Best Practices: Study Examines Trends in Asset Management
A study by CH2M HILL and McGraw Hill Construction was conducted to determine which of 14 best asset management practices 451 respondents from utilities in the U.S. and Canada water sector have adopted and whether or not these practices have impacted how water utilities - and the water industry as a whole - regulate their resources.
By Art Haddaway, WaterWorld editor
The water industry has faced a number of challenges in recent years, from an increase in water scarcity to aging systems and equipment to changing patterns of supply and demand, all while trying to balance a reasonable budget.
For many water utilities, adopting an asset management program has helped combat these issues as well as maximize profits, meet customer demands and manage overall operations. Even more, however, water utilities have utilized best management practices to help improve the state of their aging infrastructure.
A recent study by CH2M HILL in partnership with McGraw Hill Construction found that 75 percent of water utilities employing asset management practices had considered aging infrastructure to be a significant factor in their decision to adopt an asset management program.
Titled "Water Infrastructure Asset Management: Adopting Best Practices to Enable Better Investments," the study received 451 responses from utilities in the U.S. and Canada water sector. It was designed to determine which of 14 asset management practices they implemented and whether or not adopting these practices have had a significant impact on how water utilities — and the water industry as a whole — regulate their resources.
"The goal of the study is to really understand the extent to which best asset management practices have been adopted in the water industry in the U.S. and Canada and which practices yield the greatest benefits, what benefits have been achieved, what the barriers are to implementation — both from an individual utility perspective and an industry perspective," said Nick Pealy, senior consultant of asset management and reliability services at CH2M HILL and project manager of the study.
According to the research, 39 percent of respondents said the main driver behind asset management adoption across the water industry is replacing, upgrading or expanding infrastructure, and 29 percent consider the ability to determine budgets and manage capital investments as the second most important. Further, more than one third of all respondents are implementing 10 of the 14 practices listed in the survey as a result.
"These practices are ideal for a water utility — or even a wastewater utility and a city government or private firm," Pealy said. "They help those entities achieve what asset management is about, which is minimizing the whole lifecycle cost of owning and operating your assets, and so all the different practices put together help those organizations meet those objectives."
In the last decade, water and wastewater utilities have grown more concerned with the state of their infrastructure and more interested in adopting asset management practices that provide the best strategies to maintain and improve it. With the water industry's growing willingness to adopt these practices, the majority of utilities are expected to be using most of them by 2017, the study indicates.
Sixty-five percent of respondents are already implementing four or more asset management practices, while only 18 percent are employing 10 or more of the practices listed in the survey. Further, the development of an asset management policy is considered one of the greatest areas of growth among water utilities.
"I think utilities are engaged in collecting data and information, assessing where they are relative to leading practice and developing improvements for the future that are going to provide value to their customers and to the environment," said Scott Haskins, vice president and director of management and operations services at CH2M HILL and member of the project's management team.
Although each utility's reason for adoption is different, more and more of them are recognizing that best management practices put them in a better position to make a difference in every level of operation, from strategies and performance to processes and methods to data and technologies — three areas of focus vital to the success of asset management.
Practices involving strategies and performance help water utilities properly measure their performance as well as identify the best approach to managing their assets. Six of the 14 practices comprise this field, and many facilities are expected to have adopted most of them by 2017 given that this approach is a rising trend in the water infrastructure sector.
Employing practices such as customer service strategic asset management plans (SAMS); consideration of environmental, social and economic costs and benefits; and developing and monitoring customer service and asset service-level performance measures are all used to help utilities determine how well their facilities function on a scheduled basis and, in turn, how effectively they serve their customers.
"What the customers deserve is [for their utility] to be replacing infrastructure at the right time using good decisions, finance and applying lifecycle costs, and really evaluating the appropriate level of risk, level of service that these utilities should intend to provide," said Haskins.
"It's so important the way you spend your dollars or where you put your people's resources," said Pealy. "You don't want to be allocating your resources to non-value-added activities; you want to be putting them where they make a difference for the customer. It really helps you focus better on priorities. It means that your whole organization uses a common framework and methodology for making decisions, making recommendations about investment decisions, and then executing those decisions."
Five of the 14 practices employ processes and methods to help utilities make sensible investment decisions, covering areas including staff training; business cases for operations and maintenance (O&M) and capital improvement plan (CIP) investments; and consideration of risks and consequences of alternative investment/budget decisions.
Practices that encompass process and methods help utilities tactically assess risk and capital prudence by prioritizing their resources and capital and operating investments in order to maximize performance, said Pealy. As a result of its financial benefits and high stakeholder involvement, this area is a central focus for the majority of respondents.
"One of the key benefits that many of the respondents listed was that good asset management practices improve their ability to defend and respond to questions about their budget and explain their budgets to their governing bodies," said Pealy. "Utilities have tended to think that the real dollars of a capital investment are the upfront dollars, but many of these projects have very large operating costs over time, and when you look at the many alternatives, you really need to look at those operating costs."
"It's basically a methodology where you look at alternative ways to solve problems, and you identify cost benefits and risks associated with those alternatives, and you basically in effect do a cost benefit type of analysis of those alternatives to help you make decisions," said Haskins.
When it comes to gathering and recording important information by means of data and technology to support their asset management programs, utilities rely on three of the 14 practices to help them: use of an asset register to facilitate analysis and planning; asset-condition assessment for renewal/replacement planning; and a computerized maintenance management system (CMMS).
Monitoring and tracking asset performance is widely adopted in the industry and plays a large role in helping water utilities meet their performance goals. In fact, these practices rank first, second and fourth of all the practices adopted in the entire survey, according to the study.
"Decisions are always better when there is good data to support them and good ways, models and methods of evaluating that data," said Haskins. "By having better data and information, it allows you to focus on priorities and to better understand the basis for better business results."
John Fortin, director of asset management and reliability at CH2M HILL and participant of the study said, "What the technology does is turns data into information so that it can feed back out to measure how you're doing against your processes and strategies. Data is the information you're collecting against those performance standards that you've set up at the strategy level, and technology is how the data is captured and reported out, so that's very supportive."
According to the study, there are seven benefits to utilities adopting best management principles, with three considered as the top advantages: a better focus on priorities; improved ability to explain and defend budgets/investments to governing bodies; and better understanding of risks/consequences of alternative investment decisions.
Those water utilities using 10 or more of the 14 practices also experience most of the seven benefits including reduced costs without sacrificing service levels; non-cost savings business benefits; increased ability to balance between capital and operating expenditures; and better understanding of environmental, social and economic costs of investment and budget decisions.
Adoption of these practices also improves and maintains the partnership of water utilities across the industry, advancing opportunities to "communicate what they're governing about, levels of service, costs and the risks that they're encountering," said Haskins.
It's evident that an asset policy better equips water utilities to serve their customers more effectively through a holistic overhaul of their financial, social and environmental infrastructure. Further, over 60 percent of respondents that have implemented 11 of the 14 practices have found them to be successful, whereas less than 10 percent have considered them ineffective.
"Asset management practices, when implemented, are going to lead to higher performance, greater credibility with elected officials and provide a better, long-term basis for determining the best pathway for investment in the utilities," said Haskins.
"My favorite thing about this study would be the documented benefits that people who have adopted asset management have realized," said Fortin. "It is a holistic approach to efficiency that brings traditional, functional siloed units together so they work as a more holistic unit in maximizing the effective life of physical assets, thus providing a return on investment to efficiency and effectiveness."
While there are many benefits to implementing an asset management program, there are also many challenges. For one, lack of internal staff capacity/skill sets as well as complexity, effort and cost of implementation rank among the toughest along with difficulty in developing useful service-level targets. Lack of adequate data for rigorous analysis and planning is also an issue, according to respondents.
The development of an asset management policy requires water utilities to assume a high level of change and financial outlay in every area of operation, and as result, many find themselves lacking the proper education and funding to fully adopt an effective program.
"From a global standpoint, aging infrastructure is one of the leading issues, and different utilities have different asset profiles and ages of systems, but the infrastructure is not designed to last forever, and so it presents a big challenge to keep up with the needed investments in order to finance these improvements," said Haskins.
According to the research, 36 percent of respondents say that the biggest barrier to asset management adoption is the complexity of the process.
"There's a lot of different pieces to it. If you try to do it all at once, you're making a mistake," said Pealy. "I think most organizations that step into it carefully and pick a few fundamental practices to implement are going to be better off than places that try to implement the whole menu all at once."
One of the ways to overcome these barriers and encourage greater adoption across the industry is to implement a system that gives utilities access to proof of costs and benefits as well as education programs associated with asset management. According to the study, 24 percent of respondents said that having the ability to access information to help them implement a policy was a high incentive, and 22 percent regard education as a necessary focus.
"The ability to implement [asset management] effectively requires education and requires the engagement of the workforce so that the culture accepts asset management and is really committed to those practices and principles," said Haskins. "I think it helps them deal more effectively with the issues and challenges of today and tomorrow."
Other options include better funding; simplified, affordable implementation; expanding regulatory requirements; and better understanding of aging infrastructure risks.
Along with these objectives, there are many others, including having a wide range of educational and informational resources available to utilities — from white papers and cases studies to research projects and product exhibits — to help them adopt an effective program.
Employing these practices takes time, dedication and knowledge of the proper steps to success. Using "levels of service, performance measurement, using risk and consequence, you can see results within a year," said Pealy. "Some of the other practices take a while to implement and you don't see them immediately, but certainly they'll yield high benefits."
"There are practices that you can scale to your needs; focus it on critical needs," he said. "You should consult others in similar situations to find out which of the additional practices would benefit you the most."
"The water and wastewater industry is comprised of extremely dedicated and confident people who want to do the right thing," said Haskins. A report like this "puts utility leaders and asset management practitioners in a better position to respond to the needs of customers and the environment."
Asset Management Practices
1. Computerized maintenance management system
2. Asset-condition assessment for renewal/replacement planning
3. Business cases for operations and maintenance (O&M) and capital improvement plan (CIP) investments
4. Asset register to facilitate analysis and planning
5. Optimization of the balance between O&M and CIP
6. Staff training and development on asset management
7. Consideration of risks and consequences of alternative investment/budget decisions
8. Consideration of environmental, social, and economic costs and benefits
9. Strategic asset management plans
10. Developing and monitoring customer service and asset service-level performance measures
11. Development of an asset management policy
12. Benchmarking and/or a needs assessment to establish an asset management implementation plan
13. Customer and asset service-level development
14. Reliability-centered maintenance