October 22, 2004 Holistic Asset Management – It’s Not an Isolated Function 2004 Urban Water Council US. Conference of Mayors

What is “Asset Management” To the Accounting and Finance staff – AM means:  Ensuring that assets are booked on the organization’s books when placed in service  Assets are properly depreciated and removed from the books when retired  Prudent maintenance practices minimize the necessary capital and operating expenditures  Both capital and operating expenses are financed prudently to minimize the resulting rate and customer impact.

What is “Asset Management” To the O&M staff, AM consists of:  Providing appropriate maintenance support to ensure continued reliable operation of assets  Minimizing responses to emergency calls when assets fail

What is “Asset Management” To the IT Engineers, AM concerns tracking and monitoring the asset maintenance and replacement activities. To the Engineering Department, AM centers around the planning for and designing of the replacement and major rehabilitation of system assets.

What is “Asset Management”  To Utility Management Staff and Customers and Constituents, AM means:  Reliable services at the lowest possible costs  Prompt re-establishment of services after an emergency situation  Redundant capability in the event of system failures  Environmental protection  Public health and safety  Excellent customer service  LOWEST POSSIBLE COSTS

What is “Asset Management”  A way to think about an organization’s management and the stewardship of its assets  Understanding what your assets are and prioritizing maintenance and management activities  Managing the life-cycle cost (both capital and O&M), use and reliability of utility’s assets  Tailoring each organization’s needs using a systematic, proactive, scalable approach As opposed to a reactive focus on:  Problems  Politics  Technology  Costs  Budget Constraints Asset Management - a thoughtful process of self-evaluation, the development of strategy, objectives and an action plan and a phased implementation plan that coordinates the knowledge and functions of the entire organization.

Goals of Asset Management  Reduce Risk  Increase Asset Life & Minimize Asset Life Cycle Costs  Optimize Maintenance and Capital Improvement Programs  Reliably Plan Expenditures (Few Surprises!)  Maximize Organization’s Knowledge of its Assets  Understand Financial Implications of Expenditures (Scarce resources assigned to proper investments!)

Goals of Asset Management:  Reduce Risk  Increase Asset Life & Minimized Asset Life Cycle Costs  Optimize Maintenance and Capital Improvement Programs  Reliably Plan Expenditures (Few Surprises!)  Maximize Organization’s Knowledge of its Assets  Understand Financial Implications of Expenditures (Scarce resources assigned to proper investments!) Managers want and need to understand the consequences of making and not making difficult decisions Managers want and need to understand the consequences of making and not making difficult decisions

Asset Management on Two Levels  The “Big Picture” –  Five Major Asset Categories o Knowledge Base o Information Technology o People o Infrastructure o Customers  Financial Resources

Asset Management on Two Levels  The Detailed Look –  Optimal O&M of individual assets, such as: o Pumps o Equipment o Plants o Buried Infrastructure o Hardware o Etc...

 What to do ? (What tasks?)  When to do it ? (What intervals and when to start?)  Where to do it ? (Which Assets?) At the Detailed Level, the important questions are: Let’s simplify this…..

Time Asset Performance Asset Management Strategies Overhaul User Defined Failure Asset wears over time Extended useful life through overhauls / maintenance Avg O&M Costs over time O&M Costs Required Performance User Defined Lower Limit Initial Useful Life Goal #3 is to determine when it pays to replace rather than overhaul / maintain (for reducing cost and/or risk) Goal #2 is to predict failure and plan overhaul / maintenance in advance of asset failure $$ Goal #1 is to extend the interval between overhauls to as long as practical Proactive Maintenance (PM / PdM) Predictive Maintenance & Performance Monitoring Asset Replacement Strategy

 Balancing the costs associated with risk (emergency maintenance, loss of production, equipment damage, customer dissatisfaction, regulatory fines, etc.) against asset care costs.  Focus on Critical Assets first! Asset Management Strategies

Knowledge Base Customers Financial Measurement, Analysis & Planning Financial Measurement, Analysis & Planning Critical Asset Categories Critical Asset Categories PeopleInfrastructure Information Technology Information Technology Services Pricing Financial Resources Financial Resources ServiceCycleServiceCycle FinancialCycleFinancialCycle Data Financial Information Financial Information

Initial assessment of the assets’ conditions and criticality as well as the estimated, associated costs to address the proper management of those assets. A systematic, step-by-step approach, directs energy and resources to the prioritized tasks that add significant value and precision to the asset management process. Buried Infrastructure Buried Infrastructure Using an efficient, scalable approach... Plant & Pump Station Assets Plant & Pump Station Assets Financial Impact Analysis Financial Impact Analysis Step 1 Provides basic planning, budgeting & forecasting Step 2 Refines priorities based on specific data and criticality analysis Additional Steps are defined based on the results of your utility’s specific circumstances. Diagnose Results O&M Plan/Procedures O&M Risk Assessment O&M Risk Assessment IT Master Plan OD/OE Plan Stakeholder Consensus IM Fitness Evaluation IM Fitness Evaluation Staff Training Public Education Campaign Public Education Campaign CIP Master Plan Prioritize CIP Criticality Assessment Review Asset Inventory Improved Customer Satisfaction

Reduce Risk Reduce Probability of Failure Reduce Impact of Failure  Monitor  Maintain  Overhaul  Replace  Predict & Plan  Re-Design Reduce Asset Care Investment Do It SmarterDo It Better  Eliminate low value tasks  Focus on high impact failure modes  Predict rather than prevent (intrusive)  Prevent rather than let fail (non-critical assets can be run to failure if it makes sense)  Plan, Plan, & Plan  Better tools / technology  Train personnel  Document Procedures  Integrate all staff functions

Asset Management Approach is Not “Business as Usual” It will require changes in:  Philosophy  Procedures  Staff roles  Staff skills  Others?

Think Differently... Annual Planning Process = Last Year’s Budget plus inflation... (if that!) What are the right systems, staff and maintenance activities to manage the organization from an asset management perspective?

Systematically Approach Asset Management  Evaluate the strengths and weaknesses of your organization’s systems  CMMS, GIS, Financial Management Systems, etc.  Define what your goals are  What does your organization want to achieve with Asset Management?  Prioritize your action plan and implementation program

Staff Willingness To Embrace Change Is Necessary To Improving Effectiveness Barriers to Change: - Insufficient Technology - Lack of Skill-Based Training - Organizational Inertia - Union/Civil Service - Past Disappointments Existing Norms, Practices & Procedures Acceptance of New Approaches & Methods Acceptance of New Approaches & Methods

Getting Staff Buy-In Will Promote Implementation Success General awareness Communication Feedback Follow up

The Goals EEEExtension of Assets’ Lives OOOOptimal Maintenance Program OOOOptimal CIP RRRReliable, Planned Expenditures MMMMaximize Organization’s Knowledge of its Assets FFFFull Knowledge of Financial Impact of Expenditures RRRRisk Reduction The Steps UUUUpdate Asset Inventory EEEExtract “Knowledge Management” from Staff CCCCriticality Assessment CCCCondition Assessment MMMMaintenance Evaluation AAAAsset Replacement Evaluation FFFFinancial Planning SSSStaff Training & System Integration PPPPublic Education Adopt “Best Fit” Program to Support Your Needs and Priorities…

Additional Refinement Tools and Processes AM Program Refine & Calibrate Staff Activities Sustainable Assets Precise CIP Minimized Cost Organizational Alignment High Quality Customer Service Maximized Performance Knowledge, Confidence, Precision The Results...