Asset Management in Action:Asset Management in Action:Use of a Triple Bottom Line Approach to

Prioritize Capital Improvement NeedsUse of a Triple Bottom Line Approach to

Prioritize Capital Improvement Needs

Richard Cuthbert R. W. Beck, Inc.Richard Cuthbert R. W. Beck, Inc.

Asset Management (AM) ProgramsAsset Management (AM) Programs

Disciplined business approach to minimize life cycle costs for infrastructure assets

Includes consideration of both capital and operating costs

Recognizes level of service standards of utility Attempts to address least cost and risk mitigation factors in asset replacement funding

Issues in Asset Management PlanningIssues in Asset Management Planning

How to best compare immediate capital costs with long-term operating costs?

What perspective to use in measuring costs (utility, customers, society)?

How to best prioritize capital needs within limited resources?

Triple Bottom Line (TBL) Approach to AMTriple Bottom Line (TBL) Approach to AM

A broader economic evaluation of AM Financial Social Environmental

Process includes both quantitative and qualitative elements Key Assumption: There are multiple options to address service needs.

TBL in actionTBL in action

Recognize Service Level Needs

Initial Engineering Evaluations

Selection of Lowest “Cost” Selection

Final Design and Evaluation

Construction/ Implementation

Ongoing Evaluations

TBL Process is Critical to its SuccessTBL Process is Critical to its Success

Need for a disciplined evaluation approach Clear identification of alternative options Recognition of various perspectives in analysis Minimize risk and criticality factors Commitment from senior management for review process

Local Area

Capital Cost

Alternative Perspectives ConsideredAlternative Perspectives Considered

Rate Payers Utility Society

X X

X X

X

X X X

X X

X X

O & M Costs

Social Costs

EnvironmentalCost EnvironmentalBenefit

Social Benefit

Net Present Value $2 -$25 $20 $8

TBL Example 1: Water Main ReplacementsTBL Example 1: Water Main Replacements

Evaluation of two older water mains needing replacement with similar needs and costs One main serves area with large hospitals One main serves low density residential neighborhood

TBL includes social criticality of mains: Hospital main = early replacement Residential main = can allow to run to failure

TBL Example 2: Water Pump ReplacementsTBL Example 2: Water Pump Replacements

A water pump providing adequate pressurein residential neighborhood needs replacement

“Standard Approach”: $2 million cost “Alternative Approach”: Several smaller pumps TBL result: $1.5 million in savings

Examples of Social and Environmental EffectsExamples of Social and Environmental Effects

Health Factors Noise and Odor Air Quality Safety

Traffic Congestion Aesthetics Habitat Protection Visibility

SummarySummary

TBL is a new approach to asset management decision making Involves consideration of broader perspectives

in asset management-financial, social, environmental Requires consideration of alternative approaches to meeting service level

standards Can lead to significant cost savings for utilities,

both in immediate capital costs and long-termoperating costs