Municipal Infrastructure Asset Management

1. Strengthening Communities Workshopfrom Policy To Practice11 – 13 April, 2007Hotel Explorer, Yellowknife Municipal Infrastructure Asset Management Saidur Rahman, Ph.D. Senior Capital Planning Officer

2. Society, Economy and Environment Municipal Infrastructure Consumption Built Environment Reduced Life Roads, Bridges, Buildings, Transits, Fleets, Water, Sanitary, Drainage, Energy, Communications, Parks and Public Facilities Services Waste Act Locally and Think Globally

3. 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?

4. 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 community’s social and economic activities” • Community infrastructure

5. Municipal Infrastructure • Classifications • Linear and non-linear • Surface and sub-surface • Tax supported, self-financing and quasi-commercial 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.

6. Asset Classifications

7. 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

8. Population growth Population Growth of Canada [Source: The Sustainability Report] Year Population (millions) 1981 24.82 1996 29.67 2006 32.74 2026 36.20 2050 42.31 Municipal Infrastructure Issues • Infrastructure demand – $90 billion (Infrastructure Canada)

9. (CSCE 2003) Municipal Infrastructure Issues • Municipalities are spending $12 - $15 billion/year on maintenance and rehab (FCM) • Huge backlog • Current funding level will deficit $1 trillion in 60 years (CSCE 2003)

10. (CSCE 2003) Municipal Infrastructure Issues • Aging of infrastructure • 28% of Canada’s infrastructure is over 80 years old, and only 41% is under 40 years old(CSCE 2003)

11. McGill Survey 2003 (Mirza and Haider) Municipal Infrastructure Issues • 79% useful service life of infrastructure has been used (CSCE 2003) • Condition degradation

12. 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)

13. 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

14. 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)

15. We Actually Need • Accountability • Customer (demand and service) • Staff (Fiscal responsibility, health and safety) • Environment (regulatory compliance) • Risk Management • Minimize health and safety tragedies/incidents • Reduce liability claims • Asset Sustainability • Longer term (cradle to grave) • Reserve funding

16. 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

17. How These Challenges Can be Addressed • Identify maintenance, rehab and renewal needs • Increase system’s capacity and extend service life • Stewardship of the environment • Define levels of service (LOS) • Ensure financial sustainability • ImplementAsset Management Plan (based on ‘Six Whats’)

18. 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)

19. Evolution of Asset Management • In early 1900’s design and durability issues, versatile structures • After World War II, reliability issues and maintenance for mechanical and electrical equipments • In 1960’s green movements, LCC and LCM • In 1970’s and 1980’s PMS, CMMS and WO • In 1990’s IT tools, CMMS, CMMS to AMS, GIS and GPS • 2000 ~ Integrated systems

20. 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

21. 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”

22. (Life cycle) Asset Management Benefits Two fold benefits: • Reduce cost • Extend life

23. Levels of Service (LOS) Risk Cost Asset Management Benefits Another benefit is to increase the levels of service Levels of Service is a compromise between existing and expected service levels Balance between cost, risk and LOS

24. 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?

25. 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)

26. 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

27. 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 • Infrastructure Canada • Knowledge - Building, Outreach and Awareness (KOA) program • Infrastructure Canada Program • Canada Strategic Infrastructure Fund • Municipal Infrastructure Investment Planning (MIIP) – NRC • 10 municipalities consortium • Evaluating tools and techniques for investment planning

28. Who is Doing What? • Transportation Association of Canada (TAC) • Primer on Highway Asset Management (1999) • Bridge Management Guidelines (2004) • Canadian Institute of Charted Accountants (CICA) • Accounting and Reporting for Physical Assets by Governments (1990) • Accounting for Infrastructure in the Public Sector (2003) • Canada Mortgage and Housing Corporation (CMHC) • Study reports on financial planning, alternative financing and municipal infrastructure • Public Sector Accounting Board (PSAB)

29. Who is Doing What? • Municipal Infrastructure Data Standards (MIDS) • Municipal Performance Measurement Program (MPMP) • Ontario Municipal CAO’s Benchmarking Initiative (OMBI) • National Water and Wastewater Benchmarking Initiative • Municipal Infrastructure Management Systems (MIMS) • Acts and Legislation (Federal, Provincial and Territorial)

30. 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?

31. Step 6 Step 1 to 3 – Data oriented Step 4 to 5 – Methodology and policy issues Step 6 – Decision-making Step 5 Decision-making Step 4 Calculations Models Protocols Step 3 Step 2 Step 1 Asset knowledge Asset Management Plan

32. Asset knowledge Calculations Models Protocols Decision-making Revisit the ‘Six Whats’ • What do you own? • What is it worth? • What is the condition? • What is the deferred maintenance? • What is the remaining service life? • What do you fix first?

33. 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) • Life cycle cost/Whole life cost

34. 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

35. 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 • Decision-making • Combination of all and political agenda

36. Asset Management Framework • Planning (proactive and reactive) • Implementation (generally life cycle approach) • Acquisition/construction • Operation • Maintenance • Repair and rehab • decommissioning • Evaluating • Improving/Developing

37. TOP DOWN System Knowledge BOTTOM UP Asset / Component Data Asset Management Framework PROGRAM LEVEL:High-level decision-making. Synonymous to “Top-Down Approach” MIXTURE OF BOTH PROJECT LEVEL:Detailed assessment on an asset-by-asset basis. Synonymous to “Bottom-Up Approach”

38. 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?

39. Asset Valuation and Management Drivers • Corporate • Enhance accountability & responsibility (insurance) • Satisfy emerging legislative issues • Engineering & Operations • Strategic investment decision-making for short & long term • Manage future growth & demand • Finance • Stabilize Rates / Reserves

40. Asset Valuation Methods

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

42. 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

43. 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 asset’s intended purpose within the capacity and satisfactory performance

44. Performance Indicators • Performance Measured Criteria – Key Performance Indicators (KPI) • Asset information • Stakeholders • Condition and performance • Operational/maintenance • Service quality • Financial

45. 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)

46. 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 KPI’s and Set Target Level of Services Policy and Implementation Establishing LOS Review Organizational Objectives/Vision

47. Examples of Performance Indicators

48. Risk • Definition: Risk is the probability that an event may adversely affect and measured by consequences and likelihood • Common risk assessment methodologies • Quantitative • Qualitative • Risk categories • Engineering • Public health and safety • Financial • Environmental

49. Risk Assessment Algorithm

50. Asset Management Model Infrastructure Ratepayers Quality of Service Sustainability Stakeholders Asset Management Implementation Investment Decision-Making Proactive Maintenance Business Process Planning and Design Levels of Service (LOS) Risk Assessment Asset Information Condition Criticality Probability of Failure Consequence of Failure Cost Replacement /Renewal Installation/ Construction Performance indicators Customer Expectations Legislative Orders Asset Valuation Availability of Resources Life Cycle Model Repair and Rehabilitation Operation and Maintenance Processes and Activities