asset management: an essential underpinning
TRANSCRIPT
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Asset Management:
The Strategic Context
An essential underpinning
in the sustainable deliver
of water and wastewater
services
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This Module
The impact of environmental assets and urban systems on the
quality of life.
The multi-generational challenges of urbanization, system
expansion and upgrade.
The financial context and resource requirements associated
with water and wastewater systems
The public policy aspects of managing urban systems and the
long term sustainable delivery of services.
Introduce Asset Management as a process and practice
integral to the sustainable deliver of water and wastewater
services.
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As an Example: The Minneapolis / St Paul Region Has
a Relatively Common Growth Pattern Since The 1950s
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In 1950: 1.5 million people
In 2010: 3.2 million people
Prior to WWII,
urban densities
were limited to
a small part of
the region.
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Where and How We Lived Changed Dramatically.
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By the 1960s the Impacts of Urbanization Brought
About The Next Major Institutional Response.
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A Seven County Metro System
The priorities:
• Consolidate treatment
facilities to get discharges
out off high value lakes by
building interceptor lines
• Upgrade the performance of
the remaining larger plants
• Separate the combined
systems
• Developed capability to
manage a lot more residual
solids
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By the 1970/80s, the Impacts of Urbanization Began to
Reach Into a Number of Adjacent Counties
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By 2000, Some of the Fastest Growth Was Occurring in
Counties That Just a Few Decades Earlier, Were Not
Thought To Be Part of the Urban Metropolitan Region
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It Did Not Take Long, Until the Region Spread Into
What, Until Recently, Were Very Rural Areas
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The Impact of Urbanization Even In The Far Reaches of
the Urban Fringe Is Less Obvious, But Quite Dramatic.
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Where there was
once a single
home, now there
are five. The
marsh is gone
and the water
flow in the stream
is intermittent
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Unlike the Farms, the Small Communities In These
Exurban Reaches Have Extension and Upgrade In Play
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A new regionalized
1 MGD facility
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The Water and Sewer Lines Below Were Installed in 1964
in Open Land In the Urban Fringe (The Red Marker).
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This is the Land Use, Today (the Pipe Network Installed
In Virgin Land In 1964)
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Understanding The Demographic and
Legacy Aspects of Assets Within a
Particular System Is Very Important.
It Is Also Important To Have Insight Into What the
Situation Looks Across Systems: A High Level
National Assessment.
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Long Life Assets (Example: Water Infrastructure) Are
Impacted By Growth Patterns and Demographic Shifts.
We are adding population
We are relocating
For the Better Part of 50 Years
Our urban densities declined
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The History of Urbanization, Environmental Degradation,
and a Generation of Expansion and Upgrade Substantially
Defines Major Aspects of the Current Challenge
In the 1970s, the country faced significant water quality
problems and major policy and strategic changes resulted.
The Federal government took on a larger role as a regulator and
became a very significant source of funds for capital
improvements.
A new permit process was established to control discharges to
the nation’s waterways.
Very large investments were made in the treatment of industrial
waste and in the upgrading of the public wastewater systems.
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The Last Several Decades Featured Large Investments
in Expansion and Upgrade
0
50
100
150
200
1968 1972 1978 1996
Source: USEPA, Progress in Water
Quality. An Evaluation of the
National Investment in Municipal
Wastewater Treatment, June 2000.
50 Million More
People Served
Higher levels of treatment
72 82 92 96
Total Plants
19,355 15,662 15,613 16,024
Less Than
Secondary 13.4% 19.9% 5.6% 1.1%
Secondary
48.7% 50.7% 58.2% 58.6%
More Than
Secondary 2.4% 17.6% 23.6% 27.6%
No Discharge
2.4% 10.2% 12.7% 12.7%
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$ In Billions Since 1972
The chart represents approximate values
Federal Total = About $140 Billion
Does not include the
portion of the networks
that were paid for as part
of the development
scheme
On a National Scale, The Expansion and Upgrade
Required Huge Investment Over An Extended Period
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The Emerging Challenge
0
50
100
150
200
250
300
1996 2016 20250%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1972 1996 2025
Additional Served
Population1996 to 2025
(In Millions)
Leveling Off of BODU
Removal Efficiencies
Source: USEPA, Progress in Water Quality: An Evaluation
of the National Investment in Municipal Wastewater
Treatment, June 2000.
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The Projected Growth (Alone), Could Produce BODU
Loadings Similar to the Mid-1970s
0
5000
10000
15000
20000
25000
1968 1972 1978 1996 2016 2025
BODu (Metric Tons Per Day)Source: USEPA, Progress in Water
Quality: An Evaluation of the
National Investment in Municipal
Wastewater Treatment, June 2000.
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A Gap Report Was Used To Provide a Transparent
Starting Point for Thinking About the Challenge Ahead
The Gap Report Was
Released - - WEFTEC 2002.
The Purpose -- To reach a
common quantitative
understanding of the
(Funding Gap) the potential
magnitude of increase in
investment needed to:
• Address growing
population and economic
needs, and
• Renew our existing aging
infrastructure.
http://www.epa.gov/owm/gapreport.pdf
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Asset Management Is a Natural Response to the Gap
Analysis
No Revenue Growth
Scenario
$45 $31 Total
$0 $10 O&M
$45 $21 Capital
Drinking
Water
Clean
Water
Total Payment Gap (20 Years)
(Average in Billions of Dollars)
Revenue Growth
Scenario
(Annual Rate of Increase - 3% Real)
$263 $271 Total
$161 $148 O&M
$102 $122 Capital
Drinking
Water
Clean
Water
Total Payment Gap (20 Years)
(Average in Billions of Dollars)
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$
100’s of actions /
improvements
by1,000s of
organizations
Confidence In the
understanding of
$ Requirements
/ Sources /
Affordability
The Policy Thrust of Sustainably Closing the
Gap Requires
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The Single Most Important Measure of
Success in Pursuing a Sustainable Strategy
Service Providers Are Able to Do Their Work
Expertly and Carry Forward Advancements in
Sustainable Practices
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The Institutional Characteristics of the Water and
Wastewater Industry Impact Management Strategies
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There are 16,000 public owned
wastewater system that serving
approximately 75% of the population
There are 54,000 community based
water systems serving about 94% of the
population.
As shown by the graph on the size
classes of drinking water systems, we
have a lot of small systems, but most
the population is served by relatively
few large system
Note that EPA does not own or operate
water or wastewater assets.
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There Appear to Be Mega-Trends In Ownership and
Management Within the Water Sector
Institutional arrangements are trending more holistic. The focus of
organizations is broader (on the full water cycle). The holistic framework
affords opportunity to capture additional efficiencies and make least life cycle
costs choices in investment strategies.
Steps are taken toward managing both centralized and decentralized service
options and in bring green and gray approaches into a common integrated
platform. No one size fits all.
Asset Management at a strategic and tactical levels forms the process and
practice underpinnings for investment decisions.
In the leading edge, Asset Management structures are becoming more multi-
sector oriented where key decisions and priorities are set in the broader
context of multiple infrastructure requirements across several service sectors.
The service are successful being provided in both public or private
organizations. In either case, the emphasis is on becoming more business-
like, more efficient and more customer oriented in the delivery of services.
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Local Strategic Context - -
“It’s very, very difficult to run a first class country
or city on second rate infrastructure” LGAC Video
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From a Community Viewpoint
Successfully leading requires a forward looking sustainable
pathway for both community wealth (infrastructure) and natural
assets.
Infrastructure decisions necessitate significant financial
commitments. Investment choices accrue benefits for
generations.
Short term constraints are contrasted with long term views
regarding best value and intergenerational equity.
Major decisions take place in a context of known unknowns and
unknown unknowns.
Conflicts arise between regulators and the providers and the
ratepayers and the providers. Compulsion is sometimes
required.
Sustainability strategies demand a collaborative way of thinking
and acting; the knowledge requirements encompasses scientific,
engineering, public policy, business and HR skills.
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From a Systems Standpoint, Our Systems Do Not
Represent An “ All Broke Crisis, Today” But, Are On
the Way to presenting a Persistent Systemic Problem
Our systems are aging.
The status quo will result in
increased public health and
environment risk.
Failure to manage the assets
based on least life cycle costs
strategies will require more
revenues over the long term
to meet service objectives.
We can do better!
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A sustainable pathway requires the ability to make
smart investments driven toward long term outcomes
Customers need to understand what a utility does!
They need to believe that it has value!
They need to be able to accept as true that the way the work is
done (The Practices) are competent, if not exceptional!
The need to be good
The need to be transparent
This about Process, practice, tools
and improved data for decision making
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Asset Management relates to sustainability
It’s A Critical Building Block
Better acquisition, operations,
maintenance, and renewal and
replacement DECISIONS makes a
sustainable strategy more
manageable.
A focus on the “How to” aspects
of making better choices helps
achieve service objectives at least
life cycle costs.
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Our Asset Management Efforts Have Focused On
Knowledge Transfer, Training and Collaboration
Develop
Asset
Registry
Assess
Performance,
Failure Modes
Determine
Residual
Life
Determine
Life Cycle &
Replacement
Costs
Set Target
Levels of
Service (LOS)
Determine
Business Risk
(“Criticality”)
Optimize
O&M
Investment
Optimize
Capital
Investment
Determine
Funding
Strategy
Build AM
Plan
2. What is my required
level of service?
3. Which assets
are critical
to sustained
performance?
4. What are my best O&M and
CIP investment strategies?
5. What is my best long-term
funding strategy?
1. What is the current state of my assets?
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Confidence Level
Rating;
Strategic Validation;
ORDM
FMECA;
Business Risk Exp;
Delphi Technique
Expected Life
Tables;
Decay Curves
Valuation;
Life Cycle Costing
Root Cause;
RCM;
PdM;
ORDM
Renewal Annuity
New Knowledge Is Mostly About The “How To” Requiring the
Development, Mastery and Transfer of Tools and Technique
Inventory Assets
Assess Condition
Determine Residual
Life
Determine Replacement
$ & Date
Set Target LOS
Assign
BRE Rating (Criticality)
Determine
Appropriate Maintenance
Determine
Appropriate CIP
Fund
Your Strategy
Demand Analysis;
Balanced Scorecard;
Performance Metrics
Build the AMP
Asset Mgt Plan,
Polices & Strategy,
Annual Budget
Condition
Assess Protocol,
Rating
Methodologies
System Layout;
Data Hierarchy;
Data Standards;
Data Inventory
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Harvesting the Analytic Value of Applying More
Advanced Approaches Demands Additional Skills
Governance Skills
Asset
Management Skills
Business System & Data Skills
Leadership
Skills
Existing
Core
Knowledge
The Focus Of
Current
Competencies
The
Opportunity
For Growth On
The Pathway to
Excellence
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Obviously, Attitude Plays a Major Role In Establishing a
Sustainable Situation. Knowledge Transfer Efforts Are
Focused on Early Adopters.
Leading
Edge
Could Be An
“A” But…. Make Me
Passing Is
Good
Enough
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Improving Asset Management Practices Is a Foundation
Issue. The Direction Is Relative Easy to Envision, But
Difficult to Make It Happen. These Are the Elements:
• Take actions that support and promote universal adoption of advanced
asset practices and there are lots of approaches.
Sustain Communities. Assure investments are aligned with
sustainable principles. Every dollar from every source for every
purpose is an investment decision.
Think First. Focus on upfront planning - - invest dollars early to save
long term.
Build Confidence that the choices are the right ones.
Invest in research and decision support (guidance, case studies,
tools, etc).
Invest in knowledge transfer through training and education
initiatives.
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Improving Asset Management Practices - - Continue
Require Asset Management Plans as a platform for integrating base
programs such as permitting, funding and enforcement activities with
initiatives such as green investments, energy and water conservation,
climate adaptation, and capacity development. Investments are made in the
context of the asset plan. Improve the processes and data quality used in
supporting decisions.
Document Progress. Defined and track success against triple bottom line
measures for social, economic and environmental objectives.
• Professionalize the practice. Bring about practice excellence through knowledge
development and transfer initiatives. Facilitate opportunities and venues for
education and training. Document the learning process through the certification
and credentialing.
• Collaborate with other sectors. Encourage multi-sector AMPs & cross-sector
partnering.
• Advance by taking small steps in the right direction. (continuous improvement)
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There Are Several Take Home
Messages
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Some Asset Deteriorate Quickly,
Others Over Generations
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More Pipe In Lower Condition Levels
Will Impact Costs and Performance
1980 2000 2020
Excellent
Good
Fair
Poor
Very Poor
Life Elapsed
Approximately 2 - 2.5 Million Miles Water
/ Wastewater: Public / Private
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A Particular Situation Is a Reflection of the
Demographic Patterns of the Specific Region.
Seven Metropolitan Regions That Currently Have Simliar Service
Populations
0
200
400
600
800
1000
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
Po
pu
lati
on
by
De
ca
de
in
(00
0)
What services costs in Prosperville, may not provide
valuable insight into the costs of services in
Bommertown. Specific knowledge is required.
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All Assets Are Not Equal!
(Criticality) is a function of:
• “Consequence” &
• “Likelihood” of Failure
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Best
Appropriate
Process + Quality of
Data Used
Confidence
That the
Course Is the
Right One!
=
Respect the Value and Quality of
Information!
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Capital, Operations, Maintenance,
Repair, Renewal, Replacement
It’s all investment!
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What Does Mature Practice Look Like?
Assets Are Critical to Sustained Performance Broad Creek Basin
0
1
2
3
4
5
6
7
8
9
10
0 20 40 60 80 100 120 140 160 180 200
Pro
bab
ilit
y o
f Fa
ilu
re
Consequence of Failure
Manholes Collector Sewers Interceptor Sewers Trunk Sewers
ZONE 5ZONE 4
ZONE 3
ZONE 2
ZONE 1
Broad Creek Basin Business Risk Exposure
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Start Simple: Grow the Practice
What do you need to know to have confidence that
a course of action is the right thing to do, at the
right time, at the right costs.
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Websites & Video Sources
http://www.epa.gov/owm/assetmanage/index.htm
http://www.epa.gov/awi
https://courses.worldcampus.psu.edu/public/buried_assets/
http://www.epa.gov/waterinfrastructure/lgac_video/index.html
http://liquidassets.psu.edu/
End of This Module
Thank You for Your
Time!