New Strategies for Prioritizing Old Projects Using Risk and Triple Bottom Line Criteria Presenter: Celine Hyer, PE ARCADIS/Malcolm Pirnie 5/23/2012

Transcription

1 New Strategies for Prioritizing Old Projects Using Risk and Triple Bottom Line Criteria Presenter: Celine Hyer, PE ARCADIS/Malcolm Pirnie 5/23/2012

2 Today s Agenda Overview of Toho Water Authority Risk Assessment Framework Capital Project Business Case Templates & Prioritization Scoring Conclusions & Lessons Learned Questions

3 Overview of Toho Water Authority 3 24 May ARCADIS

4 Assets Owned & Managed by Toho 85,000 Customer Accounts 1068 Miles of Water mains 980 Miles of Sewer Mains 246 Miles of Reclaimed Water Mains 22 MGD of Wastewater Processed 32 MGD of Water Delivered Over $700 Million in Assets

5 Current Asset Management Systems Containing Toho s Inventory CMMS Infor EAM Data conversion from MP2 Built in GIS interface GIS - ESRI Created from paper maps

6 Timeline of Toho s Asset Management Implementation Implement New Computer Systems 2007 Create Asset Manager Position and Program 2007 Begin Condition and Risk Assessment of Assets 2008 Evaluate Service Levels and KPI s 2009 Implementation Complete 2013 Begin Transition to Staff 2010 Incorporate AM with Capital Planning 2008 & 2009 Participate in Benchmark Survey 2009

7 Drivers for Changing to a Risk Based Decision Making Approach Reduction in Revenue Retirement of Long Term Staff Increased Environmental Pressures on Water Supply Increased Stakeholder Awareness and Expectations Aligns with Asset Management Program Concepts

8 Seeking an Effective Solution Project/Needs List Available Funds

9 Risk Assessment Framework 9 24 May ARCADIS

10 Risk = Probability x Consequence of Failure Risk Framework Basics Probability of Failure = Asset Condition Consequence = Asset Criticality (Social, Environmental and Financial )

11 Condition Risk Framework Details Consequence Criteria Score = 1 to 5 Safety Level of Service Environmental Financial (O&M) Impacts Public Image Risk Matrix 10 Asset Consequence Condition Criteria Score = 2 to 10 Physical + Performance (Visual Inspections & Document Reviews))

12 Example Risk Calculation Equipment Physical (visual score) Performance (Weighted Criteria) COF (Weighted Criteria) Risk Obsolescence 1 *.15=.15 Safety 4*.2 =-.8 Back-Up Generator 2 (Good) Reliability 1*.20=.2 O&M Issues 1*.15=.15 Environmental Public Image 4*.3=1.2 2*.1= Capacity 3*.25=.75 Level of Service 2*.3=.6 Regulatory 1*.25=.25 Financial 2*.1= *Risk = (Physical + Performance) x Criticality

13 Asset Condition & Risk Data Facilitates Creating R&R Needs **Risk and Remaining Life Define CIP Groups of 1 through 5

14 Capital Project Business Case Templates & Prioritization Scoring May ARCADIS

15 Business Case Analysis Supports Project Prioritization Bundles high Risk assets into logical projects Determines which projects or project alternatives have the highest net financial benefit Considers the most important and measurable project costs and benefits including financial, social, and environmental Considers Risk for existing assets and Risk of not acting Sustainability Economic

16 Business Case Templates Collect Information to Score/Prioritize Projects Full Business Case Includes Eight Sections: 1. Funding Sources 2. Project Summary and Description 3. Strategic Plan Alignment 4. Service Level Impacts 5. Project Alternatives Evaluated 6. Condition, Consequence of Failure and Risk Analysis 7. Project Cost Estimates 8. Project Priority Scoring

17 Three Business Case Forms Created for Different Project Needs Short Form <$100,000 Standard Form for all larger projects Standard From with Added TBL Alternatives Analysis for very large projects with multiple complex alternatives TBL (Triple Bottom Line) / Multi-Criteria Analysis: In the tables below, summarize up to the 5 alternatives that were considered for this project (starting with the recommended alternative) and include a summary of the financial analysis outcome (if performed). Alternative 1 (Recommended Alternative) Summary / description of alternative scope: Alternative 2 Summary / description of alternative scope: Summary of final calculations / output (ROI, NPV, IRR, Payback, MCA score). Summary of final calculations / output (ROI, NPV, IRR, Payback, MCA score). TBL CRITERIA Weighting Option A Option B Option C Option D SOCIAL Vault Access 20% Site Security 20% ENVIRONMENTAL Building Footprint 20% Energy/ AC/ CO2 20% FINANCIAL Capital Cost LCC 20% TOTAL SCORE

18 Project Priority Score Common Set of 10 Criteria Established to Prioritize All Projects Based on Risk and TBL 1. Asset Physical Condition 2. Asset Performance Condition 3. Strategic Alignment 4. Financial Returns 5. Economic / Financial Considerations 6. Public Image Impacts 7. Service Level / Reliability Impacts 8. Public / Employee Safety Impacts 9. Environmental Impacts 10. Efficiency / Energy Impacts High Priority CIP Projects Med Priority Project Number Low Priority Criteria are weighted to calculate an overall score

19 Specific Definitions Support Consistent Scoring for Each Criteria Score / Rating Criteria Alignment with Toho s Strategic Goals Overall Rating Fully Aligned Project is directly aligned with and will have a specific and measurable impact on many Toho strategic goals including customer service, Workforce, infrastructure, water supply, and financial health. Linkages are strongly articulated and justified in the project business case write up. Overall Rating Strongly Aligned Project is aligned with two or more of Toho s strategic goals as described above and is strongly articulated and justified in the project business case write up. Overall Rating Moderately Aligned Project is aligned with one or more of Toho s strategic goals as described above and is moderately articulated and justified in the project business case write up. Overall Rating Somewhat Aligned Project is aligned with one or more of Toho s strategic goals as described above and is somewhat articulated in the project business case write up. Overall Rating Not Aligned Project is not directly aligned with Toho s strategic goals as described above and may or may not have other positive impacts to the utility.

20 Excel Tool Facilitates Ranking and Payback Calculations

21 Project Ranking Supports CIP Development for All Projects Renewal and Replacement Expansion Enhancement Project # Project Name Project Driver Project Cost Total Priority Score 1 I&I Gravity Sewer Replacement - Toho I Collection $ 8,539, Lift Station Rehab - Toho III Lift Stations $ 3,900, Western Reuse Pumping Facility Low & High Pressure Mains Reuse $ 1,200, Western Reuse Pumping Facility Reuse $ 7,250, Poinciana WRF #2 Phase I-B Design WWTP $ ,

22 Simple Graphics Show Project Priority Ranking and TBL Factors

23 Project Scoring Translates into a Defensible Capital Improvement Program Capital Improvement Plan Overview By Project Type (Non-Escalated Costs) Estimated Annual Expenditure Project District Project Name Priority Project Type Number Total Growth - Plant and Lift Stations 24 3 Southtowns Wet Well and ORF Improvements High Growth / Augmentation $ - $ 1,000,000 $ 4,600,000 $ 1,300,000 $ 7,900, Aurora N/Aurora S Pump Station Improvements Med High Growth / Renewal $ - $ - $ - $ - $ 4,000, Kennedy PS Replacement Low Growth $ - $ 200,000 $ 300,000 $ - $ 500,000 TOTAL - GROWTH $ - $ 1,70 0,0 0 0 $ 5,30 0,0 0 0 $ 1,30 0,0 0 0 $ 13,30 0,0 0 0 Augmentation - Plant and Lift Stations 16 2 Lake Street PS Improvements High Augmentation $ 1,000,000 $ 4,000,000 $ - $ - $ 5,000, Sweetland PS Improvements High Augmentation $ 100,000 $ - $ - $ - $ 1,900, Southwestern PS Elimination Med High Augmentation $ - $ - $ - $ - $ 700, Southtowns Solids Handling Med Augmentation $ - $ 2,000,000 $ 4,000,000 $ 880,000 $ 6,880, Pump Station Elimination Evaluation (Greenmeadow) Low Augmentation $ - $ 580,000 $ - $ - $ 580,000 Augmentation - Collection System 34 3 Rush Creek Interceptor Med High Augmentation $ - $ - $ 4,000,000 $ 2,800,000 $ 10,300,000 Augmentation - Other 61 All CMMS Implementation Med Augmentation $ 290,000 $ 1,145,000 $ 3,145,000 $ - $ 4,580,000 TOTAL - AUGMENTATION $ 1,630,000 $ 9,295,0 0 0 $ 13,14 5,0 0 0 $ 6,58 0,0 0 0 $ 36,650,0 0 0 Renewal / Rehabilitation / Replacement - Plant and Lift Stations 3 1 Cayuga & Industrial Parkway HVAC High Renewal $ - $ 350,000 $ - $ - $ 350, Lackawanna STP Chlorine Building and Primary Tank Repairs Med High Renewal $ - $ 170,000 $ - $ - $ 170, Southtowns Roof Replacement Med Renewal $ - $ - $ - $ 1,400,000 $ 1,400,000 Renewal / Rehabilitation / Replacement - Collection System 32 3 Village of Hamburg Collection System High Renewal $ 592,000 $ 1,000,000 $ - $ - $ 1,592, Replacement of ACP along Transit Road* High Renewal $ 500,000 $ 1,300,000 $ - $ - $ 1,800, Bethlehem Park PS and Collection System Improvements High Renewal $ 250,000 $ 500,000 $ - $ - $ 750, Holland Avenue Sewer Replacement* High Renewal $ 600,000 $ 200,000 $ 800, East Aurora Collection System Replacement NYS DOT Low Renewal $ 2,000,000 $ - $ - $ - $ 2,000,000 TOTAL - RENEWAL / REHABILITATION / REPLACEMENT $ 6,082,000 $ 6,620,0 0 0 $ 1,20 0,0 0 0 $ 1,4 0 0,0 0 0 $ 15,30 2,0 0 0 Total - All Projects $ 7,712,000 $ 17,615,0 0 0 $ 19,64 5,0 0 0 $ 9,28 0,0 0 0 $ 65,252,0 0 0

24 Conclusions Guide Document, Definitions, and Tools Allow Toho Staff to Evaluate Projects Excel Tool Allows for Financial Payback Analysis and Project Ranking Graphs Training Completed in 2010 New Forms and Process Applied for FY11 Budget and Forward

25 Lessons Learned Involve all Key Groups in the Change Process (Engineering, Operations, Finance, Management) Align with Budget Forms and Process to Reduce Paperwork Simplify Forms to Facilitate Completion Carefully Select Criteria Weightings and Test Them Out Train Staff and Provide Resources

26 Imagine the result QUESTIONS??? Presenter: Celine Hyer, PE Title: Principal Consultant Contact Info: 26