Ministry of Defence hands over assets
Project Aquatrine is the largest proposed UK public/private partnership to date. Roger Eyre and Geoff Morgans of Hyder Consulting explain the large and complex asset base work that needs to be done up-front.
Support for varying levels of private sector participation in public infrastructure projects appears to cross the political divide. This is not surprising when one considers the significant operational cost savings on offer. Large cost reductions are anticipated for the UK’s largest current proposed public/private sector partnership (PPP), Project Aquatrine, which involves the transfer of Britain’s Ministry of Defence’s (MoD) water and wastewater assets.
The ability to achieve such a saving has to be built on a solid foundation and this is where the need to be able to evaluate the condition of an asset and to develop a management plan for that asset assume great importance.
Project Aquatrine encompasses over 4000 individual sites around the UK from major bases to high street careers offices. Of these, Hyder Consulting personnel have made visits involving more than 900 with the most significant water and wastewater facilities.
From such desk and survey work, a comprehensive asset register has been compiled which provides the basic building block for the asset management plan.
One speaker at the recent London Fifth Annual Global Summit on Financing Water & Sewerage Projects conference emphasised: ‘The value of good data cannot be overstated. Results (of recent PPP’s) show that the quality and scope of bid information and data is reflected in the prices offered….’
From its position as part of a privatised water utility, Hyder Consulting has been able to make use of all the experience and cost data of managing an asset base for over a decade. The software tools that have resulted from that process, although written from the standpoint of managing a water and waste company infrastructure, are equally applicable to a broader PPP market.
Asset Data Model
The central asset database records information at three levels – general asset data, process level data and component data. From these flow a number of applications including project estimating, investment modelling based on a set of rules and cost models, and a problem reporting and solution prioritisation system.
The flexibility of the package enables users to build up sets of investment rules, representing any requirement. For example, a user may wish to stipulate that all pumps that are categorised in poor condition should be replaced. With the attachment of additional information such as timing and rationale, and the grouping of various investment rules into scenarios, it enables ‘what if’ analyses and a complete expenditure plan to be assembled.
To avoid double-counting through the inclusion of overlapping investment rules, an in-built cross checking facility is included.
New contract negotiations
As part of the process of enabling tenders to be invited for Project Aquatrine, the outline business case based on the asset database and management plan was completed and approved in February this year.
The team is now actively involved in the next stage of the project which is the procurement of a contract covering the south and west of England and Wales. It is planned that formal Invitation to Negotiate (ITN) for the first contract will be issued at the end of 2000. The programme then anticipates contracts being awarded in 2001 and in operation by early 2002. Subsequent contracts to give full geographic coverage of Great Britain will all be in place by early 2004.
A further significant element of work which is being currently undertaken in support of the contract documentation is the production of Service Area Plans (SAP’s) and Asset Plans (AP’s) to enable the assets currently owned by the MoD to be leased to the Service Provider. This work entails production of a large scale plan of each MoD site across the country to define the area within which the Service Provider is responsible for the provision of water and wastewater services and also a plan of each above ground asset on each of these sites. The SAPs will involve a team of up to 25 staff until March 2001.
Benefitting from the lessons learnt from more than 10 years of private involvement in the UK water sector, many other countries are looking at privatisation as a means to improve efficiency and customer services. Here again, short, medium and long-term appreciation of ‘asset care’ is central to this fundamental change of management.
Following an intensive asset management planning exercise, 30% of EYDAP, the Athens water and sewerage company was floated on the Greek stock market at the end of last year. A similar process is taking place to enable the partial flotation of EYATH, the equivalent company for Thessaloniki. This exercise includes a number of management and training workshops for senior staff.
Hyder Consulting has also been part of a consortium, including PriceWaterhouseCoopers and Cameron McKenna, advising on the award of a 25 year concession for water and sewerage services for the Municipality of Sofia in Bulgaria.
A pre-bid analysis aimed to identify both the major technical and operational difficulties as well as any bureaucratic and/or cross cultural difficulties that might be encountered. From the discussions with the Municipality, the publicly owned water and sewerage company (VIK) and local consultants, it was concluded that the system asset attribute information may be limited and possibly difficult to access.
Of particular relevance was the fact that, although VIK had embarked on an MIS/GIS programme, digital asset attribute data records were still very limited.
Moreover despite significant external advice from other European government agencies, previous and ongoing pilot studies/investigations had focused almost exclusively on the water distribution system – little or no data was available regarding the asset condition and operating characteristics of the drainage system.
As the key driver for both capital investment planning and the setting of associated tariffs it was considered vital that bidders be given as much asset information as possible.
Accordingly, in parallel to the capturing of asset data from existing records undertaken by the project sub-contract consultant CC ANISA, Hyder’s technical submission incorporated a Strategic Pilot Study (SPS) that undertook, with local support and specialist UK survey contractors, to monitor within a defined area the whole water cycle. The SPS objectives were to confirm current estimates for per-capita consumption and physical and non-physical losses and to determine return to sewer flows and infiltration levels.
The pilot study was supported by an eight week CCTV survey of the city’s sewers. The eight-week investigation was the first time such techniques had been applied in Bulgaria and the results provided valuable data on condition and operating characteristics.
The water supply and drainage sections of VIK operated largely independently of each other and consequently there were differences in the extent of “system events” records. Sewerage information was sparse and generally limited to records of call-outs for sewer blockages, offering little information on condition and/or failures.
Identifying critical areas
In contrast, the water supply section had established a Customer Events Database which recorded every aspect of each water supply related event including; type, diameter, material and location. Due to the inherent inadequacies of the system at that time there were hundreds of events recorded every day.
Hyder Consulting undertook an analysis of the full nine months of records representing over 16,000 lines of information. The results, presented in numerical and graphical format, identified the critical areas and principal types of failure related to diameter and material.
The work in capturing and validating the asset data helped to enable commercial close of the concession to be reached with the UK company International Water Limited in December 1999.
The whole process of asset management is an evolutionary one. But without the starting point of quality information about the asset base, it is impossible to identify the major cost drivers of the business and ensure that investment is being directed into the right areas.
In investment terms, information on the whole life costing of water assets, based on Hyder’s UK experience, is priceless.
One of the key downstream benefits for an asset intensive business is maintenance strategy and the focus on key business deliverables. It is a common failing not to focus on process need, and the underlying causes of plant and system failure. Therefore, there may be a tendency to over maintain plant and equipment. The ability to drive maintenance plans through ‘process and asset need’ generates vast cost savings.
Refocusing an organisation to practise sound asset management techniques is not a difficult task but is fundamental to the success of PPP in the water business. The savings and efficiencies to be reaped are substantial, as the privatised UK water sector demonstrates. As the international PPP market expands, the time and resources invested in such techniques will be paid back many times over.