Funding Models

The asset management plans should provide the key inputs of capital and recurrent expenditures to any funding model.

For each project, the asset management plan will include capital and current expenditure allowances for:

• Growth
• Renewal, including reliability
• New regulations or changes in levels of service
• Efficiency investments.

The management plan should be constructed so that the confidence level increases as the project gets closer to commencement day.

For projects that are further ahead e.g. 15 - 25 years out, reduced confidence levels are appropriate.

It is important to recognize that the asset management planning process is not capable of identifying the timing of future projects with a high confidence level (except for regulatory compliance issues).

An organization needs to develop an envelope for these projects and the associated funding models that represent the:

Optimistic case: the latest time that the works may be required, together with the optimistic solution / option or the lowest likely capital investment, e.g., a rehabilitation scenario.

Pessimistic case: the earliest probable time for the capital investment and the worst likely technical solution, e.g., a more expensive form of rehabilitation or the total replacement of the asset.

This complies very well with the confidence level philosophy and slowly improving the project's confidence level as it moves closer to the decision point or solution. This provides an envelope of future potential funding.

This is shown below:

The organization needs to have developed its Capital Works programs and associated recurrent expenditure budgets up to a reasonably high degree of confidence for the next 3 or 5 years, relating to their tariff or rate-setting period.

As the project moves closer to real investment (e.g. Design & Documentation) the confidence level is increased to the targets required for all investments.