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City of Calgary AMP Framework 07.doc.doc

  1. 1. The City of Calgary Asset Management Plan Framework Draft Version 0.7 June 2008
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  3. 3. THE ASSET MANAGEMENT PLAN (AMP) FRAMEWORK Table of Contents 1.0 EXECUTIVE SUMMARY............................................................1 1.1 Background and Status......................................................... 1.2 Financial Forecasts............................................................... 1.3 Asset Management Practices............................................... 1.4 Plan Improvement................................................................. 2.0 BACKGROUND............................................................................ 2.1 Asset Ownership................................................................... 2.2 Links to Corporate Plans and Business Processes.............. 2.3 AMP Timeframe.................................................................... 2.4 Stakeholder Interests............................................................ 2.5 Accountabilities and Responsibilities for AM......................... 2.6 Details of AM Systems.......................................................... 3.0 MANAGING THE ASSETS LIFECYCLE...................................... 3.1 Existing Asset Information..................................................... 3.1.1 Asset Details.............................................................. 3.1.2 Asset Performance..................................................... 3.1.3 Asset Valuation 3.2 Operating the Assets............................................................ 3.3 Maintaining the Assets.......................................................... 3.4 Renewing/Replacing/Acquiring/Augmenting or Extending the Assets........................................................ 3.5 Innovation and New Technologies 3.6 Retiring the Assets................................................................ 3.7 Commercial Focus................................................................. 4.0 AMP DRIVERS AND ASSUMPTIONS......................................... 4.1 Asset Management Objective............................................... 4.2 Asset Management Strategy................................................. 4.3 Business Drivers................................................................... 4.3.1 Regulatory Standards................................................ 4.3.2 Employee, Health & Safety Targets........................... 4.3.3 Sustainability.............................................................. 4.3.4 Capital Maintenance.................................................. 4.3.5 Growth........................................................................ 4.3.6 Business Continuity or Security & Emergency Measures (SEM) Draft Version 0.7 June 2008 Page 1
  4. 4. 4.4 Assumptions......................................................................... 5.0 LEVELS OF SERVICE (LOS)...................................................... 5.1 Corporate LOS...................................................................... 5.2 Customer Orientated LOS..................................................... 5.3 Asset LOS............................................................................. 5.4 Business Performance Targets............................................. 5.5 Justifying LOS....................................................................... 5.6 Current Performance (Actual vs. Target).............................. 6.0 FUTURE DEMAND...................................................................... 6.1 Predicting Demand and the Asset Implications..................... 6.2 Demand Management Measures.......................................... 7.0 FINANCIAL FORECASTS............................................................ 7.1Capital Expenditure (CAPEX) Planning.................................. 7.1.1 Basis for Development of the Capital Expenditure Plan (CIP).................................. 7.1.2 Capital Expenditure Allocation................................... 7.1.3 Funding Models.......................................................... 7.1.4 Depreciation Models.................................................. 7.2 Operational Expenditure (OPEX) Forecasts......................... 7.2.1 Basis for Development of the Operational Expenditure plan..................................... 7.2.3 Operational Expenditure Allocation............................ 7.2.3 Funding Models.......................................................... 7.3 Associated Risks................................................................... 8.0 ASSET MANAGEMENT PRACTICES......................................... 8.1 Technology Assets Supporting AM....................................... 8.2 Data Management Processes Supporting AM...................... 8.3 Business Processes Supporting AM..................................... 8.4 People Resources Supporting AM........................................ 8.5 Risk Management Framework.............................................. 8.6 Emergency Management Plans............................................ 9.0 PLAN IMPROVEMENT AND MONITORING............................... 10. APPENDICES Appendix 1 Detailed capital expenditure forecasts Draft Version 0.7 June 2008 Page 2
  5. 5. Appendix 2 Detailed operational expenditure forecasts Appendix 3 Summary of major asset categories Appendix 4 Asset Management Plan Improvements Draft Version 0.7 June 2008 Page 3
  6. 6. Document Revision History City of Calgary Asset Management Planning Guidelines Published and Maintained by: Infrastructure Services, Corporate Version: 0.7 Asset Management Team Issue Date: June 2008 Revision Date: June 2008 Document Revision History Version Date Summary of Changes Contact Cameron Matwie 0.6 April 2008 Initial version. (403) 268-3510 0.7 June 2008 Revision incorporating AMN feedback Please Note! If this document is in hard copy, it is not controlled and may not be the most current version. Draft Version 0.7 June 2008 Page 4
  7. 7. 1.0 EXECUTIVE SUMMARY The Executive Summary section of the AMP should be able to be read as a stand alone document that provides a succinct overview of the AMP and summarizes the main elements for the AMP. Less structure is provided in this section than the rest of the Framework in order to allow for flexibility in reporting the AMP information. 1.1 Background and Status This section of the AMP Executive Summary should contain a brief summary and any key highlights of the information contained within the following section of the AMP: • Background • Asset Lifecycle • AMP Drivers and Assumptions • Levels of Service • Future Demand 1.2 Financial Forecasts This section of the AMP Executive Summary should contain a brief summary of the financial implications of the AMP. This section should reference the scenarios that have been evaluated in terms of growth and the relationship to changes in levels of service overtime. 1.3 Asset Management Practices This section of the AMP Executive Summary should contain a brief summary of the AM practices within the BU as they relate to people, processes, systems, tools and risk. The practices detailed in this section should address the overall provision of asset management within the BU and not detail asset by asset specific management practices. 1.4 Plan Improvement This section of the AMP Executive Summary should contain a brief summary of the improvement plans that are in place, or have been recommended, for improving the asset management plan. Draft Version 0.7 June 2008 Page 5
  8. 8. 2.0 BACKGROUND This section of the AMP will contain a brief description of the scope of activities covered by the BU as well as the scope of its AM activities. This section should also include a high level summary of assets owned and operated by the BU (in terms of both quantity and replacement value as would be represented within the ISR). With regard to asset ownership, a lot of work has been done as part of the Tangible Capital Assets (TCA) project in defining which BU is to report on which assets. For the purposes of the AMP, it should be assumed that the same assignment of ownership applies as for the TCA project. This section should also contain a summary of the department’s role and mandate; including the Vision and Mission for the BU. This information should not need to be recreated for the purpose of the AMP since it should already exist within existing Business Plans. The purpose of including it here is to create a link between these plans and the AMP. An introductory, summary paragraph should be included for this chapter that provides a brief history of AM within the BU and describe at what stage the BU is at with regard to development and implementation of its AM activities and initiatives ( i.e. is the BU just starting out with AM? are there islands of excellence e.g. certain departments have trialed, piloted and implemented AM approaches, but these have not be rolled out across all departments and therefore are not integrated? or is the BU well advanced in its adoption of AM processes, tools & techniques?). Text for this section may be available within the BU’s ISR submission. 2.1 Asset Ownership This section of the AMP will contain details of who “owns” the assets and information on specific assets where the operator/owner is separate. Example of these may include City owned assets managed by third parties, City Assets subject to any Private Finance Initiatives, assets leased from or to third parties (including inter business unit leases). This section should provide an overview of how the ownership of assets would impact AM decision towards these assets. Examples of this could include: • Fleet – Vehicles, • IT – Computers & Communications equipment • Recreation – Third party operated & maintained buildings 2.2 Links to Corporate Plans and Business Processes This section of the AMP will include details as to how the AMP links to other higher order Corporate Plans (i.e. Council Priorities, Imagine Calgary and PlanIt) Draft Version 0.7 June 2008 Page 6
  9. 9. as well as to the business planning process. This section will show the link between the longer term AMP, the medium term 10 year IIP’s list, and the short term 3 year business plans. This section of the AMP should also specifically refer to how the BU plans to support the development and implementation of the City Business Continuity Plan and how this impacts on the asset base – e.g. possibly being a driver for investment or changes to Business Processes, IT systems, staff numbers or competencies. It is envisioned that as the AMP’s become further developed, the Business Planning process will become simplified as much of the information required will be taken from the longer term AMP’s. In this way the funding and any business changes required that are detailed in the Business Plans, will be put into the context of a longer term framework, which is more appropriate for long life assets. The process of creating the AMP and the three year Business Plans will be iterative, where the AMP should inform the creation of the Business Plan, but ultimately the Business Planning Process will dictate the allocation of funds between BU’s and therefore this section should comment on the outcome of this iterative process. 2.3 AMP Timeframe This section of the AMP will identify the planning time frame that is covered by the AMP. It is envisioned that due to the strategic nature of the AMPs, they could cover 20, 50 or 100 year planning horizons and this will depend on the nature of the asset base, the available knowledge of the asset base along with the sophistication of the predictive deterioration modeling approaches being utilized. However for a number of the BU’s with predominantly short life assets, an assessment should be made of the asset age/condition and the likely timescales for major refurbs/replacement. If the replacement expenditure profile is likely to be fairly stable e.g. a similar replacement cycle every x years, then there is little value in selecting a longer timeframe, which would then simply include repetition of very similar asset life cycles. This may be the case for BU’s with relatively short lived assets, such as Fleet, Computers etc. The AMP should specifically state the plan horizon being used along with details for the justification of the selected timeframe. In keeping with 2009-2011 Council Priorities: 6) Reliable, safe infrastructure, 7) Effective, efficient services, 8) Sufficient operating revenues and Draft Version 0.7 June 2008 Page 7
  10. 10. 9) Long-term capital funding It is anticipated that a first generation AMP will be created early in 2009. This will allow the BU to understand more fully the requirements for completing the full AMP and will identify data/knowledge gaps for. Subsequently, a more substantial and complete AMP will be finalized by Fall 2010 so that this document can be used for the 2012-14 business planning cycle which will likely begin in Q3/Q4 of 2010 and continue through 2011. 2.4 Stakeholder Interests This section of the AMP should include a list of the key stakeholders and what their influence/requirements/aspirations are (e.g. Interests could be financial, service quality, safety, compliance etc) as they relate to the assets of the BU. Some examples of key stakeholders are: Internal Stakeholders • City Council • ALT and Directors • Other departments and business units External Stakeholders • Civic Partners • The development industry • Funding partners • Regional partners • Environmental / Health Agencies, • Public Interest Groups 2.5 Accountabilities and Responsibilities for AM This section of the AMP will contain a high level organizational chart, or overview, showing the BU staff with AM responsibilities. This section should also contain a brief description of AM accountabilities and responsibilities (i.e. what are the long term strategic as well as tactical day to day AM activities and who is responsible for them?). Further detail will be contained in Section 8.4. 2.6 Details of Asset Management Systems This section of the AMP will contain details of specific AM, or quality, system/certifications that the BU has obtained, third party accredited or not, that are in place to support AM (i.e. has the BU obtained IS9001, 14001, or PAS 55 accreditation? is the BU in the process of gaining accreditation? or are they planning to be?). Draft Version 0.7 June 2008 Page 8
  11. 11. Draft Version 0.7 June 2008 Page 9
  12. 12. 3.0 MANAGING THE ASSETS LIFECYCLE This section of the AMP will contain information related to the AM activities that are undertaken during the lifecycle of an asset as well as a summary of the asset information that is reported in the ISR. An introductory, summary paragraph should be included for this chapter. Sections 3.2, 3.3, 3.4 and 3.5 should detail the approach to the way the assets are managed, as opposed to specific details on an asset by asset basis. If required specific asset detail should be included in the appendices. However if a range of approaches is adopted for different assets, then these should be included in this section, but preferably should be discussed for asset groupings as opposed to individual assets. 3.1 Existing Asset Information This section of the AMP will contain a summary of the asset information by category pertaining to physical details of assets including physical condition performance (including capacity, utilization, demand condition and functional condition), and asset value along with brief details of the source of any data used and with an indication of confidence grades of data used. 3.1.1 Asset Details This section of the AMP will contain a detailed summary of the assets owned and/or operated by the BU based on physical characteristics of the assets(e.g. length of distribution main, numbers of fire trucks, key facilities, age, size, location etc...). As well this section of the AMP will contain a detailed summary of the physical condition of the assets. If assets within the BU have been assessed with regard to their criticality, then this section can also comment on the basis for the asset criticality assessment and detail the proportion of the asset base in each of the criticality bandings. For details of the City of Calgary Condition Rating Scale and associated descriptors see Appendix 2 of the Asset Management Planning Guidelines. Depending on the asset type, the BU may also wish to include details of any other industry standard asset condition rating scales utilized in the BU, as it is envisaged that the BU will wish to continue with condition rating grades that facilitate benchmarking within their the respective industries, in addition to allowing cross comparisons with other BU’s within the City of Calgary. Draft Version 0.7 June 2008 Page 10
  13. 13. This section should also contain plots showing distribution of assets by year built, remaining life etc. so that the information may be easily understood by any reader of the AMP. 3.1.2 Asset Performance This section of the AMP will contain a detailed summary of the asset design capacities and utilization as well as information on asset physical condition, demand condition and functional condition. Ideally, this section should contain a summary of the information reported within the ISR. 3.1.3 Asset Valuation This section of the AMP will contain a detailed summary of asset value (in terms of current replacement value), information on the valuation methodology used to establish values, as well as any key assumptions that were made in determining asset values. 3.2 Operating the Assets This section of the AMP will contained information on the operation of assets including who is responsible for the operation of the assets, a high level overview of the structure of the operational team and whether any of the operations are outsourced. Cost information for operations should be included in the Section 7.2- Operational Expenditures. 3.3 Maintaining the Assets Since all assets deteriorate with age they will eventually fail if not adequately maintained. Effective asset maintenance management involves balancing the cost of repairs and replacements against the risk of failure. Premature or too frequent repairs and replacements unnecessarily increase maintenance costs, while repairs delayed too long can also increase costs due to excessive deterioration as well as increasing the likelihood of asset failure. As such, the maintenance management practices applied to each asset, or asset group may therefore vary depending on the strategic importance of the asset, the cost/benefit ratio of the planned maintenance and the maintenance/ inspection techniques available. This section of the AMP should include details of which asset groups are subject to condition based maintenance or usage based and which are classified as run to failure. The justification for the adoption of a certain technique should be clearly stated. Draft Version 0.7 June 2008 Page 11
  14. 14. As a result of improved knowledge and analysis of maintenance trends, inspection and test intervals can be extended, or in some cases shortened. Details of this type of approach should also be included here. Cost information for maintenance should be included in the Section 7.2- Operational Expenditures. 3.4 Renewing/Replacing/Acquiring/Augmenting or Extending the Assets Where demand for service level parameters (capacity, reliability, security of supply etc) increases, the BU should consider the use of both ‘non asset’ and ‘asset’ methods of meeting increased demand. This section of the AMP will contain details of any policies covering the following: • Non Asset Solutions: covering such areas as providing customer incentives to reduce demand, customer education. • Operational activities that enable increased demand to be accommodated. • Redeployment and upgrade of existing assets • New assets 3.5 Innovation and New Technologies This section should include details of any innovative approaches or new technologies being used within the BU. These could apply to the operation and maintenance of the assets or to the piloting of new equipment delivered as part of a capital project. In addition there may also be new or novel approaches to asset assessments, e.g. non destructive testing of materials etc, which should be also detailed in this section. This section should not just list the work being done in this area, but should also detail the scope of the anticipated benefits associated with the adoption of the new technology, whether with regard to increased performance or in terms of money & time saved. 3.6 Retiring the Assets This section of the AMP will contain a summary of the procedures for how assets are to be disposed of in a responsible manner that includes obtaining the best price for the asset. Draft Version 0.7 June 2008 Page 12
  15. 15. This section should also include a summary of procedures for how materials such as oil, lead, PCB’s and asbestos will be disposed of in an acceptable manner. 3.7 Commercial Focus This section should detail any work the BU has done with regard to assessing what is the appropriate mix of in house v external resources. This could cover design, construction, operations and maintenance activities, or the approach to stocks & materials i.e. kept in house or available through tailored agreements with third part vendors. This includes both whether the third party is external to the City, or could include other BU’s within the City e.g. the decision to purchase and maintain IT or Fleet assets independently, or through the IT or Fleet BU’s. This section should be based on the assumption that the BU is ultimately accountable for the same LOS that it currently does, but that the LOS could be achieved in a different way. Comments on whether the BU should continue to be accountable for a particular LOS or customer offering are included in Section 5.5. This section should also cover the rationale behind the decisions made, which may include both financial and non financial considerations. Draft Version 0.7 June 2008 Page 13
  16. 16. 4.0 AMP DRIVERS AND ASSUMPTIONS The Asset Management Plan is a combination of both a long term strategic plan as well as a tactical plan. The plan is tactical in nature in that it takes the City’s long term strategic goals and turns them into specific deliverables for managing the City’s’ infrastructure assets cost effectively to achieve the long term goals, but as a BU document it is also a long term strategic document from which tactical project and financial information can be derived. The AMP should be reviewed annually taking into account changes to business drivers and improved information. The AMP should be updated at least every 3 years, prior to the commencement of the businesses planning cycle and following the actual allocation of funds agreed through the business planning process, however if required the AMP could be updated more frequently. This section of the AMP will contain details of the drivers and assumptions that are the basis of the AMP and the decisions outcomes that have been formulated as part of the AMP. An introductory, summary paragraph should be included for this chapter. Levels of Service (LOS) are one of the key drivers behind the AMP but are not included in this section as the approach to setting LOS are fully detailed in Section 5.0. 4.1 Asset Management Objective This section of the AMP will contain the specific AM objectives of the BU (e.g. to maintain, replace and develop assets over the long term to meet the required delivery standards and foreseeable future needs at minimum cost). This section will also contain information on the BU’s commitment to either best practice or good practice as well as the objectives for AM improvement? Examples of key AM objectives include: • Continually improve service delivery, • Maintain LOS • Achieve continuous improvement in operating and maintaining assets • Capital projects to deliver fit for purpose assets on time and within budget. (e.g. All capital projects, whether Base Maintenance or Enhancement, will fully engage end users to ensure that fit for purpose assets are delivered. • Comply with all statutory requirements Draft Version 0.7 June 2008 Page 14
  17. 17. 4.2 Asset Management Strategy This section of the AMP will contain details on the BU’s strategies of achieving its AM objectives. Examples of AM strategies include: • Adopt a Triple Bottom Line approach when considering asset, refurbishment, replacement or upgrades • Development of staff competencies to ensure the most appropriate management and stewardship of assets • Prioritize areas of greatest risk – refine and update risk mgt framework and risk register • Accept higher levels of risk, following consultation/acceptance of stakeholders • Continue to better understand assets by obtaining better information on condition, operating environment and hence useful life • Formulate & implement cost effective asset maintenance programs to reduce or mitigate risk of failure to provide agreed levels of service – • Formulate and implement asset replacement programs where asset maintenance programs prove too costly or high risk • Identify and deliver cost effective technologies to deliver better levels of service for similar cost • Formulate and implement economically viable and socially responsible asset development programs that will meet current and future, local and regional requirements • Identify, implement and improve asset mgt systems to provide accurate and timely information for effective AM, asset planning and performance monitoring • Work closer with all levels of staff to enable optimized design and investment in assets • Seek continuous improvements to the AM process These strategies will be more fully detailed in specific sections of the AMP. 4.3 Business Drivers This section of the AMP will contain details of the key high level business drivers • LOS –See section 5 • Environmental stewardship - To minimize the adverse impact of the Corporations operations on the environment • Employees, health & safety - To be an industry best workplace • Stakeholder requirements - To be responsive to stakeholder requirements • Customer service commitment - To provide high quality products and meet customer service level requirements Draft Version 0.7 June 2008 Page 15
  18. 18. • Asset Integrity - To manage and maintain the long term integrity of assets • Economic performance - manage the business efficiently at minimum prices and to operate on a least cost philosophy subject to fulfilling other environmental, social and legislative requirements • Economic development and growth - Enabling the economic growth of Calgary, but not at the expense of lower levels of service to existing customers. • Business Continuity Planning and Emergency/Incident Planning Other drivers to be considered include ongoing deterioration of existing infrastructure leading to a maintenance backlog, loss of asset related knowledge, stricter regulations e.g. Kyoto, reduced funding sources, global warming and the move towards understanding and ultimately reducing carbon footprint etc. Council Priorities will be reflected in the Business Planning Process and ultimately through the funding allocated to the BU. However the AMP should primarily be based on the drivers included in this section and when presented in the Corporate AMP document should provide the basis for future Council and Corporate decision making. It is possible though that following renewal of Council Priorities/Corporate Direction, the AMP may need further aligning to reflect the actual outcome of the Business Planning process. For example, this may take the form of specific growth initiatives or sustainability initiatives that could not have been foreseen by the BU. The following six sections should list the specific drivers and provide the framework around which the capital program and change initiatives are formulated: • Regulatory Standards (Current & Future) • Employee Health and Safety Targets • Sustainability Targets • Capital Maintenance (including ‘spend to save’ and ‘advance CM’) • Growth • Business Continuity or Security & Emergency Measures (SEM) Triple Bottom Line is not considered a driver in its own right, in that projects are not initiated purely to yield TBL benefits. However TBL is an important consideration when considering and selecting the preferred solution for addressing a specific business need i.e. TBL should be considered as part of an overall decision making framework. Similarly Lifecycle Costing is not usually a driver behind asset investments and is also part of the overall decision making framework that assists in selection of the best whole life business solution. However there are circumstances when it can be a driver for investment – see ‘Spend to Save’ investment under the Capital Maintenance section. Draft Version 0.7 June 2008 Page 16
  19. 19. Market capacity with regard to the construction industry and supply chain should also be discussed in this section, if it is likely that this could have an impact on the deliverability of the Capital Investment Program. The same applies to the Corporations own organizational capacity. Whilst these are not specific drivers for investment, they are a key consideration in terms of profiling investment and committing to milestones and project in use dates and therefore should be included if applicable. Similarly, while not being a specific driver, affordability, with regard to the overall finances available in any one funding cycle should be commented on in the AMP. Initially this can only be done at the BU level, where a BU should aim to contain their funding requests to a reasonable level. Then following the completion of the Business Planning Process, a City wide view of affordability will further detail the available funding in individual BU’s, with any associated implications commented upon in the AMP. 4.3.1 Regulatory Standards This section of the AMP should list the key/major legislative, standards and agreements related to this BU (extract from the Business Plans) as they relate to AM. These may include statutory requirements at a Federal, Provincial or City level (e.g. Drinking Water Act, PSAB 3150, etc…). This driver could include both current and future legislation, or regulatory standards. For current legislation that the BU is not yet compliant with, details should be included regarding any authorized departures from the Regulatory Bodies which would commit the BU to compliance at some future date. For the legislation that may be forthcoming and full details are not fully known at this stage, any assumptions should be included in this section. 4.3.2 Health and Safety Targets This section of the AMP should contain a summary of the BU’s health & safety policy and show how these relate to the AM activities of the BU. For the AMP, only the health and safety requirements that are driving investment at the asset level should be included. Examples of strategic performance targets related to this business driver include: • To take practicable steps to provide employees with safe working conditions, that do not detrimentally affect their health and safety • To have no successful prosecutions under the Occupational Health & Safety Legislation – specifically where this is linked to asset investment changes in operations. Draft Version 0.7 June 2008 Page 17
  20. 20. 4.3.3 Sustainability Targets This section of the AMP will contain a list of any specific sustainability drivers and associated initiatives that are applicable to the BU. Examples of these include: • Energy use reduction • Water use reduction • Recycling of materials In the future there will likely be a far bigger focus on sustainability issues and initiatives and therefore this section will take on greater importance for subsequent versions of the AMP, but the first version of the AMP should detail what is currently being done and what is planned. 4.3.4 Capital Maintenance This section of the AMP will contain a list of any specific AM drivers that are applicable to the BU. Examples of these include: • Backlog of maintenance that will need to be addressed over a given timeframe • Advance capital maintenance i.e. capital maintenance that is being carried out before it is required purely on the basis of asset deterioration. Examples of this could be water main replacement or rehabilitation being carried out to coordinate construction activities with those of other of other utilities or as the result of a highway realignment. Similarly it may be more cost effective to carry out capital maintenance on an asset as part of a quality enhancement project, even though the assets are not due for replacement. • ‘spend to save’ i.e. CAPEX projects that are aimed at reducing OPEX and typically will have a short payback period, usually within the current funding period e.g. high efficiency electrical equipment 4.3.5 Growth This section of the AMP will contain a list of any specific growth drivers, over and above general background growth of the City, that are applicable to the BU. 4.3.6 Business Continuity or Security & Emergency Measures (SEM) This section of the AMP will include a list of any specific initiatives regarding the requirement to change or invest the assets as a result of supporting the Draft Version 0.7 June 2008 Page 18
  21. 21. Corporations Business Continuity Plan or to safeguard against terrorist acts etc. 4.4 Assumptions A main input required to develop an AMP are the forward looking planning assumptions. This section of the AMP will contain a list of all of the assumptions that were used by the BU in generating the AMP. Early versions of the AMP will likely be based on a number of assumptions in the absence of robust data. These assumptions should also be clearly listed so that any reader of the AMP will understand the context from which the AMP was created. It is also recognized as an overarching assumption that even when the AMP is well advanced the cost forecasts for the first 3 years of the plan will be more developed than those over the remaining years, which will always be indicative only. This assumption will help in the understanding and interpretation of the AMP and its content. Growth related assumptions should be dealt with in the Future Demand section since this is likely to be significant enough for all BU’s to require a specific focus. Draft Version 0.7 June 2008 Page 19
  22. 22. 5.0 LEVELS OF SERVICE (LOS) This section of the AMP will contain information related to the Levels of Service (LOS) that are used within the BU. An introductory, summary paragraph should be included for this chapter. 5.1 Corporate LOS This section of the AMP will summarize the link between Council and Corporate goals and direction and the LOS targets that the BU works to. An example of a Corporate LOS could be to ‘complete 50% of BU Internal Safety Audits’. Based on this Corporate LOS, the Water BU would then develop specific LOS that relate to their assets and methods of operations. 5.2 Customer Orientated LOS This section of the AMP should make the link between the Corporate LOS and the specific customer oriented LOS that the BU is responsible for. If there is sufficient data to demonstrate the link between historic cost (of base maintenance) and the corresponding LOS, then this should be presented in this section. Ultimately this section will include details of the level of expenditure (capital and operating) required to maintain the LOS, improve the LOS, or, in certain circumstances, the savings that could be realized by relaxing a LOS. Also, if applicable, BU’s will ultimately have sufficient cost data behind changes in LOS that they may be able to influence future legislation. This should be referred to in this section if this is likely. 5.3 Asset LOS This section of the AMP will demonstrate the link within the BU between the Customer LOS that is provided and the Asset LOS that is needed, and/or maintained to provide the Customer LOS. While certain BU’s have published Customer LOS that are in line with national standards, have been widely communicated and performance against these is tracked on a regular basis, these LOS may be maintained, or improved, without necessarily having a good understanding of the long term health of the assets and the Asset LOS. An example of this may be excessive levels of asset redundancy, which support a high Customer LOS but do so in an inefficient manner. In order to deliver a required Customer LOS in the most efficient way the BU needs to understand the link between the Asset LOS i.e. what LOS is asset capable of delivery and, ultimately, what LOS the customer can expect to receive. Draft Version 0.7 June 2008 Page 20
  23. 23. An example of an asset LOS could be burst rate of water mains, while the associated customer LOS would be interruption to supply. Once the link between these two different LOS measures is understood then the assets can be managed in a more optimal way i.e. the lowest whole life cost solution may be to live with a higher burst rate, but have increased surveillance and the ability to respond to bursts in order to maintain a fixed customer LOS. Examples of Asset LOS include: • % availability of equipment • % of assets in certain condition grades • Work order backlog • % Predictive maintenance • Level of redundancy (Available capacity/needed capacity) Asset LOS are usually internal measures that assist with the management of assets and would not require Corporate or public sign off. 5.4 Business Performance Targets This section of the AMP will contain a summary of the business performance targets. These targets generally do not necessarily relate to a customer LOS, but are derived from and are consistent with the City's Strategic Goals & objectives. Examples of these include Health and Safety targets, sustainability targets etc. The intention of this section is to include a table of targets/metrics whereas Chapter 4 is intended to provide more descriptive information (i.e. what are these targets/drivers and what does it mean at an asset level). In addition, this section could also contain a summary of how the BU is deciding on appropriate Operational Performance Measures (OPI’s) to ensure that LOS is met (e.g. the combination of Asset LOS + appropriate Operational Performance Measures = Customer LOS) – it is not intended to list all OPI’s in this section, but a brief summary of the how these are being used in conjunction with the Asset LOS to optimize the deliver of Customer LOS, should be included. 5.5 Justifying LOS This section of the AMP will contain details of how the current LOS have been established and what was the basis for the current LOS. This section should detail what LOS is currently being delivered, what should be delivered and what LOS, if different, does the BU aspire to deliver. Good customer service, as perceived by both customer and utility, will be negotiated by service level/cost trade-offs, a concept that is inherent in the Draft Version 0.7 June 2008 Page 21
  24. 24. definition of asset management: meeting customer and environment service levels at the lowest lifecycle cost. As the BU gains a better understanding of the resources required to maintain or improve Customer LOS this section should also contain information related to the costs/savings/risks/LOS tradeoffs associated with changes to the existing LOS, either raising or lowering, as well as providing a clear case for the chosen option. i.e. different scenarios should be discussed with the aim of identifying any step changes in cost, either in savings or additional costs. The BU should be aiming to demonstrate that the chosen LOS is being met in the optimum way i.e. that it is not operating at too high a level of risk, characterized by frequent failures in LOS, but conversely it is not achieving its target LOS with too high a margin of safety by having too high a level of asset redundancy, or assets that are over specified. Once costs can be attached to varying LOS, the BU should consider the use of Willingness To Pay surveys, which allow the customers to comment on the cost/risk/LOS tradeoffs. Details of any surveys should be included in this section. This section should also note whether or not these LOS have these been signed off by Council and if are they available in public documents. Also contained in this section should be any comments/details of current LOS or customer groups that could be better dealt with by other BU’s or similarly, LOS that are currently the accountability of another BU, but could be better dealt with by this BU. Details regarding the status of any discussions with other BU’s should be included here. 5.6 Current Performance (Actual vs. Target) This section of the AMP will contain a summary table detailing actual performance of LOS & KPI’s against targets. This table should also include predicted future annual targets (i.e. stable or improving LOS). Details should be included to comment on any analysis of failure data, aimed at explaining any variances between actual and target LOS, along with details of improvement plans or changes to strategy planned to address any performance gaps. Draft Version 0.7 June 2008 Page 22
  25. 25. 6.0 FUTURE DEMAND This section of the AMP will contain information related to the Future Demand that will be placed on existing assets as well as the future demand that may indicate a need for additional assets within the BU. An introductory, summary paragraph should be included for this chapter. 6.1 Predicting Demand and the Asset Implications This section of the AMP will contain details of the current demand on the assets. This section will also identify for the plan period, • What is future demand? • Are demand patterns (peaks) likely to change? • Are population spatial patterns likely to impact on the assets more than growth? • What does this mean for the asset base and the way in which it is operated? Include any graphs of projected changes. If necessary consider a number of growth scenarios (e.g. High, Medium & Low) to allow an understanding of the sensitivity of asset upgrades to varying levels of growth and to identify any step changes in likely investment. As far as possible, growth projections should be tied to Corporate documents such as PlanIT, CentreIT and Accommodating Growth . However for more specific growth projections the BU should agree on appropriate growth scenarios with any associated BU’s e.g. EMS & Fire. The growth scenarios should be tested further at Forums such as the Asset Management Network. Changes in technology may also impact on growth in the asset base, as any increase in population may be offset by the use of more efficient appliances for example. Any assumptions that the BU is making about the future use of technology and its impact on growth in the asset base should be included in this section. Include any assumptions about climate change over the planning period. This section should also contain evidence to demonstrate that the optimum approach to accommodating growth has been considered in terms of the economies of scale with regard to building in capacity at day 1, as opposed to taking an incremental approach, which may possibly be more expensive in the long term, but also has the advantage of being able to react to any downturn in demand and does not run the risk of future stranded assets. Draft Version 0.7 June 2008 Page 23
  26. 26. 6.2 Demand Management Measures This section of the AMP will contain a summary of any measures – existing or planned, that are aimed at mitigating the impact of predicted growth in demand for services. These may include customer education regarding use of asset services or may include initiatives such as grey water reuse. Draft Version 0.7 June 2008 Page 24
  27. 27. 7.0 FINANCIAL FORECASTS This section of the AMP will contain information related to the capital and operating expenditure forecasts required to deliver the target LOS and ensure an appropriate level of asset stewardship. An introductory, summary paragraph should be included for this chapter. The AMP should set down the required levels of expenditure, in terms of both CAPEX and OPEX. For CAPEX the expenditure profiles should reflect the long term requirements and should be aimed at addressing any capital maintenance backlog issues, where appropriate. However, as part of the Business Planning process, actual levels of allowable expenditure will be established and therefore the AMP should reflect this and should include a discussion on the potential risks, or alternative schemes e.g. de-scoped projects that are being taken forward as a result of the actual funding allocations i.e. there shouldn’t be a disconnect between the stated levels of funding in the AMP and those in the Business Plans as the AMP will need to reconcile any differences. This applies to both CAPEX and OPEX expenditure. This section should be written from a zero based or needs based viewpoint, rather than assuming that a certain amount of funding will be made available, based on previous years funding allocations. i.e. this section, along with the associated sections should aim to justify the levels of required expenditure, as opposed to simply prioritizing within an assumed funding cap. 7.1 Capital Expenditure (CAPEX) Planning This section of the AMP will clearly identify the degree of accuracy and basis for all expenditure forecasts included in AMP. This section should also contain detailed CAPEX plans for the following 3 year Business Planning cycle along with indicative CAPEX plans for the following 17 years (or 47, 97 etc depending on the Plan timeframe selected). For the detailed 3 year plans, it is expected that sufficient work has progressed to allow the identification of the lowest lifecycle cost solution i.e. the identified need should be assessed in sufficient detail to assess whether the solution will be either a CAPEX or OPEX scheme. It is not expected that schemes will be at a detailed design phase as further refinement of the chosen solution can then take place during the optioneering phase once funding has been allocated. Use of tools such as RIVA should be used to inform the long term investment profile, however this tool only provides an indication of the likely investment Draft Version 0.7 June 2008 Page 25
  28. 28. required and therefore should be used to inform Capex profiling in conjunction with other information sources. 7.1.1 Basis for Development of the Capital Investment Plan (CIP) This section of the AMP will contain details of how the CIP has been developed. This section will highlight whether the program is risk based, and if not what other prioritization methodologies have been adopted (e.g. asset lifecycles, condition based etc). All BU’s should aim to move towards a risk based approach to the prioritization of capital expenditure. For each scheme included in the AMP, the BU should be able to demonstrate that : 1. There is a justified need e.g. is the asset really on the verge of failing, or is it just aging? is there sufficient data available to confirm the need? 2. That the schemes are scoped correctly e.g. have other solutions, possibly non asset solutions, been considered? 3. That the scope included in the project has been realistically costed. Where possible details should be included in this section of any synergies that exist between projects i.e. for certain investment drivers, a number of these may be able to be addressed by a single project. 7.1.2 Capital Expenditure Allocation This section of the AMP will contain information on the allocation of capital for different asset management initiatives. It is good business practice to have a clear understanding of the drivers of capital expenditure in order to develop efficient asset management approaches. In this section, the capital investment required should be split over two purpose categories; Base Service and Enhancement. Base Service Provision This relates to capital expenditures that are required to maintain the current level of serviceability to customers (i.e. Capital Maintenance). Draft Version 0.7 June 2008 Page 26
  29. 29. Enhancement This relates to capital expenditures that cause a permanent increase in the current level of serviceability to a new "base" level. Enhancement is further divided as follows: Legislative This relates to expenditures that are required for compliance with new (i.e. since the base service level was established) legally enforceable quality obligations. Enhanced Levels of Service This relates to expenditures that provide an identifiable, measurable and permanent step change in overall level of service to existing customers above the standard previously provided. Supply/demand balance This relates to expenditures that provide services for new customers with no net deterioration from the current level of service provided to existing customers, as well as expenditure that accommodates the increased use of services by existing customers at the current level of service. Therefore for any given scheme the total scheme expenditure should be proportioned across the purpose categories in relation to the relative magnitudes of each element of the scheme. The level of long term capital maintenance needs to be reassessed each time there is an enhancement program. It can increase, decrease or stay the same. Base Maintenance expenditure is not just for assets that are beginning to fail, but can also be used where there is a demonstrable saving in OPEX arising from the project e.g. automation or replacing the asset with a modern equivalent. This form of funding is classified as ‘Spend to Save’ but is still Capital Maintenance. Base Maintenance funding may also be required in the form of Advance Capital Maintenance i.e. capital maintenance that is being carried out before it is required purely on the basis of asset deterioration. Funding directed towards Advance Capital Maintenance should be recorded separately, as otherwise it can present a misleading view of the BU’s long term Base Maintenance requirements. This section should also contain tables showing proposed asset expenditure by asset groupings, with the project costs broken down into the, base, quality, enhanced levels of service and supply/demand balance. The existence of any asset specific master plans should be detailed in this section, as these will provide an indication of timescales and costs for key Draft Version 0.7 June 2008 Page 27
  30. 30. projects. This section should also detail costs and timescales for any IT investment, asset data improvement projects, business process mapping etc (the justification will be contained in the Asset Management Practices section. 7.1.3 Funding Models This section of the AMP will contain details of the proposed funding model (i.e. what % is required from Corporate, Grant, 3rd parties etc…) that is needed for the CIP. Detailed Capital Investment programs should be included in the appendix. 7.1.4 Depreciation Models This section of the AMP will contain a brief description of the approach to modeling the depreciation of the assets and the asset lives used in these models. For financial reporting the depreciation model developed as part of the TCA project is based on historical costs and straight line depreciation and the drivers behind this approach are driven by Finance requirements. However for the purposes of the AMP and better understanding expected asset lives, reference should be made to Current Replacement Values and the actual deterioration of the asset base, which can result in a very different expected asset life compared with the depreciation model. 7.2 Operational Expenditure (OPEX) Forecasts This section of the AMP will contain detailed OPEX plans for the following 3 years along with indicative OPEX plans for the remainder of the Plan period. 7.2.1 Basis for Development of the Operational Expenditure Plan This section of the AMP will contain information on how the current OPEX plan has been put together (i.e. historic spending with a % uplift, historic spend but with a zero based uplift for New Opex, or total budget zero based). This section will also highlight other operational funding activities that are occurring within the BU. Examples of these include: • activity based costing carried out, which then facilitates the use of zero based budgeting • a contingency fund accurately identified and held separately at BU level for unforeseen demand, adverse weather events etc… Draft Version 0.7 June 2008 Page 28
  31. 31. 7.2.2 Operational Expenditure Allocation This section of the AMP will contain information on the allocation of OPEX for different asset management initiatives. As with CAPEX, it is good business practice to have a clear understanding of the drivers of operational expenditure in order to develop efficient asset management approaches. In this section, the operational expenditures required should be split over three purpose categories; Base, New and Temporary. Base OPEX This relates to the base funding that is required to run (operate & maintain) the existing asset base and to maintain the current level of serviceability. New OPEX This relates to the new funding that is required for: • operating and maintaining a new/refurbished asset (CAPEX funded asset) i.e. the OPEX associated with a CAPEX enhancement • providing an enhancement, where it is proven that increased OPEX is the best Whole Life Cost solution for a project. This could be for Legislative, Enhanced LOS or Supply/Demand Balance. PROPEX This relates to an increase in the OPEX funding that is used to maintain service levels, recognizing that this is greater than base OPEX, as the asset is operating beyond its useful life and needs additional propping up – additional maintenance, higher electricity costs etc. Often this is a short term measure that is put in place until CAPEX is made available 7.2.3 Funding Models This section of the AMP will contain details of the proposed funding model (i.e. what % is required from Corporate, Grant, 3rd parties etc…) that is needed for operations and maintenance etc Detailed OPEX plans should be included in the appendix. 7.3 Associated Risks This section of the AMP will contain details of the changes in both the asset risk profile and the level of risk the customer will be exposed to as a result of the level of investment sought. This is especially important when the actual funding levels are less than the requested funding. (e.g. risks could be reduced as the result of capital investment, or risks could be seen increasing over early stages of the plan period as the result of deferred investment Draft Version 0.7 June 2008 Page 29
  32. 32. polices or the lack of funding). The aim here is to explicitly link levels of risk with level of available funding and the intervention options selected. Risk maps should be used in the section (See the Asset Management Planning Guidelines, Appendix 3) to give an indication of the current asset risk profile and how this will likely change as a result of the management strategies selected. Draft Version 0.7 June 2008 Page 30
  33. 33. 8.0 ASSET MANAGEMENT PRACTICES This section of the AMP will contain information related to the asset management practices used within the BU. An introductory, summary paragraph should be included for this chapter. 8.1 Technology Assets Supporting AM This section of the AMP will contain details as to what key technology assets the BU owns and operates, whether the technology is fit for the BU purpose’s, whether the IT assets are adequately integrated and how the technology assets are managed (e.g. hardware by Corporate IT, software by BU, third party etc.) This section should also include details of any computer models e.g. hydraulic network modeling, demographic models etc) that are used by the BU for the purposes of AM. This section should also list what data model, asset inventory etc are being used by the BU for all aspects of IT. This section should also contain details as to how the BU is keeping current on emerging technologies for AM. 8.2 Data Management Processes Supporting AM This section of the AMP will contain details of where asset information about capacity, condition, performance etc of existing assets held (i.e. what sources does it come from – computer modeling, asset inspections, work records, SCADA systems etc…) This section should also contain details as to how asset data is managed and what data improvement plans are planned (this is linked to Confidence Grades stated in the Appendix 1). Several BU’s have a number of ongoing initiatives with regard to condition assessments of their asset base and details of this type of activity should be included in this section. 8.3 Business Processes Supporting AM This section of the AMP refers to the BU’s management of infrastructure assets. This section should describe the key processes that support asset management within the BU and contribute to the development and delivery of the AMP. This section should also contain • details of any available Master Plans along with details of their status • documentation of work flows, supporting roles and responsibilities, Draft Version 0.7 June 2008 Page 31
  34. 34. • technology requirements & KPIs 8.4 People Resources Supporting AM This section of the AMP should contain details of the people resources within the BU that are responsible for AM. Examples of specific information that should be included are: • Roles & responsibilities for AM • Competencies of resources responsible for AM This information should be presented for the current BU resources along with the plans for improving the BU’s people resources and AM competencies. 8.5 Risk Management Framework This section of the AMP will focus on the BU’s approach to developing and implementing a risk management framework that is used in its AM activities since risk is an integral part of managing the life cycle of infrastructure assets. Details should be included of how the BU manages both asset risk and business risk, as both can impact on the BU’s ability to consistently deliver their stated LOS. Details of a range of approaches to the assessment and management of risks are included in the Asset Management Planning Guidelines, Appendix 3 – AMP Risk methodology including use of the City of Calgary Integrated Risk Mgt Framework 8.6 Emergency Management Plans This section of the AMP will contain information on any plans that exist that set out the organizational structure and procedural arrangements for dealing with AM during/after an emergency event. This section should detail how these plans are kept up to date and refer to any additional CAPEX requirements that are linked to making the plans more robust. Examples of these plans may include: • drought management plans • flood management plans • contingency management plans Draft Version 0.7 June 2008 Page 32
  35. 35. 9.0. PLAN IMPROVEMENT & MONITORING This section of the AMP will contain a summary of the key actions that are to be progressed in order to address any deficiencies in the Plan. These may include: • asset data improvement plans, • asset surveys, • development of IT solutions, • training programs • business process mapping This section of the plan will also outline how the BU will monitor its own AM activities to ensure that it is keeping up with its initiatives within the AMP. Further details of the Improvement Plans will be included in Appendix 4 Draft Version 0.7 June 2008 Page 33
  36. 36. APPENDICES Draft Version 0.7 June 2008 Page 34
  37. 37. APPENDIX 1 DETAILED CAPITAL EXPENDITURE FORECASTS This Appendix to the AMP should include a more detailed forecast of the capital expenditures expected to be incurred by the BU in order to replace and enhance the existing and growing asset base. Draft Version 0.7 June 2008 Page 35
  38. 38. APPENDIX 2 DETAILED OPERATIONAL EXPENDITURE FORECASTS This Appendix to the AMP should include a more detailed forecast of the operational expenditures expected to be incurred by the BU in order to operate and maintain the existing and growing asset base. Draft Version 0.7 June 2008 Page 36
  39. 39. APPENDIX 3 SUMMARY OF MAJOR ASSET CATEGORIES This Appendix to the AMP should include details of depreciated value, average remaining life, condition etc. This appendix should be consistent with the asset categories that are being used for asset reporting purposes in response to PSAB 3150. Draft Version 0.7 June 2008 Page 37
  40. 40. APPENDIX 4 ASSET MANAGEMENT PLAN IMPROVEMENTS This Appendix to the AMP should include: • Details of Improvement Plans • Links to the Asset Management Assessments. Include details, costs, timescales for improving asset knowledge, competencies, business processes etc Draft Version 0.7 June 2008 Page 38
  41. 41. FOR MORE INFORMATION… For more information on The City of Calgary Asset Management Planning Guidelines, please contact… Cameron Matwie, Corporate Asset Management Phone: (403) 268-3510 Email: cameron.matwie@calgary.ca Feedback, comments and suggestions are encouraged and always welcome! Draft Version 0.7 June 2008 Page 39

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