City of Palo Alto (ID # 5390) City Council Staff Report

Report Type: Informational Report Meeting Date: 12/15/2014

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Summary Title: Infrastructure Management System Update

Title: Update on the Infrastructure Management System Needs Assessment and Next Steps

From: City Manager

Lead Department: Public Works

Recommendation This is an informational report and no Council action is required. Background On December 22, 2011 the Infrastructure Blue Ribbon Commission (IBRC) published its Final Report, entitled “Palo Alto’s Infrastructure: Catching Up, Keeping Up, and Moving Ahead”. A key recommendation of the Report was that the City should implement an Infrastructure Maintenance System (IMS) that would be used to maintain an up-to-date inventory of the City’s General Fund infrastructure assets, track maintenance activities and investments performed on the assets, maintain long range forecasts of annual costs for infrastructure maintenance and allow for regular reporting on the status of any deferred maintenance backlog, or “catch-up”. Funding for a Capital Improvement Program project (TE-13004) to implement an IMS was approved by the City Council in FY 2013 in the amount of $300,000. Since that time staff performed evaluations of software applications to determine if they could fulfill the IMS requirements, but was unable to identify an application that could perform both the asset inventory and long range infrastructure maintenance budgeting functions that are needed. In December 2013, staff contracted with Plante Moran to perform a needs assessment for the IMS project and to make a recommendation for the software application or applications that should be used to implement the project.

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Discussion The Needs Assessment report resulting from Plante Moran’s work was completed in November 2014. The report’s Executive Summary is attached (Attachment A), and the full report is available at www.cityofpaloalto.org/IMS. The report recommends a phased approach to IMS implementation that would utilize two software applications, Maintenance Connection and Questica, both of which the City already uses. The report’s primary recommendations are summarized below. Plante Moran recommendations: Build the IMS using the software applications Maintenance Connection and

Questica. Maintenance Connection is already used by the Facilities workgroup in Public Works and provides capabilities for maintaining a full asset inventory and tracking maintenance and condition information by asset. The City Council approved the acquisition of Questica in June 2014 for budget development, and Questica has indicated that its application can be integrated with Maintenance Connection to track longer term maintenance budgeting needs. Further, the City Council approved the first amendment of the contract with Questica on December 8, which provided for the acquisition of a site license in support of the IBRC recommendation.

Focus the initial IMS implementation on the inventory of assets and future budgetary needs developed by staff and the IBRC in 2011. This inventory includes the great majority of General Fund infrastructure types, and the “keep-up” and “catch-up” information that was developed has been kept up to date by staff since the completion of the IBRC’s work. The infrastructure assets in the existing inventory include streets, sidewalks, parking lots, parks, traffic control systems, and buildings.

Develop workflows and procedures to capture the monetary cost of operating and capital budget maintenance performed on the infrastructure assets.

Develop workflows and procedures to perform regular infrastructure condition assessments and capture them in the IMS.

Integrate the IMS with the City’s enterprise-wide financial system, SAP. Develop and implement an infrastructure management governance structure

to ensure collaboration across the different departments and divisions with responsibility for managing General Fund assets so that standardized asset management practices can be developed and implemented.

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Develop reporting capabilities to allow regular reporting on the condition and financial status of the City’s infrastructure assets.

Staff is in agreement with these recommendations and believes that they address the IBRC’s recommendations about the IMS, and is working on the next steps to bring the necessary decisions to the City Council to allow the IMS implementation to begin. Next Steps Staff intends to bring a report to the Council in February or March 2015 to allow the IMS implementation to proceed. The report will likely include the following items for Council’s approval: 1. A contract amendment with Maintenance Connection to provide the

additional licenses needed for the IMS; 2. Contract amendments with both Maintenance Connection and Questica, or

with a third-party integrator, to implement the system configurations needed to build the IMS;

3. A contract with Plante Moran to assist in managing and coordinating the various IMS implementation activities that will be occurring simultaneously; and

4. A Budget Amendment Ordinance to provide funding for the project in addition to the funding available in TE-13004, Infrastructure Management System.

Staff will be working to develop these contract scopes and to define their costs over the coming months. Attachments:

A - Executive Summary of Needs Assessment (DOCX)

CITY OF PALO ALTO, CA | AUGUST 30, 2014

Enterprise Asset Management System

Needs Assessment, Solution Selection, &

Implementation Strategy Plan Report

Attachment A

1. Executive Summary 1.1 INFRASTRUCTURE BLUE RIBBON COMMISSION’S CALL TO ACTION

“This Commission has been acutely aware that Palo Alto’s attractiveness, sustainability, and vitality as a community is inherently linked to the quantity and quality of its infrastructure, and that maintaining and enhancing Palo Alto’s level of infrastructure requires careful evaluation of the economics.” --- IBRC Report Summary Finding, December 2011

In 2010, the Palo Alto City Council commissioned a 17-member group of residents to serve on an Infrastructure Blue Ribbon Commission (IBRC) to identify the infrastructure needs to support the community over the next 25 years. The Commission’s four-point charge included identifying the existing state of the City’s infrastructure, identifying ways to resolve known infrastructure shortcomings, proposing strategies to prevent future infrastructure deficits, and outlining funding strategies to ensure the City’s existing/future infrastructure will predictably and sustainably meet the community’s future needs.

The IBRC conducted a comprehensive investigation involving an assessment of the City’s existing infrastructure maintenance programs to determine whether the City’s operations and finances were structured to meet current and future expectations. The Commission’s focus was on the infrastructure assets funded through the City’s General Fund. These assets include a variety of infrastructure including the City’s buildings, public safety facilities, parks, roads, sidewalks, trees, storm water management systems, vehicles, recreational amenities, and many others. The IBRC’s findings revealed an ongoing annual deferred maintenance funding gap (keep-up need) of $2.2 million with a cumulative need of $40 million to restore General Fund supported infrastructure to satisfactory conditions (catch-up need). The IBRC Final Report indicates the trend for infrastructure maintenance will continue to outstretch available resources, further contributing to an annual maintenance deficit.

The IBRC identified a number of reasons for the growing infrastructure funding deficit. Foremost among them was the absence of a means to assess infrastructure condition, prioritize asset maintenance, and weigh tradeoffs for competing funding priorities. The IBRC noted that the City was unable to develop a comprehensive strategy for infrastructure maintenance and replacement due to the divided operational structure among the various departments (Public Works, Community Services, and Administrative Services) responsible for managing the City’s infrastructure. Each department’s operating divisions have their own asset tracking and maintenance tools creating a patchwork of systems that are not integrated. This prevents the means to establish a comprehensive picture of current asset condition and maintenance needs across the City.

Further compounding the problem is the difficulty for City staff to generate longer-range financial projections for all assets to support the budgeting process so accumulated deferred maintenance (catch-up need) can be tracked. Without a means to compare those shortfalls against requests for new and/or replacement assets that are included in proposed Capital Improvement Plan (CIP) projects, the ability of City policy makers to weigh the funding tradeoffs between the two is severely limited. The IBRC also cited situations involving “pop-up” projects displacing programmed infrastructure projects with competing General Fund needs. The pop-up projects often by-pass the annual budget process when they are identified in the middle of the fiscal year. As a result, they supplant funds earmarked for operations and maintenance purposes. The IBRC report indicated that these types of projects divert approximately $1.5 million annually from scheduled O&M activities. Additionally, the absence of a reliable funding mechanism for infrastructure maintenance will continually subject asset management to competing General Fund priorities. This funding uncertainty limits the City’s ability to adequately forecast whether its infrastructure assets will meet the service level expectations and demands of the community well into the future.

To address these concerns, the IBRC recommended that the City implement an Infrastructure Management System that would track deferred and future infrastructure asset maintenance requirements and provide uniform reports of infrastructure status and the budgetary needs to effectively maintain the City’s infrastructure. This report uses the term Enterprise Asset Management System, or EAMS, in lieu of Infrastructure Management System in accordance with the standard industry terminology for such applications.

The complete IBRC report and its findings are included as Attachment A to this Needs Assessment report.

1.2 PROJECT SCOPE The City’s EAMS project charter defined the scope of this project to include a needs assessment to evaluate the City’s existing infrastructure asset management applications and related asset management information identified in the IBRC report. The major infrastructure components included those funded through the City’s General Fund to include buildings, parks, streets, sidewalks, athletic facilities, and the City’s urban forest. A complete inventory of these assets was conducted by the IBRC and can be used as a starting point for development of a more comprehensive inventory .

The information from the needs assessment has been used to make recommendations for the City’s new EAMS. There may also be opportunities to replace standalone spreadsheets, disparate systems, and databases that are not presently integrated with any of the City’s core systems making it complicated to share and exchange asset information across the organization.

Major Project Activities Defined in the Project Scope Include:

Interviews with project stakeholders and key end-users in order to build functional and technical requirements for an Enterprise Asset Management Solution (EAMS), which must include, at a minimum, capabilities for forecasting multi-year O&M and capital project needs.

A summary of industry best practices for infrastructure asset management that are appropriate for the City to

adopt as part of its EAMS strategy.

Identification of the differences between the city’s current infrastructure asset management practices and what it should be doing, and recommendations for how to close the gaps.

Evaluation of opportunities to either integrate or consolidate existing systems used to manage the City’s

infrastructure into an EAMS solution that meets required objectives.

Propose additional EAMS solutions based on stakeholder input, best practices and consultant experience. Summarize the advantages and disadvantages of each.

Recommend a preferred EAMS solution based on a consensus driven process involving process owners and

end users to fully enable the City take ownership of its ultimate system.

1.3 SUMMARY FINDINGS AND SOLUTION STRATEGY The IBRC report called for uniting information from multiple, fragmented asset management systems and programs into an integrated, central infrastructure management resource. The objective was to enable the City to provide a unified view of asset information and interface its new EAMS system with the City’s financial and budgeting systems. Plante Moran determined that the City’s requirements are in alignment with the capabilities of its existing EAMS applications. The City’s existing applications collectively address most of the required business needs outlined by the IBRC report and the EAMS business owners, with some gaps. As a result, the recommended EAMS solution options include expanded use of one of the City’s existing asset management applications, plus the use of a business intelligence (BI) software package. The BI software is the recommended approach to connect the City’s budgeting and finance (ERP) systems with the EAMS. The requirement for integration of the statistical asset data with City financial data, is the key recommendation provided by IBRC.

Three options to leverage asset management software the City currently owns were evaluated, as well as two options for an asset forecasting and modeling package. The first two asset management options, AssetWorks and Maintenance Connection offer hosted service options consistent with the City’s cloud-first policy. The third, SAP, offers an on premise option as well as native integration with its own suite of EAMS modules and financial systems. The two asset forecasting and modeling packages evaluated are Riva Modeling and Questica. The City recently acquired Questica as a tool for budget development and tracking, and is already involved in its implementation and its integration with SAP. Plante Moran concurs with the EAMS project team’s selection of Maintenance Connection as the most appropriate asset management tool, with Questica serving as the asset forecasting and modeling tool.

Plante Moran recommends expanding the use of Maintenance Connection and Questica to meet the City’s EAMS needs. This solution is presented with the intent of providing the City with the flexibility to achieve its short term and potentially long term goals. In the short term, the City will immediately realize the benefits of an integrated asset management solution. In the long-term, the City is conducting an ERP system feasibility evaluation in the coming months which may impact the longevity of the current SAP environment. By using the Questica BI tool, the City may be able to cost effectively interface the EAMS environment with an alternate ERP system in the future.

1.4 PLANTE MORAN’S MAJOR FINDINGS FOR EAMS SOLUTION Plante Moran identified how the City’s current asset management technology applications support the City’s business goals. The consultant team evaluated the IBRC’s comprehensive research and conclusions and has identified the key selection and implementation considerations for evaluation in recognition of the major findings represented in Section 1.4.1.

EAMS System Key Selection Considerations: Establish a robust work order management system that is integrated with a service request management

system (e.g. Palo Alto 311 or a similar type of Customer Request Management System (CRM).

The City’s asset managers should capture accurate, reliable, and consistent information about the work performed in response to service request needs for all capital assets.

Enable the City to schedule its preventive (keep-up) and track its corrective (catch-up) maintenance for its capital assets, track actual to planned performance with deferred maintenance accruals, and forecast future maintenance needs.

Provide the City with a comprehensive picture of the actual labor, equipment, and materials costs by project, grant program, division, and departmental levels to meet financial reporting expectations.

Field users must have access to the efficient and prompt entry of data into EAMS work management system.

A detailed analysis of the City’s existing vendor solutions to fulfill the functional requirements identified by the City’s asset managers is provided in Appendix C: Detailed Vendor Specification Compliance Analysis.

EAMS System Implementation Considerations: The City will need to invest in specialized training and resources to incorporate condition assessments (e.g. analogous to the street pavement condition scoring or pavement condition index that is already conducted by the City). Once an asset’s life can be modeled, “what-if” scenarios can be performed to determine the benefit additional increments of investment will yield when targeting new asset performance outcomes (e.g. the City’s goal of elevating the average PCI score from 77 to 85 by the year 2019). Additionally, the expectation to integrate as many existing systems should be strategically evaluated as part of other enterprise initiatives including, but not limited to the City’s current ERP system.

There were a number of consistent themes noted throughout each of the functional areas. The unmet needs, which City operations leaders and staff expressed as opportunities for improvement, are summarized as follows.

1. Achieving integration between EAMS solution modules allowing for the elimination of shadow systems when a strong business case can be supported.

2. Conducting single entry of data and reduction in manual processes and/or shadow systems.

3. Providing user configurable, intuitive, and flexible reporting tools that support the information needs of staff and the City Council including tracking and reporting of infrastructure performance metrics with service level objectives.

4. Evaluation of paper-based processes and replacement with automated, online workflows and approvals whenever possible. The process must also make business sense to the asset managing agency to determine when and where to collect information (e.g. in the field using mobile devices versus in the office using a notebook PC).

5. Improved reporting capabilities representing most current asset status.

Overall, the majority of the unmet needs identified above could be fulfilled by expanding the use of the City’s existing EAMS applications in addition to acquiring a business intelligence (BI) software package.

1.4.1 Additional Findings Asset Status Dashboards & Decision Support Systems

Asset operations managers consistently reported a need to show near real-time asset status information as a priority based, decision justification tool. The ability to quickly demonstrate work performance and represent progress toward asset management goals was a repeated takeaway from our interviews.

Commercial Off-The-Shelf Software

A more advanced, later phase EAMS will likely require specialized software that has been proven in the marketplace to demonstrate a capability of responding to the City’s asset management requirements. Some of these more advanced requirements include: asset condition forecasting, asset deterioration modeling, budget “what-if” scenario analyses, and calculating the impacts of deferred maintenance on asset service life. A hosted EAMS application (SaaS) model would provide the greatest flexibility for the City to deploy and support this service over the long term.

GASB 34 Financial Reporting – Adding Asset Life Back to the Balance Sheet

During the life of the asset, if improvements are made to extend the life of the asset, the value and the useful life of the asset can be increased and reported to the fixed asset module in the City’s ERP system. In 2002, the City contracted with Harris & Associates to perform a comprehensive GASB 34 compliance valuation of all capital assets to establish their net book value from their historic cost by applying the “Basic Approach” method. The City has an opportunity to leverage an EAMS to maintain this inventory and restore net book value to assets when they are properly maintained and when asset inventories are updated to reflect changes with new asset installations or retirements.

Forecasting Asset Condition & Budget Impacts

Providing a basis for forecasting the maintenance costs needed to sustain infrastructure service life was explicitly called for in the IBRC report. Interviews revealed that a gap analysis should be performed to demonstrate whether the current and expected performance standard is narrowing or widening. Additionally, the ability to model the cost of deferred maintenance or postponed capital repair on subsequent budget cycles was identified as a very high priority.

Establishment of Uniform Reporting Standards & Improved Reporting Capabilities

The reporting challenges from the existing EAMS applications used by the City were identified to be a challenge due to staff knowledge limitations and the capabilities of the present systems to format information in the ways to facilitate work. A uniform reporting standard should be established with all EAMS related asset performance information for: City Council’s budget review, project budget status, CIP item reviews, asset condition, and pop-up / unscheduled projects that may defer operations & maintenance activities.

Robust Maintenance Tracking Best Practices for EAMS

A core EAMS capability is to manage asset maintenance to reduce the risk of service disruption and sustain assets through their existing lifespan. Opportunities include:

Reduce asset downtime and number of failures Increase asset life expectancy Reduce overtime costs and reduce the number of labor hours

committed to reactive activities. Reduce the cost of repairs and mitigate the probability of

secondary repairs or subsequent failures. Identify assets with exceedingly high maintenance costs which

may be an indicator for capital rehabilitative maintenance, asset obsolescence / retirement, and/or additional operator training.

Improve the overall safety and quality of the services delivered to protect the public and those committed to serving them.

There are different levels of maintenance best practices that are applied based upon the asset being managed and the City’s service delivery standard. A robust EAMS should be classifying and tracking the type of maintenance according to any of the maintenance types described.

Improve Training Program Design

Existing users of the City’s current EAMS systems indicated they could not leverage the full capabilities of their software due to the learning curves involved and limited training opportunities available. The more fractionalized or siloed a department becomes as each user applies their own EAMS system, the more difficult it will be to share learning opportunities throughout multiple areas in the organization. This perpetuates a cycle where everyone becomes a Super User for their own individual function ultimately increasing the risk of knowledge loss when staff departs service.

GIS Bench Strength Severely Limited

The depth of available knowledge to support the City’s centralized GIS program is very limited. Presently, there is one individual supporting 1,400 layers of data and the responsibilities of this person are not currently being shared. This presents a single point of failure for a centralized function that synchronizes the asset inventory needs for all City Departments that will ultimately feed the future EAMS. Because of the increasing reliance on the GIS program to represent asset locations for asset management a risk mitigation strategy should be established immediately with a focus on sustainability.

EAMS System Scalability Feedback from the interviews revealed an expectation that the future EAMS be scalable to accommodate more users and assets groups within multiple service areas.

User Friendly Interfaces and Logic

System interfaces must be as simple and intuitive as possible. Users reported that other tools may offer the capacity to perform the functions they need (e.g. SAP’s work order module) but the complexity and time consuming data management process was a substantial disincentive to using them. There is a balance that must be achieved between rich functionality in contrast to a simplified/intuitive interface that is often less configurable/flexible.

System Ownership & Governance Structure

The IBRC reporting stated the importance of unifying the reporting of infrastructure information across the organization. It also noted there was no centralized person responsible for centrally managing asset

information across the organization. A governance structure should be established to provide the future EAMS with the organization’s full commitment to ensuring the system is leveraged to achieve its objectives. This should include leadership from each of the identified departmental service areas in addition to a representative from OMB and possibly the City Auditor’s office.

APWA Accreditation The City is currently working to earn an accreditation through the American Public Works Association. This is a voluntary initiative taken by the City to objectively evaluate, verify and recognize compliance with recommended management practices. The adoption of a structured asset management program is recognized as key component toward earning this designation. This City’s commitment to pursue this accreditation process demonstrates that the City is dedicated to improving existing procedures and practices which result in more efficient and high quality service delivery to customers.