APWA International Public Works Congress

NRCC/CPWA Seminar Series Innovations in Urban Infrastructure 2000

ADVANCED ASSET MANAGEMENT: TOOLS AND TECHNIQUES
by
D.J. VANIER1
Institute for Research in Construction, National Research Council Canada
1500 Montreal Road, Ottawa, CANADA K1A 0R6
Abstract
This presentation describes the six Whats of asset management. These six levels of
implementation can be used as a methodology for the implementation of an asset management
plan in most organizations. An asset management plan provides a framework for collecting the
data and information required to make decisions about the strategic plans of the fixed assets of an
organization.
The extent of the asset management market in Canada is large, upwards of CDN$ 5.5
trillion; while in the USA it could be six-times larger. The estimated maintenance and repair
expenditure requirements in Canada are of the order of CDN$110.0 billion per year, whereas
capital renewal expenses are close to CDN$ 86.5 billion per year. The sum of these two figures is
close to double the value of new construction in Canada each year. Similar maintenance and
renewal figures in the USA could be to the order of US$800 billion per year. Managers of
municipal infrastructure are realizing the need for effective tools to manage this vast asset base,
and are now demanding decision-support tools to help them in their work.
Rsum
Cet expos dcrit les six questions poser concernant la gestion des biens. La plupart des
organisations peuvent considrer ces six niveaux comme les lments dune mthode de mise en
oeuvre dun plan de gestion des biens. Un tel plan fournit un cadre pour la collecte des donnes
et de linformation ncessaires pour prendre des dcisions concernant les plans stratgiques
dune organisation en matire dimmobilisations. Les gestionnaires dinfrastructures municipales
sont conscients de la ncessit de disposer doutils efficaces pour grer cette vaste base de biens,
et ils exigent maintenant des outils daide la dcision qui faciliteront leur travail.
Keywords: investment planning, maintenance management, municipal infrastructure, decisionmaking, decision-support systems, condition assessment

Dr. Dana Vanier is a Senior Research Officer at the National Research Council Canada. He is
currently investigating the use of Information Technologies in the field of service life asset
management. He is an editor of ITCON, the Electronic Journal of Information Technology in
Construction (www.itcon.org) and a member of the CIB W78 working commission on IT in
construction. He can be reached at dana.vanier@nrc.ca or at (613) 993-9699. This paper can be
obtained electronically at www.nrcuca/irc/uir/apwa in the Louisville 2000 proceedings.
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1

Introduction

Owners of large municipal infrastructure portfolios such as federal departments, regional

governments, municipalities, universities or the armed forces have responsibility over a
diversified set of constructed facilities. These assets range from complex, inter-related
underground networks to sophisticated buildings, as well as roadway systems, parks and any
other equipment necessary to maintain this infrastructure (to be called municipal infrastructure in
this presentation). This municipal infrastructure, however, cannot be completely protected from
deterioration due to usage, climatic effects or geological conditions. Furthermore, because of
inadequate funding or inappropriate support technologies, certain components of this
infrastructure have been neglected and have received only remedial treatments (CERF 1996;
NRC 1996).
"The United States spends an enormous amount of money annually to replace or repair
deteriorated equipment, machines and other components of the infrastructure. In the next
several decades, a significant percentage of the countrys transportation,
communications, environmental, and power system infrastructure, as well as public
buildings and facilities, will have to be renewed or replaced." (NRC 1999)
2

The Six "Whats" of Asset Management: An Overview

Vanier (2000a) describes six "Whats" of asset management in his previous presentation in
this publication: What do you own? What is it worth? What is the deferred maintenance? What is
its condition? What is the remaining service life? What do you fix first? This next presentation
outlines ways to implement the six "Whats" in practice. In fact, these six "Whats" should be seen
as a sequential implementation schedule for an organization wishing to implement strategic asset
management. In the remainder of the text, these six "Whats" are called the six levels of
implementation for asset management.
2.1

Asset Management Implementation Plan

The concept of asset management is difficult to accept as a philosophy and to implement in
practice because asset management means many things to many different people. For example,
some disciplines in an organization may feel they already have an asset management system in
place when they have implemented an inventory system only. Or, some organizations may have
some disciplines that are well-advanced in asset management implementation (i.e. bridges, roads)
but may also have many that are lagging behind (i.e. parks, buried utilities). Or, some regions
may have reached a plateau and wish to advance to a higher level not knowing that a sister
discipline in another region has the tools and techniques in place to assist them. Because of these
obvious differences in organizations and in any particular organization, an organization's asset
management implementation plan should have a series of overlying principles established at a
high level in that organization. The asset management implementation plan should:

Assess organization's current level of implementation in various regions and disciplines.

Set minimum criteria for data and information for all levels of implementation.
Estimate cost of implementation.
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Set timelines for next level of implementation

2.2

Asset Management Plan: Levels of Implementation

The six asset management levels of implementation are described briefly below; however, a
full discussion of these are included in the next section and in an associated paper in this
publication (Vanier 2000a).

The "What do you own?" question may seem to have straightforward answers, but
there are many owners of municipal infrastructure who may not know the extent of their
portfolio or the percentage breakdown in the various disciplines (e.g. bridges, buried,
building, roads). Unless decision-makers have an accurate picture of the extent of the
asset base, strategic asset management planning (planning beyond the five-year
horizon) is hopeless.
The "What is it worth?" question asks asset owners to assign realistic values to their
asset portfolio. Once the value of a portfolio has been established, then it can be broken
into the various asset disciplines and maintenance budgets can be assigned accordingly.
Although it may appear nave to allocate maintenance moneys strictly based on the
value of an asset, without other metrics in place to establish priorities, basing decisions
on actuarial value is a simple, objective method; otherwise the decisions would be
entirely subjective. Book value, appreciated historical value and current replacement
value (CRV) are different ways to calculate an asset's worth (Vanier 2000a).
The "What is the deferred maintenance?" question seeks information that will
provide an additional metric for maintenance fund allocation. Knowing the amount of
deferred maintenance provides decision makers with an overview of the amount of
money required to bring the maintenance and repair under control. This value can also
be used to calculate another metric for maintenance prioritization as suggested by
NACUBO (1990); namely, the facility condition index (FCI). The FCI is calculated as
the amount of deferred maintenance divided by the CRV.
The "What is its condition?" question is an extension of the "What is it worth?"
levels of implementation, and it is another tool to prioritize maintenance, repair and
renewal. Technical condition metrics are not available for many discipline and some
may still be under development for years, so a mix of the FCI and the technical
condition indexes may have to be used in an organization to identify the condition or
level of performance. The technical condition index (Vanier 2000a) is more complex,
difficult, and expensive to obtain than its financial condition; so this level should be
attempted only when the previous three levels of implementation have been successfully
attained.
The "What is the remaining service life?" question seeks detailed information about
the asset that will add an additional metric for maintenance prioritization; namely,
when should capital renewal occur. The "technical service life" can be obtained from
in-house expertise or service life tables (HAPM 1995); however the "economic service
life" must be calculated as a function of projected maintenance and repair expenditures,
which are not know until the "What is deferred maintenance?" and "What is its
condition?" levels of implementation have been addressed satisfactorily.
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"What do you fix first?" The answers provided to each of the previous five levels of
implementation assist the decision-makers to prioritize their maintenance expenditures.
However, having suitable answers to the "What is the remaining service life?" level
of implementation will allow the asset managers to make better, objective decisions.
Unfortunately, maintenance prioritization is not a simple task (Vanier 1999, 2000a) and
sophisticated techniques such as multi-objective optimization are sometimes required
to choose between deserving, yet competing, projects and to schedule their
implementation order.
A rough layout for an asset management implementation plan, directly related to the six
"Whats" of asset management, is presented as Table 1. Current level of implementation,
milestones for the subsequent implementation levels, along with estimated costs of
implementation can be recorded.
Table 1: Asset Management Implementation Plan
Six "Whats" of Asset Management
Own

Worth

Deferred

Region #1
Bridges
Roads
Buildings

Jan 2001
$100K

June 2001
$50K

Region #2
Bridges

Roads

Buildings

Jan 2002
$25K
Jan 2001
$50K

Jan 2001
$100K

Jan 2002
$50K

Region #3

Condition

Service Life

Fix First

Jan 2002
$100K
Jan 2003
$25K

Asset Management Implementation

This section details asset management implementation. It provides examples for early
implementation strategies, normally when data or information are lacking but decisions still have
to be made.
3.1

What do you own?

Inventory systems or computerized maintenance management systems (CMMS) are tools
that can also be used to record the extent of an asset portfolio (Vanier 2000a), and some systems
may also record information required at the five other asset management levels of
implementation. However, some organizations may not have an accurate picture of their existing
portfolio and can only rely on historical "book values" or population growths to determine the
construction date, age and value of an asset. An example is provided below to estimate the age
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and value of built assets in Canada and the USA; the same techniques (and figures) can be used
to calculate the age and value of assets for most organizations.

$billion

3.1.1 Annual Growth in Canada and the USA

The value of built assets in Canada is increasing at a rate of approximately
CDN$ 100 billion per year, as shown in Curve (a) of Fig. 1 (Statistics Canada 1994, 1996, 1999;
Vanier 2000), having reached a peak of CDN$ 151 billion in 1988. This curve closely follows
growth and recession periods in Canada during that time frame. Curve (b) normalizes the CDN
dollars to US dollars, which the author believes to be more reflective of the value of the
construction growth owning to the fluctuations in the CDN dollar since 1976, as shown in Fig. 2.
Curve (c) in Fig. 1 brings forward the annual growth numbers to constant 1999 dollars, based on
figures from Fig. 3.

$280
$260
$240
$220
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0

(a) CDN$

(b) US$

(c) Constant US$

1960 1965 1970 1975 1980 1985 1990 1995 2000

Fig. 1: Annual Construction Growth (Canada) in Current and Constant 1999 Dollars.
1.0500
1.0000
0.9500
0.9000
0.8500
0.8000
0.7500
0.7000
0.6500
0.6000
1960

1965

1970

1975

1980

1985

1990

1995

2000

Fig. 2: Conversion Canadian to USA Dollar (FFC 2000).

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7
6
5
4
3
2
1
0
1960

1965

1970

1975

1980

1985

1990

1995

2000

$billion

Fig. 3: Constant 1999 dollars, obtained from Engineering News Record (ENR 2000).

$800
$700
$600
$500
$400
$300
$200
$100
$0

Constant US$
Current US$

1960 1965 1970 1975 1980 1985 1990 1995 2000

Fig. 4: Annual Construction Growth (USA) in Current and Constant 1999 Dollars.
Similar figures for the annual construction growth in the United States of America are
presented in Fig. 4 (US Census 1999).
It is interesting to note the juxtaposition of the Canada (curve a) and USA (curve b)
growths (in constant dollars) in Fig. 5 for the past 40 years. Curve (c) provides the comparison
numbers in constant US dollars for the Canadian growth patterns. Although curves (a) and (b)
appear to peek and to trough in similar patterns, the figures indicate that the Canadian
construction phases always tend to lag behind the US phases by a period of one or two years. The
most interesting difference in Curves (a) and (b) of Fig. 5 are the growth patterns for the two
countries in the last five years with the Canadian figures increasing modestly and the USA
figures hitting all time growth highs; it is well known that the USA is experiencing rapid growth
in many regions.

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$800
$700
$600
$500
$400

(a) USA US$

$300
$200
$100
$0

(b) Canada
$
(c) Canada
US$

1960 1965 1970 1975 1980 1985 1990 1995 2000

Fig. 5: Annual Construction Growth (Canadian and USA) in Constant 1999 Dollars.
3.2

What is it worth?
A rough breakdown into the specified construction classes, according to US Census (1999),
can be found in Table 2. Table 2 indicates that roughly 7% of the annual new construction budget
is spent annually on highways and streets; roughly 2.4% is spent on buried utilities; "Public
Construction (Miscellaneous)" of 2% includes recreational facilities, power generating plants,
transit systems and airfields and the 10.4% for "Buildings (Other)" in "Public Construction"
includes general administration buildings, prisons, police and fire stations, courthouses, civic
centers, and postal facilities. These four areas generally constitute the extent of municipal
infrastructure, or roughly 21% of the new construction in the USA in recent years.
Table 2: Breakdown of Annual Value of Construction Put in Place (US Census 1999)
millions (Current US$)
1994
Total Construction
555591
Private Construction
425658
Residential Buildings
247351
Non Residential Buildings136541
Public Utilities
35859
Farm Non Residential
3014
All other Private
2893
Public Construction
129933
Buildings
57754
Housing
4698
Industrial
1508
Educational
25783

1995
613535
474273
281115
153912
33156
3658
2431
139263
63471
5048
1389
28590

1996
656630
501749
289014
172990
33638
3815
2292
154882
71867
5230
999
34385

1997
711759
552236
314607
190711
40028
4284
2606
159523
73277
5124
1010
36234

1998 % Ave. 5 yr.

764233
100%
591561
77.1%
348826
44.9%
195776
25.7%
39607
5.5%
4451
0.6%
2901
0.4%
172673
22.9%
77690
10.4%
5618
0.8%
925
0.2%
39725
5.0%

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Hospital
Other
Highways
Military
Conservation
Sewer Systems
Water Supply
Miscellaneous

4236
21528
37616
3011
6308
8420
4709
12116

4617
23826
39464
2591
6008
9798
5618
12313

5152
26100
44105
2556
5739
10392
6419
13803

3906
27004
48515
2529
5447
10168
6830
12755

3968
27454
53532
2111
6003
11181
7602
14555

0.7%
3.8%
6.8%
0.4%
0.9%
1.5%
0.9%
2.0%

Although asset owners should be able to determine the extent and age of their portfolio
from their inventory numbers, sometimes population statistics may be the only way of
determining a realistic number for asset disciplines such as buried infrastructure (Gohier 1999).
In general, the breakdowns in Table 2 could be used if an organization was unable to clearly
identify the rough amounts for asset classes in their portfolios.
3.2.1 Total Asset Base (Canada and USA)
As a result of the annual growth described earlier in Canada, our country has an established
total stock of buildings and constructed infrastructure with an estimated value of more than
CDN$ 2.94 trillion, as shown in Fig. 6 (Statistics Canada 1994, 1996, 1999). Curve (a) shows
this number in constant (1999) dollars CDN, which is closer to CDN$ 5.5 trillion.

$6.0

(a) Total Constant $CDN

$trillion

$5.0
$4.0
$3.0

Total Current $CDN

$2.0
Residential
Engineering Works
Buildings

$1.0
$0.0
1960 1965 1970 1975 1980 1985 1990 1995 2000

Fig. 6: Total Assets (Canada) in Current and Constant 1999 Dollars.

The numbers for the USA total assets are presented in Fig. 7 in both current and constant
(1999) dollars. Data for Figures 7 and 8 for 1964 onwards were obtained from annual US Census
(1999) figures. Data for 1915 to 1964 were obtained from the C30-80 Supplement (US Census
Supplement 1981). Both data sets were brought forward to 1999 constant US dollars using
construction indexes from ENR (1999).
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$30
Constant 1999 US$

$trillion

$25
$20
$15
Current US$

$10
$5
$0
1960 1965 1970 1975 1980 1985 1990 1995 2000

Fig. 7: Total Assets (USA) in Current and Constant Dollars.

$trillion

The total infrastructure asset for Canada and the USA are presented and can be compared in
constant US dollars in Fig. 8. The numbers for total assets in the USA are to the order of US$30
trillion whereas the Canadian numbers are closer US$5 trillion. These numbers, and the graphical
comparisons of the USA and Canadian curves, indicate that a simple ten multiplier of USA
figures in this domain can no longer be used. The ten multiplier was probably applicable for
comparisons before 1975, whereas a multiplier of six would be more valid today. These two
curves also indicate that Canada experienced considerable growth in the 70s to 90s and that
growth is now tapering off and that from 1990 onwards the relative growth in Canada is similar
to the USA.
$60

$6

$50

$5

$40

$4

$30

$3

$20

$2

$10

$1
$0

$0
1960 1965 1970

1975 1980 1985 1990

1995 2000

USA

1960

1965

1970

1975

1980

1985

1990

1995

2000

Canada

Fig. 8: Total Public Infrastructure Assets (USA and Canada) in Constant 1999 US Dollars
(note differing scales one order of magnitude).
Accumulating the annual growth over a long period of time can also provide figures for the
total worth of an organization's portfolio. It is understood that depreciation and capital renewal
have already taken place, but at this time these factors will be ignored in these rough estimates.
These total values for Canada and USA presented in the previous figures are significant and
frightening; however, the magnitude of these numbers does establish the extent of the current
asset management challenge. The operation, maintenance, repair, and eventual renewal of this
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"built environment" therefore represent a major, and rapidly growing, cost to Canada and the
USA. Similar challenges exist in Australia (Burns et al 1999) and other developed countries.
Although the numbers presented in the proceeding sections present the picture for the entire
built environment for Canada and the USA, the same methodology could be used to establish the
value of the built environment for a specific municipality or organization. For example, if the
historical value of an asset is known (from the accountants), then Figs. 2 and 3 (the raw data for
these curves can be obtained from www.forecasts.org/data/data/EXCAUS.htm and
www.enr.com/cost/costbci.asp, respectively) can be used to calculate the value of these assets in
current and in constant dollars. This is one way to determine the second level of implementation
of asset management; that is, What is it worth?. Vanier (2000a) describes in details other ways
to calculate the value of assets in a portfolio.
3.3

What is the deferred maintenance?

Organizations investigating asset management renewal (NACUBO 1990; Melvin 1992;
NRC 1994, 1996) recommend separating maintenance and repair expenditures from those of
capital in order to understand the maintenance, repair and renewal priorities. Maintenance and
repair expenditures are interventions required to ensure that an asset is able to support the
purpose for which it was originally intended (Vanier 2000a) and to attain its optimal service life
(CICA 1989). Whereas capital renewal is a comprehensive action to completely replace an
existing asset, potentially with a whole different functionality or location. Typically, if
maintenance on a system or component is deferred too long it will promote early capital renewal;
however, this should be the exception and not the rule.
These two aspects, deferred maintenance and capital renewal, of asset management are
discussed in the following subsections in an attempt to estimate the size of the maintenance,
repair and renewal market in Canada and the USA. The techniques could also be used to estimate
the size of the deferred maintenance in most organizations.
3.3.1 Maintenance and Repair
Maintenance and repair expenditures should not include "funds for any activities that are
primarily operational or any construction work that expands or changes the function of a facility
or lengthens its life beyond its original design life" (NRC 1996) but should include routine
repairs which are defined as actions taken to restore a system or piece of equipment to its
original capacity, efficiency, or capability (NRC 1996). The Federal Facilities Council
recommends, "in the absence of other information", that annual budgets for maintenance and
repair should be set at approximately 2-4% of the current replacement value (CRV) of
constructed facilities (NRC 1994, 1996). The CRV can be defined as the cost to replace an asset
in current dollars; a full discussion on CRV is provided in the "What is it worth" section of the
accompanying paper (Vanier 2000a).
In 1995, CERF attempted to validate this 2-4% threshold to determine a suitable "level of
investment" necessary to maintain constructed facilities (CERF 1996). CERF reported that the
average "level of investment" for most facilities surveyed was less than 2% of the CRV and the
results of the survey indicated that the recommended 2-4% "would probably not be adequate for
facility upkeep if a substantial amount of deferred maintenance existed".

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Based on these recommendations from NRC and CERF, using a conservative 2% figure,
and taking an established asset base in Canada to be CDN$ 5.5 trillion, it can be roughly
estimated that the potential cost of maintenance and repair expenditures per year in Canada alone
to be CDN$ 110.0 billion. These rough techniques could also be used to estimate budget
requirements for maintenance and repair in any organization. It is more difficult to estimate the
amount of deferred maintenance in an organization when inspection data are not available.
Rough figures for the amount of deferred maintenance can be obtained by calculating the past
years' maintenance expenditures and relating these to the hypothetical 2% per year of CRV, and
then by multiplying the result by the number of years when adequate maintenance was not
performed. Of course, this does not take into account the compounding effect of deferring
maintenance described in the accompanying paper (Vanier 2000a), but can provide a starting ball
park figure for asset managers.
3.3.2 Capital Renewal
In order to establish the costs of capital renewal it is first necessary to establish the service
life of assets. Most building components or systems have service lives ranging only from 5 to 35
years (HAPM 1995), whereas engineering works, such as bridges, buried utilities and roadways,
have values for services life ranging from 10 to 100 years. The average service lives for existing
building and engineering works, as suggested by Statistic Canada (1994), are 37 and 30 years,
respectively. If a conservative average service life of 35 years is assumed and if asset renewal
follows a normal distribution curve, then the entire asset base should be replaced every 70 years,
or twice the average age of the asset. That is, half the assets should be replaced before 35 years
and the other half should be replaced in the next 35 years. This is a realistic assumption, as only a
small percentage of municipal infrastructure has historical value, therefore the majority will not
have to be maintained in perpetuity. Dividing the total asset base in Canada (CDN$ 5.5 trillion)
by 70 results in required renewals of CDN$110.0 billion each year. However, this method does
not take into account a large portion of assets that were constructed before 1980 and are now 20
years old. Some of these assets already require significant maintenance and repair, and others
require renewal. An alternative method was developed to take into account the rapid growth of
assets in the past three decades, as shown in earlier figures in this presentation. Equation (1)
calculates the total renewal requirements using a normal distribution curve for probability of
failure (pi), and the annual asset values from Fig. 1. The renewal requirements (rt) in any year (t)
are calculated as the sums of the assets built in each previous year (year t0 through to year t)
multiplied by that year's probability (based on a normal distribution and a 35-year service life).
t
r t= ni pi
i=t0

where n=value of assets and p= probability of failure in year i

Equation (1)

The renewal requirements for 1999 (r1999) using this method for Canadian assets alone are
CDN$ 86.5 billion. This is close to the CDN$ 78.6 billion calculated earlier using cruder
approximations.
3.3.3 Maintenance, Repair along with Capital Renewal
Assuming that the maintenance and repair figure of CDN$110.0 billion and the capital
renewal figure of CDN$ 86.5 billion are mutually exclusive, then the sum of CDN$ 196.5 billion
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per year represents the asset management market in Canada. In fact, in Canada the maintenance,
repair and renewal market of CDN$ 196.5 billion is almost double the current value of new
construction of CDN$ 100 billion, as shown mentioned earlier. These numbers represent a
significant base of work for the construction industry, as well as significant expenditures to
owners and operators of facilities. Unfortunately, emphasis has been placed on new construction
for the past three decades, to the detriment of maintaining the existing facilities (Johnson and
Clayton 1998). And this trend is continuing: Local governments plan an increase of 13.1% [in
1999] to a total of $ 7.6 billion in capital spending (Statistics Canada 1999). As a result, many
organizations may have more facilities than they can afford to maintain; and in many instances,
they may be unaware of this situation and their serious predicament.
3.4

What is its condition?

Once the three previous levels of implementation have been investigated, a ballpark
financial condition can be obtained using the financial condition index or FCI. As mentioned
earlier the FCI is calculated as the amount of deferred maintenance divided by the CRV. The
methods described earlier is Section 3.2 can be used to calculate the CRV, whereas Section 3.3
described a simple way to calculate the deferred maintenance. The FCI could be used to compare
assets and to prioritize maintenance and repair.
Another step for determining the condition is to assess its technical condition. Engineered
Management Systems (EMS), as implemented by the US Army Corps of Engineers, can be used
to establish the physical condition and the deferred maintenance of the asset (Vanier 2000a).
The US Army Construction Engineering Research Laboratory (CERL) has pioneered the
use of engineered management systems in many construction sectors, such as paving, roofing and
rail maintenance. Engineered management systems (EMS) assign a condition index (CI) to an
asset based on a number of factors including the number of defects, physical condition and
quality of materials or workmanship. The EMS software embodies the results of research studies
that estimate the potential degradation of the CI with respect to the loads on the system or
external agents acting on materials. With all of these data at hand, it is possible to estimate the
future CI, given the current state and a likely degradation curve.
A condition assessment survey (CAS) is another decision-support tool used to establish an
asset's existing condition. A CAS produces a benchmark for comparison; not only between
different assets, but also for the same asset at different. A CAS records the deficiencies of a
system or component, the extent of the defect, as well as the urgency of the repair work. In some
cases, the estimated cost of repair is also provided. Management, as a result of the data generated
by CAS, is better able to develop optimal plans for maintenance and repair of their buildings.
3.5

What is the remaining service life?

After the extent of an infrastructure portfolio is known, with its value and condition
determined, the asset manager must establish the remaining service life in order to calculate the
life cycle costs for alternative maintenance, repair and renewal strategies. There are different
types of service life, such as the technical service life and the economic service life.
The technical service life can be calculated employing techniques such as EMS, Markov
chain modeling (Lounis et al 1998) or from life expectancy tables (HAPM 1995). Techniques
employing databases such as EMS and sophisticated mathematical modelling using Markov
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Chain (Lounis et al 1998) provide estimates for the remaining service life of components and
systems. These techniques predict remaining service life based on studies of similar construction
forms under test conditions. Unfortunately these techniques require the collection of considerable
amounts of data; only a few domains such as bridges, pavement and roofing (Lounis et al 1998)
management have reliable service life prediction techniques.
Different data are required to calculate the economic life. Databases such as those from
R.S. Means (www.rsmeans.com) or Whitestone Research (www.whitestoneresearch.com) are
used to calculate the immediate costs of repairs and to compare these numbers to the costs of
renewal. Computer estimating programs can also calculate the costs of maintenance, repair and
replacement. The life cycle costs (LCC) of these expenditures can be calculated using standard
formulae for building economics (ASTM E917 1994).
Decisions regarding the maintenance, repair, renewal or do-nothing alternatives can be
made based on this economic analysis.
3.6

What do you fix first?

Some major asset owners in North America are realizing there will be reductions in
operating and maintenance budgets (NRC 1996) and/or "outsourcing" their maintenance and
repair responsibilities. Further complicating the asset managers challenges are perennial
construction problems such as the fragmented and conservative nature of the construction
industry and the limited financial resources for research and poor technology transfer to building
practitioners (CERF 1996).
All of these conflicting factors can make attaining an organizations management goals
extremely difficult. An analysis of these factors is necessary to identify the technical challenges
and opportunities for asset managers. These factors are broken into the following three
categories: (1) the financial versus technical factors, (2) the conflicting planning horizons and (3)
the network versus project factors.
3.6.1 Financial Versus Technical
Asset managers have a constant technical challenge to weigh the costs of maintenance,
repair or renewal versus the technical and functional benefits of implementing a solution. This is
exacerbated when there are more projects than funds, or when budgets are continuously shrinking
(FCM 1996). In many cases, these managers must allocate funds among competing yet deserving
needs; often having to make decisions based on incomplete data (CERF 1996). In addition, the
asset managers resources are being challenged from all sides: managers are also being asked to
privatize operations, outsource responsibilities or reduce overhead. All of these factors make it
extremely difficult for long-term decision-making in municipal infrastructure management.
3.6.2 Planning Horizons
Gordon and Shore (1998) have suggested three planning horizons that can illustrate the
conflicting nature of long-term decision-making for asset managers: operational, tactical, and
strategic. The operational planning horizon is identified as that within the two-year time frame;
the tactical planning is the two to five year time horizon, whereas the strategic planning is
planning beyond the five-year term. Any proponent of life cycle analysis understands these
deterrents to long-term planning: that remedies in the short term may not be the most economical
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in the long term. Combining this with conflicting political and administrative agendas,
restructuring and amalgamation, as well as rapidly changing targets and plans for each
organization, the planning for the strategic horizon is a difficult task.
3.6.3 Network Versus Project
Typically, the asset management tools in current use today deal with individual projects or
facilities (Vanier and Danylo 1998); for example, an engineered management system (EMS)
deals only with paving condition assessment surveys (CAS) and CMMS may deal only with work
orders and/or task scheduling. As any good asset manager realizes, municipal infrastructure is an
integrated system and the individual components must function both independently as well as in
unison with other systems. For example, many municipal infrastructure systems are networks that
depend on the weakest link (e.g. bridge and road networks), or the systems are interdependent,
where one network should be replaced at the same time as a neighbouring one (e.g. water
distribution and sewer).
Another network factor is the level at which asset optimization should take place:
discipline, facility or organization. Should one specific discipline (e.g. buildings or fleet) in a
municipal portfolio receive a disproportionate amount of funding, should one region attract more
funding attention than others, or should one department control the lions share of resources?
4

Challenges for the 21st Century

Because not enough is spent on maintenance and repair, owners are accumulating an everincreasing maintenance deficit, which leads to premature failures and premature renewals.
Indeed, even though Canadian cities, for example, currently spend between CDN$ 12 billion and
$ 15 billion every year on maintaining and renewing their infrastructure, there is an accumulated
shortfall estimated at CDN$ 44 billion to return these assets to an acceptable condition (FCM
1996). Many directors of public works in Canada suspect that this number is low, indicating
mounting technical challenges.
The recent announcements of infrastructure renewal programs in both the USA and Canada
are an indication that politicians (and voters) are concerned with the rapidly deteriorating
infrastructure; however the proposed remedies may be orders of magnitude too small for the
situation. The amount of deferred maintenance in some industry sectors is staggering. A "survey
of U.S. higher education facilities conditions issued by the Association of Higher Education
Facilities Officers (APPA) concluded that there's a backlog of US$26 billion in deferred
maintenance, up 27 percent from 1988 estimates" (APPA 1996). The equivalent number for
Canada has been reported at CDN$3.6 billion (CAUBO 2000), of which more than CDN$1
billion is considered urgent. In the hospital sector in the USA, there is deferred maintenance
equaling 20% of the Capital Replacement Value (CRV), of which 6.7% is deemed urgent
(Sawyers 1997).
There have been numerous reports, both in the popular press and research literature, that
many buildings are run inefficiently due to poor monitoring and control systems, water and road
networks are deteriorating faster than anticipated and the overall condition of Canadas bridges
remains unknown, and potentially hazardous. A lack of knowledge of the condition of the built
environment means that the scarce resources that are available for maintenance and repair are
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often used inefficiently or inappropriately (CERF 1996). These challenges affect everyone
through increased health and safety risks, reduced economic competitiveness, inefficient
maintenance strategies, a reduction in the value of a nations built assets and a need to increase
funding to maintain the built environment. In some cases, this overall inefficiency will actually
create the need for new buildings and engineering works; even when suitable facilities already
exist or can be modified.
Asset managers are the ones who are responsible for managing the substantial maintenance,
repair and renewal work. It is their responsibility to optimize expenditures and to maximize the
value of assets over their life cycles. In addition, asset managers are faced with many difficult
decisions regarding how and when to repair their existing building stock cost-effectively and they
have few tools, e.g. literature or intelligent computer software, to assist them in the decisionmaking process (GAO 1998).
4.1

Need for Decision-Support Tools for Municipal Infrastructure

Efficient information management is the key to better decision-making for municipal
infrastructure (CERF 1996). For many organizations, major issues of service delivery are repair
and renew rather than design and build (Johnson and Clayton 1998). Engineers, technical staff,
administrators, and politicians all benefit if decisions about maintenance, repair and renewal are
based on reliable data, solid engineering principles and accepted economic value. When reliable
data and effective decision-support tools are in place, the costs for maintenance, repair and
renewal will be reduced and the services will be timely, with less disruptions. These
improvements will all reduce the costs of managing municipal infrastructure.
Many major asset owners in North America are beginning to recognize the importance of
knowing the current and future states of their infrastructure. For example, the City of Edmonton
(1998) recently completed a long-range financial plan for infrastructure assets, in which it
recognized the need to increase capital spending and to establish priorities for renewal or new
infrastructure facilities.
Meanwhile, Winnipeg (1998) has made recommendations to: (1) invest more in
infrastructure, (2) make strategic investments with the dollars they have, and (3) find ways to
reduce the magnitude of the infrastructure deficit problem. More specifically relating to decisionsupport tools, the City of Winnipeg recommends that:
life cycle costing analysis be used for all decisions related to infrastructure alternatives;
maintenance can be deferred only if the impact on life expectancy and life cycle costs is
minimized, and if maintenance is factored into initial infrastructure costs;
the citys infrastructure asset data must be coordinated and managed by the Chief
Administrative Officer Secretariat, and
computerized maintenance management systems must be adopted.
The Governmental Accounting Standards Board (GASB) is also putting in place methods
to ensure that governmental agencies account for their assets (McElroy 2000; Lemer 2000).

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5

Summary and Conclusions

This presentation describes the six Whats of asset management. These six levels of
implementation can be used as a methodology for the implementation of an asset management
plan in an organization. The asset management plan will provide a framework for collecting the
data and information required to make decisions about the strategic plans of an organization.
The extent of the asset management market in Canada is large, upwards of CDN$ 5.5
trillion; while in the USA it could be six-times larger. Maintenance and repair expenditures in
Canada are to order of CDN$110.0 billion per year, whereas capital renewal expenses are close
to CDN$ 86.5 billion per year. The sum of these two figures is close to double the value of new
construction in Canada each year. Managers of municipal infrastructure are realizing the need for
effective tools to manage this vast asset base, and are now demanding decision-support tools to
help them in their work.
6

References

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Gordon, A.R. and Shore, K.R. (1998) Life Cycle Renewal as a Business Process, Innovations in
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US Census. (1999) Value of New Construction Put In Place, U.S. Census Board, United States
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