the journey towards asset management excellence

The Journey towards Asset Management24 July 2014

Strategic alignment Shared vision Strategic partnerships Balanced scorecard

BIMS

ISO 55000

The Destination

Definition “A set of coordinated activities that an organisation uses to realise value from

assets in the delivery of its outcomes or objectives. Realisation of value requires the achievement of a balance of costs, risks and benefits over different time scales.” (Draft ISO 55000 - Asset Management)

Drivers behind rising Asset Management awareness The rising profile of whole of life costs e.g. PPPs

Statutory obligations – obligations for government bodies to have an asset management plan

The rising cost and scarcity of money

Risk management

Value for money principals

PAS55/ ISO55000

Industry benchmarks e.g. TEFMA

Asset Management Benefits Optimised financial performance

Managed risk

Improved services and outputs

Corporate / social responsibility

Demonstrated compliance

Enhanced reputation

Improved organisational stability

Regressive

Reactive

Planned

Proactive

Don’t fix it

Fix it after it breaks

Fix it before it breaks

Don’t just fix it, improve it

• Minimise Defects• Improve Precision• Redesign• Value Focus• Reliability Centred

Maintenance• 3-5 Year Fixed

Price Contracts

• Asset Management Plans

• Capital Works Handover Processes

• Forward Works Plans• Cmms • Predict/Plan• Condition Monitoring• Critical Spares• Centralised Control• Kpis• Fixed Prices &

Schedule Of Rates Contracts

Efficiency

Excellence

Cap

abili

ty

• BIMs• ISO 55000• Strategic Alignment• Shared Vision• Balanced Scorecard• Strategic Partnerships• Asset Management Excellence Audit

Sample.Pdf• XXXX Audit Report July 2014.Pdf

• Respond To Unusual Energy Consumption

• Tri- Certification• Compliance• Run To Fail• Approved Lists• Schedule Of Rates

Contracts

The Asset Management Excellence Journey

The Other End of The Spectrum

EFFECTIVE LIFE

REPLACE

PROGRESSIVE (ACCRUED)COST OF FACILITY

CASH FLOWOF ASSETS

CREATE MAINTAIN DISPOSALREFURBISH

0 100%

VALU

E / C

OST

S( R

EAL

TER

MS

)

Comparison of gas fired heating versus electric heating for student accommodation on ‘brown field site’

Gas Item ElectricCapital cost of construction

Capital cost of life cycle works

Maintenance costs

Impact of utilities costs over time

Robustness

- Relatively High

- Medium

- Relatively Low

Funding Challenges for Planned Maintenance and Lifecycle Replacement Works The consequences of under-spending is unlikely to be immediately apparent to the

customer.

Non-core business requirements are valued less highly than core business needs.

If the assets appear to be performing within the parameters that the customer expects of them, it can be difficult for these customers to perceive a need for major expenditure.

Assets that are performing inefficiently, either due to inadequate maintenance or from having been retained in service beyond their economic life, often deteriorate gradually.

Common approaches to Lifecycle Estimating

Fixed % of value per annum

Squeaky wheel

What did we spend last year?

Advantages

Predictable budgets

Transparent calculation methodology

Fully auditable

Consistent approach

Disadvantages

Availability of funds = Backlog maintenance issues =

Reliability of assets + Responsive repair costs +

Unscheduled service interruptions +

VALUE FOR MONEY!!!Incidences of premature asset failure =

Does not reflect reality =

No direct link between estimated lifecycle costs and actual performance of assets.

Estimated lifecycle costs assume external factors do not impact lifecycle.

Disadvantages

6TH MARCH 2010… the world is changing …

… the world is changing…

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http://www.sxc.hu/browse.phtml?f=download&id=1148665

Typical 25-year Life Cycle Cost Model

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 250

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000Typical Lifecycle Cost Model - 25 Year

Annual Lifecycle

Cumulative

Year

$(m) $(m)

Cost of Service

QualityCondition

Optimal Life Cycle Costs

EXCELLENT

POOR TIME

ORIGINAL DECAY OPTIMALCONDITION

BAND

OPTIMAL RENEWALSTRATEGY

Asset Condition Survey Methodology

Case Study One

Supported State Housing Department > 500 properties supported living units

Located throughout Victoria

Lifecycle & maintenance funding = $7,000 p.a. / property

Substantial back log maintenance issues

Establishing business case for asset replacement was challenging

Typical Life Cycle Cost Model- 60 Years

$- $- $- $- $-$7

,613

.98

$6,0

77.3

7$- $-

$3,2

57.1

7$-

$8,5

30.0

8$-

$7,6

94.2

5$4

6,96

3.86

$-$7

,613

.98

$6,6

86.9

2$-

$70,

559.

61$6

,077

.37

$-$7

,613

.98

$916

.10

$767

.72

$- $-$1

5,30

8.22

$-$1

31,8

91.3

4$- $- $-

$7,6

13.9

8$9

2,18

9.22

$916

.10

$- $1,6

93.5

0$-

$96,

869.

83$-

$7,6

94.2

5$- $-

$54,

577.

83$- $- $9

16.1

0$6

,077

.37

$145

,834

.64

$7,6

13.9

8$- $- $- $- $1

12.3

2$- $- $-

$82,

626.

41

$-

$20,000.00

$40,000.00

$60,000.00

$80,000.00

$100,000.00

$120,000.00

$140,000.00

$160,000.00

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59Years

Dol

lars

$ (A

UD

)

Annual spend in $ (AUD)

Supported State Housing Department (cont’d)

Typical lifecycle profile for all properties identified

Point at which assets were ‘technically dilapidated’ identified

Lifecycle & maintenance funding increased to $24,000 p.a./ property

Business case for asset replacement established

Supported State Housing Department (cont’d)

Case Study Two

Country Base Hospital Decision taken to consolidate services at two hospitals

Management of hospital to be transferred between two state health departments

Initial period - 5 years

Lifecycle liability of infrastructure & biomedical assets to be agreed at the point of transfer

Basis of joint funding for lifecycle liability to be agreed

Lifecycle liability of infrastructure and biomedical assets for next five years was established

All assets scheduled for replacement were risk ranked

Both parties agreed sum for lifecycle replacement works for extreme and high risk assets

Tool provided a robust, transparent and equitable basis for mutually agreeing funding levels

Country Base Hospital (cont’d)

The Asset Management Process

BIMS

The risk profile varies from organisation to organisation…

Low Accuracy of Asset Lists High

Risk ranking of assetsLow High

Reliability Centered MaintenanceLow High

ISO: 55000 alignmentLow High

Benchmarking/ Trend AnalysisLow High

Whole of life cost managementLow High

Reliability

Strategic AlignmentLow High

- Outside Toilet

- Core business equipment

Tailoring Asset Management to Your Business Needs

Strategic Asset Management

• Formulate Business Plan for Board Sign Off• Commercial Planning and Outcomes• Determine Stakeholder Needs and Engagement• Analyse and Benchmark Assets• Undertake Due Diligence

• Value Engineering• Service Level Agreement Design• Re-procurement of Service• Shape Economies of Scale• Supplier Development Plan

• Manage Operations• Audit and Reporting• Measure and Improvement Program• Customer Satisfaction Evaluation

Operational

Tactical

Strategic

Key to an effective asset list A standardised approach to naming conventions

Standardised naming conventions applied to all assets

Naming convention typically follow published naming principles e.g. BCIS

QA controlled master list of assets

A ‘single source of truth’

Standardised approach to asset list inclusions e.g. > $1,000 in value and/ or requiring planned maintenance interventions

Assets <$1,000 in value are typically bundled e.g. RCD’s, fire equipment etc.

Include replacement value and date of installation

Sub- divide entire portfolio into logical and appropriate areasAsset Hierarchy Development (BL 23-04-14).xlsx

CMMS

The Asset Management Process

CMMS Features

Reliability Centred Maintenance (RCM)

Reliability Centred Maintenance Identify major asset with unusual failure patterns (e.g. desalination pump)

Sub- divide asset into composite assets (e.g. impellers, electric motor, etc.)

Identify nature and consequences of composite asset failures

Undertake a root cause analysis of each failure

Identify remedial works required (e.g. repairs and modifications)

Undertake a Cost Benefit Analysis re: remedial works required and implement as appropriate

Budget for and implement a planned maintenance regime to mitigate issues going forward

Identify training needs and implement

Identify documentation needs and implement

Root Cause Analysis

Site 1 Site 2 Site 3 Site 4 Site 50

500

1000

1500

2000

2500

3000

3500

Mean Time Between Failure - Pumps - Site Comparison

Average

Location

MTBF(hr)

0 2 4 6 8 10 11 14 16 18 21 19 23 25 27 29More

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Annual No of Failures by Pump - Frequency Analysis

Annual Failures

No of Pumps(8284)

Root Cause Analysis

5 10 15 20 25 300%

5%

10%

15%

20%

25%

30%

35%

Pump - Residual Life Analysis

Years in Service

% of Pump Popula-tion

Design Life

Root Cause Analysis

Pump Failure - Root Cause Breakdown

Lack of Lubrication

Operator Error

Dilapidated

Blocked

Wear and tear

Corrosion

Utility supply

Vandalism

Revise Planned Maintenance – Increase Lubrication Frequency

Training Program to Educate Site Operators

Review Capital Expenditure Program and Undertake Lifecycle Analysis

Root Cause Analysis

ISO 55000 - Background A new International Standard released in early 2014

Based on PAS 55

Consultation with > 30 countries including Australia

Government clients are mandating this Standard e.g. QLD Health & Federal Government

Incentivises a risk based, standardised and consistent approach to asset management

ISO 55000 - Features and Benefits Asset management policy encourages strategic alignment with core business

Risk based approach

By focusing on critical assets, expenditure is prioritised

Introduces best practice

Facilitates a proactive approach to asset management

Facilitates effective benchmarking

Supports probity and transparency

Begin with the end in mind Future proof by design

Source locally where possible

Ensure key components, systems and sub- systems are backed by guarantees and warrantees

Maximise local skills and materials

Avoid locating plant on roof

Construct plant rooms before plant has been installed

Consider maintenance access to high level architectural features e.g. glazed atriums.

Ensure metering supports future flexible usage of spaces

Always ensure service access to plant

“Black Start” test entire facility prior to handover

Make receipt of O&M manuals a ‘condition precedent’ of practical completion

Questions