Costs & Benefits
Costs
The costs of each option need to be determined. The inputs required include:
- Cost involved (total investment)
- Project start/finish dates
- Cash flow required during project.
The various treatment options are likely to involve:
- Quite different costs
- Different time when the works will be carried out.
Each option is likely to provide:
- A different improvement in the level of service or the risk to the organization
- A different effective life cycle.
Depending on the viability of the organization the replacement or rehabilitation program can be completed to suit "optimized decision making" that will have either the lowest:
- Life cycle cost (NPV) for those organizations with a viable financial structure, or
- Cashflow for those organizations that are in a difficult financial position.
The benefits that can be derived depend on the nature of the asset management program, but in general they can be derived through advanced asset management systems.
For each treatment option, the types of benefits are usually similar, the difference being a degree of magnitude. Before the analysis is carried out, management should ascertain the extent of the various benefits.
Any treatment option usually would have at least one or a combination of benefits as its objective:
Extension of asset life
This is really the effectiveness of the treatment option, i.e. the time period before the same treatment is required again in order to provide the level of service.
Reduced O&M cost
With assets in a better condition after renewal/rehabilitation the O&M cost can be optimized and reduced with less likelihood of failure.
Improved level of service
Authorities need to have regard to the level of service they offer for the cost.
An improved planned maintenance environment is likely to improve the reliability and level of service that all assets offer to customers. Although this is difficult to assess, it does reflect the cost that each ratepayer contributes towards the provision of the various asset groups in the municipality and the service level they get from them.
Some services are more critical in terms of the reliability and the quality of the service they offer, such as services that are subject to rapid consequence of failure. However, the impact on customers varies quite dramatically between the asset groups e.g., longer grass in our parks and gardens to slightly rougher roads with more potholes.
Improved production capacity/income
In some cases the renewal works will allow the organization to derive greater income through the sale of a product in demand.
Examples of this are:
- Improved quality of service that allows organization to charge a higher unit rate for its service.
- More water available during peak hour due to improved pump efficiency or water main coefficient of friction
Risk cost reduction
For critical assets with catastrophic failure modes, the greatest benefit is the avoidance of risk cost. It is not easy to quantify the risk cost, but based on local knowledge and past records about failure, the consequence of failure and the probability of failure may be estimated with relatively high degree of confidence.