Launch Slideshow

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Keeping costs manageable

Keeping costs manageable

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    This shows the trenchless rehabilitation of sewers. One benefit of asset management is reducing spending on assets that are obsolete or beyond repair. Photos: UMA Engineering Ltd.

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    Bill 175 requires municipalities to develop the full cost of providing a service and then develop a financial plan to recover the cost.

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    Sustainable asset management frameworkUMA Engineering asked a series of questions and provides a series of activities that give answers. There is a specific relationship between these questions, the activities, and the requirements of Bill 175. Source: UMA Engineering Ltd.

Money Considerations

On the cost side, the asset management initiative allowed staff a better understanding of how much and what kind of contract work the municipality was generating. Hamilton used that knowledge to develop long-term performance-based contracts for rehabilitation that are up to 25% less than standard market rates, and, in many cases, more than 50% less than replacement costs.

Still, asset management can be a difficult transition to make from traditional management practices. As a result, corporate change management becomes a critical part of the process.

“Five years into our program, we're still encountering some resistance to the change,” said Bainbridge. “The difficulty is that asset management moves public works away from a perspective that is engineering oriented to one that includes engineering along with economics, risk management, and life-cycle management. When push comes to shove, our asset management group are life-cycle managers and we try to talk asset management as a language of its own.”

The traditional mindset views capital budget and programs over the short term (15 to 20 years), whereas the asset management approach considers the full life expectancy of the asset, which can be 75 to 100 years when viewing the capital budgets and programs. “This approach allows elected officials to make informed long-term decisions in the best interest of the current and future constituents,” said Bainbridge.

When the asset management group discovered that the municipality would have to double its revenues in approximately eight years to obtain a sustainable waterworks program, they instituted an education program to help the public understand the issues. The program emphasized public information sessions with a high staff-to-public ratio.

“After the campaign, we took the program to council, demonstrated that the public had bought in, told them of the improvements—that a sustainable asset management program would create significant benefits—and advised them of the alternatives, allowing them to make an informed decision,” said Bainbridge. “In the five years since, council has progressively endorsed water and sewer rate increases anywhere from 8% to 12% [each year].”

Hamilton developed a reputation across Canada and the United States as a leading municipality in the field of asset management. When Bill 175 came into force, the city was well prepared.

In December 2004, Hamilton hired UM A Engineering through its Mississauga, Ontario, office to produce a life-cycle state of the infrastructure report on public work assets for the city. The objective was to report on the status of specific assets and to project the state of these assets in 2020 and 2050, on the assumption that existing service levels would be maintained. Subsequent reports would function as a yardstick to gauge progressive improvement to the management of the city's infrastructure. The report embraced the following asset groups: water, wastewater, stormwater, waste management, roads, building, right of way, transit, and fleets. UMA expanded the sustainable principles and practices already implemented by the asset management team to other assets supported by levy revenues.

The report forms the basis of a strategic funding plan, with tactical and operational implementation plans to follow. A sustainable asset management plan needs all three components.

Strategic plans focus on levels of service, define funding requirements for sustainability, and have a 25- to 100-year horizon to properly assess the optimum life-cycle activities. Tactical plans, with a 10- to 25-year horizon, focus on broad programs to match the funding requirements of the strategic plan. Operational plans comprise detailed action plans for the upcoming year and are used to manage the daily operation of facilities and implementation of capital works.

Although cities like Peterborough and Belleville, Ontario, have taken a proactive approach to asset management, so are western Canadian cities like Winnipeg, Saskatoon, and Edmonton, where no compelling legislation exists. “We're engaged in sustainable asset management because it allows us to establish and build reserves to accommodate future requirements,” said Bob Horton, manager of utilities in Strathcona County, Alberta, east of Edmonton.

Recognizing that assets have to last forever is a significant mind shift for municipalities. Asset managers can help by applying economics and engineering expertise to sustainable asset management programs.

Querengesser is director of sustainable asset management with UMA Engineering, Vancouver, British Columbia.