Infrastructure Asset Management

Infrastructure Asset Management is the discipline of managing infrastructure assets that underpin an economy, such as roading, water supply, wastewater, stormwater, power supply, flood management, recreational and other assets. In the past these assets have typically been owned and managed by local or central government. Investment in these assets is made with the intention that dividends will accrue through increased productivity, improved living conditions and greater prosperity. [Association of Local Government Engineers New Zealand: "Infrastructure Asset Management Manual", June 1998 - Edition 1.1]

A well-defined Standard of service (SoS) is the foundation of Infrastructure Asset Management. The SoS states, in objective and measurable terms, how an asset will perform, including a suitable minimum condition grade in line with the impact of asset failure. There are two main objectives of Infrastructure Asset Management relating to standard of service:

A) Sustain SoS (System Preservation): to sustain or deliver an agreed standard of service in the most cost-effective way through the operation, maintenance, refurbishment, and replacement of assets. Management of this objective is the focus of Asset Management Plans.

B) Change SoS (Capacity Expansion): to make strategic changes and improvements to the standard of service of the asset portfolio through the creation, acquisition, improvement and disposal of assets. Changes to the SoS are usually managed as a programme based on strategic objectives regarding the asset portfolio.

ustain SoS (System Preservation)

The key components of the sustain SoS objective are:
* a defined standard of service
** measurable specification of how the asset should perform
** minimum condition grade
* a whole-life cost approach
* asset management plan

Defined standard of service

Without a defined standard of service (SoS) there is no means of knowing what service level customers can expect, and no effective control on the whole-life cost. With a clearly defined SoS, the asset manager is clear about how success or failure will be measured, and the customer understands what to expect in return for the expenditure on the asset system. There are two parts of a well-defined Standard of Service: the minimum condition grade and a specified performance standard. By managing against a defined SoS, which couples the performance specification with the condition grade as a measure of reliability, Asset Managers avoid the considerable complication of trying to optimise maintenance over short timeframes, or the need to determine the outcome or benefit associated with each individual intervention. Asset Management takes a whole-life cost approach to decisions regarding operation, maintenance, refurbishment and replacement of assets.

Performance specification

The first part of standard of service is an objective, measurable specification of how the asset should perform. This would normally include a specification of the attributes of the asset which are important to its function e.g. location, type, height, capacity. A good performance specification will avoid being prescriptive about the method, but be specific enough to be simply and objectively measured. For example, a specification for a roading asset might be that it is capable of conveying 200 vehicles per day, with a certain roughness coefficient. A flood management asset should be specified in terms of crest-level and location - not in terms of the return period against which it might offer protection.

Minimum condition grade

The minimum condition grade part of the SoS informs decision making about when to maintain, repair, refurbish or replace an asset. With a performance-based asset management approach, decisions are flexible and depend predominantly on the current condition of the asset as well as the age of the asset, and the likely future deterioration profile. This differs from a planned maintenance approach (which does not take into account the current condition) by responding to the actual deterioration and performance of an asset. For example, a stormwater debris screen is cleared after a rain event, when it is partially blocked, rather than, say, every two weeks. The minimum condition grade needs to be set objectively, in line with the scale of impacts or consequences of asset failure during the design event. The minimum condition grade provides a key boundary condition for making investment decisions.

Over the life of a typical infrastructure asset, a representation of the changes in condition grade, might look as shown in the graph, where "X" is the serviceable life of the asset before it is replaced in order to sustain the standard of service. The minimum condition grade for this asset has been assessed as CG4.

Whole-life cost approach

Also referred to as "total cost of ownership" (TCO) or "lifecycle cost".

Over the life of an asset, there are likely to be hundreds of individual interventions, which together sustain the agreed SoS. Undertaking a formal investment appraisal to assess options or the relative benefit for "each individual intervention" or even an annual programme of interventions would be very complicated, and prohibitively expensive. It is the sum of the cost of all the individual interventions, and their effect on the whole-life cost of providing the SoS that we are concerned about.

By implementing a system that keeps a historic record of past expenditure, coupled with a forecast of expenditure to sustain the SoS we can provide a solid foundation from which to assess the asset manager’s performance.

The objective of sustain investment decisions can therefore be stated:

To provide the agreed standard of service for the minimum whole-life cost.

Delivering the agreed standard of service is a relatively simple concept on its own. We will now look closer at how to approach the other key objective – to minimise the whole-life cost.

Minimising the whole-life cost

At its most simple, Asset Management attempts to optimise the trade-off between maintenance and replacement. For a given standard of service every asset in a system requires a decision about how best to manage the asset, and at which point replacement or refurbishment may represent the most cost effective approach. The graph shown represents a summary of this, with three alternative asset management regimes, A, B & C.

Option A on the left, is a maintenance regime where the annualised maintenance costs are low, but the annualised capital costs (blue) are relatively high. In this option the asset is effectively allowed to deteriorate faster with minimal maintenance before being replaced. This scenario could be expected in a situation where maintenance costs come out of a local revenue budget but capital costs are controlled centrally, or where an organisation is under pressure to minimise revenue costs and incentivised to maximise its capital expenditure.

Option C on the right, is a maintenance regime where the annualised maintenance costs are high, preventing the deterioration of the asset and reducing the annualised capital cost of sustaining the SoS. Whilst the asset life is much longer, the cost of doing so is ultimately more expensive than if the asset was replaced earlier. Delaying or avoiding the cost of replacing the asset requires more frequent and expensive maintenance and repair in order to sustain the SoS. This scenario could be expected in a situation where it may be difficult to justify the replacement expenditure, or where the prioritisation system favours improvement projects.

Option B in the middle represents the maintenance regime that minimises the whole-life cost of providing the required SoS. This is the lowest point on the yellow line that represents the sum of the two major components of whole-life cost and is the optimum balance between maintenance and replacement costs. This scenario is most likely in an organisation that is operating an effective asset management regime with clear responsibility for whole-life cost attributed to a single person and good information systems to support that person in making the best asset management decisions based on the whole-life cost.

Asset Management Plan

Asset Management Plans (AMP) are tactical plans for managing an organisation's infrastructure and other assets in order to achieve strategic objectives. Usually an Asset Management Plan will cover more than a single asset, taking a system approach - especially where a number of assets must work together in order to deliver an agreed standard of service.

It is in the Asset Management Plan that the standard of service is recorded and compared against current standard, along with a long-term plan that shows how an organisation will deliver the defined standard of service for the minimum whole-life cost.

Priority in investment decision

It is typical in an Asset Management setting that Sustain SoS (system preservation) "comes off the top" of the available funding. [ [http://books.google.co.uk/books?id=G2HLWyb3_psC&pg=PA23&dq=preservation+of+the+system+is+%22taken+off+the+top%22&sig=p8Q0MOAqXNR6ZZGOZtmEReCnmrI Transport Research Group "Performance Measures and Targets for Transportation Asset Management", 2006 - ISBN 0309098475] ]

Change SoS (Capacity Expansion)

Asset portfolio strategy

An Asset portfolio strategy revolves around meeting customer needs in the most effective and efficient way.

Key asset portfolio strategy questions include:
* Is the need for the service real?
* What standard of service is required?
* Are the long-term costs of the current asset portfolio affordable?
* Have non-asset solutions been explored?
* What standard of service should new assets provide?

This result of an Asset Portfolio Strategy often involves making strategic changes to the portfolio of assets in order to achieve strategic objectives, including whetherof which some may be achievable without the use of infrastructure assets.

This can be a combination of creation or acquisition of new assets or the disposal or improvement of existing assets. Depending on the drivers for change, this may be to meet new demand (e.g. extending power supply to a planned development) or to relieve bottlenecks (e.g. providing additional roading capacity), or in response to reduced demand (e.g. disposal or abandonment of roads which are no longer in use) or where investment policy has changed (e.g. flood defences protecting low-value agricultural land from sea-level rise).

In managing the asset portfolio, the long-term financial sustainability is an important boundary condition. Over-extending the asset portfolio beyond what will be affordable for future generations to maintain and operate is not sustainable. Social and environmental costs and benefits should also be considered carefully. To determine long-term sustainability a good understanding of the long-term costs of sustaining the asset portfolio is required.

Improvement programme management

Improvement programme management is the short-medium term management of a series of projects, that deliver the strategic objectives identified in the Asset Portfolio Strategy. The improvement programme will often involve a mix of asset acquisiton or creation, as well as changes to existing assets, either to provide a higher standard of service, or in the case of disposal or divestment, reduce the standard of service. Controlling the initiation of change projects is an important function of improvement programme management.

Improvement project management

Changing the SoS of an existing asset usually requires careful consideration of the wider costs and benefits. Often this involves consultation with customers and other stakeholders who may be affected by the SoS change. As a result, potential SoS changes are typically managed as a project.

In the development phase of each change project, a business case for the change is required where options are developed, compared and consulted on before choosing the preferred option. Once the investment decision is made, managing risks and costs during the delivery phase is the responsibility of the project manager before handing over to the asset manager on completion.

History

The development of the Toyota Production System between 1948 and 1975 led the way for Infrastructure Asset Management, as an integrated approach to reducing cost. This has then been coupled with the principles of risk management from highly regulated nuclear, and petroleum industries. Asset Management effectively puts these two parts together to deliver a defined service for the least cost.An early development in applying these ideas to publicly owned and operated infrastructure occurred in New Zealand with the passage of the Local Government Act 1974. This required each local authority to:

* prepare an annual plan indicating performance measures in consultation with their community,
* prepare an annual report outlining council performance against annual plan objectives,
* adopt financial systems and policies in accordance with generally accepted accounting principles.

These requirements are well aligned with the objectives of Infrastructure Asset Management, and led to early attempts at an Asset Management Plan. Before this, the true costs of owning and operating infrastructure assets were generally not disclosed or known.The introduction of Australian Accounting Standard 27 (AAS27) in 1993 had a similar effect in Australia, requiring local governments to report on the current value and rate of consumption of their infrastructure assets.

In New Zealand, this was taken further by the Local Government Amendment Act (No. 3) in 1996, which required local authorities to:
* prepare and adopt a long-term (10 years plus) financial strategy every 3 years,
* include any asset creation/realisation and loss of asset service potential,
* take into account the benefits and costs of different management options
* fund or otherwise provide for any loss of service potential (depreciation)In order to provide this further level of detail, more advanced Asset Management Plans were produced.Building on this body of experience, and to encourage a more consistent approach, the first edition of the NZ Infrastructure Asset Management Manual was printed in 1996.Since then, the theory and application of Asset Management has developed further and adopted in other countries with significant infrastructure assets and the International Infrastructure Management Manual was printed in 2000. The 2006 version includes sections with case studies for New Zealand, Australia, South Africa, United Kingdom and United States.

Asset Management Toolbox

* Asset register
* Visual condition grade assessment
* Asset valuation techniques
* Asset creation and acquisition decision-making
* Asset disposal decision-making
* Whole-life cost management techniques
* Auditing condition grade and expenditure
* Training

ee also

Asset Management Plan
Cost-effectiveness analysis
Cost-benefit analysis
Infrastructure
PAS 55
Whole-life cost

References

External links

* [http://www.nams.org.nz/Home NZ National Asset Management Steering Group]
* [http://www.iam-uk.org/ UK Institute of Asset Management]
* [http://www.iee.org/OnComms/PN/assetmanagement/IIMM.pdf Review of International Infrastructure Management Manual]