Asset Management Made Easy

Asset Management Made Easy Presented by: Gary Vaughan Date: April 17, 2014 1

My Background Gary Vaughan 40+ years Utility Experience 17 years Government 10 years private utility 13 Consultant WERF Strategic Asset Management Committee WEF Infrastructure Task Force WEF Public Education Committee 1990 Australia (Sydney BOOT project) 2

Town sewage plant employee fined for urinating in co-worker's coffee pot... Posted: Tuesday, April 8, 2014 4:00 pm Updated: 9:45 am, Wed Apr 9, 2014. By Rhonda Simmonsrsimmons@starexponent.com A Culpeper jury ordered an ex-town employee in Culpeper County Circuit Court on Monday to pay $5,001 to his former co-worker whose coffee pot he admitted to spiking with his own urine... James Carroll Butler, who turns 54 next Sunday, owned up to urinating in Michael Utz s coffee pot because of personal ill will and spite toward him. Before the incident, Butler had worked for the town s waste water plant for 17 years his departure 3

Asset Management Made Easy The History 4

History of Wastewater AM Early 2000 s Mid 1990 s Early 1990 s 5

USEPA Asset Management - 2003 6

Quote from 2013 Report Card For America s Infrastructure ASCE, Physical Asset, Wastewater Grade D Capital investment needs for the nation s wastewater and stormwater systems are estimated to total $298 billion over the next twenty years. The federal government has required cities to invest more than $15 billion in new pipes, plants, and equipment to eliminate combined sewer overflows. 7

Factors Forcing Utilities to Extend facility Life (Drivers) Decreasing population Decreasing revenue Aging infrastructure Staff Retirement/replacement Citizens concern over rate hikes Unfunded federal mandates Permit Requirements 8

NPDES Permit Renewal 2/28/14 There is a recent trend of States (New Jersey and Michigan) inserting the requirement of an Asset Management Plan into NPDES Permit renewals. Here is an excerpt from a draft New Jersey NPDES permit: The permittee shall incorporate an Asset Management Plan as part of the overall O&M strategy. This plan shall include an infrastructure inventory with infrastructure repair replacement needs listed and scheduled according to priority/criticality, that ensures the entire collection system owned/operated by the permittee that conveys flows to the treatment works is perpetually and proactively managed 9

Asset Management Made Easy The Example 10

Goal: Purchase a New 1996 pickup 11

AM Decisions for the Capital Item First decision - Lease or Buy Level of service Would be my primary vehicle (did not have a spare vehicle) Maintenance Strategy Drive it until the wheels fall off Life expectancy Minimum of 150,000 miles and 12 years of service 12

EPA Worksheet Data - Example Level 2 Vehicles 1996 Ford Pickup Asset Class 11 Cost $21,000 Est. Life 12 Annual Dep. $1,250 Condition Rating 3 Residual life 8 % Asset Consumed 33% Redundancy 0% Probability Of Failure 3 Future Maintenance Change 150% 13

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Cash Flow $70,000 $60,000 Renewal Profile Asset Renewal Profile $50,000 $40,000 $30,000 Assets will need replacing I better have CASH or a loan Cash Flow Deprec $20,000 $10,000 $0 Year 14

When Do You Replace an Asset? Answer: When the cost to repair is greater than the value of the asset Asset Installation Cost $ Asset Depreciation Service Life Remaining Asset Salvage Value Annual Ops & Maintenance Asset Value O&M Replacement Salvage I Bought a New Vehicle in 2013 15

Asset Management Made Easy The Program 16

Step 1 Create an Asset Registry (List of Assets) 17

Step 2 - Decide What Level of Service (LOS) You Will Provide LOS is fundamental to AM because it: Drives costs Drives staffing Drives public opinion 18

Step 3 - Determine the Condition RULES Be consistent Use the same criteria for each asset Focus on the critical assets of the Assets 19

Step 4 What are the Consequences of Failure (CoF) CoF Rating Description % Affected Level 1 Minor Component Failure 0-25% Asset 2 Major Component Failure 25-50% Asset 3 Major Asset 0-25% Asset 4 Multiple Asset Failure 25-50% Facility / Sub-System 5 Major Facility Failure 50-100% Facility 6 Minor System Failure 20-40% Total System 7 Medium 40-60% Total System 8 Intermediate 60-80% Total System 9 Significant 80-90% Total System 10 Total 90-100% Total System 20

Step 5 What is the Probability of Failure (PoF) Probability of Failure % of Effective Life Consumed PoF Rating 0% 1 10% 2 20% 3 30% 4 40% 5 50% 6 60% 7 70% 8 80% 9 90% 10 21

Step 6 What is the Risk (how to prioritize) Probability of a failure Condition Age Material Maintenance history Consequence of that failure Costs of repair/replacement/rehabilitation Costs of damages Costs of public disruption Loss income Loss of public trust/opinion Regulatory exposure 22

Consequence Focus on Your Worst and Most Critical Assets! Risk Profile Catastrophic Major 1 Moderate 1 Minor 6 Insignificant Rare Unlikely Possible Probable Certain Likelihood (Probability) 23

Step 7 What is the Impact on Maintenance Impact on Future Maintenance Costs Rating Description Impact 1 Status Quo 100% 2 Higher 125% 3 Considerably Higher 150% 4 Significantly Higher 400% 5 Reduced Slightly 75% 6 Reduced Significantly 50% 24

Cash Flow $70,000 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Renewal Profile Entering the information gives $60,000 the following profile $50,000 $40,000 $30,000 $20,000 $10,000 $0 Year 25

Asset Management Made Easy Review 26

Let s Review the Steps 1. Involve all Stakeholders 2. Create a list of assets 3. Create a Level of Service (LOS) 4. Determine the condition of the assets 5. Determine consequences of failure and how does it impact the LOS? 6. Create a maintenance strategy to meet your LOS 7. Plan your work, work your plan 27

CUPSS Good Tool for Small Utilities http://water.epa.gov/infrastructure/drinkingwater/pws/cupss/index.cfm 28

Factors Forcing Utilities to Extend facility Life (Drivers) Decreasing population Decreasing revenue Aging infrastructure Staff Retirement/replacement Citizens concern over rate hikes Unfunded federal mandates Permit Requirements AM is a tool to help make your job easier! 29

When it Comes to Asset Management I Know It s Hard to Remember Your Original Objective Was to Drain the Swamp When You re Up to Your Backside in Alligators but, A journey of a thousand miles begins with a single step. Lao-tzu, The Way of Lao-tzu Chinese philosopher (604 BC - 531 BC) You Can Git-r-done Just Do It 30

THANKS For Letting me Share Gary Vaughan (740) 965-8020 gvaughan@greeley-hansen.com