Ross presented the Simple Infrastructure Asset Management Diagram, which shows the distinct components of asset management. He revealed that he made the diagram based on examining through all the data and what he has been doing with clients over the past year to 18 months.
The slide assumes that you’ve got an asset register, so it doesn’t show the register.
But fundamentally when you’re looking at Lifecycle Management, you’ve got those three drivers. One is Levels of Service. The second is Future Demand and that might be negative demand or a declining population, a declining use of your system. And the third one is Risk.
And they feed in to your Lifecycle Management, where you look at your Operations and your Maintenance and Asset Renewals, Rehabilitation, Replacement, New Capital if you’ve got a treatment facility or a new bore field or some new pipelines or extension of your system. And sometimes disposal of your assets, you optimized those and then you drop them into your financials.
And one of the things, even though we’ve been doing this for two decades now in New Zealand, we still get bogged down on the technical detail and that’s because we’re technical professionals. And we miss, quite often miss, showing the line of sight from Levels of Service through Lifecycle, through to the Financials.
That, say, we’re doing this because we need to fix something that we’re not delivering service-wise that we’re required to. Or we need to do this because this part of our district or our city is growing or our county.
And we’re doing because we’ve actually got this terrible risk that if we don’t do something about it’s going to costs us 10 times what we’re doing. It just makes economic sense to address that.
The other thing with that diagram is “Financials” has two parts. One is Expenditure and one is Revenue. Everybody, since the Global Financial Crisis and even before that, and in particularly smaller systems, revenue is a constant discussion.
How do we pay for stuff? And if you don’t have enough revenue to make your projected expenditure, there’s a discussion about how that can be brought up to speed or how can you get additional revenue? Or it might be loans or whatever or some sort of grants or funding from the state or federal government, bonds.
But it maybe, that you just go back through the Lifecycle Management and the Levels of Service and Demand and say, we just aren’t able to deliver. People aren’t going to pay or aren’t willing to pay for what we think is required, what do we cut out of the programs? What don’t we do?
And that’s a different discussion to have with governance, with the board, with the council or state regulators, in the community that you’re serving. And sometimes that’s a discussion that needs to be had.
And I think particularly if you’re in an area where you’ve got a declining demand for the services, that is definitely a conversation that has to be had at some stage.
So this diagram, I’ve had a bit of feedback now since I presented that back in June, and from some very senior people in the industry and there’s a general agreement that that’s a fairly good description of what asset management is about.
That it’s good to maintain that line of sight from Levels of Service and Future Demand and Risk through your Lifecycle Management.
If we went to the next slide Heather. The what you do once you’ve done it the first time is you look at the gaps and then with the further one, so if there’s any gap, you need to work out what they mean.
It might be that you’ve got quite a lot of a… To take an example for argument sake, Austin, Texas is growing very very quickly at the moment. And obviously they will have a demand gap where they’re trying to build out reticulation and additional bores and reservoir, tanks and things like that.
To keep up with that growth, it might be that you look at your service level. The services that you’re providing and say oh we’re missing something in terms of our permits or our regulations or EPA requirements or whatever it is.
And then then the final slide on this little series here is just looking at, when you get it to your financials, sometimes you have to go back to the start.
Just go through the loop again to check everything. to a level where the community and the funders are prepared to fund that and you’re meeting all your legal requirements and those sorts of things.
And so, I think what happens is often we get very very bogged down on the technical detail or Lifecycle Management. We miss some of these other drivers and pictures that we need to explain to people.
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