Chapter 3 Asset Management Asset management infrastructure management

Chapter 3 Asset Management

Asset management = infrastructure management Infrastructure management = Capital management = Asset management The differences between these terms are only slight. The engineer might favor “infrastructure management, ” the budget officer “capital management, ” and the accountant “asset management. ” Information technology is now breaking down such differences in vocabulary by different professions 2

Asset management as a concept The term “asset management” offers a useful framework to organize management activities for capital assets. From the many uses of the term, it is easy to get confused about asset management, which has only recently been applied to infrastructure. In the past, asset management meant control of money and investments in the financial world, whereas currently, for infrastructure, it includes everything that is done, from cradle to grave, to derive the most value from a physical or fixed asset 3

Asset management as a concept Activities include the full life cycle of management: 1. 2. 3. 4. 5. Acquisition (purchase) Construction Maintenance Renewal Final disposal or replacement 4

Asset management as a concept Operations should be part of asset management. The way that the facility is operated affects its life-cycle value. In infrastructure management systems, however, the emphasis (weight) is on capital. Some operational applications are now being reported. The focus in asset management on finance occurs because the main obstacle to infrastructure integrity is having enough money to: • invest in it and • manage it 5

Asset management as a concept The application of asset management to infrastructure places the focus on return-on-investment. It does not introduce new tools as much as it organizes existing ones and links uses of information for different functions. Infrastructure assets have always been there, but the public nature of financial accounting for them has inhibited the use of the term “asset management” until recently. 6

Asset management Definitions of asset management For water, sewer, and stormwater systems, “assets” are physical components that are planned, organized, and controlled in the infrastructure life cycle. They are the “fixed assets” or “plants” of the systems. Treatment plants, dams, buildings, pipelines, and long-term equipment are common categories. Alternative definitions of asset management are offered, some clear and some confusing. For example, Harlow and Armstrong wrote that asset management is “a structured program to optimize the life-cycle value of your physical assets” and that for infrastructure, it “may 7 be known as infrastructure management. ”

Asset management Definitions of asset management Brown and Caldwell wrote that asset management “is a structured program to minimize the costs of asset ownership while maintaining required service levels and sustaining infrastructure. ” They went on to explain: • Minimizing costs of asset ownership means a life-cycle approach to managing infrastructure. • Maintaining required service levels increases reliability by giving close attention to asset condition. • Sustaining infrastructure refers to maintenance-oriented programs (short-term) and refurbishment and replacement programs (long-term). 8 4

Asset management Definitions of asset management CartéGraph Systems wrote: “Public works asset management is a combination of tools and procedures to enhance the inventory, management and maintenance responsibilities of a public works organization, ” and “public works asset management can most commonly be described as the daily practice of collecting, maintaining and analyzing this asset data. ” 9

Asset management Definitions of asset management Champion wrote that asset management has the goal to “meet a required level of service in the most costeffective way through the management of assets to provide for present and future customers. ” • A life-cycle approach • Cost-effective, long-term management strategies • A defined level of service and performance monitoring • Managing risk of asset failures • Sustainable use of physical resources • Continuous improvement in asset management practices 10

Asset management activities Asset management involves five main activities, as shown in Table 3. 1. Each activity would normally focus on a separate area, but the information used in it would be shared by other management areas. Each organization will be different, of course, but one way to organize these activities would be as shown on Figure 3. 1. 11

Asset management activities Asset management links different activities of organizations to minimize 12 costs of ownership, maintain service levels, and sustain infrastructure.