Infrastructure Asset Management

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Infrastructure Asset Management is the discipline of managing infrastructure assets that underpin an economy, such as roading, water supply, wastewater, stormwater, power supply, flood management, recreational and other assets. In the past these assets have typically been owned and managed by local or central government. The investment in these assets is made with the intention that dividends will accrue through increased productivity, improved living conditions and greater prosperity.^[1]

A well-defined Standard of service (SoS) is the foundation of Infrastructure Asset Management. The SoS states, in objective and measurable terms, how an asset will perform, including a suitable minimum condition grade in line with the impact of asset failure. There are two main objectives of Infrastructure Asset Management relating to standard of service:

A) Sustain SoS: to sustain or deliver an agreed standard of service in the most cost-effective way through the operation, maintenance, refurbishment, and replacement of assets. Management of this objective is the subject of Asset Management Plans.

B) Improve SoS: to make strategic changes and improvements to the standard of service of the asset portfolio through the creation, acquisition, improvement and disposal of assets. Changes to the SoS are usually managed as a programme based on strategic objectives regarding the asset portfolio.

1 Sustain SoS
2 Improve SoS
3 History
4 Asset Management Toolbox
5 See Also
6 References
7 External links

[edit] Sustain SoS

The key components of the sustain SoS objective are:

a defined standard of service
a whole-life cost approach
asset management plan.

[edit] Defined standard of service

[edit] Minimum condition grade

Condition Grade vs Time, with a minimum condition grade of 4

without a defined standard of service (SoS) there is no means of knowing what service customers expect, and no control on the whole-life cost. With a defined SoS, the asset manager is clear about how success or failure will be measured and the customer understands what to expect in return for the expenditure on the asset system.

With a defined SoS the need to maintain, repair, refurbish or replace is dependent on the condition of the asset. With a performance-based asset management approach, decisions are flexible and depend predominantly on the current condition of the asset. This differs from a planned maintenance approach (which may not reflect the actual condition) by responding to the actual deterioration and performance of an asset. For example, a stormwater debris screen is cleared after a rain event, when it is partially blocked, rather than, say, every two weeks. The minimum condition grade needs to be set objectively, in line with the scale of impacts or consequences of asset failure during the design event. The minimum condition grade provides a key boundary condition for making investment decisions.

Over the life of a typical infrastructure asset, a representation of the changes in condition grade, might look as shown in the graph, where "X" is the serviceable life of the asset before it is replaced in order to sustain the standard of service. The minimum condition grade for this asset has been assessed as CG4.

[edit] Performance specification

The second part of standard of service is a specification of how the asset should perform. This would normally include a specification of the attributes of the asset which are important to its function e.g. location, type, height, capacity.

By managing against a defined SoS, which couples the performance specification with the condition grade as a measure of reliability we can avoid the potential complication of trying to optimise maintenance over a short timeframe, or the need to determine the outcome or benefit associated with each individual intervention. Asset Management takes a whole-life cost approach to decisions regarding operation, maintenance, refurbishment and replacement of assets.

[edit] Whole-life cost approach

Also referred to as total cost of ownership (TCO) or lifecycle cost.

Over the life of an asset, there are likely to be hundreds of individual interventions, which together sustain the agreed SoS. Undertaking a formal investment appraisal to assess options or the relative benefit for each individual intervention or even an annual programme of interventions would be very complicated, and prohibitively expensive. It is the sum of the cost of all the individual interventions, and their effect on the whole-life cost of providing the SoS that we are concerned about.

By implementing a system that keeps a historic record of past expenditure, coupled with a forecast of expenditure to sustain the SoS we can provide a solid foundation from which to assess the asset manager’s performance.

The objective of sustain investment decisions can therefore be stated:

To provide the agreed standard of service for the minimum whole-life cost.

Delivering the agreed standard of service is a relatively simple concept on its own. We will now look closer at how to approach the other key objective – to minimise the whole-life cost.

[edit] Minimising the whole-life cost

Whole-life Cost graph, showing three alternative maintenance regimes: A, B & C

At its most simple, Asset Management attempts to optimise the trade-off between maintenance and replacement. For a given standard of service every asset in a system requires a decision about how best to manage the asset, and at which point replacement or refurbishment may represent the most cost effective approach. The graph shown represents a summary of this, with three alternative asset management regimes, A, B & C.

Option A on the left, is a maintenance regime where the annualised maintenance costs are low, but the annualised capital costs (blue) are relatively high. In this option the asset is effectively allowed to deteriorate faster with minimal maintenance before being replaced. This scenario could be expected in a situation where maintenance costs come out of a local revenue budget but capital costs are controlled centrally, or where an organisation is under pressure to minimise revenue costs and incentivised to maximise its capital expenditure.

Option C on the right, is a maintenance regime where the annualised maintenance costs are high, preventing the deterioration of the asset and reducing the annualised capital cost of sustaining the SoS. Whilst the asset life is much longer, the cost of doing so is ultimately more expensive than if the asset was replaced earlier. Delaying or avoiding the cost of replacing the asset requires more frequent and expensive maintenance and repair in order to sustain the SoS. This scenario could be expected in a situation where it may be difficult to justify the replacement expenditure, or where the prioritisation system favours improvement projects.

Option B in the middle represents the maintenance regime that minimises the whole-life cost of providing the required SoS. This is the lowest point on the yellow line that represents the sum of the two major components of whole-life cost and is the optimum balance between maintenance and replacement costs. This scenario is most likely in an organisation that is operating an effective asset management regime with clear responsibility for whole-life cost attributed to a single person and good information systems to support that person in making the best asset management decisions based on the whole-life cost.

[edit] Asset Management Plan

Asset Management Plans (AMP) are tactical plans for managing an organisation's infrastructure and other assets in order to achieve strategic objectives. Usually an Asset Management Plan will cover more than a single asset, taking a system approach - especially where a number of assets must work together in order to deliver an agreed standard of service.

It is in the Asset Management Plan that the standard of service is recorded and compared against current standard, along with a long-term plan that shows how an organisation will deliver the defined standard of service for the minimum whole-life cost.

[edit] Improve SoS

[edit] Asset portfolio strategy

An Asset portfolio strategy revolves around meeting customer needs in the most effective and efficient way.

Key asset portfolio strategy questions include:

Is the need for the service real?
What standard of service is required?
Are the long-term costs of the current asset portfolio affordable?
Have non-asset solutions been explored?
What standard of service should new assets provide?

This result of an Asset Portfolio Strategy often involves making strategic changes to the portfolio of assets in order to achieve strategic objectives, including whetherof which some may be achievable without the use of infrastructure assets.

This can be a combination of creation or acquisition of new assets or the disposal or improvement of existing assets. Depending on the drivers for change, this may be to meet new demand (e.g. extending power supply to a planned development) or to relieve bottlenecks (e.g. providing additional roading capacity), or in response to reduced demand (e.g. disposal or abandonment of roads which are no longer in use) or where investment policy has changed (e.g. flood defences protecting low-value agricultural land from sea-level rise).

In managing the asset portfolio, the long-term financial sustainability is an important boundary condition. Over-extending the asset portfolio beyond what will be affordable for future generations to maintain and operate is not sustainable. Social and environmental costs and benefits should also be considered carefully. To determine long-term sustainability a good understanding of the long-term costs of sustaining the asset portfolio is required.

[edit] Improvement programme management

Improvement programme management is the short-medium term management of a series of projects, that deliver the strategic objectives identified in the Asset Portfolio Strategy. The improvement programme will often involve a mix of asset acquisiton or creation, as well as changes to existing assets, either to provide a higher standard of service, or in the case of disposal or divestment, reduce the standard of service. Controlling the initiation of change projects is an important function of improvement programme management.

[edit] Improvement project management

Changing the SoS of an existing asset usually requires careful consideration of the wider costs and benefits. Often this involves consultation with customers and other stakeholders who may be affected by the SoS change. As a result, potential SoS changes are typically managed as a project.

In the development phase of each change project, a business case for the change is required where options are developed, compared and consulted on before choosing the preferred option. Once the investment decision is made, managing risks and costs during the delivery phase is the responsibility of the project manager before handing over to the asset manager on completion.

[edit] History

The development of the Toyota Production System between 1948 and 1975 led the way for Infrastructure Asset Management, as an integrated approach to reducing cost. This has then been coupled with the principles of risk management from highly regulated nuclear, and petroleum industries. Asset Management effectively puts these two parts together to deliver a defined service for the least cost. An early development in applying these ideas to publicly owned and operated infrastructure occurred in New Zealand with the passage of the Local Government Act 1974. This required each local authority to:

prepare an annual plan indicating performance measures in consultation with their community,
prepare an annual report outlining council performance against annual plan objectives,
adopt financial systems and policies in accordance with generally accepted accounting principles.

These requirements are well aligned with the objectives of Infrastructure Asset Management, and led to early attempts at an Asset Management Plan. Before this, the true costs of owning and operating infrastructure assets were generally not disclosed or known. The introduction of Australian Accounting Standard 27 (AAS27) in 1993 had a similar effect in Australia, requiring local governments to report on the current value and rate of consumption of their infrastructure assets.

In New Zealand, this was taken further by the Local Government Amendment Act (No. 3) in 1996, which required local authorities to:

prepare and adopt a long-term (10 years plus) financial strategy every 3 years,
include any asset creation/realisation and loss of asset service potential,
take into account the benefits and costs of different management options
fund or otherwise provide for any loss of service potential (depreciation)

In order to provide this further level of detail, more advanced Asset Management Plans were produced. Building on this body of experience, and to encourage a more consistent approach, the first edition of the NZ Infrastructure Asset Management Manual was printed in 1996. Since then, the theory and application of Asset Management has developed further and adopted in other countries with significant infrastructure assets and the International Infrastructure Management Manual was printed in 2000. The 2006 version includes sections with case studies for New Zealand, Australia, South Africa, United Kingdom and United States.