Managing ageing assets – when you don’t have a crystal bal

Ageing assets represent a particular challenge for council asset managers. While the eventual failure of an asset may be inescapable, the economic end-of-life situation can be overlooked – especially when lifetimes are measured in years or decades.  

The end of an asset’s economic life is characterised by increasing operating costs and falling reliability, culminating in the asset’s functional failure. At the same time, legislative changes or evolving requirements may mean the on-going operation of an asset becomes uneconomical, even though the asset itself continues to function acceptably. 

A replacement strategy should recognise not only where an asset’s economic end-of-life has occurred, but also forecast this eventuality well in advance.  

Another important consideration is how the end-of-life situation will be managed. One common approach is simply to react to any unforeseen functional failures, sometime referred to as ‘fix-on-fail’. This can be effective where there are low-criticality assets with low consequences of failure. Even for higher-value assets, fix-on-fail can be a valid approach where there is underlying asset redundancy accompanied by a low failure rate. 

An alternative approach is to replace assets prior to functional failure. While such planned replacement can involve considerable capital expenditure, the costs associated with unplanned functional failure may be many times higher.  

There are several techniques available to determine the optimum time for planned replacement. In the highly regulated environment in which councils operate, these costs are driven up by stringent requirements in service performance, safety legislation and environmental concerns. It is therefore crucial to calculate these outlays in planning a cost-effective asset replacement. 

When faced with large numbers of critical assets moving towards their end of life, the planned approach often becomes more attractive as it will help prevent a large increase in failures and ensure customer service standards have been maintained.  

In this environment, the key question changes from ‘what is the condition of the asset?’ to ‘when will the condition of the asset become unacceptable?’ Such forecasting techniques are a key component in the development of an effective asset replacement strategy, addressing:  

• At what rate will assets deteriorate to the point of service failure – and require renewal?  

• At what rate can the available resources plan to deliver renewals?  

• What is the risk to the service if some assets reach the point of failure?  

• Can the renewal rates match asset deterioration rates and protect service outcomes through the current planning period? 

The capability to develop a strategy to manage ageing assets requires a sound understanding of asset behaviour over time and the influence on condition and service outcome. This is often specific to an asset population and will be a function of design, implementation, maintenance, operation, and service loading. 

Peak Services is capable of undertaking condition assessments and lifecycle analysis across a range of asset classes to assist you in developing your asset replacement strategy.
 

If you would like to know more about this issue, contact Simon Martin on 0448 102 122 or via email smartin@wearepeak.com.au.