Application of Asset Management Principles During Asset Creation and Design

1
Application of Asset ManagementPrinciples During
Asset Creation and Design

• Presented By Pervaiz Anwar
• at
• CWEA, San Francisco Bay SectionAsset Management
  Seminar
• September 17, 2003

2
What is Asset Management?
A simple definition!

• Asset management is a structured approach to
  delivering desired service levels at lowest life
  cycle costs

3
Life Cycle of an Asset
Plan / Create
Acquire
Maintain
Refurbish
Replace
4
Representation will Focus on Two Key Topics

• Business Case Evaluation A powerful process for
  validation Capital Investments
• Incorporating Asset Management into design

5
Business Case EvaluationA Powerful Process for
Validating Capital Investments
6
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

7
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?

8
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

9
The BCE Team Goes to Work

• Client established a BCE Team from Engineering
  and Field OM
• The team defined 15 alternative approaches!
• Several were fatal flawed out but seven
  remained
• Timing, capital costs, OM costs, and
  refurbishment costs were estimated for each of
  the seven

10
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

11
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!

12
Asset Ownership Some Valuable lessons

• Asset ownership costs are forever
• OM costs are bigger than generally perceived
• On-going capital refurbishment costs are often
  ignored
• The point beingTotal costs of Asset ownership
  are difficult to identify and usually
  underestimated

13
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 OM
• 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

14
Incorporating Asset Management Principals in
Designs
15
Agenda

• Asset Management context
• Steps to take during design
• Current applications

16
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

17
Understanding Asset Life Cycle Helps Optimize
Ownership Costs
18
Asset Management Concepts Extend From Design
Through Operations
19
Key Asset Management Steps During Design

• Develop asset hierarchy
• Establish performance measures
• Define interfaces during process design
• Coordinate OM elements with the design

20
Develop Asset Hierarchy Structure to Link
Information for Key Stakeholders

• Inventorynew andexisting assetsassociated
  withthe designproject
• Organize allassets 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

21
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

22
Future Replacement Decisions Can Be Made More
Efficiently
23
Defining Interfaces During Design Process Helps
Measure Asset Performance Over its Lifecycle

• Process control system should accommodate asset
  management objectives and PIDs 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

24
Coordinating OM Elements with Design Results in
Significant Cost Savings

• Link draft OM manuals with asset management
  concepts
• Asset management framework should guide
  maintenance management system development
• OM documents should incorporate performance
  measures developed during design

25
Where Are These Asset Management Concepts Being
Applied?

• Location
• Orange County Water District, CA

Project Large new reclamation plant
King County, WA
Large new wastewater treatment plant
Expansion of mid-size wastewater treatment plant
City of Hayword, CA
Gwinnett County, GA
Program management for multiple water and
wastewater projects
26
Summary

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

27
Questions and Discussion