Application of Asset Management Principles During Asset Creation and Design Presented By Pervaiz Anwar at: CWEA, San Francisco Bay Section Asset Management Seminar September 17, 2003

What is Asset Management? “Asset management is a structured approach to delivering desired service levels at lowest life cycle costs” A simple definition!

Life Cycle of an Asset Plan / Create Acquire Maintain Refurbish Replace My FocusKen’s Focus

Representation will Focus on Two Key Topics  Business Case Evaluation: A powerful process for validation Capital Investments  Incorporating Asset Management into design

Business Case Evaluation: A Powerful Process for Validating Capital Investments

What is Business Case Evaluation (BCE)?  BCE is a rigorous analytical process for validating capital investments  For optimum value it is initiated at the early planning stages — but it must “live” as the project proceeds  It repeatedly revisits the drivers for a project  It validates the need for a solution in terms of customer value  It seeks the lowest life cycle cost solution consistent with risk  And most important… It involves owner's cross- functional staff

BCE Focuses on the Following Questions  What is the objective of the project?  Does the project do more than required to satisfy the desired function?  Does it cost more than it is worth in terms of benefits?  Are there other ways of doing it?  What are impacts and benefits to customer?

BCE Example  Existing interceptor was surcharging in heavy rains, causing upstream spills  Client planned a new 36” relief interceptor with pump station midway  30% design completed, RFP for final design was about to be issued  Capital cost was $13.8 million  Running costs averaged $167K/year (2003 dollars)  Total PV of ownership costs (50 years) was $17.5 million

The BCE Team Goes to Work…  Client established a BCE Team from Engineering and Field O&M  The team defined 15 alternative approaches!  Several were “fatal flawed” out but seven remained  Timing, capital costs, O&M costs, and refurbishment costs were estimated for each of the seven

BCE Results  Team determined need to eliminate existing surcharging was valid  Four new alternatives were cheaper than the planned approach  Project concept changed from pipe and pump station to simple gravity pipe  Required lowering the receiving interceptor by several feet

BCE Benefits are Substantial!  Capital cost was $3 million lower  Total 50-year ownership cost was $7.5 million lower – a 40% savings  Project risk profile was improved  Project could be in place a year sooner!

Asset Ownership: Some Valuable lessons  Asset ownership costs are forever  O&M costs are bigger than generally perceived  On-going capital refurbishment costs are often ignored  The point being…Total costs of Asset ownership are difficult to identify and usually underestimated

BCE is a Powerful Process for Validating Capital Investments  Once initiated projects tend to take a life of their own – BCE repeatedly refocuses on basic drivers  It engages utility staff responsible for asset ownership and O&M  It is much more rigorous in establishing true costs of asset ownership than typical economic analysis  It is a process — not a singular event (e.g. VE) – a project can be modified, deferred, or killed at any phase

Incorporating Asset Management Principals in Designs

Agenda 1.Asset Management context 2.Steps to take during design 3.Current applications

Initiating Asset Management Concepts During Design Process has Multiple Benefits  Builds asset framework that can be continued during construction and on into operations  Develops performance indicators at the outset  Provides basis for consistent tracking of asset improvements over time  Helps successfully implement process control and maintenance management systems

Understanding Asset Life Cycle Helps Optimize Ownership Costs

Asset Management Concepts Extend From Design Through Operations

Key Asset Management Steps During Design 1.Develop asset hierarchy 2.Establish performance measures 3.Define interfaces during process design 4.Coordinate O&M elements with the design

Develop Asset Hierarchy Structure to Link Information for Key Stakeholders  Inventory new and existing assets associated with the design project  Organize all assets into a structured hierarchy  Develop a common asset identification structure  Start establishing an asset plan for each asset class and component  Require bid and final pay documents to establish costs at the same level of asset detail Process

Establish Performance Measures to Track Assets Against Stated Objectives  Identify units and measures of information needed to analyze future asset performance  Define condition assessment parameters  Define data- recording requirements and reporting needs

Future Replacement Decisions Can Be Made More Efficiently

Defining Interfaces During Design Process Helps Measure Asset Performance Over its Lifecycle  Process control system should accommodate asset management objectives and P&IDs should be consistent  Equipment data sheets should follow asset hierarchies and incorporate performance data  Lay out information systems and databases to be compatible with hierarchies and equipment numbering

Coordinating O&M Elements with Design Results in Significant Cost Savings  Link draft O&M manuals with asset management concepts  Asset management framework should guide maintenance management system development  O&M documents should incorporate performance measures developed during design

Where Are These Asset Management Concepts Being Applied? Location Orange County Water District, CA King County, WA City of Hayword, CA Gwinnett County, GA Project Large new reclamation plant Large new wastewater treatment plant Expansion of mid-size wastewater treatment plant Program management for multiple water and wastewater projects

Summary 1.Asset management concepts can be incorporated through some simple yet important enhancements to the traditional design process 2.This approach can save time and money by not having to recreate data bases and systems 3.The asset management approach can be beneficial for projects of all types and sizes

Questions and Discussion