Designing an Asset Management System


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Designing an Asset Management System

  1. 1. Designing an Asset Management System Michael P. Smith, Michael W. Lovett, and John T. Caldwell M any water and wastewater utili- plant assets based on an asset management ties in Florida are beginning to plan. This function requires an accurate Michael P. Smith, P.E., DEE, is an asso- understand the need to develop understanding of the utility’s assets, their ciate and senior project manager with a good asset management system (AMS). condition, and their replacement value. It CDM in Tampa. Michael W. Lovett is a Fixed-asset management is a requirement in also requires an understanding of which senior project manager of information the upcoming U.S. Environmental Protection business practices associated with asset man- management services with CDM in Agency’s capacity, management, operations, agement can be continuously improved; what Orlando. John T. Caldwell, P.E., is a proj- ect manager of enterprise business con- and maintenance (CMOM) rule. the priorities and risks are; what improve- sulting with CDM in Orlando. Some utilities are recognizing the bene- ments are needed to optimize the use and fits provided by the enhanced data manage- extend the life of the assets; and how to most ment and reporting capabilities of computer- effectively fund the assets’ maintenance, ized asset management systems. The new refurbishment, and replacement. types as well. Further categorizing assets into reporting capabilities meet the reporting The asset-management process includes an asset classification hierarchy is helpful to requirements of Governmental Accounting periodic audits of all process elements to utility managers for planning and imple- Standards Board Statement Number 34 achieve at least the following five objectives: menting asset management. A utility should (GASB-34). These software databases can • Meet utility-wide goals. establish an asset classification scheme as part track assets based on either the standard • Reduce and anticipate asset-related costs. of its strategy for implementing a new AMS. depreciation method or modified approach • Meet required service levels. defined in GASB-34. • Conduct asset-related procedures as Proactive Planning of Asset There are practical reasons for utilities to planned. Renewal and Replacement invest in computerized asset management sys- • Update and improve asset plans properly. Probably the most important benefit of tems other than just “meeting the regs.” There a properly designed AMS is the ability to plan are benefits that supervisors, managers, direc- What is an Asset? proactively for the renewal and replacement tors, and elected officials can realize from a A utility acquires long-lived, fixed assets of utility assets. Many utilities expanded and properly designed, comprehensive, integrated to provide water and/or wastewater service to built new water and wastewater facilities dur- AMS. Developing a new AMS provides an its customers. These assets include pipes, ing the late 1970s and early 1980s to meet opportunity to enhance work processes, inte- treatment facilities, tanks, pumps, buildings, new regulatory requirements and increased grate various “islands of information,” and and a variety of other pieces of equipment demands. The federal government provided develop reporting mechanisms that provide that have a useful life greater than one year. billions of dollars worth of grant funding for timely information for managerial decisions. Agreeing on the definition of an asset will be these utilities, with additional funding assis- one of the liveliest discussions utility man- tance from the state revolving fund program. What is Asset Management? agers will have as an AMS is designed. Since Now, some 25 to 30 years later, utilities are Asset management is a general term with most currently available asset-management beginning to experience the growing pains of many different meanings, depending on software is designed to handle a wide range of replacing their facilities. Estimates by the federal which governmental agency is using it. The assets, utility managers should not waste government and other interested parties indi- clerk considers asset management the appro- much time defining them. cate that funding renewal and replacement priate recording and reporting of assets in The important thing to remember is that (R&R) projects will cost in the hundreds of bil- accordance with generally accepted account- a water and wastewater utility has two basic lions of dollars over the next five years. State and ing principles. The finance director considers types of assets: equipment/facilities and pip- federal governments have no budgets to deal asset management a strategic financial plan. ing infrastructure. Piping infrastructure with half the expected capital needs, putting The utility director thinks of his or her job, includes water transmission and distribution considerable pressure on the utilities to proper- and maintaining the utility’s infrastructure in piping, as well as wastewater collection and ly plan for R&R projects in the near future. good working order. The utility supervisor conveyance (force) mains. Equipment and The utility manager or director who thinks of a work order system that helps plan facilities are generally all above-ground assets wants to stay ahead of the R&R curve has a and control resources and equipment. The associated with treatment plants or facilities, number of traditional methods and several information technology (IT) director sees but can also include below-ground pump sta- new concepts to apply to the problem. A asset management as another enterprise- tions. On average, the utility’s asset value will comprehensive, integrated program of struc- wide, integrated suite of computer software be one-third equipment/facilities and two- tured planning, financing, and delivery of and hardware requirements. thirds pipe infrastructure. R&R projects will now become a factor criti- Obviously these are simplified representa- The average useful life of cal to the maturing environmental utility’s tions, but they illustrate the difficulty in dis- equipment/facilities ranges from 15 to 30 success. Proactive planning allows a utility to cussing a topic that is so broad. Since all of these years, while the average useful life of pipe use a pay-as-you-go method to finance R&R agencies have policy criteria they are responsible infrastructure ranges from 80 to 120 years. projects, rather than costly debt-service to meet, designing an AMS must consider all The strategic infrastructure and financial methods. Over the long run, this approach criteria in order to be useful and successful. planning associated with these two categories can mean lower rates for utility customers. The AMS’s primary function is to enable is significantly different. Operations and It is important to start the discussion a utility to manage its infrastructure and maintenance strategies vary for these asset Continued on page 36 FLORIDA WATER RESOURCES JOURNAL • MAY 2004 • 35
  2. 2. Continued from page 35 or replacement in the next two to five years, R&R budgets. When any R&R project is com- about R&R planning with a few simple defi- allowing utility staff time to determine how pleted, the old asset can be removed from the nitions, since similar terms may have differ- R&R projects will be funded and delivered. asset record and replaced with new asset ent meanings to people. An operations and Financial planning starts with recogniz- information, restarting the cycle. maintenance (O&M) activity or project ing two basic types of R&R projects: planned Balancing the needs for corrective and allows an asset to meet its intended useful and unplanned (emergency) R&R. The utili- preventive maintenance versus asset renewal life. This may include changing glands and ty should also establish user rates so a per- and replacement is the heart of good asset seals, regular lubrication, maintenance of centage of the revenues are reserved up to a management. The current state of computer coatings, etc. O&M projects are typically set amount established for both types of R&R hardware and software makes it possible to funded and performed by a utility’s opera- projects (revenue bond covenants typically track the enormous volume of information tions and maintenance division. prescribe the amounts that should be needed to allow utility planners to optimize A renewal and replacement project is reserved, but these should be viewed as min- asset management expenditures. Utility man- one that replaces or renews part or all of the imum amounts since they may not meet the agement, in the future, will be judged by how asset or facility to keep it in service. Building needs of a maturing utility). Funds for both well and efficiently it balances and optimizes a new facility to meet growth demands or R&R project types should be replenished maintenance versus R&R costs. expanding an existing facility is considered a until the utility’s set amount is achieved. capacity expansion project. Projects that are The planned R&R fund should be grad- Asset Management System required to meet new, more stringent regula- ually increased at the beginning of the life of Development Strategy tory requirements are considered upgrade the utility, generally in relation to the expen- An obvious starting point for designing projects. Expansion and upgrade projects are diture curve that can be derived from detailed an asset management system for a water or easily recognized as capital improvement asset information (e.g., install date, historic wastewater utility is to develop a strategy. A projects, or part of a utility’s capital improve- cost, and useful life). Eventually, the planned project of this nature is comprehensive and ment program (CIP) delivery system, which R&R fund will reach a steady-state amount involves all of a utility’s sections or divisions, is typically funded in a CIP budget and deliv- equal to the utility’s replacement-cost-new as well as other governmental departments. ered by engineering or technical support divided by its cost-weighted useful life. Key elements of an AMS development strate- staff. A capital improvement project Several methods of computing this amount gy include: improves an asset or system by one or a com- are available to the utility manager. • identifying project goals and objectives bination of the following: Emergency funding should be based on a • developing the AMS scope 1) extending the useful life of the asset or sys- variety of factors and should include input • identifying the design groups tem for more than one year beyond its from various sources, including the utility’s • developing the implementation strategy original design service life, risk manager. • developing a change-management strategy 2) adding to the value of the asset or system, A project’s size and complexity and a • developing budget costs and schedule or utility’s capabilities will determine who will An asset management strategic plan 3) improving the system by providing better be responsible for delivering the R&R project. should include the AMS design strategy’s service capability or capacity. A very large or complex R&R project (greater development. By these definitions, it is clear that R&R proj- than $200,000 or multi-year projects) would ects can be considered CIP projects. typically be budgeted and delivered by the Project Goals and Objectives Proactive planning for R&R requires a utility’s standard CIP delivery system. Small The project team should be careful to dis- comprehensive or strategic view of the utili- projects not capitalized for simplicity’s sake tinguish between AMS project goals and asset ty’s business. It starts with creating and main- (less than $5,000 to $10,000) that do not management program goals. Most likely, the taining an accurate record for each major require any engineering evaluation can be utility has already identified some general asset in the system. The asset record should budgeted in the O&M division and delivered goals for its O&M and capital projects sec- contain an accurate accounting of the instal- by the maintenance staff, if possible. tions. These should be reviewed when identi- lation date and cost, and a good estimate of A large percentage of R&R projects will fying the AMS project goals. When designing the asset’s useful life at a reasonable level of fall within the $5,000-to-$200,000 range. A the AMS, the program goals may change, categorization or detail. normal CIP project takes from two to five depending on feedback from the design team A utility can implement an asset valua- years to plan, design, and construct, which is about work processes and software capabili- tion process or program to upgrade asset too long for most of these types of R&R proj- ties. After the AMS is in place and operating, records if one was not created or maintained. ects. In addition, the “lean and mean” main- utility managers can modify other goals relat- Utility engineers must carefully follow CIP tenance staff is probably not capable of pro- ed to the utility’s performance measures. project closeout procedures to capture accu- viding for this size and number of R&R proj- rate information into the record. From the ects consistently. Scope of the Asset Management System asset record, which should be computerized, A master project concept, which is a CIP A computerized AMS can range in com- planners can regularly obtain reports of project used to set aside money for multiple, plexity from a set of electronic spreadsheets to assets by category that are within the last five simple, and similar projects, can be used to a sophisticated suite of integrated software years of their useful lives. budget for and deliver this project type with- packages, including a geographic information Regular inventories and inspections of in one year. The master project team can system (GIS), work management, human the utility’s facilities should be used to verify identify, prioritize, and deliver any of these resources, billing, customer service, superviso- the record and observe the actual condition of simple projects during a fiscal year, using the ry control and data acquisition (SCADA), the assets. Feedback from O&M staff during master project’s budget if the simple project finance, purchasing, and other software sys- regular inspections is crucial to prioritizing meets eligibility criteria. This speeds up the tems. Deciding on the AMS’s scope can be dif- R&R projects. The planners can then generate delivery of simple R&R projects to less than ficult and requires an understanding of exist- a prioritized list of projects that need renewal one year and allows for strategic planning of ing technology available, existing systems in 36 • MAY 2004 • FLORIDA WATER RESOURCES JOURNAL
  3. 3. use by the utility, and level of efforts needed to modify the AMS. This is sometimes called a gap analysis, since the utility is analyzing the gaps between its existing and desired system capabilities. At this point, the utility is trying to identify basic system requirements, not a detailed definition of all functional and tech- nical requirements. Detailed requirements are refined as part of the design process. Some of the basic requirements that will determine scope include: • How does the utility want to account for its maintenance costs? • Where will the asset record reside? In what form? • Will it be an enterprise-wide system? Over the Internet? • Will it be a stand-alone system or integrated with other software systems? Which ones? • Will it be GIS-based or an integrated sys- tem? Figure 1 Figure 1 shows the common integration AMS Integration with Current & Proposed Information Management Systems elements for a utility’s AMS. The technology’s current state is such that most efficient AMSs are now enterprise-wide capable and use a browser-based technology over the enterprise goals. Most utilities may need to modify work • establishing the warranty and startup poli- intranet. High-end AMSs now provide for processes in coordination with the strengths cies the integration of GIS data to effectively of the selected asset management software to • determining how to acquire asset inventory address the mapping component of CMOM realize the real benefits of an AMS enhance- and condition assessments requirements. Once the GIS is integrated, it is ment. • establishing how to populate the AMS easier to include a direct interface to a capac- The design team for the utility’s AMS ity model, which will directly address the sys- should be divided into three groups: the Change Management tem capacity issues of CMOM. steering committee, the main design group, Employees should be informed of any The integral part of an AMS is the sys- and the functional group. At a small utility, forthcoming changes in their roles as early as tem’s ability to allow for the proper mainte- these three teams may consist of the same possible. A project communiqué should be nance and accounting of maintenance costs people; at a larger utility, they may be several developed and distributed to all affected associated with the assets. The core products representatives of different departments. employees when implementing the AMS. that perform these activities lend themselves Figure 2 shows a design team makeup for a Those who are directly involved in the AMS’s for inclusion to the overall AMS and are medium-sized utility and defines the respon- design should talk about the project’s referred to as computerized maintenance sibilities of each group. For the purposes of progress to their employees. Employees management systems (CMMS). The CMMS, if this article, a medium-sized utility is a water should be solicited for input to be sure that properly interfaced with the enterprise human and wastewater utility that serves from management or mid-level management are resource information system (HRIS) and 100,000 to 250,000 customers. informed about what the staff currently likes information from detailed accounting from about how work is being done (if it ain't the parts warehouse or direct purchasing will Implementation Strategy broke.....) and to provide them an opportuni- allow for economical job costing of the main- An implementation strategy needs to be ty to create their own wish lists for improve- tenance work performed on an asset. developed as early in the project as possible. ments to help them do their jobs. When pro- Direct collaboration with the IT depart- The strategy may be modified as the project ducing documents, provide staff an opportu- ment will help better define the enterprise’s progresses through design, but the main ele- nity to review and comment, again to solicit ability for providing what level of support the ments of the strategy will help the utility input. This approach is highly effective when IT infrastructure can provide to the overall decide on the project’s overall scope and thus managing change, which most people have a AMS. its cost and schedule. hard time accepting. Implementation is the actual process of Design Groups installing and starting up the new system. It Budget and Schedule A utility can center the AMS’s design on begins in the latter stages of design. No good project strategy is complete a request for proposal for computer hardware Implementation strategy elements include: without a good estimate of cost and schedule. and software systems to implement the • determining how to choose the right solution Costs will vary depending on a large number desired AMS; however, the computer hard- • determining how to procure hardware, soft- of factors. The budget table shows some of ware and software systems alone may not ware, and a system integrator the elements that should be included in the enhance the utility’s operations sufficiently to • defining the role of the system integrator cost estimate: meet the stated asset management program • determining if there will be a pilot program Continued on page 38 FLORIDA WATER RESOURCES JOURNAL • MAY 2004 • 37
  4. 4. Figure 2 Typical AMS Design Team Continued from page 37 The project schedule can be estimated at • piping infrastructure maintenance the strategic stage into the basic elements • corrective/preventive maintenance Budget shown in Figure 3. The time frame for a • warehouse inventory System Design ..................$ 300,000 medium-sized utility to implement an AMS • customer complaints RFDRFP Development ........$ 75,000 enhancement project will range from two to • meter management activities Vendor Procurement ..........$ 50,000 four years, depending on a number of factors. There are a series of activities that occur from the time a potential maintenance need Installation & Configuration Asset Management System Design is recognized until the work required can be - Hardware/Software..........$ 1,600,000 The actual AMS design can be divided quantified and described through the cre- - Implementation ..............$ 1,900,000 into the following major elements: ation of a work order. Once a work order is Pilot Testing & Acceptance $ 175,000 • work process development issued, there are numerous steps that have to Training..............................$ 125,000 • functional requirements development occur in order for it to be acted on—these Full Role out ......................$ 70,000 • system integration requirements develop- include obtaining parts, scheduling work, Maintenance & Support ....$ 90,000 ment and scheduling and planning other activities. • implementation requirements development Some of these process activities are similar AMS System Total ............$ 4,385,000 • request for qualifications/request for pro- for different sections of the utility, while oth- posal development ers are quite different. Some rely on other It is important to delineate between processes and must be coordinated. Figure 4 “project” costs and operational costs. Line Work Process Development shows an example work process for preven- items such as training, maintenance support, Understanding work processes a utility tive maintenance. and customization may extend longer than uses to maintain and record asset mainte- The purpose of the work process devel- the project’s duration. It is recommended nance is required to design a system that can opment task can be subdivided into the fol- that the design team decide on a time frame cost-effectively maintain accurate asset infor- lowing activities: for the project and include all costs associat- mation. Many work processes have to occur • identifying existing work processes ed with these line items during the chosen in order to install, operate, maintain, rehabil- • identifying key roles and responsibilities time frame in the project costs. Any costs itate, and replace an asset. Some examples of • developing proposed work process modifi- after the project time frame would be consid- work processes include: cations ered operational costs and should be includ- • capital project delivery activities The design team’s functional groups are ed in the utility’s operating budget. • equipment/facility maintenance the key team members in identifying existing 38 • MAY 2004 • FLORIDA WATER RESOURCES JOURNAL
  5. 5. work processes. The members of the func- tional groups are the individuals who should actually accomplish the work. A utility can create workflow diagrams to represent the work processes. These existing workflows can then be reviewed with the design group to iron out any inconsistencies and identify common roles and responsibilities. Once the existing workflows are identi- fied, the design group can begin to develop the proposed work processes. The steering committee should address and/or approve policy change issues. It is important not to spend too much time at this point on the design. Many changes will still occur when a particular software application is chosen. The primary purpose at this point is to identify what sign-offs should be required and who should do the approvals. Functional Requirements Developing functional requirements is the next step when designing AMS enhance- ments. Functional requirements differ from Figure 3 work processes in that work processes are Sample Project Schedule Estimate “what we do or should do” and functional requirements are “how we do it or want to do it.” The functional requirements can be bro- ken down into various categories, including: task will vary from utility to utility, depend- requirements, pilot testing and acceptance, • IT requirements ing on the strategy for integration estab- documentation and training, and startup • warehouse and inventory requirements lished above. The utility’s IT department assistance. The RFQ/RFP is then developed, • maintenance requirements should provide the major input for this based on the utility’s standard contract terms • management requirements task, since it will most affect the overall and conditions, or on whatever procurement • reporting requirements operations and maintenance of the utility’s method the utility decides is best. The purpose is to identify how a utility IT system. wants its AMS to function. A functional Interface requirements must determine Lessons Learned requirement example might be: “The AMS how existing and proposed information will When we consider some lessons learned must have the ability to allow the prioritizing feed to and from the new AMS. Database from completed AMS design projects, not of maintenance tasks based on critical equip- platforms, operating systems, hardware plat- surprisingly the biggest element that deter- ment designation.” Functional requirements forms, communication protocols, access and mines success is the people. When imple- are used to help define the AMS’s operational administrative rights, number of seats, and menting new systems within a utility, there is capability. Some functional requirements can other integration requirements are deter- always a reluctance to change. By nature peo- be generalized since most vendors supply the mined during this part of the project. Other ple will resist changes unless they are same functions, but others are tailored to the key issues include bandwidth needed for the informed on and are involved with selecting individual needs of a utility. operation of the AMS, which software pro- and implementing these systems. Here are Functional requirements are intended to grams control what data, and whether it is some of the numerous barriers to change and judge and quantify how different AMS solu- better to push or pull the interfaced elements their solutions: tions suit the needs of a utility by comparing to or from the AMS. vendors’ responses when asked if they meet Level of Computer Literacy of Staff the functional requirements list. Vendors Implementation Requirements Barrier: Many municipal staff members should be judged on whether they complete- As part of the design, the RFP should are not computer literate to a level required ly or partially meet each functional require- include implementation requirements. These to use the new technology. ment, or if they should identify the level of are similar to special terms and conditions Solution: Develop a training plan man- effort needed to satisfy the requirement. The but lay out the specific requirements a vendor aged by a training coordinator who can track goal of the procurement process is to select a must meet when providing software selected computer literacy levels of future AMS users software application that BEST suits the by the utility. Obviously, these requirements and apply appropriate training in the areas functional requirements of a utility with the will include specific instructions for the ven- needed. least amount of customization. dor during the selection process. This part will spell out the procurement process, which Staff Participation in System Integration will vary for different utilities. Design and Implementation System integration develops the inter- Other aspects of the implementation Barrier: Sometimes managers may choose face requirements between the new AMS requirements include the submittal of work software without defining the needs of the staff. and existing computer applications. This plans, configuration process, reporting Continued on page 40 FLORIDA WATER RESOURCES JOURNAL • MAY 2004 • 39
  6. 6. Continued from page 39 latest technology available. Interdepartmental Standardization Solution: The process of initiating Barrier: Some plants or departments staffing changes begins at the conceptual Interdepartmental Politics within a utility may be more aggressive in design phase of implementing the new tech- Barrier: Some IT departments may applying information technology than oth- nology. The first step is to involve staff who want to control all information technology ers, which may be against management’s will be using the technology in the design and used by the water and sewer utility; howev- desire to have consistent operations between decision-making process. This is all part of er, the utility needs to have priority service if departments. the change-management process. A utility they do. In many cases, IT departments have Solution: Form a management committee should hold several workshops for each area to service all municipal departments, not to discuss common strategies for implement- where new technology is sought, including just water and sewer. ing information technology using a common specific employees who are planning to use Solution: Work hard at developing a approach. IT managers should be involved in the new systems. partnership with the IT department. IT the standardization process to ensure that should be in charge of the network and com- computer hardware and communications Information Technology Knowledge puter standards such as computer operating infrastructure standards are followed. Barrier: Management and staff may not systems. The water and sewer department know what technology is available to manage should pick and choose their own applica- Disconnected Databases data about their operations. tions for SCADA, maintenance management, Barrier: Water and wastewater plants and Solution: Establish an information and related systems with input from the IT pipeline maintenance groups may have sepa- technology steering committee consisting department. It should also be willing to sup- rate databases of equipment and inventory, of department managers. This committee port IT staff for full-time system administra- and lots of paper organized in a non-stan- should meet and become educated on the tors to run these systems. dardized/centralized fashion. Collection/dis- tribution systems and county GIS may not be integrated or have separate GIS/computer- Figure 4 - Proposed Corrective Maintenance Work Process aided drafting mapping systems. Solution: Develop a centralized data- base/data center approach for storing and accessing data. Multiple databases can be developed and used by different applications or departments. Summary Municipal utilities are facing increased financial challenges due to increasing demand, diminishing available water resources, some production efficiencies, increasing output restrictions, and aging infrastructure. Utilities are also faced with an increasingly complex environment due to an aging customer base, a diminishing technical labor pool running larger and more sophisti- cated facilities, an outflow of knowledge with retiring labor base, and growing resistance to rate increases. A large part of meeting the challenge must come from better techniques for man- aging assets using an asset management sys- tem. A structured approach to developing a fully integrated AMS should strike a balance among technology, process, and people, thus creating ownership of the system through empowerment and use. Developing an AMS will further engage and involve all employees in day-to-day oper- ations and enhance efficiency and productiv- ity through employee buy-in, increased morale, and streamlined system operations. Additional benefits include maintaining compliance with CMOM and GASB-34 requirements. As time and budget constraints continue to influence a utility’s operations, an integrat- ed asset management system will allow it to maximize the use of its resources. 40 • MAY 2004 • FLORIDA WATER RESOURCES JOURNAL