Understanding the Key Components of Infrastructure Asset Management

Showing the diagram he created, Ross presented the key components of infrastructure asset management.

Simple IAM Diagram (1)

Ross explains:

Levels of Service, Future Demand, Risks

So when you’re linking that to again, even to the financial sustainability program, for any utility, you need to know what levels of service you’re delivering at the moment.

You need to know what your future demand for your services is – if you’re your shrinking down, it’s going to be less.  

If you’re a rapidly growing town or city, you might have more demand and need more sources, more pipework and things like that.

You need to know what risks you got around that service delivery and that demand and around your existing inventory.

Life Cycle Management

That drops into your lifecycle asset management. So these are:

• operations and maintenance,
• renewals, new capital,
• capital improvement programs,
• asset disposal.

You’re going to look at how you optimize that for your minimum life cycle, sustainable life cycle cost.

Financials

And then that drops ultimately across some of your financials, your expenditure, again on:

• operations and maintenance,
• renewals,
• capital,
• maybe some depreciation.

On revenue, where are you going to get your money from:

• fees,
• charges,
• tariffs,
• loan,
• grants/funding,
• bonds, anything like that.

So there are two sides to that financial expenditure and your revenue, somewhere along the line, you’d hope they match up. And they often don’t, when you do the analysis.

Now to be sustainable, you need to know most of that because otherwise, you could write a plan. But if your town is going to be half the size of this now in 20 years’ time, that plan is going to be based on the whole of wrong assumptions.

If your service levels are quite low at the moment and you’re below EPA Standard or other mandated standard, then you’re going to have brought your standards up at some stage to meet those mandated requirements.

If you don’t do it in good time, then sooner or later someone’s going to make you do that. And these will have cost associated and sometimes with your critical asset as the whole part of your risk component.

Simple IAM Diagram (2)

So moving on from that, once you had a look at that, you’re going to have look at your gaps as well.

And not always gaps upwards sometimes there’s going to be gaps downwards on providing a level of service that people don’t want to pay for anymore. Maybe we’re going to have to drop the level of service.

Our town is not growing it is shrinking, how are we going to manage that in terms of the sustainability of our infrastructure?

And sometimes you’ve looked at your risks and maybe decide you want another career or at least you need to talk about your governance.

And then in terms of the asset management process, you just cycle around that. You work it all out and then you’ve started resolving assumptions and you have another go at, and on it goes.

But in terms of producing a financial sustainability plan, a lot of the things that you need to put in there are already in this diagram.

And so, as Heather said, there’s not that much extra to actually get to doing infrastructure asset management knowing how sustainable your long term service delivery is.

And if you’ve got current expenditure at a level and this analysis shows that it should twice that level, and your revenues are already struggling to meet existing expenditure, that’s a really great starting point for a conversation with the community and with your governance Board.

“Hey, this isn’t sustainable, yes we can get some loans, or some grants or whatever else but we’ve got to talk about how do we make this work”

And then, that’s a discussion and communication issue. They take a while.

They can take five years, sometimes ten years to finish having that discussion but at the end of the day, you get some really clear direction from both your Regulators, the EPA and your community, and your board or your council or commission that says, “This is what we want to do and this is why we think it’s a good idea”.  

At that point you execute or go look for another job, I guess.

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