Anniversary MARTIN J O N ES , WILL WILLIAMS, AND JE FF ST ILLM AN The evolution of asset management in the water industry P 140 Led by utilities in the United Kingdom, Australia, and New Zealand, utility asset management has developed into a management concept; this article reviews how asset management has evolved in the US water industry and what the future holds. eople have managed assets for many thousands of years. But utilities have used a formal management approach to realize value from their assets only for the past few decades. The complex concept of managing physical assets has grown out of constraints (particularly on financial resources) and the need to optimize costs, risks, and performance over the life cycle of a portfolio of assets. This article examines how asset management developed into a management concept led by utilities in the United Kingdom, Australia, and New Zealand, and how it has evolved in the water industry in the United States. In addition, this article explores what the future holds for asset management as utilities move toward a more service-centric approach driven by increasing customer demands, adapt to the effects of climate change, and embrace the opportunities of new technologies. AUGUST 2014 | JOURNAL AWWA • 106:8 | 100TH ANNIVERSARY | JONES ET AL 2014 © American Water Works Association HOW THE ASSET MANAGEMENT CONCEPT DEVELOPED United Kingdom. In the United Kingdom, the oil and gas industry identified the need for an asset management approach to managing physical assets in the late 1980s. The key drivers for change, then as now, were the need to manage safety (risk) and achieve financial efficiency. In 1988, a fire on the Piper Alpha oil rig in the North Sea, linked in the subsequent Cullen report (The National Archives, 1990) to maintenance issues on a pump and safety valve, killed 167 workers. This accident, combined with the dramatic fall in oil prices in 1986, focused the oil and gas industry on the need to adopt a more holistic, life cycle–based asset management approach. This focus on managing the asset life cycle resulted in significant improvements in efficiency, safety, and productivity in the oil and gas industry (Figure 1). UK water and electricity utilities also adopted an asset management approach when they were privatized a few years later. The privatized water companies in England and Wales further developed asset management in response to regulatory pressures to minimize rate increases while simultaneously improving the level of service provided to customers and addressing the problem of aging infrastructure. The Office of Water Services (OFWAT; ofwat.gov.uk), the economic regulator of the water and wastewater industry in England and Wales, was created in 1989. OFWAT initially focused on improving data quality, setting service-level targets, and monitoring compliance with the service levels. The regulatory requirements for annual information returns, asset inventories, and valuations began to drive data quality improvements and implementation of asset information management systems among water companies. This led companies to make more informed and efficient asset management decisions and allowed OFWAT to benchmark companies to assess comparative efficiency. The use of current-cost regulatory accounting allowed water companies to account for assets at their current rather than historical values, which provided a much better indication of an asset’s true cost and allowed for future replacement expenditures. The water companies developed five-year asset management plans (AMPs) that OFWAT reviewed and approved to set rates. In the first three AMP periods—1989 through 2003—the sophistication of asset planning steadily Water companies use asset deterioration models to develop rehabilitation and replacement programs and to analyze effects on service levels based on different levels of investment. increased as asset data and statistical modeling techniques improved. In 2002, UK Water Industry Research (ukwir.org) developed the Common Framework for Capital Maintenance Planning, which established a detailed risk-based approach to planning asset rehabilitation and replacement. This approach was used to develop AMP4 in 2003–04 and included more condition and performance modeling to justify investments. AMP5, developed in 2007–08, required water companies to assess what their customers were willing to pay for services and use that information to assess project benefits. The water companies used asset deterioration models to develop rehabilitation and replacement programs and to analyze effects on service levels based on different levels of investment. Capital improvement plans were optimized using genetic algorithms to maximize benefits and service levels while minimizing whole life-cycle costs. The companies had to consider effects of climate change and calculate carbon costs associated with implementing JONES ET AL | 100TH ANNIVERSARY | 106:8 • JOURNAL AWWA | AUGUST 2014 2014 © American Water Works Association 141 FIGURE 1 1980 Asset management timeline 1988: Piper Alpha disaster (UK) 1989: Privatization of water industry in England and Wales; State Owned Corporations Act, New South Wales, Australia 1990 1994: Australian National Asset Management Manual 1996: New Zealand Infrastructure Asset Management Manual 2000 2000: International Infrastructure Management Manual; Water Services Association of Australia benchmarking 2001: US Environmental Protection Agency’s Capacity, Management, Operation, and Maintenance Guide 2002: Common Framework Approach to Capital Maintenance Planning 2004: UK’s Publically Available Specification 55 2006: Water Environment Research Foundation’s Sustainable Infrastructure Management Program Learning Environment 2008: US Environmental Protection Agency’s Asset Management: A Best Practices Guide; Publically Available Specification 55 updated 2010 2014: International Organization for Standardization 55001 Source: Black & Veatch their capital programs and ongoing asset operation. The continual focus on the balance between improved customer serviceability and financial efficiency necessitated ever more sophisticated approaches to asset management, with benefits accruing to customers and shareholders alike. In 2004, Publically Available Specification 55 (PAS 55) was developed by the United Kingdom’s Institute of Asset Management and published by the British Standards Institute in response to the need for a defined good-practice approach for assessing and implementing asset management, collating lessons learned, and providing opportunities to leverage the experience of others. PAS 55 has proved successful as an asset management frame142 work. It is widely adopted by the UK water industry and has become the default international standard for asset management. Australia and New Zealand. The Australian government, which identified the need to address infrastructure management early on, promoted development of asset management throughout the 1980s. The Institute of Public Works Engineering of Australia (ipwea.org) developed and issued the Australian National Asset Management Manual in 1994; it introduced asset management concepts and provided guidance on how to implement them. In New Zealand, the National Asset Management Steering Group (NAMS; www.nams.org.nz) was established in 1995 to develop and promote infrastructure asset management practices. In 1996, NAMS issued the New Zealand Infrastructure Asset Management Manual, which was used by city councils and water utilities to develop asset management plans. The Institute of Public Works Engineering of Australia and NAMS then worked together to develop the International Infrastructure Management Manual, which was first published in 2000. This built on the previous manuals and included case studies. The water industry in Australia embraced asset management, with the likes of Sydney Water and Hunter Water in New South Wales leading the way. In 1989, the New South Wales government passed legislation to restructure water boards as “state-owned corporations” and granted them operating licenses (Hunter Water in 1992 and Sydney Water in 1994). The expectation was for these new corporations to act as efficient commercial companies while providing improved levels of service to customers and meeting regulatory requirements. This spurred the development and implementation of asset management approaches. As an example, Sydney Water created an asset management group that focused initially on maintenance before creating AUGUST 2014 | JOURNAL AWWA • 106:8 | 100TH ANNIVERSARY | JONES ET AL 2014 © American Water Works Association separate asset management and asset solutions divisions in 2000 and implementing an asset management framework. Since then, Sydney Water has developed asset and system management plans and implemented a risk-based approach to asset planning and a detailed business-case evaluation process. The utility collected data about assets, including condition and performance, and calculated the cost of asset replacements based on the modernengineering-equivalent replacement asset value (Halcrow Pacific Pty Ltd, 2007). Condition-based assessments were used to determine the remaining useful asset lives and to develop asset renewal programs. Sydney Water is also using deterioration modeling to develop its water main replacement program. Benchmarking has been used in Australia and New Zealand to compare utilities and drive asset management performance improvements. The Water Services Association of Australia (WSAA; wsaa.asn.au) started a benchmarking project in 2000 to examine asset management processes. Now co-sponsored by the International Water Association, international surveys were done in 2008 and 2012 using WSAA’s Aquamark Framework. Participants included water utilities from several countries, principally Australia and New Zealand, but also from the United States and the Philippines (WSAA, 2012). United States. Asset management did not develop as quickly in the United States compared with the United Kingdom, Australia, and New Zealand, mainly because of the different structure of the industry. The US water industry comprises many more organizations and a mix of private and municipal entities. However, some US water utilities implemented asset management programs soon after the turn of this century, with Seattle Public Utilities (SPU) in Washington and Oregon’s City of Portland Water Bureau being two examples. On the wastewater side, the US Environmental Protection Agency (USEPA) recognized the benefits of an asset management approach with the introduction of the Capacity, Management, Operations, and Maintenance program in 2001. This program was one of the first initiatives to require a form of asset management planning in the United States. It provided a framework for utilities to use best practices to better manage, operate, and maintain wastewater collection systems; investigate capacity-constrained areas of collection systems; and respond to sanitary sewer overflow events (www.epa.gov/ npdes/pubs/cmom_guide_for_collection_ systems.pdf). Both the Water Research Foundation and the Water Environment Research Foundation (WERF) have actively supported numerous research studies to Benchmarking has been used in Australia and New Zealand to compare utilities and drive asset management performance improvements. advance asset management approaches in the United States. Many of these studies have leveraged Australia’s, the United Kingdom’s, and other countries’ experience and methodologies to adapt to the US environment, and some of the studies have continued to build on research conducted in other countries. One such research study managed by WERF and supported by the Water Research Foundation was the Sustainable Infrastructure Management Program Learning Environment (SIMPLE; http://simple.werf.org/home). Based on research initiated in 2006, SIMPLE is a Web-based asset management learning environment designed to help organizations implement best appropriate practice life-cycle asset management programs. SIMPLE was launched to help utilities address external drivers for change such as regulatory requirements, limited resources and budgets, and aging assets. JONES ET AL | 100TH ANNIVERSARY | 106:8 • JOURNAL AWWA | AUGUST 2014 2014 © American Water Works Association 143 In 2008, USEPA established the fivecore-questions framework for asset management in the Asset Management: A Best Practices Guide (www.epa.gov/ogwdw/ smallsystems/pdfs/guide_smallsystems_ assetmanagement_bestpractices.pdf). Targeted primarily to small- to mid-sized systems, the guide provides a fundamental and communicable structure for understanding asset management. The five core questions broadly cover the major elements of asset management, and each question covers multiple elements of good practice: • What is the current state of my system’s assets? • What is my required “sustainable” level of service? • Which assets are critical to sustained performance? • What are my minimum life-cycle costs? • What is my best long-term funding strategy? Since promulgating this document, USEPA has also released a series of case studies and other documents to assist with asset management education. Building on the guide, USEPA established an asset management training program to educate a broad base of industry professionals about asset management principles. The training is designed around the five core questions and is largely aligned with approaches presented in the WERF SIMPLE platform. Some US utilities have taken advantage of learning curves established in the United States and overseas. For example, the Tulsa Metropolitan Utility Authority (Oklahoma) understood the effects of organizational structure, communication, and operational optimization on utility performance. The authority decided to build an asset management framework based on PAS 55 to establish a baseline and enable the measurement of progress. Implementation and improvement of this framework form a key part of Tulsa’s Utility Enterprise Initiative, which provides a strong example for other utilities 144 looking to quickly leverage the available body of industry experience. SPU’s journey through the generations of asset management. SPU is a good example of an early adopter of asset management in the United States. Commencing its asset management program in 2002 and seeking out best practices from around the world, SPU identified the asset management approach associated with utilities in Australia as the most compelling because of its customer-centric approach, required performance assessment, thoughtful risk management, analytic approach to managing assets, and transparency. Blair Troutman, SPU’s director of corporate asset management, describes his organization’s evolution of asset management as a journey over generations. In the first generation, SPU worked closely with Hunter Water from Australia to develop asset management, adopting Hunter Water’s approach and exchanging employees to help transfer knowledge. The second generation entailed tailoring the approach to SPU’s specific needs by improving and embedding systems and processes. Now in the third generation of asset management, SPU is developing more advanced ap proaches by moving to a more servicecentric approach, incorporating climate change impacts into decision-making, and including social justice and equity in the triple-bottom-line assessment. A key component of SPU’s approach is the Stage-Gate process (www.stage-gate. com/) for project planning and implementation (Figure 2). The process encompasses needs identification, alternatives assessment and business case analysis, value analysis, value engineering, and risks and benefits quantification and monetization. There is no predefinition of the problem. The Stage-Gate process introduces a rigorous and systematic approach to planning and is typical of processes used by leading asset management utilities. SPU is moving from an asset-centric to a service-centric approach using service levels to guide strategic business planning. AUGUST 2014 | JOURNAL AWWA • 106:8 | 100TH ANNIVERSARY | JONES ET AL 2014 © American Water Works Association An important element of SPU’s strategic business plan is a community outreach program with stakeholders to examine inequities of service delivery including socioeconomic and climate impacts. This strategic business plan commits SPU to a five-year rate plan with defined levels of service and customer experience. Climate change is a key focus for SPU and is recognized as a critical issue for the management of long-lived assets that will face dramatically different conditions in the future. SPU is incorporating environmental and climate change decisions into the StageGate process and building resiliency into its asset base. Establishing interagency agreements with such agencies as the Seattle Department of Transportation has resulted in successful initiatives, such as building green stormwater infrastructure to manage stormwater flows. SPU’s more advanced approaches, which align with leading prac- FIGURE 2 Initiation Approver ASSET MANAGEMENT’S FUTURE Adapting to climate change. For water utilities, the effects of climate change are associated with water availability and quality, flooding, and the capacity of combined sewer systems. Addressing these increased risks requires an asset management approach that is flexible and adaptable. Climate change adaptation means taking action to ensure assets are resilient to future changes in the weather patterns; this thinking needs to be built into asset management decision-making. In England and Wales, climate change mitigation and adaptation have been important drivers for asset management planning, which focuses on improving resiliency of critical infrastructure to Seattle Public Utilities’ Stage-Gate process for standard infrastructure projects Gate 1 Authorize options analysis Lead tices of UK and Australian water utilities, reflect some of the latest developments in asset management. LOB Representative Deputy director, USM, F&A, or CSCO Gate 2 Approve business case Options analysis Gate 3 Approval to advertise Design Gate 4 Approval to award contract Construction Gate 5 Approval to close project Closeout LOB Representative Project Manager Project Manager Project Manager AMC or LOB AMC Deputy director, PDB Deputy director, PDB Deputy director, FOM Source: Seattle Public Utilities AMC—Asset Management Committee, CSCO—Corporate Strategies and Communications Office, F&A—Finance and Administration, FOM—Field Operations and Maintenance, LOB—line of business, PDB—Project Delivery Branch, USM—Utility Systems Management JONES ET AL | 100TH ANNIVERSARY | 106:8 • JOURNAL AWWA | AUGUST 2014 2014 © American Water Works Association 145 The J ournal has been my “go-to” source for understanding the nuances of drinking water since I first became involved with AWWA more than 30 years ago. It is a tremendous tool for knowledge of both regulatory/policy issues and technical insights into everything from water treatment approaches to conservation to emerging water quality issues and is the primary resource for most water professionals. Even though I can access everything in it electronically now, I still keep on my desk more than 10 years’ worth of issues as a quick resource. —Andy Eaton, Technical Director, Eurofins Eaton Analytical 146 flooding, water resource planning, and sewer catchment planning. Welsh Water’s sustainable drainage plans exemplify good practice. The plans follow a riskbased, integrated planning approach that incorporates surface water management strategies, asset rehabilitation strategies identified from deterioration models, and capacity improvement strategies identified from hydraulic modeling. Climate change effects are incorporated in its modeling, sustainable solutions are promoted, and all solutions are analyzed for their effects on service levels. Another good example is Sydney Water, which assessed the potential risks of climate change impacts on its assets and developed the Climate Change Adaptation Program (Sydney Water, 2010). The program covers three themes: vulnerability (detailed assessment of potential impacts), resilience (ability to recover and respond to events), and adaptation (embedding climate change adaptation into business processes). Based on the risk assessments, Sydney Water is developing prioritized adaptation responses and response plans that cover the whole asset life cycle. In the United States, climate change is not a top issue for most water utilities. However, a recent survey by the Water Research Foundation reported that 92% of Americans think water utilities should play a leadership role in helping communities prepare for the impacts of climate change (Water Research Foundation, 2013). SPU is incorporating climate change in its asset management approach. An example of this is RainWatch, developed with the University of Washington (www.atmos. washington.edu/SPU/). RainWatch incorporates enhanced weather forecasting, matching data from rain gauges and radar to improve the forecast of rainfall in the city. SPU’s goal is to tie the forecast tool to field response to be able to respond to incidents in real time and warn customers of potential impacts in advance. “Integrating climate considerations into all aspects of organizational decision-mak- ing, from strategic to operational, is a critical business imperative,” said Paul Fleming of SPU’s climate resiliency group. “Water utilities around the world face this imperative, so we have to collaborate to work on these problems and learn from each other.” From asset-centric to service-centric. Most water utilities in the United States are asset-centric, which means they focus on maintaining assets to perform a function rather than on the service that the assets provide (referred to as asset serviceability). Few US water utilities have welldefined service-level indicators with appropriate service-level targets beyond regulatory targets for drinking water quality compliance, sewer overflows, and stormwater discharges. Improvements in information management systems, performance data, and analytical approaches will help utilities develop appropriate service levels to take the first step toward a service-centric approach. The emergence of more advanced analytical techniques that model asset deterioration and serviceability are enabling assessment of different investment scenarios for their effects on service levels. Stakeholder engagement is another element in developing asset management strategies and informing asset management planning. It is a key requirement in asset management standard PAS 55 and in the new international asset management standard International Organization for Standardization (ISO) 55001 (Asset Management–Management Systems–Requirement). In the current round of asset management planning in England and Wales, OFWAT required close collaboration between water companies and their stakeholders in developing five-year asset management plans. Customer challenge groups consisting of customer representative organizations, businesses, and environmental regulators scrutinized each company’s plans and customer engagement activity in developing the plans and then reported back to OFWAT. Water AUGUST 2014 | JOURNAL AWWA • 106:8 | 100TH ANNIVERSARY | JONES ET AL 2014 © American Water Works Association companies had to engage with customers to obtain their opinions on service levels and rate increases (known as willingness-to-pay surveys) through telephone interviews, focus groups, and face-to-face interviews. As water utilities become more servicecentric, these approaches will become more routine. SPU already plans to build on its collaborative approach with stakeholders by discussing with customers their service-level needs and assessing the true cost of service to customers. Adopting asset management standards: ISO 55001. Building on the success of PAS 55, the ISO developed ISO 55001 with participation from more than 30 countries, publishing the standard in January 2014. ISO 55001’s fundamental objective is to guide and influence the design of an organization’s asset management activities by embedding a number of key concepts and principles within the asset management framework. Key principles include • the value that assets provide to an organization and its stakeholders; • the roles of leadership and culture in providing value because commitment from all levels of an organization is required; and • the need to assure stakeholders that assets will fulfill their required function and performance. Asset management standards can provide guidance as more water utilities seek to implement asset management programs or advance existing programs. However, compliance or certification against these standards is not a measure of asset management perfection, but another step in a continuous improvement cycle. There may not be a regulatory requirement for water utilities to implement ISO 55001, but there are potential benefits in being able to show credit agencies and investors that utilities are good asset stewards and are managing assets in line with international best practices. The potential for better bond ratings by demonstrating thorough planning and an asset management program could result in significant capital program savings through reduced debt payments. Smart integrated infrastructure. Asset management thrives on good data and advanced analytics. With the projected increase in installation of smart-meter installation, there is significant opportunity for improved operational control of water mains and customer communication in the event of an operational incident. As in the electricity sector, discussion of what “Utility 2.0” looks like is building momentum. The role of asset management in the new order will become more prominent as data and analytics become business as usual. As demands on customer levels of service become increasingly stringent, infrastructure—and infrastructure investments—will need to become smarter. Improved targeting of pipeline rehabilitation and replacement is one potential move in the right direction. The costs, technical challenges, and disruption caused by assessing the condition of water mains are significant, so only a relatively small proportion of systems are assessed each year. Although closed-circuit television inspections are routinely conducted for sewer and stormwater pipes, predicting useful remaining life based on visual observation is an emerging science. An exciting development in condition assessment is the application of technologies to transform existing urban water/ stormwater/wastewater networks into intelligent networks. These networks can monitor infrastructure condition and deterioration with far greater spatial coverage than is currently possible, and without incurring the significant costs associated with excavations and service interruption. Additional information such as pressure transients and leakage can also be monitored and prevented. Robust analysis of frequent spatially distributed sensor data and diagnostics, combined with augmentation of existing asset management practices, will help optimize capital and operational expenditure in the future. This will prolong asset life, defer or remove the need for capacity augJONES ET AL | 100TH ANNIVERSARY | 106:8 • JOURNAL AWWA | AUGUST 2014 2014 © American Water Works Association 147 mentation, and reduce asset failures and incident response times, thereby reducing any associated social disruption (e.g., interruptions to service, traffic disruption) and environmental impacts (e.g., water quality and odor). If utilities could better assess and forecast buried infrastructure condition and performance over time, they would be able to rehabilitate the right pipes in the right way at the right time. Better targeting of rehabilitation would significantly reduce the financial burden on utilities and improve the reliability of these systems as well as customer service. BUSINESS AS USUAL The past 25 years have seen rapid development and implementation of asset management programs among water utilities. Utilities at the forefront of asset management are focused on optimizing expenditures and adopting a service-centric approach. Future challenges posed by climate change, increasing cost pressures, resource limitations, and customer expectations require a flexible and adaptable approach to asset management. Collaboration is required across industries and countries to share knowledge and best practices to meet these challenges, as exemplified by the development of ISO 55001 through meetings in multiple countries during the past three years. Developments in information technologies and smart infrastructure will further increase efficiency and flexibility, improve asset resiliency, and yield enhanced levels of customer service in the water industry. US utilities have the opportunity to rapidly adopt best-practice asset management, leverage the experience of leading US utilities as well as those in the United Kingdom and Australia/New Zealand, and make the most of the opportunities afforded by recent technological developments. With customers increasingly expecting similar levels of service and communications from their utilities as they get from their cable telephone or cell phone providers, effective 148 service-centric asset management is essential now more than ever. ABOUT THE AUTHORS Martin Jones (to whom correspondence should be addressed) is a principal consultant at Black & Veatch in the Management Consulting Division, 1120 Sanctuary Parkway, Ste. 200, Alpharetta, GA 30009 USA; [email protected]. He is a water engineer specializing in utility asset management and is a PAS 55 assessor. His early career was spent with Wessex Water in the United Kingdom before he moved to a major international consulting firm where he audited water companies on behalf of OFWAT. Will Williams is director of asset management with the Management Consulting Division of Black & Veatch in Alpharetta, Ga. Jeff Stillman is the practice leader for asset management in Black & Veatch’s water business in Burlington, Mass. http://dx.doi.org/10.5942/jawwa.2014.106.0114 REFERENCES Halcrow Pacific Pty Ltd, 2007. Review of Sydney Water Corporation’s Asset Lives and Asset Value Estimates, Final Report. Halcrow Pacific Pty Ltd, Melbourne, Victoria, Australia. Sydney Water, 2010. Climate Change and Adaptation: Program Summary. www.sydneywater.com.au/ web/groups/publicwebcontent/documents/ document/zgrf/mdq0/~edisp/dd_044233.pdf (accessed June 20, 2014). The National Archives, 1990. Piper Alpha Public Inquiry: Records. http://discovery. nationalarchives.gov.uk/SearchUI/ details?uri=C7084 (accessed June 20, 2014). Water Research Foundation, 2013. What Do Americans Think About Community Water And Climate Change? Water Research Foundation, Denver. WSAA (Water Services Association of America), 2012. 2012 Asset Management Performance Improvement Project. www.wsaa.asn.au/ projects/Pages/Asset-ManagementPerformance-Improvement-Project.aspx#. U6SqTbEdmAh (accessed June 20, 2014). AUGUST 2014 | JOURNAL AWWA • 106:8 | 100TH ANNIVERSARY | JONES ET AL 2014 © American Water Works Association
© Copyright 2026 Paperzz