Consultant's Corner: Proactive Investment Strategies For Asset Management Driven By Risk Assessments
By John Fortin and Jeff Sanford, CH2M HILL
Results show 84 percent of water utilities currently practicing asset management consider risk assessment and consequence of failure of critical assets to be crucial in strategic and tactical decision making related to investing scarce resources in both existing and new assets.
“Risk scoring” of an asset involves estimating the likelihood that the asset will fail, and the consequence associated with the failure related to safety, financial, process and/or production, public image, and any other level of service critical to the client. By developing risk scores for assets within process area (e.g. influent pumping, process air, utility power, etc.), utilities can more accurately allocate maintenance and capital investment resources based on data-driven decisions. The risk assessment data additionally drives maintenance strategies, repair, and replacement strategies appropriate to each asset. For example, using risk and consequence of failure information, utilities may choose a “run to failure” strategy for pump station A, which has four pumps that provide redundancy for one another, while employing a proactive strategy for pump station B, which has two pumps that can not effectively meet peak flow (and therefore no redundancy).
Developing and implementing a process for “risk scoring” may seem enormously challenging to organizations that have not previously done so, and it can be. Nevertheless, by implementing the process one process area at a time, immediate benefits can be realized and future implementations can be more easily completed. Because availability of good historical data regarding failure rates, types of failures, and consequences of failure is often lacking, an organization may need to use estimates initially, and sharpen those estimates as it begins to collect better data over time. A utility may also consider using data found in research studies, or data collected by other utilities or consultants to augment their risk and consequence of failure assessments.
Seattle Public Utilities (SPU), one of the leading implementers of asset management in North America, incorporates risk and consequence of failure in virtually every resource allocation decision it makes. SPU, comprised of four utilities with more than $4.5 billion in assets, provides retail and wholesale water service to approximately 1.3 million Seattle citizens and water purveyors in the Seattle Metropolitan area. SPU is responsible for maintaining a 1,830 mile water system, as well as the 2,020 mile drainage and wastewater system serving approximately 700,000 customers.
With tightening regulations, mounting rate pressure and public scrutiny, aging infrastructure, and an increasing emphasis on the environment, SPU turned to asset management in 2002 as a way to leverage best practices and change its culture to achieve greater operational effectiveness and efficiency, while maintaining exceptional service to its customers.
To help make important decisions, SPU takes into consideration risk and consequence of failure in the following areas:
- Public trust
- Asset and service reliability
- Public Health
Understanding the risk landscape, SPU is equipped with the knowledge necessary to define a clear strategy for managing its assets and making smarter investment decisions — large and small — based on life cycle costs and benefits to ensure investments make good business sense.
As more utilities look for opportunities to optimize the operations and maintenance of existing assets, asset management offers a mechanism to balance performance, cost, and risk. Conducting risk assessments provides utilities a sound basis to identify, justify, and prioritize infrastructure repairs and/or replacements, and generates data that can be used to forecast the pipeline and cost of both short and long term capital improvement projects, while keeping the triple bottom line impact in the forefront.
John Fortin is an asset management practitioner at CH2M HILL with more than 25 years of facilities lifecycle experience including design, construction and O&M. He has developed and implemented effective change management programs required to implement an asset management culture. Mr. Fortin is internationally recognized for his leadership in strategy development and implementation and change management approaches. He uses innovative techniques to provide sustainable change to client’s asset management improvement programs.
Jeff Sanford is a Director of Consulting Services at CH2M HILL. He has more than 25 years of experience in maintaining water and wastewater facilities including collection and distribution systems. Mr. Sanford is a Certified Maintenance Reliability Professional as recognized by the Society for Maintenance Reliability Professionals.
Image credit: "City Geyser," © 2010 NCSphotography, used under an Attribution 2.0 Generic license: http://creativecommons.org/licenses/by/2.0/deed.en