Definitions and Benefits of Asset Management
To understand the benefits of Asset Management we must first be clear on its definitions. The International Infrastructure Management Manual (IIMM) defines Asset Management as:
“The combination of management, financial, economic, engineering and other practices applied to physical assets with the objective of providing the required level of service in the most cost-effective manner.” ¹
One might state that providing cost-effective services is exactly what New England communities have been doing all along. So what is different about asset management as promoted here compared to management practices already in place? To answer this question the IIMM provides two more definitions:
Core Asset Management Definition
“Asset Management that relies on the asset register, maintenance management systems, job/resource management, inventory control, condition assessment, simple risk assessment, and defined levels of service, in order to establish alternative treatment options and long term cashflow predictions. Priorities are usually established on the basis of financial return gained by carrying out the work…” ¹
Advanced Asset Management Definition
“Asset management which employs predictive modelling, risk management and optimized decision-making techniques to establish life-cycle treatment options and related long term cashflow predictions.” ¹
Perhaps these last two definitions provide some insight on how older practices differ from the asset management practices promoted here. These definitions suggest that there exists a set of best management practices that must be in place in order to assure that communities truly are delivering “the required level of service in the most cost-effective manner”
The collection of best practices and tools are conceived in an asset management policy, specified and utilized in asset management plans, and form the backbone of the asset management system.
The EPA Fundamentals of Asset Management captures the best practices as a ten-step process. These steps can be portrayed as the framework for asset management policy:
Asset management policy framework ²
The best practices identified in an asset management policy framework are what form the discipline of Asset Management as we know it today. However, many communities are still set in practices with no framework or have few resources to initiate asset management policy. In the meantime, the problems that communities must address are becoming more acute:
- Much of our infrastructure is at or past life expectancy, increasing the risk of failure
- Federal funding has been decreasing for decades, putting more pressure on local and state funding sources while agencies struggle to keep rates low
- Regulatory issues, such as SSOs, receive top priority while other issues within the network are often deferred due to limited funding
- Staffing has been affected by cuts and attrition leaving behind voids in organizational knowledge
- Problems are amplified in agencies that experienced a period of poor record keeping, making it difficult to address situations when basic asset attributes are not known
For many communities these problems have developed over a long period of time because old practices generally did not develop “…long term cash flow predictions” (as stated in both the Core and Advanced definitions). These communities are now finding that the old management practices have resulted in underinvestment and unacceptable degradation of their infrastructure. The 2017 ASCE report card estimates that Massachusetts alone needs to invest $1.2B in water infrastructure and $8.35B in wastewater infrastructure. It goes on to state, “Delaying these investments only escalates the cost and risks of an aging infrastructure system, an option that the country, Massachusetts, and families can no longer afford” ³.
The NEWEA Asset Management Committee believes that the concerns expressed in the ASCE Report Card are best addressed by first investing in asset management policies that will allow communities to manage investment needs in the most cost-effective manner. In other words, by implementing asset management best practices, communities will be better positioned to afford the investments required.
Perhaps the most important benefit of asset management is that it provides a structured framework for investment planning that delivers the most cost-effective solutions for delivering acceptable levels of service over the entire asset life-cycle at minimal risk.
With a structure asset management framework in place, organizations will realize these and other benefits:
- Good Business Practice. Asset management results in better decisions. Aligning management of infrastructure with strategic policies and direction will support the long-term success of the utility’s mission, goals and objectives.
- Improved Regulatory Compliance. For wastewater utilities in particular, the proposed CMOM regulations will require improved asset management. Part of asset management involves the implementation of better O&M practices, which can significantly improve compliance.
- Improved Reliability. More structured day-to-day attention to system assets and their condition means that unexpected failures are less likely, thus minimizing emergency repairs, costly lawsuits and customer relations problems. Assessing the risk implications of asset failure helps focus resources on critical priorities and reduces overall risk to the utility.
- Long Term System Integrity. The concept of “sustainable infrastructure” is gaining increased visibility, probably due to the problems in many American cities and towns where sufficient reinvestment in infrastructure has not been made. By relating costs to asset condition and conducting long term planning for each asset, policy makers get the facts they need to help sustain the infrastructure.
- Cost Savings. There is evidence that asset management systems that maintain infrastructure in a sound and reliable condition and are based on minimizing life cycle costs, can significantly reduce operating and maintenance cost, as well as long-term capital expenses. A life cycle approach means that the utility always gets the most assets for its money.
- Eligibility for Federal Funding. The apparent need for increased infrastructure spending coupled with concerns over the quality of infrastructure management prevalent in the industry have led to a range of provisions in proposed funding legislation that include requirements for “asset management plans.”
The references below provide many more definitions of Asset Management and lists of benefits that can be expected.
- General Accounting Office (GAO). “Comprehensive Asset Management Has Potential to Help Utilities Better Identify Needs and Plan Future Investments” March 2004.
- The Institute of Asset Management (IAM). “Asset Management – anatomy” Version 3.0 2015
- United States Environmental Protection Agency. “Asset Management for Water and Wastewater Utilities” web site. https://www.epa.gov/sustainable-water-infrastructure/asset-management-water-and-wastewater-utilities
- Water Environment Research Foundation’s (WERF) – SIMPLE A web-based tool to help wastewater plants learn about life-cycle asset management plans.
- ISO TC251 55000 Web site. https://committee.iso.org/home/tc251
- 2017 Infrastructure Report Card website wastewater report
¹ International Infrastructure Management Manual version 5.0 © Institute of Public Works Engineering Australasia 2015
² United States Environmental Protection Agency. Advanced Asset Management workshop materials
³ 2017 Infrastructure Report Card website. American Society of Civil Engineers