Case study: implementing an integrated approach to asset ...

Bill NichollsGeneral Manager

Asset Management

Water UK Asset ManagementScottish Water Workshop

1 July 2004

•2.5 billion litres of water a day

•Turnover - c £900 million

• Employees - now c 4,500 (6,000 in 3 WAs in 2001-02)

• Customers - 2.2 million households

• 45,500 km water mains, 38,300 km sewers

• 441 Water treatment works, 1900 Sewage Treatment Works

• 12th largest business in Scotland

• 4th largest water services provider in the UK

Scottish Water… born 1 Apr 2002

Ownership and Regulation

Owner - Scottish Executive

Economic Regulator - Water Industry Commissioner

Drinking Water - Drinking Water Quality Regulator

Environmental Regulator - Scottish Environment Protection Agency

Health & Safety Regulator - Health & Safety Executive

Our vision and strategic goal

“ to become the water and wastewater

service provider trusted by its customers

through excellence in customer service

and the efficient and effective use of

assets.”

Asset Management - Our Inheritance

At or near to the bottom of the UK performance league

Assets under-funded for generations (>10 years behind England and Wales)

Operating costs significantly above the efficiency frontier

3 investment programmes built on different strategies

Different levels of risk assumed in developing programmes

Current capital investment delivery models will not deliver efficiencies

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£ p

er c

apita ENGLAND & WALES

PROXY

SCOTLAND

“There is a significant relative under-spend in Scotland, exacerbated by greater capital efficiency south of the border. The 2002-2006 investment programme will narrow the gap, but efficiency in programme delivery is critical to affordability”

Source: WIC Strategic Review of Charges - Sept. 2001

Comparison of Investment per Capita

Bursts in Glasgow in 2002

Each red dot is a burst - 9616 in all!

Asset Decay

Derelict Assets

Some effectively derelict or beyond economic or practical repair

Network In Poor Condition..

Customer Impact of the worst kind....

Access Problems in Rural Areas

Asset

Programme Enabling Costs 27% to £1410m

Inherited Investment Costs

Base Construction Cost

£1000m

Construction margin 11% to £1110m

Total Cost/ £1000m “Spend”= £1410m

Pressing need to reduce overheadsBase Costs

overpriced c. 10%

Underlying operating expenditure trends since 1996-97, projected over the next regulatory period

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99

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Year

Scotland

England and Wales(Ofwat Target)

England and Wales(Likely Performance)

“The targeted gain in efficiency is significant but necessary. The gap with England and Wales could grow if the industry in Scotland underachieves”

Source: WIC Strategic Review of Charges - Sept. 2001

Relative Operating Cost Efficiency

The Time Pressures

• Regulatory periodic review period of 4 years began on 1st April 2002 - 1 year and 9 months remaining

• Customer expectations are rising, fuelled by awareness of current performance and price rises to fund investment

Integrated Asset Management - What?

To achieve the optimum balance of performance, cost and risk.

Performance

Cost

Risk

Achieving the balance

The Asset Life Cycle

Capability Assessment & Identification of Need

Asset Creation

Operation & Maintenance

Performance Review/

Decommission

Asset Management Level 1 Process/Roles

1

Define AssetManagement

targets

2

Developasset/network

strategy

3

Managewhole-lifeasset plan

4

Deliver capitalprogramme

6

Operateassets

5

Maintainassets

SW strategic objectives(Owner, WIC, SEPA,Customer)

SEPAWIC Reqs.

Owner Reqs.

Strategy & Planning

KPIs andperformance

standards

High-levelwhole lifeasset plan

AssetData

Data Model & StandardsRegulatory requirements

Performance data [5] [6](operation, maintenance,

condition)

Strategy & Planning

ContractsSLAs

Make v Buy

Strategy & Planning

ContractsSpecs, standards, policies [8]

Programme and Procurement

Detailed Capital work plan

Specs, standards, policies [8]T&Cs of Employment

Contracts

Operations

Operations

Actual Performance/Progress [4][5] [6]

Work requiring re-prioritisation [2]Work carried forward (or incomplete) [2]Request to review asset plan [2]

Actual Performance/ Progress [1] [2] [3]

Actual Performance[1] [2] [3] [7]

Detailed maintenance plan

Fault/Reactive workRequirement for fault response

Fault/Reactive work

Work requiring re-prioritisation [3]Work carried forward (or incomplete) [3]Parked work [2]

Need for new/revised policy

Actual Performance[1] [2] [3] [7]

CommissionedAssets

Corporate PolicyWIC Reqs

Environmental ReqsCommercial Reqs..

Strategy & PlanningProgramme and Procurement

Operations

Contract management issues

Specs,standards,policies

Requirement to change policy based on actual feed-back

Actual Performance[4] [5] [6]

Feedback to Reg. & Strat.

Management InformationFeedback to Regulation & Strategy

Actual Performance [4] [5] [6]Request to review asset plan [3]

Parked work [2]

Specs, standards, policies [8]T&Cs of Employment

Contracts

Risk Exposure(business and asset)

As-built data [4]

Detailed operations plan

Agreed outputs

Area and functionalstrategies

Feedback to BMTfrom AM process

Financial and performancemodelling outputs

Data ModelSpecs, Standards, Policies

Budgets

Guidance onrisk exposure

Strategy & PlanningProgramme & ProcurementOperations

Strategy & Planning

7

Manage assetdata

8

Maintain AMstandards and

policies9

Manage AssetManagementcompetency

AssetManagementBusiness Plan

Correct numbers of people inAM team with correct skills

AM Organisationstructure, roles andresponsibilities

AM Transformation plans

SW HR PolicySW Strategic Business Plan

AM Business Plan

All

As-built data [7]

S&P: Build strategies & plans for our assets, to meet business &

stakeholder requirements (what have we got, how does it work, how does the

business need it to work)

CIT: Administer & Co-ordinate the capital programme, (involving defined outputs agreed by external stakeholders ie

SEPA) & manage the SW - SWS contract

Ops: Operate & maintain assets to get the best results to meet the business performance targets

SWS: Deliver the capital programme outputs to an agreed price, including: (options, design

& construction)

Scottish Water Solutions

60% 20% 20%

24.5%

51%

24.5%

25% 25% 25% 25%

UUGM Stirling Water

Operations & Maintenance Strategy &

Planning

Capital Investment

Team

Scottish Water Solutions

The Asset Team

Improved Performance

and Efficiency

Operations & Maintenance Strategy &

Planning

Capital Investment

Team

Scottish Water

Solutions

Improved Performance

and Efficiency

“we will support each other”

Involve people

Clear conversation Deliver promises

Challenge for benefit

“how we work together is just as important as

what we do”

The Asset Team

Scottish Waters Common Framework Approach

to Q&S3 Capital Maintenance

Planning

Integrated Asset Management - How?

Asset Stewardship to Serviceability

£m Condition GradePerformance 1 2 3 4 5

1 7561.1 907.4 572.6 1666.0 177.7

2 3613.7 496.4 301.4 814.3 87.8

3 762.1 111.4 107.0 177.2 20.5

4 575.3 112.6 62.2 337.5 27.5

5 456.9 88.4 77.7 303.0 56.7

• Collapses• Flooding• Pollution Incidents

Focus on Assets

Focus on Customers

• Assessment of an assets capability to deliver a predetermined LOS

• Demonstrate that investment is targeted at service to stakeholders

• Allow stakeholders to make informed decision on level of investment versus risk exposure/service levels

• Serviceability Indicators:

• Water Main Bursts

• Interruptions

• Low Pressure Properties

Wastewater Treatment Workshop Approach : Detailed Analysis

• Facilitated workshop

• Max 1/2 day per workshop (on site where possible).

• Attended by :

• Asset Planner

• Operational Staff

• Process Expert (where required)

Local knowledge of key issues / behaviour of Asset

Strategies / historical performance / investment

Specialist knowledge / Tech. Depth / Objectivity

Sept 03 - Jan 04

Asset Failure Mode FM Root Cause Consequences

Iron Mill Bay WWTW

Consent exceedance due to wash over of sludge from FST due to sludge blanket lifting due to failure of belt press 2

Failure of belt press and lack of bypass. Twice in last 6months, electrical faults. belt press 10 yrs old

Tankering of sludge for a week £400 per day plus disposal=£4k. Isolated upper tier. At 2014 alternative route every day

Iron Mill Bay WWTW

Consent exceedance due to solids coming over the weirs due to foaming due to ? 1

Unknown but persistent effect due to process and incoming effluent

Consent exceedance. Ops hosing foam 2 hrs a day=£12.5k p.a., constrained by washwater. Every 6 weeks empty tanks and remove foam 10 hrs plus tanker £500=£2k. Odour, no customer complaints

Iron Mill Bay WWTW

Volumetric compliance due to spilling early due to inlet pumps tripping due to ragging in heavy flows 3

Heavy flows + ragging. Happens four times a year

Vol compliance. Lift and repair pumps 2 E&M + 1 Ops plus crane £1.2k

Step 1•Assess impact of failure modes

List all possible ways in which the works can fail

Assign unique reference number to each failure mode

Understand and where possible quantify the underlying cause of failure

Identify the consequences of failure, including costs

Step 1• Identify Failure Modes• Assess Impact of Failure Modes

Common Framework Approach Part 1 - Detailed Risk Analysis

Common Framework Approach - Business Impact Scoring System (BISS)

PollutionCat 1: major incident with persistent effect or fish kill (>100) or closure of abstraction or significant effect on amenity value28Cat 2: significant incident with fish kill (<100), notification of abstraction, reduced amenity value 5Cat 3: minor incident with local contamination or marginal reduction in amenity value 1for recurring events add in suitable Reputation Cost

P.E. 2k 20k 75k

Consent Exceedance Small Med LargeLookup table works failure 52 122 211One sample from failure (high risk) 4 4 9Isolated upper tier failure 6 8 13Isolated lower tier failure (at risk) 0 0 0

Volumetric ComplianceConsent failure (volume), dry weather flow exceeds consent 48 87 114Consent failure (volume) one-off (including storm tanks & ps) 2 3 5

Odour & FliesEnforcement notice issued by Environmental Health/SEPAImprovement noticeComplaints leading to suspected failure against planning conditions or waste mgt conditions 46 82 118Persistent complaints with local pressure 22 34 62Customer complaints of odour & flies (about 5 complaints) 1 3 21Employee complaints of odour & flies (see Health & Safety if an issue)

Extract from BISS table showing sample scores

Score = £Cost/1,000

Step 2• Estimate probability of failure, at start and end of investment period• Quantify impacts against BISS

Fai

lure

Mo

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To

tal

Ris

k -

2006

Pro

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ilit

y -

2006

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llu

tio

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nt

Exc

eed

ance

Vo

lum

etri

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om

pli

ance

Od

ou

r &

Fli

es

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sati

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lud

ge

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Bat

hin

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Co

asta

l &

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ell

Are

a F

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& S

afet

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Rep

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n:

Pu

bli

c

Rep

uta

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n:

Po

liti

cal

Fin

anci

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Pro

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2014

To

tal

Ris

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2014

Ave

rag

e R

isk

2 72.0 6 8 4 52 624 348

1 38.9 0.2 122 0 72.5 0.2 38.9 38.9

3 16.8 4 3 1.2 4 16.8 16.8

6 6.1 0.05 122 0.75 91.5 48.8

7 2.5 1 2.5 1 2.5 2.5

4 2.0 4 0.5 12 6 4

5 1.1 1 1 0.1 1 1.1 1.1

13 0.0 8 4 52 624 312

8 0.0 3 240 0.9 218.7 109.35

14 0.0 0 200 1 200 100

Estimate probability of failure (events per year) at start of investment period

Risk at start of investment is product of probability and total BISS score

Similarly, estimate probability and risk at end of investment period

Average risk for the period is mean of start and end risks (average used because risk does not occur over the entire Investment Period).


Quantify impact of failure against each serviceability indicator using BISS

Step 4• Rank selected / preferred intervention options in order of risk index• Calculate cumulative cost and risk

Intervention Cap

ex £

k

Op

ex £

k

NP

C £

k

Ris

k In

dex

Ris

k R

edu

ctio

n

Ris

k -

Bef

ore

Ris

k -

Aft

er

Cu

mu

lati

ve C

ost

£k

Cu

mu

lati

ve R

isk

0 1035

Replace diffuser membranes 9.5 9.5 0.2 45.8 45.8 0 9.5 990

Replace washwater pumps 32.6 32.6 0.3 100.0 100.0 0 42.1 890

Replace detritors 30 30 0.6 51.3 51.3 0 72.1 838

Replace RAS/SAS pumps 208.9 208.9 0.7 312.0 312.0 0 281 526

Replace air blowers 4.9 4.9 0.9 5.8 5.8 0 285.9 521

Replace the belt press 519.8 519.8 1.5 348.0 348.0 0 805.7 173

Replace inlet pumps 235.2 235.2 1.9 126.2 126.2 0 1040.9 46

Install scuda unit 105.8 105.8 2.7 38.9 38.9 0 1146.7 8

Replace storm screen 64.6 64.6 32.3 2 2 0 1211.3 6Calculate cumulative cost and risk level


Estimate the cost of the intervention

Risk Index = Capital Cost/Risk Reduction.Rank interventions in order of Risk Index

“Risk Reduction” is average risk for the period. Assume all risk removed by intervention

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Cumulative Spend (£k)

Cu

mu

lati

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Ris

k

Cumulative Risk Vs Cumulative Spend

Least Risk Reduction per pound spent

MaxRisk Reduction

per pound spent

•Pursuit of several major change initiatives over a short time period:

•opex efficiencies

•capex efficiencies

•Performance

•Q&S2 delivery

•Q&S3 delivery in parallel

•Customer focus and commercial ethos

•Asset Information particularly dynamic/transactional

Key Issues

Questions?

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