A recipe for good asset management decisions – Part 1
This is the first in a series of posts from the AWA's Asset Management Specialist Network.
Imagine if you received your water bill from your utility with, just under the total amount due, the following detailed cost breakdown:
- Water Variable Usage Charges
- Water Fixed Access Charges
- Sub-Optimal Asset Management Decision Charges
Part One: A sound and clear objective
If you don't know where you're going, you might not get there. Yogi Berra.
The first ingredient needed to make a good asset management decision is a sound and clear objective. A straightforward way to determine it consists of thinking about the needs of the people who pay for our work.
Let us introduce you to Bill, a fictional representative of the water and wastewater bill and tax payers. Anybody working in the municipal water industry works for Bill. He is our ultimate boss.
Bill's needs are simple. He wants drinking water to magically appear from the tap and wastewater to magically disappear without impacting the environment and, of course, at the lowest cost.
Water and wastewater services are so fundamental to Bill’s life that he rightly feels entitled to them and, just as with air, they must always be there, and if they're not free they're probably too expensive.
“Meet demand and compliance with a tolerable risk at lowest total cost” could be the sound and clear objective needed to make good asset management decisions.
In line with the lean philosophy, any asset management resource spent on something not contributing to this objective, even indirectly, is somewhat equivalent to charging Bill for something he doesn’t need.
What if an asset management decision was all about “buying” capacity, compliance, risk mitigation and cost efficiency?
Asset management decision making is part of an asset management system. Both the system and the objectives are specific to an organisation. Even if demand, compliance, risks and costs are always part of the equation, sound decisions should reflect the organisation’s specific objectives and priorities.
If you google the words “asset manager”, most of the results would relate to financial investment services. But what could appear at first glance as a confusion between two totally unrelated fields sharing a common designation (physical assets vs financial assets) might make sense at a deeper level.
Asset managers dealing with physical assets in the water industry can and probably should consider themselves as investors, making asset management decisions on behalf of Bill, using his money and at his risk. Within that framework, asset management decision making is about investing resources (ultimately Bill’s money) in a way that maximises the value for Bill.
Whether we’re considering a new asset, an asset renewal, an asset improvement, periodic or condition-based preventative maintenance, or a critical spare part, the logic is the same: identifying all the available options that meet demand, compliance and risk tolerance, and choosing the one with the lowest total cost.
This article was written on behalf of the AWA’s Asset Management Specialist Network.