International case studies in asset management

International Case Studies
in Asset Management

Copyright © ICE Publishing, all rights reserved.


Copyright © ICE Publishing, all rights reserved.


International Case Studies
in Asset Management

Edited by

Chris Lloyd
Copyright © ICE Publishing, all rights reserved.


Published by ICE Publishing, 40 Marsh Wall, London E14 9TP.
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Also available from ICE Publishing
Asset Management. C. Lloyd. ISBN 978-0-7277-3653-6
People and Organizational Management in Construction,
Second edition. S. Naoum. ISBN 978-0-7277-4151-6
Art and Practice of Managing Projects. A. Hamilton.
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Contents
01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Preface
List of contributors

ix
xi

Introduction

1

Section 1: Introducing asset management

7

Case study: Wessex Water
1.1.
Background and context
1.2.
How asset management evolved at Wessex
Water
1.3.
Strategic direction shaped by relationships
with stakeholders
1.4.
Conclusions
Discussion questions

References

9
9
11
18
19
20
20

Case study: Dublin Airport Authority
2.1.
Background
2.2.
Restructuring around asset management
2.3.
Approach
Box 2.1 Extracts from the DAA asset management
terms of reference document
2.4.
Outcomes and conclusions
Discussion questions
Reference

29
37
38
38

03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: Arts Victoria
3.1.
Background and context
3.2.
The requirements
3.3.
The situation
3.4.
What was done – functional spaces
3.5.
What was done – service levels
3.6.
Conclusions
Discussion questions
Reference

39
39
40
41
42
43
45
47
48

04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: South West Water

4.1.
Background and context
4.2.
Effective planning
4.3.
Investment optimisation
4.4.
Conclusions
Discussion questions
References

49
49
52
53
55
56
56

05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: City of Calgary
5.1.
Background and context
5.2.
Introduction of asset management
5.3.
Performance measures

59

59
59
64

02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21
21
22
24

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5.4.

Conclusions
Discussion questions
References

65
65
65

Case study: Scottish Water
6.1.
Background and context
6.2.

Multiple strategies within a defined
framework
6.3.
A structured hierarchy for strategies and
plans
6.4.
Conclusions
Discussion questions
References

68
77
78
78

Section 2: Becoming an asset management
organisation

81

07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: Grand Port Maritime du Havre
7.1.
Background and context
7.2.
Requirements
7.3.
Development process
7.4.

Prediction of performance over time
7.5.
Prediction of future maintenance requirements
7.6.
Prioritising maintenance interventions
7.7.
Outcomes and conclusions
Discussion questions
References

83
83
83
84
94
96
96
98
98
98

08 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: Network Rail
8.1.
Background and context
8.2.
Laying the foundations
8.3.
Establishing asset management processes

8.4.
Conclusions
Discussion questions
References

99
99
101
102
105
106
106

09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: ScottishPower Generation
9.1.
Background and context
9.2.
The Operational Transformation Programme
9.3.
Stage 1: create a vision and strategy
9.4.
Stage 2: establish leadership
9.5.
Staff awareness and communications
9.6.
Conclusions
Discussion questions
References

109
109
110
111
116
117
117
119
119

10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: City of Cambridge
10.1.
Background and context

121
121

06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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67
67
67

10.2.
10.3.
10.4.
10.5.
10.6.

Information and knowledge management
Business process improvement
Technology adoption
The capital planning process
Conclusions
Discussion questions
Reference

122
123
125
126
127
129
129

11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: London Underground
11.1.
Background and context
11.2.
Asset management and the PPP contracts

11.3.
Integrating asset management
11.4.
Conclusions
Discussion questions
References

131
131
132
134
138
139
139

12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: RailCorp
12.1.
Background and context
12.2.
Conclusions
Discussion questions
References

141
141
144
144
144

Section 3: Value and performance
improvement

145

13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: SP AusNet
13.1.
Background and context
13.2.
Impact of PAS 55
13.3.
Conclusions
Discussion questions
References

147
147
149
152
154
154

14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: City of Hamilton
14.1.
Background and context

14.2.
The analysis
14.3.
Generational differences
14.4.
Intergenerational fairness
14.5.
Putting a price on fairness
14.6.
Uneven asset bubbles that move through time
14.7.
Social policy – whose responsibility is it?
14.8.
Level of service for long-term care facilities
14.9.
Important Related Initiatives
14.10. Conclusions
Discussion questions
References

155
155
156
157
157
158
159
160
161
162

163
163
163

15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: Rio Tinto
15.1.
Background and context

165
165
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15.2.
15.3.
15.4.
15.5.
15.6.
15.7.
15.8.

Aims and scope of the AMPDP
Strategy for programme development
Identification of learning partners and
responsibilities
Programme design

Managing engagement across the business
Measuring performance
Conclusions
Discussion questions

166
167
167
168
170
170
173
174

16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: Euroports
16.1.
Background
16.2.
Introducing asset management planning
16.3.
AMP2 changes and improvements
16.4.
AMP2 report template
16.5.
Conclusions
Discussion questions
Reference

175
175
175
177
179
183
185
185

17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case study: KPMG
17.1.
Background and context
17.2.
Quality of financial–technical asset data
17.3.
Initial harmonisation of technical data and
accounting data
17.4.
Accounting purchase price excluding added
values and client interventions
17.5.
Conclusions
Discussion questions
Reference

187
187
189

18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

viii

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190
190
199
200
200

Section 4: Observations – Investment,
risk and returns

201

Observations – Investment, risk and returns
18.1.
Introducing asset management
18.2.
Becoming an asset management organisation
18.3.
Value and performance
18.4.
Conclusions
References

203

204
206
208
210
212

Index

213


Preface

This book is the result of another. Two years ago, when I
was working on Asset Management: Whole Life
Management of Physical Assets, which Thomas Telford
published in 2010, it quickly became obvious that the
follow up would need to be a book of case studies. Where
the earlier book sought to reposition asset management as
a powerful new logic for building value and generating
better returns from asset-intensive businesses, this one
looks at how a variety of organisations operating in
different sectors have embraced asset management thinking
and best practices, how this has affected them and what has
been learned from this.
These case studies will serve as a historical record of how
asset management has matured in conception and practice
since it first emerged in the 1980s. They offer insights into
how asset management is being used to prioritise capital
investment, increase operational efficiency, manage risk,

and change how organisations position themselves in the
market and account for their actions to customers,
investors, banks, regulators and others.
The book is written for investors seeking insights into the
management and performance of major infrastructure
businesses; the directors and managers of organisations new
to the opportunities presented by asset management, in the
early stages of adopting it or looking to refresh their
approach; and people studying for asset management
qualifications or taking short courses and their teachers.
Each of these audiences will find something of value in the
case studies – approaches to reflect on, problems to solve,
concrete examples, practical solutions and new ideas.
The number of potential case studies that did not make it
into this book is enough to fill another. Some emerged too
late, others were not completed and a few could not be
published for commercial reasons or because they were too
obviously promotional. There is a thin line to tread
between publishing what organisations want to read
about themselves and publishing what the asset
management audience wants to read about, one that I
hope I have managed to tread successfully. In years to
come, I would not be surprised if it became more difficult to
put case studies into the public domain as the connections
between asset management and competitiveness become
more explicit.
ix

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My acknowledgements go to Hugh Harford of CAS, whose
support and suggestions have been invaluable; to my
colleagues at CAS who thrived during my absences; and to
all those who contributed ideas, documents and/or drafts
for the case studies – the list of contributors reads like a
who’s who of asset management. Finally, because I moved
house while working on this book, its publication will be a
lasting testament to the talents, energy and forbearance of
my wife.
Chris Lloyd
Director, CAS

x

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List of
contributors

Chapter 1
J Hayes Wessex Water
Chapter 2
D Marsh OaRisk Ltd
C Moran Dublin Airport Authority
P Chambers Dublin Airport Authority
Chapter 3
P Burns Editor, ‘Strategic Asset Management’
C Ahern Arts Victoria

C Moritz Sinclair Knight Merz
Chapter 4
B Ward Aecom
S Gee Aecom
A Selby Aecom
P Rennie Aecom
D Gracie Aecom
S Rosser South West Water
Chapter 5
R Sykes City of Calgary
Chapter 6
T Newell Scottish Water
L Petch Scottish Water
Chapter 7
C Gauthier Grand Port Maritime du Havre
C Vercoglio Oxand
J Boero Oxand
Chapter 8
R Edwards AMCL
A Newby Network Rail
Chapter 9
M Sedgwick ScottishPower
A Wands Amor Group
Chapter 10
Y Shah City of Cambridge
M Hauser City of Cambridge
Chapter 11
R Moore London Underground
Chapter 12
R Wallsgrove TKJ Partners

xi

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Chapter 13
J Allen SP AusNet
A Sharp AMCL
Chapter 14
T Quinn City of Hamilton
S DuVerney City of Hamilton
A Dalziel Stantec
L Gohier Dynamix Inc.
Chapter 15
M Hodkiewicz University of Western Australia
G West Rio Tinto
N Bartlett Rio Tinto
S Tapsall AIM-UWA Business School Executive Education
Chapter 16
J Walker Euroports Holdings s.a.r.l.
H Harford CAS
Chapter 17
D Pairon KPMG

xii

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International Case Studies in Asset Management

ISBN 978-0-7277-5739-5
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Introduction
All truths are easy to understand once they are discovered.
Galileo Galilei

Where everything connects
Around the world, infrastructure businesses and other organisations that rely heavily on
the availability and reliability of physical assets for their success are reaching similar
conclusions about needing to be more strategic and efficient in the way they manage
their assets. Asset management offers them, their investors and other stakeholders a
rational set of principles for defining how corporate goals can be achieved and how
the value of a business can be confirmed. This book provides evidence that it is
helping to shape a new way of organising the relationship between services, assets and
capital. This is based on the economics of high-value-adding asset management
systems through which businesses focus on services rather than engineering and reduce
their exposure to risk at the same time as they reduce operating costs and capital
spending.
Writing about asset management means writing about how money is spent, risks are
managed and returns are made; about how value is created and accounted for; about
how organisational cultures can impede or facilitate change; and, about how easy it is
to mistake the management of assets or facilities or capital spending or operating
costs for the broader goals of asset management.
One aim of this book is to demonstrate the interrelatedness of asset management and
business strategy. Another is to build an appreciation that asset management strategy,
planning and impact need to be analysed from a number of different perspectives, and
that there are many alternative, and no definitive, off-the-shelf answers.
While definitions of asset management have converged since the Publicly Available
Specification on asset management (PAS 55) was first published in 2004, there remain

various perceptions of what it means in practice. It is seen by some as a pervasive
approach that affects all parts of an organisation, and by others as a specialised
activity, requiring the attentions of a dedicated department or function. So, the way
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International Case Studies in Asset Management

an organisation perceives asset management will have an important effect on its ability
and willingness to undertake the changes needed to engage it fully in the service of its
corporate objectives. This variation between organisations also owes much to the
external pressures they are responding to, existing cultures and structures, and the
conventional wisdom of senior managers.

Structure of the book
This book presents 17 case studies featuring leading global and national companies,
state-owned firms, municipal authorities and government agencies from seven different
countries. Each case is specific to the context and aspirations of a particular organisation,
and between them they give broad and detailed coverage of asset management in practice. Table 1 provides an overview of the range of themes explored by the case studies.
The case studies are organised into three sections, as follows.
g

g

g

Section 1 is concerned with the introduction of asset management, although this
theme continues on through the subsequent sections. The six case studies describe

how three water companies, one municipal authority, a government agency and
an airport authority have set about harnessing asset management principles to
their objectives and what has caused them to do this.
Section 2 switches the attention to the task of becoming an asset management
organisation. It is concerned not just with process and methods but also with the
challenges that asset management poses to established hierarchies, functions and
cultures. The six case studies feature three railway businesses, a state-owned roads
and transport authority, a power company and one municipal authority.
Section 3 focuses on the importance of corroborating corporate value and
performance. The emphasis here is on demonstrating good governance, delivering
better earnings and cashflows through capital expenditure reductions and
operating efficiencies and linking technical, operational and financial data.
Leading international businesses from the gas and electricity, ports, mining and
accountancy sectors are featured, along with a municipal authority.

The cases vary in length, but they all follow the same basic structure. Each starts by
giving some background information on the organisation and setting its relationship
to asset management in context. The middle sections describe the organisation’s goals,
approach and achievements. Each ends with some conclusions and a short set of
questions that may help readers reflect on their own situations, formulate ideas, focus
their studies or organise learning events.
The book concludes with Section 4, which presents a number of observations on the
contents of and themes apparent in the case studies. These are intended to amplify the
discussion questions at the end of each case study.
2

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Introduction

Table 1 Main themes of the case studies
Section
1

2

3

Case

Location

Organisation

Theme

1
2
3
4

UK
Ireland
Australia
UK

Wessex Water
Dublin Airport Authority
Arts Victoria

South West Water

5
6

Canada
UK

City of Calgary
Scottish Water

A company-wide approach
Changing the mindset
Service-oriented asset management
Risk-based management and
rehabilitation of aged assets
Service levels on public amenities
Structured decision-making for the
medium and long term

7

France

8
9

UK
UK

Grand Port Maritime
du Havre
Network Rail
ScottishPower Generation

10

Canada

City of Cambridge

11

UK

London Underground

12

Australia

RailCorp

13

Australia

SP Ausnet

14

15
16

Canada
Australia
Lux

City of Hamilton
Rio Tinto
Euroports

17

Belgium

KPMG

Reducing capital and operating
expenditures
Best-practice reviews
Integrating process safety and asset
management
Information and knowledge
management
Embedding asset management
thinking
Leadership through organisational
change
Continuous improvement and
organisational change

Intergenerational fairness
Global competence and learning
Transparency and performance
improvement
Financial and technical data alignment

What the case studies are telling us
Between them, the case studies offer a plethora of ideas, innovations, reflection,
critical success factors, insights, methodologies, models, process descriptions, system
specifications and templates. They present organisations which are in various stages of
development and maturity but share a common interest in some or all of the following.
g
g

Understanding the full impact of their assets and making sure this impact is
consistent with their missions and strategies.
Quantifying the relationships between the asset base and financial risk, and
using this knowledge to structure internal controls, risk management and
evidence trails.
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International Case Studies in Asset Management

g

g
g

g
g
g

Modelling lowest possible average costs over the lifecycle, and putting a value on
asset availability and failure that takes into account the cost of capital and
financing.
Making good decisions in an environment where most things are uncertain and a
future context where things are even more uncertain.
Delivering required outputs for the available funding in a sustainable way.
Tailoring the asset management approach to the needs and capabilities of their
organisations.
Finding ways of countering low enthusiasm for asset management with
compelling evidence.
Improving the quality of information underlying asset management decisions
because this is what drives improved understanding of the cost, risk and benefit
trade-offs, the value of the asset, the impact of its failure and the return on
investment.

In every organisation, what makes sense at one time is often displaced by something that
appears better adapted to new times and new demands. And while some organisations
adapt themselves readily to new ways of thinking or practices, others try and fail or
leave it too late, while a substantial few just sit and wait, perhaps hoping it will all go away.
Readers will draw their own conclusions on the perspectives and approaches of the
organisations featured. Not all have been successful straight away. All of them know
that you cannot treat asset management like a piece of software – buy one, install it
and move on to the next problem.
Many important messages emerge from the organisational experiences and knowledge in
this book – that it is the business purpose that provides the rationale for asset management; that it would be a mistake to regard asset management as a cure for all corporate
ills; that success calls for a movement from information to communication at all levels;

that the perception of asset management as a function or department rather than as a
strategic approach or way of thinking is a serious limitation; that it is only when organisations view asset management as a collectively coordinated activity that its benefits can
be fully realised; that asset management is not about empowering engineers, although
engineers have a key role to play; and that greater efficiency and more certainty
around capital spending forecasts are the key deliverables whether the organisation is
privately or publicly owned.
There are some very challenging ideas too, including the following.
g

Asset requirements need to be classified and aggregated in a similar way to
existing assets in order that the organisation can be structured around its future
needs rather than just its existing asset base.

4

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Introduction

g
g

g
g

Establishing asset management as a department or function will limit its strategic
potential.
Technical, operational and financial data need to be harmonised if the impact of
asset management on the corporate performance and value is to be understood

and demonstrated.
Asset-related risk needs to be understood in its full business context, and not
simply from an engineering or safety dimension, including lost opportunity.
Despite the growing number of frameworks and templates that are available, and
international standards such as BSI PAS 55 (BSI, 2008) and the impending
ISO 55001, there is no single, predetermined formula that takes asset
management into an organisation, and each organisation must decide and justify
its own path.

Culture change
Culture change, that is, the alignment of people’s attitudes and beliefs, behaviours
and performance with the organisation’s goals, is a major aspect of embedding asset
management strategy, planning and systems. In particular, effective asset management
calls for functions and disciplines to coalesce and for people to cross personal and
career boundaries in ways they never have before in many organisations.
Asset management is a new way of thinking, so it goes without saying that people
practising it have to think in a new way about the situation their organisation is in
and how to improve it. Time and time again, the case studies describe asset management
as a systematic process, an opportunity even, for bringing together people from different
functions and disciplines and stakeholders with different self-interests. And their
decisions and activities need to be informed in a new way by detailed inputs on the
current and future capacities, criticality and condition, costs and values, risks and
performance of assets.
Whether it be the engineering manager challenging the commercial department to
sharpen its levels of service definitions; the operations manager requiring future
demand forecasts from the business development team; or the finance manager calling
for product lines or processing capacity to be cut because margins are eroding and the
money would be better spent elsewhere, business-like behaviours at all levels are not
an implication of asset management, they are a prerequisite to the sightlines that are
so important to good asset management.

The issues that asset management raises – whether to do with strategic direction, harmonisation of technical and financial data, demand forecasting or cultural change, etc. – are
multifaceted and interrelated. A change in policy or in one part of the system may have
ramifications throughout. In considering the discussion questions that are posed at the
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International Case Studies in Asset Management

end of each case study, the interconnections between the components of asset management, as illustrated in the case studies, need to be taken into account.
REFERENCE

BSI (2008) PAS 55:2008. The specification for the optimised management of physical
assets. Parts 1 and 2. British Standards Institution, London.

6

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International Case Studies in Asset Management
ISBN 978-0-7277-5739-5
ICE Publishing: All rights reserved
/>
Chapter 1

Case study: Wessex Water
1.1.

Background and context

Wessex Water is a regional water and sewerage business serving an area of the south west
of England, covering 10 000 square kilometres. Since 2002, the company has been owned
by the Malaysian power company YTL Corporation. It is recognised by the industry
economic regulator Ofwat as having consistently delivered the best levels of customer
service of any water and sewerage business in the sector.
Over the last 20 years since privatisation, Wessex Water has invested more than £3 billion
in improving and maintaining services (Figure 1.1). There have also been capital and
operational efficiencies that Ofwat’s 2008–09 annual report (Ofwat, 2009a) estimated
have resulted in average annual household bills being approximately £100 lower than
they would otherwise have been. The investment has taken an uneven cyclical pattern
largely due to the interruptive nature of the 5-yearly periodic regulatory reviews in
1995, 2000 and 2005.
The main aim of developing improved asset management capabilities in the company was
to maintain its high levels of service even more cost-efficiently without increasing risk.
Given the age of most of the UK’s water infrastructure, decisions on the size of the
investment needed to maintain service levels has a major bearing on business performance. Asset management is fundamental because it offers the methodology for making
the right decisions.
In the last 10 years, Ofwat has put pressure on companies to
g

g

improve their understanding of the ability of their assets to maintain service levels
(serviceability) and knowledge of the impact and likelihood of service risk
demonstrate that full account is taken of asset criticality and condition
deterioration in the planning and prioritisation of asset repair and replacement
(capital maintenance).

Asset management initiatives in the sector undertaken by UKWIR (UK Water Industry
Research) have been as follows.
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International Case Studies in Asset Management

Figure 1.1 Wessex Water’s capital investment since privatisation
Courtesy of Wessex Water

Total capital expenditure: £ million

250.0

200.0

150.0

100.0

50.0

0.0

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Year

g

g

The Capital Maintenance Planning Common Framework (CMPCF), which used
risk-based analysis of past performance and future scenarios (UKWIR, 2002).
The Asset Management Planning and Performance Assessment Process
(AMPAP), which provided a method for companies to self-assess their capabilities
in asset management planning, including leadership, processes, systems and
reporting (UKWIR, 2007). Ofwat (2009b) subsequently developed its own version
of this, named Asset Management Assessment (AMA), which was used to rate
each water company as part of its 2009 price review to determine capital
maintenance expenditure for 2010–15.

The creation of an asset management focus in Wessex Water has led to an improvement
in the company’s capabilities, and has enabled
g
g
g
g

a long-term strategic business direction
risk-based prioritisation of investments
the integration of business systems and processes
improved operation of its networks and treatment processes.

It has also sparked a concerted effort by the company to shape the industry’s long-term
direction. The company is currently engaging stakeholders in a debate about the benefits
of regulatory incentives for holistic sustainable solutions which draw on asset management best practice.
10

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Case study: Wessex Water

1.2.

How asset management evolved at Wessex Water

The increased levels of investment that followed privatisation also gave rise to sharp
increases in maintenance expenditure. Many of the company’s assets are complex, and
meeting tighter quality standards incurs significant energy costs. They also have relatively
short asset lives, and some, which were installed 20 years ago, have now reached or are
approaching the point of replacement.
Wessex Water recognised these issues in its 2004 price review (PR04) submission by
developing proposals for improving the management of its asset base aimed at extending
the functional life of these deteriorating assets. This was described as ‘sweating the assets’
and contributed to an alignment between the company’s initiatives and Ofwat’s perspective on the company’s capital maintenance plans. Alongside the regulatory requirements,
there was a growing understanding in the company of the value to be gained by applying
the principles promoted in the CMPCF. These led to asset management being seen as
core to the future success of the business, and a belief that if sound asset management
principles were applied successfully then the regulatory aspects of price setting would
fall into place naturally.
In 2006, the company undertook a root and branch review of its asset management
capabilities, to identify where and how these needed to be developed. It was understood
that the development of these capabilities would be an evolutionary process and drive
change in the business. The review led to the launch of five major initiatives
g
g

g
g
g

the creation of an asset management function
the development of a strategic vision
the use of risk management for maintenance and investment decisions
PAS 55 certification to act as a roadmap for maturity
investment in new work and asset management systems and learning.

1.2.1
Creation of an asset management function
The company’s organisational structure, conventionally arranged around maintenance
and operations, was changed to one that focused on optimising the management of
assets (Figure 1.2), with the emphasis on achieving a deeper understanding of their requirements and the ability to find the right balance between performance, costs and risk.
A new asset management directorate (AMD) was created, which was tasked with
establishing the department at the core of the organisation’s long-term direction and
developing an integrated approach that could be implemented across the company.
The main initial objective for the AMD was to identify proposals for the periodic
regulatory review in 2009 (PR09) that could subsequently form ‘business as usual’
processes. Key to the directorate’s success was to ensure there was a commitment
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Figure 1.2 Wessex Water’s organisational structure
Courtesy of Wessex Water

Operational
services

Support
services

Non-regulated
services

Asset
management

Engineering and
construction
services

Retail
services

Continuing service to customers

from the whole company to achieving strategic objectives, and this involved developing
close working relationships at the outset with the in-house engineering, construction and
operational parts of the business.
1.2.2
A long-term strategic vision
Water companies’ objectives need to be directed by long-term environmental objectives
and customers’ needs. In December 2007, as part of the periodic review process, Wessex
Water published Water – The Way Ahead (Wessex Water, 2007), a statement of its

strategic direction that set out the future challenges for the water industry in the UK
and how the company planned to deliver services over the next 25 years.
This included a commitment to operate and maintain the capacity and condition of the
asset base for current and future generations by
g

g
g
g
g

enhancing assets to meet long-term projections of customer demand, to achieve
quality obligations and to plan for the impact of the future being different from
the past (e.g. effects of climate change, and urban creep)
maintaining stable service levels (serviceability)
delivering industry-leading standards of service
optimising capital enhancements and operational maintenance interventions
planning the management of interventions to minimise disruption to communities.

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Case study: Wessex Water

1.2.3
Risk-based prioritisation
A focal point in the development of the company’s asset management capabilities has
been risk-based prioritisation of maintenance and investment. The objective was to

improve understanding and management of risks to service associated with operational
activity and external factors. An iterative approach was taken that built on external
initiatives from environmental regulators, such as water protection plans (risk-based
plans for managing water supply compliance), and water distribution networks’
operational and maintenance strategies (DOMSs). Modelling and analytical tools
were developed to prioritise operational maintenance response and investment, by
allowing
g

g
g

a consistent way of assessing the impact and likelihood of service failure across all
the company’s physical assets at an operational, tactical and strategic level
a review of all emerging customer, environmental, legal and regulatory risks
reporting to senior management and the board on strategic high-level risks and
mitigation measures.

These processes and tools use an extensive risk and value approach that has been central
to the company’s strategic work to support the delivery of its 2010–15 (AMP5)
programme. They are now cited by external auditors as examples of asset management
best practice. The ‘heat map’ report (Figure 1.3) allows a simple representation of the
company’s aggregated risk position by using colour (green, low; red, high) to show
the severity of the risk position for the company’s service standards and industry
drivers (Sx).
The relative positions on the map are based on probability assessments of performance,
condition, potential hazards and predictive modelling; and the likely financial, customer,
environmental, regulatory, and health and safety impacts. These are summarised as
scales of very low (1) to very high (5).
1.2.4

Certification to BSI PAS 55
To help it achieve its objectives, Wessex Water has used the BSI PAS 55:2008 asset
management specification (BSI, 2008) as a road map for developing its maturity. The
company believed the requirements were more accessible and far reaching than those
developed within the sector for capital maintenance planning and self-assessment,
and that gaining external certification to the standard would also be more effective in
facilitating the changes required. In preparation for this, in 2007 the company engaged
an independent risk management and systems certification organisation, Lloyds
Register, to undertake a gap analysis, which identified pockets of good practice and
weaknesses in some business processes and systems, and in the quality and sharing of
information and data.
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Figure 1.3 Example of a risk management ‘heat map’ report. (The actual map uses colour, with the
background changing from green in the bottom left to red in the upper right, to give a visual
indication of risk)
Courtesy of Wessex Water

It was recognised that improvements in these areas could strengthen the company’s asset
management capabilities, and in the process contribute to business efficiency. Wessex
Water was the first water and sewerage business to obtain PAS 55 certification in
March 2008, and continued assessment by Lloyds has added value by helping with the
development of business processes, skill levels, and the establishment of collaborative
company-wide improvement initiatives.
Historically, business processes in the company had been managed by separate

departmental ISO 9001-certified quality management systems. A new interactive asset
management framework (Figure 1.4) has provided a clear line of sight and coherence
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Asset plans

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Asset strategies

Business objectives

Asset group plans

Boreholes
Springs
Water treatment works
Service reservoirs
Booster pumping stns
Meters

Asset group plans

Impounding reservoirs
Raw water aqueducts
Trunk mains
Distribution mains

Service pipes

Sewers (including
siphons combined
sewer overflows and
tunnels)
Rising mains
Sea outfalls

Asset group plans

Sewerage
Infrastructure

Sewage pumping stns
Sewage treatment
works
Sludge treatment
centres

Asset group plans

Sewerage
Non-infrastructure

Transport
Information systems
Laboratory equipment
Property
Control and

monitoring

Asset group plans

Management
and general

Controls
Contingency plans, structure, training, communication, information systems, risk management
Implementation
Investment planning, capital investment, operation and maintenance

Water
Non-infrastructure

Cross-functional
EMI maintenance
Carbon (energy, waste)

Asset management strategy

Risk and asset
management policies

Vision/SDS
(strategic direction statement)

Water
Infrastructure

Courtesy of Wessex Water

Figure 1.4 Wessex Water’s asset management framework

Case study: Wessex Water

15

Assessment and review
Performance and condition, compliance investigations,
audits/management review