2.01 Capital Investment Decision-Making

At the recent MRO/DE Expo, first MRO stream session was on Effective Asset Management Starts with Good Assets by Leonard Middleton, Consultant, Asset Management Solutions.“There seems to be a vast difference in perspective between those who approve projects, those who execute projects, and those who need to operate and maintain those assets that projects deliver. The presentation was delivered by someone who has worked in each of those areas, and has direct knowledge of the linkage and implications of decisions made,” said Middleton.“The presentation intended to provide a pragmatic high-level overview that provided insights on the issues and what changes can be made to improve the situation for the benefit of the organization and the individual groups,” said Middleton. “Virtual conferences are the new normal. There is no longer the immediate feedback from the body-language and attention of the audience indicating whether they are engaged and following the presentation, and that takes some adjustment.”

This paper describes strategic Asset Management at an Industry level. The illustrative case study reviews the Ontario Nuclear fleet of stations', life cycle planning and then applying simple risk analysis. The situation is illustrative, not to be taken as accurate in any aspect (eg costs, schedule etc). The purpose of this paper is to illustrate a practical example of how Asset Management can be applied at a strategic level, to support strategic planning over a multi-billion dollar, multi-decade program. The situation described is very loosely based on the OPG nuclear refurbishment program, but cannot be directly connected to it since all the information is proprietary and the numbers used are hugely different. The paper outline is expected to follow: • Background • Fleet Asset planning • Project Estimate process • Risk estimate process and review . • Conclusions The above is at a "bird's eye" view, but with enough details to understand the case study and how it pertains to a broader scope of applications. Learning: 1. Asset Management is a strong strategic tool when applied at Facility level. 2. Estimates, though rough at an early stage, can provide managerial information that is adequate for decision making. 3. Risk Management can be simple, but provides huge returns for management decision making.

ESG targets and reporting are becoming increasingly important. Investors and governments around the world are pushing for transparency and ever more rigorous reporting on ESG indicators. It is likely that financial regulators in North America will make ESG reporting mandatory within the next 2 years.  Many components of ESG frameworks affect asset management, and conversely good asset management can help improve an organization’s ESG scores. Think of climate change, pollution, health & safety, risk management, water use and GHG emissions to name a few.  It is therefore crucial for asset managers to understand the current frenzy around ESG reporting. Yet the ESG ecosystem can be quite baffling: there is no single definition of what ESG stands for, or what is “in” or “out”, or what reporting standard to follow.This presentation will shed some light on who does what in the ESG ecosystem, what standards and reporting options are available, and how all this will increasingly affect the way organizations make strategic decisions. Asset management has a big role to play in this context. Many asset managers have been confronted with complex, multi-stakeholder decision-making frameworks for years and are quite adept at aligning various departments to a common set of objectives. The definition of “value” in asset management often already contains many metrics that are now part of ESG reporting. We will explore how robust value frameworks can help organizations reach better decisions and improve their ESG scores – with the guidance of their asset management team!

Around the turn of the 21st century, municipalities began using the term asset management (AM) to refer to a broad range of processes that span the continuum, from managing short-term asset maintenance to long-term asset investment planning. Over the last two decades, AM has been accepted as an umbrella term that refers to the processes that work together to answer the following: When, why, and how should we spend money on infrastructure assets to ensure they meet evolving societal expectations? But the traditional approaches to developing AM processes—extremely granular asset inventories, age-based spending need forecast models, complex level of service metrics—have frustrated organizations, cost them millions, and not practically helped to answer this fundamental question. In recent years, a number of AM champions have developed a consumer-based approach to realize value from assets in the achievement of societal objectives. Clear processes create an asset expenditure to asset performance relationship that helps set overall spending levels and enables a living management system that’s used to develop dynamic prioritized short-term spending plans. This approach enables organizations to engage with their customers/clients to balance asset performance (level of service) expectations with financial affordability. This Asset Stewardship Quality Management System resets the AM paradigm by bringing clarity to what AM processes should do and how enablers (data, people, technology) can help. The tangible impacts resulting from the new AM paradigm include a reduction in the granularity of asset registers, improved accuracy of measuring asset performance and tracking asset spending, and confident spending need forecasts to ensure infrastructure systems can effectively underwrite desired societal progress. These tangible impacts are realized through addressing all three enablers: improving data management and data collection activities, providing a training program to staff, and leveraging innovations in hardware and software technologies.

Asset management (AM) is a far-ranging topic and can be very confusing or overwhelming to anyone who is now embarking on a program or trying to take their existing program up a notch. The biggest impact in AM is on the planning side of the AM Framework. Essentially, if you plan well, then you can execute the right activities (capital project, operations, and maintenance tasks) well. Conversely, which is the case with many organizations, there is poor planning but with efficient execution of the work and attendant sub-optimal performance. Excellence in AM requires effective planning in three areas: Growth and Rationalization, Renewal & Replacement, and Operations & Maintenance. This presentation will provide best-in-class concepts for developing these three areas and the return on investment in effective planning, and will be supported by real-life examples.   Originally presented at MainTrain 2020

Many asset-owning organizations engaging in enterprise digital transformations aren’t realizing the expected value. Follow the money and you’ll see asset-owning organizations spending tens of millions (sometimes hundreds of millions) of dollars and the only clear winners are the solution providers and supporting management consultants. Why? Some approaches can lead their organizations further away from achieving their business goals. Ambitious digital strategies are great, but success is best achieved through technology and first-principles practices and decision-making. Paul Daoust will explore a digital transformation strategy that combines technology with asset management and operational excellence practices into an integrated operational management framework that works.

Companies are continually faced with competing priorities and limited resources, and, as a result, it's critical to drive value from the business decisions they make. With more focus on asset management principles, these decisions must be justified through demonstrated and quantified value to the business. With complex systems of equipment, such as a pipeline, determining the value of a project or proposed improvement can often be difficult to estimate—especially when considering an asset's lifespan. In such cases, a more systematic, data-driven approach may be required to predict value. RAM models are one such tool that can be used to achieve this. In this case study, we'll look at how RAM models have been developed and used at Enbridge Pipelines to identify and quantify the risks to throughput volume. The models include key equipment and operational events, along with specific throughput impacts and simulated long-range demand forecasts in order to prioritize the risks and focus resources toward capturing the best opportunities. When specific improvement opportunities (e.g., additional equipment sparing) are identified, alternate cases of the model can be created and the results compared to the base case to support decisions and justify projects. We'll explore some of the challenges we encountered during development and highlight examples of how this tool is being used to quantify value, as well as the approach taken to disseminate the information within the organization.

Many organizations have implemented processes and tools to collect data to facilitate informed decision-making. Often, they will seek out best practices and measures to assist in decision-making or rely on technology to guide their basis. In many cases, however, these same organizations approach a gap in tactical deployment and in the ability to draw a connection to the follow-up or pre-emptive actions required to derive value from assets. We'll review the processes for establishing a framework for alignment and priority setting while looking at the techniques used for resiliency and risk management using a technology-agnostic approach. We'll review potential data sources that can be leveraged for decision-making and can reflect the needs and current state of the business environment. Additionally, we'll discuss the relationship and application to the decision-making process.  

A Risk-Based Approach to Spares Management 

Most organisations have implemented processes and tools to collect data to facilitate informed decision-making. Often, they will seek out best practices and measures to assist in decisionmaking or rely on technology to guide the basis of decisions. However, in many cases these same organisations approach a gap in tactical deployment and the ability to draw a connection to the follow-up or pre-emptive actions required to derive value from assets. This presentation will review the processes for establishing a framework for alignment and priority setting, while looking at the techniques employed for resiliency and risk management using a technology agnostic approach. We will review potential data sources which can be leveraged for decision-making and which reflect the needs and current state of the business environment. Further, we will discuss the relationship and application to the decision-making process. An overview of the fundamental outcome of key performance indicators and visualized metrics will be demonstrated. Finally, we will investigate the influence on decision making and the level of data confidence.