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AWWA Leadership Forum

AWWA Leadership Forum. ASSET MANAGEMENT. November 14, 2017. Outline of Presentation. What is Asset Management? Structured Program Customer Service Expectations Planned Maintenance Setting Aside Reserves Minimizing Whole Life Costs. What is Asset Management?.

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AWWA Leadership Forum

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  1. AWWA Leadership Forum ASSET MANAGEMENT November 14, 2017

  2. Outline of Presentation • What is Asset Management? • Structured Program • Customer Service Expectations • Planned Maintenance • Setting Aside Reserves • Minimizing Whole Life Costs

  3. What is Asset Management?

  4. Asset Management Simplified Initial Purchase Selected Performance Expectation Dependability 150,000 Mile Repairs 100,000 Mile Repairs Planned Maintenance Costs Expenditures Sale or Trade In Automobile Lifespan Source: Adapted from www.efcnetwork.org

  5. Element 1: A Structured Program

  6. Each Part of the Organization Sees Part of the Elephant • O&M sees: Trucks, crews, pumps, etc. • Engineering sees: Studies, capital costs • Finance sees: Interest, other financial costs • IT sees: Cost of IT systems (SCADA, GIS, Network, Computers) • Few see: Internal and external overhead

  7. Each Part of the Organization Has an Interest

  8. Each Part of the Organization Needs to Participate in the AM Program

  9. Element 2: Customer Service Expectations

  10. Getting Started in a Structured Way • Two Components • Where are we now, and • Where do we want to be? • “Gap Analysis” • AM Plan Supports Closing the Gaps

  11. Gap Analysis Where are we now ? Source of Water Supply = 110 % of Peak Demand Where do we want to be ? Source of Water Supply = 150 % of Peak Demand

  12. Gap Analysis How to we increase Supply to 150 % of Peak Day Demand ?

  13. Element 3: Planned Maintenance

  14. Planned Maintenance Initial Purchase Selected Performance Expectation Dependability 150,000 Mile Repairs 100,000 Mile Repairs Planned Maintenance Costs Expenditures Sale or Trade In Automobile Lifespan Source: Adapted from www.efcnetwork.org

  15. Planned Maintenance • What Is Likely To Fail Eventually Without Maintenance? • How Often Should That Asset Be Maintained to Prevent Failure?

  16. Examples: Why do we… • Replace pipes? Reduce risk of water main breaks and outages • Monitor pumping Reduce risk of water stations? outages • Have redundant pumps? Reduce risk of asset failure and water outages • Do preventive Same maintenance? • Increase system capacity? Reduce risk of capacity- related delivery constraints

  17. Likelihood of Failure… …or Consequences of Failure Focus Your Efforts Here H M L Likelihood of Failure L M H Consequences ($)

  18. Risk Cost: A Rational Approach • Risk cost is an inherent cost of asset ownership • It is the product of the likelihood of an event and the dollar consequence of that event • Once we know the risk cost, we can make rational decisions on reducing risk

  19. Example: Risk Cost of Having Your Car Towed • Average towing bill: $240 • Average frequency of needing a tow for your make/model of car: 8 years • Annualized risk cost: $240 x 1/8 = $30 • Add overhead and profit: $10 • Insurance company assumes your risk cost of towing: $40 per year

  20. Consequences of Failure Include Both Direct and Indirect Costs • Direct repair costs • Loss of production/revenue • Social costs (traffic, cleanup, health, etc.) • Image repair costs • Legal costs • Fines, penalties

  21. Element 4: Setting Aside Reserves

  22. Setting Aside Reserves • Bond Reserve Fund Typically = 25% of Annual Bond Payment • How Much Can Your Organization Afford to Set Aside For Repair and Replacement? • Option = Annual Depreciation Amount

  23. Depreciation $ X = Original Cost of Asset Y = Life Expectancy, Years $X/Y = Annual Depreciation

  24. Example: Pump Station $ 500,000 = Original Cost of Asset 40 = Life Expectancy, Years Depreciation = $500,000/40 = $12,500/year

  25. Element 5: Minimizing Whole-Life Costs of Asset Ownership

  26. Asset Life Cycle Cost Example: Deep Well Pump Station • Consider Capital Costs • Consider Annual Operating Costs • Consider Annual Maintenance Costs • Consider Annual Repair & Replacement Costs • Add Costs and Prepare NPV Cost

  27. Asset Life Cycle Cost Example: Deep Well Pump Station • Capital Costs…………………………………..$213,743/yr • Annual Operating Costs………………….$80,000/yr • Annual Maintenance Costs……………..$25,000/yr • Annual Repair & Replacement………...$25,000/yr • Net Present Worth Cost………………..$5,563,331

  28. What Service Levels Provide Lowest Overall Costs? Total Cost Cost Unplanned R&R Planned R&R High Level of Service Low

  29. AM Benefits Add Up. . . USEPA estimates that good AM will result in at least a 20 percent reduction in asset ownership costs

  30. SummaryAsset Management is: • Structured Program • Customer Service Expectations • Planned Maintenance • Setting Aside Reserves • Minimizing Whole Life Costs

  31. Questions?

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