Five Core Questions to Answer for Effective Management of System Assets

Asset management is more than simply “managing one’s assets.” Asset management goes beyond managing capital equipment (pumps, motors, etc.) and taking care of equipment. More accurately, asset management is a comprehensive, integrated process for maintaining system infrastructure assets and equipment for the most effective, least-cost allocation of resources, in order to sustain the utility over time.

If you read that and say to yourself, “I’m already doing that,” you’re probably right, at least in part. True asset management takes more into account than just equipment alone; it looks at each piece of equipment in a big-picture, “whole life” way that includes planning, financing, assessing risks, maintaining it, record-keeping and prioritizing replacement. Asset management may seem time-intensive and costly, but it is a long-view investment that has helped many communities save money over the long term. By being proactive versus reactive and not waiting until something breaks to replace it, systems are able to often able to provide more affordable, reliable service with fewer negative impacts for customers and/or service interruptions.

Asset management looks at every aspect of an asset during its entire life span from planning and design to obsolescence and removal. To do this requires asking and answering five critical “core” questions, identified by the U.S. Environmental Protection Agency.

1. WHAT ARE MY ASSETS AND WHAT CONDITION ARE THEY IN?

Answering these questions requires a full inventory of the system, in as much detail as you can manage, along with an assessment of the condition of each piece of equipment and the consequences to the system if that piece of equipment should fail. The inventory step is probably the most labor-intensive, time-consuming part of the process. Risk and condition assessments require two judgments to be made: what is the likelihood of an asset failing, and what will it mean to the system if it does fail? Each asset’s risk assessment must be based on two components: the likelihood of and consequences of failure. The risk of failure coupled with the age and expected life of an asset are what help to determine the asset’s condition and priority for potential action.

2. WHAT ARE MY SUSTAINABLE LEVEL OF SERVICE GOALS?

Level of Service (LOS) goals should be measurable, attainable and realistic while just far enough ahead of the present reality to represent a target requiring effort. LOS goals should be stated in quantifiable terms. To say, “I want my system to be run in the most efficient way possible,” might be a simple mission statement, but there is no way to measure performance or achievement of that goal. A more measurable goal might be, “I want the system to be run with no more than 1 (or 2, or 3) water outages in a 12-month period.” That can be both measured and achieved.

3. WHAT ASSETS ARE CRITICAL TO ATTAINING THESE GOALS?

Here one should juxtapose the results of the risk assessment with information such as the level of redundancy for an individual asset, whether a bypass or an alternative is available or whether it can be repaired or re-built instead of replaced. All these issues, along with the likelihood and consequences of an asset failing, go into determining how critical an asset is to the system.

4. WHAT ARE THE MINIMUM LIFE CYCLE COSTS OF THESE CRITICAL ASSETS?

Answering this core question requires some knowledge of more than just what a piece of equipment costs to install. One must also have some idea of the asset’s operating costs over its useful life, as well as some way to estimate the cost to remove or rebuild it when that useful life is over. If an asset has a maintenance contract, that contract amount is part of those life cycle costs. If, however, the asset is a piece of pipe, then the minimum life cycle costs might amount to almost nothing over the life of the pipe. The point is that different assets will have different cost centers as well as different life spans.

5. WHAT IS THE BEST LONG-TERM FUNDING STRATEGY?

Answering this question requires an examination of the reserves available for self-funding asset restoration/rebuilding/replacement, as well as adequacy of revenues over time. It’s important to remember that funding, in this context, pertains to the dollars needed to maintain the level of service goals that have been set as well as the cost of asset maintenance and replacement. Anything less than the levels needed for both functions could mean that the system is not operating on a sustainable basis. And in these days of scarce funding, sustainability is everything. Outside funding programs rarely fund all of a replacement or upgrade project.

Whatever your funding plans are for sustaining your system, having a plan in place is a large part of the battle. Asset management is the campaign itself. A key part of the strategy is engaging decision-makers and building buy-in for proper asset management and investments that may need to be made. The campaign can succeed with a sound plan, based on solid management practices, starting with these five core questions.

REFERENCES
Search EPA Publications online by topic or title: www.epa.gov
EPA STEP – Simple Tools for Effective Performance – Guides:
“Asset Management: A Handbook for Small Water Systems”
“Strategic Planning: A Handbook for Small Water Systems”
“Taking Stock of Your Water System: A Simple Asset Inventory for Very Small Water Systems”

Other EPA Guides:
“Asset Management for Local Officials”
“Asset Management: A Best Practices Guide”
CUPSS Software