Audit of Sydney Catchment Authority s Asset Management System

Transcription

1 Independent Pricing and Regulatory Tribunal Audit of Sydney Catchment Authority s Asset Management System Report to the Minister Water Licensing Compliance Report April 2009

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3 Audit of Sydney Catchment Authority s Asset Management System Report to the Minister Water Licensing Compliance Report April 2009

4 Independent Pricing and Regulatory Tribunal of New South Wales 2009 This work is copyright. The Copyright Act 1968 permits fair dealing for study, research, news reporting, criticism and review. Selected passages, tables or diagrams may be reproduced for such purposes provided acknowledgement of the source is included. ISBN CP-44 The Tribunal members for this review are: Dr Michael Keating, AC, Chairman Mr James Cox, Chief Executive Officer and Full Time Member Ms Sibylle Krieger, Part Time Member Independent Pricing and Regulatory Tribunal of New South Wales PO Box Q290, QVB Post Office NSW 1230 Level 8, 1 Market Street, Sydney NSW 2000 T (02) F (02) ii IPART Audit of Sydney Catchment Authority s Asset Management System

5 Contents 1 Introduction and Overview Background Audit Process Audit Scope 2 2 Overview of Findings 2 3 Agreed Actions 5 4 Next Steps 6 Appendices 7 A B Licence clauses relating to SCA s asset management obligation and to auditing the management system of the assets 9 WorleyParsons Services Limited Audit of System Catchment Authority s Asset Management System 14 Audit of Sydney Catchment Authority s Asset Management System IPART iii

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7 1 Introduction and Overview The Independent Pricing and Regulatory Tribunal of New South Wales (IPART) advised the Minister on 30 June 2008 of its intention to conduct an audit of Sydney Catchment Authority s (SCA s) Asset Management System in accordance with the requirements of its operating licence (the licence). IPART has completed the audit with the assistance of the consultant, WorleyParsons Services Limited. The purpose of this report is to inform the Minister for Water of IPART s findings in relation to SCA s performance against its asset management obligation contained in the licence and set out IPART s recommendations in response to these findings. Appendix A sets out those licence clauses relating to SCA s asset management obligation and to auditing the management system of the Assets, comprising parts 7 and 11 of the licence. A copy of the consultant s audit report is provided at Appendix B. 1.1 Background The SCA was established in July 1999 to manage Sydney s water catchment areas and infrastructure within its jurisdiction to improve water quality, protect public health and protect the environment. SCA also has the primary responsibility for supplying bulk water to Sydney Water Corporation and several smaller customers. SCA draws bulk water from the catchments of four major river systems the Warragamba, Upper Nepean, Woronora and Shoalhaven. Clause 7.3 of the licence requires that at least once during the term of the licence, IPART may conduct an audit of SCA s compliance with the asset management provisions in the licence. Accordingly, IPART undertook the audit of SCA s asset management system in concurrence with IPART s review of the Capital and Operational Expenditure of the SCA. The audit concentrated on identifying the asset management systems and practices and the value they provided in SCA s compliance with the licence, the degree to which the systems were utilised and proof of the delivery of the expected value from the systems. To achieve this, IPART s consultant reviewed the implementation of the asset management processes for a representative sample set of assets, randomly selected from SCA s high criticality assets. 1.2 Audit Process The consultant reviewed key documents, held discussions with the relevant asset management personnel, asked supplementary questions and compared SCA s approach to Asset Management with current Australian and international best practice. Audit of Sydney Catchment Authority s Asset Management System IPART 1

8 In particular, the audit assessed the robustness of SCA s risk-based approach, the use of whole-of-life costing, and the quality and quantity of the underlying data and information used to predict asset lifecycle behaviour. The consultant provided IPART and SCA with a draft report for comment and considered the comments received before finalising their report. 1.3 Audit Scope The audit assessed SCA s compliance with the asset management obligations included in the licence. These include SCA: Ensuring that its assets are managed consistent with: its obligations in the licence and all applicable laws, policies and guidelines, including the requirements of the NSW Dam Safety Committee, the principles of the Strategic Management Framework and the Total Asset Management Policy the lowest lifecycle cost and acceptable risk of the assets its assessment of the risk of loss of the assets, and capacity to respond to a potential failure or reduced performance of the assets. Reporting the state of each group of assets it manages. A summary of the audit findings are listed below. Further details of the assessment of SCA s Asset Management performance are provided in the consultant s report which is included at Appendix B. 2 Overview of Findings It was found that the SCA has achieved overall High Compliance with the asset management obligations in the operating licence. Specifically, IPART found that the SCA: Fully complied with the licence condition to manage its Assets consistent with its obligations in the licence and all applicable laws, policies and guidelines. The audit found that SCA has developed Asset Management Plans in accordance with the NSW Treasury Total Asset Management (TAM) Guidelines 06-01, and Additionally, SCA met the Bulk Water Supply targets and has dam safety processes certified to ISO IPART Audit of Sydney Catchment Authority s Asset Management System

9 Achieved High Compliance with the licence condition to ensure that its Assets are managed consistent with the principles of the Strategic Management Framework and the TAM Policy. The audit found that SCA undertakes strategic planning in its asset management and has compiled a Surplus to Needs Assets Report dealing with asset disposal 1. However, the report was dated 2005 and is therefore due for review and update. (Recommendation 1) Achieved High Compliance with the licence conditions to manage its Assets consistent with the lowest life cycle cost and acceptable risk of the Assets, and with the whole of life 2 of the Assets. The audit found that SCA has developed Asset Life Cycle Cost (LCC) Analysis processes for all its assets. The processes include Lifecycle Assessment, Risk Costing, Predictive Analysis and Return on Investment Analysis. Although the LCC steps are in place across each discrete phase of the asset life cycle (comprising planning, acquisition, operate, maintain and disposal), there is no evidence of a fully integrated LCC plan that would demonstrate the lowest LCC. (Recommendation 2) Achieved High Compliance with the licence condition to demonstrate consideration of the risk of loss of the Assets and capacity to respond to a potential failure or reduced performance of the Assets. The audit found that SCA applies a risk management process based on AS4360 principles for asset criticality ratings and condition assessment. The identification and classification of risk and allocation of asset criticality for risk treatment is considered best practice. This is evidenced through SCA s high performance rating in the Water Services Association of Australia (WSAA) 2008 Asset Benchmarking report. However, SCA is yet to implement the WSAA 2008 Benchmarking recommendation of progressing towards a corporate wide software system (Risk Management Information System) to contain and manage its corporate risks. (Recommendation 3) Achieved High Compliance with the licence condition to provide information to IPART on the state of each group of assets managed by the SCA, including how the SCA satisfies its licence conditions and legal obligations relating to asset management. However, the documentation did not contain details of how the documents and processes satisfy the legislative requirements. Additionally, the information was not consolidated into one report. (Recommendation 4) 1 TAM (Asset Disposal Strategic Planning) broadly details asset disposal planning, which involves detailed assessment of assets identified as surplus to needs (not required or unsuitable for service delivery, or uneconomical to operate) in the Asset Strategy, followed by an analysis of the physical disposal of the assets. 2 Whole-of-life (WOL) cost refers to the total cost of ownership over the life of an asset. For some assets a balanced view between maintenance strategies and renewal/rehabilitation is required. The WOL asset cost assessment is based on the performance expected of the asset, the consequences and probabilities of failures occurring, and the level of expenditure in maintenance to keep the service available and to avert disaster. Audit of Sydney Catchment Authority s Asset Management System IPART 3

10 Achieved High Compliance with the licence condition to report to IPART on the processes, practices, systems and plans for managing its Assets, and on the progress of implementing these processes, systems and plans. The audit found that SCA is in the process of implementing a Maintenance Outcomes Hierarchy 3 comprising a complete suite of processes and tools for asset management, from condition monitoring and the documentation of individual assets to return on investment analysis. However, there was no evidence that SCA had developed a documented plan for the full implementation of the Maintenance Outcomes Hierarchy that included: timelines for the key stages of the Maintenance Outcomes Hierarchy systems in its reporting mechanism, and identification of assets for which there is no value in implementing all aspects of the asset management processes. (Recommendation 5) Achieved Full Compliance with the licence condition to provide IPART with a description of each group of assets. Achieved High Compliance with the licence condition to report to IPART on the assessment of the expected capability of SCA s Assets to deliver the required services, and on information relating to the strategies and expected costs of future investments in the Assets. The audit found that the funding level for maintenance recorded in the Annual Information Return to IPART dated September 2008 was lower than that required by the SCA s Asset Strategy dated January Although SCA has provided explanation for the majority of the variation in maintenance cost estimates and evidence of the review of its capital expenditure plan, it did not provide evidence of changes made to the original asset management driven investment as a consequence of the review. (Recommendations 6 and 7) Achieved High Compliance with the licence condition to provide IPART with an assessment of the major issues or constraints on current and future performance of the Assets. The audit found that SCA has identified and captured forward planning issues in reports, and are working towards implementing improvement actions identified. However, inconsistency exists in the documentation (between the Annual Information Return provided to IPART dated September 2008 and SCA s Asset Strategy dated January 2008) as explained above. (Recommendations 6 and 7) 3 A set of systems that together satisfy Stage 6 of the NSW Treasury TAM Guideline 06-03, which requires the SCA to implement maintenance plans and programs. 4 IPART Audit of Sydney Catchment Authority s Asset Management System

11 3 Agreed Actions The audit has identified a number of actions that would further enhance SCA s strong compliance in this area. These actions have been discussed with SCA and the following actions have been agreed. SCA will: 1. Review and update the Surplus to Needs Assets Plan (2005) using current asset strategy information (this was last completed in 2005). 2. Develop a Life Cycle Cost (LCC) methodology by 1 September 2010 to differentiate which asset classes will be subject to the full implementation of the Maintenance Outcomes Hierarchy. IPART acknowledges that a fully integrated LCC plan may not be as relevant for managing long lived, large scale assets such as the Warragamba dam. For this reason, it was agreed that the SCA should develop and provide IPART with a LCC methodology that examines the risk and the asset value thresholds for which the Maintenance Outcomes Hierarchy is applicable to its assets. This will provide confidence to the stakeholders that SCA s asset investment is prudent and will deliver the right balance of service and value for money. 3. Act on the Water Services Association of Australia (WSAA) 2008 Asset Management Benchmarking recommendation to implement a corporate wide Risk Management Information System to better understand and control its business risks, improve tracking and reporting and to facilitate workflow management of identified risks. 4. Provide a matrix document that will serve as a guide for the state of the Assets information required under licence condition 7.2. SCA has provided a number of documents during the audit that together provide information to IPART on the state of each group of Assets managed by the SCA. To assist future audits of this area and SCA s compliance generally, it has been agreed that SCA will prepare a matrix document so that all of this information can be readily assessed. IPART considers that provision of such document will achieve the same outcomes as a consolidated report (which was recommended by WorleyParsons) without the additional regulatory costs associated with preparing a separate consolidated report. 5. Set timeframes and accountabilities for the key stages of the Maintenance Outcomes Hierarchy systems and report progress against these targets to the Asset Management Committee. This will facilitate full implementation of the Maintenance Outcomes Hierarchy which is used to implement maintenance plans and programs as required by the NSW Treasury Total Asset Management Guideline Update the expenditure forecasts in the Asset Strategy to reflect SCA s current assessment of forward expenditure requirements. This will eliminate inconsistency between the Asset Strategy dated January 2008 and the Annual Information Return to IPART dated September Audit of Sydney Catchment Authority s Asset Management System IPART 5

12 7. Fully implement the Maintenance Outcomes Hierarchy to assist in the documentation of the optimum forward asset investment requirements. This will provide the elements of and information for lowest lifecycle cost decisions in managing SCA s assets. 4 Next Steps IPART will continue to monitor and report SCA s compliance with the obligations under the operating licence. As part of this process, IPART will request SCA to provide it with a report on its progress in implementing the agreed actions by 1 September IPART Audit of Sydney Catchment Authority s Asset Management System

13 Appendices Audit of Sydney Catchment Authority s Asset Management System IPART 7

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15 A Licence clauses relating to SCA s asset management obligation and to auditing the management system of the assets Part 7 Asset management 7.1 Asset management obligation The SCA must ensure that its Assets are managed consistent with: a) its obligations in the Licence, and all applicable laws, policies and guidelines with which the SCA must comply, including the requirements of the NSW Dams Safety Committee; b) the principles of the Strategic Management Framework and the Total Asset Management Policy; c) subject to clause 7.1(a), the lowest lifecycle cost and acceptable risk of the Assets; d) the whole of life of the Assets; and e) its assessment of the risk of loss of the Assets, and capacity to respond to a potential failure or reduced performance of the Assets. 7.2 Reporting on the management system of the Assets At least once during the term of the Licence at a time agreed with IPART, the SCA must provide information to IPART on the state of each group of Assets managed by the SCA The information provided must include the following: a) a description of the processes, practices, systems and plans the SCA uses in managing the Assets; b) a description of each group of Assets; c) an assessment of the expected capability of the assets to deliver the services required to be delivered by the SCA and meet the existing obligations of the SCA consistent with the Licence and all applicable laws with which the SCA must comply; d) an assessment of the major issues or constraints on current and future performance of the Assets; e) the strategies and expected costs of future investments in the Assets; f) progress in implementing the management of the SCA s Assets and any recommended improvements in processes, practices, systems and plans for the management of the Assets; and g) such other information reasonably required by IPART. Audit of Sydney Catchment Authority s Asset Management System IPART 9

16 7.3 Auditing the management system of the Assets At least once during the Licence, IPART may (at a time it determines) conduct an audit of SCA s compliance with clauses 7.1 and 7.2. The audit may form part of an Annual Audit or be conducted separately from an Annual Audit, at the discretion of IPART In addition, IPART may at any time audit the SCA s compliance with clauses 7.1 and 7.2 for the purpose of: a) investigating and reporting on, or reviewing the pricing of SCA s bulk water services under the Independent Pricing and Regulatory Tribunal Act 1992; or b) investigating compliance by SCA with specific areas of its Asset management An audit undertaken under clause or 7.3.2, must comply with the scope and audit specifications determined by IPART The provisions of Part 11 apply to an audit under clause 7.3 as if the audit under clause 7.3 is an Annual audit IPART must advise the Minister of its decision to conduct an audit under clause or and, subsequent to the audit, provide the Minister with a report on the outcomes of the audit. 10 IPART Audit of Sydney Catchment Authority s Asset Management System

17 Part 11 Annual Audit of the Licence 11.1 Commission of audits IPART must initiate an operational audit of the SCA as soon as practicable after 30 June each year covering the preceding financial year, as required by this Part 11 (the Annual Audit) The Annual Audit must be conducted by IPART or by a person that IPART considers is suitably qualified to perform the Annual Audit As part of the Annual Audit, IPART must invite members of the public to make submissions to it. IPART may also undertake any other Public Consultation it considers appropriate IPART may include in its Annual Audit all or any of the matters referred to in clause 11.2 and where in any Annual Audit a matter is not made the subject of that Annual Audit, IPART may require the SCA to provide IPART with a report on the matter not included in the Annual Audit What the audit is to report on IPART or the person undertaking the Annual Audit may investigate and prepare a report on any or all of the following: a) compliance by the SCA with its obligations in each of Parts 3, 4, 5, 6, 7, 8 and 9; b) the SCA s compliance with its obligations under each Memorandum of Understanding referred to in clause 2.3; and c) any other matter required by the Licence, the Act or administrative direction to be assessed and considered as part of the Annual Audit Despite clause , neither IPART nor the person undertaking the Annual Audit may investigate a matter under clause if the investigation of that matter is ordinarily within the regulatory activities of DEC, NSW Health or DNR and the relevant agency has undertaken an investigation of the matter Nothing in this Part 11 restricts the capacity of IPART, as part of the Annual Audit from: a) satisfying the requirement in clause to investigate and prepare a report on a matter under clause by including in its report consideration of the findings and the SCA s response to those findings, of any investigation of the matter by DEC, NSW Health or DNR; and b) requesting the SCA to provide information relating to an investigation of a matter by DEC, NSW Health or DNR which is ordinarily within the regulatory activities of those agencies. Audit of Sydney Catchment Authority s Asset Management System IPART 11

18 IPART must ensure that, subject to clause , the report of the Annual Audit addresses the matters in clause and advises the Minister on the following matters: a) areas in which the SCA s performance under the Licence may be improved; b) any changes to the Licence that IPART considers necessary; c) any penalties or remedial action required as a result of the SCA s performance under the Licence; d) whether the Minister should recommend that the SCA s Licence be cancelled by the Governor under section 30 of the Act for reasons identified in the report of the Annual Audit; and e) any other matter relating to the Annual Audit or the SCA s Functions that it considers appropriate Reporting of audit IPART must ensure that the report of the Annual Audit is presented to the Minister within 1 month after its receipt by IPART If the report of the Annual Audit has identified areas of non-compliance with the Licence, in addition to whatever other action is taken or required to be taken, the SCA must comply with any requirement that may be imposed on the SCA by the Minister to do the following: a) advertise publicly and notify Customers of the areas of the non-compliance; b) provide reasons for the non-compliance; c) identify the measures that will be taken by the SCA to address the noncompliance; and d) provide such other advice concerning the non-compliance as is requested by the Minister Additional audits IPART must initiate additional audits of the SCA if required by the Minister An additional audit may address one or more of the matters in clause or any other matter required by the Minister The provisions of this Part 11 applying to the Annual Audit will apply equally to additional audits under clause (all necessary changes having been made), to the extent that those provisions are relevant. 12 IPART Audit of Sydney Catchment Authority s Asset Management System

19 11.5 Provision of information The SCA must provide IPART (or a person appointed by IPART under clause ) with all information within its possession or under its control necessary to the conduct of the Annual Audit or an additional audit, including whatever information is requested in writing by IPART or the person appointed by IPART The information sought under clause must be made available within a reasonable time of it being requested For the purposes of the Annual Audit or an additional audit under clause , the SCA must, within a reasonable time of being required by IPART (or the person appointed by IPART), permit IPART (or the person appointed): a) to have access to any works, premises or offices occupied by the SCA; b) to carry out inspections, measurements and tests on, or in relation to, any such works, premises or offices; c) to take on to or into any such premises, works or offices any other persons or equipment as necessary for the purposes of performing the audit; d) to inspect and make copies of, and take extracts from, any books and records of the SCA that are maintained in relation to the performance of the SCA s obligations under the Licence; and e) to discuss matters relevant to the audit with the SCA s employees If the SCA contracts out any of its activities to third parties (including a subsidiary) it must take all reasonable steps to ensure that, if required by IPART, any such third parties provide information and do the things specified in Part 11 that extend to the SCA as if that third party were the SCA For the purpose of an Annual Audit or an additional audit under clause , the information to be provided by the SCA or a third party under clause may include information over which the SCA or a third party claims confidentiality or privilege. IPART (or the person appointed by IPART) must (if required) enter into reasonable arrangements with the SCA or such third party to ensure that the confidential information or privileged information is kept confidential or privileged. [Note: This clause is limited by section 24FF and section 25A of the Independent Pricing and Regulatory Tribunal Act 1992 (IPART Act). For example: if IPART is advised by the SCA that the information provided by it is confidential, section 24FF of the IPART Act sets out the manner in which IPART is to deal with that information; or under section 25A of the IPART Act, IPART cannot require the SCA to produce a cabinet document.] Audit of Sydney Catchment Authority s Asset Management System IPART 13

20 B WorleyParsons Services Limited Audit of System Catchment Authority s Asset Management System 14 IPART Audit of Sydney Catchment Authority s Asset Management System

21 Audit of Sydney Catchment Authority's Asset Management System GE-RPT Feb-09 Infrastructure Level 12, 333 CollinsStreet Melbourne Vic 3000 Australia Telephone: Facsimile: WorleyParsons Services Pty Ltd ABN Copyright 2009 WorleyParsons Services Pty Ltd

22 SYNOPSIS This report presents the findings of an audit of the Sydney Catchment Authority s Asset Management. It specifically considers the degree of compliance of the Sydney Catchment Authority Asset Management with the requirements of clauses 7.1 and 7.2 of the authorities Operating Licence... Disclaimer This report has been prepared on behalf of and for the exclusive use of IPART, and is subject to and issued in accordance with the agreement between the IPART and WorleyParsons Services Pty Ltd. WorleyParsons Services Pty Ltd accepts no liability or responsibility whatsoever for it in respect of any use of or reliance upon this report by any third party. Copying this report without the permission of IPART or WorleyParsons Services Pty Ltd is not permitted GE-RPT AUDIT OF SYDNEY CATCHMENT AUTHORITY'S ASSET MANAGEMENT SYSTEM REV DESCRIPTION ORIG REVIEW WORLEY- PARSONS APPROVAL DATE CLIENT APPROVAL DATE A Outline Draft [ ] S Wise [ C Berberich [ ] P Draayers 2-Oct-08 B Amended Draft Issued for Internal Review [ ] S Wise [ C Berberich [ ] P Draayers 31-Oct-08 C Amended Draft - Issued for IPART Review [ ] S Wise [ C Berberich [ ] P Draayers 7-Nov-08 0 Issue to client 1 Minor modifications 2 Minor modifications S Wise C Berberich P Draayers S Wise C Berberich P Draayers C Berberich S Wise P Draayers 9-Jan Feb Feb-09 c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page ii

23 CONTENTS GLOSSARY/DEFINITIONS...6 Abbreviations...6 Glossary/Definitions...7 Compliance Table Assessment...7 EXECUTIVE SUMMARY INTRODUCTION Background Sydney Catchment Authority SCA s Purpose Regulatory Framework Asset Management Issues Identified in Previous Reviews/Audits Approach to this Asset Management Audit Scope of Services of this Audit METHODOLOGY Overview Draft Audit Plan SCA Audit Interviews Conduct of the Audit Audit Team SCA Asset Management Key Performance Indicators (KPIs) Verification/Proof of Performance SCA S ASSET MANAGEMENT PLAN Introduction Reference Documents for the Audit SCA Asset Management Framework Regulatory Requirements...23 c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 3

24 3.3.2 Key Performance Indicators AUDIT FINDINGS BY SECTION Operating Licence Clause 7.1 Compliance with Asset Management Obligations Clause 7.1(a) Compliance with Regulatory Obligations Clause 7.1(b) Compliance with Strategic Management Framework and TAM Policy Clause 7.1(c) Compliance with Lowest Life Cycle Cost (LCC) and Acceptable Asset Risk Clause 7.1(d) Demonstration of Whole Of Life (WOL) Asset Cost Assessment Clause 7.1(e) Demonstration of Asset Risk Assessment (Loss, Capacity to Respond to a Potential Failure or Reduced Performance) Operating Licence Clause 7.2 Compliance with Management System: Reporting on Assets Clause State of the Asset Report Submission Clause 7.2.2(a) Description of SCA Asset Management Processes, Practices, Systems and Plans Clause 7.2.2(b) Description of SCA Asset Groupings Clause 7.2.2(c) Description of SCA Asset Capability to Meet Service Delivery and Existing Legal Obligations Clause 7.2.2(d) Assessment of SCA Asset Current and Future Performance Issues or Constraints Clause 7.2.2(e) Assessment of SCA Strategies and Expected Future Asset Investment Cost Clause 7.2.2(f) Assessment of SCA progress in implementing asset management and any recommended Improvements Clause 7.2.2(g) Assessment of any Other SCA Asset Management Information Required by IPART CONCLUDING REMARKS...51 c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 4

25 Appendices APPENDIX 1 : SCOPE OF AUDIT (SCHEDULE 3) APPENDIX 2 : SCA ASSET MANAGEMENT FRAMEWORK c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 5

26 GLOSSARY/DEFINITIONS Abbreviations Commonly used abbreviations or acronyms used within this report are provided in Table A. Table A: Abbreviations Abbreviation ADWG AIR AMSP ANCOLD CMMS DECC FMECA IM&ICT IPART LCC MWP ODM OH&S SIR SCA SWCM Act TAM WOL WorleyParsons WSAA Full Description Australian Drinking Water Guidelines Annual Information Return Asset Maintenance Strategic Plan Australian National Committee on Large Dams Computerised Maintenance Management System Department of Environment and Climate Change Failure Modes Effect Criticality Analysis Information Management and Information Communication Technology Independent Pricing and Regulatory Tribunal Life Cycle Costing Metropolitan Water Plan Optimised Decision Making Occupational Health and Safety Special Information Return Sydney Catchment Authority Sydney Water Catchment Management Act NSW Treasury Total Asset Management Guidelines Whole of Life WorleyParsons Services Pty Ltd Water Services Association of Australia c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 6

27 Glossary/Definitions The glossary/definitions for terms or phrases used within this report are provided in Table B: Table B: Glossary and Definitions GENERAL TERMS AND DEFINITIONS Term Audit period Bulk Water Bulk Water Supply Agreement Function Maximo Minister Operating Licence Meaning The SCA Operating Licence asset management review period Raw Water supplied to Sydney Water (under the Bulk Water Supply Agreement) and to local councils The Bulk Water Supply Agreement between the SCA and Sydney Water signed on 13 April Means a power, authority or duty. The SCA Computerised Maintenance Management System The Minister responsible for administering the provisions of the SWCM Act The SCA s Licence, issued on the 8 th February 2006, and expiring on or about 1 July 2009 Compliance Table Assessment The compliance ratings used in the Asset Management assessment against each auditable operating licence clause are in accordance with those provided to WorleyParsons by IPART. These are: Term Grading of Compliance Full compliance High compliance Moderate compliance Low compliance Non compliance Meaning The following ratings are used to grade achievement of compliance with a Licence condition. All requirements of the condition have been met. Most requirements of the condition have been met with some minor technical failures or breaches. The major requirements of the condition have been met. Key requirements of the condition have not been met but minor achievements regarding compliance have been demonstrated. The requirements of the condition have not been met. Insufficient information Relevant, suitable or adequate information to make an objective determination regarding compliance was not available to the auditor. No requirement The requirement to comply with this condition does not occur within the audit period or there is no requirement for SCA to meet, such as a definition, a requirement placed upon another agency or the requirement was met in an earlier audit period. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 7

28 EXECUTIVE SUMMARY The Sydney Catchment Authority (SCA) manages Sydney s drinking water catchments and catchment infrastructure and supplies water on a wholesale basis to Sydney Water, to a number of local councils and to approximately 60 direct retail customers. It was established under the Sydney Water Catchment Management (SWCM) Act of 1998 and is required to operate to an operating licence. The Independent Pricing and Regulatory Tribunal (IPART) is an independent body that oversees the regulation of the water, gas, electricity and public transport industries in New South Wales, including SCA. Amongst its responsibilities, IPART is empowered to conduct an audit of SCA s compliance with Clauses 7.1 and 7.2 of its operating licence, relating to asset management, once during SCA s licence period. WorleyParsons Services Pty Ltd (WorleyParsons) has been engaged by IPART to conduct an audit of SCA s compliance with the requirements of Clauses 7.1 and 7.2 of its operating licence. This audit has found that SCA demonstrates a high level of compliance with the requirements of Clauses 7.1 and 7.2 of its licence. In summary, thirteen licence requirements have been audited. The audit has found that SCA demonstrates full compliance with two requirements of the audit. High levels of compliance are assessed against ten of the requirements and for one requirement it has been determined that there is no requirement applying to SCA. The findings are summarised in Table ES 1. SCA is currently implementing a complete suite of processes and tools for asset management, covering the full spectrum of asset management activities, from condition monitoring and the documentation of individual assets to return on investment analysis. This collective set of processes and tools is termed the Maintenance Outcomes Hierarchy by SCA. SCA has designed its asset management processes around the requirements of the NSW Total Asset Management (TAM) guidelines and around the requirements of its licence and other regulatory requirements such as occupational health and safety regulations. It has provided evidence of compliance with the regulatory requirements identified sufficient for WorleyParsons to assess full compliance against item 7.1 (a) of the licence. The strategic planning demonstrated by SCA through its Asset Strategy and its Asset Management Strategic Plan, as well as the plan for asset disposal in its Surplus to Needs Assets report and the evidence of compliance with TAM guidelines has resulted in the assessment that SCA demonstrates high levels of compliance with item 7.1 (b) of its licence. One issue identified being that the Surplus to Needs Asset Report may be out of date and should be reviewed. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 8

29 Table ES 1 High Level Audit Findings Summary Clause Requirement Compliance The SCA must ensure that its Assets are managed consistent with: 7.1 (a) Obligations in the Licence, and all applicable laws, policies and guidelines, including the requirements of the NSW Dams Safety Committee; 7.1 (b) the principles of the Strategic Management Framework and the Total Asset Management (TAMS) Policy; 7.1 (c) subject to clause 7.1(a), the lowest life cycle cost and acceptable risk of the Assets; FULL COMPLIANCE HIGH COMPLIANCE HIGH COMPLIANCE 7.1 (d) the whole life of the Assets; and HIGH COMPLIANCE 7.1 (e) its assessment of the risk of loss of the Assets, and capacity to respond to a potential failure or reduced performance of the Assets At least once during the term of the Licence at a time agreed with IPART, the SCA must provide information to IPART on the state of each group of Assets managed by the SCA The information provided must include the following: (a) a description of the processes, practices, systems and plans the SCA uses in managing the Assets; HIGH COMPLIANCE HIGH COMPLIANCE HIGH COMPLIANCE (b) a description of each group of Assets; FULL COMPLIANCE (c) (d) an assessment of the expected capability of the Assets to deliver the services required to be delivered by the SCA and meet the existing obligations of the SCA consistent with the Licence and all applicable laws with which the SCA must comply; an assessment of the major issues or constraints on current and future performance of the Assets; HIGH COMPLIANCE HIGH COMPLIANCE (e) the strategies and expected costs of future investments in the Assets; HIGH COMPLIANCE (f) progress in implementing the management of the SCA s Assets and any recommended improvements in processes, practices, systems and plans for the management of the Assets; and HIGH COMPLIANCE (g) such other information reasonably required by IPART NO REQUIREMENT Asset Lifecycle Cost Analysis processes developed and being implemented by SCA include Lifecycle Assessment, Risk Costing, Predictive Analysis and Return on Investment Analysis. Assessment of these processes has have resulted in the assessment that SCA demonstrates a high level of compliance against item 7.1 (c) and item 7.1 (d) of its licence. WorleyParsons recommends that SCA identify, document and report on timeline targets for the implementation of the processes to achieve full compliance. SCA has provided evidence of the adoption of a risk management framework based on AS It has completed a risk analysis and classification of its assets and developed action plans in response to the outcomes of the risk assessment, demonstrating a high level of compliance with the requirements of item 7.1 (e) of its licence. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 9

30 Item 7.2 of SCA s operating licence requires it to provide information on the status of each group of its assets. This information is available in various reports and forms. It is recommended that SCA develop a consolidated report in future to simplify the process of determining compliance with the operating licence and to harness the benefits that this consolidated knowledge would provide regarding the state of its assets. Whilst it is recommended that SCA compile a State of the Assets Report, it is considered that SCA provides adequate information to show high compliance with item of its licence. Items (a) and (b) are assessed largely on the same basis as item The level of compliance for 7.2.2(a) is considered to be high rather than full due to the lack of a documented plan for the full implementation of the Maintenance Outcomes Hierarchy and the fact that the implementation is incomplete. The framework developed for asset management by SCA has resulted in an assessment of full compliance for item (b) of the licence. The assessment of SCA s documentation of its future asset investment strategy has identified that there are inconsistencies between investment plans identified in the Asset Strategy and SCA s current capital and operational expenditure expectations. This inconsistency between documented expenditure requirements for asset management has resulted in an assessment of high compliance rather than full compliance against item (c), as it highlights contradictions in SCA s current plan and statements made in its Asset Strategy regarding the need for increased investment to manage ageing infrastructure. It also leads to an assessment of high rather than full compliance for item (e), where it highlights that the Asset Strategy should be updated to be consistent with SCA s current expenditure plan. SCA has provided evidence of the review of its capital expenditure plan. However it has not provided evidence of the review process and changes to the drivers behind the original asset management investment which justify the change. It has also not provided documentation regarding the consideration of its asset management drivers in the reduction of forecast operational expenditure in 2008/09 and 2009/10 from $19.11 M to $ Whilst information was provided to WorleyParsons regarding the review of forecast capital expenditure and operational expenditure during this audit and in the review of past and future capital and operating expenditure for the IPART review of prices for the Sydney Catchment Authority, 2009, the information provided did not adequately describe the rationale behind the reduction in operational expenditure. By demonstrating the incorporation of forward planning issues and the outcomes of system reviews in its asset management, SCA is considered to show high compliance with item 7.2.2(d). This audit s assessment of overall high performance by SCA in the area of Asset Management is supported by assessment of SCA s asset management during the Water Services Association of Australia (WSAA) 2008 Asset Management Benchmarking Project. The benchmarking project has previously (in 2004) identified opportunities for improvement, such as in Maintenance Management Systems. The most recent assessment has shown significant improvement against the improvement opportunities identified in the 2004 assessment. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 10

31 1. INTRODUCTION 1.1 Background WorleyParsons Services Pty Ltd (WorleyParsons) has been engaged by the Independent Pricing and Regulatory Tribunal (IPART) to complete an audit of the asset management practices of the Sydney Catchment Authority (SCA). For the purposes of this audit, compliance has been assessed against the following clauses of SCA s Operating Licence: Asset Management Obligation, and Reporting on the management system of the Assets The scope of the assignment is described in Schedule 3 of the agreement between IPART and WorleyParsons, which is attached in Appendix Sydney Catchment Authority SCA is a NSW state owned corporation. It is responsible for the supply of bulk raw water for the Greater Sydney, Illawarra, Blue Mountains and the Southern Highlands regions of NSW. SCA s role is derived from the Sydney Water Catchment Management Act 1998 (SWCM Act the Act ) and the Operating Licence issued to SCA. Under Part 7.3 of the Operating Licence, IPART may undertake an audit of SCA s performance against the asset management requirements of its Licence. IPART reports the findings to the NSW Water Minister. The asset base reviewed comprises storage dams, delivery pipeline systems, water pumping stations and online monitoring systems SCA s Purpose The SWCM Act defines the roles, purpose and objectives of SCA. Its role is to manage and protect the catchment areas and infrastructure works, supply raw water and bulk water to its customers; and to regulate specified activities within the catchment area. SCA s has the responsibility to protect the 16,000 square kilometres of drinking water catchment, manage dams, pipelines and other infrastructure and to supply raw water of the required quality to its customers. SCA s customers include Sydney Water, two local councils and approximately 60 other retail customers that are directly supplied from SCA s infrastructure. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 11

32 1.2.2 Regulatory Framework The regulatory framework applicable to SCA consists of a combination of operating licence, government department directives, water management planning and other legislation and various other guidelines and regulations. The framework is comprised of aspects of: 1. Regulatory authority requirements 2. Catchment protection 3. Environmental planning 4. Water supply (meeting Bulk Water Supply Agreements) 5. Implementation of the 2006 NSW Metropolitan Water Plan (MWP) The specific regulatory aspects considered for this asset management audit are: SCA s Operating Licence The MWP (asset investment versus asset maintenance) The NSW Treasury Total Asset Management (TAM) Guidelines Raw water quality protection to comply with the Australian Drinking Water Guidelines (ADWG) and Section 36 of the SCWM Act NSW Dam Safety Committee Guidelines Miscellaneous supporting legislation, guidelines, Standards and regulations, which may impact Asset Management practices or investment costs. Examples include the Dangerous Goods Act, OH&S Act and boiler and pressure vessel regulations. 1.3 Asset Management Issues Identified in Previous Reviews/Audits A number of previous reviews of SCA s asset management performance have been assessed to identify common themes or outstanding issues that might potentially impact service delivery. These reviews include: Cardno-Atkins 2005 Review of the SCA Operational and Capital Expenditure and Asset Management SCA s Submission to IPART s Review of Prices, September 2008 The IPART 2008 Issues Paper The Water Services Association Australia (WSAA) - Asset Management Benchmarking 2008 report (confidential to the SCA at the time of audit) c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 12

33 A discussion of the key issues arising out of these reviews is detailed in Section of this report. 1.4 Approach to this Asset Management Audit Discussion of approach to the Asset Management audit In assessing the compliance of SCA s asset management practices against Clauses 7.1 and 7.2 of its Operating Licence, WorleyParsons audited: 1. SCA s asset management systems to ensure that SCA is managing its assets consistent with Clause 7.1 (a) (e) of the Operating Licence 2. SCA s State of the Assets Reporting - Clause 7.2 A project inception meeting was held between IPART and WorleyParsons to establish a shared understanding of the scope, approach, processes and outputs of the asset management audit. WorleyParsons then visited SCA s Penrith office to gain an understanding of asset management practices and systems and gather documentation of the system and evidence of SCA s performance in the area of asset management. Where the WorleyParsons audit team was not able to draw adequate conclusions from the initial data obtained, clarification requests were raised and further information sought. To maximise the efficiency of the audit and minimise the time required to review and finalise the draft, key issues identified were included in fortnightly project management reports, which were circulated to SCA. The audit concentrated on identifying the asset management systems and practices and the value they provided in SCA s compliance with its Operating Licence, the degree to which the systems were utilised and proof of the delivery of the expected value from the systems. The last two were assessed by reviewing the asset management of a number of specific assets, selected at random from SCA s high criticality assets. Reference Documents for Audit The reference documents obtained from SCA to enable WorleyParsons to establish the degree of compliance with Clauses 7.1 and 7.2 of the Operating Licence are detailed in Section 3 of this report. Key requirements and corresponding documents for the audit are presented in Table 1-1. WorleyParsons has acted in an independent, third party, audit role in carrying out this assessment. WorleyParsons has sought to draw conclusions on the basis of facts and supporting documentary evidence demonstrating, SCA Asset Management compliance with the Operating Licence clauses. Compliance has been assessed against WorleyParsons interpretation and understanding of the requirements of the Operating Licence. This assessment does not comment on the suitability of the Operating Licence clauses nor on any aspects of SCA s Asset Management falling outside the Licence clauses. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 13

34 Table 1-1 Key Requirements Assessment Requirement Description Key Reference Document(s) Operating Licence Clause 7.1 Operating Licence Clause 7.2 Meeting SCA Asset Management Obligations Reporting on the Management System of the Assets SCA Asset Strategy SCA Asset Management Framework, Corporate risk assessment, Service Delivery Strategy 1.5 Scope of Services of this Audit Schedule 3 of the IPART agreement with WorleyParsons sets out the scope of services and the deliverables for this audit. Schedule 3 is included in Appendix 1 for reference. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 14

35 2. METHODOLOGY 2.1 Overview This assignment has been completed in accordance with the scope of works and conditions of contract between IPART and WorleyParsons. A project inception meeting has been held between IPART and WorleyParsons to establish a shared understanding of the scope, approach, processes and outputs of the asset management audit. The inception meeting has also sought to identify client contacts, methodology and protocols for information requests to SCA staff. WorleyParsons has then visited SCA s Penrith office to gather documentary evidence supporting SCA s asset management practices. Where SCA documents initially provided to the WorleyParsons audit team have not fully demonstrated compliance with Operating Licence clauses, further information has been requested by WorleyParsons. The asset management documents provided by SCA have then been reviewed by WorleyParsons. The degree to which the processes described in the documents have been implemented and the value added by the asset management practices within the SCA Asset Management Framework have been determined. This has included a review of the implementation of the processes for a representative sample set of SCA s assets. The sample set has included a dam, a pipeline delivery system, an online control system, an aqueduct and a water pumping station. Assets within these categories have been selected at random. All documentation received from SCA has been assessed for compliance against Operating Licence Clauses 7.1 and 7.2. The findings are discussed in section 4 of this report. These findings have then been graded by WorleyParsons using a set of compliance grading measures provided by IPART. The gradings are tabulated at the end of Section 4 of this report. 2.2 Draft Audit Plan To ensure that the audit requirements outlined in the Operating Licence and the brief are addressed, the scope of the audit has been confirmed with IPART and a draft audit plan (Project Execution Plan or PEP) has been prepared by WorleyParsons following the project inception meeting. This has subsequently been approved by IPART. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 15

36 2.3 SCA Audit Interviews A number of meetings have been undertaken with SCA staff during the audit: 1. Onsite meetings have been held at SCA s Penrith office, to establish a common understanding of the audit requirements and identify and collect appropriate documentation required for the audit 2. Teleconferences have been held with SCA staff to discuss clarification or information requests 3. The draft report and results have been presented to SCA and IPART personnel Information requests have been provided to SCA in advance of meetings where possible, to allow SCA the opportunity to prepare and collate the necessary documentary evidence. 2.4 Conduct of the Audit The audit has been undertaken to verify the compliance of SCA s asset management and asset investment decision making processes with its Operating Licence. The audit team has assessed examples of SCA s documentation as evidence of the authority s progress in the implementation of its asset management systems. A sample of 5 assets, representing dams, pipelines, raw water pumping stations, aqueducts and online chemical dosing systems, have been chosen for a review of SCA s implementation of its asset management and investment systems. Recommendations have been made where compliance with Operating Licence clauses could not be verified. Comments provided by the audit team are based on facts and evidence and the judgement of the auditors. 2.5 Audit Team The asset management audit team has primarily consisted of Sean Wise (analyst) and Carsten Berberich (Project Manager). WorleyParsons has completed a review of SCA s operational expenditure and capital expenditure for IPART at the same time as the asset management audit. The overall team utilised for the SCA (Capital and Operational Expenditure and Asset Management) reviews is presented in Figure 2-1. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 16

37 Figure 2-1: SCA Capital Expenditure, Operational Expenditure and Asset Management Audit Team 2.6 SCA Asset Management Key Performance Indicators (KPIs) KPIs relating to Asset Management have been identified in various SCA documents. These have been used in the assessment of SCA s compliance against Operating Licence clauses. They have also been used to assess SCA s performance against its own targets in the implementation of its asset management system and in consideration of the basic performance of SCA as a reflection of the outcomes of the implementation of its asset management processes. 2.7 Verification/Proof of Performance Verification of compliance with licence requirements has been undertaken through review of documentation and information provided by SCA. The overall findings for each clause of the Operating Licence have been documented by WorleyParsons using compliance gradings provided by IPART. The compliance gradings used are presented in Table 2-1. Audit findings are discussed and gradings of compliance and recommendations are tabulated in Section 4 of this report. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 17

38 Table 2-1 Compliance Ratings Term Grading of Compliance Full compliance High compliance Moderate compliance Low compliance Non compliance Meaning The following ratings are used to grade achievement of compliance with a Licence condition. All requirements of the condition have been met. Most requirements of the condition have been met with some minor technical failures or breaches. The major requirements of the condition have been met. Key requirements of the condition have not been met but minor achievements regarding compliance have been demonstrated. The requirements of the condition have not been met. Insufficient information Relevant, suitable or adequate information to make an objective determination regarding compliance was not available to the auditor. No requirement The requirement to comply with this condition does not occur within the audit period or there is no requirement for SCA to meet, such as a definition, a requirement placed upon another agency or the requirement was met in an earlier audit period. Any information, advice from SCA and processes have been assessed only to the extent that their contribution to SCA s compliance with Operating Licence obligations and asset reporting requirements could be objectively demonstrated. Recommendations have been made in areas where non-compliance or limited compliance is apparent. Comments provided by the audit team are supported by facts, evidence and rationale. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 18

39 3. SCA S ASSET MANAGEMENT PLAN 3.1 Introduction This section introduces SCA s asset management systems and processes and describes how they relate to SCA s regulatory requirements and framework as well as providing detail on KPIs relevant to SCA s asset management. 3.2 Reference Documents for the Audit SCA documents used by WorleyParsons to either define asset management processes or to confirm the level of implementation of its processes by SCA are listed in Table 3-1 : Table 3-1 Reference Documents Documentation provided Operating Licence Clause (s) Relevance to Operating Licence Clause(s) SCA Strategic Management Framework process diagram All All Quality Systems Certification letter 13/10/2008 from NCSI Quality Auditor 7.1 (a) Ongoing Compliance Verification for Dam Safety SCA ISO9001/14001 System Compliance Certificate 7.1 (a) Certified as per Dam Safety SCA Annual Water Quality Monitoring Report (a) Evidence of compliance as input supply to customers, in line with ADWG, and section 3.6 of Operating Licence requirements c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 19

40 Documentation provided Operating Licence Clause (s) Relevance to Operating Licence Clause(s) SCA Asset Maintenance Strategic Plan, SCA Asset, 2006 Office Accommodation and IM& ICT Strategies SCA Asset Surplus to Needs report 7.1(b) TAMS compliance Guideline TAM TAMS compliance Guideline TAM TAMS compliance Guideline TAM SCA Capital Project Summary Sheets 7.1 c) Alignment of asset management costs and practices with Capital business cases CD : SCA Procedure for Asset Acquisition by contract V2 SCA Asset Data Upload Prospect Raw Water Pumping Station Various SCA files supporting examples for 5 assets Business Case, Asset condition, Maintenance Performance, PM Schedules, Dam Surveillance Report, Job Plans and Options Studies 7.1 d) 7.1d), e) WOL - Acquisition of assets in lifecycle WOL Asset Operation (handover from design) WOL - Maintenance response schedules and job plans for assets Corporate Risk Management Framework Version 3, July e) Corporate risk management system Condition Assessment of Fish River Supply Main Leura to Cascade Dam 24/4/ (e), (e), (f) Asset risk assessment, progress in implementation and cost estimates Asset Criticality Report, Sept 2005 v2.0 (final) 7.1 (e) Risk assessment methodology, high risk asset listing Service Delivery Strategy, Jan a) d) Ability of assets to meet service delivery needs c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 20

41 Documentation provided Operating Licence Clause (s) Relevance to Operating Licence Clause(s) Asset Strategy Jan b) 7.2.1, c), d) TAM Guidelines, Asset reporting and ability of assets to meet service delivery needs CD Asset Identification Standard v pdf DATA CAPTURE TOOL V4.1 - PROSPECT RWPS 5.xls b) Procedure, and example, of Asset grouping and description from location to equipment level SCA Corporate Plan Reporting on State of the Assets Annual Maintenance Report 7.2.1, 7.2.2c) Ability to meet service delivery, Reporting on assets SCA Pricing Submission to IPART 12 September 2008.pdf c), d) Ability to deliver services and identification of constraints/issues Statement of Financial Framework (May 2007) 7.2.2d), e) Reporting on ability to meet service delivery requirements IPART Water issues paper for Review of Prices for SCA d) identification of constraints/issues for consideration in audit IPART Capital Expenditure, Asset Management and Operational Expenditure Overview and Supplementary Reports (Atkins-Cardno) Feb and July 2005 SCA Annual Information Requirements Table 3.1, line item 22: Mtce of Assets d) identification of constraints/issues from the previous determination e) SCA current and future investment cost in asset management WSAA Asset Management Benchmarking Report, July f) Benchmarked comparison of progress from latest report c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 21

42 Documentation provided Operating Licence Clause (s) Relevance to Operating Licence Clause(s) IWA-WSAA Asset Management Benchmarking Report (draft), September f) Progress on implementation of improvements in SCA Asset Management systems Computer Based Maintenance tools presentation, MAXIMO Gap Analysis spreadsheet and progress of Asset Outcomes Hierarchy, Sept f) Progress on implementation of improvements in SCA Asset Management systems Procedure for Bulk Water Innovation: Idea Network SAP-BWD-ALL f) Ideas network for innovation in asset improvement c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 22

43 3.3 SCA Asset Management Framework SCA s approach to managing assets is outlined in its Asset Management Framework Diagram (attached as Appendix 2). This framework lists key SCA reference documents and their relationship and relevance to Operating Licence clauses. The framework describes: 1. The asset management process From Corporate (Corporate Plan, Risk Assessment and Raw Water Quality Management) to Operational level supporting plan (maintenance team and contractor reporting) level 2. A set of strategies to support these plans of the asset management process (Service Delivery, Asset Strategy, Asset Maintenance Strategic Plan) 3. Significant asset management programs impacting maintenance, for example asset condition (risk, criticality, safety) assessments, and asset renewal needs 4. Management system linkages within strategies (e.g. asset disposal, Office/ICT accommodation) 5. Maintenance activities to support operating level procedures and reporting systems, and Asset Management Practices, such as the Computerised Maintenance Management System (CMMS) Regulatory Requirements The regulatory framework applying to the SCA, as described in Section (above), is defined in Table 3-2. Table 3-2: SCA Regulatory Framework relating to Asset Management Aspect Details Requirements Regulatory Authorities IPART Responsible for monitoring/reporting Operating Licence compliance Department of Water and Energy (DWE) DWE administers SCA s Water Management Licence NSW Health and Dept. Environment and Climate Change (DECC) NSW Department of Fisheries MoUs relating to environmental protection and with NSW Health dealing with water quality standards and public health Fish migration protection Fisheries Management Act (1994) c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 23

44 Aspect Details Requirements The Dam Safety Committee Prescribed Dam surveillance under the Dams Safety Act (1978) and the Mining Act (1992) Catchment Protection Environment Planning Instruments Bulk Water Supply Agreements NSW Metropolitan Water Plan (MWP) The Catchment Act Sydney Drinking Water Catchments Regional Environmental Plan No. 1 (REP) SCA entered into a new BWSA with Sydney Water in April SCA has also finalised a BWSA with Shoalhaven City Council and is working towards finalisation of a BSWA with Wingecarribee Shire Council NSW Government strategy for ensuring that Sydney s water supply matches demand over the next 25 years. 2 yearly Catchment audit. DECC was the nominated agency to undertake the 2007 Audit Water quality objectives, land/water capability assessments and new development approvals. This is a key instrument in SCA s regulatory framework. Section 22 of SWCM Act requires SCA to enter into arrangements with Sydney Water regarding the supply of bulk water. The MWP identified several projects to be carried out by SCA to augment Sydney s water supplies. A progress report was prepared by the NSW Government in The key regulatory obligations relating specifically to the Asset Management audit are: NSW Dams Safety Committee requirements, the NSW Government TAM Policy and Guidelines, Raw Water protection under the Australian Drinking Water Guidelines (ADWG), and miscellaneous legislation, standards, guidelines, and regulations that impact upon Asset Management practices and expenditure levels, such as OH&S legislation. These are discussed in detail in the audit findings (Section 4) Key Performance Indicators The KPI measures, used by SCA, relevant to the SCA Asset Management audit are: 1. SCA Corporate Plan KPIs: Outcome 1 High Quality Water Supply 1.1 Raw Water Deliveries meet quality and quantity requirements 1.2: Our dams and delivery systems are safe, efficient, well operated and maintained c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 24

45 1.3: Successfully operate our water supply system during droughts, floods, fires and other extreme events 1.4: Water supply planning and asset investment keeps pace with our current and future requirements 2. A range of KPIs detailed in the Asset Maintenance Strategic Plan which apply to asset reporting across 3 categories and are presented in Table 3-3: Table 3-3 Asset Maintenance Strategic Plan KPIs Category 1: Management Indicators Budget Variance (%) (%) Expenditure By Category e.g. maintenance, replacements, refurbishments, upgrades, asset creation (%) Expenditure By Discipline e.g. operational, civil, mechanical, electrical Category 2: Contract Indicators Contract Budget Variance (%) Works Issued by Type (no.) e.g. routine, non routine (%) Achievement of Issued Works Category 3: Technical Indicators Mean Time Between Failures by Asset Criticality (hrs) Asset Condition Rating by Criticality (no.) Work Type by Cost ($) (%) Achievement of Works by Value Works Backlog by Work Type (hrs) e.g. routine, non routine Work Type by Count (no.) Works Backlog by Asset Criticality (hrs) Breakdown Response by Work Order Priority (hrs) Asset Life Expiry by Year (list) (%) Total Availability of Equipment Incidents by Type (no.) e.g. accident, near miss Breakdown of Equipment by Asset Criticality (no.) Maintenance Cost/Asset Value (Ratio) Routine Works/Non Routine Works by Value (Ratio) Safety Audit Average Score (%) Quality Audit Average Score (%) Customer Complaints (no.) 3. WSAA Asset Management benchmarking. This assesses performance against best practice for 7 KPIs that span the asset lifecycle. These include Corporate Planning and Business Planning, Asset Capability Forward Planning, Asset Acquisition, Asset Operation, Asset Maintenance, Asset Replacement and Rehabilitation and Business Support Systems c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 25

46 4. Asset Maintenance Strategic Plan implementation and performance measures. These are reported at corporate, divisional, group, and local level. They are based upon the WSAA 2001 Benchmarking study, and the 2006 National Water Initiative indicators 5. Asset Maintenance Team KPIs these apply to both the maintenance team and contractors undertaking asset maintenance tasks These KPIs are tools in the application of appropriate processes for compliance with Clause 7.1 of the Operating Licence and in assessing SCA s asset management against industry standards. Their documentation is relevant to showing compliance with Clause 7.2 of the Operating Licence Reporting on assets. Assessment of SCA s performance against these KPIs is not provided in this report, however for sample assets, evidence has been sought to prove that the KPIs have applied. It has generally been found that the KPIs are being implemented, reported and reviewed. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 26

47 4. AUDIT FINDINGS BY SECTION This section discusses the SCA Operating Licence requirements and existing SCA Asset Management processes. It documents the findings of the audit regarding Operating Licence compliance for each clause. Consistent with the risk based approach to auditing that IPART advocates, for each clause audited, commentary on the risk of non-compliance is provided. Compliance levels are detailed in a table of findings at the end of the section. 4.1 Operating Licence Clause 7.1 Compliance with Asset Management Obligations Clause 7.1(a) Compliance with Regulatory Obligations Licence requirement: The SCA must ensure that its Assets are managed consistent with:(a) its obligations in the Licence, and all applicable laws, policies and guidelines with which the SCA must comply, including the requirements of the NSW Dams Safety Committee. Regulatory obligations for SCA (relating to Asset Management) assessed in this audit are: Dam Safety It is a requirement that SCA provide evidence of dam safety to the NSW Dam Safety Committee. The Australian National Committee on Large Dams Incorporated (ANCOLD Inc) provides guidelines relating to dam safety, which have been accepted by industry. SCA has a dam safety division and committee, which has implemented a 5 year Dam Safety Program, and has representation on the NSW Dams Committee for the ANCOLD/ICOLD committee. An As Low As Reasonably Practicable risk approach to Dam Safety has been adopted, with incremental risk reduction incorporated into SCA s decision making processes. Surveillance reporting complying with the requirements of Dams Safety Committee form D15 was confirmed for Nepean Dam. An ISO9001/14001 compliance certificate relating to the compliance of Dam Safety processes has been provided by SCA. The Dam Safety Division is audited by an external auditor every 3 years. A recent verification audit letter has been provided by SCA from its quality management system external auditor, confirming the positive outcomes of the most recent audit. Total Asset Management (TAM) Guidelines NSW Treasury has outlined specific requirements relating to asset management under three guidelines (TAM 06-01, and 06-04, TAM being considered as a secondary supporting guideline for this item). The objective, for water agencies, such as SCA, is to demonstrate that they have established systematic, holistic approaches to asset planning, management and the procurement of assets. The audit has reviewed SCA s compliance c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 27

48 against the TAM guidelines. Detailed discussion of this requirement is provided in the analysis of Clause 7.1(b) below. Whilst specific improvement opportunities have been identified for in the detail assessment of individual guidelines, it has been assessed that in an overall sense, SCA complies with the guidelines, having developed systems which are based on the requirements of the guidelines, which it is in the process of implementing. ADWG SCA s compliance with the ADWG is required only in the form of raw water protection, as part of a multiple barrier approach to the protection of drinking water quality, as advocated in the guidelines. A number of documents, such as the SCA s September 2008 submission to IPART s review of prices, its Asset Strategy, its Corporate Plan and its annual drinking water report, detail the multiple barrier approach adopted by SCA. The SCA 2006 Office accommodation strategy also discusses the multiple barrier approach taken to protect raw water quality. Bulk Water Agreement A requirement under the SWCM Act is the ability of SCA to supply water meeting quality and quantity requirements to its customers. Verification of quality has been obtained from the SCA annual maintenance performance report and the annual drinking water quality report. The annual performance report indicates general compliance with the bulk water agreement, with only 1 asset failure impacting upon supply quality. This failure has not prevented supply to customers. The target and actual 2007/08 water quantities are detailed in the Statement of Financial Frameworks report. The quantity target has been met. Miscellaneous regulatory requirements These include requirements covering high voltage equipment, pressure vessel testing, lifting equipment and the like. These miscellaneous requirements are relevant in that they may impact investment, risk or asset maintenance expenditure levels. Applicable regulatory requirements are stated in the statutory fields in each Programmed Maintenance Schedule Report in SCA s asset maintenance system (MAXIMO). Five assets have been selected for a review of compliance with miscellaneous regulatory requirements. Supporting information has been provided by SCA demonstrating that these requirements are being adequately captured in the MAXIMO system for the selected assets. The audit concludes that SCA is in full compliance with regulatory obligations Clause 7.1(b) Compliance with Strategic Management Framework and TAM Policy Licence requirement: The SCA must ensure that its Assets are managed consistent with:.. (b) the principles of the Strategic Management Framework and the Total Asset Management Policy; The NSW Department of Treasury requires that the SCA fully comply with the TAM policy, which comprises four documents spanning the asset lifecycle of planning, operation, maintenance and disposal. Guideline TAM applies to capital investment, and is not audited in this report. Assessment for compliance against each of the remaining three guidelines has been measured using c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 28

49 the SCA s Strategic Management Framework documents. The applicable guideline, and corresponding SCA verification documents, are provided in Table 4-1. Table 4-1: SCA Documents relevant to the NSW TAM Guidelines TAM Guideline TAM 06-01: Asset Strategic Planning TAM 06-03: Asset Maintenance Strategic Planning TAM 06-04: Asset Disposal Strategic Planning SCA Verification documents reviewed The Asset Strategy Asset Maintenance Strategic Plan Surplus to needs report, Asset Strategy A discussion on each guideline follows, detailing the requirements and findings for each. TAM TAM requires SCA to develop an asset strategy plan to support its service delivery requirements and Corporate Plan. The Asset Strategy should cover all physical assets owned or controlled by SCA, such as land, buildings, information technology, infrastructure, equipment, vehicle fleet, office accommodation and Information and Communication Technology (ICT). The SCA Asset Strategy details all catchment areas under its control, the water supply and monitoring systems. In addition, it details various facilities, leased properties, office accommodation and vehicles. Within each asset category, service dependency, utilization and location, capacity and functionality, and risk and performance are considered, and prioritised (on a 3, 2, 1 scale) for investment. Investment cost forecasts are provided and collated into an overall Asset Strategy Funding Summary. This funding summary is discussed in the analysis of expected future costs (Section 4.2.5). Further SCA strategy documents assessed include the 2006 Office Accommodation Strategy and the Information Management and Communications Technology (IM&CT) Strategies. The latter strategy is linked to the NSW Government Information Communications Technology (ICT) strategic plan. TAM The Asset Maintenance Strategic Plan for the Raw Water Supply System is compiled directly against the 7 step process of the TAM guideline. The strategic plan also shows the linkages between systems at a high to operational level. It is comprised of the: Service Delivery Strategy Asset Strategy Asset Management Strategic Plan Annual Work Plan (which comprises the maintenance team plan, supporting examples of work maintenance instructions, and a summary of the maintenance performance report) c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 29

50 The audit has found that each step is supported as described in Table 4-2. Table 4-2 Comparison of the SCA Asset Management Strategic Plan against TAM requirements TAM Step Description SCA Verification Documents 1. Define and Segment Assets MAXIMO Asset maintenance electronic system data extracts, Asset Identification Standard 2. Define Asset Performance Bulk Water Supply Agreement performance indicators, Asset Risk Methodology failure modes effects criticality (FMECA) 3.Define Maintenance Strategies and Maintenance Strategies and Plans i.e. maintenance team plans, Resources Renewals program lifecycle data, and in-house/external resourcing needs against skill-sets 4. Condition Assessment and Asset condition ratings (confirmed by spreadsheet sampling) and Response maintenance response (MAXIMO work orders) 5. Assess Maintenance Costs Lifecycle Analysis (Use of Risk Framework and FMECA to obtain Optimized Decision making ODM once fully implemented), and Capitally funded maintenance renewal works 6. Implement Maintenance Plans and Maintenance Outcomes Hierarchy, with 3 key elements of Asset data Programs acquisition and upload, works data collection, and data analysis tools for Maintenance configuration Management 7. Monitor and Review KPIs from Corporate to local and contractor levels reported on annual and monthly basis TAM The Asset Disposal Strategic Planning guideline broadly details asset disposal planning, which involves: 1. detailed assessment of assets identified as surplus to needs (not required or unsuitable for service delivery, or uneconomical to operate) in the Asset Strategy, followed by; 2. an analysis of the physical disposal of the assets. Disposal of the physical asset depends on whether there are net disposal benefits, either in financial or other terms (e.g. risk reduction). In assessing the benefits of disposal, the advantages from a whole of government perspective must be considered under the guideline. The SCA Asset Strategy lists each asset for disposal, along with the priority of disposal, which is based on risk and cost. A surplus to needs asset report details specific assets for disposal. Assets for disposal are identified from three sources: 1. The Asset and Maintenance management electronic System, MAXIMO, list of registered decommissioned assets c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 30

51 2. A consultant study by MCP-AMIS during Assets deemed to be surplus to core operations, as identified by SCA staff The SCA Surplus to Needs Assets report was dated 2005, and contains specific sites and a listing of asset issues. This is complemented by priority ratings for disposal of particular assets in the Asset Strategy of The audit concludes that a high degree of compliance exists with the TAM guidelines. Full compliance would require that the Surplus to Needs Assets report be updated Clause 7.1(c) Compliance with Lowest Life Cycle Cost (LCC) and Acceptable Asset Risk Licence requirement: The SCA must ensure that its Assets are managed consistent with:.. (c) subject to Clause 7.1(a), the lowest life cycle cost and acceptable risk of the Assets; The NSW Treasury guideline TAM 04-10: Life Cycle Costing details a process to be undertaken, in a stepwise approach that is similar to the TAM guidelines TAM 06-01, 03 and 04. The steps in this 6 stage process are: 1. Plan LCC 2. Select/Develop LCC Model 3. Apply LCC Model 4. Document and Review LCC results 5. Prepare Life Cost Analysis 6. Implement and Monitor Life Cost Analysis The audit has found LCC steps to be in place across each discrete phase of the asset lifecycle, as described below in Section 4.1.4, but could not be verified as a complete LCC procedure or plan which has been fully implemented at this point in time. The recommended target for full compliance is a fully integrated LCC plan that would demonstrate lowest LCC. SCA applies a risk management process using AS4360 principles, under an FMECA approach that is documented in the Asset Maintenance Strategic Plan and Criticality Analysis Reports. The identification and classification of risk and allocation of asset criticality for risk treatment is considered best practice, supported by high performance in the WSAA 2008 Asset Benchmarking report. The audit of Operating Licence Clause 7.1(e), detailed in Section below, provides further discussion. Acceptable asset risk assessment and documentation processes are well entrenched, and SCA is considered to be in full compliance with this measure. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 31

52 The audit concludes that, overall, SCA is in high compliance with this clause. It is recommended that to demonstrate that lowest LCC assessment is implemented, that integrated LCC plans should be completed in line with NSW Treasury guideline format Clause 7.1(d) Demonstration of Whole Of Life (WOL) Asset Cost Assessment Licence requirement: The SCA must ensure that its Assets are managed consistent with: (d) the whole life of the Assets; For SCA to demonstrate the application of WOL asset costing principles, clear documentation is required detailing asset acquisition, operation, maintenance, replacement and disposal. Verification of WOL asset management practices across the asset lifecycle has been assessed by considering: 1. SCA maintenance data extracted from the CMMS, using the MAXIMO Asset Maintenance system 2. A random sample of 5 SCA assets across dams, pipelines, aqueducts, online systems and raw water pumping. These examples assessed include the Nepean Dam, Pumping Station, and delivery pipelines, Prospect Raw Water Pumping Station, Simpson s Aqueduct and Broughton s Pass Chlorine dosing facility 3. A review of asset management practice KPIs, which are defined in the WSAA Benchmarking report. Documents provided by the SCA that support this approach are discussed below. Asset Acquisition The focus in the TAM guidelines is to maintain existing assets in preference to the purchase of new assets. Asset Acquisition cost, as well as other asset information, is detailed in SCA s Data Capture Tool Spreadsheet. Once the asset is acquired (either as an operating or capital expenditure purchase), an asset upload document is completed, signed off and entered as an asset into the MAXIMO database. An example of an asset upload provided by SCA is the recent Prospect Raw Water Pumping Station Project. Further, planning studies, including options analyses, are also used in project identification. One such example reviewed was the Broughton s Pass Chlorine dosing facility. Asset Operation Asset operation processes and capability is detailed in a number of SCA documents: 1. The Asset Strategy provides detail on service dependency, utilisation, capacity, functionality, risk and performance, and a strategy for operational use of the asset 2. Asset condition spreadsheets - detail full asset identification, risk ranking, asset labelling, and acquisition and commissioning dates, expected life and purchase and replacement costs. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 32

53 3. Dam Safety surveillance reports examples have been provided by SCA, such as for the Nepean Dam 4. MAXIMO asset management database excel spreadsheet extracted shows the asset acquisition date, written down value, depreciation and market value Asset Maintenance A number of tools were found to exist for SCA asset maintenance cost assessment: 1. Programmed Maintenance (PM) schedules for each equipment item within the asset are detailed in the MAXIMO system. The scope of the audit did not include an assessment of the level of coverage of assets i.e. confirmation that all assets are listed in the database, PM schedules exist and are being carried out 2. Maintenance performance report spreadsheets, which include work order details and the priority for maintenance tasks undertaken 3. Asset Job Plans detailing all tasks required under that asset 4. Monthly budget variance and contractor reports detail asset costs against set targets, and includes detail on spending variances 5. Annual maintenance reporting Asset Replacement/Disposal The WSAA Benchmarking Review assesses WOL efficiency across the asset lifecycle using 7 KPIs. The review found that SCA were amongst the highest ranking authorities across all participants in business planning, asset capability forward planning, asset operation, asset maintenance, and asset replacement and rehabilitation. SCA s WSAA benchmark ranking for asset acquisition was above median. Business support systems were the only area in which SCA was ranked just below the median score in the 2008 WSAA benchmarking project. Asset replacement is determined by SCA using business case project sheets. The Asset Maintenance Strategic Plan also details an optimised decision making (ODM) approach for projects above materiality levels of $10,000, with supporting economic evaluations for both asset maintenance and capital projects. It appears that the ODM is not yet fully implemented. Refer to Section for discussion on the progress of implementing this process. The value of the ODM approach is in determining when the risk associated with the asset has reached an unacceptable level to the SCA and only then expending funds in maintaining or renewing an asset. The Surplus to Needs Assets report and the Asset Strategy determine disposal of assets and their relative priority, respectively. The audit concludes that SCA demonstrates high compliance with this clause. SCA has shown that it has developed full lifecycle processes for all asset types, applied across the asset s entire life cycle. It is considered that SCA does not demonstrate full compliance because fully documented LCC plans are not in place for each asset and no documentation has been identified which determines the range of assets for which it has been established that the application of LCC plans are warranted. It is recommended that the range of assets for which LCC plans should be produced (based on the value c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 33

54 that LCC plans provide and the cost of development of the LCC plans) be documented and that LCC plans be produced for these assets to contribute to the ODM outcomes that SCA are currently implementing Clause 7.1(e) Demonstration of Asset Risk Assessment (Loss, Capacity to Respond to a Potential Failure or Reduced Performance) Licence requirement: The SCA must ensure that its Assets are managed consistent with:.. (e) its assessment of the risk of loss of the Assets, and capacity to respond to a potential failure or reduced performance of the Assets. A number of documents demonstrate that SCA have well developed processes in the area of Risk Assessment: 1. Corporate Risk Assessment The Corporate Risk Management Framework and Raw Water Quality Frameworks. The Corporate Risk Management Plan (CRMP) is divided into 4 components: Risk Management Policy, methodology (framework document), risk register and risk treatment plans. The Corporate Risk Management Committee meets bi-monthly to review emerging and/or changing risks 2. Asset Criticality Report details the risk assessment methodology (FMECA). Each asset is rated against OH&S, environmental, quantity, quality and heritage aspects, in a high, medium and low rating (3, 2, and 1, respectively). Further, it also identifies any impacts on dam safety consequences 3. Annual Risk Management Return (Appendix 1 to Statement of Financial Framework document) details organizational commitment to the Risk Management Framework, and monitors and reports results 4. Condition Assessment Reports are compiled for analysis and options analysis and costing. Verification of implementation was observed for the Fish River Water Supply Main, Leura to Cascade Dam 5. Maintenance Work instructions in MAXIMO preventative maintenance instructions and schedules, which detail the maintenance tasks required, and the frequency intervals at which these tasks are required to be undertaken. Together, these documents demonstrate compliance with AS4360 principles of identifying and managing risk, and demonstrate that SCA has well developed processes that allow it to respond to asset risk and asset failure. The Risk Framework document directly links with regulatory requirements detailed above in Section SCA uses a combination of MS word and MS Excel documents to manage corporate risks. These are located on a corporate server. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 34

55 The audit concludes that SCA demonstrates high compliance with this clause. The only observation for Full Compliance is that the WSAA 2008 Asset Management Benchmarking recommendation for implementation of a corporate wide Business Risk Support system be implemented. The benefits to SCA, by following the recommendation are: greater understanding and control of SCA s risks, improved tracking and reporting, the capacity for real time reporting and the facilitation of workflow management of identified risks. 4.2 Operating Licence Clause 7.2 Compliance with Management System: Reporting on Assets Clause State of the Asset Report Submission Licence requirement: At least once during the term of the Licence at a time agreed with IPART, the SCA must provide information to IPART on the state of each group of Assets managed by the SCA. The state of the assets reporting comprises a number of discrete documents, which are described in the Asset Maintenance Strategic Plan. The Asset Strategy also provides a high level assessment of the condition of assets, with ratings ranging from poor to good, and then sets priorities for investment. Examples of asset reports from 5 classes of assets, which are classified as high criticality assets, were sampled. These were: Nepean Dam, Nepean Dam Common Delivery Pipelines, The Prospect Raw Water Pumping Station, Simpson s Aqueduct and The Broughton s Pass Chlorine Dosing Facility. A number of reports are compiled for the state of assets reporting. Examples of the reports provided by the SCA were: 1. Annual Maintenance Report 2007/2008: KPIs are directly referenced within this report, which is compiled by the Maintenance Manager 2. Monthly Maintenance Team Performance Report: This report is provided by the maintenance team to the divisional management team for discussion at the monthly maintenance team meeting 3. Monthly Maintenance Team Financial Variance Report: This report is provided by the maintenance team to the divisional management team and is discussed at the monthly maintenance team meeting c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 35

56 4. Monthly Contract Performance Report: Each report is produced by the respective contract managers, and rolled up into the monthly maintenance team report for discussion at the monthly maintenance team meeting. Performance indicators are contained in, and tracked through, the MAXIMO system. Most of the data required to produce performance reports is extracted from the Computerized Maintenance Management System (CMMS - MAXIMO). This is possible because all procurement is managed through MAXIMO. Financial transactions and budget data are extracted from other systems (SUN and COGNOS, respectively). SCA uses a top down approach to performance assessment. Breakdowns and other corrective works are analysed for emerging trends as part of the monthly reporting. Full (100%) reliability is achieved where no breakdowns have occurred (for high criticality assets) and corrective works are kept to a minimum. Examples of high criticality assets, such as Nepean Dam were provided in a spreadsheet format, showing breakdown and corrective works over several years. The Asset Maintenance Strategic Plan defines the reporting systems used, in the Maintenance Outcomes Hierarchy (Section 7 of the Asset Maintenance Strategic Plan). The hierarchy shows, for each life cycle stage, the percentage to which each system for asset reporting has been implemented. Reporting covers asset management phases of progressive implementation of asset reporting, that leads to optimized decision making. These are separated into 3 distinct areas: 1. Asset Data acquisition and upload: Strategy, Tools/Guidelines, 2. Works Data Collection: Resources, planning, and implementation 3. Data Analysis tools: Monitoring and Reporting Gaps in the reporting of assets at this stage are in the resources, monitoring/reporting and analysis phases. These include important state of the asset reporting measures, such as LCC assessment, return on investment, risk cost, overall equipment effectiveness, root cause analysis and predictive analysis that stem from the use of data analysis tools. The audit concludes that SCA demonstrates a high degree of compliance with this clause. Whilst asset data acquisition, upload and Works Data collection are progressing well, further progress in the implementation of asset reporting needs to demonstrate progressive targets, accountabilities, and dates for completion. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 36

57 4.2.2 Clause 7.2.2(a) Description of SCA Asset Management Processes, Practices, Systems and Plans Licence requirement: The information provided must include the following: (a) a description of the processes, practices, systems and plans the SCA uses in managing the Assets; The combined asset management processes, practices, systems and plans are collectively described in the SCA s Asset Management Framework. Examples of the components are: Processes defined by the Asset Management Framework Asset maintenance practices across the life cycle of each asset, captured in the Asset Management System, MAXIMO, including procedures, job plans and maintenance instructions Systems are defined by the Corporate Framework, Asset and Service Delivery Strategies, the CMMS and the Hierarchy of Maintenance Outcomes within the asset maintenance strategic plan Key asset plans and strategies are detailed in the reference documents detailed in section 3 of this report These components have been discussed in preceding sections. The audit concludes that SCA demonstrates high compliance with this measure. A comprehensive suite of SCA documents exist, providing compliance with requirements, and a best practice approach. The only observation made is that the completion of the implementation of the Maintenance Outcomes Hierarchy, along with incremental target reporting against progress and assets, should lead to full compliance Clause 7.2.2(b) Description of SCA Asset Groupings Licence requirement: The information provided must include the following:.. (b) a description of each group of Assets; SCA s Asset grouping must demonstrate not only that methods exist for the categorization of assets, but where practicable, are consistent with generally accepted water authority methodology in order to demonstrate best practice. SCA s Asset Strategy details the breakdown of assets by location, down to equipment level, and is supported by the SCA Asset Identification Standard (AIS) trial version, issued in May Within the AIS, assets are listed by their location, then by equipment description, and then by engineering-financial segmentation. The asset identification system provides for equipment numbers, location code, bar code number and equipment classification code. This is designed to allow efficient c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 37

58 asset searches within the MAXIMO electronic asset management system. Assets are classified into four levels: 1. Classification: e.g. Water infrastructure 2. Group: e.g. Water transfer 3. Type: e.g. Aqueduct 4. Sub type: e.g. Water transfer - aqueduct The audit concludes that SCA demonstrates full compliance with this clause Clause 7.2.2(c) Description of SCA Asset Capability to Meet Service Delivery and Existing Legal Obligations Licence requirement: The information provided must include the following:.. (c) an assessment of the expected capability of the Assets to deliver the services required to be delivered by the SCA and meet the existing obligations of the SCA consistent with the Licence and all applicable laws with which the SCA must comply; SCA s Service Delivery Strategy outlines the service delivery requirements and the strategy to provide those services into the future. The two primary implications for future delivery of bulk raw water are: 1. Implementing supply related projects, such as those outlined in the Metropolitan Water Plan 2006, and 2. the age and condition of key parts of the existing supply system Implementation of the MWP falls under SCA s capital expenditure program, and is not subject to review in this assessment. The age and condition of the existing water supply system is detailed in the Asset Strategy. Further, development of the 5 and 10 year capital plans is also discussed in the Asset Strategy, with allocation of Category 1 and Category 2 projects, respectively. Category 1 projects are timed to occur within the next 5 years, with the MWP being the major driver for their implementation. Category 2 projects have a longer timeframe, and are typically in the planning phase. SCA data for assets reviewed also included life expectancy values for each equipment item within the parent location, indicating the ability to assess both the current and future service delivery requirements. The audit has concluded that SCA demonstrates high compliance with this clause, as the audit team could not fully verify the implementation of lifecycle assessment in relation to risks due to aging assets. It found inconsistencies between asset strategy statements regarding forward expenditure requirements and planned expenditure, specifically relating to future maintenance expenditure. This variance has the potential to impact future service delivery. SCA has identified management of aging c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 38

59 assets as an issue in the IPART submission. This requires a management plan in the Asset Strategy going forward, to ensure that any emerging risks due to asset age are identified and managed accordingly Clause 7.2.2(d) Assessment of SCA Asset Current and Future Performance Issues or Constraints Licence requirement: The information provided must include the following:.. (d) an assessment of the major issues or constraints on current and future performance of the Assets; SCA has established an Asset Strategy in which it assesses major performance issues and constraints. This Asset Strategy leads to a prioritized action plan addressing identified issues. The Asset Strategy is underpinned by the Maintenance Outcomes Hierarchy discussed further in Section Components of the Maintenance Outcomes Hierarchy such as the Asset Performance component within the Monitoring/Reporting level are keys to maintaining a current assessment of performance issues. Many of these components are yet to be fully implemented. A number of review documents have identified opportunities for progressive improvement in SCA s asset management systems. These are presented in Table 4-3. Table 4-3 Previously Identified Asset Management Improvement Opportunities Review IPART 2005 SCA Operational and Capital Expenditure and Asset Management Review IPART 2008 Issues Paper Asset Management Benchmarking 2008 (Draft) Summary of Finding or Issue The Full potential of asset maintenance system (MAXIMO) linkage to financial system yet to be realised. Appropriate asset classes and lives apply to calculating depreciation charge Although there is a well documented and managed Asset Management Improvement Program (Ideas Network), based on the findings of the 2004 WSAA asset management benchmarking, business support system improvement opportunities exist (where SCA scored below median) in: Waste Receiving Environment Modelling (identified as not applying to SCA) Geographic Information for Linear Assets and Associated Equipment Risk Management Information System SCADA and Operational History (SCADA) Maintenance Management System (MMS) c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 39

60 SCA s Submission to IPART s Review of Prices, September 2008 SCA proposes additional operating outcomes for the next IPART determination including: enhanced data acquisition, asset condition analysis, water quality and environmental flow monitoring, and meeting the cost of maintenance of new assets. The SCA also proposes to reduce its base operating expenditure in real terms The forecast operating expenditure is an immediate reduction of seven percent on the SCA s IPART approved operating expenditure of $86M for Discussion of the implications of these issues for SCA Asset Management Performance follows. IPART 2005 SCA Operational Expenditure, Capital Expenditure and Asset Management Review The main issue relating to asset management was that the full potential of the computerized asset maintenance system (MAXIMO) linkage to the financial system was yet to be realised. It appears that the establishment of this linkage is now underway, as SCA information obtained indicates that procurement is managed in MAXIMO, and that financial transactions and budget data are able to be extracted from other systems (SUN and COGNOS, respectively). IPART 2008 Issues Paper Two main issues relating to assets were identified in the IPART 2008 issues paper: 1. That Asset classes are identified, and; 2. That asset values are valued in accordance with appropriate accounting standards The SCA Asset identification standard details the process used for defining asset classes and categorising assets by asset class. In regard to asset valuations, Table 7.2 of the SCA s annual information return to IPART presents the book value and depreciated and gross replacement cost of assets by asset class. This demonstrates the application of a valuation process. SCA has presented its asset valuations for its entire asset base including the application of depreciation to the asset to determine the written down asset value from the historic value and the application of market valuations. WorleyParsons has not identified any failure of SCA to apply appropriate valuation practices in its asset valuations. WSAA Asset Management Benchmarking 2008 (Draft) The WSAA report indicates that generally, SCA s asset management systems are well advanced, scoring well in each function except Business Support Systems. It has been noted, however, that some business support systems are not applicable to SCA. Six main issues were identified as improvement initiatives. Those relating specifically to asset management are: 1. Asset Renewal planning to improve the predictive capability of civil asset future expenditure, and expand existing planning beyond the current 30 years to include the full lifecycle of the assets c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 40

61 2. Capital Projects Procurement Model - Review of the existing model, which includes asset renewal/replacement of aging assets 3. Business Risk Support System to implement a utility wide software system to contain and mange corporate risks These issues are discussed in sections (items 1 and 2) and 4.1.5, respectively. SCA 2008 Submission to IPART The SCA submission identifies conflicting requirements of reducing asset maintenance costs in the face of an increased asset base (such as additional monitoring equipment installation and ageing assets). This is discussed further in section The audit concludes that SCA demonstrates a high degree of compliance with this clause. SCA appears to have a well demonstrated understanding of the risks and constraints existing within their asset base, along with progression on resolving issues presented in previous reviews. An example is inclusion of the 2004 WSAA Asset Management Benchmarking improvements into Maintenance Team work plans. To achieve Full Compliance, SCA should address the WSAA recommendation regarding improvement in predictive and planning capabilities regarding future Asset Renewal, which will occur with the full implementation of the Maintenance of Outcomes Hierarchy Clause 7.2.2(e) Assessment of SCA Strategies and Expected Future Asset Investment Cost Licence requirement: The information provided must include the following:.. (e) the strategies and expected costs of future investments in the Assets; SCA s submission to IPART, September 2008 detailed that in relation to investment: The ageing nature of some key assets and the need to investigate and plan for appropriate refurbishment or replacement over the longer term influences the SCA s longer term investment plans. Considerable investigation of options is well underway. The focus is therefore on the examination of current assets, and the decision point for asset replacement. The asset creation process is well documented in business cases for each project. Two main documents have been used in assessment of future asset investment strategies. These are the Annual Information Return/Special Information Return (AIR/SIR) from SCA to IPART excel spreadsheet, and the SCA Submission to IPART s Review of prices, September The submission states that additional operating asset services will be required, but that reductions in operating expenditure will be required going forward. The AIR operating expenditure information c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 41

62 summarises the historic and forecasted asset maintenance costs. It projects that asset maintenance expenditure will decline over the forecast period. This is summarised in Table 4-4. Table 4-4: SCA Asset Maintenance Projections from the AIR Year 2008 (actual) ($M) (Projection) (Projection) (Projection) (Projection) Maintenance Cost The Asset Strategy details a summary of maintenance investment, which is inconsistent with the Maintenance line item in the Annual Information Return (AIR). The Asset Strategy predicts asset management spending as presented in Table 4-5. Table 4-5: Asset Strategy Projected Asset Maintenance Costs Year 2007/08 ($M) 2008/09 ($M) 2009/10 ($M) Maintenance Cost The Asset Strategy has therefore identified a substantial increase in maintenance spending when compared to relatively flat forward projection in the AIR, and a decrease in operating base proposed in the IPART submission report. The asset maintenance strategic plan details the investment process, with the maintenance outcomes hierarchy detailing the analysis on return on investment, lifecycle assessment, risk cost overall equipment effectiveness and Root cause/predictive analysis that leads to optimal decision making in relation to investment decisions. SCA has provided information via which provides an explanation for the majority of the variation in maintenance cost estimates. As this information does not appear to come from existing documentation which clearly demonstrates the process by which asset management requirements have been considered in the adjustment of the maintenance expenditure forecast, the auditors have determined that this is an area in which SCA does not demonstrate full compliance. The audit has found that SCA s asset management investment strategy requires updating, due to inconsistencies between SCA s current forecasted forward expenditure and expenditure requirements estimated in the Asset Strategy. However, SCA has demonstrated the documentation of strategies and costs for future asset investment in the Asset Strategy. It is therefore considered that SCA demonstrates a high level of compliance with this licence requirement. A number of documents also make reference to focus on aging assets. It is recommended that lifecycle analysis be implemented to allow SCA the ability to respond to changes in risk profile created by asset aging, and demonstrate appropriate methodology for future investment strategies. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 42

63 4.2.7 Clause 7.2.2(f) Assessment of SCA progress in implementing asset management and any recommended Improvements Licence requirement: The information provided must include the following:.. (f) progress in implementing the management of the SCA s Assets and any recommended improvements in processes, practices, systems and plans for the management of the Assets; Key verification documents require linkages to demonstrate medium to longer term planning of asset management, along with whole of life or life cycle costs. SCA documents reviewed included: Hierarchy of Maintenance Outcomes Reporting within the Asset Maintenance Strategic Plan Corporate Plan reporting (as it relates to Asset Management) Innovation Procedure Ideas Network WSAA Benchmarking Computer Based Tools Improvement Reporting The Hierarchy of Maintenance Outcomes, as depicted in Figure 4.1, summarises SCA s suite of asset management tools and processes, ranging from the strategies which provide the foundations for the hierarchy, the implementation, including resourcing, tools and actions, review and analysis steps and the collection of the entire process to provide an overarching Optimised Decision Making process. Implementation of the Hierarchy is from the bottom up, with the ultimate aim of completing the implementation of the entire hierarchy. The hierarchy also incorporates three summary points: Asset Data Acquisition and Upload Works Data Collection Data Analysis Tools, SCA monitors its progress in the implementation of the Hierarchy, the most recent summary of its progress being presented in Figure 4.2. SCA s primary asset management tool, MAXIMO, was implemented in Since implementation, SCA has documented the degree of implementation of discrete asset management processes. These processes collectively form a maintenance outcomes hierarchy. Progress reports measure the percentage implementation of each of these discrete processes. When the discrete processes are completely implemented, they will form an Optimized Decision Making (ODM) process. This ODM will be implemented for investment decision material levels of $10,000 and above. This maintenance outcomes hierarchy is a set of tools and systems that together satisfy Stage 6 of the TAM Guideline (to implement a maintenance plan and programs). It also compares well c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 43

64 with WorleyParsons experience of the asset management tools, resources and systems being implemented and the maturity and degree of implementation within comparable Australian water authorities. Figure 4-1: SCA Maintenance Outcomes Hierarchy The key document demonstrating progress in the implementation of integrated systems is the Maintenance Outcomes Hierarchy report and the MAXIMO gap analysis progress report, which form the CMMS Gap Analysis process. The Asset Management Strategic Plan detailed progress as at February 2008, and this was compared against the latest report in Sept This is detailed in Figure 4-2. Figure 4-2 shows that SCA is making progress towards the implementation of a fully integrated asset management system. It is recommended that timeframes and accountabilities be documented in the Maintenance KPIs to manage improvement in these areas. The audit concludes that SCA demonstrates high compliance against this clause. It is recommended that the target for full compliance is for milestone dates for completion to be documented and implemented. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 44

65 February 2008 September 2008 Reporting Maintenance Performance Asset Data Management Allowable Downtime Asset Age Profile Asset Value O&M Manuals Maintenance Metrics Asset Data Acquisition & Upload Performance Indicators Reporting Maintenance Performance Asset Data Management Allowable Downtime Asset Age Profile Asset Value O&M Manuals Maintenance Metrics Asset Data Acquisition & Upload Performance Indicators 1 Degree of Achievement Figure 4-2 Progress of implementation of the maintenance outcomes hierarchy form February 2008 to September Clause 7.2.2(g) Assessment of any Other SCA Asset Management Information Required by IPART Licence requirement: The information provided must include the following:.. (g) such other information reasonably required by IPART. No other SCA information has been required for this audit. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 45

66 Table 4-6 Assessment for Section 7 of SCA s Operating Licence Clause Requirement Risk Compliance Target for Full Compliance Findings Recommendations 7.1 Meeting Asset Management Obligations SCA must ensure that its Assets are managed consistent with: 7.1 (a) Obligations in the Licence, and all applicable laws, policies and guidelines, including the requirements of the NSW Dams Safety Committee; Non compliance of high risk assets e.g. Dam Safety FULL COMPLIANCE Dam Safety, compliance demonstrated Audit Certificates and Asset Management Plans in accordance with TAM guidelines observed, Bulk Water Supply targets met. ISO certified dam safety process. No recommendation made. 7.1 (b) the principles of the Strategic Management Framework and the Total Asset Management (TAMS) Policy; Non compliance with TAM Guideline HIGH COMPLIANCE Demonstrated methodology in Asset Strategy consistent with: TAMS 06-01, 06 03, Demonstrated use of TAM Guidelines in Asset Strategy, Asset Management Strategic Plan and Surplus to Needs document preparation was observed That the Surplus to Needs Assets report (2005) be updated, using current asset strategy information c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 46

67 Clause Requirement Risk Compliance Target for Full Compliance Findings Recommendations 7.1 (c) subject to Clause 7.1(a), the lowest life cycle cost and acceptable risk of the Assets; 7.1 (d) the whole life of the Assets; and 7.1 (e) its assessment of the risk of loss of the Assets, and capacity to respond to a potential failure or reduced performance of the Assets Non LCC investment decisions lead to sub-optimal investment All phases in the asset lifecycle are not considered in the asset cost Inadequate Corporate Risk Framework and Risk assessment methodology. Emerging/changed risk profile e.g. aging assets not captured 7.2 Reporting on the management system of the Assets HIGH COMPLIANCE HIGH COMPLIANCE HIGH COMPLIANCE All documents in SCA Asset Management Framework link with a WOL methodology and LCC plan in place All systems integrate with an LCC plan as per TAM Guideline Risk Information Management System is completely implemented, as per Maintenance Outcomes Hierarchy Lifecycle Cost (LCC) Analysis is captured across each phase of the lifecycle of the Assets managed. However, integrated LCC plans fully complying with the NSW TAMS guidelines were not located and the implementation of the LCC components of the Maintenance Outcomes Hierarchy is incomplete. Asset criticality ratings and condition assessments were demonstrated in examples provided SCA defined asset phases of planning, acquisition, operate, maintain and disposal have supporting processes in place Risk Management Standard principles were observed to be in place for identifying and managing risk, as per the Australian Risk Standard AS4360. Examples include a corporate risk framework, and asset risk assessments That integrated LCC Plans compliant with TAM guideline be developed and that the implementation of the LCC components of the Maintenance Outcomes Hierarchy be completed. That LCC Plans be produced as per TAM guideline 04-10, to demonstrate that lowest LCC can be demonstrated for asset investment decisions The target for Full Compliance is acting on the Water Services Association of Australia (WSAA) 2008 Asset Management Benchmarking recommendation for further progression of the Risk Management Information System c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 47

68 Clause Requirement Risk Compliance Target for Full Compliance Findings Recommendations At least once during the term of the Licence at a time agreed with IPART, SCA must provide information to IPART on the state of each group of its Assets State of Assets not reported to Regulators as required by Acts and legislative obligations HIGH COMPLIANCE Maintenance Outcomes Hierarchy is complete SCA has documented all aspects of its state of the assets required to satisfy its operating licence. It has however not provided a consolidated state of the assets report. It is recommended that SCA provide a consolidated State of the Assets report or overview summary The information provided must include the following: (a) a description of the processes, practices, systems and plans the SCA uses in managing the Assets; Asset Management Framework, and linkages within it, not complete HIGH COMPLIANCE Full Asset Management Framework in place SCA has a clearly documented strategy and supporting documentation down to verification level, however, the Maintenance Outcomes Hierarchy is not yet fully implemented Recommended target for full compliance is the completion of implementation of the Maintenance Outcomes Hierarchy (progressive targets for key reporting systems to be fully implemented, to allow the SCA to fully realise optimized decision making ODM) (b) a description of each group of Assets; Assets are not clearly identified to identify and manage to best practice FULL COMPLIANCE All assets are grouped appropriately and clearly SCA has an asset management framework in place with supporting documentation verified No recommendation made. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 48

69 Clause Requirement Risk Compliance Target for Full Compliance Findings Recommendations (c) an assessment of the expected capability of the Assets to deliver the services required to be delivered by the SCA and meet the existing obligations of the SCA consistent with the Licence and all applicable laws with which the SCA must comply; an assessment of the major issues or constraints on current and future performance of the Assets; All asset capability or service delivery requirements not fully understood HIGH COMPLIANCE Metrics and measures in place defining current asset capability SCA s asset management processes and plans consider service delivery requirements and document this consideration. Inconsistency exists between maintenance costs detailed in the AIR spreadsheet, Table 28 of the Asset Strategy and the Submission report. SCA have requested a lower funding level for asset maintenance than that required by the Asset Strategy That the inconsistency be resolved in order to demonstrate SCA s ability to deliver services to full compliance (d) Asset management strategies not aligned with performance risks HIGH COMPLIANCE Current assessment of present and future performance issues SCA appears to have identified and captured forward planning issues in reports, and are working towards implementing identified improvement actions. Completing the Maintenance Outcomes Hierarchy will bring this up to date. That the WSAA benchmarking project recommendation regarding predictive and planning capabilities be addressed through the implementation of the Maintenance Outcomes Hierarchy. That the assessment be brought up to date. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 49

70 Clause Requirement Risk Compliance Target for Full Compliance Findings Recommendations (e) the strategies and expected costs of future investments in the Assets; Strategies and future projections not aligned HIGH COMPLIANCE Robust Methodology and consistency between strategy projections and AIR SCA demonstrate asset management strategy development and documentation including cost forecasting. Inconsistency between the Annual Information Return Spreadsheet, the 2008 IPART Submission and the Asset Strategy for future asset maintenance investment costs. SCA have requested a lower funding level for asset maintenance than that required by the Asset Strategy That SCA update the Asset Strategy to take into account the changes in projected asset investment. That SCA implement fully the maintenance outcomes hierarchy to assist in the documentation of the optimum forward asset investment requirements. (f) progress in implementing the management of the SCA s Assets and any recommended improvements in processes, practices, systems and plans for the management of the Assets; and Gap in implementation creates asset or investment risk HIGH COMPLIANCE All systems in the Maintenance Outcomes Hierarchy are completely implemented, and ODM is in place SCA appears to be proactive in seeking continuous improvement, with an Ideas Network procedure fully documented and in place since 2001, and progressive implementation of the Maintenance Outcomes Hierarchy, Computer Based Tools improvements, and team plans for improvements in a number of source documents. Whilst there is significant improvement in electronic processes, the Maintenance Outcomes Hierarchy systems are not yet fully implemented. No other SCA Asset Management requirement was identified in the audit. That in addition to the electronic asset maintenance system (MAXIMO), on the basis of the gap analysis of the implementation of the Maintenance Outcomes Hierarchy completed by SCA, time based targets for the completion of key stages of the maintenance outcomes hierarchy systems be established. It is also recommended that these targets are included in the reporting mechanisms to the Asset Management Committee (g) such other information reasonably required by IPART NO REQUIREMENT c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 50

71 5. CONCLUDING REMARKS This audit has found that overall SCA demonstrates a high level of compliance with the requirements of parts 7.1 and 7.2 of its licence. In summary, thirteen licence requirements have been audited. The audit has found that SCA demonstrates full compliance with two requirements of the audit. High levels of compliance are assessed against ten and for one requirement it has been determined that there is no requirement applying to SCA. WorleyParsons has found that SCA is currently implementing a complete suite of processes and tools for asset management, covering the full spectrum of asset management activities, from condition monitoring and the documentation of individual assets to return on investment analysis. It terms this its Maintenance Outcomes Hierarchy. SCA has self assessed its progress in the implementation of these processes and tools over the last six months, claiming significant progress. SCA does not, however, appear to have a documented implementation plan, including timeline, for incorporation of the remainder of its assets into the Maintenance Outcomes Hierarchy. Whilst SCA has defined a materiality limit of an asset value of $10,000 for the application of the asset management processes, WorleyParsons has not sighted documentation of the rationale for this materiality limit, nor evidence that it considers risk adequately. SCA has designed its asset management processes around the requirements of the NSW Total Asset Management (TAM) guidelines, around its licence requirements and around other regulatory requirements such as occupational health and safety regulations. It has documented how it considers that specific requirements of its licence are satisfied (The Sydney Catchment Authority Asset Management Framework). The available evidence of compliance with regulatory requirements identified has been sufficient for WorleyParsons to assess full compliance against item 7.1 (a) of the licence. SCA has demonstrated that it undertakes strategic planning relating to asset management through both its Asset Strategy and its Asset Management Strategic Plan. It has also established a plan for asset disposal in its Surplus to Needs Assets Report, although it has been identified that this plan should be reviewed and updated. This evidence, alongside the evidence of compliance with TAM guidelines has resulted in the assessment that SCA demonstrates high levels of compliance with item 7.1 (b) of its licence. WorleyParsons has found that SCA has developed Asset Lifecycle Cost Analysis processes for application to all of the types of assets it is responsible for. These Asset Lifecycle Cost Analysis processes include Lifecycle Assessment, Risk Costing, Predictive Analysis and Return on Investment Analysis. SCA is in currently implementing these processes for its assets, and has provided a summary of recent progress. Whilst progress indicated by SCA and evidence of the implementation of the processes show commendable commitment to the full implementation of full Lifecycle Costing, WorleyParsons recommends that SCA identify, document and report on timeline targets for the c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 51

72 implementation of the processes. WorleyParsons has assessed that SCA demonstrates a high level of compliance against item 7.1 (c) and item 7.1 (d) of its licence. Risk analysis forms an important aspect of asset management planning. SCA has provided evidence of the adoption of a risk management framework based on AS It has completed a risk analysis and classification of its assets and developed action plans in response to the outcomes of the risk assessment, demonstrating a high level of compliance with the requirements of item 7.1 (e) of its licence. Item 7.2 of SCA s operating licence requires it to provide information on the status of each group of its assets. Whilst SCA has provided information covering the areas of asset management it is required to under item 7.2 of its licence, this information is provided in numerous documents and is not collated into a specific state of the assets report. Whilst it is recognised that the development of a state of the assets report would impose an additional cost on SCA, it is recommended that SCA develop this consolidated report in future to simplify the process of determining compliance with the operating licence and to harness the benefits of the consolidated knowledge regarding the state of its assets that the report would provide. SCA has provided documentation designed to demonstrate how specific plans and processes in its asset management arsenal are intended to address the requirements of its operating licence. This documentation, however, does not detail how the plans and processes satisfy the legislative requirements. This is left to the audit team to interpret. Whilst it is recommended that SCA compile a State of the Assets Report, it is considered that SCA provides adequate information to show high compliance with item of its licence. Items (a) and (b) are assessed largely on the same basis as item The level of compliance for 7.2.2(a) is considered to be high rather than full due to the lack of a documented plan for the full implementation of the Maintenance Outcomes Hierarchy and the fact that its implementation is incomplete. The framework developed for asset management by SCA has resulted in an assessment of full compliance for item (b) of the licence. The assessment of SCA s provision for future asset investment expenditure has identified that there are inconsistencies between investment plans identified in the Asset Strategy and SCA s current capital and operational expenditure plans. SCA has provided evidence of the review of its capital expenditure plan and information regarding discrepancies in forecasts of its operating expenditure, however this evidence does not fully explain all inconsistencies and it is recommended that the expenditure forecasts in the Asset Strategy be updated to reflect SCA s current assessment of forward expenditure requirements. The inconsistency between documented expenditure requirements for asset management has resulted in an assessment of high compliance against items (c) and (e). This audit s assessment of overall high performance by SCA in the area of Asset Management is supported by assessment of SCA s asset management during the Water Services Association of Australia (WSAA) 2008 Asset Management Benchmarking Project. The benchmarking project has previously (in 2004) identified opportunities for improvement, such as in Maintenance Management c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 52

73 Systems. The most recent assessment has shown significant improvement against the improvement opportunities identified in the 2004 assessment. c:\documents and settings\carsten.berberich\my documents\worleyparsons\ ipart\sca assessment 2008\report\finalisation\2009 versions incorporating final ipart comments\clean\ipart am report round 2\00417_00_ge_rpt_0002_rev2 sca am audit clean2.doc Page 53

74 Appendix 1 : Scope of Audit (Schedule 3) Appendix Appendix Page : Rev 2 : 27-Feb-09

75 Appendix Appendix Page : Rev 2 : 27-Feb-09

76 Appendix Appendix Page : Rev 2 : 27-Feb-09

77 Appendix Appendix Page : Rev 2 : 27-Feb-09

78 Appendix Appendix Page : Rev 2 : 27-Feb-09

79 Appendix Appendix Page : Rev 2 : 27-Feb-09

80 Appendix Appendix Page : Rev 2 : 27-Feb-09

81 Appendix Appendix Page : Rev 2 : 27-Feb-09

82 Appendix 2 : SCA Asset Management Framework Appendix Appendix Page : Rev 2 : 27-Feb-09

83 Appendix Page : Rev 2 : 27-Feb-09

84