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Strategic Asset Management - Water Utilities

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Strategic Asset Manegement in Water Utilities

Strategic Asset Management - Water Utilities

  1. 1. Water and Wastewater Utilities ReformStrategic Asset Management role inUtilities reform João Feliciano
  2. 2. CONTENTS Introduction Strategic Water Final Asset Utilities Remarks Managemen t Strategic Asset Management role in Utilities Reform
  3. 3. INTRODUCTIONStrategic Asset Management role in Utilities Reform
  4. 4. 1.Introduction Can Strategic Asset Management play a role in the utilities reform? What are the most important problems that utilities are facing today? How can we manage our utilities in order to do more than the status quo? Is money the only problem? Can we take advantage of today’s problems and turn them into future opportunities? How to help utilities to evolve and what do they need?
  5. 5. 1.Introduction
  6. 6. 1.IntroductionThe story… In the end of the 18th century two competitor Portuguese shoe factories, due to the lack of market demand in Europe, sent their sellers to the same region in Brazil. Their mission was to do some market evaluation and report to Portugal their analysis, in order to proceed with further commercial actions.
  7. 7. 1.Introduction Sometimes conclusions are in opposite directions with the same assumptions. It’s important to acknowledge what’s a real problem and if it’s not an opportunity too.
  8. 8. 1.Introduction Now the quiz… Connect the 9 dots with just 4 straight lines, always with your pencil in the paper.
  9. 9. 1.Introduction Scenario 1 1 2 4 3
  10. 10. 1.Introduction Scenario 2 1 2 4 3
  11. 11. 1.Introduction Scenario 3 2 3 1 4
  12. 12. 1.Introduction So, we must to be sure, right from the beginning that we manage our utilities: - with a whole approach and awareness, acknowledging problems; and, - having the full picture, getting out-of-the-box and understanding our full reality.
  13. 13. STRATEGIC ASSETMANAGEMENTStrategic Asset Management role in Utilities Reform
  14. 14. 2.Strategic asset management The big “dilemma” – O&M vs SAM What’s the big difference between Operation and Maintenance and Strategic Asset Management? O&M: related with day-to-day activities SAM: Many definitions exist Example: “The art of balancing performance, risk and cost” (Brown and Humphrey, 2005) The IAM cube © LNEC 2007
  15. 15. 2.Strategic asset management The IAM cube: © LNEC 2007
  16. 16. 2.Strategic asset management The big “dilemma” – O&M vs SAM - SAM is not something to face only in rich countries. - SAM it’s a challenge to be tackled all over the world, in each context for different reasons. - A water distribution system or a wastewater system in not just a sum of components or elements and requires long-term planning and strategy. - There is a need to look at the utilities networks as an “organic” system. Example: We have two pipes, same age, same material, same diameter. One is responsible for the supply of one school and the other one is responsible for the supply of just two families. If it is adopted a like-for-like policy, ignoring risk or performance, these two scenarios are equal. In a real SAM policy these are two different scenarios and the first one should be taking into account with a different rehabilitation priority due to risk and performance assessment.
  17. 17. WATER UTILITIES REFORMStrategic Asset Management role in Utilities Reform
  18. 18. 3. Water Utilities Reform Typical Utility’s constraints: - Difficulties in the access to financing or funding their own infrastructures (either to increase coverage or to rehabilitate existing systems). - Tariffs don’t cover the operational costs, so it’s even more difficult to engage in other financial commitments. - Management in a natural monopoly scenario, normally too politicized. - Difficulty to elect in politicians agenda the need to allocate financial resources in water or wastewater infrastructures. We’re talking, in 80% of the cases, about buried assets. - Customers are demanding more and more in terms of service but the willingness to pay is still low. - Water stress in many regions versus the increasing demand of customers. - Lack of legislation or inefficient control and regulation, in many countries.
  19. 19. 3. Water Utilities Reform Typical situation: Context Analysis PoliciesStakeholders Regulation Legislation Utility LevelRequirements Legislation RecommendationsCustomer Preferences Standardization Service Level StrategyFinancial IncentivesEconomyDemographyEnvironmentCulture PIs and Objectives Objectives PIs and AM Methodology and Benchmark at National at Utility Benchmark Planning Level Level Definition Calculation Objectives Standardization Characterization Diagnosis Water Assess, Problems Produce Plans compare, learn, Utility Implement Plans improve Data Monitoring Plans Infrastructure Reviewing Plans Information Financial Constraints Human Resources Short-term oriented management Technological Resources Lack of Human Resources Organizational Culture Data Increasing water demand Accounting and Finance Calculations More demanding customer’s level service Customers Information Water scarcity Other Stakeholders IS Tools Subsidization level BI integrated National/Regional Level analysis R&D Planning process and tools Rehabilitation Techniques Operational Approaches Condition Assessment
  20. 20. 3. Water Utilities Reform “Universal” SAM simple overall approach: Context Analysis PoliciesStakeholders Regulation Utility LevelRequirements Legislation RecommendationsCustomer Preferences Standardization Service Level StrategyFinancial IncentivesEconomyDemographyEnvironmentCulture PIs and Objectives Objectives PIs and AM Methodology and Benchmark at National at Utility Benchmark Planning Level Level Definition Calculation Objectives Standardization Characterization Diagnosis Water Produce Plans Assess, compare, learn, Utility Implement Plans improve Data Monitoring Plans Infrastructure Reviewing Plans Information Human Resources Technological Resources Organizational Culture Data Accounting and Finance Calculations Customers Information Other Stakeholders IS Tools BI integrated National/Regional Level analysis R&D Planning process and tools Rehabilitation Techniques Operational Approaches Condition Assessment
  21. 21. 3. Water Utilities ReformHow Strategic Asset Management policies can help?
  22. 22. 3. Water Utilities Reform How can Strategic Asset Management policies can help? - SAM will turn the short-term management into a long-term sustainable process. - To implement a SAM plan data and information are key issues. - Long-term planning demands a clear view on service, management and funding, making it easier to rationalize all resources, from water scarcity to financial resources. - A SAM plan is a good start to justify to politicians the need for new investments or investments in existing infrastructures. - A SAM plan will make use of all your information. This way there is a need to have strong and liable decision making tools. - It’s the more sustainable way to manage our utilities and our assets.
  23. 23. 3. Water Utilities Reform The Top Down versus Bottom Up “dilemma”: Information System Basic Plans What’s the best way to follow a SAM strategy? Component Top Down or Bottom Up? Data Advanced Plans - Bottom Up - the need of collecting data and the pursuit for information, but with a minor perception for a global and systematic approach for an integrated SAM Plan. - Top Down - This approach is more applicable in an advanced stage of knowledge and organization.The process should flow iteratively in both directions, tuning the available and liable dataand information with the defined strategic objectives.
  24. 24. 3. Water Utilities ReformSome relevant issues about SAM
  25. 25. 3. Water Utilities Reform SAM involves all the organization. - It is essential to take into the process the strategic goals and propagate these through tactical and operational objectives. - It is important to incorporate different visions across the organization. - A clear path must be shared within the different teams, including managers and the board or top management.
  26. 26. 3. Water Utilities Reform Standardization can provide integrated thinking. There are several standards and reference documents available internationally: - PAS-55, published by the British Standards Institution; - The methodologies and manuals from AWARE-P, EPA ‘Asset Management: A Best Practice Guide’; - Materials from ISO 24500 group; - and/or other can be relevant to support first and more developed approaches.
  27. 27. 3. Water Utilities Reform Models, tools and technical innovations. Models and tools have to be based on reliable information, the result of several years of work, gathering and analysing data in quantity and quality. Tools are a mean to an end and not the end by itself
  28. 28. 3. Water Utilities Reform How to start a Strategic Asset Management Plan?
  29. 29. 3. Water Utilities Reform Strategic Asset Management Plan Implementation Strategic Plan Objectives, criterias, goals and strategies Monitoring Review Customer Human management Financial Plan SAM Plan … resources Plan Plan Strategic Asset ManagementSource: Handbook 16 “IAM for Water Systems”; ERSAR (Portuguese Regulator) Plan
  30. 30. 3. Water Utilities Reform Integrated planning process External global context Stakeholder´s specific context Internal context Strategic Plan Tactical Plan Operational Plan Monitor and reviewSource: Handbook 16 “IAM for Water Systems”; ERSAR (Portuguese Regulator)
  31. 31. 3. Water Utilities Reform Planning levels,objectives and criteria alignment Performance Performance Performance measure 1 measure 1 measure 1 Criteria T1 Performance Tactical Performance Operational Performance Criteria S1 Criteria T2 measure 2 Criteria O1 measure 2 Objective 1 Objective 1 measure 2 Criteria T3 Performance Performance Performance Strategic measure 3 measure 3 measure 3 objective 1 Tactical Operational Criteria S2 Criteria T4 Performance Criteria O2 Performance Performance Objective 2 Objective 2 measure 4 measure 4 measure 4 Criteria T5 Performance measure 5 Tactical Operational Strategic Criteria S3 Criteria T6 Criteria O3 Objective 3 Objective 3 objective 2 Performance measure 6 Criteria T7 Performance measure n Performance Performance Operational measure k measure 7 Tactical Criteria S4 Criteria T8 Criteria O4 Objective 4 Objective 4 Performance Criteria T9 measure 8 Criteria S5 Performance Tactical Criteria T10 Complementary Operational Criteria O5 measure 9 Objective 5 measures Objective 5 Strategic objective 6 Tactical Operational Criteria Sn Performance Criteria Tm Criteria Op Performance Objective m Metric k Objective j measure n measure qSource: Handbook 16 “IAM for Water Systems”; ERSAR (Portuguese Regulator)
  32. 32. 3. Water Utilities Reform Example: Objectives/criteria/performance measures definition – Tactical level Performance measure 1 Storage capacity Performance measure 2 Criteria 1 Main rehabilitation Infrastructure sustainability adequation Performance measure 3 Service connection rehabilitation Objective 1 Performance measure 4 Ensure infrastructure Infrastructure value index sustainability Performance measure 1 Real loss for service connection Criteria 2 Performance measure 2 Infrastructure integrity Real loss for trunk lenght adequation Performance measure 3 Main failures
  33. 33. FINAL REMARKSStrategic Asset Management role in Utilities Reform
  34. 34. 4. Final RemarksIn an early stage of strategic asset management planning: - People don’t resist to their own ideas; - People are the most important asset to manage in this change; - Acknowledge available knowledge and experience from other utilities; - SAM should really be a learning process, it’s important to start fast, to fail fast and to adjust even faster; - SAM should be supported through a solid methodological basis (adapted to local conditions); - There’s much more data in the organizations than we can imagine; collect it and validate it, before start to engage new processes;
  35. 35. 4. Final RemarksIn an early stage of strategic asset management planning (cont.): - Accounting should be an important part of the IAM process. Proper “fair value” asset evaluations are much more valuable to support IAM decisions than “book value” evaluations. - Give a chance to “open-source” tools, there are really good options to evaluate and study technical alternatives; - Change starts in your utility and in the way you look at your data and your processes; - Always approach the process with a global and clear view; - SAM is not a software or a result of a consultancy company. SAM it is not how it starts but how it finishes.
  36. 36. 4. Final RemarksSAM is about: Data Climate change Economics People PIs Planning Standards Culture Methodology Funding Infrastructures Efficiency Service Politics Tools Risk Models Customers Environment Sustainability Organization Financials
  37. 37. 4. Final RemarksMain earnings and difficulties in a SAM implementation process:
  38. 38. 4. Final RemarksBut, after the implementation process:
  39. 39. 4. Final RemarksFeel free to consult:www.iwasam.org (For networking, collaborative projects and liabledocumentation)www.aware-p.org (For methods, software (open-source), training)www.wise-works.eu (For data analysis, consultancy, technical advisory)And many others,(…)

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