Customer Review/Consultation
This topic covers:
Asset Managers need to understand the real growth of their business and the way in which the demands for service will alter in future including changes in:
- Population - users and community
- Unit demand for services
- Demographics of customers and users.
Growth can be positive, stable and negative. It is often best to project a range of scenarios such as “high”, “low” and “most likely” when forecasting demand.
It is also important to understand the risks involved if there is a capacity failure as a result of incorrectly predicting demand and catering for it.
Asset owners need to be able to measure the performance of their assets in order to assess the effectiveness of their operational, maintenance and capital works program, relative to prescribed service levels and regulatory requirements.
Conventional performance indicators as measured by the number of failures, blockages, or flooding events, etc do not adequately describe the condition of the asset. Best appropriate practice requires that information on the types of failure, number of customers affected, and the degree to which the failure affected the target level of service be available. Through this process an “asset condition” index can be developed that allows the organization to amalgamate customer/user and technical requirements.
However, use of such performance indicators should take into consideration the effects of these incidents or the consequences of failure in an economic sense. As assets age, performance or the level of service provided by the assets will deteriorate. It is important that asset owners can predict the point in time at which performance will drop to an unacceptable level, and communicate this to customers or the community.
Asset condition deteriorates at different points over its life cycle and the rate of deterioration is also affected by the environment in which an asset operates and the way in which it has been maintained.
Asset managers should:
- Link these condition/function indices with their customers’ expectations at a cost that the customers are willing to pay
- Develop renewal and levels of service options for inclusion in asset management plans
- Understand the future level of service options available and their associated costs
- Publish these publicly through asset management plans and associated funding strategies
- Use these in public /customer consultation programs.
The cost of implementing the various options contributing to adopted strategies should be identified and the long-term financial impact of the strategies made known to customers.
Consultation with customers and stakeholders is carried out with costed options available for consideration. It may be that different service levels are offered to different groups of customers or geographical areas.
This approach provides an organization with:
- A framework for the management of assets
- Financial forecasts for capital and maintenance expenditure
- Assets managed from a whole of life perspective
- Benchmarking against lifecycle funding level
- Estimates of total future funding requirements
- A sustainable business with a clear relationship between cost of service and levels of service
An organization should use tactical planning for its assets to develop an appropriate funding model that balances the future capital and maintenance expenditure against the predicted impact on customers in the form of a tariff or rate.
A best appropriate practice tactical planning model includes provision for analysis of the administration, financial, operational, depreciation and capital expenditure.
It is possible to assess new capital programs in the following categories:
- Growth/augmentation
- Planned renewals
- Improved Levels of Service (Future Regulation)
- Improved Levels of Service (Customer expectation)
- New assets and services
- Business efficiency improvement
- Other investments.
This will provide the organization with a projection of the likely impact on rates or levies/charges associated with an adopted expenditure program, as shown below. The organization should make these forward projections known to customers and take steps to smooth cash flows where practicable.