So, another topic that came up at the conference I was at in Australia, and it’s something that I’ve been thinking a lot about because it gets into this terminology and how important terminology can be.
So, there’s a lot of talks right now about the need for more infrastructure replacements, and there are quotes anywhere from, you know multiple hundreds of billions to trillions of dollars that are needed to replace infrastructure. And we’ve heard a lot of talk at the national, and even in some states talking about investing in infrastructure.
And the conversation that goes on is generally a positive one, that if you invest in new infrastructure, that’s considered to be a good thing or we’re making these investments.
On the other hand, operation and maintenance, particularly maintenance, is considered a cost. And that’s perceived as sort of a negative thing or portrayed as unfavourable.
So, we’re spending money to maintain assets, but we’re investing money to rehabilitate or replace assets.
So, one has a negative connotation, and the other one has a positive but the two are so tightly connected that we need not do that because that drives us to think incorrectly.
So, for example, the more we operate and maintain our assets properly, hopefully, the longer they are going to last doing what we want them to do. And if we forgo some of that maintenance, our assets are going to have shorter lives, have to replace sooner, which will be a lot more expensive.
On the other hand, we don’t want to be in a situation where we are spending lots and lots of money inefficiently on maintaining an asset that is past its useful life and should be replaced.
So, there’s kind of a sweet spot where our expenditures on O & M and replacement are right in line: where we’re spending, the appropriate amount on maintenance to keep the assets in good operating order, doing what they need to do, keeping them to maximum life, and then replacing them when it’s their appropriate time to replace them.
And I think some of this terminology, of a cost versus an investment, get us thinking a little bit incorrectly about our assets.
Instead of seeing them as a whole, where we’re doing all these things together, and we’re trying to find the optimal point to decide to replace, we get skewed into let’s rip all the old stuff, bring old stuff out, put in all new stuff and life will be good again. Well, it won’t be because we are not answering this question of the O and M.
And we were having that conversation earlier this week around, particularly, pre-World War II cast iron pipe, which is a pretty good pipe and the manufacturing processes were such that the wall thickness is pretty big. And you get a better percolation on it sometimes.
So, that pipe has been on the ground a hundred years nearly, a lot of it, or more, and it’s going to go at least another hundred years or maybe longer versus perhaps some newer pipe materials that haven’t lasted the distance and all.
In New Zealand, we’ve had that experience with asbestos cement pipe and we put a humungous amount of it in the ground after World War II as we build up our water system in our cities and things like that.
But I think as well with this conversation Heather is, we’re building assets, when we were picking materials that have hundred-plus-year lives in pipes and even the concrete pipes, I think one of the things you’ve got to look at as well is to see what’s the entire life cycle cost of this asset?
And if you skimp at the start and you put in, like I’ve seen assets have gone in that should have lasted a hundred years, went in wrong, pipes 20 years later, you’re replacing them, that’s just nuts.
But it comes back to, did you specify correctly? Did you get the right contractor or the right team to do it? That they know what they are doing? Was it manufactured right? Was it put in the ground, right?
And the temptation is always to do that on the cheap, and somebody pays for it further down the track.