Holistic Asset Management – It’s Not an Isolated Function

1. Holistic Asset Management – It’s Not an Isolated Function 2004 Urban Water Council US. Conference of Mayors

2. What is “Asset Management” To the Accounting and Finance staff – AM means: • Ensuring that assets are booked on the organization’s books when placed in service • Assets are properly depreciated and removed from the books when retired • Prudent maintenance practices minimize the necessary capital and operating expenditures • Both capital and operating expenses are financed prudently to minimize the resulting rate and customer impact.

3. To the O&M staff, AM consists of: Providing appropriate maintenance support to ensure continued reliable operation of assets Minimizing responses to emergency calls when assets fail What is “Asset Management”

4. What is “Asset Management” To the Engineering Department, AM centers around the planning for and designing of the replacement and major rehabilitation of system assets. To the IT Engineers, AM concerns tracking and monitoring the asset maintenance and replacement activities.

5. What is “Asset Management” • To Utility Management Staff and Customers and Constituents, AM means: • Reliable services at the lowest possible costs • Prompt re-establishment of services after an emergency situation • Redundant capability in the event of system failures • Environmental protection • Public health and safety • Excellent customer service • LOWEST POSSIBLE COSTS

6. A way to think about an organization’s management and the stewardship of its assets Understanding what your assets are and prioritizing maintenance and management activities Managing the life-cycle cost (both capital and O&M), use and reliability of utility’s assets Tailoring each organization’s needs using a systematic, proactive, scalable approach As opposed to a reactive focus on: Problems Politics Technology Costs Budget Constraints What is “Asset Management” Asset Management - a thoughtful process of self-evaluation, the development of strategy, objectives and an action plan and a phased implementation plan that coordinates the knowledge and functions of the entire organization.

7. Reduce Risk Increase Asset Life & Minimize Asset Life Cycle Costs Optimize Maintenance and Capital Improvement Programs Reliably Plan Expenditures (Few Surprises!) Maximize Organization’s Knowledge of its Assets Understand Financial Implications of Expenditures (Scarce resources assigned to proper investments!) Goals of Asset Management

8. Reduce Risk Increase Asset Life & Minimized Asset Life Cycle Costs Optimize Maintenance and Capital Improvement Programs Reliably Plan Expenditures (Few Surprises!) Maximize Organization’s Knowledge of its Assets Understand Financial Implications of Expenditures (Scarce resources assigned to proper investments!) Goals of Asset Management: Managers want and need to understand the consequences of making and not making difficult decisions

9. Asset Management on Two Levels • The “Big Picture” – • Five Major Asset Categories • Knowledge Base • Information Technology • People • Infrastructure • Customers • Financial Resources

10. Asset Management on Two Levels • The Detailed Look – • Optimal O&M of individual assets, such as: • Pumps • Equipment • Plants • Buried Infrastructure • Hardware • Etc ...

11. Let’s simplify this….. At the Detailed Level, the important questions are: • What to do ? (What tasks?) • When to do it ? (What intervals and when to start?) • Where to do it ? (Which Assets?)

12. Required Performance Asset Performance Asset wears over time Initial Useful Life Extended useful life through overhauls / maintenance User Defined Failure User Defined Lower Limit Avg O&M Costs over time O&M Costs Time Goal #3 is to determine when it pays to replace rather than overhaul / maintain (for reducing cost and/or risk) Goal #1 is to extend the interval between overhauls to as long as practical Goal #2 is to predict failure and plan overhaul / maintenance in advance of asset failure Asset Management Strategies Overhaul $$ Proactive Maintenance (PM / PdM) Predictive Maintenance & Performance Monitoring Asset Replacement Strategy

13. Asset Management Strategies • Balancing the costs associated with risk (emergency maintenance, loss of production, equipment damage, customer dissatisfaction, regulatory fines, etc.) against asset care costs. • Focus on Critical Assets first!

14. People Information Technology Infrastructure Knowledge Base Service Cycle Services Financial Resources Financial Measurement, Analysis & Planning Pricing Data Financial Information Customers Financial Cycle Critical Asset Categories

15. O&M Risk Assessment Diagnose Results O&M Plan/Procedures IM Fitness Evaluation IT Master Plan Review Asset Inventory Financial Impact Analysis Criticality Assessment Prioritize CIP CIP Master Plan Staff Training OD/OE Plan Public Education Campaign Stakeholder Consensus Additional Steps are defined based on the results of your utility’s specific circumstances. Using an efficient, scalable approach ... Step 1 Provides basic planning, budgeting & forecasting Improved Customer Satisfaction A systematic, step-by-step approach, directs energy and resources to the prioritized tasks that add significant value and precision to the asset management process. Initial assessment of the assets’ conditions and criticality as well as the estimated, associated costs to address the proper management of those assets. Plant & Pump Station Assets Buried Infrastructure Step 2 Refines priorities based on specific data and criticality analysis

16. Reduce Risk Reduce Probability of Failure Reduce Impact of Failure • Monitor • Maintain • Overhaul • Replace • Predict & Plan • Re-Design Reduce Asset Care Investment Do It Smarter Do It Better • Eliminate low value tasks • Focus on high impact failure modes • Predict rather than prevent (intrusive) • Prevent rather than let fail (non-critical assets can be run to failure if it makes sense) • Plan, Plan, & Plan • Better tools / technology • Train personnel • Document Procedures • Integrate all staff functions

17. Asset Management Approach is Not “Business as Usual” It will require changes in: • Philosophy • Procedures • Staff roles • Staff skills • Others?

18. Annual Planning Process=Last Year’s Budget plus inflation ... (if that!) Think Differently ... What are the right systems, staff and maintenance activities to manage the organization from an asset management perspective?

19. Systematically Approach Asset Management • Evaluate the strengths and weaknesses of your organization’s systems • CMMS, GIS, Financial Management Systems, etc. • Define what your goals are • What does your organization want to achieve with Asset Management? • Prioritize your action plan and implementation program

20. Acceptance of New Approaches & Methods Staff Willingness To Embrace Change Is Necessary To Improving Effectiveness Existing Norms, Practices & Procedures Barriers to Change: - Insufficient Technology - Lack of Skill-Based Training - Organizational Inertia - Union/Civil Service - Past Disappointments

21. Getting Staff Buy-In Will Promote Implementation Success General awareness Follow up Feedback Communication

22. Adopt “Best Fit” Program to Support Your Needs and Priorities… The Steps • Update Asset Inventory • Extract “Knowledge Management” from Staff • Criticality Assessment • Condition Assessment • Maintenance Evaluation • Asset Replacement Evaluation • Financial Planning • Staff Training & System Integration • Public Education The Goals • Extension of Assets’ Lives • Optimal Maintenance Program • Optimal CIP • Reliable, Planned Expenditures • Maximize Organization’s Knowledge of its Assets • Full Knowledge of Financial Impact of Expenditures • Risk Reduction

23. The Results ... Sustainable Assets Knowledge, Confidence, Precision Precise CIP Maximized Performance AM Program Refine & Calibrate Staff Activities Minimized Cost Organizational Alignment Additional Refinement Tools and Processes High Quality Customer Service