On 21 January 2020, Ross Waugh and Heather Himmelberger held another Ask-the-Experts webinar titled, “Infrastructure Asset Management – How to Start.” Inframanage.com presents the webinar topics through a series of blog posts.
A participant asked a particular question, “Is there a downside to purchasing replacement pumps and valves to meet future needs instead of investing in the current low rates of a certificate of deposits.”
Heather pondered on the question, clarifying that it sounded like one should invest the money and get a tiny amount in return, or should one buy assets with it that will help future customers. She referred the question to Ross.
Well, I think Heather and I had a conversation yesterday about a bit of this subject. And one of the things in asset management, particularly around pumps and valves, is the people who are tasked with maintaining them.
A task was if the pump goes down, the valve is broken or stuck, they will jump in there, and they will try to replace it because that’s the job they have been given.
And if that valve or pump is very near the end of its life, so let’s say it’s a pump that’s 25 or 30 years old. You are planning to replace it in two or three years, and you can often spend nearly half or two-thirds of the price of a new asset fixing or doing an emergency repair on the old one. And that just doesn’t make any sense.
So, one of the things that you can do there is trying to get some metrics or some information in place for repair crews. Let’s say, hey, we’re within five years of replacing this particular pump, if it breaks, we almost always have a standby pump. Run the standby; buy a new one—much better results.
So what you are trying to do is not waste money repairing a really old asset when buying a new asset at that time would be a better idea.
Now in terms of investing money versus purchasing or for purchasing valves and pumps. First of all, every authority has a treasury policy, and so, you’ve got to look at what your treasury policy is.
You’re trying not to replace stuff early with asset management. I mean, the idea is that you’re trying to get your optimal lifecycle to spend.
So, unless that asset was a particularly high-risk asset, where replacing it barely made sense in terms of managing risks, I think you would be going, hey if we can get another ten years of life out of this asset without it causing us any operational problems, that’s a really good thing.
Because if we buy it now early, buy a new asset, we are just throwing away that ten years of life that we still have in the old asset.
So that type of analysis then assumes you know enough about that asset, and maybe you don’t. Thus, the first thing you do is say, okay, let’s go and get some measurement, some instrumentation, or some analysis on how long that pump or valve is likely going to last. How important it is to us in a network.
If it’s in the last five years of its life and it’s highly important, then maybe yes, let’s go and replace it now before it causes problems. And if it’s a slightly less critical asset, and we can live with a little bit of failure, operational failure without it causing us issues. Well, I’d be trying to get this long out of it as I could. And just tuck the money away.
But that’s more around just trying to get optimizing as much life out of assets as you can without it impacting on the service you’re providing.
And the other thing to think about is if what you’re talking about is buying parts that you’re not going to use. So, for example, we’re going to buy a bunch of valves, and you sit them on a shelf, or we’re going to buy meters or something like that.
Be careful about doing something like that because you want only to have as many spare parts on the shelf as you need for the short term because often people don’t take good care of inventory that’s sitting on the shelf somewhere.
It’s not putting the proper environment. So, it might be sitting outside in the weather. Or it might be subjected to the sun.
And you find all the seals are gone.
Yes, like rubber gaskets might wear out. So, people who have had stuff on the shelves for a long time will find it doesn’t work. Or you’ve switched technologies. So that happens a lot too with meters.
So, people bought a whole bunch of meters, and then you decide you’re going to go with automated meter reading or something. And you decided, oh, I can’t use these meters anymore. So now, all of a sudden, I have a bunch of meters that I got to throw away.
Or even worse, those meters that you bought heaps of, you put a few, and then you find that it’s not as reliable and as accurate as you thought they might be.
You go, oh really wish I didn’t have any more of those meters. You’ve got another 300 or 400 hundred sitting on the shelf in the depot. It’s not the right place to be.
Yes, so just be cautious. I don’t recommend that you have a whole bunch of extra stuff sitting on the shelf. If you do not need it in a short period, like, let’s say whatever I need in six months or and again, it depends on how long it takes you to get supplies.
If you get supply reasonably well in three months, then maybe you keep enough on the shelf for four months, so you have a little bit of time to order new.
But you don’t want to have four years’ worth of parts because you’re going to be renewing that inventory. You don’t want it sitting around.
And I don’t know how many times I’ve been in places where brand new things are entirely, or what was a brand-new thing that has sat on the shelf for so long that is not useable anymore.
And that’s just a complete waste of money. So, you want to be careful about not spending your money to buy parts that aren’t going to be used right away.
So I would say, unless there’s a need to buy something, even if you’re not making a considerable amount on your investment, you’re still better off to keep it there until it makes sense to purchase those parts or to replace something.
Yes, the exception to that, both Heather and I have worked in the Pacific Islands, and they’re quite isolated often. And you know it might be several months before you can, even if you order today, it might be three or four or five months before the ship comes with the component that you’ve requested.
And in that case, you run a different policy around parts and components, simply because of isolation.
So, the commentary we were making was for mainland type utilities where the ability to get stuff is days away or week at the outside-in.
And so, you are better off to leave that in somebody else’s stores and the supplies and grab it when you need it.
Great. So, I just want to mention; somebody had brought in the question about the benefits of asset management.
And because of time, we won’t have a chance to get to every question that was asked. But I want to refer to the fact that a couple of weeks ago, we did a webinar on the benefits of asset management.
And on the screen, you’ll see a link to that, that will be included in the slides, when we post it you can link to that, or you can find it on the SEFC network website, so there are tons of benefits to doing asset management. (Click on the image above to visit the link to the webinar)
And that webinar talks about the categories, or benefits and describes a couple of benefits from projects. So, I wanted to just refer folks to that to talk about the benefits of asset management.