There is an increasing pressure from the economic regulator in England and Wales for water companies to ensure that their capital maintenance decisions reflect an understanding of the long-term impact on their operational costs and risks. This implies that decisions must not only reflect the costs borne now but the likely costs in the future, and how these might be optimised. It is noteworthy that within the construction and transport industries, asset management decisions which have been driven in this direction utilise a whole life costing (WLC) methodology. This paper addresses the implications of transferring the concept of WLC to service-based assets such as water systems.
A WLC approach to distribution network management aims to achieve the lowest network provision and operating cost when all costs are considered to achieve standards enforced by regulation. Cognisance is to be taken of all relevant costs - direct and indirect, private and societal - in order to balance the needs of the service supplier, the customer, society and the environment in a sustainable manner. A WLC analysis thus attempts to develop a cost profile over the life of the asset. Accounting for the costs over this period is achieved through a combination of activity based costing (ABC) and a life cycle assessment (LCA) used to identify potential social and environmental costs. This process means that each of these identified costs must be linked to some physical parameter that itself varies over time due to changing demands on the system, the different operational strategies available to the operator and natural deterioration of the fabric of the system. The links established between the cost and activities of the operator provide the basis for the development of a WLC decision tool (WiLCO) for application to water distribution network management.
Asset management using a hybrid backcasting/forecasting approach
