Water sector to benefit from physical asset management

November 26, 2012

The need to maximise return on investment and maintain high productivity is a constant pressure on investors, business operators and asset owners. Optimising the value of an asset portfolio is critical to maintaining performance, continuity and profitability.

Physical asset management companies can play an enormous role in assisting public sector water service providers with getting the proper systems and business processes in place in order to establish effective internal capability. Two such companies, Pragma and Aurecon, are currently partnering with government on significant asset management projects.

Says Nico Jobe Mabaso, Executive Manager – Business Development at Pragma: “Physical asset management is gaining traction at government level. The public sector is fully aware that it presents an opportunity to improve the maintenance of the ageing and degrading existing facilities. As a result, it is currently developing and implementing proactive policies to enhance asset management in the future.” Mabaso adds that addressing this situation is set to go a long way towards ensuring universal access to clean water.
Francois Joubert, Asset Management Service Leader at Aurecon, believes that it is critical to address infrastructure from a ‘cradle-to-grave’ perspective. “There is a huge need for whole-of-life management of infrastructure solutions and services that encompasses the full range of issues impacting clients’ businesses. Strategic asset management should provide clients with the expertise to manage their infrastructure portfolio from planning and construction right through to decommissioning.”
According to Mabaso, most of the asset management opportunities in this sector lie at local government level. “The first step to improving asset management practices is to conduct asset management assessments (i.e. status quo assessments of current asset management maturity). The results of these assessments will then provide a way forward, such as the development of an asset management strategy which includes the drawing up of an asset register, including remaining useful lifespan, asset value and various asset maintenance solutions. “This in turn will ensure that service delivery is improved by proper asset care and management, and will result in significant cost savings of up to 75% from reductions in the breakdown of assets,” he says. “We’ve proven without a shadow of a doubt that proper physical asset management is key to improved and sustainable service delivery.”

Tim Beavon, Partner Support Manager at Pragma, adds: “An additional opportunity that lies ahead for public sector water service providers is in the area of optimised asset management. In support of this, the Department of Water Affairs has introduced the Blue Drop and Green Drop certification process for municipal water and sanitation services in South Africa. This allows municipalities to be independently assessed and enables them to gauge the progress they have made with regard to their asset management programme.”

Beavon believes that the beauty of this focus on asset management is the ripple effects that good asset management will have on the entire municipality. He continues: “The obvious major benefit is asset register compliance. Given the ongoing focus by the Auditor General on the integrity and accuracy of the asset register, any business processes that support activities that validate the correctness of the asset register will add significant value to an organisation. Secondly, good asset management will ensure that the age and condition of the assets are known. This knowledge enables the effective prioritisation of assets for refurbishment or replacement and makes the capital replacement programming more effective. Thirdly, urban migration and the demand for improved delivery of basic services are placing pressure on municipalities to respond. Without a master plan and effective demand forecasting, the probability of successfully meeting these requirements is low.

“Effective asset management ensures a proactive focus on the future for anticipated demand and relies heavily on reliable current information regarding the availability and sustainability of the current assets. Another benefit of asset management is risk mitigation and process control. Effective process control depends on reliable equipment and if either of these parameters are not adequately managed, then the risks associated with the facilities rises exponentially. Both the process control and the equipment require regular systematic inspection and checks, and an asset management master plan ensures that this programme is adhered to, typically through the use of a Computerised Maintenance Management System (CMMS).

“Lastly, there is work order management. Physical asset management encourages the Plan-Do-Check-Act cycle. Through effective work order management, information is gathered regarding the failures in the systems. These can be reviewed against the planned work instructions to seek an understanding of how the failures could have been prevented and, in this way, the process can be optimised.”

Asset management may not be a silver bullet for every problem but an effective asset management environment will definitely drive better process stability, reduce risk exposure and promote more effective process control.

Both Pragma and Aurecon can attest to this fact, with recent asset management success stories at three different clients which are referred to as Water Utility One, -Two and -Three in this article.

Water Utility One

Water Utility One has a distribution network that includes over 3 056 kilometers of large diameter pipeline, feeding 58 strategically located service reservoirs.
Aurecon and Pragma conducted an Asset Management Maturity Assessment at Water Utility One during September and October 2012. The current maturity level was then compared to the desired maturity target, enabling a set of activities to be defined in support of improving asset performance towards the desired maturity.
Aurecon and Pragma used Pragma’s proprietary Asset Management Improvement Planning (AMIP) Framework of 17 Key Performance Areas as reference to define the maturity of the organisation. Pragma regularly reviews the AMIP framework to ensure alignment with the greater general world of asset management as described by the current globally recognised PAS 55 (BSI) specification, and the ISO 55000 that is being developed.
Aurecon and Pragma’s report lists priority areas to be considered for improvement. In addition, specific recommendations with regard to improvement actions and planning are presented in detail in the asset management strategy document.
“The purpose of the document was to report the outcome of the assessment and to detail current maturity levels so that Water Utility One could use this as the basis for the development of a future maturity model, supporting policy and strategy, and enabling action plans. Without this benchmark, it would be impossible to quantify the level of progress made by Water Utility One,” explains Joubert.

Water Utility Two

Water Utility Two, a commercial entity in Namibia that supplies water in bulk to industries, municipalities and the Directorate of Rural Water Supply in the Ministry of Agriculture, Water and Forestry, has appointed Pragma and Aurecon for a high priority project to be delivered over the 2012/2013 period.

Water Utility Two is the custodian and operator of infrastructure assets that span the country from the Gariep to the Kunene Rivers. Its asset technologies range from extensive borehole networks in the Kuiseb Delta, to canals across the northern flood plains from Calueque to Oshakati, to name a few. All are highly exposed to the harsh climate of Namibia.

Says Karl Nepgen, Partner Consultant of Pragma: “The ‘Development of Maintenance Management System for Water Utility Two’ project commenced earlier this year. The project will be managed in three phases: Phase 1, also referred to as ‘Setting the Scene’, has been completed. It entailed an assessment of Water Utility Two’s Water Supply asset management maturity, using the AMIP framework and methodologies, followed by the development of the asset management charter consisting of policy, strategy and a master plan.

“Phase 2 (Developing the Maintenance Management System (MMS)) will focus on detailed reviewing and improvement of asset care activities, standards and procedures, as well as the critical evaluation and specification of an appropriate computerised maintenance management system from an IT point of view. The final phase (Implementing the MMS) will then round off this groundwork, with the development of detailed plans, schedules and budgets for the 2013-14 financial year. The overall outcome of the project will ensure that Namibia obtains optimal return on their investment to keep bulk water flowing from source to client.”

What’s more, it will create a unified vision of the role physical asset management can play in the organisation, serving to marshal resources to improve at all relevant levels.

Water Utility Three

Water Utility Three provides a wide range of related water and sanitation services and operates in four provinces in South Africa.

Says Nico Jobe Mabaso: “Water Utility Three, like all state owned enterprises in South Africa, is required in terms of the Public Finance Management Act (PFMA) No. 1 of 1999 and the General Recognised Accounting Practices (GRAP) to value and assess their assets for impairment. Water Utility Three therefore required a central standardised asset register that has been componentised in accordance with the requirements of the PFMA and GRAP17. Each of the components must have their Remaining Useful Life determined as well as a Residual Value.”

Pragma was required to compile the asset register in accordance with these specifications, to provide a condition assessment on the assets/components (i.e. check for indicators of impairment) and to determine the estimated new replacement cost of the Water Utility Three asset portfolio.

Pragma proposed its Asset Care Centre (ACC) Service as the vehicle to provide Water Utility Three with the asset management information and activities that are necessary to address the above mentioned requirements. The ACC Service comprises a set of asset management business processes, which are supported by the On Key Enterprise Asset Management System.

“Pragma assisted Water Utility Three in determining the value of their asset portfolio and reflecting any indicators of impairment that needed attention. At the conclusion of the project, Water Utility Three received an Asset Register that is componentised, accurate and effective for their long-term asset management needs. This register was also compliant with the PFMA and GRAP 17 regulatory requirements,” Mabaso concludes.

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