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Copyright © GHD LLC 2005
Roger ByrneInternational Manager GHD Asset Management Group
A Futuristic Perspective ForSustainable Asset Management
(SAM)
Asset Accounting & ManagementApril 2008
Copyright © GHD P/L. 2006
Take Home Messages
» Asset Management is critical to anyinfrastructure rich business
» It must be done as a Total Enterprise» It is all about Cultural Change –get this part
right» Plan the change thoroughly, get buy in across
the business» Choose what you can justify and do it ..» Apply the resources needed and monitor
progress
Copyright © GHD P/L. 2006
1 Million Person City IsBeing Built Every 5Days Globally
Some Facts –Did you know?
Copyright © GHD P/L. 2006
We need infrastructure to produce19 Billion meals a day (not all like this)
Some Facts –Did you know?
To do this we will need :•Viable land•Water infrastructure•Processing assets•Transport infrastructure•Waste disposal , and•All the associated supporting
infrastructure services
Copyright © GHD P/L. 2006
» In the next year China will build :» Australia’s electricity infrastructure in 8 months» Australia’s water infrastructure in 7 months.» Municipal infrastructure for over 1 Million people
every 18 days (at 70% of Australian standards)» China & India can keep producing carbon at the
rate they are for almost 15 years and then onlycontribute the same amounts of carbon that thedeveloped world has already.
» Victorians produce the greatest carbon per capita inthe world. Australia is only just second to the USA
Some Facts –Did you know?
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The Short Definition of Advanced AM
Making theright decision at theright time for the
right costand for the right reasons
‘Making good investment decisions’
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CustomerExpectations Cost of Service Level of Service Business Risk
Exposure
ServiceDelivery
The Management Balancing Act
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Key Issues for Asset Managers / Owners
» A need to prove ‘best value’–effectiveness &efficiency to our ratepayers / customers /stakeholders
» Set levels of service to align with customer andstakeholder expectations and their willingness topay / subsidise
» To meet this required service levels at lowestsustainable cost of service
» Understand the lowest sustainable cost ofservice ( full economic cost) in TBL terms andbalance inter generational equity
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Key Issues for Infrastructure Managers / Owners
» And last but not least … ..
»How should we respond to theissue of Climate Change?
Copyright © GHD LLC 2005
Copyright © GHD LLC 2005
Copyright © GHD LLC 2005
Copyright © GHD P/L. 2006
Road Assets
Copyright © GHD LLC 2005
Copyright © GHD P/L. 2006
Road Assets & Maintenance
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Rail Assets –Freight
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Passenger Rail Lot harder when they are older
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Port Assets –World Ports 257
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Assets Only Support Product Service Delivery
Social ImpactsSocial Impacts
Environmental ImpactsEnvironmental Impacts
Cultural ImpactsCultural Impacts
Economic ImpactsEconomic Impacts
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58%42%Ports45%55%Telecoms8%92%Gas18%82%Electricity12%88%Irrigation8%92%Drainage6%94%Wastewater10%90%Water
OPERATIONSASSET MANAGEMENTSERVICE TYPEUTILITIES
Note: Asset Management includes annualized cost of capital, maintenance, renewal andoperations related to assets… eg.The total annual average economic cost.
The Part AAM Play in Service Delivery
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9480%620%*Food Processing5585%1545%*Manufacturing58%42%*Ports (1)55%45%*Mining74%25%*Police & E Services .85%15%*Corrections75%25%*Justice80%20%*Health84%16%*Education
Other OPERATIONSASSET MANAGEMENTSERVICE TYPECOMMUNITY & PRIVATE
Note: Asset Management includes annualized cost of capital, maintenance, renewal andoperations related to assets… e.g..The total annual average economic cost.
* DenotesStillinvolveslargevalueofassets
The Part AAM Plays in Service Delivery
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Ensuring Business Performance Uniformity
Outside VictoriaAligned Business Systems (ABS)
Aligned Business Processes (ABP)
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Rio TintoGlobal
Company
Iron Ore MineralsCoal Aluminium Copper
CorporateServices
Diamonds
Exploration
Horizontal Uniformity
Managing Diverse Distributed Business Units
TechnologyConsultingBristol
Copyright © GHD P/L. 2006
Whole of Government
Loca
l Gov
ernm
ent
Educ
atio
n
Prim
ary
Indu
strie
s
Hea
lth
Prim
ary
Indu
stry
Tour
ism
Trea
sury
Ener
gy
Nat
ural
Res
ourc
es
Com
mun
icat
ions
Plan
ning
Spor
t & R
ecre
atio
n
Empl
oym
ent &
I.R.
Envi
ronm
ent P
rote
ctio
n
Fam
ily S
ervi
ces
Just
ice
Min
es &
Ene
rgy
Polic
e Se
rvic
es
Cor
rect
ive
Serv
ices
Prem
ier &
Cab
inet
Publ
ic W
orks
Hou
sing
Stat
e D
evel
opm
ent
Rac
ing
& G
ambl
ing
Tran
spor
tR
ail
Mai
n R
oads
Ports
Whole of StateWhole of StateReporting ofReporting ofDepartmentsDepartmentsRolled Up ToRolled Up To
GiveGiveCorporateCorporate
ViewView
Horizontal Uniformity ?Validation of Outputs ?
OftenOftenDepartmentsDepartmentsAllowed ToAllowed To
Undertake AMUndertake AMAs NormalAs Normal
Different Approaches Followed
Whole of NationWhole of Nation
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Rollingup With Confidence
Alig
ned
Bus
ines
s Pr
oces
ses
–Ve
rtic
al
From asset / workface to boardLevel of ServiceLevel of Service
Cost of ServiceCost of Service
LoS ReliabilityLoS Reliability
Cost of ServiceCost of Service
Copyright © GHD P/L. 2006
DevelopAsset
Register
Failure Modes:•Capacity•Physical Mortality•Level of Service•Financial Efficiency
Future FundingStrategy
DeterminePhysical &Economic
Residual Lives
Collect HistoricCosts &
Determine CurrentReplacement Cost
Set Current &Future Levels
of Service
DevelopAppropriate
Maintenance &Operations Plans
DevelopAppropriate
Capital Program
EstablishRisk Ratings
(RelativeCriticality)
Build the AMP
Current State of our Assets?
Required Sustained Level Of Service?Which Assets are Critical to Sustained Performance?
Management Strategies for the Assets
Best LongTerm funding strategy
AM Investment Decision Making Process
Copyright © GHD P/L. 2006
Renewal Decision LCC Model –But what data?
0
20
40
60
80
100
120
2000 2010 2020 2030 2040 2050 2060
Year
Ris
k / C
ondi
tion
Scal
e
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
Cos
t ($)
ConPoFCoFRiskMin RiskMin ConMn$Op$Cum$
Copyright © GHD P/L. 2006
What Is Our Funding Gap Strategy ?
0
100
200
300
400
500
600
2006
2009
2012
2015
2018
2021
2024
2027
2030
2033
2036
2039
2042
2045
2048
2051
2054
2057
2060
2063
2066
2069
2072
2075
2078
2081
2084
2087
2090
2093
2096
2099
2102
2105
Year
Expe
nditu
re
$M (C
urre
nt D
olla
rs)
0
2,000
4,000
6,000
8,000
10,000
12,000
Ass
et V
alue
s $
M
CIP Existing Current ProgramCIP New Future GrowthCIP New Future Levels of ServiceCIP Future Rehab and Replace (New Levels of Service / Growth)CIP Future Rehab and Replace (Plants)CIP Future Rehab and Replace (Collections)Operations (Operations)Operations (Maintenance)Operations (Overhead)Book ValueReplace ValueAverage Expenditure
Current Total Income$145 Million
Sustainable ExpenditureModel (AARA)$320 Million
Close the Gap Over 10 YearsNeeds 8.5% increase PA
Other options10.5% closes gap in 8 years17.5% closes gap in 5 years30.5% closes gap in 3 years
Our job is to try and drivedown these costs / this line
Now we can focus ourefforts on those items that
represent least value
Copyright © GHD P/L. 2006
ImprovedCustomer
Satisfaction
Lower FutureCost of Service
ImprovedLevel of Service
Where Do the Benefits Come From ?
20%
80%
+25%
Social
EnvironmentalSocial
Economic
Benefits ofIntroducing
Advanced AM
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Estimating Benefits for Individual Businesses
Cost $ 24M
Benefits Estimated$ 350M (2002)
Benefits Revised$ 550M (2006)
CIP Validation Savings (2005)$64.8 M
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Key Benefit Areas –Future Cost Reductions
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The Next Evolutions in Asset Management
GAMS web site layout
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AMPLE Tool –Modules
Worlds Best PracticeLife Cycle AM
Portfolio / Generic
Total EnterpriseAsset ManagementQuality Framework
TEAMQF
The Gap ToolsBasic
IntermediateAdvanced
AMPLE Product is based on allowing agencies to achieve ISO 9000 quality certification forLife Cycle Infrastructure Asset Management
WBP
BAP
CQR
BusinessCase
Benefit / Costs
AMIPAM Improvement
Plan
EIPEffective
ImplementationPlan
Pilot ProjectsTraining on
Their Assets Skills Transfer
SpecialistGuides &
Tools
Case StudiesProofs of
AAM BenefitsAchieved
Best AppropriatePractice Related to
Individual Asset Types
eLearning Module
BenchmarkLike business
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How To Use AMPLE
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Life Cycle AM Processes and Practices
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CHIFLEY Business School Accredited Course
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The Best Practice Model
AssetManagementPlans
AssetManagementPlans
OverallBusinessPlans
OverallBusinessPlans Long Term
Expenditure& FundingPlans
Long TermExpenditure& FundingPlans Customer &
StakeholderConsultation
Customer &StakeholderConsultation
Feedback / Revision
Amend / Revise
INTERNAL & EXTERNAL
AUDIT REVIEW
Consultants Contractors& Suppliers
Consultants ContractorsConsultants Contractors& Suppliers& Suppliers
OrganizationalIssues
OrganizationalOrganizationalIssuesIssues
PeopleIssues
PeoplePeopleIssuesIssues
Government &Regulators
Government &Government &RegulatorsRegulators
CustomersUsers
CustomersCustomersUsersUsers
OtherStakeholders
OtherOtherStakeholdersStakeholders
Driving BestValue Sustainable
AAMPrograms
DrivingDriving BestBestValue SustainableValue Sustainable
AAMAAMProgramProgramss
Best AppropriatePractices Assets
Best AppropriateBest AppropriatePracticesPractices AssetsAssets
LCAM Processes Generic
LCLCAM ProcessesAM Processes GenericGeneric
Data &KnowledgeData &Data &
KnowledgeKnowledge
Knowledge Transfer – Staff & Policy Makers Training – Agency Ownership – SustainabilityKnowledge TransferKnowledge Transfer –– Staff & Policy Makers TrainingStaff & Policy Makers Training –– Agency OwnershipAgency Ownership –– SustainabilitySustainability
Whole of EnterpriseBusiness / Agencyi
Whole of EnterpriseWhole of EnterpriseBusiness / AgencyBusiness / Agencyii
Enterprise BU’s orDepartments
Enterprise BUEnterprise BU’’s ors orDepartmentsDepartments
Elected BoardMembers / Directors
Elected BoardElected BoardMembers / DirectorsMembers / Directors
CEO & SeniorStaff Team
CEO & SeniorCEO & SeniorStaffStaff TeamTeam
Deputy &Middle Managers
Deputy &Deputy &MiddleMiddle ManagersManagers
Supervisors& Staff
SupervisorSupervisorss& Staff& Staff
AM InformationSystems
AM InformationAM InformationSystemsSystems
Asset ManagementPlans & Strategies
Asset ManagementAsset ManagementPlans & StrategiesPlans & Strategies
AAM DeliveryTactics
AAM DeliveryAAM DeliveryTacticsTactics
Key Success Factors –Public Sector
StakeholderConsultation Program
StakeholderStakeholderConsultation ProgramConsultation Program
Long Term ExpenditurePlans / Funding Models
Long Term ExpenditureLong Term ExpenditurePlans / Funding ModelsPlans / Funding Models
Transparency and External Stakeholders Awareness Raising & ConsultationTransparency and External Stakeholders Awareness Raising & ConsuTransparency and External Stakeholders Awareness Raising & Consultationltation
BroaderCommunityBroaderBroader
CommunityCommunityTEAMQF
Primary ElementsTEAMQF
Primary Elements
50% of BenefitsDerived Here
50% of BenefitsDerived Here
Copyright © GHD P/L. 2006
Links From Gap –Ex to AMPLE BAP Guides
Worlds Best PracticeAsset Related
PracticeGuidelines
AMIPAM Improvement
Plan / TasksProjects
Worlds Best PracticeLife Cycle AM
Processes
The Gap ToolsBasic
IntermediateAdvanced
WBP
BAP
CQR
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GAP Ex Level 1
GAP Ex Level 1
Copyright © GHD P/L. 2006
Copyright © GHD P/L. 2006
Gap Ex 1 User Guide
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Key Issues for Infrastructure Managers / Owners
» And last but not least … ..
»How should we respond to theissue of Climate Change?
Copyright © GHD P/L. 2006
Climate Change –Key Impacts
» Rise in average temperatures» Reduced total long term rainfall» Increased rainfall intensity (storm events)» Increased high wind events» Increased sea level and foreshore erosion *» Increased lightning activity and strikes» Less clouds more direct sunlight (ultraviolet)
Copyright © GHD P/L. 2006
Climate Change –Ranger Mine Jabiru
Copyright © GHD P/L. 2006
Climate Change Impacts –Pessimistic
Wind2.7 (1.8)
Lightning4.0 (2.0)
Flooding2.4 (1.6)
Foreshore Issues1.9 (1.4)
Figures intended to represent the probable increase in events overour experience of the last 30 years
Copyright © GHD P/L. 2006
The Total Energy Picture (%)
PROJECTINITIATIONPROCESS
BASEASSETMATERIALS
ASSETCONSTRUCTIONPROCESS
ASSETOPERATIONSMAINTENANCE& RENEWAL
ASSETDISPOSAL
341 40 15 10
ASSETDEMOLISIONCLEARING
1010
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The Total Energy Picture (%)
PROJECTINITIATIONPROCESS
BASEASSETMATERIALS
ASSETCONSTRUCTIONPROCESS
ASSETOPERATIONSMAINTENANCE& RENEWAL
ASSETDISPOSAL
1 40 45 10 4
ASSETDEMOLISIONCLEARING
4
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Easy To Understand Results
$ 3.404m
$1.120m
$ 0.150m
$ 4.674m
Co2 1.560M
$1.833mEconomic
$4.980mSocial
$0.500m
Economic Cost Social Cost Environmental Cost Co2
CO2
TotalEnvironmentalCost $1.050m
$1.833mEconomic
$4.980mSocial
$0.500m
Economic Cost Social Cost Environmental Cost Co2
CO2
TotalEnvironmentalCost $1.050m
Copyright © GHD P/L. 2006
Consequence of Failure by TBL Costs
$1.560M
$3.404mEconomic
$1.120m SocialEconomic Cost Social Cost CO2 CostEnvironmental Cost
TotalEnvironmentalCost $3.765m
CO2
Copyright © GHD P/L. 2006
Climate Change –Other Likely Impacts
» Higher Costs Carbon Taxes will impact on the cost ofbuilding new assets (10%) and operating existingassets
» More Rehabilitation Embodied energy costs will meanthat we will need assets to last longer. Life extensionswill be more common
» Energy Efficiency –There will be significantinvestments in energy efficiency measures
» Insurance Weather event insurance premiums andexcess limits will rise.
» Customer Expectations –Weather events will causesignificant customer outrage against managers &service organisations.
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PREMISECUSTOMER TOLERANCE REDUCES WITHREPEATED FAILURES (EXAMPLE ONLY)
NUMBER OF FAILURES
WE NEED TOUNDERSTANDPOINT ATWHICHCUSTOMERWOULDCHANGESUPPLIERS
6
4
3
2
1.0
1 2 3 4 5 6 7 8 9 10
Loss of PowerSupply
TOLE
RA
NC
E FA
CTO
RC
.o.F
MU
LTIP
LIER
What Event Causes Customer Outrage?
Water RestrictionsFor a year
ENGAGEYour
Customers
ManageTheir
OUTRAGE
UnderstandTheir
ANGSTPoint
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CompleteFor EachMitigation
Option
Understanding Climate Change Impacts
ClientBusinessActivities
SustainabilityImpacts
BusinessRisks
(Range)
MitigationOptions
(Various /Staged)
BusinessCase
Evaluations
SustainableBusinessStrategy(Staged)
Activities Impacts Risks Options Evaluation Strategy
ResidentialDevelopmentInfrastructureManufacturingMining /ResourcesEtc
Economic
Social
EnvironmentalInc. ClimateChange
Consequences
Probability•Under Organ.
Control•National &Global Control
Risk ExposureEnvelopes
Non AssetSolutions•Customers•Operations•Education
AssetSolutions•Operational•Rehabilitation•New Assets
StagedStep by StepComplianceTo suitClientsBusinessdrivers andeconomicsituation
RiskReduction
MitigationCosts
ResidualRisks
TimelineExpenditure
Select BestAppropriate
Strategy
Identify ViableMitigationOptions
AssessFor Each
Impact
IdentifyAll
SignificantImpacts
UnderstandClients
Business &Drivers
Copyright © GHD P/L. 2006
Key AM Quality Elements To Get Right
» Asset Registers are they well structured and detailed enough
» Levels of Service –are they qualified / quantified
» Failure Mode Assessment –Do you understand all FM’s
» How well is our capital justified –How good is the business case
» Risk in Decision Making how well is it assessed ? Points or $ cost
» Holistic (Life Cycle Cost) Management – Is it TBL ?
» Maintenance Management –How well is it justified?
» How are your Opex Budgets set ? How well is it justified?
» Portfolio Wide Asset Management Plans –Do your planscover all assets and do they include Opex & Capex, levels of service andrisk?
Copyright © GHD P/L. 2006
Enjoy Your Conference
» Jeff –Some priority issues with AM» David Valuation & Depreciation» John Integrating Risk» Daniel –Depreciating Roads» Adrian Measuring Levels of Service» Darran Auditing AM & Implementing
Asset Management
Copyright © GHD P/L. 2006
Take Home Messages
» Asset Management is critical to anyinfrastructure rich business
» It must be done as a Total Enterprise» It is all about Cultural Change –get this part
right» Plan the change thoroughly, get buy in across
the business» Choose what you can justify and do it ..» Apply the resources needed and monitor
progress
Copyright © GHD LLC 2005
ANY QUESTIONS ?Copy of Presentation –
Just put request on business card
Asset Accounting & ManagementApril 2008
Copyright © GHD LLC 2005
ForFor forfor further informationfurther information in relation to thisin relation to thistopic contact Roger via any of the followingtopic contact Roger via any of the following ::Email:Email: roger.byrne@ghd.com.auroger.byrne@ghd.com.au ororGlobal Roam cell +61.419.509.873Global Roam cell +61.419.509.873Or visit our GHD Web siteOr visit our GHD Web site www.ghd.com.auwww.ghd.com.auAnd check out Management Consulting … GapAnd check out Management Consulting … Gap ––ExExand AMPLEand AMPLE
This presentation is Copyrighted to GHD and is to be used for its original purpose only.
GHD Asset Management GroupNow completing work in : Australia, New Zealand , Philippines, Singapore,
Thailand, United States, Canada, Mexico, Chile, India, Middle East , Egypt, China,United Kingdom, Scotland & Ireland
Thanks For Your Time & Interest..
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