In this article, John discusses the opportunities that owners may wish to consider to help them manage risk and optimise value for money in their investments.
In recent years we have seen significant changes in how owners manage their infrastructure portfolios, particularly in how they think about risk and value.
In addition, as a result of the budget and related pressures owners face in trying to deliver, support and maintain their infrastructure capabilities, many Government departments and agencies, as well as private sector owners, are now being asked to make do with less.
Strategic reforms and market dynamics therefore continue to challenge owners to think smarter about how they deliver, support and sustain their critical infrastructure capabilities.
Optimising decision-making around the sustaining capital spend is critical – getting the best outcome for each taxpayer or shareholder.
Owners are also increasingly using efficiency and effectiveness as key drivers for strategic change in infrastructure spend and we’ve also seen the growing focus many owners place on forging strong, successful relationships with industry.
As Aurecon continues to assist water related infrastructure owners and operators in infrastructure delivery and management, the business is increasingly undertaking advisory roles that enable us to bring our global experience and expertise to help owners with their investments in organisational reform, improvement and delivery.
As water infrastructure continues to age, despite investments made over the past decade, there is growing evidence in some areas of decline and reduction in the estimated remaining life of critical infrastructure assets due to underfunding in the upkeep of infrastructure. This increases the risk of future unfunded liabilities.
Whole of life infrastructure solutions, programme and portfolio management are three interrelated options for addressing these challenges.
However, all too often insufficient consideration is given at the outset of a programme or portfolio as to the owner’s strategic objectives, the governance around the programme or portfolio and the strategy for delivering them. Programmes in particular are complex undertakings and the stakeholder and supply chain management impacts are normally critical factors in determining the successful outcome of the programme.
Programmes and portfolios where the overarching priorities for delivery are clear, commence with a set of strategic objectives in mind, but then require a major effort in terms of planning to ensure these factors are adequately addressed before delivery commences in earnest.
Public sector owners will continue to compete for their share of available funding against other government priorities and programmes. Private sector owners are facing the same challenges.
The solution is not just to seek more money or to reduce the quality of the owner’s infrastructure holdings. The more achievable solution is to design and implement a more affordable, safer and sustainable infrastructure model, which utilises integrated, best practice programme, portfolio and project management to make the right investments in infrastructure and maintenance and get the best value possible from available funding.
Many of Aurecon’s clients who are significant asset owners and operators are increasingly focused on life cycle solutions that optimise infrastructure outcomes and service delivery – a “cradle to grave” approach.
A whole of life infrastructure asset management framework enables asset owners and operators to achieve their business objectives at the optimum cost and risk across the full asset lifecycle.
This type of framework has tremendous potential to help owners address their infrastructure challenges and still have the opportunity to identify and unlock strategic reform and efficiency benefits, particularly around informing investment priorities.
The framework takes a whole of life strategic view at assets from the beginning through the application of proven process methodologies contained within the framework.
This approach has seen owners realise significant reductions in physical asset life cycle costs and simultaneous productivity increases from improved reliability of their physical assets.
By way of example, many water treatment plants comprise a vast number of buried metallic assets that require an effective corrosion mitigation strategy to minimise the risk of unscheduled maintenance, to avoid costly failures that can risk plant shutdowns, environmental pollution and even the endangering of life.
Aurecon has jointly developed a corrosion management regime with a major water utility in Australia, which has been successfully applied to its buried water pipelines and steel water tanks. The implementation of this regime has also enabled the utility to adopt a unified and structured approach to monitoring and managing corrosion issues of its assets.
In South Africa all municipalities manage large portfolios of infrastructure assets. One such municipality wanted to optimise service levels, risk and expenditure for all assets over the entire asset lifecycle and appointed Aurecon to develop a full asset management programme.
A risk based asset renewal model was implemented to aid with long-term planning of infrastructure investments and has proven valuable in optimising budget. It considers the social, environmental and economic risks associated with infrastructure services to prioritise capital renewal interventions.
The model was subsequently extended to cover all of the other infrastructure categories typically managed by the municipality such as storm water, water supply, sanitation, solid waste and electricity.
The benefits to asset intensive businesses in adopting a leading edge framework is in an improved return on the considerable investment in physical assets and improvements in the safe and sustainable use of these assets.
The other clear benefit is in providing better information and analysis around investment priorities and their necessity, a key challenge.
This contributes to a better understanding of risk and allows more informed decision making about investment priorities.
A key to achieving these outcomes is implementing them as part of a totally integrated and managed approach to programme, portfolio and project delivery.
At its most basic level it provides a framework that integrates and reconciles competing demands for resources and provides a context and control framework for the investment priorities and projects within the programme or portfolio.
It also often involves changes to the culture, style and character of organisations by providing a controlled environment in which there is a common approach to programme or portfolio direction, management, delivery and reporting.
There are four critical goals or objectives required to establish a new management framework for improving sustainable infrastructure outcomes:
What is clear is that all programmes and portfolios are different, so any solution needs to be tailored to an owner’s specific requirements, its unique policy and regulatory environment and the outcomes it is seeking.
The sustainable management of our water resources presents an increasing challenge and arguably requires greater focus than any other natural resource.
Water quality and availability impacts on the health, wellbeing and prosperity of our communities and underpins business, agriculture and the sustainability of the natural environment - this is a collective responsibility for the water sector.
Aurecon, working collaboratively with our industry partners, is committed to delivering integrated catchment-based recreation, water supply, sanitation, irrigation and environmental services at the lowest cost possible.