David Vago Midwest Asset Management Consultants Tom DeLaura Eramosa International
Asset Management IS about: Strategizing What is our mission? Planning How can we better accomplish it? Maintenance CIP Better use of scarce $$ Execution How well are we doing? Asset Management IS NOT about software Asset management is more than How much SAW Grant money can I get? Management doesn t simply decide one day to DO Asset Management.
Asset management is a change in the way an enterprise does business Change is about people People are inherently resistant to change Change requires buy-in
Graphically represented, it looks like this: Source: Manning et al, Asset Management = Culture Change Water Environment Federation Conference Proceedings, 2009
A robust Asset Management program includes: Asset Planning Asset Creation/Acquisition Financial Management Asset Operations and Maintenance (O&M) Asset Condition/Performance Asset Rehabilitation/Replacement Asset Disposal/Rationalization Asset Management Audit and Review All of which require planning and execution at all levels
1. What is the current state of my assets? 2. What is my required level of service (LOS)? 3. Which assets are critical to sustained performance? 4. What is my best O&M and CIP investment strategies? 5. What is my best long-term funding strategy?
Question #1 Question #2 Question #3 Question #4 Question #5
1. What is the current state of my assets?
Steps 1 ASSESS Facility Assessment and Report on the current state of the Assets 2 INVESTIGATE Conduct investigations to identify defects selected 3 IDENTIFY Identify and list any repairs that are required 4 PRIORITIZE Prioritize any required parts 5 ESTIMATE Estimate the costs to repair, maintain or replace 6 REVIEW Review current maintenance schedules and identify changes to improve value-added work 10
Condition Rank Condition Condition/Description 1 Very Good Operable and well maintained, like new. 2 Good Superficial wear and tear visible, not new. 3 Fair Significant wear and tear, minor deficiencies. 4 Poor Major deficiencies, marginal performance. 5 Very Poor Obsolete, unserviceable, poor performance. 16
2. What is my required level of service (LOS)? What is the demand for my services by my stakeholders? What do regulators require? What is my actual performance?
3. Which assets are critical to sustained performance? How does it fail? How can it fail? What is the likelihood of failure? What does it cost to repair? What are the consequences of failure?
Criticality Rank Effect Consequence 1 Negligible Minor loss of function No discernible effect on the facility or its operations 2 Minimal Minimal curtailment of operations Minimal investment to restore operations Normal contingency planning covers loss 3 Marginal Noticeable impact May briefly suspend some operations Some investments necessary to restore operations May cause minor personal injury 4 Critical Personal injury, substantial economic damage, or environmental impact Operations immediately and temporarily suspended Restoring operations requires significant investments 5 Catastrophic Death(s) and/or injuries or disastrous impact on operations Long-term or permanent closure Operations cease immediately
Redundancy (R) reduces (C)
ASSET RANKING The Business Risk Score for any given asset is derived by multiplying the condition score by the criticality score by the risk mitigation factor.
ASSET RANKING In our example: Probability of Failure = 1.0 Criticality = 3.3 Redundancy = 0.1 Business Risk = 3.3 x 1.0 x 0.1 = 0.33
C r i t i c a l i t y W o r k P r i o r i t y M a t r i x 2 5 2 0 1 5 1 0 5 5 2 0 1 6 1 2 8 4 4 1 5 1 2 9 6 3 3 1 0 8 6 4 2 2 5 4 3 2 1 1 5 4 3 2 1 P r o b a b i l i t y o f F a i l u r e H i g h P r i o r i t y ( 1 6-2 5 ) M e d i u m P r i o r i t y ( 6-1 5 ) L o w P r i o r i t y ( 1-5 )
4. What are my best O&M and CIP investment strategies? What alternative management options exist? Which are the most feasible for my organization?
Assets with greatest BRE scores are likely candidates for immediate rehabilitation or replacement. Assets with life left in them need to be analyzed for best life cycle strategy.
5.What is my best long-term funding strategy? Full economic cost - the base concept for effective financial decision-making. Replacement and refurbishment cost, are netter indicators than depreciation, Long-term Annualized Renewal Annuity provides the baseline funding for sustained performance. Telling the asset consumption story in simple, effective, big-picture terms sets the stage for LOS discussion and business risk based decision-making.
Manage the entire life of assets, and receive the best return on investments. Let s work through the steps, and see what s involved in each one Asset Lifecycle 39
What: Why: Who: How: 40
Creation/Acquisition Financial Management Operations Maintenance Condition & Performance Monitoring Rehabilitation, Renewal, Replacement Disposal/Rationalization Review/Audit
THANKS FOR YOUR INTEREST AND ATTENTION David Vago Midwest Asset Management Consultants dvago07@comcast.net Tom DeLaura Eramosa Engineering tom.delaura@eramosa.com For your consideration: www.michigan.gov/deq/0,4561,7-135-3307_3515_4143-10784--,00.html