plans, disposal plans, and in asset portfolio planning. Condition Assessment Performance Measurement: Condition assessment plays a crucial role in the strategic management of assets. It is important therefore that the performance of the assessment is evaluated against predetermined performance indicators. Some useful indicators are;

achievement of condition assessment objectives; cost of assessment, including any variations from expected costs; time taken to complete assessment against projected time frame; quality of information gathered, including accuracy and consistency; disruptions or inconvenience to building occupants; level of building occupant input into assessment.

P a g e | 12

© 2008 CIEAM


Analysis of Assets Condition Assessment Attributes of Assets Condition: There are a number of attributes that may be used to analyse condition assessments of physical (tangible) capital assets, such as (PSAB, 2007):

• Physical condition — the condition of an asset that enables it to meet intended service levels.

• Demand/capacity — the capacity of the asset to meet existing service requirements.

• Functionality — the ability of the asset to meet program delivery requirements.

It is recognised that none of these attributes are mutually exclusive. For example, physical condition may have an impact on an asset’s ability to meet service and program delivery requirements. Analysis of Physical Condition Assessment of Tangible Capital Assets: Reporting on physical asset condition is useful information that is currently missing from financial reports. It will assist in drawing conclusions about the effect that funding of maintenance and renewal is having on the overall physical condition of tangible capital assets. It is also the first step to drawing conclusions about the management of resources and future revenue requirements to maintain, renew and replace tangible capital assets, and the affordability and sustainability of services. The benefits of performing physical condition assessments on tangible capital assets are that it;

provides information for assessing the adequacy of existing maintenance, renewal and replacement funding;

provides information for the analysis of asset physical condition trends; reports on asset physical condition in a consistent format; assists in targeting and prioritising asset management strategies; provides information for identifying and quantifying maintenance, renewal

and replacement requirements; allows for assessment of the effectiveness of asset management strategies; provides information for strategic asset planning processes.

The physical condition of a tangible capital asset can be compared to its ability to meet original design standards. Examples of assessments of physical asset condition are typical for infrastructure assets. An assessment of the physical condition of infrastructure assets form part of expense budgeting and costing of capital assets. Subjectivity of physical condition assessment will be reduced and consistency and comparability improved when based on a detailed physical inspection using standardised, clearly defined methodology, pre-defined defect conditions, and measurement scales to determine physical impairment of the tangible capital asset.

P a g e | 13

© 2008 CIEAM


Analysis of the asset condition assessment should be reliable and verifiable. Reliable and verifiable analysis can be replicated to produce similar results, whereby concurrence of the data is achieved with a reasonable degree of precision. Evaluation of an asset’s physical condition should be completed with specific knowledge of the asset, its performance capacity, and the expectations for its continued performance. Analysis of an assessment of the physical condition of a tangible capital asset should be completed by reference to physical characteristics and technical, engineering and other specifications of the asset. Such analysis should take into consideration;

the quality of its design and construction; the asset’s durability versus use or pattern of usage; the adequacy of maintenance that has been performed.

It may not be possible to complete a physical examination of all tangible capital assets. For example, it is not always possible to physically examine sub-surface pipes. However, physical condition could be based on a combination of age, construction materials and methods, breaks per kilometre, geological and soil conditions, etc. Whatever predictive tool is used, a standardised, clearly defined methodology with pre-established logical relationships between attributes and predicted condition assessment should be employed. The results should be defensible using industry standard best practice to predict asset conditions where they exist. Physical Condition Assessment Scores: Appropriate condition indicators can be developed for each type of asset equipment. Condition indicators are qualitative scores based on tests, measurements, and inspections that are performed during the condition assessment process. Results are combined into a Condition Index with a scale of 1-10. Mid-to low-range values may trigger actions such as a repair or physical condition evaluation. Such an evaluation includes in-depth, non-routine tests that may be invasive and/or require specialised equipment and expertise however, when performed, physical condition evaluation adds confidence to the assessment results and conclusions. These results are used to adjust the Condition Index score (either up or down). Figure 3 shows a typical Condition Index score chart with suggested action (HAMP, 2006).

Figure 3. Condition Index Score Chart

P a g e | 14

© 2008 CIEAM


Demand/Capacity Analysis of Tangible Capital Assets: Demand/capacity analysis is related to asset performance. For example, a bridge may be in good physical condition, but is causing traffic congestion and delays during rush hours because the current volume exceeds the bridge’s original design capacity. Measuring this attribute would involve establishing subjective baseline service levels against which to measure actual performance. Acceptable service levels can be influenced by government policy making it difficult to establish consistency in performance measures. As a result, it would affect the comparability of information and consistency in reporting about asset condition. The demand/capacity analysis attribute may also bring into scope efficiency and effectiveness measures. For example, it might include information about how an existing water treatment plant is working compared to new water treatment technology. Functionality Analysis of Tangible Capital Assets: Functionality analysis is often excluded from the scope of reporting on the condition of assets. Functionality is closely aligned with asset usage measures. It is related to issues such as whether or not tangible capital assets are meeting user expectations. Such usage expectations are typically found in public transport and public facilities (i.e. crowded public transport systems or waiting times in hospital emergency rooms). Analysing these attributes would be based on acceptable service levels. Some expectations of public infrastructure assets service could be over-optimistic and unsustainable and governments would need to manage the expectations of the public. It would thus be difficult to establish consistency in asset usage quality measures. As a result, it would affect the comparability of information and reporting consistency of assets condition. Assets Performance Analysis: Protecting service delivery potential and addressing health and safety concerns are priorities when making decisions about asset use and maintenance. It is very important, therefore, that asset performance be appropriately reviewed and evaluated to verify that required outcomes are being achieved. The results of any performance assessment need to be reported to management to identify any actions to be taken; and to comply with the ongoing reporting requirements of Government, as well as with corporate, business and asset planning processes. In addition to the asset’s usage ability as a result of its physical condition, there are a number of measures used to analyse the assessment of asset performance, specifically utilisation and functionality. The following paragraphs describe the usage ability as a result of physical condition, utilisation and functionality of physical assets as measures to analyse the assessment of asset performance (VAMS, 2006). Usage Ability as a Result of Physical Condition: An asset should be able to be used safely and effectively. This means that it needs to be maintained in a condition that is adequate for the purpose for which it is intended, and that it complies with the relevant health and safety standards. If this is not the case, the asset's ability to deliver services to the level and standard required will be compromised. Physical condition assessments provide important inputs for compliance with legislation and in planning for asset maintenance.

P a g e | 15

© 2008 CIEAM


A proper condition assessment of an asset will involve: • Setting the required condition of the asset relative to its service delivery needs • Inspecting the asset and comparing its condition with that required • Forecasting the future condition of the asset.

Utilisation of a Physical Asset: Asset utilisation is a measure of how intensively an asset is being used to meet the entity's service delivery objectives, in relation to the asset's potential capacity. To assess utilisation, criteria and benchmarks appropriate to the services being delivered and to the class of asset being considered, firstly need to be established. The criteria should have regard to:

• The value of the asset’s unit of service potential that is being used relative to the units of service being delivered (e.g. the future economic benefit)

• The physical measures of asset capacity relative to the units of service being delivered (e.g. floor space relative to the type of activity)

• The use being made of the asset relative to the optimal availability for the type of asset (e.g. the number of hours used relative to the hours available).

The utilisation criteria should be based, wherever appropriate, on best practice data as well as on the results of analyses undertaken either by the entity or elsewhere in the private and public sectors. Under-utilised assets should be identified, and the reasons for this examined. It may be, for example, that the asset is no longer effective in performing the activities required of it or that it is in less than optimum condition. It may also be that the need for the services it delivers or supports has reduced. The following examples illustrate some of the technical reasons for under-utilisation;

physical constraints; technological obsolescence.

Action should be taken either to improve the asset’s utilisation or to redeploy it (provided that service delivery needs can be met by alternative means). Where asset utilisation is low, entities should consider whether the cost of holding the asset exceeds the cost of transferring the services it delivers, and whether there is a more economical way of delivering the services. Alternative or additional uses of assets should also be considered. The utilisation of each asset should be reviewed annually. Functionality of a Physical Asset: The functionality of an asset is a measure of the effectiveness of the asset in supporting the activities to be carried out. To assess (and monitor) functionality, it is necessary to determine:

• The role that the asset plays in achieving service delivery outcomes • The functional characteristics required to support specified activities.

The functionality of assets should be regularly reviewed. This will enable any significant impacts on services to be identified. It will also allow timely changes to be made to improve both service delivery and functional standards. Furthermore, the results of regular functionality reviews are used in the formulation of asset strategies.

AAMCoG Best Practice P a g e | 16

© 2008 CIEAM

2. Assessment Criteria for Assets Condition

Asset Physical Condition Assessment Methodologies There are numerous methodologies to assess asset physical condition in use today by engineers and asset managers for most long-lived tangible capital assets that are of great value in managing tangible capital assets. Generally, they have developed to the point that consistent methods and measurement scales can be used to assess condition on a reliable and consistent basis. The objective is selecting a method of measuring asset physical condition that will indicate whether tangible capital assets are being preserved so that they continue to provide a service and achieve expected life. Condition assessments should be based on generally accepted methods and standards and consistently applied. Methods of measurement should be an easy-to-understand reference that can be updated regularly to track the results of an organisation’s asset management strategies. It should also allow users to predict the status of assets into the future, based on current asset management policies. Characteristics of a good condition assessment methodology may include;

(a) use of standardised indicators to identify deficiencies; (b) recording of deficiencies in terms of severity and frequency; (c) prompts for the inventory and inspection process ensuring that all pertinent

data is collected, guiding the inspector through each step of the process; (d) predefined measurement scale for each type or category of asset (for example,

calculating a numerical condition index on a numerical scale of zero to 100); (e) utilization of knowledgeable inspectors with well-documented inspection

procedures; (f) predetermined inspection schedules for tangible capital assets (components,

subsystems or networks). Different condition assessment methodologies may be used for major categories. The asset condition assessment methodology does not have to be consistently applied across all categories of assets. Organisations should provide information about the condition assessment methodologies used and the relevant measurement scales. The information may include a description of the methodologies used in the assessment of the physical condition of tangible capital assets, the general acceptance of assessment methodologies used, the qualifications of evaluators and the description of asset management systems that may be used. Once methodologies and measurement scales have been determined, it is desirable but not required, that methods and standards be applied consistently from period to period. Consistency in application is important when comparing assessments of tangible capital assets between periods or at different points in time. Consistency helps prevent misconceptions that might result from the application of different methodologies and measurement scales in different periods. When a change of methodology or measurement scale is deemed to be appropriate, disclosure of the effects of the change is necessary to maintain comparability. Any


© 2008 CIEAM

changes should be described, including the reasons for the change and the implications of such a change. Where possible, prior period assessments would be restated for consistent comparison or differences between current and previously reported assessments must be clearly articulated. Assessment of the physical condition of tangible capital assets relies heavily on management’s judgment as to the acceptable level of service. It involves a determination of the condition level at which tangible capital assets must be preserved in order to meet the acceptable level of service. At present, there are no standards that provide a basis for assessing the condition level at which assets begin to lose future economic benefit or service potential, and consequently it would be difficult to ascertain whether the pre-established level selected is appropriately representative. Assessment of the physical condition of tangible capital assets would require obtaining expert assistance from internal or external sources. The physical condition should be measured using the expert’s best estimates based on assumptions that reflect the most probable asset physical condition. When a material change in an assessment of tangible capital assets is reasonably possible in the near term, the organisation should provide information about the nature and extent of uncertainty. Disclosure of the nature of the measurement of uncertainty should include a description of the circumstances giving rise to the uncertainty, and relevant information about its anticipated resolution. Assessments of tangible capital assets should include any additional evidence provided by subsequent events occurring after the reporting date. Other relevant information that should be provided includes;

(a) a description of the key assumptions used in preparing the assessment of physical condition and whether the assumptions are susceptible to change;

(b) an explanation of the changes made to past assumptions used in previous assessments of the physical condition;

(c) information about the effect of a change in the underlying assumptions used to prepare the assessment of physical condition; and

(d) the sensitivity of the assessment of physical condition to changes in the assumptions used and the reason for the sensitivity.

The organisation should provide information as to what has been done to ensure the reliability of the assessment of the physical condition of tangible capital assets. Information about reliability may be integrated throughout the Assets Condition Assessment report. Reliability may be demonstrated by including descriptions of asset management systems, the general acceptance of assessment methodologies used, and the qualifications of evaluators. The organisation should also provide a discussion of limitations of assessments and any gaps in the information used for assessing assets.


© 2008 CIEAM

Additional Information on Assets Replacement Costs: Organisations may choose to provide information on the current replacement cost of tangible capital assets by category. Current replacement costs represent the amount in today’s money necessary to acquire, develop or construct assets similar to those already owned. Information on tangible capital asset replacement costs gives users a benchmark against which to assess the total replacement costs of all assets relative to the amount being invested in maintenance, renewals and replacements. It also gives users an estimate of the total replacement costs of assets in relation to historical cost. Organisations should acknowledge that the replacement costs do not represent a need to replace all assets in any one particular year. The provision of a replacement value on all assets has limitations in meeting the information needs of users. Because of the longevity of infrastructure assets, it is difficult to make accurate projections of replacement values. For example, new infrastructure assets can last up to 75 years or more. Replacement values are a snapshot at a particular point in time of the total current value of tangible capital assets. The provision of replacement values does not provide users with any indication of the timing of renewal and replacement expenditures or the effect it will have on future revenue requirements. It is, however, good practice for organisations to determine replacement costs for internal management and planning purposes. Summary information should be presented for each major category in tabular form. Organisations may choose to provide financial information about the tangible capital assets deficit/debt/gap. The information should include:

(a) a definition of the tangible capital assets; (b) details of the types of expenditures included in the calculation of the tangible

capital assets deficit such as (i) deferred maintenance and renewal to bring existing tangible capital assets

back to desired condition (ii) replacement of existing assets (iii)enhancing functionality of existing assets (iv) increasing capacity of existing assets (v) meeting new environmental standards (vi) new assets to meet growth service requirements

(c) minimum or expected service levels; (d) minimum or expected asset condition levels required to meet service levels; (e) period over which the tangible capital assets deficit is calculated; (f) measurement methodology.

Computer programs exist that can assist in asset condition assessment information. For example, computerised maintenance management systems provide information to manage work orders, store inventory and preventive maintenance schedules. Condition assessment survey systems help identify the existing condition of various components of tangible capital assets and produce benchmarks for comparisons and projecting repair and replacement costs. Facility condition assessment systems help organizations plan and prioritise the renewal of physical assets using life cycle planning principles.


© 2008 CIEAM

Asset Condition Assessment Plans Organisations may choose to provide details of assets condition in any asset management plan that may exist. Information in such plans may include:

(a) assets strategic plans with directions to be taken, given factors such as needs assessments and growth expectations;

(b) asset tactical plans, given the existing deployment of resources; (c) long-term financing needs, including determining whether additional

resources are needed; (d) operational plans which would include life-cycle costing together with

estimates of useful life, required maintenance and timing of major repair and replacements;

(e) condition assessments for identifying performance, funding requirements; (f) any business risk associated with deteriorating tangible capital asset condition.

Providing Required Asset Condition Levels: Determining what constitutes acceptable asset condition may vary both across organisations as well as for different types of tangible capital assets held within an organisation. It may not be either possible or desirable to maintain assets in perfect condition. It may therefore be useful for users to understand management’s targets for physical condition of tangible capital assets by major category. An organisation may establish the minimum or target condition level for each asset category against which actual condition assessment measures can be compared. This will give users access to information that will allow them to determine whether assets are being preserved at the target condition level established by the organisation. Organisations may also provide the minimum or expected condition level for each asset category. The assessment of the physical condition and life expectancy of tangible capital assets should be included in the Asset Condition Assessment Plan report. Assessments should be done as close to the related reporting date as is practical. Most organisations may not perform detailed assessments of physical condition annually on all categories of tangible capital assets because of the magnitude of the information gathering and processing required. An organisation may choose to complete a detailed assessment on major categories of tangible capital assets on a cyclical or rotational basis. It may decide to do annual assessments on critical assets and cyclical assessments on other assets. Tangible capital assets may be regarded as ‘living’ assets in that they change over time due to various factors, and therefore assessments presented in the report should be updated on an ongoing basis to provide information about effects of these factors between assessments. It is important to provide new information, not just reproduce previously completed assessments. In the years between actual assessments of physical condition, an extrapolation of the previous assessments of physical condition could be used to provide an assessment as at the current reporting date. Each year, an organisation should consider the effects of factors such as age, maintenance and renewal policies, expenditures, utilization, etc., on the physical condition of tangible capital assets and determine adjustments required to update previous assessments.


© 2008 CIEAM

For example, asset management systems may be used that can extrapolate the current physical condition of assets at the reporting date by taking into account factors such as previously completed assessments, expenditures since the previously completed assessment, maintenance records, utilization and age. An organisation should provide information about which assets have been assessed in the reporting period, the rationale for, and frequency of, the assessments of physical condition. Where an actual assessment of physical condition has not been completed in the period, a discussion of the basis upon which previous assessments have been updated, and the changes in the previous assessments resulting from new information, should be included. For example, the discussion may provide information on the impact that expenditures have had on the overall asset physical condition assessment. Where an actual assessment of physical condition has not been completed and it is impractical to update previous assessments, an organisation should provide information about the most recent assessment. The level of assessment does not have to be consistent for all categories. For example, an organisation could provide detailed assessments of physical condition on categories of tangible capital assets that are critical to providing essential services while completing only minimal assessments to satisfy management and reporting needs on assets that are of minor significance to attainment of the objectives and goals of the organisation. An organisation should provide the basis and rationale for which categories they are providing assessments. An organisation may not have sufficient information on all of its major categories to complete an assessment. This does not negate the need for the organisation to provide an assessment on all major categories of tangible capital assets judged critical to the provisions of services and programs. In a situation where the organisation does not have the data, it should provide information on its plans to complete an assessment on all major categories of assets. The level of detail disclosed in the assessment of tangible capital assets should reflect the highly aggregated nature of summary financial statements. In deciding the level of detail to disclose about an assessment of the physical condition of tangible capital assets, an organisation should consider the usefulness of the information to the user in assessing the condition of tangible capital assets. The initial assessment of the physical condition and life expectancy of tangible capital assets will require considerable effort. In addition, while the recommended practices are equally applicable to organisations of varying sizes, the capacity of an organisation to apply the recommended practices will vary. Therefore, it is anticipated that the assessment of physical condition and life expectancy of all major tangible capital assets will be achieved over time. Organisations should provide the information for those categories of tangible capital assets for which assessments have been done. Organisations should also provide information about those categories for which an assessment has not been completed, whether or not an assessment is planned and the timing of reporting.


© 2008 CIEAM

3. Conducting Assets Inspections and Surveys

Assets Condition Inspections Identifying Asset Categories: Assigning the appropriate asset category prior to conducting assets inspections is designed to achieve consistent and comparable results. The method can also be used in cases where there is still uncertainty as to the appropriate category for a particular asset or class of assets. A checklist is used to identify key elements critical to the successful functioning or operation of a physical asset. Table 1 shows a table of typical physical infrastructure assets categories as applied in the public sector.

Table 1. Physical Infrastructure Assets Categories in the Public Sector (VSG, 1996)

Asset Category Description

1 (Superior) Assets of national significance that are critical to state functions; that is, key national and state infrastructure, and heritage assets that are national icons. · major national highways · major dams and bridges etc.

2 (High) Key assets with major state significance; key heritage assets; and assets that must meet very rigorous special requirements. · major infrastructure such as main sewers, national railway lines, major transmission towers, major water supply mains, key bridges, interstate highways · major hospitals etc.

3 (Above Average) Assets very important to state operations, including significant infrastructure and heritage assets, and assets needing to meet special requirements. · major power supply grid, trunk drainage mains, freeways, important bridges, major gas supply mains · interstate railway stations etc.

4 (Average) Non-critical assets, including most buildings supporting typical government service delivery functions. The lowest possible category for important infrastructure and heritage assets. · underground drainage, railway lines and sidings, power distribution grid, major piers, gas mains, major roads, bridges · government buildings such as offices, schools, tertiary institutions, courts · public housing etc.

5 (Below Average) Non-critical assets where purely functional performance is acceptable to the public. · piers · railway stations · bus shelters · minor roads etc.

6 (Low)

Assets that can reasonably operate in very basic conditions. · workshops · car parks · lanes · sheds etc.


© 2008 CIEAM

The most fundamental feature of an asset is its function. Function decides strategic importance. In the condition assessment process, particularly in conducting assets inspections, this is taken into account so that an informed judgement can be made about the priority of each asset. Priority is judged not only in relation to other assets, such as those controlled by Government Agencies making the assessment, but also in relation to all other State-owned assets. The six-point Asset Category Scale indicated in Table 7.8 has been developed for this purpose. The first step in conducting assets inspections in the assets condition assessment process is to assign each asset to the Asset Category that best reflects its significance. Identifying Required Condition: Before assessing the actual condition of an asset during asset inspections, it is important to be clear on what condition the asset needs to be in to perform at an appropriate level of efficiency and service. The Required Condition will vary between assets according to the asset's strategic importance, its specific function and its particular physical requirements. The purpose of establishing Required Condition is to provide a benchmark against which Actual Condition can be compared. Required Condition is the acceptable physical condition needed of an asset for effective service delivery. It should perform its functions without unacceptable disruption; provide the expected level of service appropriate for its functions; and provide a safe environment that meets statutory requirements. Required Condition varies according to function. It will vary not only between Asset Categories but also between individual assets within the same Asset Category. Variations within a single asset can arise as a result of assets that have a number of functions. Physical infrastructure assets or constructed assets are often complex and support a number of functions. Required Condition is simply a judgement of the main physical requirements that must be met. It will depend on the specific functions and physical requirements of those features of the asset with most strategic importance. However, careful and objective identification of Required Condition is a very important part of conducting assets inspections in the assets condition assessment process. If the Required Condition identified is too high or low, the result can be either unnecessary expenditure on maintenance or refurbishment, or deterioration of the asset and loss of value through under-expenditure. Basically, in establishing Required Condition, the emphasis should be on those elements of the asset most important in meeting business needs. Identifying Actual Condition: Assessing the actual condition of an asset is the active part of conducting assets inspections in the assets condition assessment process, in preparation for analysis. An asset's actual physical condition and the acceptability of that condition can fluctuate considerably over its useful life, particularly if there is a change in its function. Information on Actual Condition is needed at any time to be able to make effective decisions on the management of assets. The focus of Actual Condition assessment during assets inspections is on key elements. All physical assets consist of a number of elements or components that can be identified and measured. In assessing Actual Condition it is important to identify and focus on those elements of the asset most important to business needs. Table 2 provides a useful checklist of the elements important to an asset's effective operation. The checklist can be adapted to apply to most infrastructure and other constructed assets.


© 2008 CIEAM

Table 2. Physical Infrastructure Asset Elements (VSG, 1996)

Physical infrastructure asset elements have potentially different life cycles. Different elements of a single asset can therefore be at different stages of deterioration. The asset's overall Actual Condition is the result of independent examination through assets inspections of the condition of its key elements. When the key asset elements have been identified, they should be assessed against a limited number of clear criteria. These may vary according to the function of the asset. Thus, in conducting assets inspections, it is important to assess asset elements against the following criteria;

the purpose of the assessment; the key asset elements; the appropriate assessment criteria; the way the condition information is to be obtained.

In assessing asset elements against these criteria, it is advisable to include details on how well the criteria are met. There should be enough detail to describe both the condition and any major risks that would be associated with a failure to take action.


© 2008 CIEAM

Methods of Assessing Actual Condition: Assessing Actual Condition does not always need detailed inspection of an asset. Methods of assessment are either based on prediction or direct inspection. They can vary from a study that comments on specific details of individual assets to a sample survey identifying broad trends. The particular situation for conducting assets inspections determines the appropriate method of condition assessment. In many cases a broad assessment is adequate. More than one method may be needed where a wide range of assets requires information to make strategic and operational decisions. Direct inspection can range from superficial to detailed physical examination. When direct inspection of the asset or one of its key elements is not practical, physical measurement and non-destructive testing can be used for elements of the asset that cannot be reliably assessed by direct inspection; or when the level of detail required warrants such measurements. The inspection cycle varies depending on the condition of the physical asset. An asset judged to be below its Required Condition should be inspected more frequently than one considered to be above its Required Condition. Inspection cycles for elements that involve moving parts should be reasonably short. A predictive method of condition assessment involves modelling, estimating or approximation of asset condition and makes predictions about future assets condition. Establishing a Relative Condition Level: Relative Condition Level is a direct comparison of an asset's Actual Condition with its Required Condition, expressed in a Relative Condition Level scale as in Table 3.

Table 3. Relative Condition Level Scale (VSG, 1996)


© 2008 CIEAM

The purpose of comparing actual and required condition is to: examine the level of fitness for purpose; assess the extent of under or over-provision; set maintenance, refurbishment, replacement or disposal requirements.

Where the Relative Condition Level shows a significant variation between Actual Condition and Required Condition, there is likely to be a significant impact on the operation of the asset. There may also be financial impacts. These need to be clearly identified as they are important in making decisions and setting priorities. Assets condition impacts considered with Asset Category are a major determinant of the priority and urgency of action to be taken in respect of a particular physical asset. Identifying the Appropriate Action: The diagnostic information needed for making decisions is now available. The questions that remain to be answered are: • Remedial Action:

Does remedial action needs to be taken? Remedial action is the repairs and/or refurbishment needed to rectify the problems found in the assessment of Actual Condition and restore the asset to its Required Condition.

• Costs: How much will it cost? Estimated costs need to be provided at this stage. Urgent works have budget priority. Costs will be an important factor in balancing other expenditure over the asset planning cycle.

• Identifying Priorities: What is its priority? The most critical factors in evaluating the information and deciding on priorities are:

Asset Category: how important is the asset ? Condition Impacts: how serious is the risk ?

A time frame for action should be decided based on an evaluation of the critical factors in each case. Calculating the Condition Index: The Condition Index is a weighted average of the condition of a group of assets. It is calculated using the Relative Condition Level of assets multiplied by the relevant unit of measure. The unit of measure used for a group of assets depends on the nature of the physical assets. In infrastructure assets such as buildings the unit of measure is gross area in square metres. The relevant unit of measure for drains is metre length. The Condition Index has three key values; a positive value, a 0 value, and a negative value. A positive value indicates that the current condition of assets in the group is on average better than required. The closer the value is to the maximum of +2 the wider the variation from the Required Condition. A value of 0 indicates that the current condition of assets in the group is on average satisfactory. A negative value indicates that the current condition of assets in the group is on average lower than required. The closer the value is to the minimum value of –2, the wider the variation from the Required Condition.


© 2008 CIEAM

Identifying Asset Category in Conducting an Assets Inspection A detailed method for assigning the appropriate Asset Category is designed to achieve consistent and comparable results in conducting assets inspection. Such a detailed method can be used in cases where there is still uncertainty as to the appropriate category for a particular asset or class of assets. It can also be used to check or support any decisions made in regard to the Asset Category. The checklist of elements of physical infrastructure assets shown in Table 2 is used to identify elements critical to successful functioning of the asset under consideration. Its key elements will have a number of physical characteristics requiring independent consideration. These physical characteristics are shown in Table 4 below.

Table 4. Identifying Assets Physical Characteristics (VSG, 1996)

The physical characteristics need to be met at different levels in different assets. For example, some physical assets would need a much higher level of technical design than others. There are thus three levels of need: high, typical or basic. One of these levels is assigned to the physical characteristics of the asset’s key elements. The following questions need to be answered to decide the level of need:

(i) Can the physical characteristic be met without any special requirements? If the answer is yes, assign a level of basic need against this characteristic.

(ii) If the answer is no, are the special requirements moderately important? If the answer is yes, assign a level of typical need against this characteristic.

(iii) If the answer is no, the special requirements must be very important. Is it mandatory to have rigorous special requirements? If the answer is yes, assign a level of high need against this characteristic.

(iv) If the answer is no, review the earlier questions.


© 2008 CIEAM

Asset Category Guide: The following guide shows how to use the information gathered above to make a judgement on the most appropriate Asset Category. The level of need assigned to the majority of key elements is the critical factor as the number of key elements varies for different assets. Reference to Table 5 confirms whether the Asset Category chosen is appropriate in the context of the full range of physical assets.

Table 5. Appropriate Asset Category and the Level of Need (VSG, 1996)

Methods of Identifying Actual Condition – Prediction versus Inspection: The following is an outline of two broad methods of identifying actual condition; prediction and direct inspection. It also covers the basis for decisions on which method to use for a particular group of physical assets or for a particular purpose. Predicting Physical Assets Condition: Estimating current and future assets condition is the essence of the predictive method. Predictive condition assessments involve modelling, estimation, or approximation of asset condition. By analysing information from previous years, a predictive method makes assumptions about the likely current asset condition and predicts its future condition. A predictive method offers a sound and cost-effective way to examine assets and support strategic decision-making and allows for consideration of risks and options for planning purposes. A predictive method has several characteristics: • Uses life cycle approaches to look at asset condition; • Can be modified to suit assessment of particular asset categories; • Synthesises previous experience and results of direct inspection of a sample.


© 2008 CIEAM

A predictive method is the most cost-effective way to support strategic decisions. However, the method does have some advantages as well as disadvantages, as indicated in Table 6. A number of established predictive methods are currently in use in the Government sector.

Table 6. Advantages and Disadvantages of the Predictive Method (VSG, 1996)

Direct Physical Assets Inspection: Direct inspection of physical assets means actually looking at the asset. It can vary from a superficial walk-through to a detailed specialised inspection. It can also include physical measurement and non-destructive testing. Elements of infrastructure assets such as stormwater pipes and sewers may be inspected by video cameras. Electronic equipment may be needed to inspect the condition of buried power cabling. A form with standard questions is often used to assist in data gathering. Direct inspection is an important part of condition assessment of physical assets. When undertaken by experienced assessors, an on-site assessment remains the most effective way to ensure that the condition of a physical asset is properly understood and recorded. The advantages as well as disadvantages of direct condition inspection of physical assets are indicated in Table 7. A number of established direct inspection methods are currently in use in the Government sector.

Table 7. Advantages and Disadvantages of Direct Condition Inspection (VSG, 1996)

A significant characteristic of physical assets inspections is that it provides a snapshot of current assets condition by focusing on immediate condition issues, but provides little understanding of past or future assets condition and thus tends to focus on negative condition issues rather than opportunities.


© 2008 CIEAM

Selecting an Appropriate Method for Assets Condition Assessment: Physical asset condition assessment does not always mean that a detailed look at all assets is needed. In many cases a broad assessment or sampling is adequate. The most appropriate method provides information needed for optimal use of assets in both the short and long term. Any method chosen should have the following characteristics;

must be easy to use and audit; have simple data collection and data entry; allow easy calculations; be cost-effective; be widely used so practical experience can be shared.

Both predictive and direct inspection methods can be applied to all classes of constructed assets. The purpose of the assessment and the nature of the information required will in some degree decide the appropriate method. Table 8 shows the fundamental use of either method.

Table 8. Fundamental Use of the Predictive Method or Direct Inspection. (VSG, 1996)

A combination of predictive and direct inspection methods in determining physical assets condition is often used to support decisions on a group of assets. Both methods may need to be applied to cover the range of information and detail needed. Specialised advice is often needed in undertaking assets condition assessment. Considerable time and money can be lost by the inexperienced through;

collection of incorrect or inappropriate data; use of an unsuitable assessment method; an assessment method being inappropriately applied.

Time Frames for Corrective Action: Scheduling corrective action to close the gap between actual and required assets condition depends on certain criteria identified during the condition assessment process such as;

the Asset Category; the significance of the Relative Condition Level; the severity of Condition Impacts.


© 2008 CIEAM

The cost of rectification and the financial year in which funding can be made available are also important factors to be considered, particularly in the case of works that can safely be deferred. A schedule for action needs to be considered for each individual case. However, broad conclusions can be drawn on appropriate time frames for action by looking at the Asset Categories against each Relative Condition Level and each Condition Impact. These time frames are shown in Tables 9 and 10. The time frames shown for Relative Condition Level do not always match the time frames for Condition Impacts. It is important to consider both possible time frames independently. The most appropriate time frame is the one that minimises risk.

Tables 9 and 10. Corrective Action Time Frames (VSG, 1996)


© 2008 CIEAM

Assets Condition Surveys Introduction: An assets condition survey is a systematic process of evaluating the condition of physical industrial and infrastructure assets such as industrial plant, structures, buildings and installations. This is to establish whether the physical assets are capable of continually supporting business needs and legal requirements in the medium and long term. Surveys are also conducted to assess the ability of physical assets to satisfy internal expectations and external benchmarks. An objective of assets condition surveys is also to establish any remedial action required to bring physical assets up to the expected conditions (such as modifications, refurbishment and replacements), to identify their relative priorities and to propose a programme of action. Assets condition surveys help to plan for the necessary human and financial resources before functional failure of the assets. Assets condition surveys also help to;

develop an assets condition database that can be used for other purposes such as assets valuations;

prepare long term capital asset investment plans; achieve a balance between capital and maintenance funds; target scarce maintenance resources (people and funds); benchmark assets maintenance expenditure benchmark specific physical assets condition.

Condition surveys are also conducted to;

establish the condition of physical assets before the decision to purchase (such as pre-acquisition surveys for buildings);

to assess degradation after a period of use; to establish the maintenance condition of physical assets before asset

owners commit to lump sum maintenance contracts. A physical assets condition survey is a form of inspection to assess the physical, operational and maintenance conditions of the asset. An assets condition survey can be defined as a collection of data about the condition of an asset, part of an asset, or group of assets, assessing how that condition compares to a pre-determined standard, to identify any actions necessary to achieve that standard, and maintain it there over a specified time horizon, the purpose being to support management decision making. Assets condition surveys, also known as condition appraisals, are conducted for several reasons. Most asset owner organisations, particularly public sector asset owners, have traditionally conducted periodic condition appraisals to support strategic planning of their assets. Such surveys are aimed at providing an overall assessment of the condition of the building stock and normally consist of external visual inspections. These are often referred to as ‘broad brush’ surveys. Such appraisals help to prepare a strategic investment programme which specifies the time scale and resources required to bring the assets up to the desired standard. In assets maintenance management, condition surveys are conducted to collect data and appraise the condition of physical assets such as industrial plant, structures, buildings and installations.


© 2008 CIEAM

The objective of the appraisal is to develop and maintain a knowledge base of the condition of physical assets. Such knowledge would help maintenance managers to plan for future maintenance, replacement and refurbishment needs to continually support the business giving due regard to;

functional suitability and performance; physical and operational condition; safety and statutory requirements; energy and environmental performance.

BS 3811 - Glossary of Terms used in Terotechnology defines a condition appraisal as: ‘A formal and systematic appraisal of the condition of an item in respect of its ability to perform its required function’ (BSRIA, 2000). Unlike the case of many industrial plant, structures, buildings and installations, the external physical condition of certain assets, especially components of assets, may not be truly representative of their ability to perform the required function. This is because of the dynamic nature of these assets. For example, the condition of electrical joints in switchgear cannot be established by a visual inspection alone. Condition surveys are also conducted to establish the maintenance condition of physical assets before a commitment is made to lump sum maintenance contracts. It is important for contractors to establish the maintenance condition of physical assets before committing to comprehensive maintenance contracts. The contractors’ ability to deliver the performance set by the client and the cost of maintenance activities required to achieve this objective directly depends on the condition of the assets. Furthermore, the condition of physical assets is an important criterion that should be considered in pricing such contracts. Where comprehensive records of conditions are kept, the contractor may obtain the required information. However, such records are often rare, and the contractor may have to carry out a detailed survey to accurately establish the maintenance commitment. Management Approach to Asset Condition Surveys: (BSRIA, 2000) Before embarking on an assets condition survey it is necessary to establish its purpose, scope, the extent to which the survey is to be carried out, and the nature of information required from the survey. All assets condition surveys are concerned with physical condition. However, the extent to which the surveys are conducted, and the information required from them, vary depending on the reason for conducting the survey and the available resources. For example, the objective, the depth of investigation and the information to be produced by a survey investigating the dilapidation of a public building are different to those associated with a survey for maintaining a profile of plant and installation conditions to help forecasting and prioritising future maintenance needs. The appraisal of asset condition often needs to draw information from other asset inspections conducted at different times. Therefore, an assets condition survey can also be used as an exercise to coordinate information from other asset inspections and draw final conclusions on the condition of physical assets, and to determine requirements for future work.


© 2008 CIEAM

The issues that need to be addressed at the definition stage include; the objective and the purpose of the survey; the areas and items to be covered (priorities for buildings, plant items etc,

sampling of plant or installations); the functions of the industrial plant, structures, buildings and installations

that should be evaluated (eg. operation and maintenance condition, compliance with legislation, health and safety compliance, meeting operational requirements, energy savings, sustainable maintenance);

the depth of inspection and investigations (for example, the extent to which the survey should cover visual inspections and other means of assessing conditions, eg simple tests and measurements, specialist tests and examinations, plant internal examinations, analysis of supportive data such as plant log books, interviewing maintenance staff and others);

frequency of assets inspections; co-ordination with other inspections of industrial plant, structures, buildings

and installations; the nature of information required from the survey (for example, operational

and physical condition, remedial requirements, alternative action that may be possible, cost estimates etc.).

Setting Priorities for Assets Condition Surveys: The operational and maintenance conditions of certain assets are often more important to businesses than those of others. The deterioration of certain assets may also carry significant risks (for example health and safety risks) or penalties (depreciation of asset value, penalties due to non-compliance with legislation) that can affect business success. With limited resources, major maintenance is only likely to be worthwhile if the cost/penalty of non-performance is high. Assets condition surveys can also be costly. Depending on the scope of the survey, industry condition inspections may require plant to be shut down. It can disrupt the core business of the organisation. Surveyors need to spend time with management and maintenance staff to establish the history of plant behaviour. This is non-productive time. The recognition of the importance of assets to the organisation in terms of business needs, health and safety, energy and environmental performance etc. in order to set priorities for the survey is an essential part of the survey process. An assessment of the importance of the asset is normally a decision that needs to be made with the asset owner. This assessment should include those areas where the asset is particularly important, for example;

maintaining the business process; health and safety; energy consumption; corporate image;

This would inevitably incorporate a proper understanding and assessment of the consequences of failure.


© 2008 CIEAM

The importance of the assets services can be represented by a ranking system, such as:

a) critical services - services that are crucial to the core business of the organisation and have a direct impact on business continuity, and those which affect health and safety or compliance with legal requirements (for example, electrical services for essential computer operation, lighting etc.).

b) essential services - services that significantly contribute to the core business activities and have a short term impact on business continuity, (eg. heating where there are no other means of providing heating);

c) important services - services that are less significant to the core business activities but that could have a long term impact (eg. work area ventilation);

d) desirable services - services that have no direct bearing on the achievement of core business activities and are desirable to the normal operation of the organisation (eg. decorative lighting).

This information also helps the surveyor to prioritise between maintenance demands within limited resources when maintenance requirements are identified. Benefits of Assets Condition Surveys: An initial assets condition survey is mainly conducted for the purpose of maintenance planning and would normally;

identify significant defects that can adversely affect the performance of the asset’s delivery of services;

identify when undesirable asset conditions or defects would be reached; report on their cause and provide an indication of what maintenance actions

need to be done; identify budgets required for this work; prioritise the maintenance action recommended; make recommendations for specialist inspections outside the scope of the

condition survey. This information helps to optimise the planning of future maintenance and best utilise the available resources against competing demands. The information derived from assets condition surveys can also help to;

develop an assets condition database that can be used for other purposes such as asset valuations;

prepare long term capital asset investment plans; achieve a balance between capital and maintenance funds; target scarce maintenance resources (people and funds); benchmark maintenance expenditure; benchmark physical assets condition.

Managing maintenance is predominantly about preventing failures that can lead to undesirable outcomes before they occur. This requires maintenance needs to be identified in advance so that remedial action can be instigated.


© 2008 CIEAM

The basis of preventive maintenance is to take remedial action before a failure can occur. Performing work only when it is known to be required is the ideal and most cost effective way of maintaining an asset. It requires careful assessment of the conditions that could lead to failure and identifying the optimum time when remedial action should be taken. This is the crux of condition based maintenance. Decisions about maintenance can be short, medium or long term. There are other maintenance, refurbishment and renewal requirements which need to be identified sufficiently in advance to allow time for;

obtaining funds; planning the works; planning resources; delivering equipment; carrying out the works; other logistical arrangements.

Short term maintenance addresses demands as they occur. Where the time between detection and failure is small, action needs to be taken quickly to prevent failure. This type of deterioration is covered by short term maintenance and generally addressed in a planned preventive maintenance programme through activities such as;

routine inspections; condition assessment (monitoring and measurement); schedule based maintenance tasks; operational time based maintenance tasks.

Medium term maintenance deals with forecasts for a given period in the future, usually five years. Long term maintenance is about planning maintenance beyond the five year period and usually addresses major refurbishment and replacements. The information requirement for medium and long term planning is strategic in nature and needs a futuristic view of physical assets conditions. A typical example of the benefits of assets condition surveys for maintenance planning is that of building services. Building services provide the essential internal environmental conditions and electrical supplies without which most buildings would be paralysed. Building services installations also represent a significant proportion of investment in buildings. They are a valuable asset to investors. The physical condition and operational performance of building services installations deteriorate with time and use, resulting in the depreciation of their value. Deterioration of the condition of building services plant and installations can also lead to failures resulting in a number of undesirable outcomes such as;

significant losses due to business disruptions; non-compliance with legal requirements; health and safety problems; depreciation of asset value; increase of energy and environmental costs.


© 2008 CIEAM

The Role of Assets Condition Appraisals in Assets Maintenance Planning: Some key questions faced by maintenance managers with regard to medium and long term maintenance planning are: • What are the organisation’s building services assets? • What assets are critical to the business requirements and other needs of the

organisation? • What is the present condition of these assets? • What is the gap between the current and failure condition? • How soon will the failure condition be reached? • What action needs to be taken to avoid failure and to restore the asset to an

acceptable condition? • When does this action need to be taken? • What is the cost? • What are the priorities among other maintenance requirements? • What alternatives are there to maintenance, renewal or refurbishment? The purpose of a knowledge base of physical assets condition is to provide answers to these questions. Technological means of (automatically) assessing all adverse conditions, carrying out expert diagnosis and signalling failure are currently limited to a few applications, such as vibration analysis, thermal imaging etc. Human senses can often pick up a wide range of warning signs from an asset’s physical characteristics and a complex combination of present and past performance patterns, which automatic systems may not be able to do at present. Therefore, assessing the salient conditions, diagnosing failure symptoms and predicting maintenance requirements of building services plant and installations involve both technological and human expertise. A condition appraisal is an important management tool that uses human expertise to analyse information available from sources such as maintenance records, visual inspections and condition monitoring, to judge the condition of physical assets and asset service equipment, and to forecast future maintenance needs. Essential Steps of an Assets Condition Survey: Whereas an initial assets condition appraisal regime usually consists of a single survey or a number of iterations, the assets condition survey can be regarded as consisting of several consequential steps. The seven essential steps of an assets condition survey are;

1. Defining the task 2. Identifying survey priorities 3. Briefing a specialist 4. Planning and organisation 5. Condition assessment 6. Data capture, evaluation and analysis 7. Reporting.


© 2008 CIEAM

Items 1 and 2, defining the task and identifying survey priorities, are important management issues that provide the basis for the scope, the extent and the priorities associated with the surveys. They should be addressed before briefing a specialist to conduct a survey. Item 3, briefing a specialist, is about preparing a brief to persons who will conduct the survey. Item 4, planning and organisation deals with the preparatory work that needs to be carried out before the commencement of work on site. The remaining items 5 to 7 are about the implementation of the survey relating to assets condition assessment, data capture, evaluation and analysis and reporting. Scope of Assets Condition Surveys: Generic tasks that form a part of a full condition appraisal include the following;

external examination of physical assets such as industrial plant, structures, buildings and installations;

evaluation of the performance of the physical assets; evaluation of the operation and maintenance conditions of the physical assets; carrying out specialist inspections and internal examinations; co-ordinating information from inspections and tests carried out previously; co-ordinating information from other sources; evaluation of compliance with health and safety and legal requirements; analysis of condition data and information; identifying future maintenance requirements, their priorities and time scales; identifying funds required to carry out this work; developing a knowledge base of the condition of the physical assets.

Condition surveys can widely vary in scope. The extent to which activities other than external physical examinations are included in a survey depends on the asset owner’s requirements for the survey, financial resources available for this purpose, and appraisal activities that can be taken up by the maintenance organisation. The Minimum Maintenance Standard: The condition of a physical asset can be gauged objectively in respect of functional suitability, operational needs, physical condition, health and safety requirements and the requirements of law. The maintenance policy of an organisation should specify the (minimum) standard at which the asset should be maintained. Setting this policy may be done at a higher management level in the light of other competing demands such as finance and the value and the utility of the asset. This policy will be interpreted as a set of maintenance standards which describes the desired performance criteria of the physical asset, particularly for industrial plant, structures, buildings and installations. The lower threshold of acceptability will be determined by health and safety and legislative requirements. If these standards cannot be sustained, some remedial action to restore the asset to an acceptable condition is required. The minimum maintenance standard, together with the importance of the asset, provides a basis to establish the repairs or remedial action required during a given period. Some organisations use a ranking system to broadly identify the maintenance standard required of their assets.


© 2008 CIEAM

Numerous ranking systems are suggested in various publications relating to the subject. The book ‘Building Maintenance, Economics and Management’ by the Property Services Agency, describes the following assets inspection ranking system: X - Exceptional - Maintenance in impeccable order at all times for reasons of operational necessity, public importance, client status or environmental quality. N - Normal - Fully maintained with the appropriate authority’s instructions and with regards to client needs for extended use. L - Limited Life - Maintained to use for a period of not more than five years. W - Wind and Weatherproof - Disused facilities maintained only to prevent serious deterioration with due regard to safety. D - Demolition Pending - Maintained only to a level sufficient to obviate the risk of claims or legal action. The Property Services Agency, PSA, was the largest design and construction organisation in the UK, responsible for managing maintenance in the UK Government until the early 1990s. The role of the PSA included the provision, management and maintenance of a wide range of facilities such as offices, naval bases, army barracks and military airfields. Therefore the classification system used by the PSA was an overall system to cover the variety of buildings and installations in its care and the related maintenance disciplines (eg. building, mechanical, electrical and electronic). Where there are similar physical assets under similar conditions, it is economical to carry out sample surveys. A survey of a representative sample of physical assets can be conducted and the results may be extrapolated to draw conclusion about all the assets. This may be a cost effective way of assessing future maintenance needs for planning budgets. However, where there is even a slight difference in function of similar assets, or the cost of failure of an asset is high, it is not advisable to base surveys on sampling techniques. Ideally there should be a statement in the asset register about the acceptable conditions at which the assets should be maintained. This statement should express the level of availability, downtime that can be tolerated, and safety requirements. Such statements will help establish the importance of any remedial works required. Co-ordination with Other Inspections: Assets services inspections (such as building services) are sometimes carried out as a separate exercise to physical assets surveys. A main reason is that different knowledge and experience may be required to assess the condition of asset service equipment and their performance, than a survey of the physical asset itself. Whilst the information may be collected by different specialists, there are advantages in carrying out the assets services inspection as a coordinated exercise with other disciplines. This is because the condition of asset service equipment, particularly for industrial plant, structures, buildings and installations, and their maintenance requirements, can significantly interact with the physical asset and other installations such as IT and ICT. A combined survey of a physical asset, its related services, and other installations (IT), helps to achieve close co-ordination between disciplines and avoids duplication of effort.


© 2008 CIEAM

Frequency of Surveys: There are number of factors that determine the frequency of surveys at any given time. These are;

the present condition of the asset; likelihood of failure; importance of the asset; consequence of failure and business risk.

The degradation hazard curve illustrated in Figure 4 is a widely acclaimed diagrammatic representation of the failure pattern of plant and installations over its lifetime. The failure rate starts to increase rapidly after settled operation over a period of time. Failures are also expected to be high during the initial period of operation.

Figure 4. Failure Pattern of an Asset Over its Lifetime (BSRIA, 2000)

BS 8210 - British Standard Guide to Building Maintenance Management, recommends that an in-depth survey is carried out on a five-yearly cycle, supplemented by a two-year superficial inspection. It is useful to conduct a superficial appraisal within one year after a constructed asset’s initial hand over, using the operational and maintenance information gathered during this period. At this stage it is not necessary to carry out a detailed visual inspection as the physical asset should still be in good condition. The purpose of such an appraisal is to identify major shortcomings (eg. inadequate access for maintenance) in order to make changes, and identify maintenance activities that may need to be carried out to make the asset operationally acceptable in line with its services needs. Such an appraisal is best carried out by the persons responsible for maintenance. Detailed inspections should generally be carried out at longer intervals depending on the operational characteristics and operational environment of the physical asset. Towards the end of the asset’s useful life, the inspection frequency should be increased depending on the criteria described above. It may be necessary to carry out the inspections of specific assets services more frequently than the physical asset itself because most asset services (such as building services) are dynamic in nature (eg. moving parts, air flow etc.), and deterioration can rapidly set in during their operation. Some services could have a significant impact on health and safety (eg. electrical equipment, steam, high air and water temperatures etc.), and failure of certain services (eg. electricity) can directly disrupt an organisation’s core operations.


© 2008 CIEAM

A criterion for determining the frequency of physical asset inspections is the likelihood (or risk) of failure after a given operational time. The following characteristics represent low risk and may be inspected at relatively longer intervals for industrial plant, structures, buildings and installations;

designed and constructed in accordance with accepted technology; having a proven durability record; having inherent potential failure conditions that can be easily observed during

day to day operations; subject to regular maintenance inspections; having a good reliability record.

The following characteristics should be inspected relatively more frequently for industrial plant, structures, buildings and installations:

not subject to regular preventive maintenance; having inherent potential failure conditions that cannot be easily observed

during day to day operations; subjected to heavy or excessive use; approaching the end of their useful or economic life; not inspected during the last inspection; displaying rapid or unusual deterioration during their last inspection; already on the maintenance back log.

It is important to note that a condition survey will only provide a picture of the conditions at the time of inspection. Physical assets such as industrial plant, structures, buildings and installations gradually deteriorate over time between surveys. Condition records and forward maintenance plans may need to be changed on the basis of ongoing maintenance experience. Where an infrequent but detailed survey is carried out, a superficial inspection or a less detailed interim survey is useful in re-examining the conditions for which deterioration over the interim period is difficult to predict accurately. It is also reasonable to relax the frequency of detailed surveys where the maintenance regime can maintain a continuous check on physical assets condition and update assets condition records accordingly. All maintenance activities should include observation of physical asset functions during maintenance, and continually review and update assets condition and forward maintenance records. This will reduce the need for interim surveys in-between major surveys. Planning Assets Condition Surveys: Assets condition surveys may be based on visual inspections or may involve measurements, tests or other forms of investigations. These may be external inspections or may require opening up inspection covers, dismantling plant and possible shutdowns. Planning and programming the work in advance and finding suitable ‘windows of opportunity’ to carry out the inspections with minimum disruption to the organisation’s business are important pre-requisites to the condition survey process. Therefore the assets condition survey programme needs to be organised in conjunction with the maintenance function.


© 2008 CIEAM

A list of the most common tasks that need to carried out before starting on site are; identifying physical asset items and services to be examined and time scales; the preparation of a method statement of the condition survey activities; carrying out an assessment of risk associated with any corrective work; identifying specific competence and training requirements, for example to

work with particular plant and installations; making arrangements for plant shutdowns; informing users of the physical assets or services being affected; making arrangements to visit secure areas, including any security clearances; making arrangements for specialists, contractors, or other technical persons; obtaining the necessary permits for specialised work; making arrangements for access to the physical asset.

Assets Condition Survey Methodology Gathering Information: Gathering technical data about assets that need to be examined, is a pre-requisite to the assets condition survey process. This data includes details about asset ownership, location, manufacture, design details, output requirements and initial operational and performance conditions. This information will help the surveyor to plan the survey as well as compare original performance patterns with present conditions. Ideally the surveyor should have access to the following documents;

the asset register; as-installed drawings (record drawings); operation and maintenance manuals; health and safety file; information about warranties and guarantees; commissioning data; previous survey data and records of the condition of the physical asset; competent person examination reports and other specialist inspection reports; forward maintenance plans; information on maintenance backlog; relocation or refurbishment plans that could affect asset services.

The asset register, with basic identification information such as the identity, location and the function of assets, is the starting point for an asset and asset service equipment condition survey. This information should help the surveyor to plan the survey process and establish a basis for data capture. Most computer based maintenance management systems include an asset register facility. A distinct advantage of capturing the condition survey data on the basis of a computer based asset register is that the asset condition information can easily become a part of the maintenance management information system.


© 2008 CIEAM

Manufacturing and/or construction/installation information about the physical asset, design details and maintenance strategies should be found in operation and maintenance (O&M) manuals. The extent to which the required data is available from existing records varies from one organisation to another. An asset register or other forms of comprehensive asset records may not exist, and asset information may need to be established while conducting the survey. Good quality O&M maintenance manuals are often scarce and the surveyors may have to carry out detailed investigations to find the information required. Where asset information is not available, condition surveys may be used as a tool to gather such information. Physical Asset Attributes That Should be Examined: Physical conditions that can be observed by visual inspections are not solely representative of the ability of a physical asset or an asset’s item to perform as required. Unlike condition surveys of physical assets such as buildings which generally comprise a visual inspection of building elements, a comprehensive condition appraisal of an asset’s services requires consideration of both the physical condition and the operational integrity of the services related to the physical asset. The appraisal of such services installations should also take the systems approach where the physical state and the operational integrity of an entire system (for example an air-conditioning system in a building asset) should be examined. This is because the physical and operational compatibility between two items within an installation can affect the overall performance of the installation. An example is inadequate water treatment that can cause corrosion and reduce life of physical asset items such as heat exchangers. Subject to the requirements of the brief, the condition of physical asset service equipment should be examined in relation to the following aspects;

impact on health and safety; compliance with legal requirements; operational integrity; physical condition; conditions affecting operation and maintenance; functional suitability; economic life and obsolescence; energy and environmental performance.

Asset Services Functional Suitability and Operational Integrity: Functional suitability of a physical asset’s services is its suitability to the business function. Operational integrity is the ability of the physical asset’s services to perform as expected. These are important attributes of a physical asset which affect the asset owner’s business profitability. Some typical examples of functional suitability and operational integrity of a physical asset’s services that need to be considered during a survey are lighting levels and quality of lighting; adequacy of emergency lighting; adequacy of fire alarms; adequacy of power supplies; power quality; an overview of heating and ventilation standards; and an overview of services system performance. Checking functional suitability is often not included in “broad brush” type assets condition surveys. However, checking functional suitability becomes particularly important when there has been a change of physical assets or business function.


© 2008 CIEAM

Assets Physical Condition: Physical conditions of assets such as industrial plant, structures, buildings and installations, can be observed through visual inspections and other methods such as non-destructive testing. Sometimes it may be economic to carry out destructive testing on the basis of sampling to establish the true condition of certain installations. For example, a section of pipe work may be removed and examined to establish the integrity of pipe work systems. The aim is to look for indicative signs of conditions leading to failure. An overview of non-destructive testing techniques used in physical assets services applications is given later. Typical examples of physical conditions that may signal forthcoming maintenance requirements include;

deterioration (eg corrosion); wear and tear; damage; blockages (eg scaling of pipes); loose electrical joints; electrical components operating at excessive temperatures.

It is not normally possible to observe some aspects of physical deterioration during a visual inspection, for example, loose electrical joints. Such tests and inspections are often included in separate surveys conducted by specialists. Compliance with Legal and Health and Safety Requirements: Asset conditions must comply with legal and health and safety requirements. There is a vast amount of legislation that impacts upon the condition of physical assets services for industrial plant, structures, buildings and installations. The relevant Occupational Health and Safety Act (OH&S), and its supporting regulations, both nationally and internationally, have requirements for plant and installations to be operated and maintained in safe conditions and without detriment to health. They also have requirements for conditions such as the cleanliness of ductwork, adequacy and level of task lighting and safety of electrical installations. From time to time, new legislation is introduced or existing legislation is revised that may require the replacement of existing plant or major modifications to them. For example, the change regulations on ozone-depleting substances which came into force early in the new millennium. The changes affect sale and use (use for top-up or maintenance) of some refrigerants (e.g. most CFCs). It also gave rise to the need for replacing machines using such refrigerants. There is a vast array of legislation and regulations issued by responsible bodies that could have a direct or indirect impact on the condition of physical assets. It is thus not the objective here to provide a comprehensive list covering all physical asset services regulations. Assessing compliance with health and safety requirements and the requirements of law should be part of the initial survey. Non-compliance with legislation and health and safety requirements give rise to urgent work. Some recent health and safety legislation in the UK for example, has affected existing places of work and services within them, such as the Workplace (Health, Safety and Welfare) Regulations of 1992, which required compliance in retrospect to existing assets by January 1996. It specified health, safety and welfare standards to be maintained in the workplace, which gave rise to the need for major changes to plant and installations and their maintenance routines.


© 2008 CIEAM

Asset Conditions Affecting Operation and Maintenance: The ability to operate and maintain physical asset service equipment without hindrance as well as minimising downtime in the case of a failure, can be extremely important to the asset owner’s business activities. The surveyor should note such conditions that will cause downtime of critical asset items beyond acceptable levels. Aspects of industrial plant, structures, buildings and installation configurations that can seriously affect the ability to maintain and reduce downtime include:

• Inadequate access to critical equipment; personnel access; personnel egress; ease of carrying tools and materials; access for plant and equipment (eg lifts, hoists).

• Inadequate space for doing the work, for example; ergonomics; manoeuvring space for persons; space for removing and replacing components such as boiler tubes;

• Lack of built-in features for safe maintenance, for example; guards; lockable switchgear.

• Inadequate information on operation and maintenance; operation and maintenance manuals; record drawings; asset register; planned preventive maintenance records; health and safety file.

Assets Economic Life and Obsolescence: A main objective of the assets condition survey is to identify asset items that are reaching the end of their economic service lives or becoming obsolete for other reasons. Although the replacement of such asset items may not be imperative in the short term, a significant amount of planning may be needed before their replacement (for example, the replacement of boiler plant). This may require a considerable lead time for planning, obtaining funds, procurement design and contractual services and for maintenance of services whilst the work is being carried out. Obsolescence occurs for a number of reasons;

• Physical obsolescence - this can happen due to reasons such as physical deterioration, damage or non-availability of spare parts

• Condition obsolescence - condition obsolescence occurs when the physical condition of an item is no longer acceptable due to its physical condition.

• Economic obsolescence – when keeping an asset or asset service equipment in operation is no longer economic and there are cheaper alternatives. This usually happens towards the end of the asset’s economic life where operation, maintenance, energy or environmental costs are high, or if there have been technological changes that provide cheaper options


© 2008 CIEAM

• Functional obsolescence – where the function of the asset is no longer required

• Technological obsolescence - the asset or asset service equipment are no longer technically superior and consideration should be given to their replacement

• Social and legal obsolescence - for example, the asset may contravene environmental standards or legal requirements.

The survey, subject to the requirements of the brief, should identify physical assets that could become obsolete due to the above reasons. Assets Economic Life: The economic life of an asset is the estimated period beyond which the asset or asset item will not represent the least cost option for providing its required function. The economic life of an asset or a particular asset item can vary significantly from its ‘published life factors’ or specifications declared by the manufacturer, due to a number of reasons. Published life factors assume that items are;

designed and manufactured to good quality and standards, for example a high standard of quality control, compliance with national standards, international standards, and/or European standards etc;

installed, tested and commissioned to good practice requirements; operated and maintained adequately by competent and skilled persons; subjected to reasonable hours of operation commensurate with their design

intent. Therefore, the published factors only provide a starting point for identifying the remaining economic life of a physical asset or asset item. For example, improved techniques for estimating the service life of plant have been developed by the British Standards Institution/ISO, Buildings - Service Life Planning - Part 1: General Principles. This BS/ISO document and the CIBSE Guide to Ownership, Operation and Maintenance of Building Services recommend a factor approach to vary the published lives depending on a range of conditions. An algorithm for assessing plant lives based on such conditions is given. Economic Obsolescence: With regard to economic obsolescence, there are capital asset investment appraisal techniques (refer to the Assets Financial Management Module) that can be used to evaluate the relative economics of repair or replacement. Discounted cash flow techniques allow comparison of the cost of new physical assets and future costs against those of existing physical assets on the basis of current prices. Another technique that is used for infrastructure assets such as facilities and building services is the “equivalent annual cost” which projects the cost of replacement plant of assets services into future years to compare with the cost of keeping existing plant. The decision to repair or replace should also take cognisance of factors such as business production or assets usage losses due the breakdown of services which is more likely with old asset service equipment items.


© 2008 CIEAM

Functional Obsolescence: A physical asset or asset item is functionally obsolete when its operational or physical function is no longer required. Examples are redundant cables and pipes left on site after replacement by new pipe and cable systems. Redundant (standby) equipment which is not needed to support the asset owner’s business requirements can also be treated as functionally obsolete equipment. Such equipment occupies valuable space and results in maintenance resources being wasted. Technological Obsolescence: Assets based on new technologies are being developed continually which can make existing assets and related equipment obsolete. Technological obsolescence takes place when the physical asset or asset item is no longer technologically acceptable for the provision of the required function. Old products may become unacceptable because, for example, more energy efficient equipment is available, or the use of assets services such as mechanical air conditioning does not meet the owner’s image. Developments in the field of information technology, computer hardware and software have caused early replacement of items based on such technology, for example, control systems and fire alarm systems. Another example is the use of fibre optics in lighting systems. Social and Legal Obsolescence: Asset service equipment can become redundant because it no longer is socially or legally acceptable. Assets that consume excessive energy can not only be costly, but can raise negative public opinion. Another example is refrigerating machines using CFC refrigerants which have been phased out. Visual Condition Inspections: Visual inspection is the most fundamental method of non-destructive testing. It is easily carried out, inexpensive and usually does not require special equipment. Visual inspections may be enhanced by the use of optical aids. There are many defects, for example corrosion, which manifest in a visible condition that can be detected by careful visual inspection. Optical aids that can be used during asset condition surveys range from simple equipment such as low power magnifiers and binoculars to specialist equipment such as fibre optic devices for the inspection of parts to which access is restricted, for example, inside pipes and ducts. Some of these devices can also be used with camera systems. Remote photography is particularly useful to inspect asset service equipment in areas with controlled access (eg. dangerous processes, toxic material etc.) Visual inspections require good vision, good lighting and the knowledge of what to look for. Much of the success of visual inspection depends on the distinctive nature of the condition and the lighting arrangements. Surface preparation such as cleaning or etching is sometimes used to aid the examination of surface-breaking defects. Visual examinations, unless backed by measurement techniques, can be subjective and prone to variable interpretations.


© 2008 CIEAM

4. Assets Condition Scoping, Profiling and Modelling

Physical Assets Condition Scoping An assets condition scoping study defines a methodology and associated work plan to provide a physical assets portfolio condition report. The scoping methodology provides flexibility in what is included in an assessment of assets condition; how the information is integrated to provide measures of assets condition at various levels of aggregation; and how the results are presented. Despite this flexibility, there is a high degree of rigour in terms of the structure of the assets condition scoping report, as well as its contents. The report is not simply a haphazard collection of information on physical assets condition for the benefit of asset users and/or owners to make sense of as best they can. The report allows for current asset management strategies to be formulated in the context of overall assets condition by providing information on the condition of a portfolio of physical assets relative to the desired condition for their required service delivery, and relative to other non-asset services. This information can be provided at all levels, from an overall summary down to individual aspects of condition such as specific asset performance. It allows for questions to be addressed such as: ‘Are maintenance programs targeting those assets most in need of improvement?’ and: ‘Are maintenance programs targeting one set of assets or their service components while overlooking others?’ Capital assets investment strategies can also influence the content of the assets condition scoping report. If investment strategies are targeting a particular component of assets condition, such as assets operational performance, then this component is presumably of concern and should be incorporated into a physical assets portfolio condition report. An integrated assets condition report will document the cumulative impact of all assets policies, programs and strategies and will not, in general, be able to distinguish the impact of any individual capital asset investment. The assets condition scoping methodology incorporates recommendations from a first-round initial assets condition assessment. The scoping methodology also includes physical assets interface with strategic human resources management in its assessment of maintaining physical assets condition. A hierarchical structure of the components of assets condition (such as performance, operational condition and physical condition), allows for additional sub-components, such as efficiency as a result of asset performance, functionality and utilisation as a result of operational condition, demand/capacity capability and usage ability as a result of physical condition, etc. to be added as desired. Because the assessment is defined in terms of assets condition components and desired outcomes, not in terms of particular indicators or data sets, improved data can be incorporated whenever they become available. The first integrated condition assessment also seeks to identify a possible lack of data collection and inadequate data quality as impediments to the assessment of physical assets condition.


© 2008 CIEAM

Methodology for a physical assets condition scoping study: The BRS Evaluation Procedure (Chesson, 2005) has been adapted to develop a methodology for a physical assets condition scoping study. This procedure is quite general and has been successfully applied to a range of situations including the development of a conceptual framework for a condition audit project for agriculture and rangelands. The procedure involves the following steps:

• Identify the attributes of the physical asset or portfolio of assets. • Determine the components of assets condition and hierarchical structure. • Specify the desired outcome for each assets condition component. • Develop the assets condition component measurement process. • Link the measured values to decision-making and management actions such as

capital assets investment strategies. Although the steps are listed sequentially, the procedure is an iterative process with decisions made in later steps refining those associated with earlier ones. The first two steps of an assets condition scoping study is considered in greater detail below. Identify the attributes of the physical asset or portfolio of assets: Physical assets can be categorized into industrial and infrastructure assets in both the public and private sectors. Although much of the literature on asset management refers to infrastructure assets that relate predominantly to the public sector, several industry sectors, particularly the high capital cost process industries such as power generation utilities and chemical process plant, refer to industrial assets which include all plant and equipment that industry uses for manufacturing, mining, processing etc. and for producing a product (CIEAM, 2006). Industrial assets have a number of attributes considered in asset condition assessments (as well as infrastructure service assets), such as:

• Physical condition — the condition of an asset that enables it to meet intended service levels.

• Demand/capacity — the capacity of the asset to meet existing service requirements.

• Functionality — the ability of the asset to meet program delivery requirements.

• Operational condition — the condition of an asset that enables it to meet intended performance levels.

• Operational performance — the ability of the asset to achieve usage outcome requirements.

None of these attributes are mutually exclusive, for example physical condition may have an impact on an asset’s ability to meet service and performance requirements. Infrastructure assets are typically large, interconnected networks or portfolios of composite assets, comprising sub-components that are usually renewed or replaced individually to continue to provide the required level of service from the network.


© 2008 CIEAM

Infrastructure assets thus refer to the built environment, including buildings, roads, bridges, and facilities and utilities related to water, sewage, power etc. as well as assets that relate to community services such as land, parks, and related equipment, and to military facilities (CIEAM, 2006). A physical asset can be considered to be part of the infrastructure when it is an integral part of a total system, i.e. if the asset is removed the system is incomplete, or the particular asset is necessary for the system to deliver the required standard of service. Critical infrastructure is a term used by governments to describe material assets that are essential for the functioning of a society and economy. Most common critical infrastructure include (ALGE, 1998);

electricity generation, transmission and distribution; gas production, transport and distribution; oil and oil products production, transport and distribution; telecommunication; water supply (drinking water, waste water/sewage, dikes and sluices); agriculture, food production and distribution; heating (e.g. natural gas, fuel oil, district heating); public health (hospitals, ambulances); transportation systems (fuel supply, railway network, airports, harbours,

inland shipping); financial services (banking, clearing); security services (police, military).

Infrastructure assets generally have the following attributes (ALGE, 1998):

• They are large networks constructed over generations which are not often replaced as a whole system

• The system or network has a long and indefinite life because its service capacity is maintained in perpetuity (by continual refurbishment or replacement of components as they wear out).

• The system components are interdependent and not usually capable of subdivision or separate disposal, and consequently are not readily disposable within the commercial marketplace.

• The system interdependency may limit a component life to a lesser period than the expected life of the component itself.

• The assets have a high initial cost and a value which is difficult to determine. Determine the components of assets condition and hierarchical structure: Components of Industrial and Infrastructure Assets Condition: Industrial assets are basically moving assets that perform specific functions through the application of their constituent parts in a rotating, reciprocating or swinging motion. Components of industrial assets condition therefore relate to an asset’s movements that could generate operational conditions such as vibration, heat, friction, noise or electrical potential that would eventually affect the physical condition, functionality, operational capacity, operational condition or operational performance of the asset.


© 2008 CIEAM

Usage ability as a result of physical condition indicates the asset's ability to deliver services to the level and standard required. In addition to the asset’s usage ability as a result of its physical condition, there are a number of assets condition components used in a physical assets condition scoping study. Demand/capacity is related to asset performance. Measuring this component would involve establishing subjective baseline service levels against which to measure actual performance. The demand/capacity component may also bring into scope efficiency and effectiveness measures. Assets utilisation and functionality is closely aligned with asset usage measures. Asset utilisation is a measure of how intensively an asset is being used to meet its service delivery objectives, in relation to the asset's potential capacity. To assess utilisation, criteria and benchmarks appropriate to the services being delivered and to the class of asset being considered, firstly need to be established. The criteria should have regard to:

• The value of the asset’s unit of service potential that is being used relative to the units of service being delivered (e.g. the future economic benefit)

• The physical measures of asset capacity relative to the units of service being delivered (e.g. outcome relative to the type of activity)

• The use being made of the asset relative to the optimal availability for the type of asset (e.g. the number of hours used relative to the hours available).

Under-utilised assets should be identified, and the reasons for this examined. It may be, for example, that the asset is no longer effective in performing the activities required of it or that it is in less than optimum condition. It may also be that the need for the services it delivers or supports has reduced. The functionality of an asset is a measure of the effectiveness of the asset in supporting the activities to be carried out. To assess (and monitor) functionality, it is necessary to determine:

• The role that the asset plays in achieving service delivery outcomes • The functional characteristics required to support specified activities.

The functionality of assets should be regularly reviewed. The results of regular functionality reviews are used in the formulation of asset strategies. Standard of Service: A well-defined standard of service is the foundation for determining assets condition of all infrastructure assets. A standard of service, in objective and measurable terms, determines how an asset will perform, including a suitable minimum condition grade in line with the impact of asset failure. There are two main objectives of infrastructure asset management relating to standard of service (ALGE, 1998):

• Sustained standard of service: To sustain or deliver an agreed standard of service in the most cost-effective way through the operation, maintenance, refurbishment, and replacement of assets.

• Improved standard of service: To make strategic changes and improvements to the standard of service of the asset portfolio through the creation, acquisition, improvement and disposal of assets. Changes to the standard of service are usually managed as a program based on strategic objectives regarding the asset portfolio.


© 2008 CIEAM

Minimum Condition Grade: Without a defined standard of service, there is no means of knowing what level of condition the infrastructure asset is required to be sustained at or to be improved. With a defined standard of service, the need to maintain, repair, refurbish or replace is dependent upon the condition of the asset. With a performance-based asset management approach, decisions are flexible and depend predominantly on the current condition of the asset. This differs from a planned maintenance approach (which may not reflect the actual condition) by responding to the actual deterioration and performance of an asset. The minimum condition grade needs to be set objectively, in line with the scale of impacts or consequences of asset failure during the design event. The minimum condition grade provides a key boundary condition for a physical assets condition scoping study and for making investment decisions. Performance Specification: The second part of standard of service of infrastructure assets is a specification of how the asset should perform. This would normally include a specification of the attributes of the asset which are important to its function such as location, type, height, capacity. The defined standard of service in effect combines the performance specification with the condition grade as a measure of reliability whereby the potential complication of trying to optimise maintenance over a short timeframe, or the need to determine the outcome or benefit associated with each individual intervention, can be avoided. Integrated Asset Management takes a whole-life cost approach to decisions regarding operation, maintenance, refurbishment and replacement of assets. Physical Assets Profiling Physical assets profiling describes the necessary elements needed to provide descriptive information about the physical asset’s systems, sub-systems, assemblies and components in a systems hierarchical topology. The profile does not cover the geographic location of the physical assets. Physical assets profiling also describes the asset’s physical properties, such as the asset’s capabilities. Assets Profiling Systems: A typical assets profiling system consists of the following sections:

1. Overview: The assets profiling system overview summarises the asset’s attributes, services adaptation, constraints, requirements, warranties, and liabilities.

2. Profile Semantics: The profile addresses core semantics related to all aspects of the asset’s services. This includes:

Identifying the asset via unique identifiers. Articulating service-specific requirements. Indicating any commercial terms of usage. Describing warranties, indemnities, and limitation of liability. Indicating modelling requirements for describing conditions.


© 2008 CIEAM

3. Asset Attributes: The asset’s attributes identify the nature of the services via the asset’s elements within a specific Context. Any other Context may be used to provide additional descriptive detail about the service.

4. Assets Services Adaptation: Adaptation refers to the use of assets services and any related interfaces, such as an assets/human resources interface. It also relates to services composition which refers to the use of assets services with required interface modifications, and the eventual derivation of services which includes modifications of the service interface as well as the implementation of the service.

5. Constraints: This considers specific assets services constraints such as, for example, ensuring that an asset’s service in the public sector is not used for commercial advantage that infringes upon unfair competitive advantage.

6. Requirements: The assets profile incorporates an Attribution Requirement. This ensures that the use of an asset’s services is attributed to the asset owner/steward. Rectification of an asset’s condition would thus similarly be attributed to the asset owner/steward, unless specifically stipulated otherwise. The assets profile also incorporates a Payment Requirement. This is used to describe the financial terms and conditions of the asset’s usage. The assets profile further incorporates a Share Requirement. This is used to ensure that any derivative of the asset’s services must be recognised or licensed under the same terms as the original assets services.

7. Warranties, Indemnities, and Liabilities: A specific assets services usage model defines warranties, indemnities and limitations of liabilities associated with the assets services. A warranty is a promise regarding the description of services and their quality, as stated by the asset owner. An indemnity is protection against loss or other burden by the user of the assets services in the event of non-compliance to the warranty. A liability is limiting the responsibility of the assets services provision. Warranties for assets condition components are categorised into the following:

Performance: specifies criteria relating to quality of services based on the asset’s condition measures, including a measure of the level of service (LOS) provided.

Compliance: specifies a set of quality aspects of the service in conformance with the law, compliance with standards, and an established LOS agreement including the average time for resolving problems related to service provisioning as a result of assets condition.

Reliability: specifies a set of technical measures related to the configuration of assets services and the relationship between the assets services users and providers, including a performance measure of a delivered services, the probability of the services being accessible.

Monitoring: specifies measures that support the management of services, including the frequency at which a service provider verifies the availability of assets services.


© 2008 CIEAM

Physical Assets Condition Modelling Condition Modelling Techniques and Theoretical Models: In addition to the myriad condition monitoring models using Artificial Intelligence (AI) techniques such as Artificial Neural Networks (ANN), Genetic Algorithms (GA) etc. there are several theoretical models of condition monitoring techniques that are significant in assets condition modelling. Instead of attempting to cover the very broad range of commercial and research models developed for the different condition monitoring technologies, such as vibration monitoring, infrared thermography, oil analysis and tribology, ultrasonics, and motor current analysis, it is more appropriate to consider some of the significant theoretical models developed by the Reliability Research Group, at the University of Alberta, U.S.A. These theoretical models range from condition based maintenance decision making; fault diagnosis and detection; prediction of assets equipment remaining life; reliability based system design for minimal life cycle costing; to multi-state system reliability modelling (RRG, 2006). Condition Based Maintenance Decision Making Using Vibration Monitoring: Asset developers and manufacturers of capital asset equipment often state that periodic inspections and PM activities must be conducted for any warranty to be valid, and for the equipment to operate properly. Thus, maintenance departments in various industries have to follow predetermined schedules for most of their maintenance activities. These periodic maintenance schedules do have the advantage of easy job scheduling. However, information of the health conditions of the equipment in operation does not get used to modify the maintenance schedule. Thus, some physical assets are over-maintained while others are under-maintained. Vibration-monitoring systems have been used to indicate when replacements are required on selected components such as bearings in rotary equipment, and gears in drives and transmissions. They are also used in fault diagnosis at the system level in order to pinpoint any failed components. In these situations, the monitoring systems are used for reacting to failures rather than preventing failures. They are not used to predict the statistical remaining life of components. As a result, they do not consider the planning or optimising of maintenance of the whole physical asset system. How to monitor the critical components of the asset system, predict how much longer the components can reliably perform their functions, and how much longer the asset as a whole can continue to be used, as well as to provide an optimal maintenance schedule for inspections, preventive maintenance, and/or replacements in order to minimise the total cost, is yet to be investigated. In view of these issues, multi-channel vibration analysis is used to monitor the degradation of assets equipment conditions and to use the collected information to model the degradation process in order to schedule maintenance activities to minimise the total asset maintenance cost. Fault Diagnosis and Detection Using Advanced Signal Processing Techniques: A fault signature database includes vibration signatures of common failure modes (including misalignment, imbalance, rub, wear-out, cavities or cracks, and oil whirl) of critical components (rotor and shaft, bearings, gears, seals, blades) in rotating equipment. Figures and look-up tables can be used to determine the fault sources based on observed symptoms. The probability for each fault source corresponding to observed vibration signals is established.


© 2008 CIEAM

Wavelet analysis has been successfully applied in signal processing, pattern recognition and machinery fault diagnosis. Different algorithms have been developed using wavelet analysis in fault diagnosis of gearboxes, roller bearings and rotary systems. Efficient feature extraction methods have also been developed based on non-orthogonal wavelet transforms, which can be used in analysis of vibration signals from gearboxes, roller bearings and reciprocating machines. Other signal processing methods for fault diagnosis and detection include cyclo-stationary analysis, independent component analysis (ICA), and kurtosis indicators. Prediction of Equipment Remaining Life: Asset equipment deteriorates as it is used, and its life follows certain statistical distributions. Equipment health indicators such as vibration signals can be used in prediction of the remaining life of deteriorating equipment. Statistical methods have been used extensively in prediction of time series. A relatively new technique called support vector machines (SVM) has been developed for pattern recognition and regression analysis, which have been shown to perform very well in predicting time series. The use of SVM in vibration monitoring and prediction of equipment degradation is also being explored. The formulation of SVM embodies the Structural Risk Minimization (SRM) principle, as opposed to the Empirical Risk Minimization (ERM) approach commonly employed within statistical learning methods. SRM minimises an upper bound on the generalisation error, while ERM minimises the error on the training data. It is this difference, which equips SVMs with a greater flexibility and thus potentially better prediction capabilities. In SVM, the basic idea is to map the data into a high dimensional feature space via non-linear mapping. Once in the feature space, linear regression can be performed. Another approach in predicting remaining life is the use of artificial neural networks (ANN). Reliability Based System Design for Minimal Life Cycle Cost: The reliable performance of systems is becoming more and more important in many industrial and infrastructure assets. This has resulted from an increasing need for asset systems and components with higher reliability and lower cost. Thus, reliability based design of asset systems has become an important research area. However, most of the research results in the literature are either for asset system design with constant component reliabilities or for optimal maintenance planning. The focus is on developing guidelines for the selection of parameters within various maintenance models and to develop reliability based design models considering periodic maintenance for special systems structures such as standby systems and k-out-of-n systems in solving reliability based design problems. Genetic algorithms are fine tuned for their efficient application in such problems. Multi-State System Reliability Modelling: Classical reliability theory assumes that a component or a system can only be in one of two possible states, either working or failed. However, in many real-life situations, asset systems and their components are capable of assuming a whole range of levels of performance, varying from perfect functioning (denoted by level P, say) to complete failure (denoted by level 0). In these situations, the dichotomous model is an oversimplification of the actual asset systems. Models treating these asset systems and their components as multi-state entities, describe the performance of these systems in terms of the performances of their components.


© 2008 CIEAM

Condition Modelling of Infrastructure Assets: Previously, future infrastructure asset renewal and replacement plans were based on when an asset had reached the end of its useful life, with this information supplemented by any knowledge or experience derived from the performance of a particular asset. More recently this information has been enhanced by assets condition assessments undertaken to confirm an assets overall condition. These condition assessments have traditionally been focused on infrastructure assets such as roads, but in some cases, have also been undertaken on sewer and stormwater pipes. While this information has been valuable, future strategic assets planning has continued to be limited by the lack of an effective planning tool which considers not only when assets require treatment but when the best time to treat those assets arose, and what type of treatment would provide the best value. The development of a refined asset performance model provides the solution to this problem. Such a model requires a comprehensive analysis of all assets and, in some cases the collection of additional data, to be effective. The results of such modelling are pivotal to the creation of assets financial management and investment policies. Infrastructure assets modelling is an extremely detailed and complex undertaking, with each individual asset needing to be evaluated and input into the model. Thousands of assets are then compared to various factors including differing treatments, costs, and budget allocations, with the final outcome being a set of recommendations on which assets should be treated, as well as when and how these treatments should occur. In order to complete this analysis in an efficient and timely manner, current information for each asset is essential to be fed this into the model. The most comprehensive information available and the guiding principles behind each asset class are a set of manuals. These comprise (SAMG, 2006): 1. The Asset Condition Manual: Condition assessments provide indications on the physical state of an asset. The driving factor in calculating the condition of an asset is its age in relation to its expected useful life (which was recorded during the asset revaluation process). This remaining useful life is used to determine an asset’s condition on a 1-5 scale, where 1 is excellent condition through to 5 which is very poor condition. Once these 1-5 scores are determined, they are linked directly to the assets and entered into the model. As part of this analysis, it must be recognised that the actual consumption of an infrastructure asset is not a straight line such as with depreciation, meaning the time taken to move between condition scores often differ. For strategic assets planning that spans over multiple years, information on how assets will decay into the future is essential. As such, for each asset class a graph is drawn and percentage bands used to allocate a condition rating. These consumption graphs are also reflected in the model. As a secondary factor, the condition ratings allocated to each asset are adjusted for data collected from the maintenance work order system (which contains historical records on when the assets need maintenance work to be performed) or from actual condition assessments. 2. The Asset Functionality Manual: Functionality assessments provide indications on whether an asset is fit to undertake its intended purpose (i.e. Is the right asset in place to perform the required task?). For example, indicators used for road functionality are the geometry of the road and the amount of traffic it received.


© 2008 CIEAM

For most hydraulic pipe assets the criticality or the consequence of its failure is used as a measure of its functionality. Again a scale of 1 to 5 is used, with scores entered into the model. 3. The Asset Capacity Manual: Capacity assessment provides an indication of the ‘maximum potential’ of an infrastructure asset. Engineering indicators like load-carrying capacity of roads and bridges and flow capacity of pipes are used. In many cases significant analysis and design work is required to allocate an indicator on a scale of 1 to 5, to each asset class. Once these manuals are developed, data files of every asset in each class are created and the ratings (1,2,3,4 or 5) for condition, functionality and capacity allocated. It should be noted that this work concentrates on the major sections of each asset class and those that can be easily grouped and treated in a consistent manner. Hence minor assets in roads (eg. signs, retaining walls, jetties and ramps) and hydraulics (eg. treatment plants and pump stations) are not yet modelled in this way. Additionally it is important to note that these models are annually updated to include new or first recognised assets and updated performance reports from the maintenance work order system. Additional data available now or in the future such as new condition assessments and data from CCTV inspections of pipes are also incorporated to enhance the sophistication of the models.

Figure 5. Different Treatments Available for Typical Infrastructure Assets

(SAMG, 2006)


© 2008 CIEAM

The next step in the development of the infrastructure assets condition model is to allocate treatments for each asset class (the type of options available to rectify an under performing asset) and treatment costs per unit measure. All costs are obtained from benchmark estimates and are the same costs used in the last assets valuation. As an example, a $/sqm is used for roads and a $/meter for pipes. Once this information is available, the asset data files are imported into the condition model. The model has the following steps – Imports, Models, Strategies and Reports. There are a number of steps to develop the model, the most critical one being the allocation of treatments to condition. Figure 5 shows two of the different treatments available for typical infrastructure assets. The two possible treatments are ‘full replacement of the Asphalt Footpath and Kerb’ and’ replacement of only the Asphalt Footpath’ (leaving the Kerb intact). As can we seen in Fig 5 (via the ticked boxes) consideration is only given to replacing the footpath if the Kerb is in excellent condition (Score of 1 or 2). If however the Kerb is in a poor state (score of 3, 4 or 5) then both the Footpath and Kerb will always be replaced. Not only does such an action reflect how the conditions of these assets are approached, it also reinforces a cost effective course of action. Any number of strategies may be run within the asset model, using the same asset inputs. When creating a strategy the following needs to occur;

treatment costs assigned – sourced from benchmarking data; annual expenditure over the life of the analysis (up to 25 years) set; a discount (inflation) rate can be set – this is used if future construction

costs are expected to exceed CPI; an estimate is made of the expenditure distribution, relative to the asset

condition rating. The final step is the model output (reports) where, after running the strategy, the following information is available, either in spreadsheet or graphical form. • Funding Distribution: This shows the expenditure over the period of the

strategy for each treatment plus an amount required for maintenance. • Condition Analysis: This shows the condition of the assets as a class (average)

and the number of assets at condition 1, 2, 3, 4 or 5 in each year. It also shows the assets in each capacity rating showing the effect of an upgrade treatment.

• Works Prioritisation: This provides a spreadsheet of each asset that has been selected by the model to be treated in each year of the strategy.

• Strategy Used in Financial Modelling: Of all the strategies available, the one that seeks to preserve infrastructure assets in their current state over the next 20 years is normally selected for further development outside of the model and forms the basis of revised financial policies. The funding gaps highlighted by this strategy and how the organisation intends to address them, are the subject of the assets financial management policies. In addition to the financial spend figures from the assets condition model, other costs are added to determine actual required funding levels and the associated funding gap. These costs include non-modelled assets and estimates made of required new works due to development and known infrastructure deficiencies that are not accounted for in the capacity rating of assets.


© 2008 CIEAM

5. Assets Health Monitoring and Life Cycle Management

The Concept of Health Indices Health Indices provide a basis for assessing the overall health of an asset. Health Indices are based on identification of the modes of failure for the asset and its subsystems, and then developing measures of generalized degradation or degradation of key subsystems that can lead to end-of-life for the entire asset. A composite Health Index is a very useful tool for representing the overall health of a complex asset. Transmission and distribution assets are seldom characterized by a single subsystem with a single mode of degradation and failure. Rather, most assets are made up of multiple subsystems, and each subsystem may be characterized by multiple modes of degradation and failure. Depending on the nature of the asset, there may be one dominant mode of failure, or there may be several independent failure modes. In some cases, an asset may be considered to have reached end-of-life only when several subsystems have reached a state of deterioration that precludes continued service. The composite Health Index combines all of these condition factors into a single indicator of the health of the asset (Acres International, 2003). For a typical asset class, a wide range of diagnostic tests and visual inspections are undertaken as part of the maintenance program or special-purpose Asset Condition Assessment (ACA) surveys. In some cases, a poor condition rating value will represent a failure of a subsystem, which can be repaired through replacement of that subsystem, with no resultant impact on the serviceability of the overall asset. However, it should be recognized that generalized deterioration of many or all of the subsystems that make up an asset can also be a valid indication of the overall health of the asset. A composite Health Index captures generalized deterioration of asset subsystems, as well as fatal deterioration of a dominant subsystem. In developing a composite Health Index for an asset, it is very important to understand the functionality of the asset, and the manner in which the various subsystems work together to perform the main functions of the asset. With a clear understanding of asset functionality, the various condition ratings can be combined to create a composite ‘score’ for the asset, and the continuum of asset scores can be subdivided into ranges of scores that represent differing degrees of asset health. The critical objectives in the formulation of a composite Health Index are : • The index should be indicative of the suitability of the asset for continued

service and representative of the overall asset health • The index should contain objective and verifiable measures of asset condition,

as opposed to subjective observations • The index should be understandable and readily interpreted

Development of a condition-based Health Index requires an assessment of the relative importance of the different condition factors in determining the health of the asset.


© 2008 CIEAM

Each condition factor in determining the health of the asset must be assessed as falling into categories as shown in Table 11:

Table 11. Relative Degree of Importance of Condition Factors (Acres International, 2003)

By using a multi-criteria analysis approach, the various factors can be combined into an idealized condition-based Health Index. This involves grouping together the various factors, crafting the mathematical and/or logical formulations, and establishing the importance weightings of all the factors to allow combining them into a single Health Index. Next a quantified scoring system can be developed to appropriately represent the asset health consistent with this philosophical approach. The steps are as follows:

1. Deterioration assessments or scores are converted to health scores in a defined range from ‘perfect health’ to ‘end-of-life’.

2. An importance weighting is assigned to each factor in a range from ‘modest importance’ to ‘very high importance’.

3. A general deterioration index is formulated by calculating the maximum possible score by summing the multiples of steps 1 and 2 for each factor.

4. The general deterioration index is normalized to a maximum score of 100 based on a defined acceptable/minimum number of condition criteria.

5. The dominant factors are normalized to a maximum score of 100.

6. Calculation of the overall Health Index as the lesser of step 4 or 5, where 100% is excellent health and 0% is poor health.

7. Finally the continuum of asset health scores is correlated into discrete categories of asset health from ‘Very Poor’ to ‘Very Good’.


© 2008 CIEAM

Table 12 shows the conversion of the continuum of asset health scores into discrete categories of asset health.

Table 12. Categories of Asset Health (Acres International, 2003)

This conversion into discrete categories for a condition index requires fine-tuning of the health scoring system, since it is necessary that the relative degree of severity of the scores due to dominant factors and those due to generalized degradation match up at the boundaries between each category. This may require iteration of the individual steps to ensure that the resulting index is rational and coherent, and reasonably reflects field conditions. Health Indices have been developed for a wide range of distribution assets. For each of these, a recommendation has been made on the type of condition tests or inspections that are required. It should be noted that in many cases good Health Indices can be formulated with fewer condition criteria, but their precision might be less. Based on these results assessments can be made on the required maintenance, refurbishment or replacement levels needed over a defined time period for a particular asset. As such the Health Index can be considered a key performance indicator (KPI) in physical asset performance management and decision making where its interpretation takes into account the nature of the asset being rated. In summary, Health Indices provide a basis for assessing the overall health of an asset and can be used as a key performance indicator (KPI) of the condition of a physical asset. Health Indices are based on identification of the modes of failure for the asset and its subsystems, and developing measures of generalized degradation or degradation of assets equipment that can lead to end-of-life for the entire asset. This approach is a valuable method of justifying the need for capital assets expenditures and/or maintenance requirements for physical assets, based on the condition of the assets and not on their age alone.


© 2008 CIEAM

Further asset health analysis relates to an asset’s life cycle information. For each of the asset systems and equipment inspected, it is possible to estimate the current state and position of the asset within its life cycle, as well as the replacement value of the asset at the end of the life cycle. Figure 6 illustrates typical output generated from a sample life cycle data analysis.

Figure 6. Life Cycle Data Analysis

(VFA, 2006) One of the most powerful benchmark data that can be derived from such information is called the Facility Condition Index (FCI). The FCI is a ratio of costs against value, and is used to measure the relative condition of a single asset, such as a building, or a portfolio of assets, taking into account either a specific priority of an asset system or all of the asset portfolio systems. The FCI is calculated by dividing the asset’s cost of deficiencies as a result of condition degradation, by the asset’s current replacement value (cost of replacing the asset). Thus: Facilities Condition Index (FCI) = Cost of Asset Deficiencies Current Replacement Value From this formula, it is obvious that the higher the FCI, the worse the asset condition or related health indices are, due to an increase in the asset cost of deficiencies. However, the FCI can become less if the asset current replacement value is higher, which can in many cases have nothing to do with asset condition.


© 2008 CIEAM

Assets Life Cycle Management The Life Cycle of Physical Assets: The management of physical assets is a systematic process for programming and integrating efficient and equitable allocations of resources cost-effectively during the different life cycle stages of the assets in accordance with established performance and service delivery objectives. In this context, the stages of an industrial asset’s life cycle include the initial engineering design phases of asset feasibility, and conceptual, preliminary and detail design; the asset establishment phases of fabrication, installation and commissioning; the asset usage stages of operation, maintenance and renewal; and the asset replacement phases of decommissioning and disposal. The ‘life cycle’ concept is due to the possible shifting of an asset’s ‘useful life’ status from one life cycle stage to another, both progressively and iteratively. Thus, an asset’s useful life can shift progressively from design to fabrication to operation to maintenance, and iteratively back to re-design, re-construction / re-fabrication to re-operation / re-utilisation and so on, prior to renewal – in effect cycling through various stages of its ‘useful life’. These life cycle stages of physical assets and related cost categories are indicated in Figure 7 (Stapelberg, 2008).

Figure 7. Life Cycle Stages of Physical Assets and Related Cost Categories

(Stapelberg, 2008) A common understanding of a physical asset is that it is an investment of enduring value over its useful life. The two elements, namely ‘value’ and ‘useful life’ are fundamental to all physical assets. In the public sector, it is often more important to appreciate the non-monetary aspects of an asset’s value.


© 2008 CIEAM

The term ‘service potential’ is used to describe the utility of an asset where the asset does not generate income, and is referred to as the expected ‘future benefit’ to be derived from the asset’s ‘useful life’ (ANAO, 1996). The ‘useful life’ of an asset as a whole, needs to be distinguished from its ‘residual life’ with respect to an organisation’s delivery strategies. Useful life is the period over which the benefits relating to an organisation’s delivery strategies are to be derived from the use of the asset (Victorian Government, 1995). Residual life is a concept related to non-destructive testing (NDT), where the main goal of NDT is to predict or assess the performance and service life of a physical asset or its related systems at various stages of construction/manufacturing and service life cycle (so-called asset residual life assessment) to evaluate an asset’s remaining useful life. Residual life, in the context of renewal or replacement of a physical asset’s equipment (sub-systems, assemblies and components), which is typically carried-out during scheduled maintenance, is in effect equivalent to the time elapsed between maintenance intervals. This is however not the true residual life, based on the equipment’s reliability characteristics. The difference between the two provides a means of comparison for maintenance optimisation of an asset’s critical equipment. Optimum maintenance intervals are best determined through the method of equipment age analysis that identifies the rate of component deterioration and potential failure ages. The risk-based maintenance technique of residual life assessment is ideally applied in equipment age analysis where the frequencies of preventive maintenance activities can be optimised. However, residual life is widely used in modelling stochastic processes during engineering design of industrial assets, and is one of the random variables that determines the design requirements for an asset’s component renewal / replacement; the other being the component age once the design has progressed beyond the engineered installation stage, and the physical asset has been in use for some time. In reliability theory, residual life appears as the time until the next failure, whereas for the renewal / replacement process it is normally expressed as a mathematical function of conditional reliability in which the residual life is determined from the asset’s component age. The mean residual life or remaining life expectancy function at a specific component age is defined to be the expected remaining life given survival to that age. It is a concept of interest in maintenance optimisation and most important in process reliability (Stapelberg, 2008). Life Cycle Management (LCM): For many managers, Life Cycle Management (LCM) is the practice of supervising ongoing assets performance and monitoring the aging of the asset efficiently. LCM is the next step in enlightened asset management. It establishes a clear relationship between economic performance and quality goals. It can also minimize unforeseen capital expenditures and makes long-term strategic planning more effective. LCM represents a step beyond predictive maintenance, by factoring in the cost and efficiency of each asset at every step of its useful life. In addition, this practice considers replacement and disposal costs as well as peripheral issues that affect the cost/benefit analysis. This process addresses strategic concerns and can provide critical, timely information to support decisions.


© 2008 CIEAM

LCM is a continuous process that begins with an integrated assessment of all the factors affecting the operation, maintenance, service life, and ongoing resource requirements for a facility in order to produce a realistic, long-term forecast of investments and activities that will be needed to maintain and operate the asset (UNICCO, 2005). The principles of LCM can be successfully applied to any capital or labour intensive industrial or infrastructure asset. The program can be set up for an entire complex (multiple assets), a utility or facility and all its equipment, or for selected systems or equipment assemblies. The greatest benefits from LCM programs occur when:

• Assets require a large capital outlay, relatively long lead time for replacement, and/or scheduled outages, changeovers, or downtimes for maintenance are infrequent and short in duration.

• Assets whose operation and maintenance costs dominate the strategic planning decisions concerning new capital expenditures and economic service life.

• Management decisions regarding operating and capital expenditures for the facility are subject to shareholder, government agency, or third-party examinations.

• There is a need to optimise and/or integrate several ongoing maintenance activities or programs (such as corrective maintenance, preventive maintenance (PM), reliability centred maintenance (RCM), predictive condition-based maintenance (CBM), surveillance activities, etc.) that have evolved during the service life of the facility.

• Utilities (i.e. power generation assets) and facilities (i.e. water treatment and distribution assets) that are in regulated industries.

• Utilities and facilities that require special siting considerations, such as the need for an environmental impact assessments.

• Utilities and facilities that may adversely affect employees and public health and safety, and/or need to comply with federal OSHA regulations (including 29CFR1910, ‘Process Safety Management of Highly Hazardous Chemicals’), EPA regulations, or similar state and local regulations.

• Federal, state, and local infrastructures require assurance that long-term integrity can be maintained and long-term funding requirements for the modifications, repairs, inspections, and testing are realistic.

The decision of when to start a LCM program is driven by the need to apply resources and assets effectively, to have a reliable vision of the future, and to avoid crisis management situations. Historically, LCM programs get started when a decision has to be made about an asset’s future: Should it continue in operation, or should it be replaced? Another trigger for LCM is when determining if the cost of a new capital asset addition can be recovered during the remaining service life of an existing asset. The need for more effective control of operating and maintenance costs also causes LCM efforts to be considered.


© 2008 CIEAM

Starting an LCM Program: Step 1: Perform an asset and asset equipment condition assessment: A condition assessment determines the current operating conditions and life expectancies of various assets. It examines replacement costs and projected return on investment, as well as overall asset health. The LCM implementation will be impacted if asset condition is not methodically researched. Also, this examines existing PM and CBM programs and efforts. Features and conditions that impose significant replacement or refurbishment costs and regulatory or public relations costs should also be specifically noted. It is helpful to benchmark findings to other assets within the same industry. The initial condition assessment tests the economic viability of the goals in comparison to other alternatives. The results of the analysis allow management to evaluate the goals, understand the potential merit of a LCM program, shape the scope of the program, and identify the resource requirements. Step 2: Shape the Scope of the Program and Prepare the Program Plan: The assets equipment that have the greatest influence on costs, safety, and reliability merit the most attention. These are the equipment that could directly impact the continued use of the asset and force its eventual shutdown or retirement. These are the ‘critical equipment’. Identify, categorize, and model the critical equipment. Consider replacement feasibility, service history, performance impact, regulatory consideration, and the potential benefit of preventive maintenance activities. Produce a ranking of the assets equipment in each category. The highly ranked items are the critical equipment, which become the focus of the program. The lower ranked items receive a proportionally reduced level of attention. The program plan should become a tool to involve all of the organisations that manage, operate, and maintain the asset to make them aware of the goals and objectives. The plan defines the scope, evaluation approaches, and implementation priorities, as well as the responsibilities of the affected organisations, schedules, and resource requirements. Step 3: Establish Effective Maintenance Requirements and Methods: This step ensures that assets and assets equipment are measured or controlled at appropriate intervals based on costs, safety, and reliability and/or indications of degraded performance or failure. A more thorough examination is performed for the critical equipment. The examination process identifies needed enhancements or corrective actions. Typically, these enhancements refocus maintenance activities to emphasize the critical equipment; formalise current practices and schedules; and adjust the scope and/or frequency of inspections, surveillance, and testing activities to ensure they will detect and mitigate the contributing mechanisms. Sometimes, the enhancement may involve changes in operation, production, or utilisation. The examination improves understanding of the mechanisms that contribute to degraded conditions through misuse or age-related degradation. It considers the design features, design requirements, materials, and operating and maintenance history. Contributing mechanisms are identified, and their influences on ongoing performance are characterised. Next, the effectiveness of the current procedures to detect and mitigate these mechanisms is evaluated. Operational experience and manufacturer's information are investigated. Production/utilisation schedules are examined to identify opportunities to perform maintenance activities.


© 2008 CIEAM

Step 4: Recognize the Peripheral Issues: LCM needs to examine peripheral issues that are non-hardware factors that affect the overall program. These include governmental, environmental, personnel, training, public relations, financial, and social issues that influence asset decisions. Some of the more significant peripheral issues are:

• Transfer of Institutional Memory: Key personnel develop a valuable knowledge base about the design, operation, and maintenance of an asset. The LCM program should establish methods for capturing and transferring this institutional memory to new personnel.

• Cost/Benefit Issues: Management of regulated and publicly held companies must often justify expenditures; therefore, the LCM program should facilitate periodic cost/benefit evaluations to develop the needed management information.

• Technical Obsolescence: The LCM program must factor into the long-term availability of replacement parts and competent suppliers. This is particularly important when there is a significant dependency on specialized machinery or the performance of electronic components.

• Changes in Regulatory Requirements and Industry Standards: These changes may require back-fitting to remain in compliance. Worker safety and handling hazardous materials are typical examples.

Step 5: Prepare a Life Cycle Management Diagram: Optimising capital and labour costs for an asset, or asset equipment, requires a reliable tool for forecasting replacement, refurbishment, and maintenance activities. A life cycle management diagram illustrates a timeline for all the activities. It shows recurrence intervals, costs, work hours, and other related data. Other pertinent information, such as the description of the activity, performance schedules, or implementation prerequisites, is maintained in a supporting database. Using the diagram, peak activity periods can be easily planned. Critical and routine spare parts can be better stocked to meet operational needs without the cost of excess inventory or rush orders. Step 6: Implementation and Ongoing Monitoring: LCM is an ongoing process that requires the development of an implementation plan and a continuous feedback system. The implementation plan is also a convenient tool to describe the program goals and specific metrics to management to receive the required authorisations. When shifting to LCM implementation:

• Use the evaluation results and life cycle management diagram to formulate appropriate implementation strategies.

• Identify the affected organisations, their responsibilities, and resource requirements.

• Establish an implementation schedule and annual budget. • Provide training for personnel involved in maintenance, inspection, and other

LCM activities.


© 2008 CIEAM

• Perform the implementation activities. Generate work orders for all processes in accordance with the planned LCM schedule. The LCM program should also interface with other business systems to form an integrated capability.

• Establish ongoing monitoring and feedback methods based on observed trends.

• Conduct routine appraisals and reassessments, and institute required course corrections.

• Prepare administrative control documents and measures to ensure that asset maintenance programs adhere to LCM requirements.

Step 7: Cost/Benefit Analysis: Once an LCM program is in place, it is relatively easy to determine the relative cost/benefits of maintaining a particular asset. It is important to recognise when corrective and preventive maintenance activities and ongoing monitoring begin to add to the overall cost of operating an asset or asset equipment. By conducting periodic cost/benefit appraisals, asset managers can consider the merits of other options such as replacement, addition of new inspection techniques, or the increase (or decrease) of maintenance activities/frequencies. Benefits of Assets Life Cycle Management: LCM programs provide short-term benefits by avoiding corrective maintenance expenses and unplanned operational failures. Resources are optimised and focused on productivity and operating cost factors. Spare parts inventories are closely managed and purchasing improved. The near-term payback can be more than enough to cover the engineering evaluations and program development implementation costs. The long-term benefits are both economic and strategic in nature. Disciplined LCM processes quantify service life margins, which increases asset production, capacity, or availability. This maximizes service life, defers replacement costs, and has environmental benefits. LCM programs also minimize the costs for refurbishing or replacing major structures, systems, and equipment. Since routine and fixed costs are well known, capital costs are likely to be anticipated and evaluated in advance, enabling companies to execute long-term financial and strategic plans. Intangible benefits can also be important factors. For example, LCM activities promote and contribute to the overall operational excellence of an asset. Motivational benefits improve employee morale, teamwork, and quality awareness. An efficient asset operation also reduces corporate risk and liability. The consequence of inaction can escalate baseline costs worsened by unanticipated maintenance, refurbishment, or replacement costs. For most assets, a LCM program will pay for itself. Life Cycle Management Framework: Life cycle management (LCM) can be understood as a way for business to manage an approach to sustainable development. LCM is the application of life cycle thinking to modern business practice, with the aim of managing the total life cycle of an organisation’s products and services towards more sustainable consumption and production. LCM is not a single methodology, but a flexible integrated management framework of concepts, techniques and procedures incorporating environmental, economic, and social aspects of products, processes and organisations.


© 2008 CIEAM

An Integrated LCM framework is derived from an amalgamation of LCM and asset management theories. The Integrated LCM framework refers to the management of assets over their complete life cycle, from before acquisition to disposal, taking into account economic, environmental, social and technical factors and performance. Furthermore, ‘assets’ refer to strategic assets. In this case, strategic assets refer to physical assets only, however, strategic assets may include non-physical assets such as intellectual capital. Figure 8 illustrates the Integrated LCM framework, showing the input of external and internal drivers to strategic assets assessment.

Figure 8. The Integrated LCM Framework (CSIR, 2008)

External Drivers of Change in the LCM Framework: The external drivers of change are defined as those factors that emanate from outside the organisation, but cause changes within the organisation. These factors include, inter alia: communities, i.e. social and/or environmental concerns; competition; consumers, i.e. social and/or economic concerns; cost of raw material; cost of power; cost of chemicals; environmental lobby groups; government, e.g. legislation; increased or decreased services demand; and scarcity of skills and experience. Internal Drivers of Change in the LCM Framework: The internal drivers of change are defined as those factors that are driven from within the organisation and that cause changes within the same organisation. These factors include, inter alia: cost-reduction initiatives; lack of system capacity; loss of skilled personnel; obsolescence, i.e. high maintenance costs; redundancy, e.g. need for interconnectivity and additional facilities; process efficiency; and safety. External and internal drivers of change impact upon an assessment of strategic assets.


© 2008 CIEAM

Assessment of strategic assets in the LCM Framework: Performance assessment of strategic assets is essential in the LCM framework, and is done in terms of:

• Economic or financial impacts, i.e. life-cycle costing or total cost of ownership • Environmental impact/s, i.e. environmental incursions in terms of chemical

spillages, land refills, etc. • Social impact/s, i.e. disasters that affect people in anyway • Technical impacts, i.e. efficiency and effectiveness • Technical losses.

The Integrated LCM framework assists in organising existing information and identifying gaps for information that is not available and which has to be gathered. Some of the relevant concerns during this phase are assessing the performance of the asset over its design life cycle as follows:

• Are there new technologies that can perform the same (or more functions) at a better price or in a safer and more efficient manner?

• Has the performance deteriorated to a point, even before the predicted design life span, that necessitates the modification of the asset?

Asset Renewal Decision in the LCM Framework: The asset renewal decision refers to a decision that needs to be made regarding the future of the asset. A sound business case, unless there are safety and/or legislative reasons for asset renewal, needs to be compiled to support the asset renewal decision. The decision could include maintaining the status quo, i.e. run the asset to failure as part of the maintenance tactics, but it is ensured that a complete risk assessment is conducted to support this decision. The asset renewal decision can, therefore, include any one or a combination of the following;

leave as is – run to failure strategy – risk assessment completed; leave as is – operate and maintain as usual – future assessment to be made; retrofit; refurbishment; replacement of component parts; overhaul; complete asset replacement.

Operate and Maintain Strategic Assets: The strategic assets are operated and maintained in accordance with predetermined guidelines, standards and specifications in such a manner so as to try and achieve the design life with the least possible costs, and minimal (preferably zero) social and environmental impacts. Total performance in the LCM Framework: The assets are monitored and managed in terms of predetermined standards and specifications with regards to the economic, environmental, social and technical performances.


© 2008 CIEAM

Collect and Record Strategic Asset Data in the LCM Framework: Total performance data of the strategic assets are collected, verified/validated and recorded. The data are verified against design performance parameters, but moderated for actual application conditions. A data trend and historic usage information are established. Set points are determined for the data to flag the system if the asset performance deteriorates to an unacceptable level. Update the Asset Register: A detailed asset register is kept, and updated regularly to reflect the performance of the strategic assets. An integrated software system incorporating an interactive database management system will be essential to the successful implementation of an asset register. The asset register clearly identifies the following;

the asset’s attributes; its geographic location; primary data such as technical ratings and design life span; secondary data such as operational performance, maintenance history,

technical performance, total cost of ownership, social impacts, and environmental impacts;

any background activities such as asset renewal decisions in process linked to the asset.

Information from the asset register could serve as an internal driver of change. For example, the condition of an asset could be such that it is clear that the design life of the asset will not be reached, thus necessitating an asset renewal decision to be taken. Key attributes of the Integrated LCM Framework: In summary, the Integrated LCM framework attempts to provide the technical, social and environmental dimensions to a modified physical asset management model. Other key areas of asset management, not captured in other life cycle management or asset management models, such as data collection and the recording of key data in on integrated information platform, such as an asset register, is also depicted in the framework. The key attributes of the Integrated LCM framework are as follows:

• External drivers such as environmental pressures and legislation. • Internal drivers such as capacity concerns, efficiency and resource

management. • Data collection, which is a key aspect of proper physical asset management. • Asset register, which forms a pivotal role in linking the asset to the financial

statements of the business.


© 2008 CIEAM

6. Assets Life Cycle Analysis and Life Cycle Costing

Life Cycle Analysis Life cycle analysis (LCA), or ‘assessment’ is an analytical methodology that is used to quantify the environmental impacts of products, processes or services. Life cycle analysis is one tool that industry can use to deliver sustainable development through enhanced assets stewardship. Life cycle analysis typically comprises four stages (Monhemius, 2006);

the goal definition and scoping stage; the life cycle inventory stage; the life cycle impact assessment stage; the interpretation or improvement stage.

Life cycle impact assessment can also be re-framed as ‘life cycle costing’, using a variety of techniques to place a monetary value on the socio-economic and environmental impacts of alternative decisions. Life cycle analysis tools assess impacts on a variety of environmental values, including air and water quality, greenhouse emissions and land use for a suite of activities undertaken in the mining and minerals processing industry. The ‘life-cycle’ concept in LCA assesses the assets usage life cycle, from commissioning, operation, maintenance, preservation or rehabilitation, and iteratively back to re-design, re-construction / re-fabrication or to re-operation / re-utilisation and so on, prior to renewal or replacement or disposal. The ‘cradle-to-grave’ concept in LCA assesses the assets usage life cycle, from commissioning, operation and maintenance, preservation or rehabilitation, to renewal or replacement or disposal. Life cycle impact assessment (or ‘life cycle costing’) typically has three components (Mangena and Brent, 2006): • Classification: Where the results of the inventory are categorised into impact

categories; • Characterisation: Where the contribution of inventory data to each impact

category is determined; • Valuation: Where the different impacts are normalised and weighted against

each other. Environmental impacts to be quantified are selected for each operation, within each stage of production. A major concern with LCA, like any impact assessment process, is the way that values are attributed for different types of impacts. Regardless, once values are quantified, LCA can be a useful decision support tool for comparing project or process options within an agreed value framework. LCA is still developing. An international standard (ISO) has been developed for LCA (ISO 14040-2).


© 2008 CIEAM

Assets Life Cycle Impact Assessment or Life Cycle Costing (NSWT, 2004) The determination of costs is an integral part of the asset management process and is a common element of many of the asset manager’s tools, particularly Economic Appraisal, Financial Appraisal, Value Management, Risk Management, and Demand Management. In the past, comparisons of asset alternatives, whether at the concept or detailed design level, have been based mainly on initial capital costs. Growing pressure to achieve better outcomes from assets means that ongoing operating and maintenance costs must be considered as they consume more resources over the asset’s service life. Both the capital and the ongoing operating and maintenance costs must be considered wherever asset management decisions involving costs are made. Life Cycle Impact Assessment or Life Cycle Costing is a process to determine the sum of all the costs associated with an asset or part thereof, including acquisition, installation, operation, maintenance, refurbishment and disposal costs. It is pivotal to the asset management process as an input to the evaluation of alternatives via Economic Appraisal, Financial Appraisal, Value Management, Risk Management and Demand Management. An Australian Standard on Life Cycle Costing (AS4536) includes examples of the application of Life Cycle Costing. The Life Cycle Cost (LCC) of an asset is defined as the total cost throughout an asset’s life, including planning, design, acquisition and support costs, and any other costs directly attributable to owning or using the asset. Life Cycle Impact Assessment or Life Cycle Costing adds all the costs of alternatives over their life period and enables an evaluation on a common basis for the period of interest (discounted costs). This enables decisions on acquisition, maintenance, refurbishment or disposal to be made in the light of full cost implications.

Asset Life Cost Planning: Life Cost Planning concerns the assessment and comparison of options/alternatives during the asset’s design/procurement phase. It utilises similar techniques as those for Economic Appraisal in that future, nominal costs are discounted to today's value of Discounted Cost. The application of Discounted Cost Analyses to Life Cost Planning differs in assets economic appraisals, in that Life Cost Planning generally;

considers all cost components within asset options over the asset’s life; does not directly consider benefits or revenue streams that are generally

assumed to be equal among the options being compared (benefits and revenues are considered in the evaluation of options).

Life Cost Analysis: Life Cost Analysis enables assets creation, usage, and disposal costs, to be monitored throughout the asset’s life to enable timely decision-making as to how these costs can be minimised. Where ownership of the asset changes over time, each owner, takes responsibility for decisions required during the period of ownership only. Life Cost Analysis is used as the basis for the monitoring and management of costs over an asset’s life. It is essentially a financial management tool in which costs are generally not expressed as real or discounted costs, but as nominal costs (i.e. estimated costs to be paid when due) to enable a comparison of the predicted cost and the actual cost. This enables better prediction and adjustment of the Life Cycle Costing (LCC) Model.


© 2008 CIEAM

A Life Cycle Costing Model A Life Cycle Costing Model (LCCM) is an accounting structure containing terms and factors which enable estimation of an asset's component costs. A number of commercially available models can be used for LCC analysis. However, in some cases it may be appropriate to develop a model for a specific application. In either case, the LCCM should (NSWT, 2004);

represent the characteristics of the asset being analysed including its intended life cycle usage, environment, operating and maintenance support scenarios and any constraints or limitations;

be comprehensive enough to include and highlight the factors relevant to the asset’s usage life cycle;

be easily understood to allow timely decision-making, future updates and modifications;

provide for the evaluation of specific asset life cycle cost elements independently of other elements.

Before selecting an appropriate LCCM, the purpose of the analysis and the information it requires should be identified. The model should also be reviewed with respect to the applicability of all asset usage cost factors, empirical relationships, constants, elements and variables. LCCM Breakdown into Asset Cost Elements: Estimating total asset life cycle costs requires breakdown of the asset into its constituent cost elements over time. The level to which it is broken down will depend on the purpose and scope of the LCC analysis and requires identification of;

significant cost generating activity components; the time in the life cycle when the work/activity is to be performed; relevant resource cost categories such as labour, materials, overhead, etc.;

Asset cost elements may be further allocated to recurring and non-recurring costs. Asset cost elements may also be estimated in terms of fixed and variable costs. To facilitate control and decision-making and to support the Life Cycle Impact Assessment or Life Cycle Costing process, asset cost information should be collected and reported in a manner consistent with defined LCC breakdown structure. Estimating Asset Cost Elements: The method used to estimate asset cost elements in LCC calculations will depend on the amount of information needed to;

establish asset usage patterns and operational characteristics and hence expected asset ‘useful life’ in the asset usage life cycle;

understand the technology employed in the asset. Sources of Asset Cost Data: By definition, detailed asset cost data will be limited in the early stages of the asset’s usage life cycle, particularly during the design/acquisition phase. Cost data during these early stages will need to be based on the cost performance of similar asset components currently in operation. Where new technology is being employed, data can only be based on estimated unit cost parameters.


© 2008 CIEAM

Developing and Applying a Life Cycle Costing Model: A Life Cycle Costing Model should create or adopt a cost breakdown structure (CBS) that identifies all relevant cost categories in all appropriate usage life cycle phases of the asset. Cost categories should continue to be broken down until a cost can be readily estimated for each individual cost element. Where available, an existing cost breakdown structure may provide a useful starting point for development of the CBS. The Model should also identify those cost elements that will not have a significant impact on the overall LCC of the asset(s) under consideration or those that will not vary between alternatives. These elements may be eliminated from further consideration. Development of a LCC Model should include the following steps: • Select a method (or methods) for estimating the cost associated with each cost

element to be included in the model. • Determine the data required to develop the estimates, and identify data sources. • Identify any uncertainties that are likely to be associated with the estimation of

each cost element. • Integrate the individual cost elements into a unified LCC model, which will

provide the LCC outputs required to meet the analysis objectives. • Review the LCC model to ensure it adequately addresses analysis objectives. • The LCC model including all assumptions should be documented to guide and

support the subsequent phases of the analysis process. Application of the LCC Model involves the following steps: • Obtain data and develop cost estimates and their timing for all the basic cost

elements in the LCC model. Validate the LCC model with available historical data if possible.

• Obtain the LCC model results from each relevant combination of operating and support scenarios defined in the analysis plan.

• Identify cost drivers by examining LCC model inputs and outputs to determine the cost elements that have the most significant impact on asset LCC.

• Quantify any differences (in performance, availability or other relevant constraints) among alternatives being studied, unless these differences are directly reflected in the LCC model outputs.

• Categorise and summarise LCC model outputs according to any logical groupings, which may be relevant to users of the analysis results (eg. fixed or variable costs, recurring or nonrecurring costs, acquisition or ownership costs, direct or indirect costs).

• Conduct sensitivity analyses to examine the impact of variations to assumptions and cost element uncertainties on LCC model results. Particular attention should be given to assumptions related to asset usage and different discount rates.

• Review LCC outputs against the objectives defined in the analysis plan to ensure that all goals have been fulfilled and that sufficient information has been provided to support the required decision.

• The LCC analysis should be documented to ensure that the results can be verified and readily replicated by another analyst if necessary.


© 2008 CIEAM

Life Cycle Costing Analysis Plan The Life Cycle Costing process begins with development of a plan, which addresses the purpose, and scope of the analysis. The plan should;

define the analysis objectives in terms of outputs required to assist management decisions. Typical objectives are; - determination of the LCC for an asset in order to assist planning,

contracting, budgeting or similar needs, - evaluation of the impact of alternative courses of action on the LCC of

an asset (such as design approaches, asset acquisition, support policies or alternative technologies)

- identification of cost elements which act as cost drivers for the LCC of an asset in order to focus design, development, acquisition or asset support efforts.

delineate the scope of the analysis in terms of the asset(s) under study, the time period (life cycle phases) to be considered, the usage environment and the operating and maintenance support scenario to be employed;

identify any underlying conditions, assumptions, limitations and constraints (such as minimum asset performance, availability requirements or maximum capital cost limitations) that might restrict the range of acceptable options to be evaluated;

identify alternative courses of action to be evaluated. The list of proposed alternatives may be refined as new options are identified or as existing options are found to violate the problem constraints;

provide an estimate of resources required and a reporting schedule for the analysis to ensure that the LCC results will be available to support the decision-making processes for which they are required.

Life Cycle Costing can be carried out during any or all phases of an asset's life cycle. It can be used to provide input to decisions regarding asset design, manufacture, installation, operation, support and disposal. By the end of the concept and definition phases, more than half of the asset’s life costs may be committed by decisions made with respect to asset performance, reliability, technology as well as support resources. The Life Cycle Costing Plan should be documented at the beginning of the Life Cycle Costing process to provide a focus for the rest of the work. Intended users of the analysis results should review the plan to ensure their needs have been correctly interpreted and clearly addressed. Methods of Asset Cost Analysis: One or more of the following methods for analysing cost data should be used: Engineering Cost Method involves the direct estimation of a particular cost element by examining the asset, component-by-component. Analogous Cost Method provides the same level of detail as the Engineering Cost Method but draws on historical data from components of other assets having analogous size, technology, use patterns and operational characteristics. Parametric Cost Method uses actual or historical detailed asset component data that is limited to known parameters. This data is used to develop a mathematical regression or progression formula that can be solved for the cost estimate required.


© 2008 CIEAM

7. Assets Usage Life Cycle and Maintenance Planning

Assets Life Cycle and Usage Life Cycle To plan and manage an asset’s usage, consideration has to be given to critical life stages that begin before the asset is purchased and continue through to its disposal. The concept of a ‘life cycle’ of physical assets is due to the possible shifting of an asset’s ‘useful life’ status from one critical life stage to another, both progressively and iteratively. Thus, an asset’s ‘life cycle’ can shift progressively from design to fabrication, installation, commissioning, operation and maintenance, preservation or rehabilitation, and iteratively back to re-commissioning and re-operation/re-utilisation due to asset preservation or rehabilitation, prior to renewal/replacement or disposal. An asset’ usage life cycle is therefore that portion of the asset’s whole-of-life that is concerned with the physical application of the asset, and considers all the asset usage elements, from asset consumption, operation, maintenance, modification, preservation or rehabilitation, to asset replenishment through renewal/replacement and/or disposal. Asset-intensive industries need to employ an assets usage life cycle strategy that takes into consideration the type of asset to be used. It needs to address the type of planning that is required to maximise an asset’s ‘useful life’, from a strategic, tactical and/or operational perspective, and provide the appropriate planning to be able to integrate asset systems and equipment at their respective levels of detail. Absence of long-term strategic planning capability is a particularly expensive oversight that will greatly diminish the overall effectiveness of an asset’s usage strategy. Such strategies must incorporate an approach to assets usage life cycle management that addresses the specific service delivery requirements of asset-intensive organisations, including long term assets planning. Currently, most asset-intensive organisations practice work management and short term application scheduling, which is an operational approach to assets usage planning. While the need for assets life cycle management is often identified, it is rarely practiced because organisations continue to adopt a short term, reactive approach to asset management rather than exploiting their assets for competitive advantage. Assets usage life cycle management is a proactive process that compliments existing policies by not only providing a strategic perspective, but also a tactical and operational focus on the efficient utilisation of assets. Medium term tactical planning capabilities through the application of the appropriate assets usage life cycle models and effective assets maintenance planning, will improve asset equipment mean time between failures, reliability, and eventual asset ‘useful life’, to ultimately result in a reduction of the total cost of ownership. Assets usage life cycle management does not include asset conceptualisation and design, or even re-design. Assets usage life cycle management can thus be defined as an integrated approach to the efficient use of a physical asset, that considers all the elements that affect its useful life, from acquisition through consumption, operation, maintenance, modification and preservation or rehabilitation, to replenishment through renewal or replacement and/or disposal. Asset usage life cycle management is an increasingly important strategic, tactical and operational initiative for asset-intensive industries.


© 2008 CIEAM

Assets Usage Life Cycle Management Assets usage life cycle management encompasses the operation, maintenance, and disposal of physical assets. The management of physical assets from operations to maintenance and disposition should be an integrated and seamless process, linking the various asset usage phases. The usage of these physical assets should be accomplished in a safe and cost-effective manner to ensure protection of workers, the public, and the environment. This incorporates industry standards, a graded approach, and performance objectives. In this context, the following definitions are applicable: Physical Assets: All land, land improvements, structures, facilities, utilities, systems, equipment and components. Infrastructure: All physical assets that are capable of an intended service delivery, comprising of rigid assets such as buildings, roads, bridges, and facilities, as well as flexible assets such as utilities and facilities related to power, water, sewage, etc. Facilities: The buildings, structures, and other land improvements associated with an operation or service and dedicated to a common function. Utilities: A system, or any of its components, that generates and/or distributes (via pipelines, wires, buses, or electromagnetic waves) a commodity or service to itself and/or to other facilities. Asset Usage Life Cycle Management Requirements: Asset owner organisations should use a value-added, quality driven, graded approach to asset usage life cycle management. Asset management performance measures should be based upon best industry practice, and should be commensurate with the value and importance of the asset using a graded approach. Asset management performance measures should also ensure formal, comprehensive, integrated, documented planning, and control methods for the acquisition, use, maintenance, leasing and disposal of physical assets, including infrastructure and facilities and utilities. This should address, but should not be limited to, the following: • A comprehensive asset usage planning process with stakeholder involvement. • The effective acquisition, management, and use of facilities and utilities. • Management of backlogs related to maintenance, repair, and improvements. • A method for the prioritisation of infrastructure requirements. • A method to declare assets excess.

Asset Usage Life Cycle Process: The assets usage life cycle process considers specific requirements for the following assets usage phases;

physical asset acquisition; physical asset usage; physical asset maintenance; physical asset disposal.


© 2008 CIEAM

Physical Asset Acquisition: The process for physical asset acquisition should be an integrated, systematic approach that should ensure, but should not be limited to, the following: • Use of a comprehensive asset-usage process with stakeholder involvement. • Use of a process tool, such as value engineering, to improve cost-effectiveness

and efficiency when analysing physical asset acquisition. • Specification of the appropriate state, regional, or national building codes to

which physical assets should be designed and constructed. • Consideration of maintainability, operability, disposition, life-cycle costs, and

configuration integrity in designs and acquisitions. • Consideration of current asset demand needs and appropriate scope of usage. • A project management system based on effective management practices that is

sufficiently flexible to allow for the size and complexity of the project. For non-infrastructure assets, the following requirements are considered minimal: • Prior to the commencement of conceptual design, include the following in

Assets Procurement Project Planning for approval; asset demand needs; minimum technical functional requirements; proposed cost and schedule ranges; preliminary environmental strategy; identification of project technical and organizational interfaces; integration with other projects and activities.

Physical Asset Usage: The process for the operation/use of physical assets should ensure, as a minimum, the following: • A method for the prioritisation of infrastructure requirements. • The efficient and effective management and use of energy utilities. • A method to ensure that prior to the completion of operation activities, certain

actions are implemented. • These actions should include but not be limited to;

identifying and characterising hazardous and radioactive materials and wastes remaining in asset systems/facilities and providing for their stabilisation (if necessary), and adequate storage until they are removed from the facility (unless otherwise agreed to prior to facility transfer);

assessment and adjustment (if necessary) of the facility authorisation basis to ensure it continues to reflect conditions in the facility pending disposition;

conducting surveillance activities required to ensure that the asset system/facility, and remaining hazardous and radioactive materials, wastes, and contamination are in a stable condition pending facility disposition;

identifying and allocating resources needed to maintain stable and known conditions pending disposition.


© 2008 CIEAM

Physical Asset Maintenance: The process for the maintenance of physical assets should ensure, as a minimum, the following: • A configuration management process to ensure the integrity of physical assets

and system. • The identification, inventory, and periodic assessment of the condition of

physical assets in the maintenance program. • The establishment of requirements, budgets, and a work management system to

maintain physical assets in a condition suitable for their intended use. • Planning and execution of corrective, preventive, and predictive maintenance to

ensure physical asset availability for planned use and/or proper disposition. • The management of backlogs associated with maintenance, repair, and capital

improvements. Physical Asset Disposal: The process for the disposition of physical assets should ensure, as a minimum, the following: • A method whereby assets are either transferred, or are determined excess,

available for disposal, and disposal procedures are initiated.

• For the transfer of contaminated facilities, as a minimum, the following apply: completion of a pre-transfer review, with adherence to environmental and

safety and health requirements, for transfer of asset systems/facilities for disposition whose scope should be commensurate with potential hazards;

development of a signed agreement by relevant personnel to document scope, conditions, state of readiness, and associated funding, when transferring asset systems/facilities. This includes a budget resources plan to manage the asset systems/facilities until funding is provided to the receiving program through the normal budgeting process.

• For execution of contaminated facility disposition, as a minimum, a method to ensure that deactivation, surveillance and maintenance, and decommissioning operation activities are appropriately planned, conducted, and documented in a manner consistent with the guiding principles and core functions of the integrated safety management and facility disposition policies. The disposition process should provide for;

the collection of baseline data to reflect changes in asset conditions. surveillance and maintenance activities corresponding with asset conditions,

including changes resulting from disposition activities. a method for identifying, assessing, and evaluating alternatives for

deactivating and/or decommissioning operations and for selecting and documenting a preferred alternative.

an end-point process in deactivation and decommissioning operations that identifies specific activities needed to achieve those end-points.

a method for detailed engineering planning and documentation to execute the preferred deactivation and/or decommissioning operations.


© 2008 CIEAM

Assets Maintenance Planning (NSWT, 2006) The NSW Government’s approach to asset planning is based on Total Asset Management (TAM), which links assets to providing services. As part of this policy, budget dependent Government Agencies are required to develop asset maintenance strategic plans in support of submissions to the Budget Committee of Cabinet for funding. These plans must be focused on ensuring assets continue to support the planned delivery of services, identify any deferred maintenance requirements and establish a funding plan. The change in focus by Government from capital works asset creation to strategic asset management places an increasing importance on maintaining the service capacity of existing assets. In order to successfully implement maintenance planning, Government Agency managers need to pursue initiatives that;

enhance the link between service delivery outcomes and the maintenance of the assets involved in the delivery;

establish clear links between maintenance objectives and asset performance; gain the commitment of operational maintenance managers and staff to

maintenance planning; resolve uncertainty regarding the disposal of assets.

Benefits of Assets Maintenance Planning: The adoption of maintenance planning offers a number of benefits to both Government Agencies and Government as a whole: • Maintenance planning provides feedback to improve future application of the

maintenance process; • Maintenance planning provides feedback for continuous improvement; • Assets perform at optimum levels, reducing service disruptions and losses due to

asset failure; • The performance of the asset can be reviewed to determine whether the asset

suits service delivery needs; • Alternative asset and non-asset solutions can be compared to best suit service

delivery needs; • Asset costs associated with service delivery can be identified and minimised in

the long term; • Asset maintenance costs can be quantified and budgeted with confidence; • Asset maintenance costs can be benchmarked across Government Agencies and

different industries; • The value of public sector assets can be protected, where appropriate; • Risks to Government can be identified and ameliorated; • Risks to the Agency posed by its assets can be identified and ameliorated; • Reduced environmental impact by controlling resource usage. • Environmental responsibilities such as energy management, water usage, and

pollution control can be addressed.


© 2008 CIEAM

The Role of Assets Maintenance Planning: Assets maintenance planning plays a key role in the strategic management of an asset over its useful life span. It is initially undertaken during development of the asset strategy and may indicate one of three options for the future of the asset: • Maintenance to meet the ongoing service role of the asset. • Renewal or adaptation to suit changed service needs by capital expenditure. • Disposal of the asset when it is no longer required for service delivery.

Asset maintenance planning is a detailed assessment of those assets or asset equipment that require only strategic maintenance management in order to satisfy the delivery of service. It is aimed at ensuring these assets remain productive at the lowest possible long-term cost, and involves;

a detailed functional analysis of maintenance needs that meet the required service delivery outcomes;

the institution of procedures to ensure adequate control of the implementation of the Maintenance Management Plan;

the development of appropriate maintenance strategies; Asset Deterioration and Asset Maintenance Planning: Some equipment of an asset will fail before others. Timely attention to these failures can allow the remainder of the asset system to continue in service. Maintenance slows the overall deterioration of the asset’s equipment by restoring the condition of its short-life components and allows its overall full service or ‘useful life’ to be achieved. The budgetary process requires Government Agencies to focus on maintaining their current levels of service delivery. For Agency plans based on maintenance of current service levels, asset maintenance planning should ensure the asset or asset base continues to support delivery of existing service levels. Sometimes this will unavoidably require upgrading the asset to comply with changes to codes and statutes, or to address changes in service delivery risk. Where such factors are the drivers for maintenance funding requests, a clear explanation of the basis for the funding sought, and an evaluation of the risks if funding is not available, should be provided. Where a Government Agency plans to maintain assets to support higher levels of service delivery, it should first discuss the proposal with an analyst, as funding for any proposal which increases service levels is subject to prior invitation from Treasury. This has been implemented to ensure increased service delivery remains consistent with Government priorities and provides maximum benefit overall. Figure 9 shows the deterioration in asset condition over time, the deterioration being regularly addressed with maintenance expenditure. The restored condition is usually below that of a new asset. At less frequent intervals, more extensive refurbishment and upgrading commonly occurs to replace asset equipment components, and to change the asset’s functionality to accommodate changed service requirements. Particular aspects of the asset or its overall performance standard may then exceed those of the original asset. Regardless of the source of funds for such works, both asset maintenance and asset upgrades should be identified in the Asset Maintenance Plan. If the amount to be spent on maintenance or upgrading assets exceeds available funding, then value management and economic appraisal techniques can be used to test alternative maintenance action and disposal/replacement options.


© 2008 CIEAM

Figure 9. Effect of Maintenance Over the Life of an Asset (NSWT, 2006)

The value of alternative maintenance options that may require significantly different expenditure patterns over the life of the asset can be compared through the use of asset life cycle costing methods. This allows for selection of optimised maintenance strategies by adjusting the cost of each proposal’s value of money over time. While the term backlog or deferred maintenance may be used for maintenance requirements identified but not addressed within a timeframe, this distinction is not addressed in this section. Asset maintenance is driven by the need to ensure assets continue to support service delivery. Maintenance proposals that do not proceed in one year should be reassessed along with other proposals in future years and specific priorities set according to their impacts. Some proposals will remain valid. Others may change or be combined. All maintenance proposals should be reviewed and tested to determine whether they remain valid. The Assets Maintenance Planning Process: Assets maintenance planning is a structured and systematic process, which ensures that an Agency’s portfolio of assets supports Agency service delivery at the lowest possible long-term cost. The application of the asset maintenance planning process requires a detailed knowledge of the Agency’s asset portfolio and good understanding of its service delivery strategy. A well-defined and comprehensive service delivery strategy aligned with an Agency’s ‘Results and Services Plan’ is essential to the development of a meaningful and effective asset maintenance strategy. It must specify the services to be provided in sufficient detail to assess asset options against each service delivery component. Criteria should be developed for assessing existing asset maintenance for its suitability to support service delivery objectives. This suitability will be expressed as a performance gap between existing asset maintenance levels and what is required, and should be measured at each step in an asset strategy framework (eg. location, capacity, functionality etc.).


© 2008 CIEAM

This gap analysis should also highlight areas of waste, (such as under-utilisation of an asset or operating cost above benchmark or standard), and clarify opportunities for improving performance. An Agency’s future direction is influenced by a number of factors including Government priorities, budgetary constraints, advances in technology, and changes in legislation. These factors impact on the way an Agency delivers its services and need to be taken into account when determining future asset maintenance requirements. Asset maintenance planning involves: • An analysis of maintenance needs against Agency or corporate objectives and

service outcomes; • The development of maintenance strategies; • The instigation of procedures to ensure adequate control of the implementation

of the maintenance program. The 7-step assets maintenance planning process illustrated in Figure 10 has been developed to link service strategies with asset maintenance, and will be later described in checklist format. The description of each stage is not intended to be prescriptive but to rather present a range of issues, which should be considered. The significance of each issue and the degree of detail evaluated in the Asset Maintenance Management Plan will vary between organisations, and with the types of assets they control. An asset maintenance strategy should align with the capital assets investment strategy and asset disposal strategy, collectively reflecting the organisation’s overall asset strategy. Preparation of the maintenance budget is part of the process of preparing the Assets Maintenance Management Plan.

Figure 10. The Assets Maintenance Planning Process

(NSWT, 2006) Stage 1: Define and Segment Assets to Meet Service Delivery Strategy: An asset strategy should clearly define the assets which are to be kept and maintained over their estimated service life. Assets of significant value or significant strategic importance, should be grouped into segments according to the service outputs they support. It may be necessary to link an asset to several services where it supports the delivery of more than one service. It is necessary to establish why assets are needed and what purpose they serve. Assets should be maintained to the level that best contributes to achieving service strategy objectives over their planned service life.


© 2008 CIEAM

Stage 2: Determine Required Asset Performance: The required asset performance level is determined by its role in delivering service. The performance level allows asset maintenance needs to be established, and these needs are communicated to the maintenance planners. There are many aspects or attributes of an asset, which are vital to their service delivery support role, while other aspects are less important or of no significance. Safety, availability, quality, and durability are examples. Some attributes are more necessary than others for the asset to perform a particular service role. Therefore, maintaining all attributes to their original standard might be an unnecessary burden. For example, a building can be structurally sound, quiet, secure, and aesthetically pleasing. Some buildings require lighting maintained to very critical standards while security or aesthetics in the same area might not pose a risk to delivery of the service. It is necessary to define broad performance requirements that establish which attributes must be maintained for each asset or asset segment and to what level. The performance standard specified for a particular asset should allow it to satisfy its role in service delivery. Any gaps between present and required asset performance level should be identified. Once the significant aspects of particular assets or classes of assets have been defined, a range of possible performance levels should be set for each attribute. The minimum value of this range for each attribute, which achieves the desired performance level for each asset segment, is then adopted as the asset standard. The standard of each attribute required for an asset to support the delivery of service can vary significantly throughout a facility, within a network of assets, or across a portfolio of assets. Asset performance is also determined by codes and legislation which can vary during the service life of an asset. Where compliance is mandatory, this should be addressed in the asset performance requirements. Even the way in which assets are required to withstand weathering and general wear and tear varies with an asset’s service delivery role, and is affected by factors including the risk of such events disrupting service delivery and the remaining service life of the asset. Where the emergence of new technologies affects the way in which services are delivered and the compatibility of existing assets with these technologies, maintenance decisions will be affected by the rate of planned obsolescence. Stage 3: Define Maintenance Resources and Overall Strategies: Maintenance resources include planning, technical procurement and trade skills. These skills may be available in-house or on contract, or a mix of the two. Knowledge of the asset base and systems to manage this data should also be seen as a maintenance resource. A maintenance strategy that sought to prevent all failures from occurring would be costly and disruptive. Similarly a strategy that attended to all maintenance only after failure occurred, would also be costly and even more disruptive. An optimal balance between preventive and corrective maintenance is needed and will vary with each asset owner’s requirements, resources, and circumstances. The most appropriate strategy will depend on the type of asset, its condition, planned service life and specific circumstances. These may include the;

type of asset to be maintained and its failure modes; consequences of breakdown or non-performance of the asset; availability of resources to execute the maintenance.


© 2008 CIEAM

An organisation’s structure and its assessment of risk will affect its decision on the maintenance resources required. The nature of the service delivery, the location and complexity of the assets and the criticality of maintenance response times impact on the maintenance resources the organisation has in house, whether they be located centrally or regionally, and how effective resources can be obtained when required. Different strategies may be adopted for various assets or for the asset’s equipment. These generally fall under three categories;

fix when failed, breakdown or corrective maintenance; planned routine and scheduled preventive maintenance; condition-based, periodic or predictive maintenance.

For example, with infrastructure assets such as a building;

fix when failed maintenance is usually adopted for minor mechanical, hydraulic and electrical utilities or when attending to unavoidable defects;

planned routine maintenance applies to infrastructure components and asset equipment that require regular servicing, or where statutory requirements for maintenance at prescribed intervals exists (such as fire control equipment), whereas scheduled preventive maintenance usually applies to progressively degrading infrastructure and operational asset systems and major equipment;

condition-based or predictive maintenance may be applied to infrastructure components such as building fabric elements, as well as asset service equipment, reflecting maintenance applied to achieve desired service levels.

Advances in technology may allow replacement of infrastructure components and asset equipment with improved materials and functional properties, leading to increased performance and service life. This should be taken into account when planning for future replacements. Having defined maintenance resources available and overall strategies, an organisation will be able to decide in broad terms how maintenance work is to be delivered, using in-house resources or external contractors through specifically scheduled works or performance-based maintenance contracts. Stage 4: Assess Condition of Assets and Recommend Maintenance: It is necessary to identify asset deficiencies that could be a risk to an asset owner’s service delivery. This may be achieved by conducting condition surveys, to compare actual asset condition and performance with required performance, or by statistical analysis of a sufficient numbers of similar assets. In addition to asset segmentation according to service output requirements undertaken in Stage 1, a thorough understanding of the performance of a complex network or portfolio of assets may require segmentation of the asset base by characteristics such as type, age, service life, maintenance approaches, demographics, cost structures, etc. Each asset segment is further broken into those components requiring different maintenance approaches, skills or resources. Any important inter-relationships between these components should be identified. For example, transport infrastructure will consist of bridges, culverts, pavement types and traffic control systems; whereas a water supply utility will consist of water reservoirs, pumping stations, treatment works, distribution systems and monitoring/control systems; and a hospital building could be segmented into departments consisting of the relevant electro-medical equipment, computers, utility equipment and fit-outs attached to that department.


© 2008 CIEAM

The condition of the infrastructure components and asset equipment should be assessed in the light of their service delivery role to;

identify any defects, deterioration and/or deficiencies either currently effecting asset performance or likely to occur over the estimated life of the Assets Maintenance Plan;

identify the impacts on their service delivery capability; determine the maintenance or renovation required to bring the asset to the

state where it provides the specified level of service delivery support; estimate the cost of maintenance.

Consider the risk and cost entailed in not rectifying deficiencies. In some situations it may be cheaper to live with the defect or substandard asset. Create an Asset Maintenance Task List: An appropriate register of assets and maintenance work is vital to the success of the Assets Maintenance Plan. Asset registers should allow for easy retrieval of the information in a usable and flexible format. Regular feedback about asset performance in achieving desired service outcomes needs to be provided to maintenance planners.

Rank the Maintenance Tasks: The maintenance tasks are ranked in order of priority based on supporting service objectives. It is unlikely that funds will be available to carry out all the desired maintenance tasks and therefore the tasks that are most important to supporting service outputs should be identified and given priority. In response to limited funding situations, organisations can experience pressure to defer maintenance liabilities in favour of other resources to ensure continuing service delivery. Some assets deteriorate slowly and threaten service delivery only incrementally. There is however a risk that this strategy will accrue major cost liabilities for future funding, if the asset related risk to service delivery becomes critical. An organisation’s asset performance measurement, risk management, and asset maintenance planning should aim to ensure such liabilities do not arise. The criteria that determine the importance and urgency of maintenance may include;

statutory requirements; occupational safety and health legislation; service delivery and commercial risks;

Larger capitally funded maintenance and refurbishment projects may need to be the subject of a business case, and require accredited project planners and managers to be involved. The maintenance tasks are then evaluated and ranked against these criteria with an organisation-wide perspective to remove the bias of regional or operational units. This is particularly important with an integrated maintenance plan covering constructed assets, ICT, mobile equipment/vehicle fleet, office accommodation, plant and equipment. It is recognised that the assessment of asset condition may reveal differing maintenance strategies, resources and/or contractual approaches to those established in Stage 3 and hence Stages 3 and 4 must be treated as integrative and iterative. Plans should also take into account the iterative nature of asset service planning. Both must be balanced and delivered within the budgeted resources.


© 2008 CIEAM

Stage 5: Assess Maintenance Costs: In assessing maintenance costs, it is important to carefully evaluate priorities and to focus on appropriate standards along with the most cost effective solutions. Rarely will funds be available to allow all identified tasks to be carried out. This will require the development of a proposed funding strategy that may revisit the recommended maintenance established in Stage 4, and to this extent Stages 4 and 5 are also iterative. Planning should be done at three levels of detail; long-term planning, medium-term planning, and short-term planning. Maintenance plans should be integrated with the organisation’s capital asset investment and asset disposal strategies. Long-term Planning: Long-term planning should show the timetable for modification, rehabilitation, renewal and/or replacement, and disposal of major assets, as well as any long-term maintenance cycles and their funding. Long-term planning should allow for the most appropriate decision-making. For example, if a scheduled maintenance cycle is adopted, then the long-term plan should exceed the cycle times in order to encompass at least one full scheduled maintenance cycle. For example, if a major asset is scheduled for scheduled refurbishment in 5 years time, then the appropriate long-term plan period should exceed 5 years. If service delivery methods or the demand for service is likely to change greatly over 5 years, then this will have a major effect on long-term asset maintenance planning. Medium-term Planning: Medium-term planning schedules major maintenance overhauls and downtimes, and programs resources, thus becoming the basis for budget planning. Any shorter time scale allows medium-term planning to be a more focused and accurate prediction than a long-term planning perspective. Short-term Planning: Maintenance planning is a dynamic process. Priorities can sometimes change at short notice. An annual short-term maintenance plan is in effect a final assessment of maintenance priorities, and thus becomes the working maintenance plan. Annual maintenance planning is also needed to confirm required annual funding. Stage 7: Monitor and Review the Assets Maintenance Plan: As with all management processes, it is necessary to monitor and review the relevance, effectiveness and efficiency of the Assets Maintenance Plan in relation to achieving the required service delivery levels. This continuous feedback is a most important aspect of the maintenance planning cycle. Monitoring is most effectively achieved through the use of key performance indicators (KPI). Guidelines on the development of performance indicators specifically for maintenance planning are considered later. Such measures should utilise best practice benchmarks to provide a basis of assessing relative performance. With the benefit of hindsight and the use of collected data, it is possible to improve the previous decisions concerning management of assets and their maintenance so that subsequent maintenance expenditures will be more effective. Actual performance should be compared against the nominated performance indicators. This involves reviewing asset and service objectives and achieved results.


© 2008 CIEAM

8. Assets Maintenance Management and Optimisation

The Assets Maintenance Management Process (QWSP, 2001) The Assets Maintenance Management Process can initially be described according to outcomes, outputs and phases. Outcomes of the Assets Maintenance Management Process: Effective assets maintenance management will ensure that;

assets life cycle costs are minimised; there is efficient use of resources; environmental compliance is not compromised through asset failure; service levels are maintained or improved.

Outputs of the Assets Maintenance Management Process: Outputs from the assets maintenance management process include;

an Assets Maintenance Management Plan; assets maintenance plans (sub-plans); an assets maintenance management system.

Phases of the Assets Maintenance Management Process: The assets maintenance management process involves two interrelated phases:

a strategic phase; an operational phase.

The Assets Strategic Maintenance Management Phase: The strategic phase of assets maintenance management is illustrated in Figure 11. The purpose of this strategic phase is to;

set a policy framework for the assets maintenance management; identify the impacts of various maintenance strategies on:

- service levels, - cost of maintenance (planned and unplanned); - infrastructure investment costs (asset replacement or rehabilitation);

develop a strategy for the delivery of assets maintenance services; develop a strategy for the management of the assets maintenance process.

Policies Relating to Assets Maintenance Management: Assets maintenance management policies that may be developed would include;

policy on the delivery of assets maintenance services (e.g. level of outsourcing; contractual arrangements);

overall policy clarifying the philosophy and direction in relation to the maintenance of assets.


© 2008 CIEAM

Figure 11. Strategic Phase of Assets Maintenance Management

(QWSP, 2001) The Strategic Assets Maintenance Management Process: The strategic phase of assets maintenance management involves evaluating, as far as possible, the impacts of various maintenance strategies as a whole. This could possibly include evaluating the impacts of various maintenance delivery strategies. This may also be addressed during the procurement phase for certain assets. Based on the balance of costs and service levels, an optimised maintenance strategy should be developed. This will include projected maintenance costs for the next 5 to 10 years. The approach to this optimisation will vary between organisations, depending on the availability of information and the size of the organisation in terms of physical assets. For many organisations the initial approach may be very simple, using basic spreadsheet models which would rely on coarse data and projections. Initially the model outcomes will require a critical review by management. However, over time the model can be refined on the basis of real verifiable data. Over the next few years, as formalised asset management and supporting processes become well established within a competitive environment, it is likely that optimisation of asset maintenance and renewal costs against service standards will become a critical asset management activity. The strategic phase will also address the issue of support systems for managing maintenance activities such as;

assets maintenance planning; directing and controlling assets maintenance; management of asset plant and system shutdowns; recording and reporting assets maintenance performance; analysing and optimising assets maintenance performance.


© 2008 CIEAM

This will involve developing a strategy and action plans for implementing a formalised maintenance management system. Options include one or more of the following;

basic wall charts; card-based system; basic spreadsheet, database, or GIS-based system; specialist computerised maintenance management system; establishing an integrated asset management system (IAMS).

All these systems have advantages and limitations, with the simpler systems being more appropriate for the smaller asset owners. The Operational Assets Maintenance Management Process: The operational phase of assets maintenance management involves the more detailed implementation of the strategies developed in the strategic phase. The initial development of strategies will be an iterative process, requiring the balancing of resources and available budgets as determined in the strategic phase. The operational phase is illustrated in Figure 12.

Figure 12. Operational Phase of Assets Maintenance Management

(QWSP, 2001)


© 2008 CIEAM

For the operational phase of assets maintenance management, maintenance strategy adopted for each asset will depend on;

direction set in the strategic phase; level of importance of the asset (directly related to consequence of failure); probability of failure of the asset; availability of the asset for maintenance (shutdown of irrigation channels); recommended maintenance requirements; optimal industry practices.

Available maintenance strategies to be adopted in the operational phase include:

planned shutdown maintenance; scheduled preventive maintenance; condition-based/predictive maintenance; unplanned corrective maintenance.

A number of tools exist to assist in developing appropriate maintenance strategies for assets, such as reliability-centred maintenance, which evaluates the following;

the operational and physical functions of an asset; methods in which the asset’s functions could fail; the effects and consequences of functional failure; the causes of each functional failure; options to predict or prevent failure; options for managing a failure.

The process of documenting planned and unplanned assets maintenance procedures can consume a lot of time and resources, so the following steps will be necessary: • Identify asset maintenance activities to be documented. • Prioritise the activities to be documented, according to issues such as:

- importance level of the asset; - frequency of the activity; - development of documentation.

• Carry out peer review of the documentation to: - ensure clarity and succinctness of information; - ensure compliance with regulatory requirements; - identify opportunities for more efficient procedures.

The documentation should have a consistent, user-friendly style that is suitable for incorporation into a quality management system. Flow charts should be used where appropriate. The documentation should include a section on risk management to ensure that all risks are minimised. Risk is addressed under the following categories:

political/social (e.g. notification of consultation with customers); public health (e.g. procedures required to protect public health); safety (e.g. workplace health and safety issues to be highlighted); environmental (e.g. procedures to minimise environmental harm).


© 2008 CIEAM

Procedures should also include a data collection sheet where appropriate. The documentation can be compiled into an assets system or equipment maintenance plan that outlines maintenance procedures and their frequency. In many instances the documentation process may occur in parallel with the input of maintenance procedure information into a computerised maintenance management system. A critical maintenance management activity will be the analysis of asset performance data. This analysis will be used to;

evaluate the cost-effectiveness of the adopted maintenance strategies and their impact on service standards;

provide information to enhance and/or calibrate predictive models for optimisation of asset maintenance, rehabilitation and/or replacement and determine service level impacts.

Risk Issues Relating to Assets Maintenance Management: Potential risks associated with assets maintenance management include;

industrial action; competition for service; failure of critical assets; sabotage and/or vandalism. poor contractor performance; inadequate emergency response; workplace health and safety risks; sub-optimal maintenance practices; public health, political or social risks; environmental impacts of maintenance practices; inadequate feedback to planners, designers and management; selection of an inappropriate maintenance management system; inaccuracy or unreliability of maintenance data and information; non-compliance with service standards or regulatory requirements; customer complaints and/or inadequate communication or consultation; culture change from reactive/informal practices to planned/formal practices;

Development of an Assets Maintenance Management Plan: The development of an Assets Maintenance Management Plan should include the following deliverables;

asset maintenance manuals available for all key and critical assets; asset maintenance optimisation through assets maintenance modelling; evaluation of options for delivery of maintenance management systems; linking of assets maintenance management systems to the financial system; asset maintenance documentation as part of a Quality Management System.

Table 13 gives a layout of the content and development level of an Assets Maintenance Management Plan and related maintenance management sub-plans.


© 2008 CIEAM

Assets Maintenance Optimisation ((NRCC, 2002) Asset owners and stewards are faced with the necessity to reduce total life cycle costs of assets, as well as to improve their physical condition and long-term performance while considering the relative consequences of their failure. An essential outcome of such a necessity is a systematic decision-making approach for asset maintenance management that combines asset performance prediction with asset maintenance to determine the optimal allocation of maintenance funds and prioritisation of assets maintenance tasks, inclusive of assets repair, rehabilitation, renewal or replacement. Maintenance optimisation includes minimisation of assets maintenance costs, maximisation of assets condition and performance, and minimisation of the risk (weighted consequence) of assets functional failure. Benefits of a maintenance optimisation approach can be compared to traditional maintenance prioritisation and management practices. To assess the impact of prioritisation procedures on assets maintenance planning and maintenance expenditures, a maintenance optimisation approach is compared to age-based, condition-based and consequence-based methods. For a single objective, the age-based prioritisation method assigns maintenance activities purely on the basis of age, whereas a condition-based approach considers maintenance costs for setting priorities, and the consequence-based method considers maintenance tasks that will mitigate the risk of consequences (measured in cost), without consideration of failure or condition. For maintenance budget allocation, the lowest priced maintenance activities at given condition ratings, together with statutory tasks for avoiding safety consequences of failure, are however given precedence. A significant portion of annual expenditures on infrastructure and industrial assets is for assets maintenance management. The main components of an asset life-cycle maintenance management system to be examined, may be considered as;

condition assessment of asset systems and equipment; prediction of future performance and remaining service life; assessment of consequences of asset system and equipment failure; selection of appropriate maintenance tasks against cost optimisation.

Condition assessment of asset systems and equipment is represented as discrete condition ratings by mapping assessed degradation levels to a rating scale. These techniques have been applied to various infrastructure assets. The condition and performance of asset equipment deteriorate with time, due to environmental degradation, loading, inadequate maintenance and workmanship etc. Uncertainty and variability is associated with each of these factors. A model that will capture both time-dependence and randomness of asset system performance is best used to assess current assets condition, and to predict future condition. Performance predictions are then combined with an asset condition assessment model to evaluate probabilities of system failure. Consequences of system failure are evaluated from cost data on asset system functional losses, which refer to the loss of functionality or serviceability. Consequences of asset system failure is the outcome of system functional losses and their associated probabilities of failure. The approach of prioritising assets for optimal maintenance is based on asset systems interrelationships; a standardised framework for collecting and processing data; probabilistic models for condition/performance prediction and risk assessment; and maintenance optimisation procedures.


© 2008 CIEAM

Assets Preventive Maintenance Optimisation (HSBRT, 2003) A preventive maintenance program is effective when it puts emphasis on minimising risk, which will lead to improved asset safety, reliability, availability and utilisation. Developing an effective (or optimised) asset preventive maintenance program is a component of overall asset’s life cycle management (LCM).

Assets Preventive Maintenance Program Optimisation: This process consists of the following steps: • Identifying business objectives. • Development of asset systems technical model. • Condition assessment of installed assets. • Assets criticality and risk assessment. • Maintenance program development/review. • Loading of maintenance tasks to a CMMS system. • Maintenance spares strategy (not covered in this module).

Figure 14 shows a schematic flow chart of the assets preventive maintenance program optimisation process.

Figure 14. Assets Preventive Maintenance Program Optimisation

(HSBRT, 2003)


© 2008 CIEAM

Identifying Business Objectives: Business objectives are set at the corporate and asset plant levels. They reflect market conditions, shareholders expectations, and regulatory compliance. Objectives at this level include production levels, products qualities, safe operation policies and requirements, environmental integrity requirements, and operating cost targets. Objectives are then translated to specific performance expectations of major assets. Measures at this level might include availability, asset utilisation, efficiency, specific products qualities, overall asset equipment effectiveness, cost per unit produced, etc. Target values are set by operating and maintenance personnel and approved by management. Major assets or systems performance expectations are further refined to the individual asset equipment level. Here target vales for measures, such as asset system availability, asset equipment reliability, Mean Time Between Failure (MTBF), Mean Time To Repair (MTTR), etc. are set and approved. This process is repeated periodically, and the objectives are changed to reflect the organisation’s position regarding the main business drivers. Figure 14 identifies the steps involved in developing asset performance expectations. Business objectives and performance expectations set the stage for defining asset equipment performance standards for high risk equipment in which assets preventive maintenance programs are optimised. Asset Systems Technical Model: The asset systems technical model (also known as asset hierarchy) is composed of a hierarchy of systems, sub-systems, assemblies, sub-assemblies and components that gradually represent increased levels of detail in describing the asset. The model reflects how asset systems and sub-systems fit together, interrelate and operate to provide the intended business function. As such, the hierarchy reflects both the structural and process flow characteristics of the asset. The model starts with the process flow diagram representing the overall operation of an asset. This level consists of the major asset systems or production units; utility systems such as electricity, water, steam, air, fuel, etc. and their control systems; support facilities such as feed and raw material preparation facilities and final product storage; and infrastructures, etc. The next level breaks down each asset system into sub-systems as depicted on unit process flow diagrams (PFDs) and pipe and instrumentation diagrams (P&IDs). At progressively lower levels of the model, the breakdown of the asset plant becomes more detailed until reduced to asset equipment and components. Control and protective systems are incorporated in the hierarchy at the appropriate levels. In the case where a control or protective system is dedicated to one asset system or sub-system then it should be set up as a sub-element of that system. In the case where a control/protective system is controlling/protecting multiple asset systems, it should be set up as an element at the same level in the hierarchy. Every asset hierarchy element - whether it is an asset system, sub-system or asset equipment item - has a clearly defined boundary. Boundary definitions are standardised for classes of asset system/equipment items. The steps involved in developing an asset plant technical model are depicted in Figure 15 and grouped as follows;

collect technical information and drawings; establish a standard for defining asset system boundaries; develop asset plant technical hierarchy and load into CMMS; define asset system functions.


© 2008 CIEAM

Figure 15. Steps in Developing an Asset Technical Model (HSBRT, 2003)

Condition Assessment of Installed Assets: The objective of condition assessment of installed assets is to provide sufficient information on asset condition to allow informed assets strategic planning and maintenance management decisions to be made. Assessment results, together with functionality, utilisation and cost considerations, can be used to support a wide range of asset decisions, particularly in relation to the following: • Assets Maintenance Planning • Asset Review and Analysis • Assets Disposal Planning • Assets Life Cycle Planning

The condition assessment process for built assets should rate asset condition, determine the risks associated with letting an asset remain in that condition, and identify maintenance work needed to restore and retain an asset in its required condition. The benefits of effective condition assessment of installed assets include;

maintenance and capital funding can be established and evaluated; asset condition trends can be analysed; asset condition can be reported in a consistent format; maintenance programs can be effectively targeted and prioritised; maintenance requirements can be identified and quantified; maintenance strategies can be assessed and adjusted if necessary.


© 2008 CIEAM

Risks associated with non-performance or ineffective condition assessment include; asset condition cannot be adequately reported; declining asset condition is not identified and addressed; maintenance planning is not related to asset condition needs; condition-based maintenance demand is not properly identified; deferred maintenance liability cannot be assessed and reported; provisions for future maintenance requirements cannot be reported; poor quality of asset condition data leading to poor decision-making; serious deficiencies can be overlooked and resources not used effectively.

Assets Condition, Maintenance and Risk: Condition Ratings: Asset condition inspections should be performed to be able to apply a rating for asset condition. The rating provides an indication of the gap between actual asset condition and that which has been specified . Required Maintenance Action: In the case where the condition assessment findings are to be used in the development of an asset maintenance program, the following information should be collected;

the presence of any defect (existing or potentially arising within the period of the Asset Maintenance Plan which is usually annual or up to three years);

the nature of the defect (e.g. corroded structural frames and/or fittings, broken railings, faulty controls, etc.);

the location of the defect; how the defect should be corrected (e.g. adjust, repair, refurbish, replace,

remove, etc.); the quantity of corrective work (for estimation and specification purposes in

appropriate units of measure, i.e. square metres, running metres, items, etc); the remedial cost for each defect; when the defect should be seen to (i.e. immediately, or the date required).

Assessing the Risk: The direct risks associated with asset condition should also be assessed. This assessment should be based on both the likely impact and the probability of an event occurring as a direct result of the asset’s condition. The need to undertake maintenance action to bridge the gap between existing and desired conditions can then be considered, taking into account the risks associated by allowing an asset to remain in its existing condition. Risks that need to be considered include those that relate to;

workplace/occupational safety and health and security; asset functionality and consequence of functional failure; financial impacts (including the cost of consequential damage); compliance with statutory requirements and related legal exposure; losses incurred in regard to business disruptions and/or potential income.


© 2008 CIEAM

A risk rating is assigned based on an assessment of the risks resulting from the condition of the asset element inspected. Typical risk ratings are shown in Table 14.

Table 14. Typical Asset Risk Ratings (QGSAM, 1999)

Risk Status/Rating General Description

Very High Asset is unusable. Immediate high risk to security, health and safety, property damage. Significant cost implication.

High Major disruption to service capability. High probability of risk to health and safety or property. High cost implications.

Medium Constant inconvenience to asset operations/usage. Some risk to health and safety or property. Medium cost implications.

Minimal Intermittent minor inconvenience to asset operations/usage. Probability of risk to health and safety or property is slight. Low cost implications.

Nil No effect on service capability. No risk. Assets Criticality and Risk Assessment: Criticality and risk assessment is a qualitative analysis of assets failure events and the ranking of those events according to their impact on the business goals of the organisation. The process consists of the following main activities: • Collect equipment condition assessment records or generic failure frequencies. • Define for each assessment criteria the failure consequences and their scores. • Select asset systems and/or equipment for assessment. • Determine failure frequencies and their ratings. • Perform systems/equipment risk analysis. • Establish criticality assessment criteria. • Define assets criticality ranking scores. • Define assets criticality ranking rules. • Rank asset systems/equipment by risk. • Rank systems/equipment by criticality.

Failure Frequencies: Failure frequencies are defined based on asset systems and equipment performance. When defining failure frequencies, consideration is given to aspects such as;

operational failure history (where available); generic reliability data; equipment redundancy; mode of equipment operation; equipment stress variations, etc.

In the case where actual failure frequencies are not available, failure frequency scores are used in the calculation of relative risk to determine the likelihood of failure of the assessed asset system/equipment. Table 15 shows example failure frequency scores.


© 2008 CIEAM

Table 15. Scores for Estimated Failure Frequencies (HSBRT, 2003)

Failure Frequency Score Failures occur daily 10 Failures occur weekly 9 Failures occur monthly 8 Failures occur between one month and one year intervals 7 Failures occur yearly 6 Failures occur between 1 and 5 years 5 Failures occur between 5 and 10 years 4 Failures occur less frequently than once in 10 years 1

Assessment Criteria: Criticality assessment criteria are defined according to the consequences of failure. The following are some suggested criticality assessment criteria;

occupational safety and health; production/process integrity; environmental integrity; assets functionality; operating costs.

Failure Consequences: Failure consequences within each criterion are defined and given an evaluation score. Table 16 provides examples of occupational safety and health, production/process integrity and environmental integrity consequences of failure and their scores.

Table 16. Criticality Assessment Criteria Scores (HSBRT, 2003)

Score Consequence Occupational Safety and Health

20 Fatalities. 18 Disabling injury. 14 Serious injury. 6 Minor or first aid injury such. 0 No injury.

Product/Process Integrity 10 Unacceptable quality resulting in TOTAL product loss. 5 Unacceptable quality resulting in TOTAL product rework. 0 No effect on product quality.

Environmental Integrity10 Major damage or contamination of the environment. 8 Repairable damage or contamination of the environment. 6 Minor damage or contamination of the environment. 5 Potential damage or contamination of the environment.


© 2008 CIEAM

Figure 16 shows the assets criticality and risk assessment process.

Figure 16. Assets Criticality and Risk Assessment Process

(HSBRT, 2003) The assessment starts by analysing the selected system and/or equipment failure consequences. The most serious failure consequence in each defined consequence criterion is identified and its score recorded. Asset system and equipment failure consequences are analysed in terms of the resultant effects on the asset as a whole, considering the impact of the failure on safety of personnel and on asset performance. The analysis is conducted by answering a series of questions about each asset system or equipment item. These questions assess both the consequence of system or equipment failure and the frequency/probability of failure with respect to the assessment criteria. The criticality number and relative risk are calculated during the assessment from responses to the questions. Questions are typically formulated in the following form: “If the system/equipment fails, could it result in a safety consequence? If yes, how serious should the potential consequence be rated?” And; “If the system/equipment fails, could it result in a production/process consequence? If yes, how serious should the potential consequence be rated?”


© 2008 CIEAM

Results of Criticality and Risk Assessment: Assets criticality and risk assessment produces the following results: • Systems/equipment criticality ranks. • Relative risk. • Total consequence scores. • Individual system/equipment scores.

Relative Risk: The probability of failure is used in combination with the total failure consequence of an asset system/equipment to determine the relative risk value of the asset system/equipment. The concept of relative risk is used to identify those asset systems/equipment that have the greatest potential impact on the asset owner. The relative risk (RR) of an asset system or equipment is the product of the Failure Frequency/Probability (F/P) Score and the Total Consequence Score (TC). RR = F/P * TC It is called ‘relative risk’ because it only has meaning relative to the other systems and equipment evaluated by the same method. The Total Consequence (TC) is the sum of all the scores assigned to each of the criteria. Maintenance Tasks Development/Optimisation: The maintenance tasks development/optimisation process establishes a structured framework for developing or assessing a maintenance program for in-service or newly commissioned assets. The process emphasises the use of operation and maintenance experience documented in a form of standard maintenance tasks. The steps involved in the development/optimisation of maintenance tasks are as follows: • An asset system is identified for review by selecting an element from the asset

plant technical hierarchy. As described earlier, the selected system boundary should be clearly defined. The selected system includes all lower level elements.

• A risk analysis is performed according to the previous section. If an analysis was conducted in the past, review of failure frequencies in lieu of the current asset system/equipment items’ condition is conducted, and the frequency scores changed as necessary. The asset system/equipment items selected are then ranked by their risk ranking.

• In the case that the system under review belongs to an equipment class group that has a Standard Maintenance Task (SMT) documented, it is only necessary to verify for low risk asset systems/equipment that any specific standards and/or regulation requirements are applicable, and simple service activities are adequate and cost efficient. For high and medium risk asset systems/equipment, verification of all SMT elements is required.

• When an applicable SMT is not available, a more detailed analysis is required for high and medium risk asset systems/equipment. For high risk items, a complete reliability-centred-maintenance (RCM) analysis is recommended, while for medium risk items, failure modes and effects analysis (FMEA) is sufficient to develop/optimise the maintenance program.


© 2008 CIEAM

• The outcome of RCM is a set of proposed tasks, their frequencies, and the crafts and skill levels of individuals performing the work, or recommended actions in case suitable routine tasks cannot be found.

• For low risk items that are not governed by any standard or statutory requirements, a run-to-failure strategy is adopted. When such requirements exist, routine tasks are developed and incorporated into work packages.

• From the output of RCM, detailed routine task descriptions are developed and then incorporated into work packages.

• SMTs are developed to reduce task development time or effort, and to ensure consistency when dealing with equipment from the same equipment group. Developed SMTs are kept in a library for future reference. Routine updates are made to SMTs to reflect the current condition of equipment, additional maintenance and operating experience, and any new changes/modification to asset systems and equipment.

• The final step in the analysis is to upload the developed maintenance work packages into a Computerised Maintenance Management Systems (CMMS). This could include maintenance systems such as MAXIMO, SAP Plant Maintenance, Document Management Systems, Inspection Systems, etc.

• Monitoring developed/optimised maintenance programs is essential to ensure their effectiveness in meeting the set objectives. An established method for recording failure modes, failure effects, failure causes and failure consequences, as well as the corrective actions taken to eliminate/reduce the failure effects is critical to the successful implementation of any maintenance program.

Standard Maintenance Task (SMT): An SMT is a set of maintenance activities, which demonstrate a technically feasible and cost-effective maintenance strategy for a defined equipment group. An equipment group is a set of equipment of the same class that functions in an identical operating context. An equipment group has similar design, failure modes and frequencies. Establishing a library of SMTs ensures consistent documentation of maintenance strategies, reduces the RCM effort for developing maintenance programs for new systems, ensures the application of uniform, consistent and cost-effective maintenance activities, and facilitates analysis of equipment groups. It is recommended to include the following information when documenting a standard maintenance task;

completed RCM, FMEA and FMECA analysis; applicable standards and statutory requirements; description of systems boundaries and references to drawings; description of operating context (operational and environmental); assumptions/requirements/analysis for asset system risk assessment; dominating failure modes, causes and frequencies with probabilities; maintenance activities to reduce the probability of identified failure modes; maintenance activity intervals (time-based or performance/condition-based); all condition monitored parameters with their sensitivity to faults or failures; asset system/equipment performance measures including maintenance KPIs.


© 2008 CIEAM

In addition, the following information assists in any required problem solving during a standard maintenance task;

experience from using a known maintenance strategy along with periodic monitoring of established performance indicators;

for non-evident failure modes, the tests/inspections required to determine equipment expected availability;

the required experience and competency of maintenance personnel, and relative estimated person-hours for the maintenance activity;

estimated repair time and essential spare parts, tools, equipment, and logistic support lead times.

The extent of documentation depends on the complexity and the risk assigned to the asset system/equipment under review. For low risk assets, only the first three points above are required for documentation and assessment if simple service activities are adequate and cost effective. For high and medium risk assets, it is recommended that the SMT documents all of the listed points. The flowchart in Figure 17 describes the steps involved in carrying out a maintenance tasks development/optimisation process.

Figure 17. Maintenance Tasks Development/Optimisation Process (HSBRT, 2003)


© 2008 CIEAM

Assets Predictive Maintenance Optimisation (EPM, 2004) Predictive maintenance is not new; it has been around in some shape or form for many years. Studies have proven predictive maintenance to be a lower cost means of performing maintenance, and indeed modern maintenance philosophies such as reliability centred maintenance (RCM) and maintenance optimisation, all direct the asset user towards predictive maintenance as a preferred strategy. Predictive maintenance depends on the ability to measure and extrapolate asset health in order to predict the moment that the asset will fail to fulfil its function. Other strategies that can be used to complement predictive maintenance are corrective maintenance, preventive maintenance and proactive or condition-based maintenance. Corrective maintenance entails waiting for asset equipment to fail and then fixing it. For some less critical assets, this may be the most economical means of maintenance. Preventive maintenance involves performing scheduled, time based tasks that are designed to replace components that are known to wear; this may also include routine lubrication tasks although routine maintenance is considered separate from preventive maintenance in that a routine maintenance task is not necessarily targeted toward failure prevention, but rather toward maintaining asset operational condition. Proactive or condition-based maintenance identifies asset degradation causes that may lead to potential failure, and addresses these causes usually through modifications or re-designing them out of the asset system or equipment functional operation. Historically predictive maintenance has been targeted at rotating machinery which is fine in a factory environment where asset equipment usually have motion, and include such items as gearboxes. rollers and conveyors. However, modern asset plant consist of many other types of asset equipment (sub-systems, assemblies, sub-assemblies and components) that have the potential to fail. Many maintenance planners are already utilising predictive maintenance techniques on rotating machinery such as vibration monitoring, ultrasonics, infrared ‘hot-spot’ identification, and oil debris analysis. Because of the results obtained from applications with industrial assets, predictive maintenance is expanding rapidly to other assets such as infrastructure, subject to expansion/contraction and subsurface pressures and movement. In this context, predictive maintenance has developed through use of electronic sensors and CCTV. However, one of the barriers to the expansion of predictive maintenance has been the difficulty in gathering consistent and accurate information on asset system/equipment condition for overall asset health assessment. Such information has been difficult to obtain because asset condition survey reports are generally inconsistent at best, and inaccurate at worst. Today's predictive maintenance programs rely largely on intelligent sensor signals delivered to analytical software of advanced monitoring technologies. Typically, these technologies also raise alarms if the components being monitored suddenly develop symptoms of impending failure, so that immediate corrective action can be taken. Accurate diagnostic information on the condition of field devices and service equipment (valves, pumps, motors, fans, etc.), enables determining, with some precision, whether immediate action is required to prevent a potential or impending failure, or whether the work can be done at the next regular scheduled shutdown. Actions based on predictions increase the reliability of critical components, and costly interruptions diminish as a result.


© 2008 CIEAM

Improving Maintenance Schedules: Maintenance schedules can be optimised to extend run times and plan maintenance activities accurately. Making maintenance work processes more efficient is a necessary step towards realising the full potential of automated maintenance systems. Well organised maintenance work processes incorporate four phases: • Initiation/Prioritisation – Diagnostic information should be a guide in evaluating

maintenance schedules and determining the order in which they should be done. Purging should also be practiced to ensure that proposed schedules add value to the operations while eliminating unnecessary maintenance work that might be marginally beneficial.

• Maintenance Scheduling - Capable personnel and necessary material must be brought together at the right time and place. Careful maintenance scheduling can eliminate wasted effort and cut 20 to 30 percent off the time required to complete a maintenance task.

• Execution - The use of asset management software and other software systems can speed up the execution of routine and preventive maintenance tasks, such as open/clean shuts and the configuration and calibration of field instrumentation.

• Analysis - Accurate data collection, root cause analysis, and standard reliability engineering principles should be used in determining whether maintenance was really needed, which can be a guide in the future.

An ideal maintenance environment incorporates both a CMMS and AMS. An Intelligent Device Manager and Machinery Health Manager receive reliable information directly from the plant assets and scan those assets in real time for alerts. When all of these technologies are used in a complementary fashion, the online software delivers the data, and serves as the trigger to launch CMMS transactions. When these technologies are integrated, asset users can effectively automate the maintenance process from point of alert conditions through to completion of the maintenance work order. Essential information is available later in the form of an audit trail so that the work can be analysed and the benefits of automation measured. Using the Internet can also facilitate analysis and accelerate decision-making for even better returns. New technologies securely collect, consolidate, and distribute asset information to the users who need it, wherever they are located. For example, users can now open a web browser to view the status of the instrument and valves controlling an industrial asset such as a boiler, the health of the pump and motor train circulating condensate, and the overall performance of the entire boiler. In a plant asset network, experts can compare device configurations, look far trends in faults, or review asset system and equipment performance from a single web application. Asset maintenance optimisation can be put into practice at any time and to any degree, but making a commitment to a total assets maintenance program is the best way to ensure significant results in the shortest amount of me. This will realise the full benefits of asset predictive maintenance optimisation, as well as asset optimisation. In the simplest terms, asset optimisation supports maximum output while incurring minimum costs. Output is maximised by adopting predictive maintenance strategies designed to ensure the reliability essential to production assets, and by utilising all available asset information and diagnostics to identify potential problems and avoid it.


© 2008 CIEAM

9. Establishing Assets Condition

Auditing Benchmarks Assets Condition Diagnosis The primary use for condition monitoring is to predict failures in physical assets that perform specific functions that could generate operational conditions such as vibration, heat, friction, noise or electrical potential, that would eventually affect the operational and physical functions of the asset. The use of condition monitoring in performance analysis of physical assets is to compare the asset’s operational features against expected values or operational limits and output indicators (e.g. level low, level normal, level high, etc.). Condition monitoring for performance analysis may also generate alerts based on defined operational limits and, when appropriate data are available, may generate assessments of operational context (current operational state or operational environment). Ultimately, this would lead to automatic assessment of the operational condition of the physical asset, thereby reducing human inspection tasks and unnecessary maintenance in addition to the periodic maintenance scheme. Automated operational condition assessment would also provide valuable real-time decision support data for operational planning. Automated systems for monitoring the condition of assets for performance observe an asset’s operational performance for signs of variation indicating possible asset equipment defects or degradation, then diagnose the asset’s performance variation for determining corrective or preventive intervention before any critical failure occurs (Stapelberg, 2008). Systems for monitoring the condition of assets can range from simple instrumentation to highly integrated monitoring systems usually coupled with process control. Continuous online operational condition monitoring systems collect, measure, and display asset operational condition variables in real time. All the incoming data is correlated and continuously analysed by diagnostic tools and knowledge-based decision-support systems (DSS) that effectively and systematically conduct root-cause analysis and select the appropriate corrective or preventive actions. Actionable information can be embedded in the knowledge-based decision-support system to validate diagnostic information and automate the decision-making process. Assets condition diagnosis (or assets health assessment) determines the root-cause of problems in an asset’s system or equipment. Asset condition diagnostic systems usually consist of advanced device resident algorithms or programs whereby asset conditions are detected from within. Condition diagnostics can include off-line diagnostics that are run outside the condition monitoring systems, usually on-demand; and background diagnostics that monitor the asset’s system or equipment for operational deviations and marginal events, and provide statistical data for failure prediction and root cause analysis of potential failure conditions. Intelligent device asset monitors are self contained microprocessor-based devices integrated in an automated or continuous online condition monitoring system, and capable of process


© 2008 CIEAM

control or asset health diagnosis. NAMUR (2006) defines status levels for diagnosis; Maintenance; Failure; Function Check; and Out of Specification (TSSS, 2005). Benchmarking Assets Condition Assessments (VGDI, 2005) Assets condition assessment is a basic public sector responsibility and is required by all State Governments. Government Agencies thus need to provide for regular assets inspections and surveys; assets condition reporting; and assets maintenance and rectification actions. Information on the condition of assets is fundamental to making good management decisions. A balance is needed when making investment decisions on assets. The challenge is to neither under-invest and inadvertently run assets down, nor over-invest and put an unnecessary strain on funds. Government Policy on Assets Condition: Government policy requires agencies to establish and manage processes to monitor the condition of assets under their control. The following summarises the policy requirements for condition assessment in the State of Victoria (VGDI, 2005):

• In 1993, the Cabinet Budget and Expenditure Review Committee gave the government’s view on assets condition assessment. The Audit Report stated that asset conditions needed to be seriously addressed.

• In 1994, the Financial Management Package called for a condition assessment of all assets. The Minister for Finance guideline, Standards of Publicly Owned Buildings, released pursuant to the Building Act 1993, requires strategic action to be taken, especially in relation to public buildings.

• In 1995, the Victorian State Government’s Asset Management Series outlined asset condition policy and practice requirements for constructed assets. Policy documents, include an Integrated Management Cycle and Investment Evaluation Policy and Guidelines that require asset condition information.

• In July 1996 the Victorian Government released the Trial Consolidated Financial Report on the operations and financial position of government agencies. This is the first whole-of-government accrual-based financial statement. The reliability of this report depends significantly upon realistic condition assessments and valuation of assets.

All Government Agencies are responsible and accountable for making condition assessment decisions on the assets they own or control. Government Agencies are encouraged to seek advice on assessing the condition of their assets, but ultimately, they must take responsibility for any decisions. It is important to clearly define the required conditions for assets, as the range of possibilities may appear endless. A good understanding of assets condition assessment requires practice and experience. As skills and confidence increase, agencies will learn to optimise the effort and direction put into assessments. Consequently Government Agencies should focus attention on assets which offer a high level of service and are significant to the organisation; should appropriately assess assets which provide few services but are significant to the organisation; experiment with assessment methods on assets which currently provide few services but show potential; need only conduct minimal assessments, sufficient to satisfy


© 2008 CIEAM

management and reporting needs on assets which provide few services and are of minor significance to the organisation. Where Does Assets Condition Assessment Begin? All physical assets, particularly constructed assets, must be assessed on an ongoing basis. This need not necessarily be done all at once or by direct inspection. The most effective asset management and reporting is achieved through a planned condition assessment program, tailored to suit the organisation. A range of methods may be required for comprehensive assessment. Predictive methods are commonly used for planning purposes and direct inspection is often used to evaluate conditions for operational needs. There is no single condition assessment method appropriate for every situation. Government Agencies need to take individual asset circumstances into account to obtain the best results from condition assessment. What are Constructed Assets? Constructed assets can be complex and may require different methods to assess their conditions throughout their lives. Constructed assets, sometimes referred to as fixed or non-current physical assets, include;

structures such as bridges, piers and dams; built environment such as public buildings, schools, hospitals, etc.; infrastructure such as road, rail, telecommunication and sewer networks.

The Primary Driver Behind Assets Condition Assessment is Service Delivery: In 1996, Asset and Building Policy released the guideline: ‘Assessing the Condition of Constructed Assets’ (VGDI, 2005). This guideline applies to all government constructed assets. The condition assessment process uses the same information for asset reporting as required by asset and financial managers administering their asset portfolios. ‘Assessing the Condition of Constructed Assets’ provides a condition assessment methodology. The guideline is divided into three phases: Phase One – Collect the Database: This covers understanding the importance of assets within a whole-of-government context; determining the appropriate asset condition for the required level of performance, which will then provide a reference for measuring actual condition; and conducting the actual condition assessment, which may be by predictive methods or by direct inspection. Phase Two – Analyse the Database: This covers establishing the asset's relative condition level, which is a comparison of the actual condition and the required condition; identifying condition impacts, which involves evaluating the impact of the actual condition on the provision of services, operational costs, and health and safety; and identifying appropriate action together with its cost and priority.

Phase Three – Management Reporting: The third phase provides performance reporting measures which give a broad view on the management of an agency’s assets. The guideline details the assets condition index measure, and the assets condition trend performance indicator. These measures also support reporting required by the Department of Treasury and Finance on constructed assets. The guideline explains how to prepare and present the index and


© 2008 CIEAM

trend and provides advice on interpreting the results. Asset reporting requires a firm commitment to effective condition assessment. Benchmarking Assets Condition Surveys Industry Assets Condition Surveys: (BSRIA, 2000) A condition survey deals with the physical condition of an asset, which is the time period before an asset’s component wears out or breaks down. An assets condition survey is a systematic process of evaluating the condition of asset equipment and installations. The frequency of the condition survey will depend upon its purpose. Single one-of surveys may be appropriate in dealing with the assessment of repair liabilities in conjunction with a physical asset. On the other hand, if the purpose is to ensure the cost effective long-term maintenance of a group of assets, the store of condition data needs to be refreshed periodically to maintain the time horizon, allow for actions taken, and monitor unpredictable deterioration. An assets condition survey can consist of:

• Visual Inspection: Examination of the outside of the asset, together with internal examination of the asset’s equipment.

• Visual inspections with tests: To ascertain a true condition of the asset equipment. For example, thermal imaging can be used to identify defects.

• Specialist surveys: Certain assets equipment will need to be examined and tested by approved contractors. Other specialist contractors also perform more in depth NDT testing methods such as vibration monitoring, power quality surveys, eddy currents and leak detection.

Conducting an initial condition survey can identify significant defects that can adversely affect the performance of asset services and installations; when undesirable conditions or defects would be reached; cause of defects and an indication of what remedial or maintenance actions need to be applied; budgets required for remedial or maintenance action; remedial or maintenance action recommended; and specialist inspection outside the scope of the condition survey. The information derived from condition surveys can also help to;

develop a condition database that can be used for other purposes such as asset valuations and prepare long term asset investment plans;

achieve a balance between capital and maintenance funds and target scarce maintenance resources (people and funds)

benchmark assets condition and maintenance expenditure.


© 2008 CIEAM

Assets Condition Data Collection: The information associated with the condition of asset equipment and installations falls into two generic categories:

• Core data about the asset e.g. asset identity, description, age, location, etc. • Condition data about the asset.

Condition data recorded should include;

current condition; whether a defective condition exists or not; defects or non-conformity in comparison to acceptable condition; condition grade; maintenance action required to bring the asset up to the required condition; any existing equipment lists that can be used to check off each asset item

as verification of the completeness of existing records. The above condition data is typically supplemented with the following information;

method of inspection/data collection (including details of inspection techniques used);

any limitation associated with the survey/inspection process, e.g. where asset equipment could not be inspected and related reasons;

relevant documents inspected; relevant interviews conducted; observations including results of any tests and measurements carried out; photographic or diagrammatic records to illustrate the conditions.

This assets condition information is used to justify the findings in a report. Typical asset survey condition guides, such as the BSRIA Guide Condition Survey of Building Services, AG 4/2000 (BSRIA, 2000), contain a series of condition survey checklists and priority tables from various sources which enables the surveyor to prioritise condition of assets equipment from checklist forms. BSRIA uses this guide as a toolkit to conduct condition surveys of property for their clients, producing comprehensive detailed reports on asset equipment serviceability and life expectancy. Structural Assets Condition Surveys: (CPS, 2007) Condition surveys of infrastructure or structural assets provide a systematic uniform and objective basis for obtaining information on the usable state of the assets. The surveys identify the work necessary to bring infrastructure or structural assets up to a good state of repair, and to comply with current legislation. Once in a good (or at least maintainable) state, routine maintenance can be carried out under a pre-planned programme. This approach also keeps any day-to-day (responsive) maintenance to a minimum and deals only with restoring infrastructure or structural asset components to an acceptable level.


© 2008 CIEAM

Scope and Extent of Structural Assets Condition Surveys: Aspects on which a structural assets condition survey will primarily report are the condition of the infrastructure or structural asset, and the electrical/mechanical services of the infrastructure or structural asset. The surveys are non-invasive and do not incorporate any specialist tests and/or inspections as routine. However the need for any further surveys or tests are identified if deemed necessary. Typical examples would be pressure testing of pipe work, drainage surveys or structural assessments which would involve the opening up of building structure or fabric. The survey does not ordinarily report on furniture, fixtures and fittings that are considered not to be part of the asset structure or fabric. The survey reports principally on elements for which costs are likely to be incurred, and to significant items of repair or replacement in the next five years. Asset Condition Survey Methodology: All assets condition surveys make reference to a pre-determined classification system to demonstrate that similar judgements are being made about asset condition and priority. The existing assets condition, particularly of electrical and mechanical service equipment, is assessed using a four grade assessment system A – D, where:

• Grade A = Good: Performing as intended and/or operating efficiently. • Grade B = Satisfactory: Performing as intended but with minor deterioration. • Grade C = Poor: Exhibiting major defects and/or not operating as intended. • Grade D = Bad: Life expired and/or serious risk of imminent failure.

Once the condition of the assets equipment have been assessed, a priority grading is applied according to the seriousness of the condition revealed, and any urgency associated with, and breaches of, legislation. This will have particular regard to the possible consequences of maintenance deferment. The following priority grades are in the context of a ten year planning period:

• Priority 1: Urgent works that will present immediate closure of the asset and/or address an immediate high risk to the health and safety of users and/or remedy a serious breach of legislation.

• Priority 2: Essential work required within two years that will prevent serious deterioration of the asset and/or address a medium risk to the health and safety of users and/or remedy a less serious breach of legislation.

• Priority 3: Desirable work required within three to five years that will prevent deterioration of the asset and/or address a low risk to the health and safety of users and/or remedy a minor breach of legislation.

• Priority 4: Long term work required beyond a five year planning period that will prevent deterioration of the asset and/or restore equipment or services.

Cost to Repair or Renew: An estimate is made at the time of assessment of the cost of repairing or renewing a defective asset or asset services equipment. The costs indicate bringing the asset up to Grade A condition. Costs include the cost of works including preliminaries and contingencies, and the cost as appropriate of professional fees connected with such work. The estimates do not include upgrading specifications to current standards, except where the existing specification is no longer available or would breach legislation. Costs associated with routine maintenance e.g. servicing, and day-to-day


© 2008 CIEAM

(responsive) maintenance e.g. replacement of consumables and adjustments etc., are not included as part of the condition survey, but are added and reported separately. Recording of Assets condition Survey Data: Survey data is recorded on spreadsheets, enabling the survey information to be utilised for technical and presentation purposes and as part of the overall Assets Condition Assessment Plan. Facilities Condition Surveys: (IHS, 1997) Facilities engineering is a complex challenge to any facilities manager because it involves managing the operation, maintenance, repair, and renovation of a facility’s physical assets. Use of an asset’s equipment will have an effect on the life span of any asset. However, different asset equipment serving similar functions will deteriorate at varying rates. Even identical asset equipment within the same facility will have varying life spans. There is no single method to predict the actual economic life of a facility and/or its assets and asset equipment. However, good scheduled preventive maintenance and scheduled periodic maintenance and repair or replacement of some asset equipment will extend the economic life of the facility. Extending the economic life of the facility is the ultimate goal of each facilities manager. Conducting facilities condition surveys at periodic intervals help to accomplish this goal. A facilities condition survey is a continuing program of comprehensive assessments of a facility’s assets. The surveys require competent personnel examining all facility buildings, grounds, and service equipment, and evaluating their condition. A report is generated that lists facility deficiencies, including physical condition deficiencies, violation of codes and standards, and required space utilisation improvements. This information is incorporated into a report that lists each deficiency along with a recommended corrective action and an associated budget cost estimate. The data is entered into a Facilities Engineering Deficiency System (FEDS) that is contained within the structure of an integrated Facilities Database. The FEDS can then be used to establish and prioritise projects for the upcoming fiscal year and subsequent years. An annual report, derived from the FEDS, establishes a plan for corrective actions on the facility deficiency data. The FEDS data collected during a survey provides sound management information and allows control of economic elements that are essential to an effective and economic facilities management program. However, in order to maintain and extend the life span of a facility the deficiencies identified in the survey must be corrected. This can only be achieved with management's concurrence and positive actions taken toward correcting identified deficiencies. The most challenging portion of a facilities condition survey is the detection of worn and/or deteriorated components along with the estimating and planning of their repair or replacement before an actual breakdown occurs. The primary survey areas include:

• Operations and maintenance activities and capabilities • Physical conditions of the facility’s assets • Compliance with codes, standards and guidelines.


© 2008 CIEAM

The Facilities Condition Survey document is developed to:

• Provide a standard format for execution of the physical survey • Prepare the final facilities condition survey report • Outline responsibilities, and provide instructions to teams that will examine

facilities for existing deficiencies and potential problems. The information contained in the document allows:

• An overview of the planning process for execution of the condition survey • An overview of the survey process so that team members, management

officials, and the Facilities Manager will have an understanding of what to anticipate during a survey

• Detailed instructions and standard formats to be used in completing the report. Benefits of implementing the survey recommendations include:

• Facilities related accreditation requirements are corrected • Building systems operate more effective, efficient, and are easier to maintain • Life expectancy of facility buildings and building service equipment systems

are prolonged • Environmental conditions adequate to the needs of the programs are appraised

and the work environment is improved • Each facility is analysed for physical condition, economic life expectancy,

deficiency corrective action priority, project completion time span, and estimated cost of correction

• Needed additional resources are justified with better planning for the facilities budget, which may result in additional funding in the future

• Customers are better satisfied with services provided. Type of Facilities Condition Surveys: Two types of surveys are used to assess facilities and their installations. These are annual general inspections and facility condition surveys.

• Annual General Inspection: It is recommended that an annual general inspection is conducted to review the status of the most current FEDS information, provide other corrective actions, review new problem areas, revise estimates, survey any buildings that may have been added to the facility inventory since the last annual general inspection or facility condition survey, and evaluate recently developed problems. The annual general inspection is the primary means for facilities staff to review the status of all existing FEDS corrective items at an installation.

• • • • •


© 2008 CIEAM

• Facility Condition Survey: This is an in-depth evaluation of the physical condition and functional performance of the facility (i.e., structure, appurtenances), building service equipment, utilities, grounds, and program space utilisation, conducted every five years The survey team consists of qualified building professionals including, but not limited to, architects and engineer(s) of appropriate discipline(s) including civil, structural, mechanical, and electrical who will review and document existing and potential facilities related problems.

Components of a Facility Condition Survey: There are three main components of a facility condition survey:

• Planning - The planning stage is initiated through the submission of an annual consolidated report which contains a listing of the facility condition surveys scheduled for the upcoming fiscal year. The Facilities Engineer determines whether the facility condition surveys are to be conducted by in-house staff or by a contracted Architect/Engineering (A/E) firm. The planning component ends with finalisation of on-site dates and times. The Facilities Engineer coordinates the schedule with each Facilities Manager.

• Site Survey - The site survey stage includes an initial briefing with local installation personnel prior to the start of the actual site survey; on-site examination and evaluation; and the exit briefing at the conclusion of the visit to summarize the survey findings and recommendations.

• Report - The report stage includes finalisation of the deficiency reports, preparation, distribution, and review of the draft report, and incorporation of comments/corrections and distribution of the final report.

Conducting the Facility Conditions Survey: Planning - The Facilities Engineer initiates the planning with a determination of which facilities are due for a facility condition survey. The Facilities Engineer also determines the best option for conducting the survey. The scope of work should include the following for each facility to be surveyed:

(1) The facility designation (name, building number(s), address) of each building at the location to be inspected.

(2) Area map and/or location plan for the facility to be utilised for the site survey and inclusion in the final report.

(3) Latest FEDS printout for the facility with completed items noted and a listing of the backlog of maintenance and repair projects.

(4) Current floor plans for each building, facility site plans, and utility layout plans, suitable for use during the site survey and inclusion in the final report.

(5) Any special requirements or information to be included in the report. (6) Any limiting factors, such as portion(s) not to be included in the survey. (7) Real property inventory. (8) Listing of applicable codes, standards, and/or guidelines that must be applied

when conducting the survey (9) Current environmental assessment, surveys, and testing. (10) A Statement of Condition for each building as required by accreditation.


© 2008 CIEAM

The next part of the planning stage is scheduling the survey. For in-house surveys, this includes designation of the team and determining availability for completion of the survey. The survey date must be coordinated with the Facilities Manager. For contract surveys, this starts with negotiating the delivery order and award of the delivery order. The remaining coordination includes briefing of the survey team members on their responsibilities, survey procedures, and the scope of work. Each survey team member will be responsible for providing the following information:

The descriptive narrative of each detected deficiency or corrective action related to the subject deficiency code.

Prepare rough sketches as necessary. Recommendations defining the method of correcting the deficiency, and

an estimated cost to correct the deficiency. If the deficiency is beyond the capability to be accomplished in-house,

then a total dollar cost estimate will suffice, If the deficiency is within the capability of in-house maintenance force,

the estimate should reflect the number of estimated labour-hours by trade, estimated material costs, and other resources required to accomplish the scope of work.

Each team member should review the checklist for familiarity with the subject matter. The team member should begin facility component examination by beginning outside the building and then progressing to the inside. Each team member should compare the intent of the checklist to the facility components or the facility management methodology. Facility components or facility related management items that do not favourably compare with the compliance criteria are to be considered as deficiencies. Each member should prepare the descriptive narrative at the time of deficiency detection, recording deficiencies, recommendations, and cost estimates.

Each team member brings the necessary items required to conduct the survey. If photographs are used to support narratives, ensure that entering the corresponding installation number, building number, and temporary task number on the reverse side of the photo identifies each photo.

Upon completion of the survey, each team member will review respective survey notes. Team members complete the prescribed forms and submit them within a specific period after completion of the survey.

All photos must be retained with the original narratives, recommendations, and cost estimates. The original survey forms are filed for future surveys, and to review progress of recommended corrective action.


© 2008 CIEAM

Assembling the Facility Condition Survey Team: A typical survey team includes the following discipline specialists:

• Architect • Civil/structural engineer • Mechanical engineer • Electrical engineer • Facilities Manager.

It is extremely important that the team members have both operation and design experience needed for these surveys.


© 2008 CIEAM

10. Assets Condition Audit and Maintenance Reporting

Assets Condition Audit Reporting The overall asset condition audit reporting process documents the evaluated condition of the organisation’s assets, based on condition criteria and end-of-life criteria that are indicative of asset condition and consistent with industry practices. The organisation’s assets are grouped into asset classes and prioritised into categories, for example, Priority 1 (P1), Priority 2 (P2), and Priority 3 (P3), based on their value to the organisation’s business (in terms of customer/community service, reliability, finance, health and safety, regulatory/legal/environment requirements) and importance of acquiring the condition information. These prioritised categories include: • P1 assets (inclusive of their asset classes) represent the highest priority assets

and are of high value in terms of total sustainment program expenditures, and also high risk in terms of sustainable asset costs.

• P2 assets (inclusive of their asset classes) are second in priority with moderate value and high risk;

• P3 assets (inclusive of their asset classes) are lowest in priority with lower value and low risk.

The assets condition audit report usually presents the condition assessment results of the P1 and P2 assets. For the low priority P3 assets, only a review of industry practices is presented – any available condition assessment is not assessed. The Assets Condition Audit Report is prepared by selected staff of the organisation in consultation with assets condition assessment specialists. The condition assessment analysis and its conclusions are based on the findings of the condition assessment specialists, and the results compiled in the assets condition audit report by selected staff. This approach is adopted since the relevant analysis is normally well advanced at the time of commencement of the assets condition audit report, and it is more appropriate that the organisation’s selected staff objectively develop the audit report. The condition assessment specialists in this case usually limit their involvement to applying condition assessment analytical methods and providing assessed condition results for the auditing process. In general, a very careful and thoughtful evaluation of condition assessment results is undertaken, and follows a steady and measured program of data collection to secure the information needed to assess the condition of the assets. The data collection methods, tools and technologies are generally appropriate to the task of measuring asset condition, and providing the right data at the appropriate cost. These methods need to be consistent with industry practices. Methods and procedures for data collection are usually well documented in head office procedure documents and specifications for data collection services. Except for a few exceptions that might not result in any significant impact to the assets condition audit results, the identified data collection procedures need to be executed according to set specifications, and useable data collected and stored in centralised databases.


© 2008 CIEAM

The Assets Condition Audit Report Outputs: The Assets Condition Audit Report documents the methodology employed in the investigation and the philosophical approach used, along with summary output results for all asset classes. To gather detailed condition information on every asset is not practical and economically infeasible, thus all assets are grouped into asset classes and prioritised in three categories, Priority 1 (P1), Priority 2 (P2), and Priority 3 (P3). The output results present condition assessment results of the P1 and P2 assets. Limited information is to be provided on the P3 assets because acquiring asset condition information on these assets is of low value for any of the following reasons: • The assets are of low value in terms of ongoing investments and it is not cost

effective or practical to collect condition information on these assets. • When these assets fail, risks are considered relatively low and a process exists to

identify and repair or replace the assets that have failed, or are about to fail. The assets included in each asset group (P1, P2 and P3) and the corresponding sections of the output results report dealing with these assets are listed in a table. Usually a comprehensive asset condition assessment for all P1 and P2 assets is completed in accordance with the condition assessment scope of work. However, the Assets Condition Audit Report should provide details of the condition assessment methodology and strategy detailed previously. It should also include high level discussions of strategy and address the investment needed to maintain the service potential condition of existing assets as well as investment needed to replace and upgrade existing assets, and acquire new assets to enhance service delivery of outputs. The information could be textual and may be supported by tables including data. It should basically include: • Current Assets – describe current assets applied in achieving the required

service delivery • Non-asset solutions - describe non-asset solutions available as alternatives to

asset based solutions (i.e. demand management, insurance, managed failures,); • Current processes - review current condition assessment processes and levels of

service being provided by the assets, and identify related asset performance • Method of analysis - provide details on the condition assessment analysis related

to the desired level of service, especially where the level of service is different from what is currently being provided by the assets.

Reporting on Assets Descriptions: A detailed description should be prepared for each of the assets in the P1 and P2 categories, and some in the P3 asset classes that have been specifically investigated. The descriptions focus on the nature of the assets, their function within the system, and key characteristics of the assets including the critical asset subsystems or equipment that make up the assets. Reporting on Assets Demographics: Detailed demographics are prepared for all assets in the P1 and P2 asset classes, focusing on the total population size of each asset class, and the distribution of this population by various salient asset characteristics, such as asset types, operating characteristics, ages, and geographic locations.


© 2008 CIEAM

The objective of the demographic breakdown is to quantify population sizes within definable groupings, which then form the basis for extrapolation of sampled condition results to the respective target populations. The data for the demographic analyses is usually from a variety of data sources, including the Maintenance Work Order system, Asset Surveys and Asset Condition Assessment Surveys. An example of a typical asset demographics chart for power distribution is illustrated in Table 17.

Table 17. Example of a Typical Asset Demographics Chart (Acres International, 2005)

Reporting on the Assets Condition Assessment Process: A review of asset condition assessment processes for each of the P1 and P2 asset classes needs to be included in the Assets Condition Audit Report. This review is carried out in comparison with an idealised framework for a hierarchical and prioritised asset condition assessment process, as described in the beginning of this section. Elements of the review include;

an analysis of asset deterioration and failure modes; description of the organisation’s condition assessment process; a review of industry practices; benchmarking of the organisation’s practices against industry practices; recommendation of practices for use by the organisation, analysis and recommendation of composite Health Indices.

Reporting on the Assets Condition: In the asset condition assessment process, assets condition information is aggregated and indicators of asset management effectiveness developed. Information at this level provides an internal management tool and assists in reporting for the Assets Condition Audit Report. Reports on the condition of public assets are required at two levels - internal agency reports, and reports to the Department of Treasury and Finance. Internal agency reports are generated on the overall condition of the agency's assets, condition trends, and projected improvements or deterioration of assets over time.


© 2008 CIEAM

They also require well substantiated recommendations for all asset management decisions, including re-deployment, refurbishment and maintenance. Reports to the Department of Treasury and Finance have been defined in accordance with the Minister for Finance introducing 'whole of government' reporting to monitor the condition of the State's assets. Agencies need to prepare their reports in a uniform format so Treasury can aggregate the information. The reports are based on information gathered as part of their assets condition assessment. Agencies also need to aggregate their reports at both agency and Ministerial portfolio level. Separate reports are prepared for each Asset Category, allowing analysis based on relative strategic importance. This is a key factor at both agency and government level. The reports need to provide information on:

• Condition Index - a weighted average expressing the current overall condition of a group of assets. A weighted average achieves a balanced view by representing individual assets in proportion to their relative size.

• Condition Trend – showing movements in the Condition Index over successive years, indicating whether overall asset conditions are improving , stable or deteriorating.

Reports to the Department of Treasury and Finance are at both agency and Ministerial portfolio level. However, agencies also need to disaggregate their figures by grouping assets. This serves both internal management purposes and requests from Treasury for more detailed information to support or explain aggregate figures. The appropriate asset groups need to be selected for these purposes. The key asset groups are the six Asset Categories indicated in Table 1. Further breakdown may not be necessary if all an agency's assets in a particular Asset Category are of the same class. For example in Asset Category 4 an agency's assets may be all office buildings. An agency with more than one class of assets in a particular Asset Category will need to develop sub-groups to reflect the different functions and to support benchmarking. For example in Asset Category 2 the agency may have both bridges and highways. For internal management purposes, an agency may choose to create sub-groups of assets related to expected assets life-cycles. Reporting on the Asset Condition Assessment Analysis: The inclusion of asset condition assessment analysis in the Assets Condition Audit Report specifically focuses on technical justification, namely asset condition, of the risks associated with certain assets condition levels. Judgement is applied to assess risks concerning asset performance, health and safety, environment, reliability, technical obsolescence, etc. This has resulted in a need to understand the condition of assets in more detail than was previously necessary. Companies are moving towards condition-based management strategies for their major assets. This requires an understanding of the present condition of the assets, and how this relates to a desired level of service and future assets performance. While this is a very understandable and necessary approach, there are some significant difficulties in implementing the conclusions from condition assessment processes to deliver the outcomes required. For example, utility organisations such as electricity distribution systems are made up of a very large number of individual components, which are widely distributed. Conventionally, in order to make a decision about the future of an individual asset, relatively detailed condition information is required.


© 2008 CIEAM

This immediately raises a very significant practical problem for electricity companies. To attempt to gather detailed condition information and to respond to the outcome of the analysis for every individual asset would not be practical. In order to overcome this situation, a hierarchical approach to condition assessment is applied to enable prioritisation and a focused gathering of detailed condition information. There are a number of ways in which this prioritisation and focusing can be achieved. These include the use of existing knowledge and simple, low cost, condition assessment procedures to progressively identify items at high risk, so that resources necessary for detailed condition assessment can be concentrated on these items. Alternatively, a sampling approach may be adopted within definable subgroups of assets. Reporting on the Assets Condition Index: An assets condition index is defined as a weighted average of the condition of a group of assets. It is calculated using the Relative Condition Level of assets multiplied by the relevant unit of measure. The unit of measure used for a group of assets depends on the nature of the assets. A condition index has three key values for interpretation:

• Value of 0: indicates that the current condition of assets in the group is on average satisfactory.

• Positive value: indicates that the current condition of assets in the group is on average better than required. The closer the value is to the maximum of +2 the wider the variation from Required Condition.

• Negative value: indicates that the current condition of assets in the group is on average lower than required. The closer the value is to the minimum of -2 the wider the variation from Required Condition.

Table 18 shows how the Condition Index is calculated for a group of assets.

Table 18. Assets Condition Index (VSG, 1996)


© 2008 CIEAM

Each step followed in Table 18 is explained as follows: (i) Column 2: List the Relative Condition Level of each asset; (ii) Column 3: List the total units of measure of each asset; (iii) Column 4: Multiply Column 2 by Column 3 for each asset; (iv) Add Column 3 (v) Add Column 4 (vi) Column 5: Divide total of Column 4 by total of Column 3

The resulting weighted average gives the Condition Index for the whole group of assets. In the example in Table 18, the Condition Index has a negative value (- 0.8) indicating that overall the group of five buildings is not satisfactorily maintained. Reporting on the Assets Condition Trends: Table 19 shows an assets condition trend with nine possible interpretations.

Table 19. Assets Condition Trend (VSG, 1996)


© 2008 CIEAM

An assets condition trend is defined as a comparison of the current year's condition index with that of preceding years. An assets condition trend is used to monitor variations in overall asset condition over time. In particular, measurement of trends is a tool for protecting the long term viability of assets by maintaining optimum condition. It can also show whether expenditure on assets is above or below that required. The trend period must also be calculated. Useful information is gained by comparing the condition index of two successive years. However, a longer monitoring period gives a fuller picture of trends. Reporting on Asset Deterioration and Degradation Processes: When considering asset condition assessment, it is important to understand the differences between defect or corrective maintenance and regular routine maintenance versus long-term asset degradation and condition-based maintenance. Defects are usually well defined and associated with failed or defective components mostly in ancillary systems that affect the operation and reliability of the asset well before the asset’s end-of-life. These defects do not normally affect the life of the asset itself, if detected early and corrected. Defects are routinely identified during short-interval inspections, and are dealt with by corrective maintenance activities to repair or replace failed components to ensure continued operation of the asset. However, long term degradation is generally less well defined and is not easily determined by routine inspections. The purpose of asset condition assessment in this case is to detect and quantify long term degradation and to provide some means of quantifying remaining asset life. This includes determining assets that are high risk or near end-of-life that will require major capital or maintenance expenditures to either refurbish or replace. A proper understanding and reporting of asset degradation and failure processes in the Assets Condition Audit Report is vital if condition assessment procedures and the appropriate remedial maintenance actions are to be effectively applied. It is important to identify the critical modes of degradation, the nature and consequences of asset failure, and, if possible, the time remaining until the asset is degraded to the point of failure. Unless there is a reasonable understanding of the degradation and failure processes, it is impossible to establish sensible assessment criteria or to define appropriate end-of-life criteria. Reporting on Asset Performance: Appropriate performance measures should be included in the Assets Condition Audit Report to enable adequate understanding of the way in which assets are being managed, used and consumed within the context of service delivery operations.

Review of assets performance against the following measures should be reported in respect of all the classes of controlled assets: • Maintenance expenditure • Asset condition • The amount of deferred maintenance • Asset utilisation.

Appropriate financial accounting ratios should also be included to provide a balanced view of asset performance from both an asset management and asset financial accounting viewpoint.


© 2008 CIEAM

These ratios should be qualified with reference to the capital structures that are required to support service delivery operations. It may also be possible to use some financial ratios in support of information presented with regard to derived asset age, derived effective useful life, etc.

Comparison of Asset Performance with Industry Practice: A benchmarking exercise should be undertaken to compare the organisation’s asset performance with those of similar organisations. This benchmarking exercise is conducted informally through information obtained from the Assets Condition Audit Report in regard to every type of asset class. The benchmarking should focus on points of reference for several classes of assets, and every asset class should be benchmarked against at least three organisations within each geographic area. The benchmarking should also focus on the types of testing and inspection undertaken for each class of asset, the frequency of testing and inspection, and the use of maintenance and condition assessment data. Attention should be paid to development of composite Health Indices for different classes of assets, although organisations are reluctant to reveal the details of the particular algorithms used for such Health Indices. Reporting on Assets Operations and Maintenance: Information is provided on the operations and maintenance of the existing asset base. The impact of proposed new investments on operations and maintenance strategies and resources should be included in the Assets Condition Audit Report, including strategies for ensuring that the service potential of existing and new assets will be maintained to the appropriate condition standard for output production. The risks associated with funding level adjustments in the current budget year, which impact on whole of life costs and outline options to address maintenance needs, are identified. Comment should also be provided on the management tools adopted in regard to the level of service performance of assets for inclusion in an operations and maintenance strategy, cost benefit analysis, and whole of life costs, as well as any high priority deferred maintenance works and how the proposed strategies would address this issue. Information in regard to a Strategic Maintenance Plan should consider the following;

current and future levels of service; forecast of planned maintenance work (type and budgets); forecast magnitude of unplanned maintenance work (budgets); deferred maintenance and related risk (long-term effects of deferral); risk management (trends and analysis); how maintenance will be funded.

Reporting on Assets Disposal Strategy: Disposal is any of the activities associated with disposal of an asset, including sale, demolition or relocation. The assets disposal strategy should;

forecast proposed disposal of assets, including timing and costs; forecast cash flow of income from disposals; forecast cash flow of expenditures; destination of disposal proceeds such as a funding source for acquisition; identify any business risk associated with the disposal.


© 2008 CIEAM

Reporting on Assets Usage Life Cycle Management Reporting on assets usage life cycle management is predominantly in the form of assets usage documentation, as the assets usage life cycle spans a protracted period over the life of an asset, which can last from 10 to 20 years, and even longer when assets rehabilitation or replacement is taken into account. Thus assets usage documentation ranges from documentation covering assets commissioning or post modification re-commissioning, operations, maintenance, modification, preservation or rehabilitation, through to renewal or replacement and/or disposal. Assets Design Intent Document: The initial assets design intent document was developed using the requirements outlined in the asset owner/user’s requirements and the design professional’s plan in a narrative description of the various asset systems and their intended modes and conditions of operation. This initial document forms the basis used to clearly define the benchmarks for how each system is to be commissioned or re-commissioned. Assets Commissioning and Re-Commissioning Report: Upon completion of commissioning activities, the commissioning agent will produce a written report documenting commissioning activities and their results. Any deficiencies found will be identified with suggested remedies, and any corrective action taken will be reported. The commissioning agent will also need to compile a re-commissioning manual to outline the design criteria and measurable standards and tests that are required to re-certify and validate that the commissioned systems are meeting functional performance standards for future use.

Assets Maintenance Documentation: Many asset owners, as part of their quality management system, document their planned maintenance procedures. The process can have a heavy consumption of time and resources, so the following steps will be necessary;

identify activities to be documented; prioritise activities to be documented, according to issues such as importance

level of the asset, frequency of the activity, and development of documentation;

carry out peer review of the documentation to ensure clarity and succinctness of information, ensure compliance with regulatory requirements, and identify opportunities for more efficient procedures;

include a section on risk management to ensure that all risks are minimised. Review Operations and Maintenance Documentation: The timely submittal of operations and maintenance documentation is crucial for the successful coordination of testing requirement development and requirements for the commissioning process execution. The review of this documentation is also a key objective to make certain of completeness. The content of the final documentation manuals will comprise of approved final submittals reflecting any modifications.


© 2008 CIEAM

REFERENCES ABB, (2004), ‘Asset Life Study’, white paper by Stanier D., ABB Eutech, Pavilion 9, Belasis Hall Technology Park Billingham, Cleveland TS23 4YS, England Acres International, (2003), ‘Health Indices for Distribution Asset Condition Assessment’, white paper eds. Hjartarson T. and Reid M., Acres International Limited, 1235 North Service Road West, Oakville, Ontario L6M 2W2 Canada Acres International, (2005), ‘Asset Condition Assessment’, white paper Schedule 1 RP–2005-0020/EB-2005-0378, Acres International Limited, 1235 North Service Road West, Oakville, Ontario L6M 2W2 Canada ALGE, (1998), ‘Infrastructure Asset Management Manual’, Association of Local Government Engineers New Zealand, June 1998 - Edition 1.1 ANAO, (1996), ‘Asset Management Handbook’, Australian National Audit Office. ANAO, (2007), ‘Best Practice Principles for Performance Information’, Australian National Audit Office API, (2007), ‘Fitness-for-Service Standard API 579-1/ASME FFS-1’, The American Petroleum Institute, Washington DC 20005-4070 U.S.A. BAC, (2000), ‘Getting the Best from Local Authority Assets’ British Audit Commission, UK BSRIA, (2000), ‘Condition Survey of Building Services’, Application Guide AG 4/2000, Building Services Research and Information Association, Department of the Environment, Transport and the Regions (DETR), with Coventry University - Estates Department; WSP Group Plc; and Haden Building Management Limited, UK CIEAM, (2006), ‘Infrastructure and Industry Assets Management Survey: Preliminary Literature Review and Survey Analysis Report’, ET01/0106, published research report by Stapelberg R.F. Cooperative Research Centre for Integrated Engineering Asset Management (CIEAM), ISBN 978-0-9803102-1-4 CERL, (2006), ‘Sustainment Management Systems’, ed. Marrano L. Research and Development Center, U.S. Army Corps of Engineers Chesson J., (2005), ‘Measuring Contributions to Sustainable Development – A Practical Approach’, Public Administration Today, Dec 04-March 05. CPS, (2007), ‘Proposed Non-Housing Property Condition Survey’, ed. Broomfield C., Report of Head of Contracts and Property Services, UK Cabinet


© 2008 CIEAM

CSIR, (2008), ‘Evaluation of an Integrated Asset Life Cycle Management Model’ by Brent A.C. and Haffejee M, Natural Resources and the Environment, Council for Scientific and Industrial Research (CSIR), South Africa, and University of Pretoria, ISSN 0378-4738 Water SA Vol. 34 No. 2. DMTF, (2006), ‘Physical Asset Profile’, Document Number: DSP1011, Version: 1.0.0a, Distributed Management Task Force Inc. 1001 SW 5th Avenue, Portland, OR 97204, U.S.A. DOE, (1998), ‘Life Cycle Asset Management’, DOE O 430.1A, U. S. Department of Energy, Washington, D.C. U.S.A. EPM (2004), ‘Predictive Maintenance as a Part of an Overall Asset Optimisation Strategy’, paper by Podolsky, J., Asset Optimisation - Emerson Process Management, NWW 3165, Wirral, CH49 1TN, for Process Products, March 2004, U.K. EPRI, (2006), ‘Integrated Monitoring and Diagnostics’, report P037.007, Electricity Power Research Institute, 3420 Hillview Avenue, Palo Alto, California 94304 USA GSI, (2001), ‘Facility Condition Assessment Practices’, eds. Teicholz E. and Edgar A. Graphic Systems, Inc. 56 John F. Kennedy Street, Cambridge, MA 02138 HAMP, (2006), ‘Equipment Condition Assessments’, ed. Rux L. Hydroelectric Design Center, hydroAMP Asset Management Partnership, USACE Asset Management Risk and Reliability Workshop, Alexandria, VA HBS, (1996), ‘The Balanced Scorecard: Translating Strategy into Action’, eds. Kaplan R., and Norton D., Harvard Business School, U.S.A. HSBRT, (2003), ‘Effective Maintenance Program Development/Optimisation’ paper by Seifeddine S., HSB Reliability Technologies, for the 12th International Process Plant Reliability Conference, October 22-23, 2003, Houston, Texas, U.S.A. IHS, (1997), ‘Facilities Condition Survey’, Indian Health Services Report, eds. Smith and Associates, Architects and Planners Tulsa, Oklahoma 74105 LGV, (2006), ‘Guidelines for Measuring and Reporting the Condition of Road Assets’ Department for Victorian Communities, Local Government Victoria, Melbourne Victoria, Australia Mangena, S.J. and Brent A.C., (2006), ‘Application of a life cycle impact assessment framework to evaluate and compare environmental performances with economic values of supplied coal products’, Journal of Cleaner Production 14: 1071-1084. Mathew J. and Stapelberg F., (2008), ‘The Significance of Assets Condition Monitoring in the Development of Engineering Asset Management’, British Institute of Non-Destructive Testing (BINDT) Fifth International Conference on CM and MFP, Edinburgh, Scotland, July 2008


© 2008 CIEAM

MIMOSA, (2004), ‘Condition Based Operations for Manufacturing’, white paper on OpenO&M, Machinery Information Management Open Systems Alliance (MIMOSA), Manufacturing Joint Working Group, U.S.A. Mitchell J.S., (1995), ‘MIMOSA - Building the foundation for 21st Century optimised asset management’, Sound and Vibrations, September, pp. 12-19. 1995 Mitchell J.S., (2007), ‘From Vibration Measurements to Condition Based Maintenance’, Sound and Vibration 40th Anniversary Issue, January 2007 Monhemius J., (2006), ‘Editorial - Section 1: Life cycle and process analysis in the mining industry’, Journal of Cleaner Production 14: pp 1040-1041. MSSP(a), (1992), ‘Fault detection and diagnosis in low speed rolling element bearings part I: The use of parametric spectra’, eds. Mechefske C. K. and Mathew J., in Mechanical Systems and Signal Processing, Vol. 6(4) 1992 pp297-307 MSSP(b), (1992), ‘Fault detection and diagnosis in low speed rolling element bearings part II: The use of nearest neighbour classification’, eds. Mechefske C. K. and Mathew J., in Mechanical Systems and Signal Processing, Vol. 6(4) 1992 p309 NAMUR, (2006), ‘Recommendation NE 107’, NAMUR Recommendations and Worksheets, International Process Industries End-User Group - NAMUR Registered Office, Building K9 51368 Leverkusen, Germany NRCC, (2002), ‘Multi-Objective Optimisation of Asset Maintenance Management’, paper by Kyle B. R., Lounis Z., and Vanier D. J., Urban Infrastructure Rehabilitation, Institute for Research in Construction, National Research Council of Canada, Ottawa, Ontario, Canada, for the Ninth International Conference on Computing in Civil and Building Engineering April 3-5, 2002, Taipei, Taiwan. NSWT, (2004), ‘Life Cycle Costing Guideline’, TAM 04-10, New South Wales Treasury, Government of New South Wales, Australia. NSWT, (2006), ‘Asset Maintenance Strategic Planning’, Total Asset Management Guideline TAM 06-3, New South Wales Treasury, New South Wales, Australia. PIME, (1985), ‘A signal processing technique for detecting local defects in a gear from the signal average of the vibration’, eds. McFadden P. D. and Smith J. D., in Proc.IMechE Part C, Vol. 205 1985 p305 PMRS, (2005), ‘Condition Monitoring in the 21st Century’, by Dunn S., Assetivity Pty Ltd for The Plant Maintenance Resource Center, PO Box 1315 Booragoon WA 6154 Australia PSAB, (2007), ‘Assessment of Tangible Capital Assets’, Statement of Principles, Public Sector Accounting Board, Toronto, Ontario M5V 3H2


© 2008 CIEAM

QGSAM, (1999), ‘Condition Assessment’, Strategic Asset Management series of the Queensland Government, Brisbane, Queensland. QWSP, (2001), ‘Asset Maintenance Management Implementation Guide’ Guidelines for Implementing Total Management Planning (TMP), Asset Management Series, Water Service Providers (WSPs), Queensland Government, Australia. RRG, (2006), ‘Theoretical Modeling Research’, Reliability Research Group, Department of Mechanical Engineering, University of Alberta, Edmonton, U.S.A. SAM, (2007), ‘Condition Assessment’, Strategic Asset Management, Queensland State Government, Brisbane, Queensland SAMG, (2006), ‘Service Levels and Asset Modelling’, discussion paper Bamford S., Glenorchy City Council Strategic Asset Management Group (SAMG) SEEE, (2006), ‘Machine Condition Monitoring’, Signal Processing Division, Department of Electronic and Electrical Engineering, University of Strathclyde, Royal College Building, Glasgow G1 1XW, http://www.spd.eee.strath.ac.uk Snell Infrared, (2005), ‘Best Practice for Using Infrared Thermography for Condition Monitoring of Oil-Filled Utility Assets’, white paper by Snell J. Snell Infrared, Montpelier, VT 05601-0006, U.S.A. Stapelberg R.F., (1991), ‘RAMS Analysis of Industrial Plant and Equipment: The RAMS (Reliability, Availability, Maintainability and Safety) Philosophy and Methodology in the Mining, Refinery, Process and Power Industries’, Industrial Engineering Integrity Training Manuals, ICS Industrial Consulting Services, P.O. Box 166 Miami QLD, Australia Stapelberg R.F., (2008), ‘Handbook of Reliability, Availability, Maintainability and Safety in Engineering Design’, Springer, UK, ISBN 978-1-84800-174-9 Then S.S. and Tan T.H., (1998), ‘A Performance Measurement Framework for Asset Management in Queensland’, CIB W70 Facilities Management and Maintenance Symposium, Singapore TTB, (2000), ‘Public Sector Asset Performance’, eds. Tan, Then and Barton, Proceedings of CIBW70 Brisbane Symposium, Queensland, Australia TSS, (2005), ‘Asset Management and Monitoring’, by Clarke N., Tessella Support Services plc 3 Vineyard Chambers, Abingdon, Oxon, OX14 3PX, England UNICCO, (2005), white paper by Lohnes G. UNICCO Service Company, UGL UNICCO 275 Grove Street Newton, MA 02466 VAMS, (2006), ‘Asset Performance’, Asset Management Series, Victoria State Government, Melbourne, Victoria


© 2008 CIEAM

Victoria Government, (1995), ‘Asset Management Series - Principles, Policies and Practices’, Department of Treasury and Finance, Government of Victoria VFA, (2006), ‘Life Cycle Data Analysis’, white paper, Vanderweil Facility Advisors, Boston, MA, U.S.A. VGDI, (2005), ‘Condition Assessment - a strategic look at your constructed assets’, information sheet of the Victorian Government Department of Infrastructure, Office of Building Asset and Building Policy and the Building Services Agency, Levels 1 and 3, 33 St Andrews Place, East Melbourne 3002 VSG, (1996), ‘Assessing the Condition of Constructed Assets’, Asset Management Guideline for the Victorian Public Sector, Deputy Secretary, Office of Building, Victoria State Government, Australia VSG, (2005), ‘Fair Value Asset Valuation Methodologies for Victorian Local Governments’, Department of Sustainability and Environment, Victoria State Government, Australia

cieam apcc assets condition auditing

Documents

life asset management

asset management act

asset management host

asset management groups

asset management strategies

life cycle management

asset ownerscustodians

members of aamcog