A€Futuristic€Perspective€For Sustainable€Asset ... futuristic perspective...Consultants€Contractors &€Suppliers Consultants€Contractors &€Suppliers Organizational Issues

Copyright © GHD LLC 2005

Roger ByrneInternational Manager GHD Asset Management Group

A Futuristic Perspective ForSustainable Asset Management

(SAM)

Asset Accounting & ManagementApril 2008

Copyright © GHD P/L. 2006

Take Home Messages

» Asset Management is critical to anyinfrastructure rich business

» It must be done as a Total Enterprise» It is all about Cultural Change –get this part

right» Plan the change thoroughly, get buy in across

the business» Choose what you can justify and do it ..» Apply the resources needed and monitor

progress


1 Million Person City IsBeing Built Every 5Days Globally

Some Facts –Did you know?


We need infrastructure to produce19 Billion meals a day (not all like this)


To do this we will need :•Viable land•Water infrastructure•Processing assets•Transport infrastructure•Waste disposal , and•All the associated supporting

infrastructure services


» In the next year China will build :» Australia’s electricity infrastructure in 8 months» Australia’s water infrastructure in 7 months.» Municipal infrastructure for over 1 Million people

every 18 days (at 70% of Australian standards)» China & India can keep producing carbon at the

rate they are for almost 15 years and then onlycontribute the same amounts of carbon that thedeveloped world has already.

» Victorians produce the greatest carbon per capita inthe world. Australia is only just second to the USA



The Short Definition of Advanced AM

Making theright decision at theright time for the

right costand for the right reasons

‘Making good investment decisions’


CustomerExpectations Cost of Service Level of Service Business Risk

Exposure

ServiceDelivery

The Management Balancing Act


Key Issues for Asset Managers / Owners

» A need to prove ‘best value’–effectiveness &efficiency to our ratepayers / customers /stakeholders

» Set levels of service to align with customer andstakeholder expectations and their willingness topay / subsidise

» To meet this required service levels at lowestsustainable cost of service

» Understand the lowest sustainable cost ofservice ( full economic cost) in TBL terms andbalance inter generational equity


Key Issues for Infrastructure Managers / Owners

» And last but not least … ..

»How should we respond to theissue of Climate Change?





Road Assets



Road Assets & Maintenance


Rail Assets –Freight


Passenger Rail Lot harder when they are older


Port Assets –World Ports 257


Assets Only Support Product Service Delivery

Social ImpactsSocial Impacts

Environmental ImpactsEnvironmental Impacts

Cultural ImpactsCultural Impacts

Economic ImpactsEconomic Impacts


58%42%Ports45%55%Telecoms8%92%Gas18%82%Electricity12%88%Irrigation8%92%Drainage6%94%Wastewater10%90%Water

OPERATIONSASSET MANAGEMENTSERVICE TYPEUTILITIES

Note: Asset Management includes annualized cost of capital, maintenance, renewal andoperations related to assets… eg.The total annual average economic cost.

The Part AAM Play in Service Delivery


9480%620%*Food Processing5585%1545%*Manufacturing58%42%*Ports (1)55%45%*Mining74%25%*Police & E Services .85%15%*Corrections75%25%*Justice80%20%*Health84%16%*Education

Other OPERATIONSASSET MANAGEMENTSERVICE TYPECOMMUNITY & PRIVATE

Note: Asset Management includes annualized cost of capital, maintenance, renewal andoperations related to assets… e.g..The total annual average economic cost.

* DenotesStillinvolveslargevalueofassets

The Part AAM Plays in Service Delivery


Ensuring Business Performance Uniformity

Outside VictoriaAligned Business Systems (ABS)

Aligned Business Processes (ABP)


Rio TintoGlobal

Company

Iron Ore MineralsCoal Aluminium Copper

CorporateServices

Diamonds

Exploration

Horizontal Uniformity

Managing Diverse Distributed Business Units

TechnologyConsultingBristol


Whole of Government

Loca

l Gov

ernm

ent

Educ

atio

n

Prim

ary

Indu

strie

s

Hea

lth

Prim

ary

Indu

stry

Tour

ism

Trea

sury

Ener

gy

Nat

ural

Res

ourc

es

Com

mun

icat

ions

Plan

ning

Spor

t & R

ecre

atio

n

Empl

oym

ent &

I.R.

Envi

ronm

ent P

rote

ctio

n

Fam

ily S

ervi

ces

Just

ice

Min

es &

Ene

rgy

Polic

e Se

rvic

es

Cor

rect

ive

Serv

ices

Prem

ier &

Cab

inet

Publ

ic W

orks

Hou

sing

Stat

e D

evel

opm

ent

Rac

ing

& G

ambl

ing

Tran

spor

tR

ail

Mai

n R

oads

Ports

Whole of StateWhole of StateReporting ofReporting ofDepartmentsDepartmentsRolled Up ToRolled Up To

GiveGiveCorporateCorporate

ViewView

Horizontal Uniformity ?Validation of Outputs ?

OftenOftenDepartmentsDepartmentsAllowed ToAllowed To

Undertake AMUndertake AMAs NormalAs Normal

Different Approaches Followed

Whole of NationWhole of Nation


Rollingup With Confidence

Alig

ned

Bus

ines

s Pr

oces

ses

–Ve

rtic

al

From asset / workface to boardLevel of ServiceLevel of Service

Cost of ServiceCost of Service

LoS ReliabilityLoS Reliability

Cost of ServiceCost of Service


DevelopAsset

Register

Failure Modes:•Capacity•Physical Mortality•Level of Service•Financial Efficiency

Future FundingStrategy

DeterminePhysical &Economic

Residual Lives

Collect HistoricCosts &

Determine CurrentReplacement Cost

Set Current &Future Levels

of Service

DevelopAppropriate

Maintenance &Operations Plans

DevelopAppropriate

Capital Program

EstablishRisk Ratings

(RelativeCriticality)

Build the AMP

Current State of our Assets?

Required Sustained Level Of Service?Which Assets are Critical to Sustained Performance?

Management Strategies for the Assets

Best LongTerm funding strategy

AM Investment Decision Making Process


Renewal Decision LCC Model –But what data?

0

20

40

60

80

100

120

2000 2010 2020 2030 2040 2050 2060

Year

Ris

k / C

ondi

tion

Scal

e

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

Cos

t ($)

ConPoFCoFRiskMin RiskMin ConMn$Op$Cum$


What Is Our Funding Gap Strategy ?

0

100

200

300

400

500

600

2006

2009

2012

2015

2018

2021

2024

2027

2030

2033

2036

2039

2042

2045

2048

2051

2054

2057

2060

2063

2066

2069

2072

2075

2078

2081

2084

2087

2090

2093

2096

2099

2102

2105

Year

Expe

nditu

re

$M (C

urre

nt D

olla

rs)

0

2,000

4,000

6,000

8,000

10,000

12,000

Ass

et V

alue

s $

M

CIP Existing Current ProgramCIP New Future GrowthCIP New Future Levels of ServiceCIP Future Rehab and Replace (New Levels of Service / Growth)CIP Future Rehab and Replace (Plants)CIP Future Rehab and Replace (Collections)Operations (Operations)Operations (Maintenance)Operations (Overhead)Book ValueReplace ValueAverage Expenditure

Current Total Income$145 Million

Sustainable ExpenditureModel (AARA)$320 Million

Close the Gap Over 10 YearsNeeds 8.5% increase PA

Other options10.5% closes gap in 8 years17.5% closes gap in 5 years30.5% closes gap in 3 years

Our job is to try and drivedown these costs / this line

Now we can focus ourefforts on those items that

represent least value


ImprovedCustomer

Satisfaction

Lower FutureCost of Service

ImprovedLevel of Service

Where Do the Benefits Come From ?

20%

80%

+25%

Social

EnvironmentalSocial

Economic

Benefits ofIntroducing

Advanced AM


Estimating Benefits for Individual Businesses

Cost $ 24M

Benefits Estimated$ 350M (2002)

Benefits Revised$ 550M (2006)

CIP Validation Savings (2005)$64.8 M


Key Benefit Areas –Future Cost Reductions


The Next Evolutions in Asset Management

GAMS web site layout


AMPLE Tool –Modules

Worlds Best PracticeLife Cycle AM

Portfolio / Generic

Total EnterpriseAsset ManagementQuality Framework

TEAMQF

The Gap ToolsBasic

IntermediateAdvanced

AMPLE Product is based on allowing agencies to achieve ISO 9000 quality certification forLife Cycle Infrastructure Asset Management

WBP

BAP

CQR

BusinessCase

Benefit / Costs

AMIPAM Improvement

Plan

EIPEffective

ImplementationPlan

Pilot ProjectsTraining on

Their Assets Skills Transfer

SpecialistGuides &

Tools

Case StudiesProofs of

AAM BenefitsAchieved

Best AppropriatePractice Related to

Individual Asset Types

eLearning Module

BenchmarkLike business


How To Use AMPLE


Life Cycle AM Processes and Practices


CHIFLEY Business School Accredited Course


The Best Practice Model

AssetManagementPlans

AssetManagementPlans

OverallBusinessPlans

OverallBusinessPlans Long Term

Expenditure& FundingPlans

Long TermExpenditure& FundingPlans Customer &

StakeholderConsultation

Customer &StakeholderConsultation

Feedback / Revision

Amend / Revise

INTERNAL & EXTERNAL

AUDIT REVIEW

Consultants Contractors& Suppliers

Consultants ContractorsConsultants Contractors& Suppliers& Suppliers

OrganizationalIssues

OrganizationalOrganizationalIssuesIssues

PeopleIssues

PeoplePeopleIssuesIssues

Government &Regulators

Government &Government &RegulatorsRegulators

CustomersUsers

CustomersCustomersUsersUsers

OtherStakeholders

OtherOtherStakeholdersStakeholders

Driving BestValue Sustainable

AAMPrograms

DrivingDriving BestBestValue SustainableValue Sustainable

AAMAAMProgramProgramss

Best AppropriatePractices Assets

Best AppropriateBest AppropriatePracticesPractices AssetsAssets

LCAM Processes Generic

LCLCAM ProcessesAM Processes GenericGeneric

Data &KnowledgeData &Data &

KnowledgeKnowledge

Knowledge Transfer – Staff & Policy Makers Training – Agency Ownership – SustainabilityKnowledge TransferKnowledge Transfer –– Staff & Policy Makers TrainingStaff & Policy Makers Training –– Agency OwnershipAgency Ownership –– SustainabilitySustainability

Whole of EnterpriseBusiness / Agencyi

Whole of EnterpriseWhole of EnterpriseBusiness / AgencyBusiness / Agencyii

Enterprise BU’s orDepartments

Enterprise BUEnterprise BU’’s ors orDepartmentsDepartments

Elected BoardMembers / Directors

Elected BoardElected BoardMembers / DirectorsMembers / Directors

CEO & SeniorStaff Team

CEO & SeniorCEO & SeniorStaffStaff TeamTeam

Deputy &Middle Managers

Deputy &Deputy &MiddleMiddle ManagersManagers

Supervisors& Staff

SupervisorSupervisorss& Staff& Staff

AM InformationSystems

AM InformationAM InformationSystemsSystems

Asset ManagementPlans & Strategies

Asset ManagementAsset ManagementPlans & StrategiesPlans & Strategies

AAM DeliveryTactics

AAM DeliveryAAM DeliveryTacticsTactics

Key Success Factors –Public Sector

StakeholderConsultation Program

StakeholderStakeholderConsultation ProgramConsultation Program

Long Term ExpenditurePlans / Funding Models

Long Term ExpenditureLong Term ExpenditurePlans / Funding ModelsPlans / Funding Models

Transparency and External Stakeholders Awareness Raising & ConsultationTransparency and External Stakeholders Awareness Raising & ConsuTransparency and External Stakeholders Awareness Raising & Consultationltation

BroaderCommunityBroaderBroader

CommunityCommunityTEAMQF

Primary ElementsTEAMQF

Primary Elements

50% of BenefitsDerived Here

50% of BenefitsDerived Here


Links From Gap –Ex to AMPLE BAP Guides

Worlds Best PracticeAsset Related

PracticeGuidelines

AMIPAM Improvement

Plan / TasksProjects

Worlds Best PracticeLife Cycle AM

Processes

The Gap ToolsBasic

IntermediateAdvanced

WBP

BAP

CQR


GAP Ex Level 1

GAP Ex Level 1



Gap Ex 1 User Guide


Key Issues for Infrastructure Managers / Owners

» And last but not least … ..

»How should we respond to theissue of Climate Change?


Climate Change –Key Impacts

» Rise in average temperatures» Reduced total long term rainfall» Increased rainfall intensity (storm events)» Increased high wind events» Increased sea level and foreshore erosion *» Increased lightning activity and strikes» Less clouds more direct sunlight (ultraviolet)


Climate Change –Ranger Mine Jabiru


Climate Change Impacts –Pessimistic

Wind2.7 (1.8)

Lightning4.0 (2.0)

Flooding2.4 (1.6)

Foreshore Issues1.9 (1.4)

Figures intended to represent the probable increase in events overour experience of the last 30 years


The Total Energy Picture (%)

PROJECTINITIATIONPROCESS

BASEASSETMATERIALS

ASSETCONSTRUCTIONPROCESS

ASSETOPERATIONSMAINTENANCE& RENEWAL

ASSETDISPOSAL

341 40 15 10

ASSETDEMOLISIONCLEARING

1010


The Total Energy Picture (%)

PROJECTINITIATIONPROCESS

BASEASSETMATERIALS

ASSETCONSTRUCTIONPROCESS

ASSETOPERATIONSMAINTENANCE& RENEWAL

ASSETDISPOSAL

1 40 45 10 4

ASSETDEMOLISIONCLEARING

4


Easy To Understand Results

$ 3.404m

$1.120m

$ 0.150m

$ 4.674m

Co2 1.560M

$1.833mEconomic

$4.980mSocial

$0.500m

Economic Cost Social Cost Environmental Cost Co2

CO2

TotalEnvironmentalCost $1.050m

$1.833mEconomic

$4.980mSocial

$0.500m

Economic Cost Social Cost Environmental Cost Co2

CO2



Consequence of Failure by TBL Costs

$1.560M

$3.404mEconomic

$1.120m SocialEconomic Cost Social Cost CO2 CostEnvironmental Cost


CO2


Climate Change –Other Likely Impacts

» Higher Costs Carbon Taxes will impact on the cost ofbuilding new assets (10%) and operating existingassets

» More Rehabilitation Embodied energy costs will meanthat we will need assets to last longer. Life extensionswill be more common

» Energy Efficiency –There will be significantinvestments in energy efficiency measures

» Insurance Weather event insurance premiums andexcess limits will rise.

» Customer Expectations –Weather events will causesignificant customer outrage against managers &service organisations.


PREMISECUSTOMER TOLERANCE REDUCES WITHREPEATED FAILURES (EXAMPLE ONLY)

NUMBER OF FAILURES

WE NEED TOUNDERSTANDPOINT ATWHICHCUSTOMERWOULDCHANGESUPPLIERS

6

4

3

2

1.0

1 2 3 4 5 6 7 8 9 10

Loss of PowerSupply

TOLE

RA

NC

E FA

CTO

RC

.o.F

MU

LTIP

LIER

What Event Causes Customer Outrage?

Water RestrictionsFor a year

ENGAGEYour

Customers

ManageTheir

OUTRAGE

UnderstandTheir

ANGSTPoint


CompleteFor EachMitigation

Option

Understanding Climate Change Impacts

ClientBusinessActivities

SustainabilityImpacts

BusinessRisks

(Range)

MitigationOptions

(Various /Staged)

BusinessCase

Evaluations

SustainableBusinessStrategy(Staged)

Activities Impacts Risks Options Evaluation Strategy

ResidentialDevelopmentInfrastructureManufacturingMining /ResourcesEtc

Economic

Social

EnvironmentalInc. ClimateChange

Consequences

Probability•Under Organ.

Control•National &Global Control

Risk ExposureEnvelopes

Non AssetSolutions•Customers•Operations•Education

AssetSolutions•Operational•Rehabilitation•New Assets

StagedStep by StepComplianceTo suitClientsBusinessdrivers andeconomicsituation

RiskReduction

MitigationCosts

ResidualRisks

TimelineExpenditure

Select BestAppropriate

Strategy

Identify ViableMitigationOptions

AssessFor Each

Impact

IdentifyAll

SignificantImpacts

UnderstandClients

Business &Drivers


Key AM Quality Elements To Get Right

» Asset Registers are they well structured and detailed enough

» Levels of Service –are they qualified / quantified

» Failure Mode Assessment –Do you understand all FM’s

» How well is our capital justified –How good is the business case

» Risk in Decision Making how well is it assessed ? Points or $ cost

» Holistic (Life Cycle Cost) Management – Is it TBL ?

» Maintenance Management –How well is it justified?

» How are your Opex Budgets set ? How well is it justified?

» Portfolio Wide Asset Management Plans –Do your planscover all assets and do they include Opex & Capex, levels of service andrisk?


Enjoy Your Conference

» Jeff –Some priority issues with AM» David Valuation & Depreciation» John Integrating Risk» Daniel –Depreciating Roads» Adrian Measuring Levels of Service» Darran Auditing AM & Implementing

Asset Management


Take Home Messages

» Asset Management is critical to anyinfrastructure rich business

» It must be done as a Total Enterprise» It is all about Cultural Change –get this part

right» Plan the change thoroughly, get buy in across

the business» Choose what you can justify and do it ..» Apply the resources needed and monitor

progress


ANY QUESTIONS ?Copy of Presentation –

Just put request on business card

Asset Accounting & ManagementApril 2008


ForFor forfor further informationfurther information in relation to thisin relation to thistopic contact Roger via any of the followingtopic contact Roger via any of the following ::Email:Email: [email protected]@ghd.com.au ororGlobal Roam cell +61.419.509.873Global Roam cell +61.419.509.873Or visit our GHD Web siteOr visit our GHD Web site www.ghd.com.auwww.ghd.com.auAnd check out Management Consulting … GapAnd check out Management Consulting … Gap ––ExExand AMPLEand AMPLE

This presentation is Copyrighted to GHD and is to be used for its original purpose only.

GHD Asset Management GroupNow completing work in : Australia, New Zealand , Philippines, Singapore,

Thailand, United States, Canada, Mexico, Chile, India, Middle East , Egypt, China,United Kingdom, Scotland & Ireland

Thanks For Your Time & Interest..

mailto:[email protected]

mailto:[email protected]

http://www.ghd.com.au

http://www.ghd.com.au

Documents

A€Futuristic€Perspective€For Sustainable€Asset ... futuristic perspective...Consultants€Contractors &€Suppliers Consultants€Contractors &€Suppliers Organizational Issues