Utility Asset Management for Small Systems 104 South Congress Street Winnsboro, SC 29180 803-815-0334 www.sercap.org

Asset Management Is A business practice A process for better decision making A tool for communicating needs A plan for future investments A way to move from reactive to predictive maintenance practices

Balancing Asset Management Is The official definition of AM involves 3 main components: Total Cost of Ownership – determining the lowest life cycle cost of an asset (from planning / design, bidding / construction, related supplies, operations / maintenance, repairs / rehabilitation, decommissioning / disposal) Acceptable Level of Service – which relates to what your assets provide to your customers and what they expect Acceptable Level of Risk - What would happen if I don’t do anything, what could go wrong and how bad could it be? remembering that not all assets are created equally, some are more critical to the system and your citizens than others – a waterline in front of a hospital is more critical than one in a residential neighborhood. People living in that neighborhood may disagree, but the fact is that the hospital line represents a greater risk to the community as a whole. The most commonly cited definition is a system of balancing capital and operational costs in such a way as to provide the highest sustainable level of service a utility can provide for the longest period of time… planning ahead for future investments based on appropriate and relevant information and operating / maintaining existing investment in a responsible manner.

Asset Management is … Cost Balancing Risk Service

Asset Management is … MAKING GOOD DECISIONS EARLY LATE OPTIMUM Asset management is making good decisions. You have to perform certain activities at certain times to keep infrastructure in good condition. Knowing when to perform these activities is an important part of responsible ownership. Every day utility managers make timely decisions about the public assets they are entrusted with. They know that replacing an asset too early is a waste of money. That means you haven’t squeezed the full life out of it. Replacing an asset too late can be disastrous and much more expensive than replacing it on time. The trick is finding the optimum time to do what needs to be done. Asset Management is an approach to making decisions like these in an objective, justifiable, defensible way. Asset management will take time, but over time some systems have realized savings of up to 20% by just recognizing that preventative or predictive maintenance is much cheaper than reactive or emergency repairs. OPTIMUM SOLUTION

Asset Management is … A system to define the lowest cost options for providing the highest level of service over the longest period of time. The most commonly cited definition is a system of balancing capital and operational costs in such a way as to provide the highest sustainable level of service a utility can provide for the longest period of time… planning ahead for future investments based on appropriate and relevant information and operating / maintaining existing investment in a responsible manner.

Doing the right thing at the right time for the right reasons. Asset Management is … Doing the right thing at the right time for the right reasons. More efficient data management Better resource allocation, reduced O&M costs Reduced risk, service disruptions and collateral costs More accurate financial planning Protection of reserve funds for future renewal and replacement More effective communication, both internal and external Clear, consistent decision criteria for more confident management

Asset Management is … More than planning for big projects. It’s knowing you are focusing limited resources on the right projects.

INFRASTRUCTURE ASSET MANAGEMENT FOR SMALL SYSTEMS Key Concepts: The 5 Questions

Five Cores of Asset Management Current State of Asset Level of Service Long-Term Funding Plan Asset Management Minimum Life Cycle Cost Critical Assets

What are the core elements of asset management practice? 1. WHAT IS THE CURRENT STATE OF YOUR ASSETS? Asset Inventory, Organize, Prioritize Into Asset Hierarchy 2. WHAT IS YOUR REQUIRED SUSTAINABLE LEVEL OF SERVICE? Establish LOS, Policies & Performance Measures 3. WHICH ASSETS ARE CRITICAL TO SUSTAINED PERFORMANCE? Determine Asset Criticality, Conduct Asset Risk Assessments 4. WHAT ARE YOUR MINIMUM LIFE CYCLE COST STRATEGIES? O&M Procedures, Replacement / Repair / Rehabilitation Schedules 5. WHAT IS YOUR BEST LONG-TERM FUNDING STRATEGY? Long-term Funding Plan, Communication Plan, Policy Statements

Asset Management Process What is the current state of my assets? 2. What is required LOS? Inventory Assets Assess Condition Determine Remaining Life Determine Replacement Cost & Date Set Target LOS These questions are associated with a 10-step process that align with the 5 questions. What is the current state of my assets? What do I own? Where is it? What condition is it in? How long will it last? What is its economic value? What is my required sustained Level Of Service? What is the demand for my services by my stakeholders? What do regulators require? What is my actual performance? Which assets are critical to sustained performance? How does it fail? How can it fail? What is the likelihood of failure? What does it cost to repair? What are the consequences of failure? What are the best “life-cycle-cost” CIP and O&M strategies? Given the above, what is the best long-term funding strategy? Assign Rating (Criticality) Determine Appropriate Maintenance Determine Appropriate CIP Develop Funding Strategy Build or Refine the AMP 3. What is greatest risk? 4. What is the best O&M and CIP strategy? 5. What is the best long-term funding strategy?

What defines an Asset: All equipment, buildings, land, people, pipe, valves, tanks, pumps, wells, hydrants, treatment facilities, and other components that are needed to deliver safe and clean water are typical assets. Considerations for defining assets: Would you write a work order for the asset Financial Criticality A combination of the above values can be used in deciding how far to drill down to determine an asset. Assets are essentially all the equipment, buildings, land, people, and other components needed to deliver safe and clean water. Assets are generally large pieces of complicated equipment or infrastructure that can be very expensive. They usually last a fairly long time so utilities really want to keep them in good shape. We all know that some of the infrastructure in this country is aging and failing at an alarming rate. And the reality is we don’t even know where it all is! It’s important to remember not only the large pieces of equipment that we see above ground, but also all the equipment that it located underground. And it’s important to take note these assets are essential to protecting public health as well as for economic development. A utility is made up of several assets and some bigger assets have several components. So, you may ask where do I start in building my inventory? How far must I drill down?   The asset inventory’s lowest level is the maintenance managed item. Think “work order.” At what level is an asset maintained? Do you create a work order for the asset or the component? What level are decisions made to repair, refurbish, or replace? The answers to these questions determine the lowest level of your utility’s asset inventory.

Current State of Asset Inventory What do I own? Where is it? What condition is it in? What is its remaining useful life? How long will it last? When does it need attention? How much will that cost to replace? ways to approach generating an asset inventory.   GPS physical location of each asset and apply applicable attributes. Begin first listing your utility’s critical assets. Also as, existing crews respond to work orders they can build the asset inventory by collecting information on assets such as the age, condition, location, etc. Prospective Asset Inventory. As you are acquiring new assets into your utility immediately add the assets into the asset inventory. This can be done in the handover process from the engineers to the utility. A system could include a requirement to receive the asset information in a form that is easy to include in their inventory as a part of their contract. Documentation will be provided to assist with Useful Life and Condition

Level of Service Defines how you will operate the utility Set Goals Customer Demand Regulations Physical capabilities of assets Knowing the utility’s required “sustainable” level of service will help implement an asset management plan and communicate to stakeholders what is being done. The required sustainable level of service is the set of features that describe the utility’s short‐ and long‐term performance standards as well as the customer’s expectations. Quality, quantity, reliability, and environmental standards are elements that can define level of service and associated system performance goals. Information about customer demand, data from utility commissions or boards, and information from other stakeholders can be used to develop the statement.   Begin with a review of existing LOS. Does the utility have a mission statement? Have you established core principles or goals? Do you have baseline measurements of performance? How do you know if you are accomplishing your objectives? What is the demand for my services by my stakeholders? What do regulators require? What is my actual performance? 

Level of Service Example LOS PRIORITIZATION TABLE PRIORITY WEIGHT 1 Health & Safety 20% 2 Regulatory Compliance 3 Financial / Economic Impact 10% 4 Community Disruption 15% 5 Service Delivery 6 Response Time Knowing the utility’s required “sustainable” level of service will help implement an asset management plan and communicate to stakeholders what is being done. The required sustainable level of service is the set of features that describe the utility’s short‐ and long‐term performance standards as well as the customer’s expectations. Quality, quantity, reliability, and environmental standards are elements that can define level of service and associated system performance goals. Information about customer demand, data from utility commissions or boards, and information from other stakeholders can be used to develop the statement.   Questions to ask in determining Level of Service: ‐What do the regulators require? ‐What are the utility’s performance goals  ‐What level of service do the utility’s stakeholders and customers demand or expect? Another way to ask this is what is the best way to meet the needs of the customers? ‐What are the physical capabilities of the utility’s assets? Or would your community be satisfied with receiving their drinking water from a pipe like the one in the photo shown?

Critical Assets Which assets are critical to sustained performance Criticality (Public health, safety concern, legal) Redundancy importance How can various assets fail? How likely is each asset to fail? How important are they to the service level? Is there a redundancy or bypass alternative? What are the consequences if they do fail? Impact on service goals Impact on system and community How much will it cost to fix if they fail? How much will it cost to replace?

Minimum Life Cycle Cost What are my bests “minimum life-cycle-cost” capital improvement plan and my best operations and maintenance strategies? Feasible strategies for your operation Alternative Strategies It’s important to recognize that operations and maintenance (O&M), personnel, and the capital budget account for an roughly estimated 85 percent of a typical system’s expenses. Asset management enables a system to determine the lowest cost options for providing the highest level of service over time. Utilities want to optimize their work O&M crews are doing, where they are doing it, and why. An asset management program helps a utility make risk‐based decisions by choosing the right project, at the right time, for the right reason.  

Minimum Life Cycle Cost Additional questions to ask yourself when tacking this question include: ‐What alternative management strategies exist? Run to failure may be a very real option for some utilities. Is it necessarily the best option, all of the time? ‐What strategies are the most feasible for my organization?

Long Term Funding What are the funding needs Day to Day Expense (O&M)Capital Expenditures Where will the money come from: O&M – Rates, fees, penalties, impact fees, taxes, community general fund dollars Capital Projects – Community and/or Outside Funding (Grants, Loans, Bonds, Bank Loans Given what you’ve learned about your assets, their conditions, priorities, how will you pay for it? What is the best long-term funding strategy? Borrow? Raise rates? Let it fall apart and become someone else’s problem? Review rates annually. When was the last rate increase? Consider how you would build community support for increased rates. Example: Hold public sessions Determine if your current budget covers the full ost of your operation. Operation cost to include all cost, energy bill, salaries, maintenace cost, reserve, debt

REMEMBER THE FIVE QUESTIONS? 1. WHAT IS THE CURRENT STATE OF YOUR ASSETS? Asset Inventory, Organize, Prioritize Into Asset Hierarchy 2. WHAT IS YOUR REQUIRED SUSTAINABLE LEVEL OF SERVICE? Establish LOS, Policies & Performance Measures 3. WHICH ASSETS ARE CRITICAL TO SUSTAINED PERFORMANCE? Determine Asset Criticality, Conduct Asset Risk Assessments 4. WHAT ARE YOUR MINIMUM LIFE CYCLE COST STRATEGIES? O&M Procedures, Replacement / Repair / Rehabilitation Schedules 5. WHAT IS YOUR BEST LONG-TERM FUNDING STRATEGY? Long-term Funding Plan, Communication Plan, Policy Statements Here are the 5 questions you should be able to answer through your asset management program. If organized knowledge does not exist for our assets, we can’t possibly make the case that they are being properly managed. Knowing what you have, where it is, what condition it is in, and it’s value and having this knowledge organized is a threshold expectation of responsible stewardship. Levels of service are the performance measure of the system, what your customers expect of your system. Things like water pressure, response time for repairs, regulatory compliance. Establishing levels of service is important to measure performance and gauge improvement. Having some understanding as to how much longer the critical asset will be able to meet service requirements is a mature conscientious prerequisite to success. All assets can and do fail. Demonstrating by plans and actions that the provider has the ability to effectively manage the failures that will inevitably occur represents strategic and tactical planning integral to satisfactory performance and the sustainable delivery of the services. Determining feasible alternatives and options and using optimal renewal decision-making as well as moving systematically to Reliability Centered and Condition-Based Maintenance, incorporates strategic CIP validation and business planning. The process of balancing CIP needs and O&M requirements. Determining a sustainable renewal funding level and effectively “telling the funding story,” includes a focus on the “Whole of Business” perspective and advanced asset management principles for rate setting and budgeting. “What we don’t know limits the case for higher rates/federal help.” (Sweeney)

Where to Begin? Building your team Deciding where to start first Develop an asset management plan Implementing an asset management plan Now that you have a understanding of five core question framework Your next question is most likely, how do I get started?   Getting started first begins with building a dedicated team of personnel and stakeholders. Second, decide where to start first. What sources of data are available to begin your inventory, financial records, etc? Next, with your data gathered create an asset management plan. Last, a plan is no use unless it is put to use. Let’s discuss more ways to get started.

Identify a Dedicated Team Identify the appropriate personnel and outside stakeholders Asset knowledge Ability to apply best appropriate practices at the utility Vision of financial measures leading to system sustainability Clarify roles, responsibilities, accountabilities, and decision making authority 35 Successful asset management requires a dedicated team. Key team members include: Utility operators and engineers (including upper management) These team members have: ‐Knowledge of the current state of water infrastructure assets. ‐Ability to describe the costs and benefits of changes to infrastructure assets. ‐Experience with the current capital improvement plan and the operations and maintenance strategy. Local and elected officials (e.g., mayor, council, town manager) These team members have: ‐Authority to commit resources. ‐Knowledge of the political landscape. ‐Ability to create new financing mechanisms and restructure ineffective institutions. Accounting. These team members have: ‐Ability to help estimate the replacement cost of assets. ‐Knowledge of the existing financing strategy, potential financial resources and challenges, and the need for rate changes. Information Technology. These team members have: ‐Ability to determine the most practical way to collect, store, and present the information needed to make strategic decisions. Treasurer. These team members have: ‐Ability to implement new financing mechanisms (e.g., bonds, loans, and other debt instruments) and create dedicated reserve accounts Don’t forget other stakeholders such as: ‐Other infrastructure managers and utilities (e.g., roads, sewers, and electric) ‐Conservation and environmental groups ‐Neighboring water districts ‐Community members Once your team is assembled clarify roles, responsibilities, accountabilities and decision making authority.

Gather Data As-built drawings, electronically or hardcopy Design drawings/Shop Drawing/Schematics Manufacturers’ manuals Bid documents Staff—current and previous Photos and videos Asset Appraisal Reports from Insurance Adjusters

Develop Asset Management Plan Best available current information Existing levels of service Existing management strategies and opportunities for improvement Cash flow projection – five to ten years Establish financial and performance benchmarks An asset management plan should be developed based on the best current information that is readily available. The more information the utility has, the better the plan can be.   What is the utility’s cash flow projection for the next five to ten years? Knowing how much money will be coming in and going out will help with managing assets. It’s very important for the plan to establish financial and performance benchmarks – lack of goals equals lack of growth (both financial and capacity). An asset management plan should be reviewed at least once a year, noting any relevant changes. Throughout the year, systems should keep a running list of items to consider or include in the annual update.

Transitioning to an Asset Management Plan Transition from building and operating to managing assets Extending asset life Optimizing maintenance and renewal Developing accurate long-term funding stra Sustain long-term performance! Organizational and cultural change Centered on team Public knowledge and acceptance Will not work overnight Start up may increase budget   tegies A paradigm shift will occur for the utility has you transition from building and operating to managing assets.   Asset life will be extended, maintenance and renewal optimized, long‐term funding strategies. All leading to sustaining long‐term performance. Asset management results in an organizational and cultural change that is centered on team. Asset management is not an overnight process and sometimes requires and increase budget during start up.

Implement Asset Management Plan Ultimately, implementing an asset management plan will help: Address high-priority asset needs critical to a utility’s performance Identify the costs of operating the utility Plan for future capital and operating expenditures which will help evaluate rate structure As asset management is implemented, it really becomes a broader way of thinking about utility management.   Ultimately, implementing an asset management plan will help: Address high‐priority asset needs critical to a utility’s performance Identify the costs of operating the utility Plan for future capital and operating expenditures Once you know what it takes to run a system, you might not want to be in the business of running a system and can look to other alternatives

EPA’s Sustainable Water Infrastructure website has tons of helpful resources, not the least of which is CUPSS, which is based on the “5 Questions” approach to asset management. Initially developed by Steve Allbee, this is an incremental approach to developing and maintaining a functional asset management program. Before I get into CUPSS as a tool, please allow me to quickly review a few basic asset management principles because you’ll see them all in the CUPSS program when we get into it.

A Practical Tool for Successful Asset Management Check Up Program for Small Systems

Why Use CUPSS Free, easy-to-use software specifically geared to small systems Asset Management 101 for water and wastewater systems Simple interface Less jargon Tools for data collection and entry Written asset management plan in 7 steps Uses EPA’s 5-Question approach CUPSS helps you make determinations about the current state of the assets in your utility, the level of service you are aiming to uphold, which of your assets are critically important, what the minimum life cycle cost is, and helps lay out a long-term funding strategy.

Why Use CUPSS CUPSS represents a way for new and existing waterworks to clearly demonstrate TMF capacity: TECHNICAL: MANAGERIAL: FINANCIAL: Gather, organize and maintain critical information and data necessary to effectively operate and sustain facilities and assets CUPSS is designed to help small water and wastewater utilities support budget discussions with solid facts and numbers, boost the efficiency of the utility, save your staff time, and improve customer service by ensuring continual service at competitive prices.

Why Use CUPSS CUPSS represents a way for new and existing waterworks to clearly demonstrate TMF capacity: TECHNICAL: MANAGERIAL: FINANCIAL: CUPSS also helps you to prepare work orders and an asset management plan. An asset management plan provides valuable information that you can use when you make management decisions about your utility. CUPSS provides a snapshot of your utility that allows someone with little knowledge to jump in and understand the state of the utility. The generated work orders can be used to help keep operation and maintenance, as well as compliance tasks, on schedule. Develop work order system with reminders so tasks can be performed regularly and consistently to improve efficiency

Why Use CUPSS CUPSS represents a way for new and existing waterworks to clearly demonstrate TMF capacity: TECHNICAL: MANAGERIAL: FINANCIAL: Make clear and justified budget decisions for timely repair, rehabilitation and/or replacement of infrastructure assets

Waste Inventory Data Collection Sheets from CUPSS

Wastewater Inventory Data Collection Sheets from CUPSS

Why Prioritize capital needs Apply proactive decision making Establish / maintain levels of service goals Reduce risks, surprises and potential catastrophes Comply with financial reporting procedures Implement long range planning Better communicate needs to customers, regulators and elected officials

Beginning Screen in CUPSS – This is where we’ll set a database for your utility.

Web site www.epa.gov/cupss CUPSS Support User’s Guide Workbook Tutorials/training User E-mail List Web site www.epa.gov/cupss There is a vast amount of support and training for CUPSS Users

Here is the CUPSS homepage, you can: ‐Do some training ‐Create or update a schematic ‐Enter inventory ‐Enter tasks or work orders ‐Enter finances ‐Generate Check Up reports ‐Ultimately CUPSS will help a utility prepare an asset management plan

Points exported from CUPSS into Google Maps

SERCAP CAN ASSIT WITH YOUR ASSET MANAGEMENT NEEDS FOR WATER AND WASTEWATER SMALL SYSTEMS. This presentation served to provide a broad overview of asset management, we have training classes available to give more detail to the 5 core components of asset management 104 South Congress Street Winnsboro, SC 29180 803-815-0334 www.sercap.org