AAPA FINANCE COMMITTEE WEBINAR:STRATEGIC ASSET MANAGEMENT2pm-3:30pm (EDT), MAY 21, 2015

AGENDA

Opening remarks: Jeff Strader, CFO, Port Freeport, and Chairman, AAPA Finance Committee—5m

Overview of strategic asset management —Erik Stromberg, Stromberg Associates—15m

Port Perspectives: Drivers, status, lessons learned and future plans at selected ports—50m

Port Metro Vancouver—10m

Port of Portland Oregon—10m

Port of San Diego—10m

Port Alliance of Seattle/Tacoma—10m

Port of Houston—10m

General Discussion/Q&A—15m

Next steps—Continuing SAM education through a six-webinar series in 2015 –5m

Jeff Strader, CFO, Port Freeport TexasChairman, AAPA Finance Committee

Welcome and Introduction

Strategic Asset Management—An OverviewErik Stromberg, Stromberg Associates

Definitions

PAS 55: “Systematic and coordinated activities and practices through which an organization optimally and sustainably manages its assets and asset systems, their associated performance, risks and expenditures over their lifecycles for the purposes of achieving its organizational strategic plan.”

ISO 55000: “…coordinated activity of an organization to realize value from assets.”

ISO 55000: “Asset management policy is the link that connects strategic and business goals to the physical asset portfolio.”

SAM Overview—StrombergWhy is SAM an emerging management imperative?

Aging Infrastructure

Operating costs—too high and too often hidden

Deferred maintenance--substantial but uncertain scope, cost and impact

“Preventative maintenance” program = “run-to-failure”

Inadequate Capital Resources:

Scarce public capital,

Cautious private capital, and

Inadequate internal resources

SAM Overview—StrombergWhy is SAM an emerging management imperative?

Business processes

Asset data: Deficient, especially life-cycle position/variable definitions/not transparent

Information systems do not support investment decisions

Uncertain level-of-service requirements

Capital planning—ad hoc prioritization does not comprehensively address strategic risks across the organization

Leaseholder responsibilities: Poorly defined/not specified/not monitored

Human resources: Retiring ‘Boomers’ -- loss of institutional knowledge

SAM Overview—StrombergCurrent state of asset management

Unpleasant surprises—facility failures

Inconsistent decision processes

Suboptimal allocation of scarce capital

Higher than necessary repair and maintenance costs; longer down times

Lack of confidence by Commission/shareholders/senior management

Damaged reputation among customers/critical stakeholders

Due diligence challenges – “what is the value of this facility?”

Lower employee morale (fixing same thing over and …)

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Maturity Pyramid

SAM Overview—StrombergSteps to SAM Program Development

Define SAM goals; develop policy; establish SAM plan aligned with corporate goals

Data/Information systems review; gap analysis; refine asset registry/hierarchies;

Define required asset levels of service/performance measures

Assess current and life-cycle asset condition/performance

Investment prioritization:

Apply risk analysis to prioritize asset investment/reinvestment options

Apply budget constraints to identify affordable, mission-critical investments

Review results; assess progression toward sustainable, embedded strategic asset management practices; refine SAM policy and protocols; establish training programs

SAM Overview-StrombergLessons learned

Develop an asset management plan (road map) defining:

clear, measureable goals,

timelines, critical paths, success criteria,

budget and annual review process

Senior leadership engaged at beginning and throughout

Demonstrate value--find and deliver early and ongoing successes

Keep all departments engaged — understand resistance and its root causes--don’t ignore it

Asset management will neither get cheaper nor easier over time. Negative consequences of NOT getting started will ONLY get worse.

Port Metro VancouverGary Tosh, Infrastructure Asset Management Coordinator

Current Standing

Asset inventory: ~750 assets in 15 asset classes

High level, baseline condition assessments on all assets

Detailed condition assessments: prioritized and scheduled for next 5

years

Created GIS standards for future detailed inspections

Integrate future and past inspections results spatially

Interdepartmental asset information flows are being fine tuned

Purchase, construction, upgrade, repair, divestment, demolition

Focussing current AM plan on business critical assets

Port Metro VancouverGary Tosh, Mo Mofrad

Drivers

“What will our annual capital maintenance expenditures be for the

next 10 years?”

“What are our priorities for capital repairs and why?”

“What are the risks if we defer these repairs?”

A shift from being reactive to proactive

Port Metro VancouverGary Tosh, Mo Mofrad

Long Term Goals

“The goal of PMV’s Asset Management program is to develop an

integrated decision support framework with modeling capabilities

for short, medium, and long range forecasting to optimize the

creation, use, and replacement of infrastructure assets. This should

be completed at the lowest possible lifecycle cost while meeting

the required level of service at an acceptable risk.”

Port Metro VancouverGary Tosh, Mo Mofrad

Measuring Success

Short & Medium Term

Integrated data from in-house GIS, MS SQL server database, corporate documentation database

Finalised in-house asset information flows regarding the purchase, construction, upgrading, repair, divestment and demolition

A completed AM plan for business critical concrete structures

Long term

When the AM team has identified the optimal capital maintenance points for PMV assets

Able to quantify the risks associated with expected capital maintenance funding scenarios

Port Metro VancouverGary Tosh, Mo Mofrad

Organizing The Effort

People

Project Engineer, AM Coordinator, GIS Integration Specialist

Relevant dept. representatives

Executive backing

Policy

AM cannot be optional

Plan

GIS as a central data repository

The life cycle of an asset and those around it is inherently spatial

Port Metro VancouverGary Tosh, Mo Mofrad

Lessons Learned

Create an AM Policy

AM cannot be optional

AM is long-term and buy-in from all levels is needed

Prioritize assets

Start with business critical assets

Learn from those and proceed to less critical assets

Identify critical data

You will never have all the ideal data

Identify and connect with resources

No need to reinvent the wheel

Port of Portland

Strategic Asset Management

Art Spillman

Sr. Mgr. Facilities, Assets, and Infrastructure

What can go wrong?

• “Over collecting” data

• Taking on everything at once

• Tracking assets at the wrong level

• Not including the right stakeholders

• Believing that software will define your asset

management program

Our approach

• Secure management support

• Keep it simple

• Prioritize asset data collection

• Align with existing CMMS

• Ensure the right stakeholder involvement

• Data collection - Maintain flexibility for future data migration

• Inform the Capital Improvement Program

• Strategic Asset Disposal (SAD)

Asset Management Planning (AMP) team

• Multiple cross-departmental teams

• Arranged by disciplines

• Purpose –

Provide up-to-date system consensus

based condition data on a continual

basis.

Provide asset renewal recommendations.

• Why the AMP teams work

Spreadsheet of Dreams

“Knowledge is power only if man knows what facts not to bother with."

-- Robert Lynd,

Irish writer

• Data collection focused on assets at the end of life

• “Why When” and Consequence of Delay

• Tracking/Planning condition assessments

• Initiate capital projects

• Tracking “Future Assets”

• Future data collection

San Diego Unified Port DistrictCid Tesoro, Major Maintenance Program Manager

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Installation ProfileConsumption Profile

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Year Asset Name Action Type Action Cost Risk Score

2014 Metal pipe LIN-HAS-78 Replace $340,000 25

2014 Metal pipe LIN-HAS-92 Replace $176,000 25

2014 Metal pipe LIN-HAS-114 Replace $49,000 20

2014 Pump #2 Oak St. PS Rehab $20,000 20

2014 GenSet Vine Rd. PS Replace $80,000 15

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Ports of Seattle and TacomaDavid Amble, Seaport Asset Manager, POSRick Unruh (tentative), Project Manager, POT

Port of Seattle/Tacoma – Northwest Seaport AllianceDavid Amble

Tacoma initiated a pilot program for building assets – presented in 2013 at TRB

Seattle (Seaport Division) began looking at the issue in 2010, and initiated a

yards, docks, and building asset program in 2013 Seattle Airport Division (operationally focused) has it’s own AM program, focusing on runways

and terminals.

Seattle and Tacoma currently establishing an alliance to manage container

terminals in Puget Sound.

Staff remain origin-port employees, but are seconded to the Alliance

A multi-tier approach –

Identifying assets from a top down/bottom up approach.

Documenting asset conditions at the location and system level

Reviewing best practices and tools useful for managing assets

Port of Seattle/Tacoma – Northwest Seaport AllianceDavid Amble

A port’s terminal management model influences how asset

management is accomplished:

Terminal management model (landlord port versus direct operations)

Lease agreement terms for each terminal

Issues: The program is not a “third-rail” of capital development and

financial management; it is an accounting tool to drive decision

making.

Need to have a champion to drive the successful

development/deployment of an AM program

Port of Houston Authority Journey to SAMTom Heidt, CFO

Q&A

Next StepsErik Stromberg

Ongoing seminar topic—Engineering, Finance, MTMT

Asset management resources—see AAPA website

Asset management network

Proposed six-webinar series on SAM (June-December, 2015) covering:

Setting SAM goals, governance, establishing a plan

Assessing current state---data, information systems, business processes

Determining fit-for–purpose, level-of-service requirements

Cost-effective condition assessments, degradation modeling and life cycle condition forecasting

Risk assessment strategies and investment prioritization models

Continuous improvement strategies, annual review and training