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Incorporating Sustainability Into Asset Management Through Critical Life Cycle Cost Analyses

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Asset management is about managing assets more effectively – which is really about making better decisions about and for assets, both existing and future. The main key to achieving better decision-making is having the right kind of information available from which to make the decisions. The goals that better decision making are trying to reach are service levels that are met, risks, including public health, safety, financial, and environmental, that are reduced, and costs that are optimized.

One analysis method used for asset management that facilitates long-term cost optimization is the use of life cycle cost analyses (LCCAs). A typical life cycle cost analysis (LCCA) includes evaluating the costs incurred by an asset over its useful life to find the least cost solution. However, since the goals of asset management are to meet level of service (LOS) standards and reduce risk as well, the typical LCCA solution often times does not meet these needs. This has led to the development of the critical LCCA, which meets asset management goals by incorporating LOS, condition, criticality, vulnerability, risk, and remaining useful life into the analysis. The goal of a critical LCCA is not merely the least cost solution but the least cost solution to meet the asset management goals or the “optimal” cost solution. The assets with the greatest gap between LOS and condition and the assets with the highest risk are therefore the highest priority. In order to make the critical LCCA as robust as possible, these environmental and social or sustainability principles and costs need to be included with the economic costs and the LOS and risk goals. The potential exists for the results of a critical LCCA to be significantly different if sustainability costs are incorporated, favoring the traditionally more economically costly sustainable alternative to the standard solution.

Sustainability is the concept of managing natural resources in a manner that does not cause harm to the ecosystem and allows it to be as fruitful as possible, while permitting human activity to be productive and long lasting as well. Some of the specific sustainability ideas can specifically be integrated into critical LCCAs that are applicable to the water and wastewater industry. There are two potential ways that will be discussed to incorporate sustainability principles in a critical LCCA. The first method is to change the way a critical LCCA is developed – by looking not just at one asset but at a whole system. For example, rather than analyzing and optimizing just one pump, the analysis would include the entire pumping system – pumps, motors, piping, valves, etc. The second technique is to quantify environmental and social costs, through specific tools such as the Ecological Footprint, and add them into the critical LCCA. By integrating these concepts with life cycle cost analyses, asset management programs can help agencies make cost optimizing decisions that are more sustainable for meeting long term goals.
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Document Type: Research Article

Publication date: 2006-01-01

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