October 22, 2004

Holistic Asset Holistic Asset Management – Management –

It’s Not an Isolated It’s Not an Isolated FunctionFunction

2004 Urban Water Council

US. Conference of Mayors

What is “Asset What is “Asset Management”Management”

To the Accounting and Finance staff – AM means:To the Accounting and Finance staff – AM means: Ensuring that assets are booked on the Ensuring that assets are booked on the

organization’s books when placed in serviceorganization’s books when placed in service

Assets are properly depreciated and removed Assets are properly depreciated and removed from the books when retiredfrom the books when retired

Prudent maintenance practices minimize the Prudent maintenance practices minimize the necessary capital and operating expendituresnecessary capital and operating expenditures

Both capital and operating expenses are Both capital and operating expenses are financed prudently to minimize the resulting financed prudently to minimize the resulting rate and customer impact.rate and customer impact.

What is “Asset What is “Asset Management”Management”

To the O&M staff, AM consists of:To the O&M staff, AM consists of:Providing appropriate maintenance Providing appropriate maintenance support to ensure continued reliable support to ensure continued reliable operation of assetsoperation of assets

Minimizing responses to emergency Minimizing responses to emergency calls when assets failcalls when assets fail

What is “Asset What is “Asset Management”Management”

To the IT Engineers, AM To the IT Engineers, AM concerns tracking and concerns tracking and monitoring the asset monitoring the asset maintenance and maintenance and replacement activities.replacement activities.

To the Engineering To the Engineering Department, AM centers around Department, AM centers around the planning for and designing the planning for and designing of the replacement and major of the replacement and major rehabilitation of system assets.rehabilitation of system assets.

What is “Asset What is “Asset Management”Management”

To Utility Management Staff and Customers and To Utility Management Staff and Customers and Constituents, AM means:Constituents, AM means:

Reliable services at the lowest possible costsReliable services at the lowest possible costs Prompt re-establishment of services after an Prompt re-establishment of services after an

emergency situationemergency situation Redundant capability in the event of system Redundant capability in the event of system

failuresfailures Environmental protectionEnvironmental protection Public health and safetyPublic health and safety Excellent customer serviceExcellent customer service LOWEST POSSIBLE COSTSLOWEST POSSIBLE COSTS

What is “Asset What is “Asset Management”Management”

A way to think about an organization’s A way to think about an organization’s management and the stewardship of its assetsmanagement and the stewardship of its assets

Understanding what your assets are and Understanding what your assets are and prioritizing maintenance and management prioritizing maintenance and management activitiesactivities

Managing the life-cycle cost (both capital and Managing the life-cycle cost (both capital and O&M), use and reliability of utility’s assetsO&M), use and reliability of utility’s assets

Tailoring each organization’s needs using a Tailoring each organization’s needs using a systematic, proactive, scalable approachsystematic, proactive, scalable approach

As opposed to a reactive As opposed to a reactive focus on:focus on:

ProblemsProblems PoliticsPolitics TechnologyTechnology CostsCosts Budget ConstraintsBudget Constraints

Asset Management - a thoughtful process of self-evaluation, the development of strategy, objectives and an action plan and a phased implementation plan that coordinates the

knowledge and functions of the entire organization.

Goals of Asset Goals of Asset ManagementManagement

Reduce RiskReduce Risk Increase Asset Life & Minimize Asset Life Cycle Increase Asset Life & Minimize Asset Life Cycle

CostsCosts Optimize Maintenance and Capital Improvement Optimize Maintenance and Capital Improvement

ProgramsPrograms Reliably Plan Expenditures (Few Surprises!)Reliably Plan Expenditures (Few Surprises!) Maximize Organization’s Knowledge of its AssetsMaximize Organization’s Knowledge of its Assets Understand Financial Implications of Expenditures Understand Financial Implications of Expenditures

(Scarce (Scarce resources assigned to proper investments!)resources assigned to proper investments!)

Goals of Asset Goals of Asset Management:Management:

Reduce RiskReduce Risk Increase Asset Life & Minimized Asset Life Cycle Increase Asset Life & Minimized Asset Life Cycle

CostsCosts Optimize Maintenance and Capital Improvement Optimize Maintenance and Capital Improvement

ProgramsPrograms Reliably Plan Expenditures (Few Surprises!)Reliably Plan Expenditures (Few Surprises!) Maximize Organization’s Knowledge of its AssetsMaximize Organization’s Knowledge of its Assets Understand Financial Implications of Expenditures Understand Financial Implications of Expenditures

(Scarce (Scarce resources assigned to proper investments!)resources assigned to proper investments!)

Managers want and need to understand the consequences

of making and not making difficult decisions

Managers want and need to understand the consequences

of making and not making difficult decisions

Asset Management on Asset Management on Two LevelsTwo Levels

The “Big Picture” – The “Big Picture” – Five Major Asset Five Major Asset

CategoriesCategorieso Knowledge BaseKnowledge Baseo Information TechnologyInformation Technologyo PeoplePeopleo InfrastructureInfrastructureo CustomersCustomers

Financial ResourcesFinancial Resources

Asset Management on Asset Management on Two LevelsTwo Levels

The Detailed Look – The Detailed Look – Optimal O&M of Optimal O&M of

individual assets, such individual assets, such as:as:

o PumpsPumpso EquipmentEquipmento PlantsPlantso Buried InfrastructureBuried Infrastructureo HardwareHardwareo Etc ...Etc ...

What to do ? (What tasks?)

When to do it ? (What intervals and when to start?)

Where to do it ? (Which Assets?)

At the Detailed Level, the important questions are:

Let’s simplify Let’s simplify this…..this…..

Time

Asset

Performance

Asset Management Asset Management StrategiesStrategies

Overhaul

User Defined Failure

Asset wears over time

Extended useful life through overhauls / maintenance

Avg O&M Costs over time

O&M Costs

Required Performance

User Defined Lower Limit

Initial Useful Life

Goal #3 is to determine when it pays to replace rather than overhaul /

maintain (for reducing cost and/or risk)

Goal #2 is to predict failure and plan overhaul / maintenance in

advance of asset failure

$$

Goal #1 is to extend the interval between overhauls

to as long as practical

Proactive Maintenance(PM / PdM)

Predictive Maintenance & Performance Monitoring

Asset Replacement Strategy

Balancing the costs associated with risk (emergency maintenance, loss of production, equipment damage, customer dissatisfaction, regulatory fines, etc.) against asset care costs.

Focus on Critical Assets first!

Asset Management Asset Management StrategiesStrategies

Knowledge

Base

CustomersCustomers

FinancialMeasurement,

Analysis & Planning

FinancialMeasurement,

Analysis & Planning

Critical Asset

Categories

Critical Asset

Categories

People

Infrastructure

InformationTechnologyInformationTechnology

ServicesServices

PricingPricing

FinancialResourcesFinancial

Resources

ServiceServiceCycleCycle

ServiceServiceCycleCycle

FinancialFinancialCycleCycle

FinancialFinancialCycleCycle

DataData

Financial InformationFinancial

Information

Initial assessment of the assets’ conditions and criticality as well as the estimated, associated costs to address the proper management of those assets.

Initial assessment of the assets’ conditions and criticality as well as the estimated, associated costs to address the proper management of those assets.

A systematic, step-by-step approach, directs energy and resources to the prioritized tasks that add significant value and precision to the asset management process.

A systematic, step-by-step approach, directs energy and resources to the prioritized tasks that add significant value and precision to the asset management process.

BuriedInfrastructure

BuriedInfrastructure

Using an efficient, Using an efficient, scalable approach ...scalable approach ...

Plant & PumpStation AssetsPlant & PumpStation Assets Financial

Impact Analysis

Financial Impact

Analysis

Step 1Step 1Provides basicProvides basic

planning, budgetingplanning, budgeting& forecasting& forecasting

Step 2Step 2Refines prioritiesRefines prioritiesbased on specificbased on specific

data and criticality analysisdata and criticality analysis

Additional Steps are defined based on the results of your utility’s specific

circumstances.

Dia

gnos

e R

esul

tsD

iagn

ose

Res

ults

O&M Plan/Procedures

O&M Plan/Procedures

O&M Risk AssessmentO&M Risk

Assessment

IT Master PlanIT Master Plan

OD/OE PlanOD/OE Plan

Stakeholder ConsensusStakeholder Consensus

IM Fitness EvaluationIM Fitness Evaluation

Staff TrainingStaff Training

Public EducationCampaign

Public EducationCampaign

CIP Master PlanCIP Master PlanPrioritize CIPPrioritize CIP

Criticality Assessment

Criticality Assessment

Review Asset InventoryReview Asset Inventory

Imp

rove

d C

ust

om

er

Sati

sfacti

on

Imp

rove

d C

ust

om

er

Sati

sfacti

on

Reduce RiskReduce RiskReduce

Probability of Failure

Reduce Impact of Failure Monitor

Maintain Overhaul Replace

Predict & Plan Re-Design

Reduce Asset Care Reduce Asset Care InvestmentInvestmentDo It Smarter Do It Better

Eliminate low value tasks Focus on high impact failure

modes Predict rather than prevent

(intrusive) Prevent rather than let fail

(non-critical assets can be run to failure if it makes sense)

Plan, Plan, & Plan Better tools /

technology Train personnel Document

Procedures Integrate all staff

functions

Asset Management Asset Management Approach is Not Approach is Not

“Business as Usual”“Business as Usual”It will require It will require

changes in:changes in: PhilosophyPhilosophy ProceduresProcedures Staff rolesStaff roles Staff skillsStaff skills Others?Others?

Think Differently ...Think Differently ...

Annual Planning ProcessAnnual Planning Process ==

Last Year’s Budget plus Last Year’s Budget plus inflation ...inflation ...

(if that!)(if that!)

What are the right systems, What are the right systems, staff and maintenance staff and maintenance

activities to manage the activities to manage the organization from an asset organization from an asset management perspective?management perspective?

Systematically Approach Systematically Approach Asset ManagementAsset Management

Evaluate the strengths and weaknesses Evaluate the strengths and weaknesses of your organization’s systemsof your organization’s systems CMMS, GIS, Financial Management CMMS, GIS, Financial Management

Systems, etc.Systems, etc. Define what your goals areDefine what your goals are

What does your organization want to What does your organization want to achieve with Asset Management?achieve with Asset Management?

Prioritize your action plan and Prioritize your action plan and implementation programimplementation program

Staff Willingness To Embrace Staff Willingness To Embrace Change Is Necessary To Change Is Necessary To Improving EffectivenessImproving Effectiveness

Barriers to Change:

- Insufficient Technology

- Lack of Skill-Based Training

- Organizational Inertia

- Union/Civil Service

- Past Disappointments

Existing Norms,

Practices &Procedures

Acceptance of New

Approaches& Methods

Acceptance of New

Approaches& Methods

Getting Staff Buy-In Will Getting Staff Buy-In Will Promote Implementation Promote Implementation

SuccessSuccess

General awarenessGeneral awareness

CommunicationCommunication

FeedbackFeedback

Follow upFollow up

The GoalsThe Goals Extension of Assets’ Extension of Assets’

LivesLives

Optimal Maintenance Optimal Maintenance ProgramProgram

Optimal CIP Optimal CIP

Reliable, Planned Reliable, Planned ExpendituresExpenditures

Maximize Maximize Organization’s Organization’s Knowledge of its AssetsKnowledge of its Assets

Full Knowledge of Full Knowledge of Financial Impact of Financial Impact of ExpendituresExpenditures

Risk ReductionRisk Reduction

The StepsThe Steps Update Asset InventoryUpdate Asset Inventory

Extract “Knowledge Extract “Knowledge Management” from Management” from StaffStaff

Criticality AssessmentCriticality Assessment

Condition Assessment Condition Assessment

Maintenance Maintenance EvaluationEvaluation

Asset Replacement Asset Replacement EvaluationEvaluation

Financial PlanningFinancial Planning

Staff Training & Staff Training & System IntegrationSystem Integration

Public EducationPublic Education

Adopt “Best Fit” Program to Adopt “Best Fit” Program to Support Your Needs and Support Your Needs and

Priorities…Priorities…

Adopt “Best Fit” Program to Adopt “Best Fit” Program to Support Your Needs and Support Your Needs and

Priorities…Priorities…

Additional Refinement Tools and Processes

AM Program

Refine & Calibrate Staff Activities

Sustainable Assets

PreciseCIP

Minimized Cost

OrganizationalAlignment

High Quality Customer Service

Maximized Performance

Knowledge, Confidence, Precision

The Results ...The Results ...