The Asset Reinvestment Logic Diagram This step wraps up those assets that are candidates for reinvestment. Funding can be from the O&M budget and/or the capital budget. Just because it is a candidate for funding does not mean it is funded. Best practice based CIP management processes are available to first validate the need in the form of a business case and secondly to prioritize the validated projects. WERF’s CIP Validation and Prioritization Tool guides the asset manager in best practice in this area. End of Asset Life Reinvestment Decision Support Tool

Recall the distinction between strategic AM and tactical AM Strategic track (funding flow and policy focus) Focus is on high-level “how many,when” - i.e., management strategy group cohort projections based on conditional probabilities Service Level and economic life sets life-cycle based renewal policies framework (e.g., for ductile iron <8” renew after 6th total break or 3rd in five years) Strategic level risk mitigation strategies emerge (eg, increase valve density, leak management program, I&I mitigation, etc) Tactical track (CIP focus) Focus is on “which,when”? Condition/usage based direct assessment (physical deterioration model – conditional probabilities - linked to likely failure mode) Service level/capacity business rules Economic life Select appropriate risk and economic/financial analytic techniques As noted in previous slides, the End of Asset Life flow diagram impacts the investment decision at two distinctly different but related levels. The output from these two levels are illustrated in the following two slides. End of Asset Life Reinvestment Decision Support Tool

Strategic level - how many assets in timeframe period will likely fail and at what cost each (this sets funding framework) End of Asset Life Reinvestment Decision Support Tool

Tactical level – which assets within a CIP cycle will likely fail (list of capital projects) End of Asset Life Reinvestment Decision Support Tool

Putting the pieces together – looking one final time at the whole flow Note that projects must still be validated and prioritized before a capital budget/plan is finalized As noted, just because the asset is a candidate for reinvestment does not mean it is automatically funded. Such careful analysis does strengthen the rationalization for such investment, but until the entire portfolio of such candidates is reviewed from a project validation and prioritization process, funding should not be assured. This is particularly true for organizations where funds are very challenging to come by and not all needs – even well documented ones – are likely to be funded. The key here, of course, is the business case, for the development of which this process is a major source. Staff’s role is to make a clear and carefully rationalized case for investment, stating clearly and without hyperbole the likely impact of not funding the candidate project; but it is the policy board’s role to make – and live with - the final investment decision. End of Asset Life Reinvestment Decision Support Tool

Consider: have we made a solid business case? Can we demonstrate this is the best investment solution of the feasible options considered? Can we demonstrate this is the right time to effect the investment? As noted, the real client of the end of asset life decision process is the business case. While the End of Asset Life Reinvestment Decision Support Tool assists in reaching decisions about reinvestment, it is the business case that documents the decision and sets the stage for final appropriation. WERF’s Business Case Tool facilitates the development of a business case. End of Asset Life Reinvestment Decision Support Tool

Our fundamental “take home” message Cost effective re-investment in an asset requires an understanding of when that asset reaches its “end of life”. The end of life for an asset involves a systematic interaction among three “triggers”: Service level/capacity life Physical life Economic life Reinvestment is really a decision process where the practitioner systematically determines for a specific asset or class of assets which of the three triggers trips the reinvestment decision first and at what point in time. End of Asset Life Reinvestment Decision Support Tool

The End of Asset Life Reinvestment Decision Support Tool is available for download at http://water.epa.gov/infrastructure/sustain/am_training.cfm These slides are embedded in the Tool.