Strengthening Communities Workshop

from Policy To Practice

11 13 April, 2007 Hotel Explorer, Yellowknife

Municipal Infrastructure Asset Management

Saidur Rahman, Ph.D.

Senior Capital Planning Officer

Act Locally and Think Globally

Society, Economy and Environment

Consumption Services

Built Environment
Roads, Bridges, Buildings, Transits, Fleets, Water, Sanitary, Drainage, Energy, Communications, Parks and Public Facilities

Reduced Life

Waste

Presentation Outline

Understanding of infrastructure and asset management Why we need to care about? Benefits Asset management plan development What is going on around? Where we are now? What to do next?
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Municipal Infrastructure

The Canadian Oxford Dictionary: infrastructure as the basic structural foundation of a society or enterprise; roads, bridges, sewers, etc. regarded as a country's economic foundation City of Edmonton: all the physical assets developed and used by the City to support the communitys social and economic activities Community infrastructure
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Municipal Infrastructure

Classifications

Linear and non-linear Surface and sub-surface Tax supported, self-financing and quasicommercial or blended (CWF New Tools for New
Times, 2006)

Community public infrastructure (CPI)

Stationary and movable Office buildings, fire hall, storage facilities, arena, recreation centres, water and sewage facilities and solid waste disposal etc.
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Asset Classifications

Why Municipal Infrastructure?

Livable and healthy place Safety Economic prosperity Quality of life In Canada, municipal infrastructure worth $1.1 trillion, approximately 20% of total built asset of $5.5 trillion (NRC) Municipal assets are economic backbone and extremely high-value assets that cannot be allowed to deteriorate or misuse
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Municipal Infrastructure Issues

Population growth
Year 1981 1996 2006 2026 2050 Population (millions) 24.82 29.67 32.74 36.20 42.31
Population Growth of Canada
[Source: The Sustainability Report]

Infrastructure demand $90 billion (Infrastructure Canada)

Municipal Infrastructure Issues

Municipalities are spending $12 - $15 billion/year on maintenance and rehab

(FCM)

(CSCE 2003)

Huge backlog Current funding level will deficit $1 trillion in 60 years (CSCE 2003)
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Municipal Infrastructure Issues

Aging of infrastructure 28% of Canadas infrastructure is over 80 years old, and only 41% is under 40 years old
(CSCE 2003)

(CSCE 2003)

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Municipal Infrastructure Issues

79% useful service life of infrastructure has been used (CSCE 2003) Condition degradation
00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
ds Ro a Si de w al k
McGill Survey 2003 (Mirza and Haider)

Condition (% of Acceptability)

Good/A c c eptable

Needs Repair/Not A c c eptable

Br W id at ge er s Di st Se r ib w ut ag io e n Tr ea tm en St t or m Se w er So lid W as te Bu ild in gs Tr an si t

Pa rk s

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Municipal Infrastructure Issues

Infrastructure gap $50 to $125 billion, 6-10 times of current annual infrastructure budget Deferred maintenance for Big Sixes $564 million (2003 CWF) First Nations will cost $475 - $560 million (2003 CAN$) to address risks for water and wastewater assets Estimated cost for upgrading Canadian sewer infrastructure is $11.8 billion (2003)
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MIIP Survey Results

NRC-MIIP survey (2004) results:

Total 67 municipalities of over 5000 peoples Questionnaire based on Six Whats 70% spending less than 2% on maintenance 28% do not have system to record asset value Assets were rated as 2.9 or good to fair from range of 1 to 7 ratings 50% of the assets were at least 30 years old, in 10 years 75% will be +30 years old Represents 32% of Canadian population
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Infrastructure at Stake

Water main breaks: Avg. 700 breaks per day in Canada and USA ($3,000 per repair) Walkerton tragedy: E. coli 0157:H7 outbreak in Walkerton. Cost $64 million Peterborough flood in 2004: Damage cost $20 to $40 million. Compensation $500/ household and $2500/ small business Basement flooding: 30,000 to 40,000 events /year, average cost $3,000 - $5,000 /events (CMHC 2004)
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We Actually Need

Accountability

Customer (demand and service) Staff (Fiscal responsibility, health and safety) Environment (regulatory compliance) Minimize health and safety tragedies/incidents Reduce liability claims Longer term (cradle to grave) Reserve funding
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Risk Management

Asset Sustainability

So the Challenges are...

Infrastructure demand and population growth Aging of infrastructure and condition deterioration Infrastructure deficit Service level improvement Lack of integrated systems/tools and consistent approach Inadequate funding Organizational restructuring
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How These Challenges Can be Addressed

Identify maintenance, rehab and renewal needs Increase systems capacity and extend service life Stewardship of the environment Define levels of service (LOS) Ensure financial sustainability Implement Asset Management Plan (based on Six Whats)
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Need for Change

Asset management needs some reorganization of public agencies function Traditional design-build- operate-maintain approach is simply inadequate in the face of current dilemma Adoption of asset management principles and tools (IT tools and financial regulations)

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Evolution of Asset Management

In early 1900s design and durability issues, versatile structures After World War II, reliability issues and maintenance for mechanical and electrical equipments In 1960s green movements, LCC and LCM In 1970s and 1980s PMS, CMMS and WO In 1990s IT tools, CMMS, CMMS to AMS, GIS and GPS 2000 ~ Integrated systems
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What do You Think?

Clerks/municipal employees - data

recording and reporting using General Accepted Accounting Principles (GAAP)

Directors of finance strategic financial

plan

Utility directors/supervisors - maintain

the utilities and manage work order systems

IT directors software, hardware, integrated

systems and database management
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What is Asset Management?

What is your definition? NRC, FHWA and IIAM (Australia) Asset Management is a systematic process of planning, operating, maintaining, upgrading and replacing assets cost effectively with minimum risk and at the expected levels of service over the assets life cycle

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Asset Management Benefits

Two fold benefits:

Reduce cost Extend life

(Life cycle)

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Asset Management Benefits

Another benefit is to increase the levels of service
Service Expected

Service Levels

Service Agreed/LOS Service Provided Service Gap

Levels of Service is a compromise between existing and expected service levels

Service Items
Levels of Service (LOS)

Balance between cost, risk and LOS

Risk

Cost

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Simple Questions?

Simple questions but

Is there anything wrong? What is wrong? What should we do? How do we fix it? What will the benefits be? How much will it cost and how do we pay for it? How can we be more proactive?

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Who is Doing What?

Australian Initiatives

Institute of Public Works Engineering Australia (IPWEA)

IIAM Manual

Asset Management Quarterly International (AMQI) Commonwealth Industrial and Scientific Research Organization (CSIRO)

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Who is Doing What?

In USA

American Public Works Association (APWA) AMSA Managing for Public Infrastructure Assets AWWA Publications and reports Federal Facilities Council (FFC) - Investments in Federal Facilities FHWA

Asset Management Office: Primer on Asset management, LCCA, GASB and Case Studies Transportation Asset Management Manual Software: LCCA, BMS and PMS etc.

National Association of College and University Business Officers (NACUBO) Facility Condition Index (FCI) Others: WIN, WERF and TRB
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Who is Doing What?

In Canada

National Guide (IC, FCM, NRC) <www.ifraguide.gc.ca>

Canada wide network of $25.7 million budget Over 56 best practices in 7 target areas Knowledge - Building, Outreach and Awareness (KOA) program Infrastructure Canada Program Canada Strategic Infrastructure Fund

Infrastructure Canada

Municipal Infrastructure Investment Planning (MIIP) NRC

10 municipalities consortium Evaluating tools and techniques for investment planning

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Who is Doing What?

Transportation Association of Canada (TAC)

Primer on Highway Asset Management (1999) Bridge Management Guidelines (2004) Accounting and Reporting for Physical Assets by Governments (1990) Accounting for Infrastructure in the Public Sector (2003)

Canadian Institute of Charted Accountants (CICA)

Canada Mortgage and Housing Corporation (CMHC)

Study reports on financial planning, alternative financing and municipal infrastructure

Public Sector Accounting Board (PSAB)

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Who is Doing What?

Municipal Infrastructure Data Standards (MIDS) Municipal Performance Measurement Program (MPMP) Ontario Municipal CAOs Benchmarking Initiative (OMBI) National Water and Wastewater Benchmarking Initiative Municipal Infrastructure Management Systems (MIMS) Acts and Legislation (Federal, Provincial and Territorial)
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What Can Be Included?

What are the absolute requirements? How do an existing system fit into? How does Asset Management assist in monitoring of condition and performance? How should an Asset Management system be implemented? How Asset Management is compatible with business approach to managing infrastructure assets?
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Asset Management Plan

Step 6

Step 1 to 3 Data oriented Step 4 to 5 Methodology and policy issues Step 6 Decision-making
Step 4 Step 5

Decision-making

Calculations
Step 3

Models Protocols

Step 2

Step 1

Asset knowledge

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Revisit the Six Whats

What do you own? What is it worth? What is the condition?

Asset knowledge

Calculations Models Protocols

What is the deferred maintenance? What is the remaining service life? What do you fix first?
Decision-making

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Revisit the Six Whats

What do you own?

Asset inventory Database

Paper based Electronic (relational database and spreadsheets) Integration with GIS and CMMS

What is it worth?
Asset valuation

Book value, historical value, depreciated value, PV Current Replacement Value (CRV) Cost modeling (direct and indirect costs, PSAB, FCA)
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Life cycle cost/Whole life cost

Revisit the Six Whats

What is the condition?

Condition assessment

Condition grading systems (subjective evaluation, distress based matrices and hybrid systems)

Structural and functional (defects, breaks, hydraulics, blockages etc.) Protocols (IT tools)

PMS, BMS, WRc, NAAPI or homegrown

Prediction modeling (Markov, survival functions, NN)

What is the deferred maintenance?

Facility Condition Index (FCI) Maintenance backlog and economic inflation/deflation
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Revisit the Six Whats

What is the remaining service life?

Service life modeling

Analytical and probabilistic methods Costs for alternative maintenance, repair and renewal

What do you fix first?

Prioritization

Methods: AHP, B/C, weighted factor methods, PAN, MOO and expert knowledge Ranking: Asset by asset or group of assets Costs for alternative maintenance, repair and renewal Combination of all and political agenda
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Decision-making

Asset Management Framework

Planning (proactive and reactive) Implementation (generally life cycle approach)

Acquisition/construction Operation Maintenance Repair and rehab decommissioning
Improving/ nt Developme

Planning

Implementting

Evaluating Improving/Developing

Evaluating

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Asset Management Framework

TOP DOWN
System Knowledge

PROGRAM LEVEL: High-level decision-making. Synonymous to Top-Down Approach MIXTURE OF BOTH PROJECT LEVEL: Detailed assessment on an asset-byasset basis. Synonymous to Bottom-Up Approach

BOTTOM UP
Asset / Component Data

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Some Specific Issues

What are the service standards for WTP? What level of details are available for pump station? O&M manual? How many water trucks you need? Show the investment for next 20 years? Show the critical asset on the map? What are the risks and how will be managed? How will you prioritize your investment?
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Asset Valuation and Management Drivers

Corporate

Enhance accountability & responsibility (insurance) Satisfy emerging legislative issues Strategic investment decision-making for short & long term Manage future growth & demand Stabilize Rates / Reserves
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Engineering & Operations

Finance

Asset Valuation Methods

Methods Book Value, Historical Costs Written down replacement cost Advantages Data available Simple method Compares replacement options Disadvantages Does not account for any changes as: price, technology and usability Accurate condition/ performance data required Misleads when an old asset behaves like good condition as new asset

Current replacement Straight forward value (CRV) Reflects current condition Identify backlogs Net salvage value Optimized replacement cost Uses for available data (service life, material usages) Optimized for service life and condition Reflects actual costs and benefits

Difficult to predict future cost and asset usage Impacts for uncertainties like condition, performance and economic factors

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Asset Valuation Model Algorithm

Define Component Levels & Attributes Capture Inventories (integrated system) Assess Asset Condition Asset Life Expectancy & Remaining Life Assess Asset Value & Risk Level Inventory data
Condition data Performance Criticality Prob. of failure Replacement options Cost comparison Depreciation

Optimized Replacement Cost

Asset Value

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Asset Valuation - User vs Owner

Economics Unit costs based on: area, length, diameter, material, capacity etc. Service life (design life, expected life, age, remaining life) Condition & performance Depreciation factors Salvage value
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Levels of Service

Important considerations

What are the services? What are the standards? What are the target levels of service?

Levels of Service is a qualitative or quantitative measure to describe how well or poorly a service is provided by the asset or network of assets based on the assets intended purpose within the capacity and satisfactory performance
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Performance Indicators

Performance Measured Criteria Key Performance Indicators (KPI)

Asset information Stakeholders Condition and performance Operational/maintenance Service quality Financial
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Key Factors

System performance (capacity, remaining service life, condition) Serviceability Impact (disruptions in daily life) Risk tolerance level (health, safety and other direct and indirect costs) Long-term impact (environmental and other intangible impacts) Operation and Maintenance cost (life cycle basis)
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Establishing LOS
Review Organizational Objectives/Vision Understand the Asset (inventory, condition and performance) Determine Customer Expectations (demand, growth) Identify Required Measures for Levels of Service Assess and Quantify Risk Test Affordability (budget planning and forecasting) Select KPIs and Set Target Level of Services Policy and Implementation

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Examples of Performance Indicators

Measured Indicators (WATER) Per capita consumption System loss Target Levels --- M3 pa <10% Measured Indicators (WASTEWATER) Ipeak day/I average day Hydraulic capacity Basement flooding Surcharge Number of blockages Service interruptions 10km/ year or no. of days/ year Number of complains (pollution, contamination) Response time Repair cost /year (last 5 years) Target Levels <5 >0.3 m <20/year 20/year 25/year <20 <10/year <3 hrs $$

Service interruptions 10 km/ year or <20 no. of days/ year Breakage rate Response time Head loss Drink water guidelines: Microbiological Color <15HU Turbidity < 1 NTU Number of complains (taste, color and chlorine residuals) Repair cost /year (last 5 years) 5/100 km/yr <3 hrs >1.5 m/km

99% 99% 99% 20/year $$

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Risk

Definition: Risk is the probability that an event may adversely affect and measured by consequences and likelihood Common risk assessment methodologies

Quantitative Qualitative Engineering Public health and safety Financial Environmental

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Risk categories

Risk Assessment Algorithm

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Asset Management Model

Stakeholders Infrastructure Ratepayers Quality of Service Sustainability

Asset Management Implementation

Investment Decision-Making

Proactive Maintenance

Business Process

Levels of Service (LOS)

Planning and Design

Risk Assessment

Performance indicators Customer Expectations Legislative Orders Asset Valuation Availability of Resources

Replacement /Renewal Life Cycle Model Repair and Rehabilitation

Asset Information

Installation/ Construction

Condition Criticality Probability of Failure Consequence of Failure

Operation and Maintenance

Cost

Processes and Activities

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Application Tools

Capital Asset Planning Tool

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Application Tools

Linear Asset Prioritization Tool

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MACA Capital Planning Tool

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MACA Capital Planning Tool

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What Next?

Think globally and act locally Learn from failures Use best practices Stewardship for the infrastructure Work for the sustainable community New Deal a WIN-WIN situation for the NWT communities
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Questions?
Society, Economy and Environment Consumption Services

Roads, Bridges, Buildings, Transits, Fleets, Water, Sanitary, Drainage, Energy, Communications, Parks and Public Facilities

Built Environment

Reduced Life Waste

[email protected] Tel: (867) 873-7944