For much of the last century asset management methods have evolved through incremental innovations in established techniques. Indeed, many of these techniques – such as those which emphasise comprehensive condition assessment, and those which focus on engineering considerations rather than service to customers - have remained largely unchanged since they were originally developed.
However, recent developments in the UK have brought about a radical reappraisal of the methods which are available to asset management professionals. The development of the cross-industry PAS 55 standard by the Institute of Asset Management, and the desire by utility regulators for greater clarity and consistency in asset decisions, is forcing the evolution of asset management 'best practice'. In our view, the technical advances which are being progressed in the UK will become commonplace throughout the world. Companies with the same owner will increasingly aim to adopt common working practices; utilities will seek to emulate best practice; and regulators will scan for opportunities to improve the quality of service that end-customers receive.
In many ways, the development of the new thinking pivots around the progressive adoption by the water industry of the Capital Maintenance Planning Common Framework (the 'Common Framework'). The Common Framework has been used in the UK to structure the regulatory assessment of prudent capital and operating expenditures by water utilities. The Framework can be adopted both as a tool to inform regulatory judgements and as a set of principles and techniques to inform business decisions and planning.
With industry input, the Common Framework is evolving towards an emphasis on forward-looking, risk-based capital maintenance plans. This is a welcome and progressive example of the way in which utilities can moderate the focus on short-term gains and achieve a consistent approach to delivering long-term service standards which are aligned to customer needs. In this context, asset 'failure' is only relevant if it is linked to service delivery failure.
Under the Framework, Asset Managers are challenged to make long-term decisions which simultaneously optimise capital and operating expenditure from a customer perspective. The theoretical approach to achieving this optimisation is long-established, however, because the Common Framework is at the frontier of our thinking, there is significant scope for discussion about the precise way in which this optimisation should be applied in practice. In particular, utilities need to find a way to apply the theory within the practical constraints of the real world. These practical constraints include the fact that utilities: have a huge number of options to choose between; are often faced by significant gaps in their asset data; have a range of other systems which will need to coexist with their optimisation chosen tool; and cannot be confident of the way in which best practice will evolve over the next few years.
Given this, what is the best approach?
We think utilities should be looking to employ state of the art optimisation tools which satisfy four criteria. These tools should: provide industrial strength computational ability; be robust to data shortcomings; be easily integrated with other systems; and have the flexibility to address future needs.
The need to deploy industrial strength computational ability arises because the range of options available to Asset Managers exceeds the capability of commonplace decision tools.
Conventional methods for selecting projects typically involve ranking or prioritisation and cannot properly balance goals for multiple criteria. We would advocate an approach which addresses this limitation by using a mathematical technique known as integer programming. Under this approach, the problem is expressed as a requirement to maximise the financial value of selected projects, subject to a range of constraints which take the form of financial, non-financial or logical requirements.
Theoretical methods for optimising investment decisions have a voracious appetite for data. In a perfect world utilities would: understand the condition of their assets; be able to predict the probability of asset failure; understand the consequence of this failure; and be able to estimate the cost and benefits of the interventions that they might make. But the world is far from perfect. The capture and storage of asset-related data has been hampered by inconsistencies in data definition; the historical lack of automated processes; the high cost of collecting data; and limitations in the ability to process data. As a consequence, optimisation tools need to be able to produce sensible answers even when data is incomplete or uncertain. We recommend development of prior distribution models based on existing data and subjective judgments. Practitioners can then use current data to update the prior distribution and draw inferences about the data gaps. This process can be repeated over time as more data is obtained.
It allows the data and model quality to evolve, and permits informed decisions to be made without comprehensive information.
Utilities typically have a range of systems with a foot print that will overlap with the data required and produced by an asset optimisation tool. Most importantly, the output from any optimisation tool will need to feed into systems which support business planning, budgeting and financial processes. Utilities will therefore need to consider the way in which their optimisation tools can be efficiently integrated with the rest of the IT estate to avoid the risk of inconsistencies and effort which is wasted by capturing duplicate data.
Finally, given the pace of developments in this area, we can be confident that any optimisation tool that is implemented now will need to be cable of solving different problems in the future. For this reason, the best tools will implemented on scalable IT platforms and will be designed with the flexibility to be extended to meet new demands.
In summary, the application of state of the art asset management techniques will require utilities to resolve a number of practical challenges. Nevertheless, the adoption of the Common Framework by the water industry creates an opportunity to secure significant advances in asset management techniques. This will benefit not only water companies in the UK but, ultimately, the global utility industry.
