1. 1 Creating long term sustainable value in urban infrastructure Mark Brown, Amey December 2013

2. 2 Presentation content Introductions What is Asset Management? Case Studies Whither Asset Management? Conclusions

3. 3 What is Asset Management: The goal To help create better places to live, work and travel “ deriving value from assets in a structured and predictable way to meet the objectives of their owner” IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

4. 4 Typical breadth of assets provides a unique understanding of entire city landscapes IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

5. 5 To align with the globally recognised Standard for Asset Management IntroductionsAsset ManagementRisk TransferIdeas & Suggestions Strategy & Planning Decision Making Lifecycle Management Knowledge Organisation & People Risk & Review

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7. 7 Some of the questions that need answering.. Which roads/bridges, If any, should be replaced? What reactive maintenance can be expected? What level of M aintenance/ inspection should be planned? What risk is the business exposed to a s a result of the plans ? How can risk be managed and mitigated? Assets Policies, Strategies & Plans What contingency plans should be in place? What operational changes can be made to extend life ? What are the s ymptoms of imminent failure? What is the cost ? What is the effect on the longer term? IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

8. 8 Business as usual……. You want how much?!!! Just as well we doubled the estimate!!! FINANCE ENGINEERING??? IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

9. 9 The Amey Approach - Filling the gap IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

10. 10 Filling the gap IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

11. 11..and joining things up IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

12. 12 Making the links THE ASSET MANAGEMENT APPROACH IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

13. 13 Where is asset management applied in the built environment? IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

14. 14 Key building blocks of asset management EAMS - systems

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16. 16 ‘Basic - Competent Asset Management’ - Support to asset maintenance, based on knowledge of asset numbers, location, condition, etc EG:  Controlled asset register  Work plans and work execution managed within asset data systems  Basic planning and compliance reporting ‘

17. 17 Advanced Asset Management’ – whole-life value goal, through predictive modelling, risk management and optimised decision making techniques using detailed data on asset asset condition, performance and cost. EG:  Integrated Materials Stores Management  Optimised planning and scheduling  Predictive Maintenance – Condition Monitoring  Equipment based maintenance  Activity Based Costing  Standard Costing  Productivity Analysis  Cost per Asset  Advanced Reporting and Analysis

18. 18 Case Study 1 – London Underground ‘Tube Lines’ 50% of London Metro 500 million passengers a year. 340km of track, 101 stations; 251 trains 2,395 buildings & structures 93 lifts and 227 escalators Decades of under-investment £800m investment – 50% by private sector 30 year contract split into four 7½ year Periods IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

19. 19 Reporting framework and productivity management  Site Staff to Directors/Executive  Crosses functional/asset boundaries (Assurance/Projects Operations/LU, etc: can get same reports)  No excuses for not knowing  Staff see who is receiving report so enforces good practice against defined processes.  Back up by Report Tracking – total visibility

20. 20 Reporting structure – driving decision-making Ownership Accountability Monitoring Continuous improvement Single source of ‘truth’

21. 21 Case Study – ‘Tube Lines’ Outcomes IntroductionsAsset ManagementRisk TransferIdeas & Suggestions Reliability +66% Operations spend -15% since 2008 Introduced single world class asset management system Optimising Capex v Opex WLC costs -£26m Increased productivity Improved our worker safety.

22. 22 Tube Lines comparative performance with rest of Underground to date IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

23. 23 Asset Ownership Public Public & Private Private Operations & Maintenance Public & Private SharedPrivate Capital Investment Public Private Commercial Risk Public SharedPrivate Tariff Collection Public Private PublicPrivate Duration1-2 years2-5 years8-12 years25-30 years20-30 yearsIndefinite BOTDivestiture Responsibility Service Contract Management Contract Lease Contract Concession A few Examples of Risk Transfer Models IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

24. 24 Case study 2: Birmingham Highways IntroductionsAsset ManagementRisk TransferIdeas & Suggestions Vision to be ‘world class city’ by 2026 PFI funding to deal with maintenance backlog £600m PFI credits from central government £350m investment over 5 years Public demand – ‘something must be done!’ The project is worth c£2.7 billion over 25 years Largest Local Authority Highways PFI ever awarded

25. 25 What Does the project Cover Asset GroupQuantity Roads2,547 km Footways4,923 km Street Lighting Columns95,107 no. Structures and Bridges1,093no. Traffic Signal Installations967 no. Tunnels3 no. Pumping Stations15 no. Traffic Signs13,912 no. Gullies117,000 no. Trees80,000 no. Street Lighting Carriageway Pedestrian Guard Railing Traffic Signals Highway Trees Winter Maintenance Road Sign Illuminated Bollard Footway Gully Street Name Plate Road Markings IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

26. 26 Project Overview ‘Capex’ in Core Investment Period (CIP) Years 1 - 5: 6,500 km of carriageway and footways– over 55% treated 93,000 street lights – 50% replaced in CIP 29 structures strengthened in CIP, 3 tunnels refurbished Upgrade UTC to UTMC standards ‘Opex’ in Years 1 - 25 Surveys and inspections Routine, cyclic, emergency and winter maintenance Dealing with customers via Help Desk in Operational Control Room Lifecycle programme to maintain network to ‘performance standards’ Replacing up to1,000 trees each year IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

27. 27 Increase in productivity of around 30% due to packaging works by type and area & eliminating peaks/troughs 20% efficiencies via integrated service delivery The transfer of risk equates to c£100 million of other savings Improved service delivery e.g. Road Traffic Accident response rates What is the Project delivering? IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

28. 28 Birmingham Street Lighting PFI enables long-term investment LED solution New technology/remote monitoring – flexibility Improved visibility & community safety Reduction in energy costs of around £2m Approx 50% energy/carbon savings Delivering council’s carbon reduction targets IntroductionsAsset ManagementRisk TransferIdeas & Suggestions

29. 29 Whither asset management? There are spectacular examples of the success of asset management, adding significant whole-life value…. …..so why do relatively few organisations employ asset management to its full potential?

30. 30 Constraining the full potential of asset management Spend-to-save: sourcing funds to invest in long-term benefits Excessive focus on technology (eg: EAMS) and too little on people and outcomes Simplistic contracts which fail to share risk or incentivise innovation Credibility of the discipline: can these promised benefits really materialise?! Solutions and appraisal methods are ‘capex biased’: failure to comprehend whole-life value

31. 31 Conclusions Asset management is a holistic discipline: technology, process, people, finance… A key process is that of converting data into knowledge Asset management can operate under a variety of contract frameworks Finance can be key to unlocking future value: spend-to-save There are spectacular examples of success, adding significant value But, relatively few organisations employ asset management to its full potential

32. 32 THANK YOU Mark Brown Amey mark.brown2@amey.co.uk