DEVELOPMENT OF AN
AND PRIORITISATION MODEL
Incorporating customer, regulator and business preferences
S Hyland, T Kaur, E Sullivan, D Lynch, B Morris
Publication Date (Web): 28 September2018
TasWater was formed from three predecessor water businesses in 2013 to deliver substantial improvement in customer service and regulatory performance across all its activity streams, both infrastructure and non-infrastructure related. This requires significant capital investment but within challenging annual pricing, capital budget and time constraints.
An integrated Jacobs and TasWater team worked collaboratively to develop a 20-year Long Term Strategic Plan (LTSP), that established the optimal pathway for TasWater to deliver projects and programs over the next 20 years, in order to achieve performance and service objectives within the business’s constraints.
To facilitate this, an investment optimisation and prioritisation model was in order to inform the development of TasWater’s LTSP. The model has allowed TasWater to prepare a 20-year capital plan which maximises benefits derived from infrastructure investment (capex/NPV/TOTEX) within challenging pricing, budget and time constraints across all business areas – water quality, health based initiatives, dam safety, STP effluent quality and asset renewals.
Figure 1: Strategic Framework – Line of Sight Schematic Supporting Corporate Plan
Figure 2: TasWater Optimisation and Prioritisation Model – Overview
Figure 3: TasWater Optimisation and Prioritisation Model – Overview of Workflow
The model allows explicit trade-off testing of the merits of proposed projects and programs of works based on their targeted quantitative benefits and investment. Most importantly this model also takes into account customer, technical regulators and economic regulator preferences to maximise benefits delivered for a specified annual capital investment.
The development of the optimisation model (and the LTSP) involved several tasks, including:
a) Development of an Enhanced Planning Framework – which was developed to support the business’s overarching strategic framework. This involved specifying tactical and operational objectives and supporting measures of success (or KPIs) which are explicit, quantitative and readily measureable.
b) Data and information collection and review - a wide range of TasWater documentation was provided and assessed, including a range of corporate documents, asset class and activity stream management plans, various iterations of a 20-year capital plan, business cases and supporting technical documentation and other relevant project and program information. The key information provided was TasWater’s preliminary capital plan.
c) Building the optimisation and prioritisation model - a spreadsheet model was developed which formulates the problem of which projects to commit capital to - and when - as a linear program, then uses a free and open source Excel add-in called OpenSolver to solve the optimisation problem and generate an optimized capital plan. The model does this by considering the temporal capital cost profile of every project as well as benefits the project will bring. Each benefit is defined as one of series of modelled benefit categories.
d) Trade-offs testing - the optimisation and prioritisation model, once developed, was used for extensive trade-offs testing. It was used to investigate various capital expenditure and benefit priority scenarios.
e) Sensitivity testing - Sensitivity testing was undertaken on the optimisation model, through extensive testing of a wide range of input parameters, including benefit weightings, capital expenditure limits, project commitment threshold, and many other parameters.
f) Stakeholder engagement - Stakeholder engagement was undertaken to inform the scenarios to be tested by the Optimisation and Prioritisation model, and the preferences for outcomes to be achieved by the LTSP.
The totality of this work formed the basis of TasWater’s 20 year LTSP. The LTSP process and the model are now part of TasWater’s formal business practices.
The overarching value of this optimisation and prioritisation model and the LTSP framework is to provide an essential underpinning of TasWater’s enhanced business planning processes; and to provide a robust, open and meaningful basis for discussion of the necessary trade-offs across the whole range of business activity streams linked to customer outcomes.
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