An asset management plan helps you plan ahead so that you can get the most value from your assets and have the financial resources available to replace them when necessary. Assets are tangible things such as pipes, pumps and tanks that are components of your water system.
Many small water systems have smaller income, and need considerable notice to budget and gather funds for replacement of assets. By planning for timely renewal, you can avoid some equipment failures. This helps you to provide safe, reliable, and secure drinking water.
If you haven’t already, you will first need to complete a Basic Asset Inventory. If your asset inventory was done more than a year ago, you should review and update it by inspecting each component of your system and recording new information.
Your next step is to prioritize your assets. This will help you allocate resources. You can do this by assigning a rank (based on importance) to each asset in your system. Typically, assets are prioritized based on their remaining useful life; moving those that will need replacement soonest to the top of the list. However, you can also prioritize them by putting them in order from most critical to least critical. In this approach, you will want to place anything that is an existing threat to public health and safety or the environment at the top of your list, followed by those with potential concern to public health and safety. This middle of your list would contain those assets that pose an internal safety concern or are a public nuisance. You would place the items that improve operations and maintenance, or those that would be nice to have at the bottom.
Questions you should ask when prioritizing your assets:
- What is the remaining useful life of the asset?
- How important is the asset for safe drinking water?
- How important is the asset to the operation of the system?
- Can other assets do the same job?
Of course, there are other factors that can influence which water system projects are funded and when they are completed. Developing an asset management plan and prioritizing your assets will help you work out when you should replace your assets so water delivery is not jeopardized. You may have to collaborate with your community to develop a replacement schedule that works for all parties; letting them know about the plan and the benefits/consequences that might occur.
An asset management plan made in conjunction with long-term planning will help forecast your future financial needs. It enables you to develop a reasonable rehabilitation and replacement schedule for your system.
Calculate how much money you will need for asset replacement in the future by:
- listing your assets
- assigning their replacement priority
- specifying the year that the asset will need to be replaced
- estimating the cost of replacement and
- estimating the annual reserve required.
To calculate how much it will cost to rehabilitate and replace your assets as they deteriorate, you will need to gather information on all costs associated with this, which includes:
- equipment purchase cost
- installation cost
- pilot tests
- labour charges
- disposal of the replaced asset
For information about estimated repair or replacement costs, contact suppliers and consultants. A listing of companies that provide equipment and services and can provide cost data can be found on the Canadian Water Directory web page (check the box for BC).
You can now summarize the information you’ve created on an asset replacement schedule. To protect public health and deliver safe water, you will need to rehabilitate and replace your assets over time. Many systems need considerable lead-time to budget and gather the necessary funds for. By developing an asset replacement schedule, you will be able to allocate your resources in the most efficient way. This can be as simple as a list organized by date, but should be reflected in your Five-Year Plan and Long-Term Plan.
This preventative maintenance will help you to maximize the useful life of your assets, avoid problems, and reduce or delay replacement costs. It helps you stay on top of maintenance, repairs, and parts replacements so you can avoid equipment failure.
A key element of asset management is having a Replacement Reserve Fund. This is a fund where you accumulate money for future asset renewal. This reserve fund should be protected from other uses, as it ensures funds will be available to replace system components when required.
To calculate your Replacement Reserve Fund, you will need to make some decisions on how quickly you need to build this fund, and how much you need in it. By knowing how long your assets should last, and how much they will cost to replace, you can figure out how much money you will need, and by when.
While it can be difficult to put funds aside, it is far easier to put aside $200 a year to replace equipment than to come up with $2,000 once it fails; and to have the entire system down until funds can be secured and replacements made. Customers on limited incomes often cannot suddenly find significant sums to pay for unexpected repairs.
We recommend that this information be reviewed annually and modified as necessary. Your system’s finances and costs can change from year to year, so it is important to update this worksheet annually. This will ensure you have enough reserves to cover necessary rehabilitations and improvements. Key decision makers such as the trustees or key property owners will want to understand the financial requirements related to the renewal of your assets. We recommend obtaining stakeholder feedback early in the process. Consider presenting your draft Business Management Plan (BMP) to the key decision makers and customers.
Asset Inventory Worksheet by the Sustainable Infrastructure Society
Asset Management Worksheet by the Sustainable Infrastructure Society
Financial Best Management Practices Guide by the Sustainable Infrastructure Society
Water, Data & Tools by the BC government
Taking Stock of Your Water System from The Environmental Protection Agency of the United States
Asset Management: A Handbook for Small Water Systems, US EPA, 2003