“With aging infrastructure and with limited, if there’s any, records, are there any tools or best practices for figuring replacement cost for assets and/or their classes?”
Heather:
Okay, tools to figure out cost? I don’t know of any particular tool that’s set up for that exact purpose. That say, here’s the piece of pipe, how much will it cost? You certainly can use the experience as part of your guide.
How much have you expensed in the past on replacing some mile of pipe? How much in the past have you spent in replacing well?
You can use your neighbor’s experience. If you have neighboring utilities you have just had to drill a well or had to replace some pipe, you can ask them.
Another place you can go is your state revolving fund people who have funded the project because they may have some information about cost from other projects.
If you have an engineer that you worked with. Somebody that does many routine works with you and would be willing to give some advice on what a cost for a mile pipe or a pump or a pump station or something like that, you might want to ask them if they have any cost.
So there’s a couple of different ways you can go about it. I don’t know of any real tool but maybe Ross knows of a tool that does replacement cost. Ross, do you have anything that’s specific to replacement cost?
Ross:
No, I think we pretty much do the same thing as you’ve described it, Heather. The only advantage we’ve got here is everybody’s required to do asset valuations. And to do that, it’s a replacement cost valuation.
So every water utility in New Zealand’s got to come up with some sort of replacement cost anyway. And they can get aggregated data across regions and areas. And so we’ve got some databases of that information.
I think one of the best examples I saw of that was an authority and maybe I think they’re about 50,000 population looking after. It was just a town or we call it a city out here.
They have a university college student coming every year that gets them in for Christmas vacation work or for your case summer vacation work. And they would grab all the construction costs over the past year from all of their records because they were always doing some construction each year.
The thing is you have to adjust the costs as well. So they just put them into a spreadsheet and they adjusted the cost for inflation and for the cost of capital and things like that.
They just kept the series of graphs and they could work out what their average cost per mile, per depth or per type of pipe was from the information that was really useful.
And the trick to it was just keeping it up to date every year. And it wasn’t a big cost and it wasn’t a big effort.
A really good exercise for a keen young engineering college student to do every year at Christmas vacation time. That’s our main summer vacation here, so in your case – your summer vacation effectively.
PHOTO CREDIT: Sunghan Kim via Flickr Creative Commons License.
[…] He clarified that he want it to be for replacement cost. […]