In asset management, it is important for people to understand the connection between the level of service one has to provide, how much funding is allocated, and the risks being undertaken.
The Service Level Trade-offs diagram that infrastructure management experts in NZ created explains the relationship between these three factors.
How the Service Level Trade-offs diagram came about
When the recession hit the US in 2007, it hit the rest of the OECD countries as well.
New Zealand experienced a recession in 2007 to about 2012.
NZ came out of it a couple of years ago and this has obviously put the pressure on funding infrastructure and particularly the land transport sector, which is all-funded or co-funded by the central government by fuel taxes.
So two years ago, the minister-in-charge of transportation infrastructure funding (equivalent to cabinet secretary in the US) created a task force to look into the funding of road maintenance.
They had a look at what NZ road infrastructure authorities were doing in the aspect of the maintenance aspects of infrastructure asset management and the implications.
The study was quite a wide-ranging. They sent out questionnaires to the road controlling authority asset management staff, analyzed the results, followed up, and commented on the trends.
One of the things that came out as a result of the study was the Service Level Trade-offs diagram above.
How the diagram applies to road and utilities asset management
This diagram is also applicable to utilities, whether in NZ or US water utilities asset management, even Australia, and Canada.
Asset Management NZ experts simply observed that after NZ had about a decade of increased funding in the road assets and utilities, the levels of service actually rose.
How does the diagram illustrate the asset management dynamics?
This diagram is like the playground apparatus with the spring and the balance board. Typically, what happens when you push down on one area, the other two come up.
So what happened in New Zealand was, infrastructure authorities have been funding more and the levels of service rose.
It was observed that the risks of failure and risks of non-service delivery and things like that have gone down. Looking at the diagram, raising the levels of service means lowering the risk.
What’s happening at the moment is that in the past few years (as a result of the recession) the funding had been constrained or pushed down. So the result if we’re going to push the funding down for too long, ultimately levels of service will go down probably noticeable after five years, and risk will push up.
Service Level Trade-offs diagram Issue
The issue that NZ has got – and this thinking came out two years ago with only the start of trying to model the dynamics of this system – is that nobody knows quite how these relationships work. And modeling Service Level Trade-offs diagram has been very difficult.
One of the really large transportation networks started doing some work on modeling the diagram using their own data and observing what happens.
So far it is early in this process and NZ still has a long way to go yet to fully understand the dynamics of these relationships. It is a complex issue and a complex set of inter-relationships.
Nevertheless, the diagram illustrates clearly the concept that if you push funding down, ultimately levels of service drops and risks across non-delivery of service or risks of increased failures increase.
For efficient asset management, it’s useful to understand how the diagram works conceptually.
However, infrastructure asset management practitioners must be aware that the answer to the breakpoints for the trade-offs hasn’t been established or known in any sort of definitive way at the moment.