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CWEA Asset Management SeminarCWEA Asset Management SeminarBerkeley, CA, September 17, 2003Berkeley, CA, September 17, 2003
Ken Harlow, Brown and Caldwell
Planning for and FundingAsset Replacements and Refurbishments:
“Making Do” with Limited Asset Knowledge
What Can I Do with my Existing Asset Knowledge?
Using Class-based Knowledge to Forecast R&R Costs
The RPM: Establishing Funding Policies for Sustainability
How does the RPM Help?
Demonstration of the RPM
Outline of PresentationOutline of Presentation
Your Board/Council Your Board/Council DoesDoes Care about the Infrastructure!Care about the Infrastructure!
“What is our system worth in today’s dollars?”
“How much should we be spending on R&R?”
“How much will we be spending twenty years from now?”
“What should our R&R reserve levels be?”
“How much should we contribute each year?”
Perfect Asset Knowledge – Perfect Asset Knowledge – When???When???
Many agencies can’t answer these questions because of poor asset knowledge
Remedying this is a lot of work – improving asset knowledge is usually a task of many years (but worth it, of course…)
Question: What can you do with the asset knowledge you have now?
With only a moderate effort, you can:
Establish long-term replacement funding policy to assure infrastructure integrity
Calculate the value your infrastructure assets
Especially in California: Protect needed reserves from possible expropriation
What Can I Do with the Asset What Can I Do with the Asset Knowledge I have Now?Knowledge I have Now?
Using Class-based Knowledge Using Class-based Knowledge to forecast R&R Coststo forecast R&R Costs
Two Kinds of Asset KnowledgeTwo Kinds of Asset Knowledge
Asset specific knowledge: Age, condition, value, likely replacement and refurbishment (R&R) needs
• This level of knowledge is required to make dependable R&R decisions on specific assets
Asset class knowledge: Typical useful life, pricing formulas, model refurbishment programs
• If you can develop class-based knowledge, you can forecast aggregate R&R needs and support long-term funding policies to sustain your infrastructure
An asset class is a group of assets with:• Similar form and function• Similar useful lives and refurbishment programs• Similar replacement pricing formulas
Key: Prepare a master asset listing and assign each asset to a class (usually 20-25 classes)
Each asset class has a useful life, pricing formula, and typical refurbishment program
A refurbishment is a capital expenditure required to achieve useful life — it is not an O&M cost
What is an Asset Class?What is an Asset Class?
Typical R&R Life Cycle: Steel Typical R&R Life Cycle: Steel TankTank
Build ReplaceA. Exterior painting (7.5 years)
B: Interior coating / Floor repair (15 years)
C. Floor replacement (30 years)
$
Refurbishment types:
A A A A
A+B
A+B+C
Time
A+B
0 7.5 15 22.5 30 37.5 45 52.5 60
You Still Need You Still Need SomeSome Asset- Asset-specific Knowledgespecific Knowledge
Year in service
Asset class
Physical attributes (length, diameter, material, horsepower, etc.)
• Physical attributes are used to generate replacement costs of assets using formulas or look-up tables
And that’s all you need (if that’s all you have)
Using Class-based Knowledge Using Class-based Knowledge to Generate R&R Coststo Generate R&R Costs Once class-based knowledge is defined, you can
simulate infrastructure performance: Asset-by-asset replacements and refurbishments over many years
Key is the cyclical nature of these “R&R” activities
Each “transaction” is costed to create a schedule of expenditures well into the future
Finally, funding policies can be tested against future expenditures to create a funding plan
All this is done easily using the Replacement Planning Model (RPM)
Mesa Consolidated Water District
Orange County Water District
Irvine Ranch Water District
Maui Board of Water Supply
Orange County Sanitation District
Asheville, North Carolina
City of Roseville
City of Oxnard
Dublin San Ramon Services District
Montecito Sanitary District
MWD of Southern California
Moulton Niguel Water District
Who has Used This Approach?Who has Used This Approach?
The RPM: Establishing The RPM: Establishing Funding Policies for Funding Policies for
SustainabilitySustainability
RPM R&R costsby year
Usefullives
AssetinventoryYears in
service
Replacementcosts
Refurbishmentprograms
Annualcontributions
Earnings rate Inflation rate
Fundbalances
Elements of the Funding Elements of the Funding AnalysisAnalysis
Replacement/Refurbishment (R&R) Fund is the fundamental tool for accumulating and disbursing R&R money
Fund performance is modeled using the RPM
The R&R FundThe R&R Fund
R&R Fund balances are based on:• Beginning balance
• Fund contribution policies
• R&R needs by year
• Interest earnings
• Various other policy decisions
The RPM “builds” funding policy by varying these and other parameters while observing results of the simulation
Modeling R&R Fund Modeling R&R Fund PerformancePerformance
How does the RPM Help?How does the RPM Help?
Clear delineation of R&R costs over various timeframes
Easy-to-use, friendly interface
Detailed logs of transactions; many graphical reports
Ideal for exploring policy options and recommendations with the board
The RPM Shows Clearly the The RPM Shows Clearly the Patterns of Future R&R Patterns of Future R&R ExpendituresExpenditures
Helps develop true asset-based funding policies
Provides an entry to asset management
Proven track record delivers confidence to your client
The RPM Provides Clear, Effective The RPM Provides Clear, Effective Answers to Funding QuestionsAnswers to Funding Questions
RPM supplies the replacement value of all assets
Current asset value is of great interest and usefulness to:• Staff• Board• Customers
The RPM Also Shows what the The RPM Also Shows what the Infrastructure is WorthInfrastructure is Worth
RPM DemonstrationRPM Demonstration
Questions and AnswersQuestions and Answers