1 Whole Life Asset Management/ Project and Asset Management
2 What is an Asset Anything that has potential benefit/value to the organisation. The value will vary between different organizations and their stakeholders, and can be tangible or intangible, financial or non-financial Assets may take the following forms Human assets Financial assets Information assets Physical assets Intangible assets
3 Asset Value / Life CycleThe period from the creation of an asset to the end of its life is the asset life. An asset’s life does not necessarily coincide with the period over which any one organization holds responsibility for it An asset can provide potential or actual value to one or more organizations over its asset life, The value of the asset to an organization can change over its asset life.
4 AM Tradeoffs Asset management involves the balancing of costs, opportunities and risks against the desired performance of assets, to achieve the organizational objectives. The balancing might need to beconsidered over different timeframes.
5 Asset and Value Assets exist to provide value to the organization and its stakeholders. Asset management does not focus on the asset itself, but on the value that the asset can provide to the organization. The value (which can be tangible or intangible, financial or non-financial) will be determined by the organization and its stakeholders, in accordance with the organizational objectives.
6 A Definition “Systematic and co-ordinated activities and practices through which an organisation optimally and sustainably manages it assets and asset systems, their associated performance, risks and expenditures over the life cycle for the purpose of achieving its organisational strategic plan”. BSI PAS 55-1:2008.
7 Infrastructure CharacteristicsWealth Creation & Distribution Created, Managed and Renewed Through Time Degrade and become Obsolete Support Policy and services
8 Economic InfrastructureProcess Focussed Waste disposal Power Water Movement Air Sea Road Rail Internet /Broadband Communication Television Telephones Retail/Offices Industrial Education Health Space
9 Why the interest in Whole Life Performance?Capital Operation and Maintenance Business value and benefit Ratio: to to
10 PROJECT IMPLEMENTATION Engineering, Procurement, ConstructionLIFE CYCLE BASE Total Installed Cost DEFINITION CONCEPT DESIGN CONSTRUCTION COM PROJECT APPRAISAL PROJECT IMPLEMENTATION OPERATION OF THE ASSET Front End Engineering Design Engineering, Procurement, Construction OPERATE + - Project Account TIME PAYBACK PERIOD A B C A – INCREASED NET REVENUE C – REDUCED B – DELAYED COMPLETION
11 WLAM Philosophy Holistic – the entire picture has to be examined.Systematic – a methodical approach that promotes consistent, repeatable and auditable decisions and actions. Systemic – consideration of assets as part of a system of assets and seeking to optimise the assets systems value.. Risk based – focus resources and expenditures and setting priorities appropriate to the identified risks and associated cost/benefits. Optimal – establishing the best value compromise Sustainable – consideration should be given to the long term consequences of short term activities Integrated – recognising that interdependencies and combined effects are vital for success.
12 Asset Trade Off Short term expenditure v long term benefitsExpenditure v performance Planned v unplanned availability Capital costs v operating expenditure Risk v performance Asset utilisation v asset care
13 Corporate Strategy/CONTEXT Physical Asset Policy Physical Asset Plans Business Goals, Stakeholder requirements, Statutory requirements Physical Asset Policy Statutory requirements, optimised and sustainable framework for delivery of assets , measureable outcomes Physical Asset Plans Actions, responsibilities, timescales, resources, performance Implementation – Life cycle activity Capital Investment Maintenance Renew/ Disposal Single Assets Asset Systems Portfolio of asset
14 The Organisation ContextWhen establishing or reviewing its asset management system, an organization should take into account its internal and external contexts. The external context includes the social, cultural, political economic and physical environments, as well as regulatory, financial and other constraints. The internal context includes organizational culture and environment, as well as the mission, vision and values of the organization. Stakeholder inputs, concerns and expectations are also part of the context of the organization. The influences of stakeholders are key to setting rules for consistent decision making and also contribute to the setting of organizational objectives, which in turn, influence the design and scope of its asset management system.
15 INTEGRATED AM Goals/ Visions/ Values People Governance/ Processes/Asset/Infrastructure/ Technology People Governance/ Organisation Goals/ Visions/ Values Processes/ Procedures Culture
16 Asset Policy Asset PlansValues Process Governance People Technology Culture Business Context Asset Policy Asset Plans Asset Management Implementation
17 Delivering Strategy through physical assetsAsset Policy Delivering Strategy through physical assets
18 WLAM System There is a need for a top down connective thread to run through the AM system. There should be a “line of sight” from objectives – plans- monitoring –feedback “Bottom up” data is essential for realistic plans.
19 AM Policy (AMP) The asset management policy is a short statement that sets out the principles by which the organization intends to apply asset management to achieve its organizational objectives. Directly aligned to the organisation’s strategy. The key to AMP is to determine how the strategic plans will be achieved through management of physical assets.
20 AMP AMP provides a framework for asset management strategies and plans. AMP has to look at future needs of the organisation and align to physical assets ??? AMP should direct performance criteria. Adherence to applicable laws, legislation and regulations
21 AMP Integration Must encompass organisation values.AMP must align to existing risk frameworks Relate to existing organisation SHE and regulatory framework. (Water/Rail) Must align to existing QA, ICT and other organisation processes (Gate reviews) Communications strategy - stakeholders Review and audit procedures
22 Asset Management Plans
23 Asset Strategy Sets out how policy is to be achievedIt is a co-ordinating mechanism for achieving the asset management plans. High level support is required. Performance criteria need to be developed to measure future performance
24 Asset Strategy Mechanism to match portfolio of assets to service that is being delivered Provides the link between: Service Delivery Capital Investment Asset Maintenance Asset Disposal Needs Asset strategy time frame Short term implementation Action Plan < 1 year Medium term plan 3 to 5 years Long term - 5 to 10 years +
25 Review The following should be reviewed Stakeholder expectationPrevious AM strategy Existing AM plans Future organisation priorities Future demand for services
26 Review A more specific asset related reviewAsset related risks and asset registers Criticality of assets Capital investment criteria and option planning Maintenance and operating strategies Value for money studies.
27 Review Five characteristics that help in forming an asset strategy:Relationship between asset and service being provided Can the service be delivered with less dependency on assets Asset Utilisation Are assets fully used in providing the service Asset Location Are assets in the right location for effective delivery of services Asset Capacity Do the assets have sufficient capacity to deliver the service required Asset Functionality Are the assets suitable for the optimal delivery of the service required
28 Asset Costs Review Total asset costs derived from:Capital investment cost, including acquisition, renewal and adaptation Maintenance costs over the life of the asset Operating costs over the life of the asset, including staff costs Disposal costs
29 Check List Link to Asset Management PolicyIdentify Life Cycle requirements of assets Identify asset related risks Identify criticality of assets Establish asset performance criteria VFM and optimisation analysis Single , system or portfolio review of the assets Cost structure
30 Asset Management Detailed Plans
31 Detailed Planning Provides measurable targets from the Asset management strategy. Providing practical targets for the organisation. Optimisation in terms of Asset performance Condition Risk Cost
32 Asset Performance AreasService standards Levels of service Reliability Maintainability Functionality Survivability Capacity – outputs and quality Safety Environmental impact.
33 Considerations Targets not set in isolation.Asset interdependencies must be considered. Asset system performance should be considered Realistic Optimised Criticality Costs Baseline performance
34 AM Plans Translating the objectives into implementation plansSpecific tasks to required to optimise costs, risks and performance of assets. Individual, system and portfolio plans Establishing the designated authority and responsibility to implement such actions The resources for such actions
35 Trade Off risk cost performance value
36 Plans Creation, acquisition or renewal of assets (design, const, procure, commission) Utilisation of the asset. Maintenance of the asset Decommission / disposal of asset
37 Contingency Planning Contingency plans needed for unforecasted eventsContinuity of performance is needed Contingencies should look at Asset related risks Potential disruption to a critical asset Emergency responses Stakeholder responses BAA, BA winter 2010
38 Appropriateness Effectiveness Efficiency Goals/Visions/ Values Service delivery congruency Alignment of needs to service expectations Whole system approach Asset base Optimisation of high level decisions Intelligent output-specified objectives People Asset ownership and control Evaluation of non-asset alternatives Forward-thinking strategies Proactive investigation of non- asset and asset alternatives Formulation all asset registers and evaluation reports. Ongoing investment efficiencies Governance/ Organisation Resource allocation Balancing needs and desired options Avoid duplication of resources Partnerships with other companies Informed and Forecasted decision making Organisation development Processes/ Procedures Life cycle approach Regular monitoring Comprehensive reporting arrangements Establishment of benchmarks Integrated budgetary allocations Asset performance management Asset/Infrastructure/Techn ology User Satisfaction Quality asset infrastructure Equitable access Economic growth Transparency and Flexibility Continuous Improvement Culture Responsive portfolio of assets Demand management strategies Management capacity Published performance measures Global competitiveness Sustainable development
39 Impact Appropriateness Effectiveness (L5) Efficiency (Outcomes)Aligned Objectives Effective Governance and Leadership Integrate Risk Management Entire System Buy-in Intelligent use of Assets to Deliver Goals Competency Assurance Systemic Thinking Continuity of Performance Investment Efficiency Avoided Costs Increased Revenue Impact
40 Capital Investment
41 Capital Investment StrategyCapital investment planning is about using scarce resources effectively It is also about taking account of the consequences of capital investment in terms of: Long term maintenance and operational costs Physical construction of assets reduces flexibility in changes to service delivery requirements during the life of an asset Typical of what we would term ‘ projects’ They are delivery vehicles for capital investment
42 Capital Investment StrategyCapital investment is about planning for: New assets Improving or upgrading existing assets Capital investment also involves looking at options Purchase; Lease/rent Private sector involvement in public projects Non physical asset solutions
43 Capital Investment StrategyCapital investment planning is about structuring a process for selecting the best way of procuring an asset Requires: Knowing existing asset portfolio The services that are required to be delivered The asset strategy Capital investment planning time horizons Short term - annual budget cycle Medium term - three to five years Long term - 5 to 10 years +
44 Capital Investment CyclePre Brief Brief Feasibility - options, risk, value, sustainability Design Construction Commission and Handover Post project review Operation and use Maintenance and refurbishment
45 Asset Maintenance
46 Asset Maintenance StrategyMaintenance of assets impacted by: Ageing of asset base Growth and diversity in investment in assets Changing expectations about technology - renewal, refurbishment, maintenance & functionality
47 Asset Maintenance StrategyBenefits of maintenance planning Assets performing at optimum levels Risks can be anticipated of asset deterioration Quantification of costs of maintenance Permits asset performance reviews and permits Continuous Improvement regimes Reduces environmental impacts Maintenance costs related to service delivery Benchmarking Asset valuations updated
48 Asset Maintenance StrategyMaintenance strategy ties in with Asset Strategy and options for the future: Maintenance to meet ongoing service requirements of the asset Renewal and adaptation to suit changes in service needs Disposal when no longer required for service delivery or at the end of its economic life
49 Asset Maintenance StrategyMaintenance planning benefits Reliable and economic operation of assets Reductions to operating costs, eg energy, failure, repair and replacement Optimising maintenance permits alignment or realignment with service needs
50 Asset Maintenance StrategyMaintenance also addresses risks from owning an asset. Risks can include: Service delivery risk - interruption; service levels not achieved eg heating levels Cost risk - higher maintenance costs due to asset deterioration; possible litigation Social risks - health and safety; community disruption
51 Maintenance Planning ProcessDefine asset base to be reviewed and service level requirements Determine required asset performance Define maintenance resources Type of asset, consequence of breakdown or failure; availability of resources for maintenance (money, staff)
52 Maintenance Planning ProcessPossible strategies: Fix when fail - breakdown maintenance eg. vandalism Scheduled or routine maintenance - machinery requiring regular upkeep, eg lifts Condition based - major periodic maintenance - elements of building fabric Assess asset conditions and make recommendations Condition survey, sampling Ranking - statutory; health and safety; social; commercial
53 Maintenance Planning ProcessAssess maintenance costs Levels of detail Short term - annual budgets Medium term - major tasks, downtime Long term - replacement, disposal, modification Implement Maintenance Plan
54 Asset Disposal
55 Asset Disposal Disposal issues related to the role of the asset in service delivery Final stage in the asset life cycle Two aspects Assets that are surplus; No longer required for service delivery now or in the future Uneconomic to maintain or operate Not suitable for delivering the service
56 Asset Disposal Two aspects Does the asset have a market value DisposalBenefits of disposal Secondary service obligations necessitating retention Without negative impacts on physical environment Does the asset have a market value
57 Asset Disposal ProcessAssess from Asset Strategy those that are surplus to requirements Assess the advantages of disposal Identify any opportunities for increasing asset value prior to decision dispose Identify disposal requirements and any legal issues Prepare, implement and monitor Disposal Plan
58 Procurement ProcessesNew Asset Delivery Procurement Processes
59 PROCUREMENT MANAGEMENTProcurement Strategy A way of organising and managing the design and construction processes Contract Strategy A way of binding the contributing parties to the project together contractually Procurement and contract strategy are important strategically - they are not tactical decisions
60 Whole Life Management & Value Based Thinking* 07/16/96 Whole Life Management & Value Based Thinking CORPORATE STRATEGIC DIRECTION VALUE MANAGEMENT AND VALUE ENGINEERING STRATEGIC PROJECT MANAGEMENT PROCUREMENT, CONTRACT STRATEGY and IMPLEMENTATION Value and Strategic Fit ASSET MANAGEMENT LAND AND PROPERTY NEW FACILITIES OR REFURBISHMENT MANAGEMENT OF CHANGE ORGANISATIONAL TECHNOLOGICAL * ##
61 Cost, Time, Quality & Risk
62 PROCUREMENT SYSTEMS DESIGN TEAM CONTRACTOR MAINTENANCE & OPERATIONCONCEPT DESIGN CONSTRUCTION CONTRACTOR
63 MANAGEMENT CONTRACTING & CONSTRUCTION MANAGEMENTPROCUREMENT SYSTEMS CONSULTANT-LED PROJECT MANAGEMENT TRADITIONAL CONSULTANT-LED SEPARATE DESIGN & CONSTRUCTION CONTRACTOR-LED DESIGN & BUILD CONCEPT DESIGN CONSTRUCTION MAINTENANCE & OPERATION MANAGEMENT FORMS MANAGEMENT CONTRACTING & CONSTRUCTION MANAGEMENT CONTRACTOR-LED TUNRNKEY & ‘PACKAGE DEAL’ CONTRACTOR-LED FINANCE, DESIGN, BUILD, OPERATE & TRANSFER – FDBOT OR BOT CONTRACTOR-LED PRIME, DESIGN, BUILD, TEST FOR COMPLIANCE
64 Key Definitions for ‘Project’ ActivitiesDriven by Strategy Execution Planning Managed by PMO and Leadership Initiatives - Set of programmes and/or projects managed in a coordinated way and aimed at building core or differentiating business capability.1 Programme - Set of related projects managed in a coordinated way to achieve benefits or synergy that cannot be achieved by managing them individually. 1,2 Project - Temporary endeavour undertaken to deliver a unique product, service or result.2 Process - Series of actions which produce a change or development, adding value to input.4 Portfolio - Totality of an organisation’s investment in the changes required to achieve its strategic objectives.3 Capacity - Facilities, personnel, process and funding made available to meet the product or service needs of the customer. 5 Sources – (1) BSCOL, (2) PMI, (3) OGC, (4) Collins, (5) CAM-I
65 Programme overview incorporating capability assessment interventionsOGC Gateways Policy development Policy Deliverability – Sponsor Assessment Programme or Major Project Initiation OR transition Transition Delivery Environment Assessment Gateway 0 Gateway 1 Gateway 2 Gateways 3 to 4 Gateway 5 Delivery Environment Re-assessment Programme Development Business case Develop programme brief & strategic objectives using high quality dataset Consider approach to risk and procurement options Assess Client and Supply Chain Capability Requirements Establish strategy for early engagement with supply chain. Identify key risks and approach to compliancy Establish principles with regard to Asset Management Procurement Implement procurement strategy Establish programme governance structure Define approach to engagement with extended supply chain Define: Requirements Benefits Balance of risk and reward Incentivisation mechanisms Performance measurement Contracting framework Programmed procurement activities Engineering & construction Delivering the brief. Realising benefits Contract management and delivery phase Implement approaches to: Programme & project controls/processes Risk & Value Management Integrated engineering Production planning Logistics Monitoring and reporting Testing and commissioning Operational Readiness appraisal OR strategy implementation Implementation of Operational Readiness plan Commercial negotiation and closure Assessment and distribution of commercial risk and reward Handover to end user and building operator Post project review & lessons learned Investment planning Delivery stages Operational readiness Asset Management Phase Stakeholder Management OR plan established UNCLASSIFIED UNCLASSIFIED
66 Benefits Management Benefits Monitoring – check that delivery is taking place Measuring Benefits – whose benefits Benefits Realisation – measurement of benefits.
67 Asset Risk Management
68 ‘Decision Making Under Uncertainty’RISK – what is it? Making decisions in a situation where all the information is not available and a series of assumptions have to be made about the consequences of those decisions ‘Decision Making Under Uncertainty’
69 RISK Four main concepts associated with evaluating riskRisk event: a possible occurrence which could affect (positively or negatively) the achievement of the objectives of an investment as a project Likelihood: the chance (or probability) of the risk event occurring within a defined time period An important issue is the assumptions on which probability assessment is made Impact: the financial value of the effect of the risk event on one or more objectives if it occurs Expected value: the average impact of the risk event over a large number of similar projects (calculated as likelihood x impact)
70 RISK EVENT A risk event is a specific happening that can influence the success of an investment as a project Need to be identified Need to be evaluated Need to be mitigated Each risk event can be triggered by one or more causes and can result in one of several outcomes
71 RM Methodology (1) Identify sources - rank Quantify risksEliminate or avoid risks; transfer Generate a residual risk reduction profile
72 Risk Identification If not identified not included BrainstormingCheck Lists Case Histories Experts / Delphi
73 Probability-Impact GridProbability of Occurrence Low High Low Impact Trivial Expected High Risk Management Hazard
74 RISK EVENT CAUSE OF RISK RISK EVENT RISK OUTCOME PROBABILITYASSUMPTIONS FLOOD EARTHQUAKE
75 A Pragmatic Approach to RiskLIKLIHOOD High Medium Low IMPACT Monitor and manage Monitor Monitor It is recommended that you become familiar with determining risk events, assessing their likelihood of occurrence and their likely impact. A matrix above us useful for presenting risks graphically. Those risks in the High/High box need to be addressed as a matter of urgency. Those falling in the Medium to High boxes Monitor and manage Address urgently Monitor
76 Risk Registers Is a build-up of historic experienceCan be accessed to review alternatives Should also contain codes of practice and limitations Should identify differences in applications
77 Own transfer and mitigate riskRetain Share Transfer Mitigation Ownership Global Organisational Project
78 Types of Risk Business Risk/Whole Life - OngoingProject Risk - Temporary B U S I N E S S R I S K Project Risk
79 Vulnerability Vulnerability refers to the inability to withstand the effects of a hostile environment. A window of vulnerability (WoV) is a time frame within which defensive measures are diminished, compromised or lacking
80 Resilience Resilience is the ability of a system to withstand disruption and continue to function. It is related to durability and performance to expected standards over time. Disruption is defined as a significant, unexpected and/or unpredictable change, which has serious consequences for a system. It might involve: a random ‘delta’ event such as a flood, hurricane or terrorist attack; a slow, steady change in operating conditions such as global warming or demographic changes; or a combination of the two, such as increased frequency of storms caused by climate changes or an influx of refugees caused by conflict.
81 Critical InfrastructureCritical infrastructure is a term used by governments to describe assets that are essential for the functioning of a society and economy. Most commonly associated with the term are facilities for: electricity generation, transmission and distribution; gas production, transport and distribution; oil and oil products production, transport and distribution; telecommunication; water supply (drinking water, waste water/sewage, stemming of surface water (e.g. dikes and sluices)); agriculture, food production and distribution; heating (e.g. natural gas, fuel oil, district heating); public health (hospitals, ambulances); transportation systems (fuel supply, railway network, airports, harbours, inland shipping); financial services (banking, clearing); security services (police, military).
82
83 Criticality Scale Description CAT 5 This is infrastructure the loss of which would have a catastrophic impact on the UK. These assets will be of unique national importance whose loss would have national long-term effects and may impact across a number of sectors. Relatively few are expected to meet the Cat 5 criteria CAT 4 Infrastructure of the highest importance to the sectors should fall within this category. The impact of loss of these assets on essential services would be severe and may impact provision of essential services across the UK or to millions of citizens CAT 3 Infrastructure of substantial importance to the sectors and the delivery of essential services, the loss of which could affect a large geographic region or many hundreds of thousands of people CAT 2 Infrastructure whose loss would have a significant impact on the delivery of essential services leading to loss, or disruption, of service to tens of thousands of people or affecting whole counties or equivalents CAT 1 Infrastructure whose loss could cause moderate disruption to service delivery, most likely on a localised basis and affecting thousands of citizens CAT 0 Infrastructure the impact of the loss of which would be minor (on national scale).
84 Value Who owns the value.
85 VALUE? Customer focused Subjective Component ‘Soft’ EvidenceObjective Component – ‘Hard’ Evidence Teams and Individuals Making decisions and choices about cost and price Objective measures: Cost – resources used Market based exchanges - price Impacted by Perceptions, Attitudes Culture, Hierarchy Impacted by Industrial, Economic Social and Political Frameworks Operating At the core of the strategic management process is making choices about where to invest. This involves making ‘value-based’ judgements. It is the ‘customer’ that is the only one that can make value choices. However, there is often considerable difficulty in deciding who is the customer is complex organisations. It is the person that pays the money?, is it the end user?, or is it the project manager(s) that act as gatekeepers to more senior managers in the organisation who make the decisions on what and where to invest?. Value-based decisions also involve making choices about cost – the monetary value of resources used to deliver a project and price – the market exchange value offered by service providers that may be procured from the market place to help deliver the project. Also, value-based decisions involve perceptions about what is or is not good ‘ value-for-money’, for example, do I buy a £200 Cross fountain pen or a 50p Bic ball point pen. Their basic function is to make marks on paper but a Bic does not have the same prestige and status as a Cross fountain pen. Culture and where you sit in the organisational hierarchy will also affect how value-for-money is perceived.
86 Value This definition is dependent upon the:“ the intrinsic property of an object or service that has the capacity to satisfy” This definition is dependent upon the: perception of the customer or user complexity of the customer interface complexity of the customer organisation complexity of the interfacing project organisations Context and performance Source: Developed and adapted from BAA major projects research
87 Value Based Approaches and WLM* 07/16/96 Value Based Approaches and WLM Principle of value based approaches to developing WLM strategy is to ensure that it is defined correctly in the first place WHOSE VALUE IS IT? Stakeholders Company Shareholders * ##
88 Value Based Approaches and WLM* 07/16/96 Value Based Approaches and WLM Substantial savings can be made without compromising value Improving value-for-money at the appropriate cost; Cost addition Cost reduction Cost redistribution * ##
89 CORPORATE STRATEGIC DIRECTION* 07/16/96 Whole Life Management CORPORATE STRATEGIC DIRECTION STRATEGIC PROJECT MANAGEMENT Asset Creation and Renewal Value and Strategic Fit ASSET MANAGEMENT Facilities Management Property Maintenance Project Life Cycle Concept Design Construction Use MANAGEMENT OF CHANGE * ##
90 Concepts of Whole Life Costing
91 Defining Whole Life CostingISO Standard on service life planning defines WLC as “a tool to assist in assessing the cost performance of construction work, aimed at facilitating choices where there are alternative means of achieving the client’s objectives and where those alternatives differ, not only in their initial costs but also in their subsequent operational costs”. Edwards S., Bartlett E & Dickie I., (2000). BRE Digest 452, pp2
92 Whole Life Costing WLC includes systematically considering all relevant costs and revenues related to the acquisition, use, maintenance and disposal of an asset Procurement costs can include initial construction, purchase/lease, interest and fees Recurring costs can include rent, rates, cleaning, maintenance, repair, replacement/renewal, energy and utilities, dismantling or disposal, security and management Revenue can include sales of recycled materials, interest in asset and rental income
93 WLC - Concepts Different Time Periods Period of analysis for WLCExpected life of the asset, the system or the component Period for WLC analysis Economic life Expected physical life Period of analysis for WLC Not the same as expected physical life Defined as the expected period of use that the asset owner or user will require from the asset
94 WLC - Concepts Expected life of componentsWhat is the acceptable life? - depends on who is defining it! Expected service life is used in the WLC analysis Affected by the frequency of maintenance Defined as the time scale over which the asset and fabric can be maintained in an acceptable physical condition Minimum life: may come from manufacturing or testing agencies Design life: driven by specifications as a requirement Average life: time to 50% failure, usually a post hoc analysis. Judgement and available evidence are the clear issues
95 Life Cycle Costing Sum all significant costsInclude current as well as future costs Calculate the net benefit/cost for each year Calculate to arrive at Net Present Value Choose option with the lowest LCC PV = x FV FV = future value, cost or income i= rate of interest over time (usually per annum)
96 Internal Rate of ReturnIt is to calculate the i discount rate in the NPV calculation The IRR is calculated when the NPV of the project is zero It is known as the yield It represents the Life cycle rate of return on a project.
97 Cost Benefit Analysis Used on Projects without a pure financial outcome It attempts to quantify items without a financial value Examines all future costs and benefits Major issue is how do you place a value on something that has no basis for valuation Project approval if Benefits > Costs
98 ISO 55000 Asset Management Systems
99 Terminology Asset - something that has current or potential or actual value to an organization Asset Life - period from conception to end of life Responsibility period - period of value realisation from an asset by an organization Asset management - coordinated activities of an organization to realise value from assets
100 Asset Responsibility PeriodMaintenance folks use a lifecycle model of Acquire, Utilize, Maintain, Dispose. The responsibility of an organization for an asset may extend beyond the time it physically possesses or controls the asset.
101 Asset Management Asset management enables the realization of value from assets Value realization is achieved through the use of analytical approaches and implementation processes that have similar core characteristics, no matter what the industry
102 The Three Disciplines of Asset ManagementAsset Performance Management Operational Deriving value from the asset Asset Assurance Management Records and compliance Interface to internal and external stakeholders Asset Portfolio Management High level planning What do we have, and what should we have?
103 Asset Management PrinciplesAssets provide value to stakeholders. People are key determiners of asset value realization. An asset management organization is a learning organization. Asset management knows internal and external context, enablers, and opportunities. Asset management decisions consider future economic, environmental and social implications. Asset management transforms strategic intent into technical, economic and financial activities.
104 ISO Required Management System DefinitionAsset Management System Set of interrelated or interacting elements of an organization to establish policies and objectives, and processes to achieve those objectives All ISO Management System Standards use the same definition for “XXX management system”. (Those that don’t yet, will when revised.)