Integrating Asset Based Risk Assessments for Continuous ... · • Asset management influences a...
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Integrating Asset Based Risk Assessments for Continuous ImprovementOctober 25, 2012
Michael Wright, BAppSc | GHD – Asset ManagerEndorsed PAS-55 Assessor
Canadian Society of Value Analysis
Agenda
• Asset Management Overview
• An Asset Management Program
• Asset Management Framework
• AM Plan Overview
• Value Engineering and Asset Management
• Integrating Risk Assessments
• Closing
Canadian Society of Value Analysis
Asset Management Overview
• Many governments do a good job managing their assets
• Asset Management presents an opportunity to do better– Enables well informed decisions and balanced trade-offs – Represents a strategic approach to managing infrastructure assets– A long-term view of infrastructure performance and cost; considers
options in a holistic, proactive, and informed way
Pressure on the government to make appropriate decision regarding infrastructure assets to deliver high quality serviceswhile keeping rates, taxes & user fees low
Canadian Society of Value Analysis
Agenda
• Asset Management Overview
• An Asset Management Program
• Asset Management Framework
• AM Plan Overview
• Value Engineering and Asset Management
• Integrating Risk Assessments
• Closing
Canadian Society of Value Analysis
An Asset Management Program
Communications Planning / Leading Change / Organizational Support / Integration / Program Management
Canadian Society of Value Analysis
An Asset Management Program
Typical Asset Management ProgramMonth 1 Month 2 Month 3 Month4 Month 5 Month 61 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Vision, Situation Analysis & Roadmap
AM Policy & Framework
Asset Management Plan
Performance Mgmt Framework & Processes
Canadian Society of Value Analysis
Agenda
• Asset Management Overview
• An Asset Management Program
• Asset Management Framework
• AM Plan Overview
• Value Engineering and Asset Management
• Integrating Risk Assessments
• Closing
Canadian Society of Value Analysis
Asset Management Framework
Purpose of an Asset Management Framework• Facilitates the sustained implementation of an Asset Management
philosophy
• Combines key business management concepts that, when implemented, collectively facilitate the effective delivery of services
• Asset management influences a number of business processes including planning, service delivery, performance monitoring, and continuous improvement.
• A wide variety of practices are a practical necessity in supporting the business of infrastructure services
Canadian Society of Value Analysis
Asset Management Framework
Canadian Society of Value Analysis
Asset Management Framework
Canadian Society of Value Analysis
Asset Management Framework
Canadian Society of Value Analysis
Agenda
• Asset Management Overview
• An Asset Management Program
• Asset Management Framework
• AM Plan Overview
• Value Engineering and Asset Management
• Integrating Risk Assessments
• Closing
Canadian Society of Value Analysis
Why do we need an Asset Management Plan?
To ensure that staff are doing the right work,at the right time, for the right price,for the right reasons
maintainrehabilitate
next month?next year?
now?
20152018
2023
2031
inventoryengineering
labour
permittingtender
design
construction
obsolete
critical assetsextreme risk
capacityfailure
regulations
dispose
AM Plan Overview
Canadian Society of Value Analysis
What will the Asset Management Plan tell us? • Asset inventory and condition – by service and function
• Risk of an asset related failure – by service and function
• Strategies for maximizing asset reliability and extending useful life
• Costs of current maintenance programs and future growth strategies
AM Plan Overview
Canadian Society of Value Analysis
Define Target Levels of Service (LOS) & Demand
Describe Systems,
Facilities, AssetsIdentify Lifecycle Activities & Costs
Identify Failure Modes
Assess Asset Performance
& Residual Life
Determine Business Risk
(Criticality)Identify & Analyze Lifecycle Options
Rationalize Strategic Plans
Determine Funding Strategy
Build the AM Plan
Demand AnalysisBalanced ScorecardPerformance Metrics
System LayoutData Hierarchy
Standards Inventory
ValuationLifecycle Costing
CapacityPhysical Mortality
Financial Efficiency Level of Service
Condition Assessment Protocols
Rating Methodolgies
Failure Mode & Effects Analysis (FEMA)
Business Risk Exposure
Root Cause AnalysisReliability Centred Mtce
Optimized Decision-Making
Customer SatisfactionBudgetary Constraints
Renewal Annuity Analysis
AM Plan ContentsPolicies & Strategies
1. What is the Required LOS? 2. What is the Current State of My Assets?
3. Which Assets are Critical?
4. What is the Optimal O&M & CIP Strategy? 5. What is the Best Funding Strategy?
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AM Plan Overview
Canadian Society of Value Analysis
Define Target Levels of Service (LOS) & Demand
Describe Systems,
Facilities, AssetsIdentify Lifecycle Activities & Costs
Identify Failure Modes
Assess Asset Performance
& Residual Life
Determine Business Risk
(Criticality)Identify & Analyze Lifecycle Options
Rationalize Strategic Plans
Determine Funding Strategy
Build the AM Plan
Demand AnalysisBalanced ScorecardPerformance Metrics
System LayoutData Hierarchy
Standards Inventory
ValuationLifecycle Costing
CapacityPhysical Mortality
Financial Efficiency Level of Service
Condition Assessment Protocols
Rating Methodologies
Failure Mode & Effects Analysis (FEMA)
Business Risk Exposure
Root Cause AnalysisReliability Centred Mtce
Optimized Decision-Making
Customer SatisfactionBudgetary Constraints
Renewal Annuity Analysis
AM Plan ContentsPolicies & Strategies
1. What is the Required LOS? 2. What is the Current State of My Assets?
3. Which Assets are Critical?
4. What is the Optimal O&M & CIP Strategy? 5. What is the Best Funding Strategy?
1
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AM Plan Overview
Canadian Society of Value Analysis
Define Target Levels of Service (LOS) & Demand
Describe Systems,
Facilities, AssetsIdentify Lifecycle Activities & Costs
Identify Failure Modes
Assess Asset Performance
& Residual Life
Determine Business Risk
(Criticality)Identify & Analyze Lifecycle Options
Rationalize Strategic Plans
Determine Funding Strategy
Build the AM Plan
Demand AnalysisBalanced ScorecardPerformance Metrics
System LayoutData Hierarchy
Standards Inventory
ValuationLifecycle Costing
CapacityPhysical Mortality
Financial Efficiency Level of Service
Condition Assessment Protocols
Rating Methodologies
Failure Mode & Effects Analysis (FEMA)
Business Risk Exposure
Root Cause AnalysisReliability Centred Mtce
Optimized Decision-Making
Customer SatisfactionBudgetary Constraints
Renewal Annuity Analysis
AM Plan ContentsPolicies & Strategies
1. What is the Required LOS? 2. What is the Current State of My Assets?
3. Which Assets are Critical?
4. What is the Optimal O&M & CIP Strategy? 5. What is the Best Funding Strategy?
1
10
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AM Plan Overview
Canadian Society of Value Analysis
Define Target Levels of Service (LOS) & Demand
Describe Systems,
Facilities, AssetsIdentify Lifecycle Activities & Costs
Identify Failure Modes
Assess Asset Performance
& Residual Life
Determine Business Risk
(Criticality)Identify & Analyze Lifecycle Options
Rationalize Strategic Plans
Determine Funding Strategy
Build the AM Plan
Demand AnalysisBalanced ScorecardPerformance Metrics
System LayoutData Hierarchy
Standards Inventory
ValuationLifecycle Costing
CapacityPhysical Mortality
Financial Efficiency Level of Service
Condition Assessment Protocols
Rating Methodologies
Failure Mode & Effects Analysis (FEMA)
Business Risk Exposure
Root Cause AnalysisReliability Centred Mtce
Optimized Decision-Making
Customer SatisfactionBudgetary Constraints
Renewal Annuity Analysis
AM Plan ContentsPolicies & Strategies
1. What is the Required LOS? 2. What is the Current State of My Assets?
3. Which Assets are Critical?
4. What is the Optimal O&M & CIP Strategy? 5. What is the Best Funding Strategy?
1
10
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AM Plan Overview
Canadian Society of Value Analysis
Define Target Levels of Service (LOS) & Demand
Describe Systems,
Facilities, AssetsIdentify Lifecycle Activities & Costs
Identify Failure Modes
Assess Asset Performance
& Residual Life
Determine Business Risk
(Criticality)Identify & Analyze Lifecycle Options
Rationalize Strategic Plans
Determine Funding Strategy
Build the AM Plan
Demand AnalysisBalanced ScorecardPerformance Metrics
System LayoutData Hierarchy
Standards Inventory
ValuationLifecycle Costing
CapacityPhysical Mortality
Financial Efficiency Level of Service
Condition Assessment Protocols
Rating Methodologies
Failure Mode & Effects Analysis (FEMA)
Business Risk Exposure
Root Cause AnalysisReliability Centred Mtce
Optimized Decision-Making
Customer SatisfactionBudgetary Constraints
Renewal Annuity Analysis
AM Plan ContentsPolicies & Strategies
1. What is the Required LOS? 2. What is the Current State of My Assets?
3. Which Assets are Critical?
4. What is the Optimal O&M & CIP Strategy? 5. What is the Best Funding Strategy?
1
10
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AM Plan Overview
Canadian Society of Value Analysis
Define Target Levels of Service (LOS) & Demand
Describe Systems,
Facilities, AssetsIdentify Lifecycle Activities & Costs
Identify Failure Modes
Assess Asset Performance
& Residual Life
Determine Business Risk
(Criticality)Identify & Analyze Lifecycle Options
Rationalize Strategic Plans
Determine Funding Strategy
Build the AM Plan
Demand AnalysisBalanced ScorecardPerformance Metrics
System LayoutData Hierarchy
Standards Inventory
ValuationLifecycle Costing
CapacityPhysical Mortality
Financial Efficiency Level of Service
Condition Assessment Protocols
Rating Methodologies
Failure Mode & Effects Analysis (FEMA)
Business Risk Exposure
Root Cause AnalysisReliability Centred Mtce
Optimized Decision-Making
Customer SatisfactionBudgetary Constraints
Renewal Annuity Analysis
AM Plan ContentsPolicies & Strategies
1. What is the Required LOS? 2. What is the Current State of My Assets?
3. Which Assets are Critical?
4. What is the Optimal O&M & CIP Strategy? 5. What is the Best Funding Strategy?
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AM Plan Overview
Canadian Society of Value Analysis
• Communication tool for council & other stakeholders
• What are the goals of asset ownership?
• What functions & LOS do we need from our assets?
• What assets do we own?• What are their characteristics
& lifecycle costs?• How might they fail?• How are they performing?• How important are they to
service delivery?• What are the asset plans:
creation, renewal & mtce?
• Where should we focus asset decision-making and data & systems improvements?
• What level of long range funding is needed to sustain the assets / service delivery?
• Mandate for service delivery• Key stakeholders
• Goals of organization• Needs of key stakeholders• Service delivery performance
• Asset hierarchy & inventory• Asset lifecycles & costs• Failure modes (how might
our assets fail)• Asset performance• Risk framework• Consequences of asset
failure
• AM Plan assumptions• Confidence in AM Plan inputs
& processes• Gap assessments
• Historical budgets• Programmed expenditures
• Purpose of the AM Plan• Summary of findings
AM Plan Overview
Canadian Society of Value Analysis
Agenda
• Asset Management Overview
• An Asset Management Program
• Asset Management Framework
• AM Plan Overview
• Value Engineering and Asset Management
• Integrating Risk Assessments
• Closing
Canadian Society of Value Analysis
Value Engineering and Asset Management
Analyse Functions
Understand the project from a
functional perspective
What are the functions & how are they related
Create Options
Generate a quantity of ideas on other ways to
perform functions
How else may the functions be
performed
Evaluate Options
Reduce the quantity of ideas
to those with greatest potential
to improve the project
Of the identified ideas, which are worth spending time to develop
Develop Solutions
Further analyze, short list & develop the
identified ideas
What additional value does each
idea provide? Are ideas mutually
exclusive?
Present Results
Present value alternatives to stakeholders &
decision makers
How does implementation
of ideas improve the current
state?
Gather Information
Understand the current state &
constraints
What is going on in the tactical &
operational contexts?
Canadian Society of Value Analysis
Analyse Functions
Understand the project from a
functional perspective
What are the functions & how are they related
Create Options
Generate a quantity of ideas on other ways to
perform functions
How else may the functions be
performed
Evaluate Options
Reduce the quantity of ideas
to those with greatest potential
to improve the project
Of the identified ideas, which are worth spending time to develop
Develop Solutions
Further analyze, short list & develop the
identified ideas
What additional value does each
idea provide? Are ideas mutually
exclusive?
Present Results
Present value alternatives to stakeholders &
decision makers
How does implementation
of ideas improve the current
state?
Gather Information
Understand the current state &
constraints
What is going on in the tactical &
operational contexts?
Value Engineering and Asset Management
Canadian Society of Value Analysis
How do we get there?
Inventories
ConditionAssessments
MaintenanceManagementSystems
Capital Projects and many more…
MaintenancePrograms
Value Engineering and Asset Management
Canadian Society of Value Analysis
Analyse Functions
Understand the project from a
functional perspective
What are the functions & how are they related
Create Options
Generate a quantity of ideas on other ways to
perform functions
How else may the functions be
performed
Evaluate Options
Reduce the quantity of ideas
to those with greatest potential
to improve the project
Of the identified ideas, which are worth spending time to develop
Develop Solutions
Further analyze, short list & develop the
identified ideas
What additional value does each
idea provide? Are ideas mutually
exclusive?
Present Results
Present value alternatives to stakeholders &
decision makers
How does implementation
of ideas improve the current
state?
Gather Information
Understand the current state &
constraints
What is going on in the tactical &
operational contexts?
Value Engineering and Asset Management
Canadian Society of Value Analysis
Define Target Levels of Service (LOS) & Demand
Describe Systems,
Facilities, AssetsIdentify Lifecycle Activities & Costs
Identify Failure Modes
Assess Asset Performance
& Residual Life
Determine Business Risk
(Criticality)Identify & Analyze Lifecycle Options
Rationalize Strategic Plans
Determine Funding Strategy
Build the AM Plan
Demand AnalysisBalanced ScorecardPerformance Metrics
System LayoutData Hierarchy
Standards Inventory
ValuationLifecycle Costing
CapacityPhysical Mortality
Financial Efficiency Level of Service
Condition Assessment Protocols
Rating Methodologies
Failure Mode & Effects Analysis (FEMA)
Business Risk Exposure
Root Cause AnalysisReliability Centred Mtce
Optimized Decision-Making
Customer SatisfactionBudgetary Constraints
Renewal Annuity Analysis
AM Plan ContentsPolicies & Strategies
1. What is the Required LOS? 2. What is the Current State of My Assets?
3. Which Assets are Critical?
4. What is the Optimal O&M & CIP Strategy? 5. What is the Best Funding Strategy?
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Value Engineering and Asset Management
Canadian Society of Value Analysis
Step 1 - Define Target Levels of Service & Demand
Value Engineering and Asset Management
Canadian Society of Value Analysis
Define Target Levels of Service (LOS) & Demand
Describe Systems,
Facilities, AssetsIdentify Lifecycle Activities & Costs
Identify Failure Modes
Assess Asset Performance
& Residual Life
Determine Business Risk
(Criticality)Identify & Analyze Lifecycle Options
Rationalize Strategic Plans
Determine Funding Strategy
Build the AM Plan
Demand AnalysisBalanced ScorecardPerformance Metrics
System LayoutData Hierarchy
Standards Inventory
ValuationLifecycle Costing
CapacityPhysical Mortality
Financial Efficiency Level of Service
Condition Assessment Protocols
Rating Methodologies
Failure Mode & Effects Analysis (FEMA)
Business Risk Exposure
Root Cause AnalysisReliability Centred Mtce
Optimized Decision-Making
Customer SatisfactionBudgetary Constraints
Renewal Annuity Analysis
AM Plan ContentsPolicies & Strategies
1. What is the Required LOS? 2. What is the Current State of My Assets?
3. Which Assets are Critical?
4. What is the Optimal O&M & CIP Strategy? 5. What is the Best Funding Strategy?
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10
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Value Engineering and Asset Management
Canadian Society of Value Analysis
Step 2 - Describe Systems, Facilities and Assets • Define asset hierarchy
• Engage decision makers for meaningful outcomes
Division
Department 1Service or
Client
…
…
…
Department 2Service or
Client
Service Costing
Facility Costing
Depreciation CostingRenewal Prediction
Asset Type
Facility
Assets
Child AssetsMaintenanceMaterials Costs
Future ExpansionComponent Costing
Parent Assets
{{
BOTTOM DRIVEN
Value Engineering and Asset Management
Service Type
Canadian Society of Value Analysis
Step 2 - Describe Systems, Facilities and Assets
Validate Data - Asset Portfolio Summaryby Client (or other aggregation)
Value Engineering and Asset Management
Canadian Society of Value Analysis
Step 2 - Describe Systems, Facilities and Assets
Validate Data - Asset Portfolio Summaryby Client (or other aggregation)
Value Engineering and Asset Management
Canadian Society of Value Analysis
Step 2 - Describe Systems, Facilities and Assets
Validate Data - Asset Portfolio Summaryby Client (or other aggregation)
Value Engineering and Asset Management
Canadian Society of Value Analysis
Step 2 - Describe Systems, Facilities and Assets
Validate Data - Asset Portfolio Summaryby Client (or other aggregation)
Value Engineering and Asset Management
Canadian Society of Value Analysis
Step 2 - Describe Systems, Facilities and Assets
Data for AM Plan
Install Year
Service Life
Replacement Value
Condition
Consequence of Failure
…Data Gap!
Value Engineering and Asset Management
Canadian Society of Value Analysis
Agenda
• Asset Management Overview
• An Asset Management Program
• Asset Management Framework
• AM Plan Overview
• Value Engineering and Asset Management
• Integrating Risk Assessments
• Closing
Canadian Society of Value Analysis
Define Target Levels of Service (LOS) & Demand
Describe Systems,
Facilities, AssetsIdentify Lifecycle Activities & Costs
Identify Failure Modes
Assess Asset Performance
& Residual Life
Determine Business Risk
(Criticality)Identify & Analyze Lifecycle Options
Rationalize Strategic Plans
Determine Funding Strategy
Build the AM Plan
Demand AnalysisBalanced ScorecardPerformance Metrics
System LayoutData Hierarchy
Standards Inventory
ValuationLifecycle Costing
CapacityPhysical Mortality
Financial Efficiency Level of Service
Condition Assessment Protocols
Rating Methodologies
Failure Mode & Effects Analysis (FEMA)
Business Risk Exposure
Root Cause AnalysisReliability Centred Mtce
Optimized Decision-Making
Customer SatisfactionBudgetary Constraints
Renewal Annuity Analysis
AM Plan ContentsPolicies & Strategies
1. What is the Required LOS? 2. What is the Current State of My Assets?
3. Which Assets are Critical?
4. What is the Optimal O&M & CIP Strategy? 5. What is the Best Funding Strategy?
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Integrating Risk Assessments
Canadian Society of Value Analysis
- Develop an outline of applicable failure modes for assets within the portfolio- Risk and asset consumption will be described by the applicable failure modes
Customer Need Failure ModeAvailable Services of sufficient capacity are convenient
and accessible to the entire communityUtilization Demand exceeds the capacity of the
existing asset or network of assets (or vice versa in some cases)
Reliable Services are predictable and continuous Physical Mortality
Structural condition of the asset is such that it has reached the end of its effective life
Cost Effective
Services are provided at the lowest possible cost for both current and future customers, for a required level of service, and are affordable
Financial Efficiency
The cost of the asset exceeds the economic return necessary to justify retention of the asset
Safe
Suitable
Sustainable
Services are delivered such that they minimize health, safety and security risksServices are suitable for the intended function (fit for purpose)Services preserve and protect the natural and heritage environment
Level of Service
The asset no longer meets higher regulatory or other requirements
Step 4 - Identify Failure Modes
Integrating Risk Assessments
Canadian Society of Value Analysis
Define Target Levels of Service (LOS) & Demand
Describe Systems,
Facilities, AssetsIdentify Lifecycle Activities & Costs
Identify Failure Modes
Assess Asset Performance
& Residual Life
Determine Business Risk
(Criticality)Identify & Analyze Lifecycle Options
Rationalize Strategic Plans
Determine Funding Strategy
Build the AM Plan
Demand AnalysisBalanced ScorecardPerformance Metrics
System LayoutData Hierarchy
Standards Inventory
ValuationLifecycle Costing
CapacityPhysical Mortality
Financial Efficiency Level of Service
Condition Assessment Protocols
Rating Methodologies
Failure Mode & Effects Analysis (FEMA)
Business Risk Exposure
Root Cause AnalysisReliability Centred Mtce
Optimized Decision-Making
Customer SatisfactionBudgetary Constraints
Renewal Annuity Analysis
AM Plan ContentsPolicies & Strategies
1. What is the Required LOS? 2. What is the Current State of My Assets?
3. Which Assets are Critical?
4. What is the Optimal O&M & CIP Strategy? 5. What is the Best Funding Strategy?
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Integrating Risk Assessments
Canadian Society of Value Analysis
Step 6 – Determine Business Risks• Infrastructure Risk Management
Integrating Risk Assessments
Canadian Society of Value Analysis
Step 6 – Determine Business Risks
- Risk Maps; aggregates asset replacement costs (based on the PoF and CoF of the failure mode)
Utilization; Physical Mortality; Financial Efficiency; or Level of Service
Integrating Risk Assessments
Canadian Society of Value Analysis
Step 6 – Determine Business Risks- Consequence of Failure; for each failure mode
Integrating Risk Assessments
Canadian Society of Value Analysis
Total Asset Replacement Valuewith PoF = P3 and CoF = C4
Creating An Asset Management Plan
Canadian Society of Value Analysis
(or other aggregation)Public Works $200,000 $500,000 $1,000,000 $3,000,000Public Housing $20,000Social Services……
Step 6 – Determine Business Risks
- By Department, Client• Directly related to the functional design of the asset hierarchy• Provides decision makers with an understanding of the trade-off between
levels of service, risk and cost
Creating An Asset Management Plan
Canadian Society of Value Analysis
Agenda
• Asset Management Overview
• An Asset Management Program
• Asset Management Framework
• AM Plan Overview
• Value Engineering and Asset Management
• Integrating Risk Assessments
• Closing
Canadian Society of Value Analysis
Closing
Asset Management is an integrated set of processes that minimize the lifecycle costs of owning, operating, and maintaining assets, at an acceptable level of risk, while continuously delivering established levels of service.
RISK
Service Levels
LowCosts
Canadian Society of Value Analysis
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