A To Z Asset Management PDF

Asset management: "A" to "Z"
Vanier, D.J.
NRCC-45163
A version of this paper is published in / Une version de ce document se trouve dans:

NRCC/CPWA/IPWEA Seminar Series "Innovations in Urban Infrastructure",
Philadelphia, PA., Sept. 9-12, 2001, pp. 1-16
www.nrc.ca/irc/ircpubs
APWA International Public Works Congress, Philadelphia, Sep. 2001
NRCC/CPWA/IPWEA Seminar Series Innovations in Urban Infrastructure
ASSET MANAGEMENT: "A" TO "Z"
by
D.J. VANIER1
Institute for Research in Construction, National Research Council Canada
1200 Montreal Road, Ottawa, CANADA K1A 0R6
Abstract
Today, there exists an estimated $33 trillion worth of constructed assets in North America, with 20
percent of that asset base invested in municipal infrastructure. In North America and Australia, there are
hundreds of billions of dollars in backlogged maintenance, and a large portion of the asset base must be
considered for capital renewal in the near future. This paper and the remainder of the papers in this
Asset Management session take an in-depth look, on a discipline-by-discipline basis, at how to reach
strategic solutions to managing, maintaining and renewing this vital infrastructure. In the associated six
papers, the domain experts will concentrate on the overall goals of strategic asset management and its
application to water and waste water systems, bridge projects and networks, building maintenance, and
roadway infrastructure. This panel of international speakers address the six essential areas of asset
management in their domain of interest: 1) asset inventory techniques, 2) asset valuation methods, 3)
deferred maintenance classification, 4) condition assessment surveys, 5) service life prediction models,
and 6) maintenance planning strategies.
The goal of my paper is to introduce the reader to the topic of strategic asset management, to provide a
vocabulary of terms used in the domain, to provide a background for the need for asset management, to
describe a sequential process for the proper implementation of an asset management system, and to
describe an innovative project related to municipal infrastructure investment planning.
Keywords: Asset management, municipal infrastructure, investment planning, maintenance planning
This paper and others are from the Asset Management Super-sized Session held at the APWA
Annual Congress and Exposition in Philadelphia, September 2001. Electronic copies are located
at www.nrc.ca/irc/uir/apwa
1
Dr. Dana Vanier is a Senior Research Officer at the National Research Council Canada. He is
currently investigating the use of Information Technologies in the field of service life asset
management. He is an editor of ITCON, the Electronic Journal of Information Technology in
Construction (www.itcon.org) and a member of the CIB W78 working commission on IT in
construction. He can be reached at dana.vanier@nrc.ca or at (613) 993-9699.
1
1. Introduction
Managers of mixed urban infrastructure assets such as federal departments, state or provincial
governments, municipalities, universities and school boards have to manage a diversified set of built
assets, ranging from complex underground networks (e.g. water distribution, sewers) to buildings. This
also includes the roadway systems, parks and any other equipment necessary to maintain all these
infrastructures. These built assets, however, are not protected from deterioration due to ageing, climate,
geological conditions, and changes in use. Furthermore, and in particular, because of a lack of adequate
funding and appropriate support technologies, certain components of the urban infrastructure have been
neglected and receive only remedial treatments (Edmonton 1998; Winnipeg 1998; Burns et al 1999).
Consequently, these built assets will not last their originally predicted service life (HAPM 1995): unless
of course there are major premature maintenance and rehabilitation investments.
1.1 Definitions
Many different terms are used in the industry to explain the same concept, and some terms are
used interchangeably. To eliminate any confusion or misinterpretation of "jargon", the following terms are
used in this paper to describe concepts related to strategic asset management. A full definition of asset
management is provided in Section 3.
Asset managers and property managers are those responsible for managing the maintenance,
repair and renewal work. It is their collective responsibility to maximize the effect of expenditures as
well as to maximize the value of their assets over the assets service life. The asset manager, by
definition in this paper, is responsible for major maintenance, repair and renewal decisions, as well as
the long-term strategic plans for a corporate asset portfolio. The property manager or facility
manager primarily deal with day-to-day accommodation issues and the implementation of the strategic
plan. Typically, the property or facility manager's activities occur in the operational (under two
years) or tactical planning horizons (two to five years); whereas the asset manager's responsibilities
are in the strategic planning horizon (beyond five years). All these managers work co-operatively to
ensure that any asset, or component thereof, can attain its predetermined service life.
Service life is defined as the actual period of time during which [the asset] or any of its
components performs without unforeseen costs of disruption for maintenance and repair (CSA 1995).
The term unforeseen is a key word in the definition: all components and materials require planned
maintenance and they must be maintained to ensure that the service life is reached. Not all systems or
components are replaced at the end of their technical service life (i.e., when they fail to meet their
functional requirements), sometimes they are replaced when they reach their economic service life
(that is, when it is less expensive to replace than to maintain the asset). Durability has ambiguous
meaning in technical circles; its use is discouraged as durability has so many different meanings to so
many different people.
The term maintenance is normally used to cover a broad range of planned or unplanned
activities for preserving an asset in its original condition. Maintenance generally consists of:
(1) inspections are carried out periodically to monitor and record how systems are performing;
(2) preventive maintenance ensures that systems or components continue to perform their intended
functions throughout their service life (e.g. obstructions are removed and depleted protection fluids are
replenished); (3) repairs are required when defects occur and unplanned intervention is required, and
2
(4) rehabilitation replaces one major component of a system when the system is reaching the end of its
service life of the system. Capital renewal is considered outside of the maintenance definition as a
renewal replaces a system at the end of service life or because of technical, economic, obsolescence,
modernization or compatibility issues.
Condition assessment surveys (CAS) are inspections used to assess the performance of a
system, subsystem or components; this term can be used synonymously with technical audit. In many
systems, the CAS provides a facility condition index related to the cost of required repairs
(NACUBO, 1990) or a technical condition index related to the technical performance of the asset
(Bailey et al, 1989). Deferred maintenance constitutes work that has been postponed or phased for
future action. It represents the cost of maintenance (and not capital renewal) to bring the asset to its
original potential. This term is synonymous with maintenance backlog.
Six terms are used currently in asset management to describe the value of an asset. The historical
value is the original book value of the asset. The appreciated historical value of an asset is the
historical value calculated in current dollars, taking into account annual inflation or deflation. The
capital replacement value is the cost of replacing an asset in current dollars. The performance-in-
use value is the prescribed value of the actual asset for the user (Lemer, 1998). The deprival cost is
the cost that would be incurred by an entity if it were deprived of an asset and was required to
continue delivering programs/services using the asset. The value is measured by the replacement cost
of the benefits currently embodied in the asset. Deprival value may also represent an opportunity value
i.e. the cost avoided as a result of having control of an asset (ANAO, 1996, p. 68). This term is used
predominantly in Australia. The market value is the value of the property if it were sold on the open
market. In many instances, the market value cannot be used for municipal infrastructure; however, it is
applicable to many types of assets such as buildings or unoccupied land.
2. Background
Asset and property managers are faced with many difficult decisions regarding when and how to
inspect, maintain, repair or renew their existing facilities in a cost-effective manner. In addition, managers
have few tools, either literature or intelligent computer software, to assist them in the decision-making
process. Many of the major property owners in North America recognize these service life and asset
management problems. Most have corrective measures for isolated problems, but none has an
integrated, comprehensive solution to address the needs for maintaining their assets efficiently and
effectively over their service life (Vanier 2000; Vanier 2001). In addition, there are Information
Technology (IT) solutions claiming to address the full needs of municipalities; however, these are
proving to be only isolated solutions to specific market niches.
2.1 Annual Asset Growth in Canada and USA

Figure 1 shows the annual growth of newly constructed assets in North America since 1960;
many North American organizations have seen their asset base grow in a similar fashion.
3
$800
(a) USA US$
$700
$600
$500
$billion
$400
$300
$200
$100 (b) Canada
(c) Canada US$
CDN$
$0
1960 1965 1970 1975 1980 1985 1990 1995 2000
Figure 1: Annual Construction Growth (Canadian and USA) in Constant Dollars.
2.2 Total Assets in Canada and USA

The total infrastructure asset for Canada and the USA are presented and can be compared in
Constant US$ in Figure 2. The numbers for total assets in the USA are to the order of US$30 trillion
whereas the Canadian numbers are closer US$5 trillion. Figures 1 and 2 also illustrate that Canada
experienced considerable growth in the 70s to 90s and that growth is now tapering off; whereas
growth is continuing in the USA.
$60 $6
$50 $5
$40 $4
$trillion
$30 $3
$20 $2
$10 $1
$0 $0
1960 1965 1970 1975 1980 1985 1990 1995 2000 1960 1965 1970 1975 1980 1985 1990 1995 2000
(a) (b)
Figure 2: Total accumulated built assets in (a) United States of America and (b) Canada
In fact, if 2% of the capital replacement value of current assets in Canada were expended in
maintenance as suggested by leading authorities in this domain (CERF, 1996; NRC, 1996), and if all
assets in Canada were renewed at the end of their service life, then approximately $196.5 billion would
be required each year to maintain and replace Canadas estimated $5.5 trillion current built assets
(Vanier, 2001). Similar numbers can be developed for the current assets in the USA. Indeed, these
numbers are an order of magnitude more than is currently expended in Canada and the USA.
4
3. What is Asset Management?
A number of organizations provide definitions for asset management. A good definition for asset
management is (FHWA, 1999):
Asset management is a business process and a decision-making framework that

covers an extended time horizon, draws from economics as well as engineering, and
considers a broad range of assets. The asset management approach incorporates
the economic assessment of trade-offs among alternative investment options and
uses this information to help make cost-effective investment decisions.
In an attempt to classify and to describe examples of decision-support tools for asset

management, the author presents his six Whats of asset management. Asset management can
therefore be described as the successful implementation of data collection related to the following six
questions:
What do you own?
What is it worth?
What is the deferred maintenance?
What is its condition?
What is the remaining service life?
What do you fix first?
Anecdotal information from typical organizations maintaining municipal infrastructure indicate that
they fare well with the first two questions, but have not implemented the remaining four. Discussions with
asset management professionals indicate that there is also a scattering of responses depending on the
discipline (i.e. roadways, bridges, parks, buried utilities, buildings).
In the following subsections, the author describes the six levels for asset management
implementation. The author also suggests that practitioners can use this six-level classification as a
sequential roadmap for implementing an asset management plan. As the reader will see in Section 3.7, it
is important to realize that some domains or regions in a portfolio will have considerably more data, and
more accurate data, than other domains or regions.
3.1 What do you own?

The first question to be answered relates to the physical area of responsibility of an organization.
Administrative change such as restructuring, amalgamation or downsizing makes it difficult to document
the full extent of an organization's portfolio. For example, when 14 municipalities are amalgamated to
form a super city, how does the new super city accumulate, merge and cross-reference all the
"amalgamated" data (paper-based, differing databases, spreadsheets) into one comprehensive system.
And how long will that take to harmonize? An example of downsizing is where a higher level
government assigns both authority and responsibility of an asset to a lower level government, but does
not provide sufficient funding for that asset, or does not it supply adequate historical data about
maintenance, repair and renewal.
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Tools Available: Geographical information systems (GIS), CAD systems and relational database
management systems provide accurate pictures of the extent of an asset management portfolio. One
such tool that is typically used to record what assets are owned is a computerized maintenance
management system (CMMS). There is a large selection of fully commercialized CMMSs available;
many of these are relational database applications that can be adapted to meet the data handling needs
of asset managers. A quick search on the Internet (e.g. http://www.altavista.digital.com,
http://www.excite.com) using computerized maintenance management system or cmms produces
thousands of sites dedicated to this topic. Detailed information on over 300 CMMS packages can be
obtained from the Plant Maintenance Resource Center (PM 2000). It is obvious from this information
that the CMMS domain, at this time, is mature, and that many stable, comprehensive, useful tools exist.
For example, any number of CMMS applications can manage work orders, trouble calls, equipment
cribs, stores inventories and preventive maintenance schedules, and many programs include features
such as time recording, inventory control and invoicing. The CMMSs capability to store inventory data
is formidable; however, their capacity with respect to life cycle economics, service life prediction and
risk analysis is considerably less sophisticated.
3.2 What is it worth?

Once an organization identifies the extent of its portfolio, the next question to be answered is
"what is the asset value?. Unfortunately, it is not a simple matter of providing numbers for each asset,
as assets may consist of many components with their own individual values, they may have historical
values on record, or they may be approximations based on unit areas or volumes.
In fact, six different terms to describe the value of an asset were described in Section 1.1.:
historical value, appreciated historical value, current replacement value (CRV), performance in use
value, deprival cost, and market value. One can take the simple view of the value of an asset as one
data field on the asset record; however, the calculation and the recording of the value are neither simple
nor straightforward. In addition, these numbers may be difficult to find in the proliferation of electronic
records and the variety of manual systems found in most offices. Typically, large organizations store only
the historical values of assets, and bring this value forward to current dollars using well-known building
economic principles (ASTM E917 1994), or calculate the replacement cost based on the area, volume
or length of a system or component (www.rsmeans.com).
However, many do not store the value of that asset, but only the cost of installation or
replacement. Asset managers require both value and cost to make educated decisions about
maintenance and renewal. For example, in the case of a simple re-paving project the asset manager may
wish to know the original cost, the past maintenance costs, as well as the life cycle costs of a specific
type of system. The last value could be used to compare this option against a proposed configuration
that is more expensive but could have a longer service life, lower maintenance costs and higher
reliability.
Tools Available: Life cycle costing (LCC) is based on well-known standards in the domain
(ASTM E917, 1994). A number of off-the-shelf commercial tools such as Building Life-Cycle Cost
program (BLCC 1995) have been developed to implement these ASTM standards.
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3.3 What is the deferred maintenance?

The deferred maintenance cannot be treated simply a sum of past annual maintenance deficits; it
must include the compounding effect of deferring maintenance from one year to the next. This
compounding effect is similar to the interest on a debt: if the maintenance is not completed in year one,
then the costs of maintenance, repair or replacement are significantly higher in subsequent years, as
shown in Figure 3. De Sitters Law of Fives (De Sitter 1984) approximates this effect: if maintenance
is not performed, then repairs equaling five times the maintenance costs are required. In turn, if the
repairs are not effected, then renewal expenses can reach five times the repair costs. Therefore,
postponing the maintenance compounds the amount of deferred maintenance.
(a) $ 0 maintenance per year
Deferred Maintenance ($)
Deferred Maintenance ($)

(a) Total for all assets types
(a) (b) $ 1 M per year
(b) Asset type i (a)
(c) $ 2 M per year
(c) Asset type ii
(d) $ 3 M per year
(d) Asset type iii (b)
(b)
(c)
(c)
(d)
(d)
Year Year
Figure 3: Growing deferred maintenance Figure 4: Deferred maintenance reduction
Spending on maintenance and repair as shown in Figure. 4 can reduce this deferred maintenance.
Figure 4 schematically illustrates the reduction of the deferred maintenance with various levels of
maintenance funding. The asset manager should keep in mind that maintenance and repair funding should
be applied first to those assets of the type in curve (b) of Figure 3, i.e. those with the highest
compounding curves.
NACUBO uses the term facility condition index or FCI to provide comparisons for the amount
of deferred maintenance between different facilities or systems. The FCI is the amount of deferred
maintenance divided by the current replacement value (CRV). NACUBO studies (1990) indicate those
facilities with FCIs higher than 0.15 are problematic.
The NACUBO Model can be easily implemented in a spreadsheet or database. The FCI
provides a general impression of the overall state of the individual facilities (NACUBO 1990), as shown
in and example in Table 1. A higher FCI indicates a worsening relative state of the facility. More
granular data on specific disciplines can also be displayed if available, as in the example for Building X-2
in Table 1. This example illustrates some of the challenges at this level for asset management: (1) a
number of engineering and financial applications are required to produce the data required to prioritize
work, and (2) valid data is required to respond to the first two asset management questions. The
corollary is that data are required across all domains and for all regions of the portfolio, a difficult task.
This issue is discussed in Section 3.7 of the paper.
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Tools Available: Typically, the data required to calculate the FCI are stored in the CMMS
system. However, they may also exist in a number of different CMMS systems in the same
organization.
Another technique gaining in popularity for this type of work is "data warehousing". Traditionally,
a relational database such as a CMMS only maintains the most current information in its records;
however, very often in asset management there is a need to save intermittent snapshots of the state of
the assets. These snapshots could be in the form of data dumps from the CMMS database; for
example, saving data about the repair dates, repair scope, labour costs, contract specifications and
drawings. These data could be warehoused and mined in future years to extract trends of past years on
issues such as deferred maintenance and recurring maintenance.
Table 1: Deferred Maintenance
Facility Replacement Deferred Facility Condition
Value Maintenance Index (FCI)
Building X-2 $ 6,967,000 $ 640,509 9.19%
Architectural $ 2,345,000 $ 216,011 9.21%
Mechanical $ 1,267,000 $ 30,241 2.39%
Structural $ 2,134,000 $ 242,234 11.35%
Electrical $ 1,221,000 $ 152,023 12.45%
Asset X-3 $ 1,241,000 $ 67,315 5.42%
Asset X-20 $ 10,031,000 $ 326,239 3.25%
Asset X-24 $ 23,359,000 $ 239,391 1.02%
Asset X-50 $ 6,451,000 $ 956,000 14.82%
3.4 What is its condition?

Once the extent and the value of an asset has been determined and a ballpark financial condition
has been obtained using the FCI, then decision-making can take place on an objective, rather than
subjective, level. However with the FCI, the decision-maker is prioritizing maintenance based on
"worst" overall condition. That is, a small repair ($150) on an inexpensive asset ($1000) will yield a high
FCI (15%) and a high priority for funding. Whereas, a large repair ($15K) on an expensive asset
($1M) will have a considerably lower FCI (1.5%) and virtually no chance of funding. But in the absence
of any other objective system it is far superior to "fixing the squeaky wheel". The next step to a
comprehensive, and objective, asset management system developing and implementing a technical
condition assessment system (CAS).
Tools Available: Engineered Management Systems (EMS), as implemented by the US Army Corps of
Engineers, can be used to document the physical condition of many types of asset (Bailey et al 1989;
Shahin 1992). The US Army Construction Engineering Research Laboratory (CERL) has pioneered the
use of engineered management systems in many construction sectors, such as paving, roofing and rail
maintenance (http://www.cecer.army.mil/facts/sheets/fl08.html). Engineered management systems
(EMS) assign a condition index (CI) to an asset based on a number of factors including the number of
defects, physical condition and quality of materials or workmanship. The EMS software embodies the
results of research studies that estimate the potential degradation of the CI with respect to the loads on
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the system or external agents acting on materials. With all of these data at hand, it is possible to estimate
the future CI, given the current state and a likely degradation curve. A number of systems exist for
municipal infrastructure including PAVER (Shahin 1992), ROOFER (Bailey et al 1989), and BUILDER
(Uzarski and Burley, 1996).
A condition assessment survey (CAS) takes many forms and is another decision-support tool
used to establish an asset's condition. A CAS produces a benchmark for comparison, not only between
different assets, but also for the same asset at different times. Using CAS, a maintenance manager can
formalize the assembly of basic planning elements such as deficiency-based repair, replacement costs,
projected remaining life and planned future use (Coullahan and Siegfried 1996). A CAS records the
deficiencies of a system or component, the extent of the defect, as well as the urgency of the repair
work. In some cases, the estimated cost of repair is also provided. Management, as a result of the data
generated by CAS, is better able to develop optimal plans for maintenance and repair of their buildings
(Coullahan and Siegfried 1996). Many CMMS's claim to have condition assessment capability, but
typically this means a field to record the condition state (i.e. failed, fair, good, excellent or a number
from 1 to 10). The shortcomings inherent in this rating system include the biases introduced by different
inspectors and the lack of cross-relationships between discipline domains. However, in the absence of a
methodical, repeatable and objective system, this recording tool is a step in the right direction.
3.5 What is the remaining service life?

After the extent of an portfolio is established, along with its value and technical condition
determined, the asset manager must be able to establish the remaining service life of the assets in order
to calculate the life cycle costs for alternative maintenance, repair and renewal strategies. Two types of
service life can be calculated: technical service life and economic service life.
Tools Available: The remaining technical service life can be calculated employing techniques
such as Markov chain modeling (Lounis et al 1998), the factorial method, case-based reasoning or
CBR, or from life expectancy tables (HAPM 1995). These techniques predict remaining service life
based on studies of similar construction forms under test and/or field conditions. Unfortunately these
techniques require the collection of considerable amounts of data; so only a few domains such as bridge
(Frangopol et al 1997), pavement (Shahin 1992) and roofing (Bailey et al 1989; Lounis et al 1998)
management have reliable service life prediction techniques. Currently, there are few information
technology tools that implement these types of service life prediction.
Calculating the economic life is different from the technical life and requires a different set of
formulae. Databases such as those from R.S. Means (www.rsmeans.com) or Whitestone Research
(www.whitestoneresearch.com) are used to calculate the immediate costs of repairs and to compare
these numbers to the costs of renewal. The life cycle costs (LCC) of these expenditures can be
calculated using standard formulae for building economics (ASTM E917 1994) as shown in
Equations (1) and (2).
N
PVLCC= Ct
t
Equation (1)
t=0 (1+i)
Where PVLCC = present value (PV) of life cycle costs
Ct = sum of all relevant costs, occurring in year t
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N = length of study
i = the discount rate
Ct =IC+PVM+PVR+PVF-PVS Equation (2)
IC = initial cost
PVM = PV of maintenance and repair cost
PVR = PV of replacement cost
PVO = PV of operations cost
PVS = PV of resale value
Obtaining the correct data for Equations (1) and (2) is not an easy task; not only is it difficult to
obtain all of the costs for future years on projected operations, maintenance, repair and resale, but it is
very difficult to obtain projections on the discount rate to be used. In addition, the user must have first
obtained an approximation of the technical service life, as described earlier. However, if all these data
are obtained, the optimum economic service life can be easily visualized (Kleiner, 2001).
3.6 What do you fix first?

Finding the answers to the first five "what's" of asset management clearly illustrates the problem
with answering the last question: "What do you fix first?" Even if a portfolio manager has embraced asset
management and its philosophy, it may be decades before the asset management plan is fully
implemented and "ticking away smoothly". In the meanwhile, the portfolio manager will have to make
decisions today as to what to fix tomorrow. For example, if the manager has finally inventoried all the
assets in the portfolio (Q1 --"What do you own?"), then decisions will be based on these objective data
and any number of subjective data including: "it's in bad condition", "it's a priority", "it's a hazard", and
"it's slated for renewal". However, if Q2 ("What is it worth?") has been addressed portfolio-wide then
attention can be focused on the relative value of the assets under consideration for maintenance or
renewal. Following this train of thought, if Q3 ("What is the deferred maintenance?") is addressed then
the decisions for maintenance and renewal can be based on objective data about the amount of
outstanding work. By the time the portfolio manager is reaching the "lofty heights" of Q4 ("What is the
condition?"), then decisions can be made on objective data related to the actual need for maintenance
and repair, i.e. condition based maintenance. Q5 ("What is the remaining service life?") finesses the
previous four questions by quantifying the remaining technical service life and allowing the economic
service life of particular assets to be calculated. In addition, there are a number of socio-technical
challenges.
Financial Versus Technical Challenges: Asset managers have a constant technical challenge
to weigh the costs of maintenance, repair or renewal versus the technical and functional benefits of
implementing a solution. This is exacerbated when there are more projects than funds, or when budgets
are continuously shrinking (FCM 1995). In many cases, managers must allocate funds among competing
yet deserving needs; often having to make decisions based on incomplete data (CERF 1996). In
addition, the asset managers resources are being challenged from all sides: managers are also being
asked to privatize operations, outsource responsibilities or reduce overhead. All of these factors make it
extremely difficult for long-term decision-making in municipal infrastructure management.
Planning Horizons Challenges: Gordon and Shore (1998) have suggested three planning
horizons to illustrate the conflicting nature of long-term decision-making for asset managers: operational,
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tactical, and strategic. The operational planning horizon is identified as that within the two-year time
frame; the tactical planning is the two to five year time horizon, whereas the strategic planning is planning
beyond the five-year term. Any proponent of life cycle analysis understands this deterrent to long-term
planning: - remedies in the short term may not be the most economical in the long term. Combined with
conflicting political and administrative agendas, as well as rapidly changing targets and plans for each
organization, the planning for the strategic horizon is a difficult task.
Network Versus Project Challenges: Typically, the asset management tools in current use
today deal with individual domain or type of facilities; for example, an engineered management system
(EMS) deals only with paving condition assessment surveys (CAS) and CMMS may deal only with
work orders and/or task scheduling. As any good asset manager realizes, municipal infrastructure is an
integrated system and the individual components must function both independently as well as in unison
with other systems. For example, many municipal infrastructure systems are networks that depend on
the weakest link (e.g. bridge and road networks). Or the infrastructure systems are interdependent,
where one network should be replaced at the same time as a neighbouring one (e.g. water distribution
and sewer).
Another network factor is the level at which asset optimization should take place: discipline,
facility or organization. Should one specific discipline (e.g. buildings or fleet) in a municipal portfolio
receive a disproportionate amount of funding, should one region attract more funding attention than
others, or should one department control the lions share of resources?
Tools Available: NACUBO (1990) provides a practical method to plan the appropriate
rehabilitation, replacement or renewal. The methodology is related to the Facility Condition Index (FCI)
discussed earlier and is called capital renewal (CR) analysis. The CR analysis calculates the renewal
costs and spreads these future expenditures equally around the planned renewal date in a five-year time
span, as shown in Figure 6 (b). In this example, three renewal projects are planned and the costs for
implementing Project (i) are amortized from year two through year seven. Using CR analysis, costs for
the CR for each and every system or facility can be calculated well into the future (knowing the service
life), and can be discounted as a present value or calculated as an annuity expense, as shown in curve
(c) in Figure 7. These calculations can also be used to establish sinking funds or reserve funds for
the facility. Spreadsheets can be used to implement the NACUBO model.
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Accumulated Maintenance ($)
(a) Accumulated Maintenance (a) Maintenance / Renewal Requirements
Maintenance / Renewal ($)

(b) Projected Capital Renewal (b) Accumulated Maintenance
(Projects i, ii, and iii (a) (c) Projected Capital Renewal
spread over 5 years) ($3 M maintenance per year)
(Capital Renewal amortized over 10 years)
(a)
(b)
Project iii
Project i Project ii (c)
(b)
Year Year
Figure 6: Capital Renewal Figure 7: Maintenance and renewal reduction
The Real Estate Capital Asset Priority Planning System or RECAPP (http://www.recapp.com)
is a strategic planning tool that calculates the funding requirements for capital repair/renovations up to a
25-year time horizon (Gordon and Shore 1998). RECAPP allows the user to input data at an
organizational, regional, district, building or departmental level and permits the user to enter information
about assets such as building location, gross area, tenancy, and asset type. It also stores additional data
such as digital images of the facility, system and components or CAD drawings of the floor plan. It can
save archival information such as construction cost, age of facility, and maintenance expenditures. The
output of RECAPP includes sophisticated plotting routines with histograms, pie charts or line plots
depicting portfolio age profiles or 25 year expenditure projections.
In general, there are few tools available to asset managers to allow them to prioritize their
maintenance projects.
3.7 Asset Management Implementation Plan

The concept of asset management is difficult to accept as a philosophy and difficult to implement
in practice as asset management means many things to many different people. For example, some
disciplines in an organization may feel they already have an asset management system in place when they
have implemented an inventory system only. Or, some organizations may have some disciplines that are
well-advanced in asset management implementation (i.e. bridges, roads) but will also have many that are
lagging behind (i.e. parks, buried utilities). Or, some regions may have reached a plateau and wish to
advance to a higher level not knowing that a sister discipline in another region has the tools and
techniques in place to assist them. Because of these obvious differences in organizations and in any
particular organization, an organization's asset management implementation plan should have a series of
overlying principles established at the highest level in that organization. An example is provided in Table
2. The asset management implementation plan should:
Assess organization's current level of implementation in various regions and disciplines.
Set minimum criteria for data and information for all levels of implementation.
Estimate cost of implementation.
12
Set timelines for next level of implementation
Table 2: Asset Management Implementation Plan
Six "Whats" of Asset Management

Own Worth Deferred Condition Service Fix First
Life
Region #1
Bridges v v v
Roads v v v v
Buildings v Jan 2001 June 2001
$100K $50K
Region #2
Bridges v v Jan 2002
$25K
Roads v v Jan 2001 Jan 2002
$50K $100K
Buildings v v v Jan 2003
$25K
Region #3 Jan 2001 Jan 2002
$100K $50K
4. Challenges for the 21st Century
There have been numerous reports, both in the popular press and research literature, that many
buildings are run inefficiently due to poor monitoring and control systems, water and road networks are
deteriorating faster than anticipated and the overall condition of Canadas bridges remains unknown,
and potentially hazardous. A lack of knowledge of the condition of the built environment means that the
scarce resources that are available for maintenance and repair are often used inefficiently or
inappropriately (CERF 1996). These challenges affect everyone through increased health and safety
risks, reduced economic competitiveness, inefficient maintenance strategies, a reduction in the value of a
nations built assets and a need to increase funding to maintain the built environment. In some cases, this
overall inefficiency will actually create the need for new buildings and engineering works; even when
suitable facilities already exist or can be modified.
4.1 Need for Decision-Support Tools for Municipal Infrastructure

Efficient information management is the key to better decision-making for municipal infrastructure
(CERF 1996). For many organizations, major issues of service delivery are repair and renew rather
than design and. Engineers, technical staff, administrators, and politicians all benefit if decisions about
maintenance, repair and renewal are based on reliable data, solid engineering principles and accepted
economic value. When reliable data and effective decision-support tools are in place, the costs for
maintenance, repair and renewal will be reduced and the services will be timely, with less disruptions.
These improvements will all reduce the costs of managing municipal infrastructure.
13
Many major asset owners in North America are beginning to recognize the importance of
knowing the current and future states of their infrastructure. For example, Edmonton (1998) recently
completed a long-range financial plan for infrastructure assets, in which it recognized the need to
increase capital spending and to establish priorities for renewal or new infrastructure facilities.
Meanwhile, Winnipeg (1998) has made recommendations to: (1) invest more in infrastructure,
(2) make strategic investments with the dollars they have, and (3) find ways to reduce the magnitude of
the infrastructure deficit problem. More specifically relating to decision-support tools, the City of
Winnipeg recommends that:
life cycle costing analysis be used for all decisions related to infrastructure alternatives;
maintenance can be deferred only if the impact on life expectancy and life cycle costs is
minimized, and if maintenance is factored into initial infrastructure costs;
the citys infrastructure asset data must be coordinated and managed by the Chief
Administrative Officer Secretariat, and
computerized maintenance management systems must be adopted.
More recently, the Governmental Accounting Standards Board (GASB 1999) has put in place
methods to ensure that governmental agencies account for their assets.
5. Conclusions
A multilevel plan for the implementation of asset management is presented in the form of six
questions: What do you own? What is it worth? What is the deferred maintenance? What is its
condition? What is the remaining service life? What do you fix first? Each successive level describes
currently available tools and techniques for asset management and each What establishes a growing
framework for the implementation of an asset management plan. Unfortunately, few tools exist in the
area of strategic asset management and managers of municipal infrastructure have considerable work
ahead in order to implement the full six levels described. The investigation leading to this presentation
located a limited number of decision-support applications in the domain of municipal infrastructure but
did not find any comprehensive solution that addresses the current and future needs for investment
planning for municipal engineers and managers.
Based on the investigation completed to date and the experience learned from various related
projects (Lounis et al 1998), the author identifies several administrative, financial and technical
challenges to fully address the need of municipal infrastructure planning:
seamless data integration of the software environment;
enhancement and standardization of the currently available tools;
central repository for the information;
shared experiences and best practices such as proposed in the National Technical for
Municipal Infrastructure;
life cycle analysis and long-term service life prediction; and
intercommunication between municipal infrastructure research and service life research.
14
The National Research Council Canada and the City of Montreal, in conjunction with the City of
Edmonton, City of Hamilton, Greater Toronto Authority and the City of Ottawa are cooperating on a
Municipal Infrastructure Investment Planning (MIIP) Project (http://www.nrc.ca/irc/uir/miip). This
project addresses the need for decision-support tools and addresses some of the challenges identified
earlier. The objectives of the MIIP Project are:
Locate tools and techniques to assist municipal infrastructure investment planning.
Investigate extent of asset management techniques by asset owner.
Conduct field trials of tools and techniques with Consortium Collaborators.
Develop prototype tools and techniques for asset managers to better manage their municipal
infrastructure.
Develop state-of-practice manuals/guidelines for asset management.
6. References
ANAO. (1996) Asset Management Handbook, Australian National Audit Office, Jun., Canberra,
Australia (http://www.anao.gov.au/bpg_asstmanhbk/contents.html).
ASTM E917. (1994) Standard Practice for Measuring Life-Cycle Costs of Buildings and Building
Systems, American Society for Testing and Materials, Philadelphia Pa.
Bailey, D.M., Brotherson, D.E., Tobiasson, W. and Knehans, A. (1989) ROOFER: An Engineered
Management System for Bituminous Built-Up Roofs, Technical Report M-90/04/ ADA218529,
US Army Construction Engineering Research Laboratory, Champaign, Ill.
BLCC. (1995) The NIST "Building Life-Cycle Cost" Program, Version 4.3, User's Guide and
Reference Manual, NISTIR 5185-3, National Institute of Standards and Technology,
Gaithersburg, Md.
Burns, P., Hope, D. and Roorda, J. (1999) Managing Infrastructure for the Next Generation,
Automation in Construction, Vol. 8, 689-703.
CERF. (1996) Level of Investment Study: Facility and Infrastructure Maintenance and Repair,
Civil Engineering Research Foundation, Washington, D.C.
Coullahan, R. and Siegfried, C. (1996) Facilities Maintenance Using Life Cycle Asset Management,
Facilities Engineering Journal, Mar/Apr, Association for Facilities Engineering, Cincinnati, Oh
(http://www.afe.org/).
CSA (1995) CSA S478-1995: Guidelines on Durability in Buildings, Canadian Standards
Association, Rexdale, ON., 93p.
De Sitter, W.R. (1984) Costs for Service Life Optimization: The Law of Fives, Durability of Concrete
Structures, Workshop Report, Ed. Steen Rostam, 18-20 May, Copenhagen, Denmark, 131-134.
Edmonton. (1998) Securing our Future: Edmontons Long Range Financial Plan, KPMG
presentation to Council, Available from: The City of Edmonton, Alberta, Canada.
FCM. (1995) Report on the State of Municipal Infrastructure, Federation of Canadian
Municipalities. Available from: Federation of Canadian Municipalities and McGill University.
FHWA (1999) Asset Management Primer, Federal Highways Administration, US Department of
Transportation, http://www.fhwa.dot.gov/infrastructure/asstmgmt/amprimer.pdf
15
Frangopol, D.M., Lin, K.Y. and Estes, A.C. (1997) Life-cycle cost design of deteriorating structures,
ASCE Journal of Structural Engineering., Vol. 123, No. 10, 1390-1401.
GASB (1999) GASB Statement No. 34, Basic Financial Statementsand Management's
Discussion and Analysisfor State and Local Governments, Governmental Accounting
Standards Board, Norwalk, CT.
Gordon, A.R. and Shore, K.R. (1998) Life Cycle Renewal as a Business Process, Innovations in
Urban Infrastructure Seminar of the APWA International Public Works Congress, Las Vegas,
USA, pp. 41-53, (http://www.nrc.ca/irc/uir/apwa/apwa98).
HAPM (1995) LifeSpans of Building Components, Technical Note 6, Housing Association Property
Mutual, June, 1995, London (http://www.hapm.co.uk).
Kleiner, Y.; Adams, B.J.; Rogers, J.S. (2001) "Water distribution network renewal planning" Journal
of Computing in Civil Engineering, 15, (1), Jan., pp. 15-26.
Lemer, A.C. (1998) Progress Toward Integrated Infrastructure-Assets-Management Systems: GIS and
Beyond, Innovations in Urban Infrastructure Seminar of the APWA International Public
Works Congress, Las Vegas, Nevada, pp. 7-24, (http://www.nrc.ca/irc/uir/apwa/apwa98).
Lounis, Z. Vanier, D.J. Lacasse, M.A. and Kyle, B.R (1998) Effective decision-making tools for
roofing maintenance management, First International Conference on New Information
Technologies for Decision Making in Construction, Montreal, Canada, pp. 425-436,
(http://www.nrc.ca/irc/fulltext/nrcc42831.pdf).
NACUBO (1990) Managing the Facilities Portfolio, National Association of College and University
Business Officers, Washington, DC, 100p.
NRC. (1996) Budgeting for Facilities Maintenance and Repair Activities, Standing Committee on
Operations and Maintenance, Report 131, National Research Council, National Academy Press,
Washington, D.C.
PM. (2000) Plant Maintenance Resource Center, Winthrop, Western Australia (http://www.plant-
maintenance.com/maintenance_software.shtml).
Shahin, M.Y. (1992) 20 Years Experience in the PAVER Pavement Management System:
Development and Implementation, Pavement Management Implementation, F.B. Holt and W.L.
Gramling, editors, ASTM, Philadelphia, Pa.
Uzarski, D.R., L.A. Burley (1997) "Assessing Building Condition by the Use of Condition Indexes",
Infrastructure condition assessment: art, science, and practice: proceedings of the conference
sponsored by the Facilities Management Committee of the Urban Transportation Division of the
American Society of Civil Engineers, Boston, Massachusetts, August 25-27, pp. 365-374.
Vanier, D.J. (2000) Advanced Asset Management: Tools and Techniques, Innovations in Urban
Infrastructure Seminar of the APWA International Public Works Congress, Louisville, U.S.A,
pp. 39-56, (http://www.nrc.ca/irc/uir/apwa/apwa00).
Vanier D.J. (2001) Why industry needs asset management tools, Journal of Computing in Civil
Engineering, 15 (1), January, pp. 35-43.
Winnipeg. (1998) Strategic Infrastructure Reinvestment Policy: Report and Recommendations,
Available from: Strategic Infrastructure Reinvestment Policy, City of Winnipeg, 100 Main Street,
Winnipeg, Manitoba, Canada R3C 1A4, Tel: (204) 986-7997.
16

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Asset management: "A" to "Z"

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ASSET MANAGEMENT: "A" TO "Z"

Keywords: Asset management, municipal infrastructure, investment planning, maintenance planning

2.1 Annual Asset Growth in Canada and USA

Figure 1: Annual Construction Growth (Canadian and USA) in Constant Dollars.

2.2 Total Assets in Canada and USA

3. What is Asset Management?

Asset management is a business process and a decision-making framework that

In an attempt to classify and to describe examples of decision-support tools for asset

3.1 What do you own?

3.2 What is it worth?

3.3 What is the deferred maintenance?

Deferred Maintenance ($)

Figure 3: Growing deferred maintenance Figure 4: Deferred maintenance reduction

3.4 What is its condition?

3.5 What is the remaining service life?

3.6 What do you fix first?

Maintenance / Renewal ($)

Figure 6: Capital Renewal Figure 7: Maintenance and renewal reduction

3.7 Asset Management Implementation Plan

Set timelines for next level of implementation

Table 2: Asset Management Implementation Plan

Six "Whats" of Asset Management

4. Challenges for the 21st Century

4.1 Need for Decision-Support Tools for Municipal Infrastructure

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