From Industry Trend to Industry Standard

Black & Veatch’s 2013 “Strategic Directions in the U.S. Water Industry” report quantifies and confirms the industry’s most pressing challenges: aging infrastructure and costs associated with maintaining and improving infrastructure. The report also provides strategies and recommendations that can help utilities better manage aging infrastructure in a manner that improves operational efficiencies and reduces costs.
Key findings and associated analysis reveal an industry more focused on informed spending to stretch limited budgets and extend the life of current assets. More than 90 percent of utility leaders expect to have formal asset management programs in place or in progress by 2016. There is increasing industry awareness that asset management programs are proven to reduce operational costs, reduce capital costs, extend asset life and provide transparency and valuable information about the true condition, risks and capabilities of entire systems as well as individual assets. Utilities that are starting the journey of implementing a comprehensive program can learn a lot from those who are further down the road.

The Survey Says…
Black & Veatch’s second annual U.S. water industry study, conducted earlier this year, included input from a total of 397 water utility representatives. Statistical significance testing was conducted on survey responses and represented data within the report has a 95 percent confidence level. 

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“Our survey participants identified their top three issues as aging infrastructure, managing capital costs and managing operational costs,” said Cindy Wallis-Lage, president of Black & Veatch’s water business. “Asset management programs will help utilities address these challenges. However, this will not erase the large capital needs of our water infrastructure.”

Non-revenue water also poses a challenge for the water industry. The national average for non-revenue water is 20 percent. Improving system metering, data integrity, leak monitoring and control will improve system performance, reduce costs and conserve precious water supplies. The current rate of replacement for collection and distribution systems is less than 1 percent for most respondents nationwide. 

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Nearly 70 percent of respondents who provide water services are implementing drought contingency plans. These plans include water conservation, community outreach and use/sourcing of alternative supplies.
It’s important for the industry to educate city leaders and customers about the value of water. Nearly 60 percent of respondents stated their customers had little to no understanding regarding the gap between current rates and the cost of providing safe and reliable water and/or wastewater services. Meanwhile, industry leaders remain hesitant to look beyond traditional financing mechanisms to meet critical infrastructure needs. Less than 20 percent stated their organization is considering using a public-private partnership.
The Road to Asset Management Benefits

Various industry estimates show as much as a third of all water and wastewater infrastructure nationwide, accounting for approximately half a million miles of pipeline, has surpassed its useful design life. Cost estimates for rehabilitating or replacing this infrastructure extend into the trillions of dollars. Fortunately, these estimates are largely based on the book life rather than the current condition of existing infrastructure assets.
Participant responses and overall industry activity indicate that the implementation of formal asset management programs is a fast-growing trend in the U.S. water and wastewater industry. In three years, more than 70 percent of respondents expect their organizations to have good practice asset management programs in place or to be industry leaders in the development of asset management concepts and ideas.
Data collected from the 2013 industry survey indicates that the U.S. industry is very much in the early stages of understanding the concepts of asset management improvement programs and how these programs can benefit the entire utility enterprise. For a utility, the first step in implementing an asset management improvement program is to develop an understanding of all of the areas where these programs can improve utility operations.

Well-developed asset management programs have been shown to provide a high level of benefit for all of the areas listed in Figure 1 in the U.S. and other utilities of various sizes. When asked to rate the level of benefit improvement programs will have on the listed activities and processes, utility respondents zeroed in on the benefits associated with prioritizing infrastructure replacement and developing effective capital improvement programs (CIPs).

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Less than half of respondents believe asset management programs will provide a high level of benefit for improving operational optimization, knowledge transfer and interdepartmental communications and determining level of service goals. This lack of recognition of key benefits attached to asset management may be attributable to the less mature level of asset management in the United States compared to countries with more established asset management programs, such as the United Kingdom and Australia, where utilities have achieved significant cost-savings and service-level improvements.

When asked about the tools and systems used to support asset management, survey participants indicated a high reliance on hydraulic models, geographic information systems (GIS) and CIP prioritization, but these were also systems that needed improvement. More than 70 percent of respondents have condition assessment and inspection programs with an additional 20 percent planning to implement these programs.

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There is a clear upcoming focus on improving capabilities in paperless work order systems and mobile applications, computer maintenance management systems (CMMS), and dashboards, indicating that respondents are looking to improve data collection and reporting.

Deterioration modeling is one example of turning data — in this case results from condition assessments and historical rates of performance — into usable information that supports proactive decision making, which is a key component of effective asset management improvement programs. Although many respondents are collecting condition data on their assets, nearly half stated they are not currently using deterioration models and have no plans to implement them. This is potentially a missed opportunity because utilities could extract considerable value from condition data if it were analyzed to understand the deterioration rates of their assets, thereby enabling well-targeted rehabilitation and replacement planning.

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Condition Assessment and Inspection Programs
It takes at least three to five years to develop and implement a comprehensive asset management improvement program. In addition to a time commitment, successful programs require complete support from the highest levels of the organization to fully implement necessary changes. For the more than 70 percent of respondents who stated they expect their organizations to have very good or excellent programs in place in three years, making the most of lessons learned elsewhere is an efficient path forward.

It’s not necessary to design the components of an asset management program entirely from scratch. Regulation is the primary driver for investment and change in the water industry, not only in the United States but also in other parts of the world. Over the last 20 years, regulation of private water companies in the United Kingdom. and state-owned water companies in Australia drove the need for improved asset management approaches. This included the development and implementation of comprehensive asset management frameworks, such as Publicly Available Specification (PAS) 55. Water and wastewater utility industry leaders in the United States have a valuable opportunity to benefit from these best practices pioneered abroad and essentially leapfrog the development process. Adoption of best-practice asset improvement programs offers proven benefits for utilities and their customers.

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A maturity assessment that identifies gaps in current practices compared to industry best practices or identified benchmarks is essential for implementation of a successful asset management framework. The PAS 55 framework, for example, provides a 28-point requirements checklist of good practices in physical asset management. Typically, utilities undergoing a maturity assessment will enlist the help of a third-party organization to identify gaps in performance against established benchmarks. Once gaps are identified, utilities and third-party advisors should develop a road map for improving all areas where gaps were identified. These maps require prioritizing specific initiatives based on desired outcomes — such as operational efficiencies and improvements to capital improvement planning. 

One example can be found in Tulsa, Okla., where the city engaged a team of consultants to conduct a comprehensive assessment of its water and wastewater systems. The team helped implement improvements to the city’s strategic asset management system by converting a spreadsheet risk analysis tool into a multiuser database connected to wastewater treatment computerized maintenance management systems. The team also led a utility-wide assessment of the gaps between Tulsa’s current asset management practices and goals, which yielded recommendations for changing organizational structure, staffing, information systems and more.

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In March 2013, the city again engaged the consulting team to deliver a comprehensive Utility Enterprise Initiative. This initiative includes governance issues, strategic management improvement, performance management improvement, operational optimization and implementation of a comprehensive asset management program. An asset management improvement roadmap was developed through the application of the PAS 55 asset management standard as part of the asset management portion of the three-year program.

“The PAS 55 standard provided a structured framework and identified our organization’s strengths as well as specific areas for improvement” said Tulsa Metropolitan Utility Authority Water and Sewer Department director Clayton Edwards. “We are now using the framework to develop a detailed action plan for the short term. This will provide for constructive action and communication within our department, with other city departments and with our governing board.” 

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As utilities implement improvements to close identified gaps, they also need to identify ways to track and measure various operational aspects. The best asset management programs are not checklists. They are dynamic processes that enable utilities to manage their assets and operations efficiently, deliver high levels of service to their customers and drive continuous improvement in people, processes and asset risk evaluation and reduction. Comprehensive asset management programs can help utilities stay abreast of required investment in highest-priority system needs, enabling them to deliver the required levels of service at the most appropriate balance of performance, cost and risk. There is ample evidence globally of successful application of these programs. The challenge for U.S. utilities is to quickly assimilate the lessons learned and get on the fast track to improvement.  

Matt Bond is an associate vice president and the director of Infrastructure and Asset Management for the Americas and Asia Pacific Regions of Black & Veatch’s Water Business. Will Williams is a director in Black & Veatch’s management consulting division where he leads the asset management practice.

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