Trigger Points

Capital expenditure items can be used to overcome risk exposure.

The risk may be sufficient at a point in time to justify the investment expenditure.

However the works may be deferred because:

• A more accurate indication of failure is available through other performance indicators or parameters
• The actual time to failure (and therefore the probability) can be more accurately assessed
• The work to overcome the failure can be completed in a timeframe shorter than the warning given by the relevant trigger point.

In these cases the capital expenditure can be deferred until another trigger point is reached. In this way the capital expenditure can be deferred until there is a high probability of it actually being required. The organization will have implemented the CIP "just-in-time".

Although an organization is aware that the capacity of their assets may be insufficient for peak demand situations, it could:

• Establish the timeframe required to fast track the necessary capital works
• Identify the actual time at which the new facilities need to be in operation and the indicators that will identify this point
• By working backwards from this point, identify the indicators that should trigger the commencement of design and/or construction
• Optimize the capital works program to eliminate long-term delays. This may involve some preliminary planning, design and even tenders and supply for specific pieces of equipment
• Build this timing into a detailed project management plan, with the trigger points clearly marked.

These works can appear in the CIP program as "Contingency Items". In this way the capital expenditure is significantly deferred, resulting in savings to customers and the organization itself.

In some cases a series of trigger points may be needed to indicate the commencement of the:

• Detailed design process
• Calling of tenders
• Acquisition of specialist components etc.

These warning trigger points may occur but the construction may not proceed if the situation improves in the meantime. Examples are:

Expansion of headwork capacity for water utilities

Delay in reconfiguration arrangements for water treatment and long term storage in a water system.

This is shown below:

Unplanned/Contingency Item Approval/Fast Track Path

Best practice CIP validation processes need to encourage the accurate prediction of capital expenditure projects in sufficient time for them to be clearly identified, processed and managed over a logical and achievable time-frame.

Works sometimes need to be identified and completed via a fast track or contingency route. Causes include:

• Critical events that are totally unexpected or not predictable. For example sudden movement in a dam picked up during regular condition monitoring (dam surveillance program), would immediately indicate to engineers that some catastrophic failure was imminent and that emergency works needed to be undertaken urgently. This type of work needs to be evaluated as with any other capital expenditure.
• Emergency situations. When an asset fails unpredicted, emergency repair activity may involve capital expenditure items, which should also be capable of being fast-tracked. As organizations become more commercial and restrict capital and recurrent expenditures, it is more probable that failures may occur ahead of current predictions. The CIP program should be rearranged to suit the actual event, accelerating the emergency program and rescheduling the program of works based on the risk ranking of projects.
• Natural events such as:
  • High wind storm
  • Floods
  • Earthquakes
  • Land slip.
    The CIP review may not be completed until after the event. It is still desirable that analysis is undertaken so that information from these events can be used to ensure that the organization takes appropriate action and makes the most appropriate investments in the future.
• Developer generated works. For many organizations and utilities, this item of capital expenditure is one over which they have least control. Best practice with capital investments is to fast track these to provide the appropriate level of support to developers. This trend has put even greater pressure on utilities, municipal organizations and Government departments. In some cases the proposed development will result in significant system augmentation or extension works for the responsible authority and it is vital that these are properly identified, costed and a thorough economic evaluation is undertaken. This will ensure that true costs are clearly identified and that the appropriate charges etc. are allocated to the development concerned. In most cases these are private sector works. From a commercial and business perspective it is vital the organization has a fast track process to evaluate these proposals as quickly as possible, in a logical way that derives a high confidence level in the results.
• Contingency item works. Some works can be identified and set in place but the actual timing of the works should be deferred until actual trigger points occur. Fast tracking arrangements are not necessarily required because these contingency works would have been fully evaluated before the trigger event. Note that a contingency item has met the normal evaluation program requirements.

The capital expenditure review process needs to accommodate these Unplanned / Contingency / Fast Track item type works.

These should be accommodated in the normal program as shown below :