CIEAM APCC Assets Condition Auditing PDF

Best Practice in
Integrated Engineering
Asset Management
2008 CIEAM
AAMCoG Best Practice
The Australian Asst Management Collaborative Group (AAMCoG)

The Australian Asset Management Collaborative Group (AAMCoG) was formed in August
2006 by the CRC for Integrated Engineering Asset Management (CIEAM). AAMCoG is a
collaboration of several of Australias peak bodies interested in work programmes in asset
management. AAMCoGs mission - Facilitate collaboration between interested organisations
to promote and enhance asset management for Australia.
Members of AAMCoG aim to:
Collaborate nationally on asset management strategies between all asset management
groups
Coordinate transfer of technology and knowledge sharing of asset management R&D
Promote skills development in asset management
Host the annual National Forum for Asset Management
Act as a communication channel between member bodies
Inform asset owners/custodians of the critical aspects of whole of life asset

management
For further details, please refer to the AAMCoG Website www.aamcog.com
Acknowledgments
The CRC for Integrated Engineering Asset Management (CIEAM) would like to
acknowledge the financial support from the Commonwealth Governments Cooperative
Research Centres Programme and the contributions from our industry, government and
university participants.
CIEAM would also like to acknowledge the following contributions to this project:
Dr. Fred Stapelberg of CIEAM
Mr Graham Carter of the APCC
This project was undertaken under the guidance of Professor Joseph Mathew chair of
AAMCoG and Professor Kerry Brown, Executive Officer, AAMCoG.
Confidentiality
In accordance with Australian freedom of information legislation, all information collected as
part of this study will be retained for seven years in a safe and secure environment. Paperbased data will be stored in a locked filing cabinet, and electronic data will be encrypted and
stored at CIEAM Head Office, Brisbane.
Disclaimer
AAMCoG members make use of this report or any information provided by CIEAM at its
own risk. CIEAM will not be responsible for the results of any actions taken by members or
third parties on the basis of the information in this report, or other information provided, nor
for any errors or omissions that may be contained in this report. CIEAM expressly disclaims
any liability or responsibility to any person in respect of anything done or omitted to be done
by any person in reliance on this report or any information provided.
Enquiries
Communication Officer/ Jane Davis
CRC for Integrated Engineering Asset Management
Level 7, O Block, QUT Gardens Point campus
GPO Box 2434
BRISBANE QLD 4001
2008 CIEAM
Phone: +617 3138 1471

Fax: +617 3138 4459
Email: jane.davis@cieam.com
CONTENTS
Page:
INTRODUCTION
1.
Assets Condition Assessment and Analysis
2.
Assessment Criteria for Assets Condition
16
3.
Conducting Assets Inspections and Surveys
21
4.
Assets Condition Scoping, Profiling and Modelling
47
5.
Assets Health Monitoring and Life Cycle Management
58
6.
Assets Life Cycle Analysis and Life Cycle Costing
71
7.
Assets Usage Life Cycle and Maintenance Planning
76
8.
Assets Maintenance Management and Optimisation
88
9.
Establishing Assets Condition Auditing Benchmarks
107
10.
Assets Condition Audit and Maintenance Reporting
117
REFERENCES
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Introduction
Collectively the Commonwealth, State, Territory and Local Government Authorities
are the largest owners of built assets in Australia. The replacement value of
government assets is over $371 billion and each year over $18 billion is spent on
maintenance of the assets. These assets are the major element of governments
balance sheets and underpin their individual credit ratings. Asset maintenance is
therefore clearly a key strategic function that must be properly planned and managed.
At present there is no nationally accepted regime for condition auditing and
maintenance planning. Asset planning and management is a critical issue for the
public sector at all levels of Government. The adoption of a consistent, national model
for condition auditing and maintenance planning would greatly enhance
understanding of this issue and overcome some of the barriers that often result in
inadequate funding being provided for asset maintenance budgets.
The whole of Government and individual Government Agency maintenance plans for
assets needs to be based on a uniform, cyclical assessment of the actual condition of
assets, compared to the desired standard of condition for individual asset portfolios.
This assessment program must provides consistent, quantitative and qualitative
information relating to asset performance in terms of condition and associated risks.
The assessments establish the maintenance necessary to meet the standard, and define
the base-line for determining the adequacy and effectiveness of maintenance over
both the preceding and subsequent cycles. The basic principles of asset management
represent current thinking with national asset owners as well as professional
organisations representing asset owners.
The principle that: Government Agencies must report on the usage, maintenance and
performance of their assets, is among the important asset management principles that
have been developed by the APCC to enable asset management to be integrated into
the mainstream of Government and Government Agency business planning. The
APCC considers the inter-relationship between an assets physical condition,
functionality, and compliance, as criteria for integrated condition auditing and
maintenance planning, where:
Physical Condition can be considered the physical state of the asset including
the weather-tightness, structural stability/integrity and security that is required.
Functionality can be considered the way in which an asset has been designed,
modified and/or developed and the extent to which it currently meets the
contemporary functional needs of the occupants.
Compliance can be considered the extent to which an asset complies with

statutory design and operational requirements.
The assets condition auditing process defines objectives; prioritises assets for which
assets condition assessment and auditing is to be carried out; identifies the asset
degradation and failure modes to determine condition and end-of life criteria;
provides best practices; analyses and assesses asset condition; and verifies/audits that
the asset condition assessment results reflect actual field conditions.
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The overall asset condition auditing plan documents the evaluated condition of the
organisations assets based on condition criteria and end-of-life criteria that are
indicative of the status of the assets condition. Condition audits are also conducted to
establish the condition of physical assets before any decision is made to purchase
(such as pre-acquisition surveys for buildings); to assess degradation after a period of
use; and to establish the maintenance condition of physical assets before asset owners
commit to major maintenance action and/or lump sum maintenance contracts.
When considering condition assessments in the assets condition auditing process, it is
important to understand the differences between defect maintenance management and
regular maintenance planning for assets preservation in contrast to long term
maintenance planning for assets rehabilitation. It is this assessment of assets condition
in the assets condition auditing process that will provide the appropriate types of
assets maintenance, particularly in planning regular maintenance for assets
preservation compared to long term maintenance plans for assets rehabilitation.
Assets condition assessment is an essential part of managing physical assets.
Condition assessment of physical assets can be defined as the technical assessment of
the operational and physical conditions of an asset, using a systematic method
designed to produce consistent, relevant and useful information. A principal objective
of condition assessment is to provide sufficient information on the condition of
physical assets for strategic assets planning decision-making in order to capitalise and
depreciate physical assets based on residual value, rather than expense them against
earnings. Condition assessment assists in reporting changes in physical asset service
levels, identifying candidate assets for renewal treatment, selecting the optimum
renewal treatment and as an input into modelling of future condition and service
levels and funding scenarios. Condition assessment procedures are intended to
measure asset degradation, the criticality of the degradation, and asset remaining life.
Condition assessment is also often used to assess the useful life of physical assets.
Whilst common condition indicators have been in existence for some years,
converting these indicators to verifiable remaining life and overall useful life remains
a significant difficulty and a source of major variations in practice. Many of the
mechanistic models upon which estimates of remaining life of physical assets are
based, are far from perfect because of the lack of reliable data available to validate
these models. Condition assessment however can be a reliable tool for determining
the remaining life of physical assets, where the assets are nearing the end of their life.
An understanding of the failure as well as degradation processes of physical assets is
necessary to establish sensible condition assessment criteria and to define asset
remaining life. The condition assessment process for physical assets should, as a
minimum, rate asset operational and physical condition, determine the risks associated
with continual usage of an asset in such condition, and identify the type of
maintenance needed to retain or restore an assets required condition. Condition
assessment results, together with asset functionality, utilisation and cost
considerations, are used to support a wide range of strategic assets planning decisions
particularly in relation to assets operational and physical function performance and
assets maintenance strategies.
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An assets condition survey or condition auditing, is a systematic process of evaluating

the condition of physical assets. This is to establish whether the physical assets are
capable of continually supporting service needs and statutory requirements in the
medium and long term. Surveys are also conducted to assess the ability of physical
assets to satisfy internal expectations and external benchmarks. An objective of assets
condition surveys is also to establish any remedial action required to bring physical
assets up to the expected conditions (such as modifications, refurbishment and
replacements), to identify their relative priorities and to propose a programme of
maintenance action. Assets condition surveys help to plan for the necessary resources
to maintain the assets before any functional failure might occur.
The assets condition assessment planning process defines objectives; prioritises assets
for which assets condition assessment is to be carried out; identifies the asset
degradation and failure modes to determine condition and end-of life criteria;
provides industry practices; analyses and assesses asset condition; and verifies/audits
that the asset condition assessment results reflect actual field conditions. The overall
asset condition assessment plan documents the evaluated condition of the
organisations assets, based on condition criteria and end-of-life criteria that are
indicative of asset condition and consistent with industry practices.
When considering assets condition assessment, it is important to understand the
differences between defect maintenance, as well as routine and preventive
maintenance, especially for assets repair, preservation, rehabilitation or replacement.
Defects are usually well defined and associated with failed or defective components
that affect the use and reliability of the asset well before its end-of-life. These do not
normally affect the life of the asset itself, if detected early and corrected. Defects are
regularly identified during inspection and dealt with through maintenance activities to
repair or replace failed components to ensure continued effective use of the asset.
Long term degradation is generally less defined and is not easily determined by
routine inspection. The main purpose of asset condition assessment is to detect and
quantify long-term degradation and provide some means of quantifying remaining
asset life. This includes identifying assets that are of high risk or at their end-of-life,
that will require major capital expenditure to either refurbish, replace, or eliminate
altogether. Condition assessment procedures are intended to measure asset
degradation, the criticality of the degradation, and the remaining asset life. A
reasonable understanding of the degradation and failure processes is required to
establish sensible assessment criteria or to define appropriate end-of-life criteria.
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1. Assets Condition Assessment

and Analysis
Condition Assessment of Physical Assets
Condition Assessment of physical assets can be defined as the technical assessment of
the operational and physical conditions of an asset, using a systematic method
designed to produce consistent, relevant and useful information. A principal objective
of Condition Assessment is to provide sufficient information on the condition of
physical assets for strategic assets planning decision-making in order to capitalize and
depreciate infrastructure assets based on residual value, rather than expense them
against earnings. Condition Assessment procedures are intended to measure asset
degradation, the criticality of the degradation, and asset residual life. An
understanding of the failure as well as degradation processes of physical assets is
necessary to establish sensible Condition Assessment criteria and to define asset
residual life. The Condition Assessment process for physical assets should, as a
minimum, rate asset operational and physical condition, determine the risks associated
with continual usage of an asset in such condition, and identify the type of
maintenance needed to retain or restore an assets required condition. Condition
Assessment results, together with asset functionality, utilisation and cost
considerations, are used to support a wide range of strategic assets planning decisions
particularly in relation to assets operational and physical function performance and
assets maintenance strategies.
Attributes of Assets Condition:
There are a number of attributes that are used to assess the condition of physical or
tangible capital assets, such as (PSAB, 2007):
Physical condition - the condition of an asset that enables it to meet intended

service or operational levels. The physical condition of a tangible asset can be
compared to its ability to meet original design standards. The assessment of
the condition of a physical asset should reference its operational and physical
characteristics and technical, engineering and other specifications. It should
also take into consideration the assets durability; the quality of its design and
manufacture / construction; its use; and the assets design maintainability and
adequacy for required maintenance.
Demand/capacity - the capacity of the asset to meet existing application

requirements. Demand/capacity is related to asset performance. Measuring this
attribute would involve establishing subjective baseline service or operational
levels against which to measure actual performance. The demand/capacity
attribute brings into scope the assets efficiency and effectiveness measures.
Functionality - the ability of the asset to meet service or operational delivery

requirements. Functionality is closely aligned with the assets whole-of-life
performance measures such as early life, useful life, and wear-out or residual
life operational performance.
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It is recognized that none of these attributes are mutually exclusive. For example,
physical condition may have an impact on an assets ability to meet service or
operational delivery requirements.
Benefits and Risks of Condition Assessment:
There are definitive benefits or risks in performing effective or ineffective condition
assessment of physical assets. These are (SAM, 2007):
Benefits - The benefits of performing effective condition assessment include;

the adequacy of existing maintenance and capital funding can be established
and evaluated;
asset condition trends can be analysed;
asset condition can be reported to Government in a consistent format;
maintenance programs can be effectively targeted and prioritised;
current maintenance liabilities and emerging maintenance requirements can be
identified and quantified;
the effectiveness of prevailing maintenance strategies can be assessed and
adjusted if necessary;
strategic asset planning processes can be enhanced by information on future
liabilities.
Risks - The risks associated with non-performance or ineffective condition

assessment include;
declining asset condition is not identified and addressed;
maintenance planning is not related to asset needs;
asset condition cannot be adequately reported;
deferred maintenance liability and provisions for future maintenance
requirements cannot be reported in financial statements;
maintenance demand is not properly identified;
poor quality of data leading to poor decision-making;
serious deficiencies can be overlooked;
information gathered on asset condition could be misleading;
resources are not used effectively.
The Assets Condition Assessment Process:

A whole-of-government Maintenance Management Framework (MMF) has been
introduced in Queensland, from the second half of 1999. The MMF has established a
framework for the maintenance of government assets (i.e. buildings) to ensure
consistency in the planning, implementation and reporting of a physical Assets
Maintenance Plan. The whole-of-government reporting mechanism is based on input
from public assets maintenance performance which flows through to maintenance
policy, standards and strategy setting; maintenance strategic planning; and
maintenance implementation. Condition assessment, along with budget allocation,
stem from the policy, standards, planning and strategy framework, to make up a
maintenance works program.
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Figure 1 illustrates the Maintenance Management Framework (MMF) flow diagram.
Figure 1. Maintenance Management Framework Flow Diagram

(SAM, 2007)
The condition assessment process can be separated into a series of four phases aimed
at providing useful information on the physical condition of an asset. The phases are
interrelated and the success of each phase impacts on, and contributes to, the success
of succeeding phases. Figure 2 illustrates the four phases of the condition assessment
process.
Figure 2. The Four Phases of the Condition Assessment Process

(SAM, 2007)
Define Condition Assessment Objectives:
Defining the objectives of condition assessment is essential in providing a clear
direction for the assessment process. Government Agencies need to have a clear
understanding of why the assessment is being undertaken, and how the findings are
intended to be used.
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This will allow the outcomes and specific outputs of the assessment process to be
properly defined. Well defined assessment objectives will assist in determining;
the type of information required
the level of accuracy necessary
the assessment method to be used
the frequency with which data should be collected
the manner in which the assessment will be conducted.
Condition data can be expensive to collect and manage, and has a limited useful life.
Therefore, only data essential to the assessment objectives should be collected.
Define Condition Assessment Standards:
Government Agency core service strategies enable asset service requirements and
future service potential to be determined. Performance standards for an asset can then
be established based on the significance that an asset has in supporting core business.
Factors such as criticality, utilisation and functionality are key considerations in
determining asset performance standards. Once a performance standard for an asset is
determined, a corresponding minimum standard for asset condition can be defined.
Planning for Condition Assessment:
Condition assessment is generally a planned activity, involving a number of persons
in a systematic review of a physical asset that has been identified for assessment.
Planning for condition assessment of physical assets usually includes a determination
of the assets to be initially inspected and the inspection intervals. The objectives of
the assessment and the type of asset will determine the approach to be employed and
the items that need to be inspected.
Assets Condition Inspection:
Asset inspection is the primary activity undertaken as part of a condition assessment.
The level of detail and accuracy of information that can be obtained from an
inspection can vary depending on the assessment method used. Assessment methods
can range from a survey, which provides fairly broad information, to a detailed audit,
which provides a more comprehensive level of detail. The depth of asset inspection
will be guided by the assessment objectives and resources available. The assessment
method chosen should produce the outputs required as per the objectives, deliver
consistent results, and be cost effective.
Some of the key activities that need to be considered when planning for assets
condition inspection are;
allocating sufficient and appropriately skilled resources;
reviewing the asset register, drawings, manuals, etc and outstanding
maintenance tasks;
consulting the asset occupants to arrange access at an appropriate time;
determining how inspection will be carried out;
selecting an appropriate data collection method;
choosing the method for data processing and analysis.
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Items to be inspected - Where funds are limited and an indicative assessment is

required, a survey of an asset can yield quick results without a detailed inspection of
individual components. However, in many instances, assessing the condition of an
asset will be more manageable if an asset is broken down into smaller components.
The level to which an asset may need to be broken down will depend on the degree of
accuracy and detail that needs to be achieved. Items that would normally be
individually assessed can be broadly grouped into the physical asset structure and
constituency; related support services (electrical, mechanical, hydraulics, etc.); and
related infrastructure support/services. These items can then be individually inspected,
assessed and the results aggregated to give an overall indication of asset condition.
The Cost Control Manual of the Australian Procurement and Construction Council
(APCC), formerly known as the National Public Works Council, provides an accepted
industry standard for the breakdown of an asset into elements and sub-elements and
may be used for this purpose. Conducting trials on sample assets can be a useful
means to test proposed inspection and assessment techniques. Results can be
compared for quality and consistency, and techniques reviewed if necessary.
Inspection intervals - If a number of assessments are to be undertaken over time, an
initial inspection should be undertaken as early as possible in the life of an asset, to
determine a baseline condition which can be used as a reference point for future
comparisons. The interval between subsequent inspections, which can be used to
reveal a trend in asset condition over time, needs to be carefully planned. The
inspection interval needs to ensure that inspections capture any significant changes in
asset condition before they can impact on asset performance. Factors that can affect
the required interval include;
complexity;
age;
location;
environmental factors;
asset usage.
Government Agencies should formulate asset inspection requirements, taking the
above factors into consideration. Since the data from inspections may be used for
maintenance work programs, asset life cycle planning, assets strategic planning, assets
usage logistic support, as well as reporting requirements, an asset should be assessed
on a cyclical basis which supports these needs.
Assets Condition Assessment Surveys:
A survey usually involves a broad appraisal which produces a relatively fast scan of
asset condition. It is generally used where a quick result is required, funding is
limited, and assets are less complex. The inspection can be carried out by technical or
non-technical personnel. A survey can be conducted using a questionnaire process in
which asset occupants or appraisers provide feedback, particularly about the state and
maintenance needs of assets. The results of the survey can then be analysed. However,
caution is required when using the results of this approach due to the limited depth of
the inspection. Survey results can be subjective and inconsistent according to the
varying interest and expertise of the respondents.
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Assets Condition Assessment Audits:

An audit is a more structured inspection approach which provides consistent,
quantitative and qualitative information relating to asset performance in terms of
condition and associated risk. The audit involves a detailed appraisal of an asset by
competent qualified personnel. Detailed audits are recommended where an asset is
complex or when comprehensive information is required. An audit of a complex asset
is normally carried out by assessing an assets individual elements. Elements are
inspected and their actual condition relative to the desired condition standards is then
reported in detail. Any deficiencies in asset condition, together with the associated
risks, can then be evaluated.
Assets Condition Rating:
Inspections should be performed to enable a rating for asset condition to be applied.
The rating provides an indication of the gap between actual asset condition and that
which has been specified. In the case where the condition assessment findings are to
be used in the development of an asset maintenance program, the following
information should be collected;
the presence of any defect (existing or potentially arising within the period
of the maintenance plan, usually three to five years);
the nature of the defect;
the location of the defect;
how the defect should be corrected (e.g. adjust, repair, replace etc.);
the quantity of corrective work (for estimation and specification purposes);
the remedial cost for each defect;
when the defect should be addressed (i.e. immediately, or when required).
Assessing the Risk of Asset Condition:
The direct risks associated with asset condition should also be assessed. This
assessment should be based on both the likely impact and the probability of an event
occurring as a direct result of asset condition. The need to bridge the gap between
existing and desired conditions can then be considered, taking into account the risks
associated with leaving an asset to remain in its existing condition. A risk rating is
assigned based on an assessment of the risks resulting from the condition of the asset
inspected. Risks that must be considered include those that relate to workplace health
and safety; security; functionality; financial impacts (including cost of consequential
damage); and legal exposure.
Condition Assessment Standards:
Condition Assessment initially includes a physical inspection of the asset equipment
(sub-systems, assemblies and components) using specialised NDT tools such as
ultrasonic and laser techniques as well as magnetic field measurements that produce
data describing the condition of the equipment providing evidence of various types of
wear or damage on a macro- and micro-scale. The data is usually analysed to
characterise the variability of operating parameters such as potential, flow,
temperature, pressure or capacity fluctuations, from which related physical damage
can be assessed.
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Condition Assessments are fundamentally evaluations of a physical assets service or

operating inefficiency, evaluation of asset equipment damage, and prediction of asset
residual life. This includes a determination of what possibly caused the operational
inefficiency or physical damage; what exactly the damage is and through which
mechanisms the damage developed; if the asset equipment has not yet failed, then
what the estimated residual life would be, considering a specific damage mechanism;
and what operating recommendations would prevent damage in the future, or allow
continued operation in the short term.
Condition Assessments also include engineering evaluation of the physical condition
of an assets equipment in which a flaw has been detected. The focus of such an
evaluation is to determine if the assets equipment can continue in service, and if so,
for how long. Industry standards such as API 579-1/ASME FFS-1 specify a
quantitative procedure for determining fitness-for-service (FFS) of different types of
industrial asset equipment, however not all equipment are covered by such standards.
In cases where no standards exist, a semi-quantitative or qualitative approach to
residual life prediction is used to determine whether the equipment could continue in
service (API, 2007).
Assessment methods and procedures in Standard API 579-1/ASME FFS-1 can be
used for fitness-for-service assessments and/or re-rating of asset equipment designed
and manufactured/constructed to recognised codes and standards. The Standard has
broad application since the assessment procedures are based on allowable stress
methods and plastic collapse loads for non-crack-like flaws, as well as applying the
Failure Assessment Diagram (FAD) approach for crack-like flaws. Fitness-for-service
assessment procedures cover both the present integrity of an assets equipment, given
a current state of damage, and the projected remaining or residual life. The assessment
procedures in the Standard can be used to evaluate flaws commonly encountered in
pressure vessels, piping and tankage.
Assessment techniques are included to evaluate flaws including general and localised
corrosion; widespread and localized pitting; blisters and hydrogen damage; weld
misalignment and shell distortions; crack-like flaws including environmental
cracking, laminations, dents and gouges; and remaining life assessment procedures for
components operating in the creep range. In addition, evaluation techniques are
provided for condition assessment of asset equipment including resistance to brittle
fracture, long-term creep damage, and fire damage. The procedures are not intended
to provide a definitive guideline for every possible situation that may be encountered.
However, flexibility is provided in the form of an advanced assessment level to
handle uncommon situations that may require a more detailed analysis.
The Standard API 579-1/ASME FFS-1 is intended to supplement and augment the
requirements in the following standards;
API 510 - Pressure Vessel Inspection Code;
API 570 - Inspection, Repair, Alterations and Re-rating In-Service Piping
Systems; API 653 Tanks Inspection, Repair, Alterations and
Reconstruction;
Post construction codes that reference FFS evaluations such as NB-23.
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Record, Analyse and Report Findings:

Recorded data needs to be appropriately stored where it can be readily accessed for
analysis, planning and reporting purposes. A suitable method for recording the data
would have been established in the planning phase. There is increasing use of
electronic devices which enable data transfer to occur quickly and accurately. Data
should be stored within a management system capable of handling the quantity of
information to be collected both at time of inspection and in the future.
If assets condition assessments are being carried out by different persons, particularly
in different geographic locations, it is important that data collected is checked for
consistency, and any variations or discrepancies rectified. The objectives of the
condition assessment will determine the type of data analysis to be undertaken.
Examples of analyses include:
Statistical analysis of condition ratings to identify an average condition across

a portfolio of assets, and the range from worst to best condition
Sorting of data into particular categories, e.g. asset location or type, to enable
comparisons to be made
Analysing condition trends over time to assess the effectiveness of

maintenance strategies, detect asset deterioration, or evaluate the adequacy of
works program budgets
Prioritisation of identified remedial works to enable the development of works

programs (e.g. maintenance, capital improvements, refurbishment, etc).
Presentation of the assessment results should focus on establishing a priority of the

works. Priority ranking should result in works with the greatest deviation between
desired and actual condition and the largest risk being allocated the highest priority.
Condition assessment findings can be reported on and used in a range of strategic
asset planning and management processes. For example, findings are used in the
development of maintenance plans, capital investment strategic plans, disposal plans,
and in asset portfolio planning.
Condition Assessment Performance Measurement:
Condition assessment plays a crucial role in the strategic management of assets. It is
important therefore that the performance of the assessment is evaluated against
predetermined performance indicators.
Some useful indicators are;
achievement of condition assessment objectives;
cost of assessment, including any variations from expected costs;
time taken to complete assessment against projected time frame;
quality of information gathered, including accuracy and consistency;
disruptions or inconvenience to building occupants;
level of building occupant input into assessment.
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Analysis of Assets Condition Assessment

Attributes of Assets Condition:
There are a number of attributes that may be used to analyse condition assessments of
physical (tangible) capital assets, such as (PSAB, 2007):
Physical condition the condition of an asset that enables it to meet intended

service levels.
Demand/capacity the capacity of the asset to meet existing service

requirements.
Functionality the ability of the asset to meet program delivery

requirements.
It is recognised that none of these attributes are mutually exclusive. For example,
physical condition may have an impact on an assets ability to meet service and
program delivery requirements.
Analysis of Physical Condition Assessment of Tangible Capital Assets:
Reporting on physical asset condition is useful information that is currently missing
from financial reports. It will assist in drawing conclusions about the effect that
funding of maintenance and renewal is having on the overall physical condition of
tangible capital assets. It is also the first step to drawing conclusions about the
management of resources and future revenue requirements to maintain, renew and
replace tangible capital assets, and the affordability and sustainability of services.
The benefits of performing physical condition assessments on tangible capital assets
are that it;
provides information for assessing the adequacy of existing maintenance,
renewal and replacement funding;
provides information for the analysis of asset physical condition trends;
reports on asset physical condition in a consistent format;
assists in targeting and prioritising asset management strategies;
provides information for identifying and quantifying maintenance, renewal
and replacement requirements;
allows for assessment of the effectiveness of asset management strategies;
provides information for strategic asset planning processes.
The physical condition of a tangible capital asset can be compared to its ability to
meet original design standards. Examples of assessments of physical asset condition
are typical for infrastructure assets. An assessment of the physical condition of
infrastructure assets form part of expense budgeting and costing of capital assets.
Subjectivity of physical condition assessment will be reduced and consistency and
comparability improved when based on a detailed physical inspection using
standardised, clearly defined methodology, pre-defined defect conditions, and
measurement scales to determine physical impairment of the tangible capital asset.
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Analysis of the asset condition assessment should be reliable and verifiable. Reliable
and verifiable analysis can be replicated to produce similar results, whereby
concurrence of the data is achieved with a reasonable degree of precision. Evaluation
of an assets physical condition should be completed with specific knowledge of the
asset, its performance capacity, and the expectations for its continued performance.
Analysis of an assessment of the physical condition of a tangible capital asset should
be completed by reference to physical characteristics and technical, engineering and
other specifications of the asset. Such analysis should take into consideration;
the quality of its design and construction;
the assets durability versus use or pattern of usage;
the adequacy of maintenance that has been performed.
It may not be possible to complete a physical examination of all tangible capital
assets. For example, it is not always possible to physically examine sub-surface pipes.
However, physical condition could be based on a combination of age, construction
materials and methods, breaks per kilometre, geological and soil conditions, etc.
Whatever predictive tool is used, a standardised, clearly defined methodology with
pre-established logical relationships between attributes and predicted condition
assessment should be employed. The results should be defensible using industry
standard best practice to predict asset conditions where they exist.
Physical Condition Assessment Scores:
Appropriate condition indicators can be developed for each type of asset equipment.
Condition indicators are qualitative scores based on tests, measurements, and
inspections that are performed during the condition assessment process. Results are
combined into a Condition Index with a scale of 1-10. Mid-to low-range values may
trigger actions such as a repair or physical condition evaluation. Such an evaluation
includes in-depth, non-routine tests that may be invasive and/or require specialised
equipment and expertise however, when performed, physical condition evaluation
adds confidence to the assessment results and conclusions. These results are used to
adjust the Condition Index score (either up or down). Figure 3 shows a typical
Condition Index score chart with suggested action (HAMP, 2006).
Figure 3. Condition Index Score Chart
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Demand/Capacity Analysis of Tangible Capital Assets:

Demand/capacity analysis is related to asset performance. For example, a bridge may
be in good physical condition, but is causing traffic congestion and delays during rush
hours because the current volume exceeds the bridges original design capacity.
Measuring this attribute would involve establishing subjective baseline service levels
against which to measure actual performance. Acceptable service levels can be
influenced by government policy making it difficult to establish consistency in
performance measures. As a result, it would affect the comparability of information
and consistency in reporting about asset condition. The demand/capacity analysis
attribute may also bring into scope efficiency and effectiveness measures. For
example, it might include information about how an existing water treatment plant is
working compared to new water treatment technology.
Functionality Analysis of Tangible Capital Assets:
Functionality analysis is often excluded from the scope of reporting on the condition
of assets. Functionality is closely aligned with asset usage measures. It is related to
issues such as whether or not tangible capital assets are meeting user expectations.
Such usage expectations are typically found in public transport and public facilities
(i.e. crowded public transport systems or waiting times in hospital emergency rooms).
Analysing these attributes would be based on acceptable service levels. Some
expectations of public infrastructure assets service could be over-optimistic and
unsustainable and governments would need to manage the expectations of the public.
It would thus be difficult to establish consistency in asset usage quality measures. As
a result, it would affect the comparability of information and reporting consistency of
assets condition.
Assets Performance Analysis:
Protecting service delivery potential and addressing health and safety concerns are
priorities when making decisions about asset use and maintenance. It is very
important, therefore, that asset performance be appropriately reviewed and evaluated
to verify that required outcomes are being achieved. The results of any performance
assessment need to be reported to management to identify any actions to be taken; and
to comply with the ongoing reporting requirements of Government, as well as with
corporate, business and asset planning processes. In addition to the assets usage
ability as a result of its physical condition, there are a number of measures used to
analyse the assessment of asset performance, specifically utilisation and functionality.
The following paragraphs describe the usage ability as a result of physical condition,
utilisation and functionality of physical assets as measures to analyse the assessment
of asset performance (VAMS, 2006).
Usage Ability as a Result of Physical Condition:
An asset should be able to be used safely and effectively. This means that it needs to
be maintained in a condition that is adequate for the purpose for which it is intended,
and that it complies with the relevant health and safety standards. If this is not the
case, the asset's ability to deliver services to the level and standard required will be
compromised. Physical condition assessments provide important inputs for
compliance with legislation and in planning for asset maintenance.
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A proper condition assessment of an asset will involve:
Setting the required condition of the asset relative to its service delivery needs
Inspecting the asset and comparing its condition with that required
Forecasting the future condition of the asset.
Utilisation of a Physical Asset:

Asset utilisation is a measure of how intensively an asset is being used to meet the
entity's service delivery objectives, in relation to the asset's potential capacity. To
assess utilisation, criteria and benchmarks appropriate to the services being delivered
and to the class of asset being considered, firstly need to be established. The criteria
should have regard to:
The value of the assets unit of service potential that is being used relative to
the units of service being delivered (e.g. the future economic benefit)
The physical measures of asset capacity relative to the units of service being
delivered (e.g. floor space relative to the type of activity)
The use being made of the asset relative to the optimal availability for the type
of asset (e.g. the number of hours used relative to the hours available).
The utilisation criteria should be based, wherever appropriate, on best practice data as
well as on the results of analyses undertaken either by the entity or elsewhere in the
private and public sectors. Under-utilised assets should be identified, and the reasons
for this examined. It may be, for example, that the asset is no longer effective in
performing the activities required of it or that it is in less than optimum condition. It
may also be that the need for the services it delivers or supports has reduced. The
following examples illustrate some of the technical reasons for under-utilisation;
physical constraints;
technological obsolescence.
Action should be taken either to improve the assets utilisation or to redeploy it
(provided that service delivery needs can be met by alternative means). Where asset
utilisation is low, entities should consider whether the cost of holding the asset
exceeds the cost of transferring the services it delivers, and whether there is a more
economical way of delivering the services. Alternative or additional uses of assets
should also be considered. The utilisation of each asset should be reviewed annually.
Functionality of a Physical Asset:
The functionality of an asset is a measure of the effectiveness of the asset in
supporting the activities to be carried out. To assess (and monitor) functionality, it is
necessary to determine:
The role that the asset plays in achieving service delivery outcomes
The functional characteristics required to support specified activities.
The functionality of assets should be regularly reviewed. This will enable any
significant impacts on services to be identified. It will also allow timely changes to be
made to improve both service delivery and functional standards. Furthermore, the
results of regular functionality reviews are used in the formulation of asset strategies.
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2. Assessment Criteria for

Assets Condition
Asset Physical Condition Assessment Methodologies
There are numerous methodologies to assess asset physical condition in use today by
engineers and asset managers for most long-lived tangible capital assets that are of
great value in managing tangible capital assets. Generally, they have developed to the
point that consistent methods and measurement scales can be used to assess condition
on a reliable and consistent basis. The objective is selecting a method of measuring
asset physical condition that will indicate whether tangible capital assets are being
preserved so that they continue to provide a service and achieve expected life.
Condition assessments should be based on generally accepted methods and standards
and consistently applied. Methods of measurement should be an easy-to-understand
reference that can be updated regularly to track the results of an organisations asset
management strategies. It should also allow users to predict the status of assets into
the future, based on current asset management policies.
Characteristics of a good condition assessment methodology may include;
(a) use of standardised indicators to identify deficiencies;
(b) recording of deficiencies in terms of severity and frequency;
(c) prompts for the inventory and inspection process ensuring that all pertinent
data is collected, guiding the inspector through each step of the process;
(d) predefined measurement scale for each type or category of asset (for example,
calculating a numerical condition index on a numerical scale of zero to 100);
(e) utilization of knowledgeable inspectors with well-documented inspection
procedures;
(f) predetermined inspection schedules for tangible capital assets (components,
subsystems or networks).
Different condition assessment methodologies may be used for major categories. The
asset condition assessment methodology does not have to be consistently applied
across all categories of assets. Organisations should provide information about the
condition assessment methodologies used and the relevant measurement scales. The
information may include a description of the methodologies used in the assessment of
the physical condition of tangible capital assets, the general acceptance of assessment
methodologies used, the qualifications of evaluators and the description of asset
management systems that may be used. Once methodologies and measurement scales
have been determined, it is desirable but not required, that methods and standards be
applied consistently from period to period. Consistency in application is important
when comparing assessments of tangible capital assets between periods or at different
points in time. Consistency helps prevent misconceptions that might result from the
application of different methodologies and measurement scales in different periods.
When a change of methodology or measurement scale is deemed to be appropriate,
disclosure of the effects of the change is necessary to maintain comparability. Any
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changes should be described, including the reasons for the change and the
implications of such a change. Where possible, prior period assessments would be
restated for consistent comparison or differences between current and previously
reported assessments must be clearly articulated.
Assessment of the physical condition of tangible capital assets relies heavily on
managements judgment as to the acceptable level of service. It involves a
determination of the condition level at which tangible capital assets must be preserved
in order to meet the acceptable level of service. At present, there are no standards that
provide a basis for assessing the condition level at which assets begin to lose future
economic benefit or service potential, and consequently it would be difficult to
ascertain whether the pre-established level selected is appropriately representative.
Assessment of the physical condition of tangible capital assets would require
obtaining expert assistance from internal or external sources. The physical condition
should be measured using the experts best estimates based on assumptions that
reflect the most probable asset physical condition. When a material change in an
assessment of tangible capital assets is reasonably possible in the near term, the
organisation should provide information about the nature and extent of uncertainty.
Disclosure of the nature of the measurement of uncertainty should include a
description of the circumstances giving rise to the uncertainty, and relevant
information about its anticipated resolution. Assessments of tangible capital assets
should include any additional evidence provided by subsequent events occurring after
the reporting date. Other relevant information that should be provided includes;
(a) a description of the key assumptions used in preparing the assessment of
physical condition and whether the assumptions are susceptible to change;
(b) an explanation of the changes made to past assumptions used in previous
assessments of the physical condition;
(c) information about the effect of a change in the underlying assumptions used to
prepare the assessment of physical condition; and
(d) the sensitivity of the assessment of physical condition to changes in the
assumptions used and the reason for the sensitivity.
The organisation should provide information as to what has been done to ensure the
reliability of the assessment of the physical condition of tangible capital assets.
Information about reliability may be integrated throughout the Assets Condition
Assessment report. Reliability may be demonstrated by including descriptions of asset
management systems, the general acceptance of assessment methodologies used, and
the qualifications of evaluators. The organisation should also provide a discussion of
limitations of assessments and any gaps in the information used for assessing assets.
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Additional Information on Assets Replacement Costs:

Organisations may choose to provide information on the current replacement cost of
tangible capital assets by category. Current replacement costs represent the amount in
todays money necessary to acquire, develop or construct assets similar to those
already owned. Information on tangible capital asset replacement costs gives users a
benchmark against which to assess the total replacement costs of all assets relative to
the amount being invested in maintenance, renewals and replacements. It also gives
users an estimate of the total replacement costs of assets in relation to historical cost.
Organisations should acknowledge that the replacement costs do not represent a need
to replace all assets in any one particular year. The provision of a replacement value
on all assets has limitations in meeting the information needs of users.
Because of the longevity of infrastructure assets, it is difficult to make accurate
projections of replacement values. For example, new infrastructure assets can last up
to 75 years or more. Replacement values are a snapshot at a particular point in time of
the total current value of tangible capital assets. The provision of replacement values
does not provide users with any indication of the timing of renewal and replacement
expenditures or the effect it will have on future revenue requirements. It is, however,
good practice for organisations to determine replacement costs for internal
management and planning purposes. Summary information should be presented for
each major category in tabular form.
Organisations may choose to provide financial information about the tangible capital
assets deficit/debt/gap. The information should include:
(a) a definition of the tangible capital assets;
(b) details of the types of expenditures included in the calculation of the tangible
capital assets deficit such as
(i) deferred maintenance and renewal to bring existing tangible capital assets
back to desired condition
(ii) replacement of existing assets
(iii)enhancing functionality of existing assets
(iv) increasing capacity of existing assets
(v) meeting new environmental standards
(vi) new assets to meet growth service requirements
(c) minimum or expected service levels;
(d) minimum or expected asset condition levels required to meet service levels;
(e) period over which the tangible capital assets deficit is calculated;
(f) measurement methodology.
Computer programs exist that can assist in asset condition assessment information.
For example, computerised maintenance management systems provide information to
manage work orders, store inventory and preventive maintenance schedules.
Condition assessment survey systems help identify the existing condition of various
components of tangible capital assets and produce benchmarks for comparisons and
projecting repair and replacement costs. Facility condition assessment systems help
organizations plan and prioritise the renewal of physical assets using life cycle
planning principles.
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Asset Condition Assessment Plans

Organisations may choose to provide details of assets condition in any asset
management plan that may exist. Information in such plans may include:
(a) assets strategic plans with directions to be taken, given factors such as needs
assessments and growth expectations;
(b) asset tactical plans, given the existing deployment of resources;
(c) long-term financing needs, including determining whether additional
resources are needed;
(d) operational plans which would include life-cycle costing together with
estimates of useful life, required maintenance and timing of major repair and
replacements;
(e) condition assessments for identifying performance, funding requirements;
(f) any business risk associated with deteriorating tangible capital asset condition.
Providing Required Asset Condition Levels:
Determining what constitutes acceptable asset condition may vary both across
organisations as well as for different types of tangible capital assets held within an
organisation. It may not be either possible or desirable to maintain assets in perfect
condition. It may therefore be useful for users to understand managements targets for
physical condition of tangible capital assets by major category. An organisation may
establish the minimum or target condition level for each asset category against which
actual condition assessment measures can be compared. This will give users access to
information that will allow them to determine whether assets are being preserved at
the target condition level established by the organisation. Organisations may also
provide the minimum or expected condition level for each asset category.
The assessment of the physical condition and life expectancy of tangible capital assets
should be included in the Asset Condition Assessment Plan report. Assessments
should be done as close to the related reporting date as is practical. Most organisations
may not perform detailed assessments of physical condition annually on all categories
of tangible capital assets because of the magnitude of the information gathering and
processing required. An organisation may choose to complete a detailed assessment
on major categories of tangible capital assets on a cyclical or rotational basis. It may
decide to do annual assessments on critical assets and cyclical assessments on other
assets. Tangible capital assets may be regarded as living assets in that they change
over time due to various factors, and therefore assessments presented in the report
should be updated on an ongoing basis to provide information about effects of these
factors between assessments. It is important to provide new information, not just
reproduce previously completed assessments. In the years between actual assessments
of physical condition, an extrapolation of the previous assessments of physical
condition could be used to provide an assessment as at the current reporting date.
Each year, an organisation should consider the effects of factors such as age,
maintenance and renewal policies, expenditures, utilization, etc., on the physical
condition of tangible capital assets and determine adjustments required to update
previous assessments.
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For example, asset management systems may be used that can extrapolate the current
physical condition of assets at the reporting date by taking into account factors such as
previously completed assessments, expenditures since the previously completed
assessment, maintenance records, utilization and age. An organisation should provide
information about which assets have been assessed in the reporting period, the
rationale for, and frequency of, the assessments of physical condition. Where an
actual assessment of physical condition has not been completed in the period, a
discussion of the basis upon which previous assessments have been updated, and the
changes in the previous assessments resulting from new information, should be
included. For example, the discussion may provide information on the impact that
expenditures have had on the overall asset physical condition assessment. Where an
actual assessment of physical condition has not been completed and it is impractical
to update previous assessments, an organisation should provide information about the
most recent assessment.
The level of assessment does not have to be consistent for all categories. For example,
an organisation could provide detailed assessments of physical condition on
categories of tangible capital assets that are critical to providing essential services
while completing only minimal assessments to satisfy management and reporting
needs on assets that are of minor significance to attainment of the objectives and goals
of the organisation. An organisation should provide the basis and rationale for which
categories they are providing assessments. An organisation may not have sufficient
information on all of its major categories to complete an assessment. This does not
negate the need for the organisation to provide an assessment on all major categories
of tangible capital assets judged critical to the provisions of services and programs. In
a situation where the organisation does not have the data, it should provide
information on its plans to complete an assessment on all major categories of assets.
The level of detail disclosed in the assessment of tangible capital assets should reflect
the highly aggregated nature of summary financial statements. In deciding the level of
detail to disclose about an assessment of the physical condition of tangible capital
assets, an organisation should consider the usefulness of the information to the user in
assessing the condition of tangible capital assets. The initial assessment of the
physical condition and life expectancy of tangible capital assets will require
considerable effort. In addition, while the recommended practices are equally
applicable to organisations of varying sizes, the capacity of an organisation to apply
the recommended practices will vary. Therefore, it is anticipated that the assessment
of physical condition and life expectancy of all major tangible capital assets will be
achieved over time. Organisations should provide the information for those categories
of tangible capital assets for which assessments have been done. Organisations should
also provide information about those categories for which an assessment has not been
completed, whether or not an assessment is planned and the timing of reporting.
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3. Conducting Assets Inspections

and Surveys
Assets Condition Inspections
Identifying Asset Categories:
Assigning the appropriate asset category prior to conducting assets inspections is
designed to achieve consistent and comparable results. The method can also be used
in cases where there is still uncertainty as to the appropriate category for a particular
asset or class of assets. A checklist is used to identify key elements critical to the
successful functioning or operation of a physical asset. Table 1 shows a table of
typical physical infrastructure assets categories as applied in the public sector.
Table 1. Physical Infrastructure Assets Categories in the Public Sector
(VSG, 1996)
Asset Category
Description
1 (Superior)
Assets of national significance that are critical to state functions; that is, key
national and state infrastructure, and heritage assets that are national icons.
major national highways
major dams and bridges etc.
2 (High)
Key assets with major state significance; key heritage assets; and assets that
must meet very rigorous special requirements.
major infrastructure such as main sewers, national railway lines, major
transmission towers, major water supply mains, key bridges, interstate
highways
major hospitals etc.
3 (Above Average)
Assets very important to state operations, including significant infrastructure

and heritage assets, and assets needing to meet special requirements.
major power supply grid, trunk drainage mains, freeways, important
bridges, major gas supply mains
interstate railway stations etc.
4 (Average)
Non-critical assets, including most buildings supporting typical government

service delivery functions. The lowest possible category for important
infrastructure and heritage assets.
underground drainage, railway lines and sidings, power distribution grid,
major piers, gas mains, major roads, bridges
government buildings such as offices, schools, tertiary institutions, courts
public housing etc.
5 (Below Average)
Non-critical assets where purely functional performance is acceptable to the

public.
piers
railway stations
bus shelters
minor roads etc.
6 (Low)
Assets that can reasonably operate in very basic conditions.

workshops
car parks
lanes
sheds etc.
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The most fundamental feature of an asset is its function. Function decides strategic
importance. In the condition assessment process, particularly in conducting assets
inspections, this is taken into account so that an informed judgement can be made
about the priority of each asset. Priority is judged not only in relation to other assets,
such as those controlled by Government Agencies making the assessment, but also in
relation to all other State-owned assets. The six-point Asset Category Scale indicated
in Table 7.8 has been developed for this purpose. The first step in conducting assets
inspections in the assets condition assessment process is to assign each asset to the
Asset Category that best reflects its significance.
Identifying Required Condition:
Before assessing the actual condition of an asset during asset inspections, it is
important to be clear on what condition the asset needs to be in to perform at an
appropriate level of efficiency and service. The Required Condition will vary between
assets according to the asset's strategic importance, its specific function and its
particular physical requirements. The purpose of establishing Required Condition is to
provide a benchmark against which Actual Condition can be compared. Required
Condition is the acceptable physical condition needed of an asset for effective service
delivery. It should perform its functions without unacceptable disruption; provide the
expected level of service appropriate for its functions; and provide a safe environment
that meets statutory requirements. Required Condition varies according to function. It
will vary not only between Asset Categories but also between individual assets within
the same Asset Category. Variations within a single asset can arise as a result of assets
that have a number of functions. Physical infrastructure assets or constructed assets
are often complex and support a number of functions. Required Condition is simply a
judgement of the main physical requirements that must be met. It will depend on the
specific functions and physical requirements of those features of the asset with most
strategic importance. However, careful and objective identification of Required
Condition is a very important part of conducting assets inspections in the assets
condition assessment process. If the Required Condition identified is too high or low,
the result can be either unnecessary expenditure on maintenance or refurbishment, or
deterioration of the asset and loss of value through under-expenditure. Basically, in
establishing Required Condition, the emphasis should be on those elements of the
asset most important in meeting business needs.
Identifying Actual Condition:
Assessing the actual condition of an asset is the active part of conducting assets
inspections in the assets condition assessment process, in preparation for analysis. An
asset's actual physical condition and the acceptability of that condition can fluctuate
considerably over its useful life, particularly if there is a change in its function.
Information on Actual Condition is needed at any time to be able to make effective
decisions on the management of assets. The focus of Actual Condition assessment
during assets inspections is on key elements. All physical assets consist of a number
of elements or components that can be identified and measured. In assessing Actual
Condition it is important to identify and focus on those elements of the asset most
important to business needs. Table 2 provides a useful checklist of the elements
important to an asset's effective operation. The checklist can be adapted to apply to
most infrastructure and other constructed assets.
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Table 2. Physical Infrastructure Asset Elements

(VSG, 1996)
Physical infrastructure asset elements have potentially different life cycles. Different
elements of a single asset can therefore be at different stages of deterioration. The
asset's overall Actual Condition is the result of independent examination through
assets inspections of the condition of its key elements. When the key asset elements
have been identified, they should be assessed against a limited number of clear
criteria. These may vary according to the function of the asset. Thus, in conducting
assets inspections, it is important to assess asset elements against the following
criteria;
the purpose of the assessment;
the key asset elements;
the appropriate assessment criteria;
the way the condition information is to be obtained.
In assessing asset elements against these criteria, it is advisable to include details on
how well the criteria are met. There should be enough detail to describe both the
condition and any major risks that would be associated with a failure to take action.
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Methods of Assessing Actual Condition:

Assessing Actual Condition does not always need detailed inspection of an asset.
Methods of assessment are either based on prediction or direct inspection. They can
vary from a study that comments on specific details of individual assets to a sample
survey identifying broad trends. The particular situation for conducting assets
inspections determines the appropriate method of condition assessment. In many
cases a broad assessment is adequate. More than one method may be needed where a
wide range of assets requires information to make strategic and operational decisions.
Direct inspection can range from superficial to detailed physical examination. When
direct inspection of the asset or one of its key elements is not practical, physical
measurement and non-destructive testing can be used for elements of the asset that
cannot be reliably assessed by direct inspection; or when the level of detail required
warrants such measurements. The inspection cycle varies depending on the condition
of the physical asset. An asset judged to be below its Required Condition should be
inspected more frequently than one considered to be above its Required Condition.
Inspection cycles for elements that involve moving parts should be reasonably short.
A predictive method of condition assessment involves modelling, estimating or
approximation of asset condition and makes predictions about future assets condition.
Establishing a Relative Condition Level:
Relative Condition Level is a direct comparison of an asset's Actual Condition with its
Required Condition, expressed in a Relative Condition Level scale as in Table 3.
Table 3. Relative Condition Level Scale
(VSG, 1996)
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The purpose of comparing actual and required condition is to:

examine the level of fitness for purpose;
assess the extent of under or over-provision;
set maintenance, refurbishment, replacement or disposal requirements.
Where the Relative Condition Level shows a significant variation between Actual
Condition and Required Condition, there is likely to be a significant impact on the
operation of the asset. There may also be financial impacts. These need to be clearly
identified as they are important in making decisions and setting priorities. Assets
condition impacts considered with Asset Category are a major determinant of the
priority and urgency of action to be taken in respect of a particular physical asset.
Identifying the Appropriate Action:
The diagnostic information needed for making decisions is now available. The
questions that remain to be answered are:
Remedial Action:
Does remedial action needs to be taken? Remedial action is the repairs and/or
refurbishment needed to rectify the problems found in the assessment of Actual
Condition and restore the asset to its Required Condition.
Costs:
How much will it cost? Estimated costs need to be provided at this stage. Urgent
works have budget priority. Costs will be an important factor in balancing other
expenditure over the asset planning cycle.
Identifying Priorities:
What is its priority? The most critical factors in evaluating the information and
deciding on priorities are:
Asset Category: how important is the asset ?
Condition Impacts: how serious is the risk ?
A time frame for action should be decided based on an evaluation of the critical
factors in each case.
Calculating the Condition Index:
The Condition Index is a weighted average of the condition of a group of assets. It is
calculated using the Relative Condition Level of assets multiplied by the relevant unit
of measure. The unit of measure used for a group of assets depends on the nature of
the physical assets. In infrastructure assets such as buildings the unit of measure is
gross area in square metres. The relevant unit of measure for drains is metre length.
The Condition Index has three key values; a positive value, a 0 value, and a negative
value. A positive value indicates that the current condition of assets in the group is on
average better than required. The closer the value is to the maximum of +2 the wider
the variation from the Required Condition. A value of 0 indicates that the current
condition of assets in the group is on average satisfactory. A negative value indicates
that the current condition of assets in the group is on average lower than required. The
closer the value is to the minimum value of 2, the wider the variation from the
Required Condition.
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Identifying Asset Category in Conducting an Assets Inspection

A detailed method for assigning the appropriate Asset Category is designed to achieve
consistent and comparable results in conducting assets inspection. Such a detailed
method can be used in cases where there is still uncertainty as to the appropriate
category for a particular asset or class of assets. It can also be used to check or support
any decisions made in regard to the Asset Category.
The checklist of elements of physical infrastructure assets shown in Table 2 is used to
identify elements critical to successful functioning of the asset under consideration. Its
key elements will have a number of physical characteristics requiring independent
consideration. These physical characteristics are shown in Table 4 below.
Table 4. Identifying Assets Physical Characteristics
(VSG, 1996)
The physical characteristics need to be met at different levels in different assets. For
example, some physical assets would need a much higher level of technical design
than others. There are thus three levels of need: high, typical or basic. One of these
levels is assigned to the physical characteristics of the assets key elements.
The following questions need to be answered to decide the level of need:
(i) Can the physical characteristic be met without any special requirements?
If the answer is yes, assign a level of basic need against this characteristic.
(ii) If the answer is no, are the special requirements moderately important?
If the answer is yes, assign a level of typical need against this characteristic.
(iii) If the answer is no, the special requirements must be very important.
Is it mandatory to have rigorous special requirements?
If the answer is yes, assign a level of high need against this characteristic.
(iv) If the answer is no, review the earlier questions.
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Asset Category Guide:

The following guide shows how to use the information gathered above to make a
judgement on the most appropriate Asset Category. The level of need assigned to the
majority of key elements is the critical factor as the number of key elements varies for
different assets. Reference to Table 5 confirms whether the Asset Category chosen is
appropriate in the context of the full range of physical assets.
Table 5. Appropriate Asset Category and the Level of Need
(VSG, 1996)
Methods of Identifying Actual Condition Prediction versus Inspection:

The following is an outline of two broad methods of identifying actual condition;
prediction and direct inspection. It also covers the basis for decisions on which
method to use for a particular group of physical assets or for a particular purpose.
Predicting Physical Assets Condition:
Estimating current and future assets condition is the essence of the predictive method.
Predictive condition assessments involve modelling, estimation, or approximation of
asset condition. By analysing information from previous years, a predictive method
makes assumptions about the likely current asset condition and predicts its future
condition. A predictive method offers a sound and cost-effective way to examine
assets and support strategic decision-making and allows for consideration of risks and
options for planning purposes. A predictive method has several characteristics:
Uses life cycle approaches to look at asset condition;
Can be modified to suit assessment of particular asset categories;
Synthesises previous experience and results of direct inspection of a sample.
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A predictive method is the most cost-effective way to support strategic decisions.

However, the method does have some advantages as well as disadvantages, as
indicated in Table 6. A number of established predictive methods are currently in use
in the Government sector.
Table 6. Advantages and Disadvantages of the Predictive Method
(VSG, 1996)
Direct Physical Assets Inspection:

Direct inspection of physical assets means actually looking at the asset. It can vary
from a superficial walk-through to a detailed specialised inspection. It can also
include physical measurement and non-destructive testing. Elements of infrastructure
assets such as stormwater pipes and sewers may be inspected by video cameras.
Electronic equipment may be needed to inspect the condition of buried power cabling.
A form with standard questions is often used to assist in data gathering.
Direct inspection is an important part of condition assessment of physical assets.
When undertaken by experienced assessors, an on-site assessment remains the most
effective way to ensure that the condition of a physical asset is properly understood
and recorded. The advantages as well as disadvantages of direct condition inspection
of physical assets are indicated in Table 7. A number of established direct inspection
methods are currently in use in the Government sector.
Table 7. Advantages and Disadvantages of Direct Condition Inspection
(VSG, 1996)
A significant characteristic of physical assets inspections is that it provides a snapshot

of current assets condition by focusing on immediate condition issues, but provides
little understanding of past or future assets condition and thus tends to focus on
negative condition issues rather than opportunities.
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Selecting an Appropriate Method for Assets Condition Assessment:

Physical asset condition assessment does not always mean that a detailed look at all
assets is needed. In many cases a broad assessment or sampling is adequate. The most
appropriate method provides information needed for optimal use of assets in both the
short and long term. Any method chosen should have the following characteristics;
must be easy to use and audit;
have simple data collection and data entry;
allow easy calculations;
be cost-effective;
be widely used so practical experience can be shared.
Both predictive and direct inspection methods can be applied to all classes of
constructed assets. The purpose of the assessment and the nature of the information
required will in some degree decide the appropriate method. Table 8 shows the
fundamental use of either method.
Table 8. Fundamental Use of the Predictive Method or Direct Inspection.
(VSG, 1996)
A combination of predictive and direct inspection methods in determining physical

assets condition is often used to support decisions on a group of assets. Both methods
may need to be applied to cover the range of information and detail needed.
Specialised advice is often needed in undertaking assets condition assessment.
Considerable time and money can be lost by the inexperienced through;
collection of incorrect or inappropriate data;
use of an unsuitable assessment method;
an assessment method being inappropriately applied.
Time Frames for Corrective Action:
Scheduling corrective action to close the gap between actual and required assets
condition depends on certain criteria identified during the condition assessment
process such as;
the Asset Category;
the significance of the Relative Condition Level;
the severity of Condition Impacts.
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The cost of rectification and the financial year in which funding can be made
available are also important factors to be considered, particularly in the case of works
that can safely be deferred. A schedule for action needs to be considered for each
individual case. However, broad conclusions can be drawn on appropriate time frames
for action by looking at the Asset Categories against each Relative Condition Level
and each Condition Impact. These time frames are shown in Tables 9 and 10. The
time frames shown for Relative Condition Level do not always match the time frames
for Condition Impacts. It is important to consider both possible time frames
independently. The most appropriate time frame is the one that minimises risk.
Tables 9 and 10. Corrective Action Time Frames
(VSG, 1996)
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Assets Condition Surveys

Introduction:
An assets condition survey is a systematic process of evaluating the condition of
physical industrial and infrastructure assets such as industrial plant, structures,
buildings and installations. This is to establish whether the physical assets are capable
of continually supporting business needs and legal requirements in the medium and
long term. Surveys are also conducted to assess the ability of physical assets to satisfy
internal expectations and external benchmarks. An objective of assets condition
surveys is also to establish any remedial action required to bring physical assets up to
the expected conditions (such as modifications, refurbishment and replacements), to
identify their relative priorities and to propose a programme of action. Assets
condition surveys help to plan for the necessary human and financial resources before
functional failure of the assets. Assets condition surveys also help to;
develop an assets condition database that can be used for other purposes
such as assets valuations;
prepare long term capital asset investment plans;
achieve a balance between capital and maintenance funds;
target scarce maintenance resources (people and funds);
benchmark assets maintenance expenditure
benchmark specific physical assets condition.
Condition surveys are also conducted to;
establish the condition of physical assets before the decision to purchase
(such as pre-acquisition surveys for buildings);
to assess degradation after a period of use;
to establish the maintenance condition of physical assets before asset
owners commit to lump sum maintenance contracts.
A physical assets condition survey is a form of inspection to assess the physical,
operational and maintenance conditions of the asset. An assets condition survey can
be defined as a collection of data about the condition of an asset, part of an asset, or
group of assets, assessing how that condition compares to a pre-determined standard,
to identify any actions necessary to achieve that standard, and maintain it there over a
specified time horizon, the purpose being to support management decision making.
Assets condition surveys, also known as condition appraisals, are conducted for
several reasons. Most asset owner organisations, particularly public sector asset
owners, have traditionally conducted periodic condition appraisals to support strategic
planning of their assets. Such surveys are aimed at providing an overall assessment of
the condition of the building stock and normally consist of external visual inspections.
These are often referred to as broad brush surveys. Such appraisals help to prepare a
strategic investment programme which specifies the time scale and resources required
to bring the assets up to the desired standard. In assets maintenance management,
condition surveys are conducted to collect data and appraise the condition of physical
assets such as industrial plant, structures, buildings and installations.
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The objective of the appraisal is to develop and maintain a knowledge base of the
condition of physical assets. Such knowledge would help maintenance managers to
plan for future maintenance, replacement and refurbishment needs to continually
support the business giving due regard to;
functional suitability and performance;
physical and operational condition;
safety and statutory requirements;
energy and environmental performance.
BS 3811 - Glossary of Terms used in Terotechnology defines a condition appraisal as:
A formal and systematic appraisal of the condition of an item in respect of its ability
to perform its required function (BSRIA, 2000). Unlike the case of many industrial
plant, structures, buildings and installations, the external physical condition of certain
assets, especially components of assets, may not be truly representative of their ability
to perform the required function. This is because of the dynamic nature of these
assets. For example, the condition of electrical joints in switchgear cannot be
established by a visual inspection alone.
Condition surveys are also conducted to establish the maintenance condition of
physical assets before a commitment is made to lump sum maintenance contracts. It is
important for contractors to establish the maintenance condition of physical assets
before committing to comprehensive maintenance contracts. The contractors ability
to deliver the performance set by the client and the cost of maintenance activities
required to achieve this objective directly depends on the condition of the assets.
Furthermore, the condition of physical assets is an important criterion that should be
considered in pricing such contracts. Where comprehensive records of conditions are
kept, the contractor may obtain the required information. However, such records are
often rare, and the contractor may have to carry out a detailed survey to accurately
establish the maintenance commitment.
Management Approach to Asset Condition Surveys:
(BSRIA, 2000)
Before embarking on an assets condition survey it is necessary to establish its
purpose, scope, the extent to which the survey is to be carried out, and the nature of
information required from the survey. All assets condition surveys are concerned with
physical condition. However, the extent to which the surveys are conducted, and the
information required from them, vary depending on the reason for conducting the
survey and the available resources. For example, the objective, the depth of
investigation and the information to be produced by a survey investigating the
dilapidation of a public building are different to those associated with a survey for
maintaining a profile of plant and installation conditions to help forecasting and
prioritising future maintenance needs.
The appraisal of asset condition often needs to draw information from other asset
inspections conducted at different times. Therefore, an assets condition survey can
also be used as an exercise to coordinate information from other asset inspections and
draw final conclusions on the condition of physical assets, and to determine
requirements for future work.
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The issues that need to be addressed at the definition stage include;

the objective and the purpose of the survey;
the areas and items to be covered (priorities for buildings, plant items etc,
sampling of plant or installations);
the functions of the industrial plant, structures, buildings and installations
that should be evaluated (eg. operation and maintenance condition,
compliance with legislation, health and safety compliance, meeting
operational requirements, energy savings, sustainable maintenance);
the depth of inspection and investigations (for example, the extent to which
the survey should cover visual inspections and other means of assessing
conditions, eg simple tests and measurements, specialist tests and
examinations, plant internal examinations, analysis of supportive data such
as plant log books, interviewing maintenance staff and others);
frequency of assets inspections;
co-ordination with other inspections of industrial plant, structures, buildings
and installations;
the nature of information required from the survey (for example, operational
and physical condition, remedial requirements, alternative action that may be
possible, cost estimates etc.).
Setting Priorities for Assets Condition Surveys:
The operational and maintenance conditions of certain assets are often more important
to businesses than those of others. The deterioration of certain assets may also carry
significant risks (for example health and safety risks) or penalties (depreciation of
asset value, penalties due to non-compliance with legislation) that can affect business
success. With limited resources, major maintenance is only likely to be worthwhile if
the cost/penalty of non-performance is high. Assets condition surveys can also be
costly. Depending on the scope of the survey, industry condition inspections may
require plant to be shut down. It can disrupt the core business of the organisation.
Surveyors need to spend time with management and maintenance staff to establish the
history of plant behaviour. This is non-productive time.
The recognition of the importance of assets to the organisation in terms of business
needs, health and safety, energy and environmental performance etc. in order to set
priorities for the survey is an essential part of the survey process. An assessment of
the importance of the asset is normally a decision that needs to be made with the asset
owner. This assessment should include those areas where the asset is particularly
important, for example;
maintaining the business process;
health and safety;
energy consumption;
corporate image;
This would inevitably incorporate a proper understanding and assessment of the
consequences of failure.
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The importance of the assets services can be represented by a ranking system, such as:
a) critical services - services that are crucial to the core business of the
organisation and have a direct impact on business continuity, and those which
affect health and safety or compliance with legal requirements (for example,
electrical services for essential computer operation, lighting etc.).
b) essential services - services that significantly contribute to the core business
activities and have a short term impact on business continuity, (eg. heating
where there are no other means of providing heating);
c) important services - services that are less significant to the core business
activities but that could have a long term impact (eg. work area ventilation);
d) desirable services - services that have no direct bearing on the achievement of
core business activities and are desirable to the normal operation of the
organisation (eg. decorative lighting).
This information also helps the surveyor to prioritise between maintenance demands
within limited resources when maintenance requirements are identified.
Benefits of Assets Condition Surveys:
An initial assets condition survey is mainly conducted for the purpose of maintenance
planning and would normally;
identify significant defects that can adversely affect the performance of the
assets delivery of services;
identify when undesirable asset conditions or defects would be reached;
report on their cause and provide an indication of what maintenance actions
need to be done;
identify budgets required for this work;
prioritise the maintenance action recommended;
make recommendations for specialist inspections outside the scope of the
condition survey.
This information helps to optimise the planning of future maintenance and best utilise
the available resources against competing demands. The information derived from
assets condition surveys can also help to;
develop an assets condition database that can be used for other purposes such
as asset valuations;
prepare long term capital asset investment plans;
achieve a balance between capital and maintenance funds;
target scarce maintenance resources (people and funds);
benchmark maintenance expenditure;
benchmark physical assets condition.
Managing maintenance is predominantly about preventing failures that can lead to
undesirable outcomes before they occur. This requires maintenance needs to be
identified in advance so that remedial action can be instigated.
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The basis of preventive maintenance is to take remedial action before a failure can
occur. Performing work only when it is known to be required is the ideal and most
cost effective way of maintaining an asset. It requires careful assessment of the
conditions that could lead to failure and identifying the optimum time when remedial
action should be taken. This is the crux of condition based maintenance.
Decisions about maintenance can be short, medium or long term. There are other
maintenance, refurbishment and renewal requirements which need to be identified
sufficiently in advance to allow time for;
obtaining funds;
planning the works;
planning resources;
delivering equipment;
carrying out the works;
other logistical arrangements.
Short term maintenance addresses demands as they occur. Where the time between
detection and failure is small, action needs to be taken quickly to prevent failure. This
type of deterioration is covered by short term maintenance and generally addressed in
a planned preventive maintenance programme through activities such as;
routine inspections;
condition assessment (monitoring and measurement);
schedule based maintenance tasks;
operational time based maintenance tasks.
Medium term maintenance deals with forecasts for a given period in the future,
usually five years. Long term maintenance is about planning maintenance beyond the
five year period and usually addresses major refurbishment and replacements. The
information requirement for medium and long term planning is strategic in nature and
needs a futuristic view of physical assets conditions.
A typical example of the benefits of assets condition surveys for maintenance
planning is that of building services. Building services provide the essential internal
environmental conditions and electrical supplies without which most buildings would
be paralysed. Building services installations also represent a significant proportion of
investment in buildings. They are a valuable asset to investors. The physical condition
and operational performance of building services installations deteriorate with time
and use, resulting in the depreciation of their value. Deterioration of the condition of
building services plant and installations can also lead to failures resulting in a number
of undesirable outcomes such as;
significant losses due to business disruptions;
non-compliance with legal requirements;
health and safety problems;
depreciation of asset value;
increase of energy and environmental costs.
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The Role of Assets Condition Appraisals in Assets Maintenance Planning:

Some key questions faced by maintenance managers with regard to medium and long
term maintenance planning are:
What are the organisations building services assets?
What assets are critical to the business requirements and other needs of the
organisation?
What is the present condition of these assets?
What is the gap between the current and failure condition?
How soon will the failure condition be reached?
What action needs to be taken to avoid failure and to restore the asset to an
acceptable condition?
When does this action need to be taken?
What is the cost?
What are the priorities among other maintenance requirements?
What alternatives are there to maintenance, renewal or refurbishment?
The purpose of a knowledge base of physical assets condition is to provide answers to

these questions. Technological means of (automatically) assessing all adverse
conditions, carrying out expert diagnosis and signalling failure are currently limited to
a few applications, such as vibration analysis, thermal imaging etc. Human senses can
often pick up a wide range of warning signs from an assets physical characteristics
and a complex combination of present and past performance patterns, which
automatic systems may not be able to do at present. Therefore, assessing the salient
conditions, diagnosing failure symptoms and predicting maintenance requirements of
building services plant and installations involve both technological and human
expertise. A condition appraisal is an important management tool that uses human
expertise to analyse information available from sources such as maintenance records,
visual inspections and condition monitoring, to judge the condition of physical assets
and asset service equipment, and to forecast future maintenance needs.
Essential Steps of an Assets Condition Survey:
Whereas an initial assets condition appraisal regime usually consists of a single
survey or a number of iterations, the assets condition survey can be regarded as
consisting of several consequential steps.
The seven essential steps of an assets condition survey are;
1. Defining the task
2. Identifying survey priorities
3. Briefing a specialist
4. Planning and organisation
5. Condition assessment
6. Data capture, evaluation and analysis
7. Reporting.
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Items 1 and 2, defining the task and identifying survey priorities, are important
management issues that provide the basis for the scope, the extent and the priorities
associated with the surveys. They should be addressed before briefing a specialist to
conduct a survey. Item 3, briefing a specialist, is about preparing a brief to persons
who will conduct the survey. Item 4, planning and organisation deals with the
preparatory work that needs to be carried out before the commencement of work on
site. The remaining items 5 to 7 are about the implementation of the survey relating to
assets condition assessment, data capture, evaluation and analysis and reporting.
Scope of Assets Condition Surveys:
Generic tasks that form a part of a full condition appraisal include the following;
external examination of physical assets such as industrial plant, structures,
buildings and installations;
evaluation of the performance of the physical assets;
evaluation of the operation and maintenance conditions of the physical assets;
carrying out specialist inspections and internal examinations;
co-ordinating information from inspections and tests carried out previously;
co-ordinating information from other sources;
evaluation of compliance with health and safety and legal requirements;
analysis of condition data and information;
identifying future maintenance requirements, their priorities and time scales;
identifying funds required to carry out this work;
developing a knowledge base of the condition of the physical assets.
Condition surveys can widely vary in scope. The extent to which activities other than
external physical examinations are included in a survey depends on the asset owners
requirements for the survey, financial resources available for this purpose, and
appraisal activities that can be taken up by the maintenance organisation.
The Minimum Maintenance Standard:
The condition of a physical asset can be gauged objectively in respect of functional
suitability, operational needs, physical condition, health and safety requirements and
the requirements of law. The maintenance policy of an organisation should specify the
(minimum) standard at which the asset should be maintained. Setting this policy may
be done at a higher management level in the light of other competing demands such as
finance and the value and the utility of the asset. This policy will be interpreted as a
set of maintenance standards which describes the desired performance criteria of the
physical asset, particularly for industrial plant, structures, buildings and installations.
The lower threshold of acceptability will be determined by health and safety and
legislative requirements. If these standards cannot be sustained, some remedial action
to restore the asset to an acceptable condition is required. The minimum maintenance
standard, together with the importance of the asset, provides a basis to establish the
repairs or remedial action required during a given period. Some organisations use a
ranking system to broadly identify the maintenance standard required of their assets.
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Numerous ranking systems are suggested in various publications relating to the

subject. The book Building Maintenance, Economics and Management by the
Property Services Agency, describes the following assets inspection ranking system:
X - Exceptional - Maintenance in impeccable order at all times for reasons of
operational necessity, public importance, client status or environmental quality.
N - Normal - Fully maintained with the appropriate authoritys instructions and with
regards to client needs for extended use.
L - Limited Life - Maintained to use for a period of not more than five years.
W - Wind and Weatherproof - Disused facilities maintained only to prevent serious
deterioration with due regard to safety.
D - Demolition Pending - Maintained only to a level sufficient to obviate the risk of
claims or legal action.
The Property Services Agency, PSA, was the largest design and construction
organisation in the UK, responsible for managing maintenance in the UK Government
until the early 1990s. The role of the PSA included the provision, management and
maintenance of a wide range of facilities such as offices, naval bases, army barracks
and military airfields. Therefore the classification system used by the PSA was an
overall system to cover the variety of buildings and installations in its care and the
related maintenance disciplines (eg. building, mechanical, electrical and electronic).
Where there are similar physical assets under similar conditions, it is economical to
carry out sample surveys. A survey of a representative sample of physical assets can
be conducted and the results may be extrapolated to draw conclusion about all the
assets. This may be a cost effective way of assessing future maintenance needs for
planning budgets. However, where there is even a slight difference in function of
similar assets, or the cost of failure of an asset is high, it is not advisable to base
surveys on sampling techniques. Ideally there should be a statement in the asset
register about the acceptable conditions at which the assets should be maintained.
This statement should express the level of availability, downtime that can be tolerated,
and safety requirements. Such statements will help establish the importance of any
remedial works required.
Co-ordination with Other Inspections:
Assets services inspections (such as building services) are sometimes carried out as a
separate exercise to physical assets surveys. A main reason is that different
knowledge and experience may be required to assess the condition of asset service
equipment and their performance, than a survey of the physical asset itself. Whilst the
information may be collected by different specialists, there are advantages in carrying
out the assets services inspection as a coordinated exercise with other disciplines. This
is because the condition of asset service equipment, particularly for industrial plant,
structures, buildings and installations, and their maintenance requirements, can
significantly interact with the physical asset and other installations such as IT and
ICT. A combined survey of a physical asset, its related services, and other
installations (IT), helps to achieve close co-ordination between disciplines and avoids
duplication of effort.
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Frequency of Surveys:
There are number of factors that determine the frequency of surveys at any given
time. These are;
the present condition of the asset;
likelihood of failure;
importance of the asset;
consequence of failure and business risk.
The degradation hazard curve illustrated in Figure 4 is a widely acclaimed
diagrammatic representation of the failure pattern of plant and installations over its
lifetime. The failure rate starts to increase rapidly after settled operation over a period
of time. Failures are also expected to be high during the initial period of operation.
Figure 4. Failure Pattern of an Asset Over its Lifetime

(BSRIA, 2000)
BS 8210 - British Standard Guide to Building Maintenance Management,
recommends that an in-depth survey is carried out on a five-yearly cycle,
supplemented by a two-year superficial inspection.
It is useful to conduct a superficial appraisal within one year after a constructed
assets initial hand over, using the operational and maintenance information gathered
during this period. At this stage it is not necessary to carry out a detailed visual
inspection as the physical asset should still be in good condition. The purpose of such
an appraisal is to identify major shortcomings (eg. inadequate access for maintenance)
in order to make changes, and identify maintenance activities that may need to be
carried out to make the asset operationally acceptable in line with its services needs.
Such an appraisal is best carried out by the persons responsible for maintenance.
Detailed inspections should generally be carried out at longer intervals depending on
the operational characteristics and operational environment of the physical asset.
Towards the end of the assets useful life, the inspection frequency should be
increased depending on the criteria described above. It may be necessary to carry out
the inspections of specific assets services more frequently than the physical asset itself
because most asset services (such as building services) are dynamic in nature (eg.
moving parts, air flow etc.), and deterioration can rapidly set in during their operation.
Some services could have a significant impact on health and safety (eg. electrical
equipment, steam, high air and water temperatures etc.), and failure of certain services
(eg. electricity) can directly disrupt an organisations core operations.
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A criterion for determining the frequency of physical asset inspections is the

likelihood (or risk) of failure after a given operational time. The following
characteristics represent low risk and may be inspected at relatively longer intervals
for industrial plant, structures, buildings and installations;
designed and constructed in accordance with accepted technology;
having a proven durability record;
having inherent potential failure conditions that can be easily observed during
day to day operations;
subject to regular maintenance inspections;
having a good reliability record.
The following characteristics should be inspected relatively more frequently for
industrial plant, structures, buildings and installations:
not subject to regular preventive maintenance;
having inherent potential failure conditions that cannot be easily observed
during day to day operations;
subjected to heavy or excessive use;
approaching the end of their useful or economic life;
not inspected during the last inspection;
displaying rapid or unusual deterioration during their last inspection;
already on the maintenance back log.
It is important to note that a condition survey will only provide a picture of the
conditions at the time of inspection. Physical assets such as industrial plant,
structures, buildings and installations gradually deteriorate over time between
surveys. Condition records and forward maintenance plans may need to be changed
on the basis of ongoing maintenance experience. Where an infrequent but detailed
survey is carried out, a superficial inspection or a less detailed interim survey is useful
in re-examining the conditions for which deterioration over the interim period is
difficult to predict accurately. It is also reasonable to relax the frequency of detailed
surveys where the maintenance regime can maintain a continuous check on physical
assets condition and update assets condition records accordingly. All maintenance
activities should include observation of physical asset functions during maintenance,
and continually review and update assets condition and forward maintenance records.
This will reduce the need for interim surveys in-between major surveys.
Planning Assets Condition Surveys:
Assets condition surveys may be based on visual inspections or may involve
measurements, tests or other forms of investigations. These may be external
inspections or may require opening up inspection covers, dismantling plant and
possible shutdowns. Planning and programming the work in advance and finding
suitable windows of opportunity to carry out the inspections with minimum
disruption to the organisations business are important pre-requisites to the condition
survey process. Therefore the assets condition survey programme needs to be
organised in conjunction with the maintenance function.
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A list of the most common tasks that need to carried out before starting on site are;
identifying physical asset items and services to be examined and time scales;
the preparation of a method statement of the condition survey activities;
carrying out an assessment of risk associated with any corrective work;
identifying specific competence and training requirements, for example to
work with particular plant and installations;
making arrangements for plant shutdowns;
informing users of the physical assets or services being affected;
making arrangements to visit secure areas, including any security clearances;
making arrangements for specialists, contractors, or other technical persons;
obtaining the necessary permits for specialised work;
making arrangements for access to the physical asset.
Assets Condition Survey Methodology

Gathering Information:
Gathering technical data about assets that need to be examined, is a pre-requisite to
the assets condition survey process. This data includes details about asset ownership,
location, manufacture, design details, output requirements and initial operational and
performance conditions. This information will help the surveyor to plan the survey as
well as compare original performance patterns with present conditions. Ideally the
surveyor should have access to the following documents;
the asset register;
as-installed drawings (record drawings);
operation and maintenance manuals;
health and safety file;
information about warranties and guarantees;
commissioning data;
previous survey data and records of the condition of the physical asset;
competent person examination reports and other specialist inspection reports;
forward maintenance plans;
information on maintenance backlog;
relocation or refurbishment plans that could affect asset services.
The asset register, with basic identification information such as the identity, location
and the function of assets, is the starting point for an asset and asset service equipment
condition survey. This information should help the surveyor to plan the survey
process and establish a basis for data capture. Most computer based maintenance
management systems include an asset register facility. A distinct advantage of
capturing the condition survey data on the basis of a computer based asset register is
that the asset condition information can easily become a part of the maintenance
management information system.
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Manufacturing and/or construction/installation information about the physical asset,

design details and maintenance strategies should be found in operation and
maintenance (O&M) manuals. The extent to which the required data is available from
existing records varies from one organisation to another. An asset register or other
forms of comprehensive asset records may not exist, and asset information may need
to be established while conducting the survey. Good quality O&M maintenance
manuals are often scarce and the surveyors may have to carry out detailed
investigations to find the information required. Where asset information is not
available, condition surveys may be used as a tool to gather such information.
Physical Asset Attributes That Should be Examined:
Physical conditions that can be observed by visual inspections are not solely
representative of the ability of a physical asset or an assets item to perform as
required. Unlike condition surveys of physical assets such as buildings which
generally comprise a visual inspection of building elements, a comprehensive
condition appraisal of an assets services requires consideration of both the physical
condition and the operational integrity of the services related to the physical asset.
The appraisal of such services installations should also take the systems approach
where the physical state and the operational integrity of an entire system (for example
an air-conditioning system in a building asset) should be examined. This is because
the physical and operational compatibility between two items within an installation
can affect the overall performance of the installation. An example is inadequate water
treatment that can cause corrosion and reduce life of physical asset items such as heat
exchangers. Subject to the requirements of the brief, the condition of physical asset
service equipment should be examined in relation to the following aspects;
impact on health and safety;
compliance with legal requirements;
operational integrity;
physical condition;
conditions affecting operation and maintenance;
functional suitability;
economic life and obsolescence;
energy and environmental performance.
Asset Services Functional Suitability and Operational Integrity:
Functional suitability of a physical assets services is its suitability to the business
function. Operational integrity is the ability of the physical assets services to perform
as expected. These are important attributes of a physical asset which affect the asset
owners business profitability. Some typical examples of functional suitability and
operational integrity of a physical assets services that need to be considered during a
survey are lighting levels and quality of lighting; adequacy of emergency lighting;
adequacy of fire alarms; adequacy of power supplies; power quality; an overview of
heating and ventilation standards; and an overview of services system performance.
Checking functional suitability is often not included in broad brush type assets
condition surveys. However, checking functional suitability becomes particularly
important when there has been a change of physical assets or business function.
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Assets Physical Condition:

Physical conditions of assets such as industrial plant, structures, buildings and
installations, can be observed through visual inspections and other methods such as
non-destructive testing. Sometimes it may be economic to carry out destructive testing
on the basis of sampling to establish the true condition of certain installations. For
example, a section of pipe work may be removed and examined to establish the
integrity of pipe work systems. The aim is to look for indicative signs of conditions
leading to failure. An overview of non-destructive testing techniques used in physical
assets services applications is given later. Typical examples of physical conditions
that may signal forthcoming maintenance requirements include;
deterioration (eg corrosion);
wear and tear;
damage;
blockages (eg scaling of pipes);
loose electrical joints;
electrical components operating at excessive temperatures.
It is not normally possible to observe some aspects of physical deterioration during a
visual inspection, for example, loose electrical joints. Such tests and inspections are
often included in separate surveys conducted by specialists.
Compliance with Legal and Health and Safety Requirements:
Asset conditions must comply with legal and health and safety requirements. There is
a vast amount of legislation that impacts upon the condition of physical assets
services for industrial plant, structures, buildings and installations. The relevant
Occupational Health and Safety Act (OH&S), and its supporting regulations, both
nationally and internationally, have requirements for plant and installations to be
operated and maintained in safe conditions and without detriment to health. They also
have requirements for conditions such as the cleanliness of ductwork, adequacy and
level of task lighting and safety of electrical installations. From time to time, new
legislation is introduced or existing legislation is revised that may require the
replacement of existing plant or major modifications to them. For example, the
change regulations on ozone-depleting substances which came into force early in the
new millennium. The changes affect sale and use (use for top-up or maintenance) of
some refrigerants (e.g. most CFCs). It also gave rise to the need for replacing
machines using such refrigerants. There is a vast array of legislation and regulations
issued by responsible bodies that could have a direct or indirect impact on the
condition of physical assets. It is thus not the objective here to provide a
comprehensive list covering all physical asset services regulations. Assessing
compliance with health and safety requirements and the requirements of law should
be part of the initial survey. Non-compliance with legislation and health and safety
requirements give rise to urgent work. Some recent health and safety legislation in the
UK for example, has affected existing places of work and services within them, such
as the Workplace (Health, Safety and Welfare) Regulations of 1992, which required
compliance in retrospect to existing assets by January 1996. It specified health, safety
and welfare standards to be maintained in the workplace, which gave rise to the need
for major changes to plant and installations and their maintenance routines.
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Asset Conditions Affecting Operation and Maintenance:

The ability to operate and maintain physical asset service equipment without
hindrance as well as minimising downtime in the case of a failure, can be extremely
important to the asset owners business activities. The surveyor should note such
conditions that will cause downtime of critical asset items beyond acceptable levels.
Aspects of industrial plant, structures, buildings and installation configurations that
can seriously affect the ability to maintain and reduce downtime include:
Inadequate access to critical equipment;

personnel access;
personnel egress;
ease of carrying tools and materials;
access for plant and equipment (eg lifts, hoists).
Inadequate space for doing the work, for example;

ergonomics;
manoeuvring space for persons;
space for removing and replacing components such as boiler tubes;
Lack of built-in features for safe maintenance, for example;

guards;
lockable switchgear.
Inadequate information on operation and maintenance;

operation and maintenance manuals;
record drawings;
asset register;
planned preventive maintenance records;
health and safety file.
Assets Economic Life and Obsolescence:

A main objective of the assets condition survey is to identify asset items that are
reaching the end of their economic service lives or becoming obsolete for other
reasons. Although the replacement of such asset items may not be imperative in the
short term, a significant amount of planning may be needed before their replacement
(for example, the replacement of boiler plant). This may require a considerable lead
time for planning, obtaining funds, procurement design and contractual services and
for maintenance of services whilst the work is being carried out. Obsolescence occurs
for a number of reasons;
Physical obsolescence - this can happen due to reasons such as physical

deterioration, damage or non-availability of spare parts
Condition obsolescence - condition obsolescence occurs when the physical

condition of an item is no longer acceptable due to its physical condition.
Economic obsolescence when keeping an asset or asset service equipment

in operation is no longer economic and there are cheaper alternatives. This
usually happens towards the end of the assets economic life where operation,
maintenance, energy or environmental costs are high, or if there have been
technological changes that provide cheaper options
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Functional obsolescence where the function of the asset is no longer

required
Technological obsolescence - the asset or asset service equipment are no

longer technically superior and consideration should be given to their
replacement
Social and legal obsolescence - for example, the asset may contravene
environmental standards or legal requirements.
The survey, subject to the requirements of the brief, should identify physical assets
that could become obsolete due to the above reasons.
Assets Economic Life:
The economic life of an asset is the estimated period beyond which the asset or asset
item will not represent the least cost option for providing its required function.
The economic life of an asset or a particular asset item can vary significantly from its
published life factors or specifications declared by the manufacturer, due to a
number of reasons. Published life factors assume that items are;
designed and manufactured to good quality and standards, for example a
high standard of quality control, compliance with national standards,
international standards, and/or European standards etc;
installed, tested and commissioned to good practice requirements;
operated and maintained adequately by competent and skilled persons;
subjected to reasonable hours of operation commensurate with their design
intent.
Therefore, the published factors only provide a starting point for identifying the
remaining economic life of a physical asset or asset item. For example, improved
techniques for estimating the service life of plant have been developed by the British
Standards Institution/ISO, Buildings - Service Life Planning - Part 1: General
Principles. This BS/ISO document and the CIBSE Guide to Ownership, Operation
and Maintenance of Building Services recommend a factor approach to vary the
published lives depending on a range of conditions. An algorithm for assessing plant
lives based on such conditions is given.
Economic Obsolescence:
With regard to economic obsolescence, there are capital asset investment appraisal
techniques (refer to the Assets Financial Management Module) that can be used to
evaluate the relative economics of repair or replacement. Discounted cash flow
techniques allow comparison of the cost of new physical assets and future costs
against those of existing physical assets on the basis of current prices. Another
technique that is used for infrastructure assets such as facilities and building services
is the equivalent annual cost which projects the cost of replacement plant of assets
services into future years to compare with the cost of keeping existing plant. The
decision to repair or replace should also take cognisance of factors such as business
production or assets usage losses due the breakdown of services which is more likely
with old asset service equipment items.
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Functional Obsolescence:
A physical asset or asset item is functionally obsolete when its operational or physical
function is no longer required. Examples are redundant cables and pipes left on site
after replacement by new pipe and cable systems. Redundant (standby) equipment
which is not needed to support the asset owners business requirements can also be
treated as functionally obsolete equipment. Such equipment occupies valuable space
and results in maintenance resources being wasted.
Technological Obsolescence:
Assets based on new technologies are being developed continually which can make
existing assets and related equipment obsolete. Technological obsolescence takes
place when the physical asset or asset item is no longer technologically acceptable for
the provision of the required function. Old products may become unacceptable
because, for example, more energy efficient equipment is available, or the use of
assets services such as mechanical air conditioning does not meet the owners image.
Developments in the field of information technology, computer hardware and
software have caused early replacement of items based on such technology, for
example, control systems and fire alarm systems. Another example is the use of fibre
optics in lighting systems.
Social and Legal Obsolescence:
Asset service equipment can become redundant because it no longer is socially or
legally acceptable. Assets that consume excessive energy can not only be costly, but
can raise negative public opinion. Another example is refrigerating machines using
CFC refrigerants which have been phased out.
Visual Condition Inspections:
Visual inspection is the most fundamental method of non-destructive testing. It is
easily carried out, inexpensive and usually does not require special equipment. Visual
inspections may be enhanced by the use of optical aids. There are many defects, for
example corrosion, which manifest in a visible condition that can be detected by
careful visual inspection.
Optical aids that can be used during asset condition surveys range from simple
equipment such as low power magnifiers and binoculars to specialist equipment such
as fibre optic devices for the inspection of parts to which access is restricted, for
example, inside pipes and ducts. Some of these devices can also be used with camera
systems. Remote photography is particularly useful to inspect asset service equipment
in areas with controlled access (eg. dangerous processes, toxic material etc.)
Visual inspections require good vision, good lighting and the knowledge of what to
look for. Much of the success of visual inspection depends on the distinctive nature of
the condition and the lighting arrangements. Surface preparation such as cleaning or
etching is sometimes used to aid the examination of surface-breaking defects. Visual
examinations, unless backed by measurement techniques, can be subjective and prone
to variable interpretations.
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4. Assets Condition Scoping,

Profiling and Modelling
Physical Assets Condition Scoping
An assets condition scoping study defines a methodology and associated work plan to
provide a physical assets portfolio condition report. The scoping methodology
provides flexibility in what is included in an assessment of assets condition; how the
information is integrated to provide measures of assets condition at various levels of
aggregation; and how the results are presented. Despite this flexibility, there is a high
degree of rigour in terms of the structure of the assets condition scoping report, as
well as its contents. The report is not simply a haphazard collection of information on
physical assets condition for the benefit of asset users and/or owners to make sense of
as best they can. The report allows for current asset management strategies to be
formulated in the context of overall assets condition by providing information on the
condition of a portfolio of physical assets relative to the desired condition for their
required service delivery, and relative to other non-asset services. This information
can be provided at all levels, from an overall summary down to individual aspects of
condition such as specific asset performance. It allows for questions to be addressed
such as: Are maintenance programs targeting those assets most in need of
improvement? and: Are maintenance programs targeting one set of assets or their
service components while overlooking others?
Capital assets investment strategies can also influence the content of the assets
condition scoping report. If investment strategies are targeting a particular component
of assets condition, such as assets operational performance, then this component is
presumably of concern and should be incorporated into a physical assets portfolio
condition report. An integrated assets condition report will document the cumulative
impact of all assets policies, programs and strategies and will not, in general, be able
to distinguish the impact of any individual capital asset investment. The assets
condition scoping methodology incorporates recommendations from a first-round
initial assets condition assessment. The scoping methodology also includes physical
assets interface with strategic human resources management in its assessment of
maintaining physical assets condition.
A hierarchical structure of the components of assets condition (such as performance,
operational condition and physical condition), allows for additional sub-components,
such as efficiency as a result of asset performance, functionality and utilisation as a
result of operational condition, demand/capacity capability and usage ability as a
result of physical condition, etc. to be added as desired. Because the assessment is
defined in terms of assets condition components and desired outcomes, not in terms of
particular indicators or data sets, improved data can be incorporated whenever they
become available. The first integrated condition assessment also seeks to identify a
possible lack of data collection and inadequate data quality as impediments to the
assessment of physical assets condition.
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Methodology for a physical assets condition scoping study:

The BRS Evaluation Procedure (Chesson, 2005) has been adapted to develop a
methodology for a physical assets condition scoping study. This procedure is quite
general and has been successfully applied to a range of situations including the
development of a conceptual framework for a condition audit project for agriculture
and rangelands. The procedure involves the following steps:
Identify the attributes of the physical asset or portfolio of assets.
Determine the components of assets condition and hierarchical structure.
Specify the desired outcome for each assets condition component.
Develop the assets condition component measurement process.
Link the measured values to decision-making and management actions such as

capital assets investment strategies.
Although the steps are listed sequentially, the procedure is an iterative process with
decisions made in later steps refining those associated with earlier ones. The first two
steps of an assets condition scoping study is considered in greater detail below.
Identify the attributes of the physical asset or portfolio of assets:
Physical assets can be categorized into industrial and infrastructure assets in both the
public and private sectors. Although much of the literature on asset management
refers to infrastructure assets that relate predominantly to the public sector, several
industry sectors, particularly the high capital cost process industries such as power
generation utilities and chemical process plant, refer to industrial assets which include
all plant and equipment that industry uses for manufacturing, mining, processing etc.
and for producing a product (CIEAM, 2006).
Industrial assets have a number of attributes considered in asset condition assessments
(as well as infrastructure service assets), such as:
Physical condition the condition of an asset that enables it to meet intended

service levels.
Demand/capacity the capacity of the asset to meet existing service

requirements.
Functionality the ability of the asset to meet program delivery

requirements.
Operational condition the condition of an asset that enables it to meet

intended performance levels.
Operational performance the ability of the asset to achieve usage outcome

requirements.
None of these attributes are mutually exclusive, for example physical condition may
have an impact on an assets ability to meet service and performance requirements.
Infrastructure assets are typically large, interconnected networks or portfolios of
composite assets, comprising sub-components that are usually renewed or replaced
individually to continue to provide the required level of service from the network.
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Infrastructure assets thus refer to the built environment, including buildings, roads,
bridges, and facilities and utilities related to water, sewage, power etc. as well as
assets that relate to community services such as land, parks, and related equipment,
and to military facilities (CIEAM, 2006). A physical asset can be considered to be
part of the infrastructure when it is an integral part of a total system, i.e. if the asset is
removed the system is incomplete, or the particular asset is necessary for the system
to deliver the required standard of service. Critical infrastructure is a term used by
governments to describe material assets that are essential for the functioning of a
society and economy. Most common critical infrastructure include (ALGE, 1998);
electricity generation, transmission and distribution;
gas production, transport and distribution;
oil and oil products production, transport and distribution;
telecommunication;
water supply (drinking water, waste water/sewage, dikes and sluices);
agriculture, food production and distribution;
heating (e.g. natural gas, fuel oil, district heating);
public health (hospitals, ambulances);
transportation systems (fuel supply, railway network, airports, harbours,
inland shipping);
financial services (banking, clearing);
security services (police, military).
Infrastructure assets generally have the following attributes (ALGE, 1998):
They are large networks constructed over generations which are not often
replaced as a whole system
The system or network has a long and indefinite life because its service
capacity is maintained in perpetuity (by continual refurbishment or
replacement of components as they wear out).
The system components are interdependent and not usually capable of

subdivision or separate disposal, and consequently are not readily disposable
within the commercial marketplace.
The system interdependency may limit a component life to a lesser period than
the expected life of the component itself.
The assets have a high initial cost and a value which is difficult to determine.
Determine the components of assets condition and hierarchical structure:

Components of Industrial and Infrastructure Assets Condition:
Industrial assets are basically moving assets that perform specific functions through
the application of their constituent parts in a rotating, reciprocating or swinging
motion. Components of industrial assets condition therefore relate to an assets
movements that could generate operational conditions such as vibration, heat, friction,
noise or electrical potential that would eventually affect the physical condition,
functionality, operational capacity, operational condition or operational performance
of the asset.
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Usage ability as a result of physical condition indicates the asset's ability to deliver
services to the level and standard required. In addition to the assets usage ability as a
result of its physical condition, there are a number of assets condition components
used in a physical assets condition scoping study. Demand/capacity is related to asset
performance. Measuring this component would involve establishing subjective
baseline service levels against which to measure actual performance. The
demand/capacity component may also bring into scope efficiency and effectiveness
measures. Assets utilisation and functionality is closely aligned with asset usage
measures. Asset utilisation is a measure of how intensively an asset is being used to
meet its service delivery objectives, in relation to the asset's potential capacity. To
assess utilisation, criteria and benchmarks appropriate to the services being delivered
and to the class of asset being considered, firstly need to be established. The criteria
should have regard to:
The value of the assets unit of service potential that is being used relative to
the units of service being delivered (e.g. the future economic benefit)
The physical measures of asset capacity relative to the units of service being
delivered (e.g. outcome relative to the type of activity)
The use being made of the asset relative to the optimal availability for the type
of asset (e.g. the number of hours used relative to the hours available).
Under-utilised assets should be identified, and the reasons for this examined. It may
be, for example, that the asset is no longer effective in performing the activities
required of it or that it is in less than optimum condition. It may also be that the need
for the services it delivers or supports has reduced. The functionality of an asset is a
measure of the effectiveness of the asset in supporting the activities to be carried out.
To assess (and monitor) functionality, it is necessary to determine:
The role that the asset plays in achieving service delivery outcomes
The functional characteristics required to support specified activities.
The functionality of assets should be regularly reviewed. The results of regular

functionality reviews are used in the formulation of asset strategies.
Standard of Service:
A well-defined standard of service is the foundation for determining assets condition
of all infrastructure assets. A standard of service, in objective and measurable terms,
determines how an asset will perform, including a suitable minimum condition grade
in line with the impact of asset failure. There are two main objectives of infrastructure
asset management relating to standard of service (ALGE, 1998):
Sustained standard of service: To sustain or deliver an agreed standard of

service in the most cost-effective way through the operation, maintenance,
refurbishment, and replacement of assets.
Improved standard of service: To make strategic changes and improvements

to the standard of service of the asset portfolio through the creation,
acquisition, improvement and disposal of assets. Changes to the standard of
service are usually managed as a program based on strategic objectives
regarding the asset portfolio.
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Minimum Condition Grade:

Without a defined standard of service, there is no means of knowing what level of
condition the infrastructure asset is required to be sustained at or to be improved.
With a defined standard of service, the need to maintain, repair, refurbish or replace is
dependent upon the condition of the asset. With a performance-based asset
management approach, decisions are flexible and depend predominantly on the
current condition of the asset. This differs from a planned maintenance approach
(which may not reflect the actual condition) by responding to the actual deterioration
and performance of an asset. The minimum condition grade needs to be set
objectively, in line with the scale of impacts or consequences of asset failure during
the design event. The minimum condition grade provides a key boundary condition
for a physical assets condition scoping study and for making investment decisions.
Performance Specification:
The second part of standard of service of infrastructure assets is a specification of how
the asset should perform. This would normally include a specification of the attributes
of the asset which are important to its function such as location, type, height, capacity.
The defined standard of service in effect combines the performance specification with
the condition grade as a measure of reliability whereby the potential complication of
trying to optimise maintenance over a short timeframe, or the need to determine the
outcome or benefit associated with each individual intervention, can be avoided.
Integrated Asset Management takes a whole-life cost approach to decisions regarding
operation, maintenance, refurbishment and replacement of assets.
Physical Assets Profiling

Physical assets profiling describes the necessary elements needed to provide
descriptive information about the physical assets systems, sub-systems, assemblies
and components in a systems hierarchical topology. The profile does not cover the
geographic location of the physical assets. Physical assets profiling also describes the
assets physical properties, such as the assets capabilities.
Assets Profiling Systems:
A typical assets profiling system consists of the following sections:
1. Overview:
The assets profiling system overview summarises the assets attributes,
services adaptation, constraints, requirements, warranties, and liabilities.
2. Profile Semantics:
The profile addresses core semantics related to all aspects of the assets
services. This includes:
Identifying the asset via unique identifiers.
Articulating service-specific requirements.
Indicating any commercial terms of usage.
Describing warranties, indemnities, and limitation of liability.
Indicating modelling requirements for describing conditions.
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3. Asset Attributes:
The assets attributes identify the nature of the services via the assets
elements within a specific Context. Any other Context may be used to provide
additional descriptive detail about the service.
4. Assets Services Adaptation:
Adaptation refers to the use of assets services and any related interfaces, such
as an assets/human resources interface. It also relates to services composition
which refers to the use of assets services with required interface modifications,
and the eventual derivation of services which includes modifications of the
service interface as well as the implementation of the service.
5. Constraints:
This considers specific assets services constraints such as, for example,
ensuring that an assets service in the public sector is not used for commercial
advantage that infringes upon unfair competitive advantage.
6. Requirements:
The assets profile incorporates an Attribution Requirement. This ensures that
the use of an assets services is attributed to the asset owner/steward.
Rectification of an assets condition would thus similarly be attributed to the
asset owner/steward, unless specifically stipulated otherwise.
The assets profile also incorporates a Payment Requirement. This is used to
describe the financial terms and conditions of the assets usage.
The assets profile further incorporates a Share Requirement. This is used to
ensure that any derivative of the assets services must be recognised or
licensed under the same terms as the original assets services.
7. Warranties, Indemnities, and Liabilities:
A specific assets services usage model defines warranties, indemnities and
limitations of liabilities associated with the assets services. A warranty is a
promise regarding the description of services and their quality, as stated by the
asset owner. An indemnity is protection against loss or other burden by the
user of the assets services in the event of non-compliance to the warranty. A
liability is limiting the responsibility of the assets services provision.
Warranties for assets condition components are categorised into the following:
Performance: specifies criteria relating to quality of services based on the
assets condition measures, including a measure of the level of service
(LOS) provided.
Compliance: specifies a set of quality aspects of the service in
conformance with the law, compliance with standards, and an established
LOS agreement including the average time for resolving problems related
to service provisioning as a result of assets condition.
Reliability: specifies a set of technical measures related to the
configuration of assets services and the relationship between the assets
services users and providers, including a performance measure of a
delivered services, the probability of the services being accessible.
Monitoring: specifies measures that support the management of services,
including the frequency at which a service provider verifies the availability
of assets services.
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Physical Assets Condition Modelling

Condition Modelling Techniques and Theoretical Models:
In addition to the myriad condition monitoring models using Artificial Intelligence
(AI) techniques such as Artificial Neural Networks (ANN), Genetic Algorithms (GA)
etc. there are several theoretical models of condition monitoring techniques that are
significant in assets condition modelling. Instead of attempting to cover the very
broad range of commercial and research models developed for the different condition
monitoring technologies, such as vibration monitoring, infrared thermography, oil
analysis and tribology, ultrasonics, and motor current analysis, it is more appropriate
to consider some of the significant theoretical models developed by the Reliability
Research Group, at the University of Alberta, U.S.A. These theoretical models range
from condition based maintenance decision making; fault diagnosis and detection;
prediction of assets equipment remaining life; reliability based system design for
minimal life cycle costing; to multi-state system reliability modelling (RRG, 2006).
Condition Based Maintenance Decision Making Using Vibration Monitoring:
Asset developers and manufacturers of capital asset equipment often state that
periodic inspections and PM activities must be conducted for any warranty to be
valid, and for the equipment to operate properly. Thus, maintenance departments in
various industries have to follow predetermined schedules for most of their
maintenance activities. These periodic maintenance schedules do have the advantage
of easy job scheduling. However, information of the health conditions of the
equipment in operation does not get used to modify the maintenance schedule. Thus,
some physical assets are over-maintained while others are under-maintained.
Vibration-monitoring systems have been used to indicate when replacements are
required on selected components such as bearings in rotary equipment, and gears in
drives and transmissions. They are also used in fault diagnosis at the system level in
order to pinpoint any failed components. In these situations, the monitoring systems
are used for reacting to failures rather than preventing failures. They are not used to
predict the statistical remaining life of components. As a result, they do not consider
the planning or optimising of maintenance of the whole physical asset system. How to
monitor the critical components of the asset system, predict how much longer the
components can reliably perform their functions, and how much longer the asset as a
whole can continue to be used, as well as to provide an optimal maintenance schedule
for inspections, preventive maintenance, and/or replacements in order to minimise the
total cost, is yet to be investigated. In view of these issues, multi-channel vibration
analysis is used to monitor the degradation of assets equipment conditions and to use
the collected information to model the degradation process in order to schedule
maintenance activities to minimise the total asset maintenance cost.
Fault Diagnosis and Detection Using Advanced Signal Processing Techniques:
A fault signature database includes vibration signatures of common failure modes
(including misalignment, imbalance, rub, wear-out, cavities or cracks, and oil whirl)
of critical components (rotor and shaft, bearings, gears, seals, blades) in rotating
equipment. Figures and look-up tables can be used to determine the fault sources
based on observed symptoms. The probability for each fault source corresponding to
observed vibration signals is established.
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Wavelet analysis has been successfully applied in signal processing, pattern

recognition and machinery fault diagnosis. Different algorithms have been developed
using wavelet analysis in fault diagnosis of gearboxes, roller bearings and rotary
systems. Efficient feature extraction methods have also been developed based on nonorthogonal wavelet transforms, which can be used in analysis of vibration signals
from gearboxes, roller bearings and reciprocating machines. Other signal processing
methods for fault diagnosis and detection include cyclo-stationary analysis,
independent component analysis (ICA), and kurtosis indicators.
Prediction of Equipment Remaining Life:
Asset equipment deteriorates as it is used, and its life follows certain statistical
distributions. Equipment health indicators such as vibration signals can be used in
prediction of the remaining life of deteriorating equipment. Statistical methods have
been used extensively in prediction of time series. A relatively new technique called
support vector machines (SVM) has been developed for pattern recognition and
regression analysis, which have been shown to perform very well in predicting time
series. The use of SVM in vibration monitoring and prediction of equipment
degradation is also being explored. The formulation of SVM embodies the Structural
Risk Minimization (SRM) principle, as opposed to the Empirical Risk Minimization
(ERM) approach commonly employed within statistical learning methods. SRM
minimises an upper bound on the generalisation error, while ERM minimises the error
on the training data. It is this difference, which equips SVMs with a greater flexibility
and thus potentially better prediction capabilities. In SVM, the basic idea is to map the
data into a high dimensional feature space via non-linear mapping. Once in the feature
space, linear regression can be performed. Another approach in predicting remaining
life is the use of artificial neural networks (ANN).
Reliability Based System Design for Minimal Life Cycle Cost:
The reliable performance of systems is becoming more and more important in many
industrial and infrastructure assets. This has resulted from an increasing need for asset
systems and components with higher reliability and lower cost. Thus, reliability based
design of asset systems has become an important research area. However, most of the
research results in the literature are either for asset system design with constant
component reliabilities or for optimal maintenance planning. The focus is on
developing guidelines for the selection of parameters within various maintenance
models and to develop reliability based design models considering periodic
maintenance for special systems structures such as standby systems and k-out-of-n
systems in solving reliability based design problems. Genetic algorithms are fine
tuned for their efficient application in such problems.
Multi-State System Reliability Modelling:
Classical reliability theory assumes that a component or a system can only be in one
of two possible states, either working or failed. However, in many real-life situations,
asset systems and their components are capable of assuming a whole range of levels
of performance, varying from perfect functioning (denoted by level P, say) to
complete failure (denoted by level 0). In these situations, the dichotomous model is an
oversimplification of the actual asset systems. Models treating these asset systems and
their components as multi-state entities, describe the performance of these systems in
terms of the performances of their components.
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Condition Modelling of Infrastructure Assets:

Previously, future infrastructure asset renewal and replacement plans were based on
when an asset had reached the end of its useful life, with this information
supplemented by any knowledge or experience derived from the performance of a
particular asset. More recently this information has been enhanced by assets condition
assessments undertaken to confirm an assets overall condition. These condition
assessments have traditionally been focused on infrastructure assets such as roads, but
in some cases, have also been undertaken on sewer and stormwater pipes. While this
information has been valuable, future strategic assets planning has continued to be
limited by the lack of an effective planning tool which considers not only when assets
require treatment but when the best time to treat those assets arose, and what type of
treatment would provide the best value. The development of a refined asset
performance model provides the solution to this problem. Such a model requires a
comprehensive analysis of all assets and, in some cases the collection of additional
data, to be effective. The results of such modelling are pivotal to the creation of assets
financial management and investment policies.
Infrastructure assets modelling is an extremely detailed and complex undertaking,
with each individual asset needing to be evaluated and input into the model.
Thousands of assets are then compared to various factors including differing
treatments, costs, and budget allocations, with the final outcome being a set of
recommendations on which assets should be treated, as well as when and how these
treatments should occur. In order to complete this analysis in an efficient and timely
manner, current information for each asset is essential to be fed this into the model.
The most comprehensive information available and the guiding principles behind each
asset class are a set of manuals. These comprise (SAMG, 2006):
1. The Asset Condition Manual:
Condition assessments provide indications on the physical state of an asset. The
driving factor in calculating the condition of an asset is its age in relation to its
expected useful life (which was recorded during the asset revaluation process). This
remaining useful life is used to determine an assets condition on a 1-5 scale, where 1
is excellent condition through to 5 which is very poor condition. Once these 1-5
scores are determined, they are linked directly to the assets and entered into the
model. As part of this analysis, it must be recognised that the actual consumption of
an infrastructure asset is not a straight line such as with depreciation, meaning the
time taken to move between condition scores often differ. For strategic assets
planning that spans over multiple years, information on how assets will decay into the
future is essential. As such, for each asset class a graph is drawn and percentage bands
used to allocate a condition rating. These consumption graphs are also reflected in the
model. As a secondary factor, the condition ratings allocated to each asset are
adjusted for data collected from the maintenance work order system (which contains
historical records on when the assets need maintenance work to be performed) or
from actual condition assessments.
2. The Asset Functionality Manual:
Functionality assessments provide indications on whether an asset is fit to undertake
its intended purpose (i.e. Is the right asset in place to perform the required task?). For
example, indicators used for road functionality are the geometry of the road and the
amount of traffic it received.
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For most hydraulic pipe assets the criticality or the consequence of its failure is used
as a measure of its functionality. Again a scale of 1 to 5 is used, with scores entered
into the model.
3. The Asset Capacity Manual:
Capacity assessment provides an indication of the maximum potential of an
infrastructure asset. Engineering indicators like load-carrying capacity of roads and
bridges and flow capacity of pipes are used. In many cases significant analysis and
design work is required to allocate an indicator on a scale of 1 to 5, to each asset class.
Once these manuals are developed, data files of every asset in each class are created
and the ratings (1,2,3,4 or 5) for condition, functionality and capacity allocated. It
should be noted that this work concentrates on the major sections of each asset class
and those that can be easily grouped and treated in a consistent manner. Hence minor
assets in roads (eg. signs, retaining walls, jetties and ramps) and hydraulics (eg.
treatment plants and pump stations) are not yet modelled in this way. Additionally it
is important to note that these models are annually updated to include new or first
recognised assets and updated performance reports from the maintenance work order
system. Additional data available now or in the future such as new condition
assessments and data from CCTV inspections of pipes are also incorporated to
enhance the sophistication of the models.
Figure 5. Different Treatments Available for Typical Infrastructure Assets

(SAMG, 2006)
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The next step in the development of the infrastructure assets condition model is to
allocate treatments for each asset class (the type of options available to rectify an
under performing asset) and treatment costs per unit measure. All costs are obtained
from benchmark estimates and are the same costs used in the last assets valuation. As
an example, a $/sqm is used for roads and a $/meter for pipes. Once this information
is available, the asset data files are imported into the condition model. The model has
the following steps Imports, Models, Strategies and Reports. There are a number of
steps to develop the model, the most critical one being the allocation of treatments to
condition. Figure 5 shows two of the different treatments available for typical
infrastructure assets. The two possible treatments are full replacement of the Asphalt
Footpath and Kerb and replacement of only the Asphalt Footpath (leaving the Kerb
intact). As can we seen in Fig 5 (via the ticked boxes) consideration is only given to
replacing the footpath if the Kerb is in excellent condition (Score of 1 or 2). If
however the Kerb is in a poor state (score of 3, 4 or 5) then both the Footpath and
Kerb will always be replaced. Not only does such an action reflect how the conditions
of these assets are approached, it also reinforces a cost effective course of action.
Any number of strategies may be run within the asset model, using the same asset
inputs. When creating a strategy the following needs to occur;
treatment costs assigned sourced from benchmarking data;
annual expenditure over the life of the analysis (up to 25 years) set;
a discount (inflation) rate can be set this is used if future construction
costs are expected to exceed CPI;
an estimate is made of the expenditure distribution, relative to the asset
condition rating.
The final step is the model output (reports) where, after running the strategy, the
following information is available, either in spreadsheet or graphical form.
Funding Distribution: This shows the expenditure over the period of the
strategy for each treatment plus an amount required for maintenance.
Condition Analysis: This shows the condition of the assets as a class (average)
and the number of assets at condition 1, 2, 3, 4 or 5 in each year. It also shows
the assets in each capacity rating showing the effect of an upgrade treatment.
Works Prioritisation: This provides a spreadsheet of each asset that has been
selected by the model to be treated in each year of the strategy.
Strategy Used in Financial Modelling: Of all the strategies available, the one
that seeks to preserve infrastructure assets in their current state over the next 20
years is normally selected for further development outside of the model and
forms the basis of revised financial policies. The funding gaps highlighted by
this strategy and how the organisation intends to address them, are the subject of
the assets financial management policies. In addition to the financial spend
figures from the assets condition model, other costs are added to determine
actual required funding levels and the associated funding gap. These costs
include non-modelled assets and estimates made of required new works due to
development and known infrastructure deficiencies that are not accounted for in
the capacity rating of assets.
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5. Assets Health Monitoring and

Life Cycle Management
The Concept of Health Indices
Health Indices provide a basis for assessing the overall health of an asset. Health
Indices are based on identification of the modes of failure for the asset and its
subsystems, and then developing measures of generalized degradation or degradation
of key subsystems that can lead to end-of-life for the entire asset. A composite Health
Index is a very useful tool for representing the overall health of a complex asset.
Transmission and distribution assets are seldom characterized by a single subsystem
with a single mode of degradation and failure. Rather, most assets are made up of
multiple subsystems, and each subsystem may be characterized by multiple modes of
degradation and failure. Depending on the nature of the asset, there may be one
dominant mode of failure, or there may be several independent failure modes. In some
cases, an asset may be considered to have reached end-of-life only when several
subsystems have reached a state of deterioration that precludes continued service. The
composite Health Index combines all of these condition factors into a single indicator
of the health of the asset (Acres International, 2003).
For a typical asset class, a wide range of diagnostic tests and visual inspections are
undertaken as part of the maintenance program or special-purpose Asset Condition
Assessment (ACA) surveys. In some cases, a poor condition rating value will
represent a failure of a subsystem, which can be repaired through replacement of that
subsystem, with no resultant impact on the serviceability of the overall asset.
However, it should be recognized that generalized deterioration of many or all of the
subsystems that make up an asset can also be a valid indication of the overall health of
the asset. A composite Health Index captures generalized deterioration of asset
subsystems, as well as fatal deterioration of a dominant subsystem. In developing a
composite Health Index for an asset, it is very important to understand the
functionality of the asset, and the manner in which the various subsystems work
together to perform the main functions of the asset. With a clear understanding of
asset functionality, the various condition ratings can be combined to create a
composite score for the asset, and the continuum of asset scores can be subdivided
into ranges of scores that represent differing degrees of asset health. The critical
objectives in the formulation of a composite Health Index are :
The index should be indicative of the suitability of the asset for continued
service and representative of the overall asset health
The index should contain objective and verifiable measures of asset condition,
as opposed to subjective observations
The index should be understandable and readily interpreted
Development of a condition-based Health Index requires an assessment of the relative

importance of the different condition factors in determining the health of the asset.
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Each condition factor in determining the health of the asset must be assessed as falling
into categories as shown in Table 11:
Table 11. Relative Degree of Importance of Condition Factors
(Acres International, 2003)
By using a multi-criteria analysis approach, the various factors can be combined into
an idealized condition-based Health Index. This involves grouping together the
various factors, crafting the mathematical and/or logical formulations, and
establishing the importance weightings of all the factors to allow combining them into
a single Health Index. Next a quantified scoring system can be developed to
appropriately represent the asset health consistent with this philosophical approach.
The steps are as follows:
1. Deterioration assessments or scores are converted to health scores in a defined
range from perfect health to end-of-life.
2. An importance weighting is assigned to each factor in a range from modest
importance to very high importance.
3. A general deterioration index is formulated by calculating the maximum
possible score by summing the multiples of steps 1 and 2 for each factor.
4. The general deterioration index is normalized to a maximum score of 100
based on a defined acceptable/minimum number of condition criteria.
5. The dominant factors are normalized to a maximum score of 100.
6. Calculation of the overall Health Index as the lesser of step 4 or 5, where
100% is excellent health and 0% is poor health.
7. Finally the continuum of asset health scores is correlated into discrete
categories of asset health from Very Poor to Very Good.
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Table 12 shows the conversion of the continuum of asset health scores into discrete
categories of asset health.
Table 12. Categories of Asset Health
This conversion into discrete categories for a condition index requires fine-tuning of
the health scoring system, since it is necessary that the relative degree of severity of
the scores due to dominant factors and those due to generalized degradation match up
at the boundaries between each category. This may require iteration of the individual
steps to ensure that the resulting index is rational and coherent, and reasonably
reflects field conditions.
Health Indices have been developed for a wide range of distribution assets. For each
of these, a recommendation has been made on the type of condition tests or
inspections that are required. It should be noted that in many cases good Health
Indices can be formulated with fewer condition criteria, but their precision might be
less. Based on these results assessments can be made on the required maintenance,
refurbishment or replacement levels needed over a defined time period for a particular
asset. As such the Health Index can be considered a key performance indicator (KPI)
in physical asset performance management and decision making where its
interpretation takes into account the nature of the asset being rated.
In summary, Health Indices provide a basis for assessing the overall health of an asset
and can be used as a key performance indicator (KPI) of the condition of a physical
asset. Health Indices are based on identification of the modes of failure for the asset
and its subsystems, and developing measures of generalized degradation or
degradation of assets equipment that can lead to end-of-life for the entire asset. This
approach is a valuable method of justifying the need for capital assets expenditures
and/or maintenance requirements for physical assets, based on the condition of the
assets and not on their age alone.
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Further asset health analysis relates to an assets life cycle information. For each of
the asset systems and equipment inspected, it is possible to estimate the current state
and position of the asset within its life cycle, as well as the replacement value of the
asset at the end of the life cycle. Figure 6 illustrates typical output generated from a
sample life cycle data analysis.
Figure 6. Life Cycle Data Analysis

(VFA, 2006)
One of the most powerful benchmark data that can be derived from such information
is called the Facility Condition Index (FCI). The FCI is a ratio of costs against value,
and is used to measure the relative condition of a single asset, such as a building, or a
portfolio of assets, taking into account either a specific priority of an asset system or
all of the asset portfolio systems. The FCI is calculated by dividing the assets cost of
deficiencies as a result of condition degradation, by the assets current replacement
value (cost of replacing the asset). Thus:
Facilities Condition Index (FCI)
Cost of Asset Deficiencies

Current Replacement Value
From this formula, it is obvious that the higher the FCI, the worse the asset condition
or related health indices are, due to an increase in the asset cost of deficiencies.
However, the FCI can become less if the asset current replacement value is higher,
which can in many cases have nothing to do with asset condition.
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Assets Life Cycle Management

The Life Cycle of Physical Assets:
The management of physical assets is a systematic process for programming and
integrating efficient and equitable allocations of resources cost-effectively during the
different life cycle stages of the assets in accordance with established performance
and service delivery objectives. In this context, the stages of an industrial assets life
cycle include the initial engineering design phases of asset feasibility, and conceptual,
preliminary and detail design; the asset establishment phases of fabrication,
installation and commissioning; the asset usage stages of operation, maintenance and
renewal; and the asset replacement phases of decommissioning and disposal. The life
cycle concept is due to the possible shifting of an assets useful life status from one
life cycle stage to another, both progressively and iteratively. Thus, an assets useful
life can shift progressively from design to fabrication to operation to maintenance,
and iteratively back to re-design, re-construction / re-fabrication to re-operation / reutilisation and so on, prior to renewal in effect cycling through various stages of its
useful life. These life cycle stages of physical assets and related cost categories are
indicated in Figure 7 (Stapelberg, 2008).
Figure 7. Life Cycle Stages of Physical Assets and Related Cost Categories
(Stapelberg, 2008)
A common understanding of a physical asset is that it is an investment of enduring
value over its useful life. The two elements, namely value and useful life are
fundamental to all physical assets. In the public sector, it is often more important to
appreciate the non-monetary aspects of an assets value.
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The term service potential is used to describe the utility of an asset where the asset
does not generate income, and is referred to as the expected future benefit to be
derived from the assets useful life (ANAO, 1996). The useful life of an asset as a
whole, needs to be distinguished from its residual life with respect to an
organisations delivery strategies.
Useful life is the period over which the benefits relating to an organisations delivery
strategies are to be derived from the use of the asset (Victorian Government, 1995).
Residual life is a concept related to non-destructive testing (NDT), where the main
goal of NDT is to predict or assess the performance and service life of a physical asset
or its related systems at various stages of construction/manufacturing and service life
cycle (so-called asset residual life assessment) to evaluate an assets remaining useful
life. Residual life, in the context of renewal or replacement of a physical assets
equipment (sub-systems, assemblies and components), which is typically carried-out
during scheduled maintenance, is in effect equivalent to the time elapsed between
maintenance intervals. This is however not the true residual life, based on the
equipments reliability characteristics. The difference between the two provides a
means of comparison for maintenance optimisation of an assets critical equipment.
Optimum maintenance intervals are best determined through the method of equipment
age analysis that identifies the rate of component deterioration and potential failure
ages. The risk-based maintenance technique of residual life assessment is ideally
applied in equipment age analysis where the frequencies of preventive maintenance
activities can be optimised. However, residual life is widely used in modelling
stochastic processes during engineering design of industrial assets, and is one of the
random variables that determines the design requirements for an assets component
renewal / replacement; the other being the component age once the design has
progressed beyond the engineered installation stage, and the physical asset has been in
use for some time. In reliability theory, residual life appears as the time until the next
failure, whereas for the renewal / replacement process it is normally expressed as a
mathematical function of conditional reliability in which the residual life is
determined from the assets component age. The mean residual life or remaining life
expectancy function at a specific component age is defined to be the expected
remaining life given survival to that age. It is a concept of interest in maintenance
optimisation and most important in process reliability (Stapelberg, 2008).
Life Cycle Management (LCM):
For many managers, Life Cycle Management (LCM) is the practice of supervising
ongoing assets performance and monitoring the aging of the asset efficiently. LCM is
the next step in enlightened asset management. It establishes a clear relationship
between economic performance and quality goals. It can also minimize unforeseen
capital expenditures and makes long-term strategic planning more effective. LCM
represents a step beyond predictive maintenance, by factoring in the cost and
efficiency of each asset at every step of its useful life. In addition, this practice
considers replacement and disposal costs as well as peripheral issues that affect the
cost/benefit analysis. This process addresses strategic concerns and can provide
critical, timely information to support decisions.
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LCM is a continuous process that begins with an integrated assessment of all the
factors affecting the operation, maintenance, service life, and ongoing resource
requirements for a facility in order to produce a realistic, long-term forecast of
investments and activities that will be needed to maintain and operate the asset
(UNICCO, 2005).
The principles of LCM can be successfully applied to any capital or labour intensive
industrial or infrastructure asset. The program can be set up for an entire complex
(multiple assets), a utility or facility and all its equipment, or for selected systems or
equipment assemblies.
The greatest benefits from LCM programs occur when:
Assets require a large capital outlay, relatively long lead time for replacement,
and/or scheduled outages, changeovers, or downtimes for maintenance are
infrequent and short in duration.
Assets whose operation and maintenance costs dominate the strategic planning
decisions concerning new capital expenditures and economic service life.
Management decisions regarding operating and capital expenditures for the

facility are subject to shareholder, government agency, or third-party
examinations.
There is a need to optimise and/or integrate several ongoing maintenance

activities or programs (such as corrective maintenance, preventive
maintenance (PM), reliability centred maintenance (RCM), predictive
condition-based maintenance (CBM), surveillance activities, etc.) that have
evolved during the service life of the facility.
Utilities (i.e. power generation assets) and facilities (i.e. water treatment and
distribution assets) that are in regulated industries.
Utilities and facilities that require special siting considerations, such as the
need for an environmental impact assessments.
Utilities and facilities that may adversely affect employees and public health
and safety, and/or need to comply with federal OSHA regulations (including
29CFR1910, Process Safety Management of Highly Hazardous Chemicals),
EPA regulations, or similar state and local regulations.
Federal, state, and local infrastructures require assurance that long-term

integrity can be maintained and long-term funding requirements for the
modifications, repairs, inspections, and testing are realistic.
The decision of when to start a LCM program is driven by the need to apply resources
and assets effectively, to have a reliable vision of the future, and to avoid crisis
management situations. Historically, LCM programs get started when a decision has
to be made about an assets future: Should it continue in operation, or should it be
replaced? Another trigger for LCM is when determining if the cost of a new capital
asset addition can be recovered during the remaining service life of an existing asset.
The need for more effective control of operating and maintenance costs also causes
LCM efforts to be considered.
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Starting an LCM Program:

Step 1: Perform an asset and asset equipment condition assessment:
A condition assessment determines the current operating conditions and life
expectancies of various assets. It examines replacement costs and projected return on
investment, as well as overall asset health. The LCM implementation will be impacted
if asset condition is not methodically researched. Also, this examines existing PM and
CBM programs and efforts. Features and conditions that impose significant
replacement or refurbishment costs and regulatory or public relations costs should
also be specifically noted. It is helpful to benchmark findings to other assets within
the same industry. The initial condition assessment tests the economic viability of the
goals in comparison to other alternatives. The results of the analysis allow
management to evaluate the goals, understand the potential merit of a LCM program,
shape the scope of the program, and identify the resource requirements.
Step 2: Shape the Scope of the Program and Prepare the Program Plan:
The assets equipment that have the greatest influence on costs, safety, and reliability
merit the most attention. These are the equipment that could directly impact the
continued use of the asset and force its eventual shutdown or retirement. These are the
critical equipment. Identify, categorize, and model the critical equipment. Consider
replacement feasibility, service history, performance impact, regulatory consideration,
and the potential benefit of preventive maintenance activities. Produce a ranking of
the assets equipment in each category. The highly ranked items are the critical
equipment, which become the focus of the program. The lower ranked items receive a
proportionally reduced level of attention. The program plan should become a tool to
involve all of the organisations that manage, operate, and maintain the asset to make
them aware of the goals and objectives. The plan defines the scope, evaluation
approaches, and implementation priorities, as well as the responsibilities of the
affected organisations, schedules, and resource requirements.
Step 3: Establish Effective Maintenance Requirements and Methods:
This step ensures that assets and assets equipment are measured or controlled at
appropriate intervals based on costs, safety, and reliability and/or indications of
degraded performance or failure. A more thorough examination is performed for the
critical equipment. The examination process identifies needed enhancements or
corrective actions. Typically, these enhancements refocus maintenance activities to
emphasize the critical equipment; formalise current practices and schedules; and
adjust the scope and/or frequency of inspections, surveillance, and testing activities to
ensure they will detect and mitigate the contributing mechanisms. Sometimes, the
enhancement may involve changes in operation, production, or utilisation.
The examination improves understanding of the mechanisms that contribute to
degraded conditions through misuse or age-related degradation. It considers the
design features, design requirements, materials, and operating and maintenance
history. Contributing mechanisms are identified, and their influences on ongoing
performance are characterised. Next, the effectiveness of the current procedures to
detect and mitigate these mechanisms is evaluated. Operational experience and
manufacturer's information are investigated. Production/utilisation schedules are
examined to identify opportunities to perform maintenance activities.
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Step 4: Recognize the Peripheral Issues:

LCM needs to examine peripheral issues that are non-hardware factors that affect the
overall program. These include governmental, environmental, personnel, training,
public relations, financial, and social issues that influence asset decisions. Some of the
more significant peripheral issues are:
Transfer of Institutional Memory:

Key personnel develop a valuable knowledge base about the design, operation,
and maintenance of an asset. The LCM program should establish methods for
capturing and transferring this institutional memory to new personnel.
Cost/Benefit Issues:
Management of regulated and publicly held companies must often justify
expenditures; therefore, the LCM program should facilitate periodic
cost/benefit evaluations to develop the needed management information.
Technical Obsolescence:
The LCM program must factor into the long-term availability of replacement
parts and competent suppliers. This is particularly important when there is a
significant dependency on specialized machinery or the performance of
electronic components.
Changes in Regulatory Requirements and Industry Standards:

These changes may require back-fitting to remain in compliance. Worker
safety and handling hazardous materials are typical examples.
Step 5: Prepare a Life Cycle Management Diagram:

Optimising capital and labour costs for an asset, or asset equipment, requires a
reliable tool for forecasting replacement, refurbishment, and maintenance activities. A
life cycle management diagram illustrates a timeline for all the activities. It shows
recurrence intervals, costs, work hours, and other related data. Other pertinent
information, such as the description of the activity, performance schedules, or
implementation prerequisites, is maintained in a supporting database. Using the
diagram, peak activity periods can be easily planned. Critical and routine spare parts
can be better stocked to meet operational needs without the cost of excess inventory
or rush orders.
Step 6: Implementation and Ongoing Monitoring:
LCM is an ongoing process that requires the development of an implementation plan
and a continuous feedback system. The implementation plan is also a convenient tool
to describe the program goals and specific metrics to management to receive the
required authorisations.
When shifting to LCM implementation:
Use the evaluation results and life cycle management diagram to formulate
appropriate implementation strategies.
Identify the affected organisations, their responsibilities, and resource
requirements.
Establish an implementation schedule and annual budget.
Provide training for personnel involved in maintenance, inspection, and other
LCM activities.
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Perform the implementation activities. Generate work orders for all processes
in accordance with the planned LCM schedule. The LCM program should also
interface with other business systems to form an integrated capability.
Establish ongoing monitoring and feedback methods based on observed
trends.
Conduct routine appraisals and reassessments, and institute required course
corrections.
Prepare administrative control documents and measures to ensure that asset
maintenance programs adhere to LCM requirements.
Step 7: Cost/Benefit Analysis:

Once an LCM program is in place, it is relatively easy to determine the relative
cost/benefits of maintaining a particular asset. It is important to recognise when
corrective and preventive maintenance activities and ongoing monitoring begin to add
to the overall cost of operating an asset or asset equipment. By conducting periodic
cost/benefit appraisals, asset managers can consider the merits of other options such
as replacement, addition of new inspection techniques, or the increase (or decrease) of
maintenance activities/frequencies.
Benefits of Assets Life Cycle Management:
LCM programs provide short-term benefits by avoiding corrective maintenance
expenses and unplanned operational failures. Resources are optimised and focused on
productivity and operating cost factors. Spare parts inventories are closely managed
and purchasing improved. The near-term payback can be more than enough to cover
the engineering evaluations and program development implementation costs. The
long-term benefits are both economic and strategic in nature. Disciplined LCM
processes quantify service life margins, which increases asset production, capacity, or
availability. This maximizes service life, defers replacement costs, and has
environmental benefits. LCM programs also minimize the costs for refurbishing or
replacing major structures, systems, and equipment. Since routine and fixed costs are
well known, capital costs are likely to be anticipated and evaluated in advance,
enabling companies to execute long-term financial and strategic plans. Intangible
benefits can also be important factors. For example, LCM activities promote and
contribute to the overall operational excellence of an asset. Motivational benefits
improve employee morale, teamwork, and quality awareness. An efficient asset
operation also reduces corporate risk and liability. The consequence of inaction can
escalate baseline costs worsened by unanticipated maintenance, refurbishment, or
replacement costs. For most assets, a LCM program will pay for itself.
Life Cycle Management Framework:
Life cycle management (LCM) can be understood as a way for business to manage an
approach to sustainable development. LCM is the application of life cycle thinking to
modern business practice, with the aim of managing the total life cycle of an
organisations products and services towards more sustainable consumption and
production. LCM is not a single methodology, but a flexible integrated management
framework of concepts, techniques and procedures incorporating environmental,
economic, and social aspects of products, processes and organisations.
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An Integrated LCM framework is derived from an amalgamation of LCM and asset

management theories. The Integrated LCM framework refers to the management of
assets over their complete life cycle, from before acquisition to disposal, taking into
account economic, environmental, social and technical factors and performance.
Furthermore, assets refer to strategic assets. In this case, strategic assets refer to
physical assets only, however, strategic assets may include non-physical assets such
as intellectual capital. Figure 8 illustrates the Integrated LCM framework, showing
the input of external and internal drivers to strategic assets assessment.
Figure 8. The Integrated LCM Framework

(CSIR, 2008)
External Drivers of Change in the LCM Framework:
The external drivers of change are defined as those factors that emanate from outside
the organisation, but cause changes within the organisation. These factors include,
inter alia: communities, i.e. social and/or environmental concerns; competition;
consumers, i.e. social and/or economic concerns; cost of raw material; cost of power;
cost of chemicals; environmental lobby groups; government, e.g. legislation;
increased or decreased services demand; and scarcity of skills and experience.
Internal Drivers of Change in the LCM Framework:
The internal drivers of change are defined as those factors that are driven from within
the organisation and that cause changes within the same organisation. These factors
include, inter alia: cost-reduction initiatives; lack of system capacity; loss of skilled
personnel; obsolescence, i.e. high maintenance costs; redundancy, e.g. need for
interconnectivity and additional facilities; process efficiency; and safety.
External and internal drivers of change impact upon an assessment of strategic assets.
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Assessment of strategic assets in the LCM Framework:

Performance assessment of strategic assets is essential in the LCM framework, and is
done in terms of:
Economic or financial impacts, i.e. life-cycle costing or total cost of ownership
Environmental impact/s, i.e. environmental incursions in terms of chemical

spillages, land refills, etc.
Social impact/s, i.e. disasters that affect people in anyway
Technical impacts, i.e. efficiency and effectiveness
Technical losses.
The Integrated LCM framework assists in organising existing information and

identifying gaps for information that is not available and which has to be gathered.
Some of the relevant concerns during this phase are assessing the performance of the
asset over its design life cycle as follows:
Are there new technologies that can perform the same (or more functions) at a
better price or in a safer and more efficient manner?
Has the performance deteriorated to a point, even before the predicted design
life span, that necessitates the modification of the asset?
Asset Renewal Decision in the LCM Framework:

The asset renewal decision refers to a decision that needs to be made regarding the
future of the asset. A sound business case, unless there are safety and/or legislative
reasons for asset renewal, needs to be compiled to support the asset renewal decision.
The decision could include maintaining the status quo, i.e. run the asset to failure as
part of the maintenance tactics, but it is ensured that a complete risk assessment is
conducted to support this decision. The asset renewal decision can, therefore, include
any one or a combination of the following;
leave as is run to failure strategy risk assessment completed;
leave as is operate and maintain as usual future assessment to be made;
retrofit;
refurbishment;
replacement of component parts;
overhaul;
complete asset replacement.
Operate and Maintain Strategic Assets:
The strategic assets are operated and maintained in accordance with predetermined
guidelines, standards and specifications in such a manner so as to try and achieve the
design life with the least possible costs, and minimal (preferably zero) social and
environmental impacts.
Total performance in the LCM Framework:
The assets are monitored and managed in terms of predetermined standards and
specifications with regards to the economic, environmental, social and technical
performances.
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Collect and Record Strategic Asset Data in the LCM Framework:

Total performance data of the strategic assets are collected, verified/validated and
recorded. The data are verified against design performance parameters, but moderated
for actual application conditions. A data trend and historic usage information are
established. Set points are determined for the data to flag the system if the asset
performance deteriorates to an unacceptable level.
Update the Asset Register:
A detailed asset register is kept, and updated regularly to reflect the performance of
the strategic assets. An integrated software system incorporating an interactive
database management system will be essential to the successful implementation of an
asset register. The asset register clearly identifies the following;
the assets attributes;
its geographic location;
primary data such as technical ratings and design life span;
secondary data such as operational performance, maintenance history,
technical performance, total cost of ownership, social impacts, and
environmental impacts;
any background activities such as asset renewal decisions in process linked
to the asset.
Information from the asset register could serve as an internal driver of change. For
example, the condition of an asset could be such that it is clear that the design life of
the asset will not be reached, thus necessitating an asset renewal decision to be taken.
Key attributes of the Integrated LCM Framework:
In summary, the Integrated LCM framework attempts to provide the technical, social
and environmental dimensions to a modified physical asset management model. Other
key areas of asset management, not captured in other life cycle management or asset
management models, such as data collection and the recording of key data in on
integrated information platform, such as an asset register, is also depicted in the
framework.
The key attributes of the Integrated LCM framework are as follows:
External drivers such as environmental pressures and legislation.
Internal drivers such as capacity concerns, efficiency and resource

management.
Data collection, which is a key aspect of proper physical asset management.
Asset register, which forms a pivotal role in linking the asset to the financial
statements of the business.
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6. Assets Life Cycle Analysis

and Life Cycle Costing
Life Cycle Analysis
Life cycle analysis (LCA), or assessment is an analytical methodology that is used
to quantify the environmental impacts of products, processes or services. Life cycle
analysis is one tool that industry can use to deliver sustainable development through
enhanced assets stewardship. Life cycle analysis typically comprises four stages
(Monhemius, 2006);
the goal definition and scoping stage;
the life cycle inventory stage;
the life cycle impact assessment stage;
the interpretation or improvement stage.
Life cycle impact assessment can also be re-framed as life cycle costing, using a
variety of techniques to place a monetary value on the socio-economic and
environmental impacts of alternative decisions.
Life cycle analysis tools assess impacts on a variety of environmental values,
including air and water quality, greenhouse emissions and land use for a suite of
activities undertaken in the mining and minerals processing industry.
The life-cycle concept in LCA assesses the assets usage life cycle, from
commissioning, operation, maintenance, preservation or rehabilitation, and iteratively
back to re-design, re-construction / re-fabrication or to re-operation / re-utilisation and
so on, prior to renewal or replacement or disposal. The cradle-to-grave concept in
LCA assesses the assets usage life cycle, from commissioning, operation and
maintenance, preservation or rehabilitation, to renewal or replacement or disposal.
Life cycle impact assessment (or life cycle costing) typically has three components
(Mangena and Brent, 2006):
Classification: Where the results of the inventory are categorised into impact
categories;
Characterisation: Where the contribution of inventory data to each impact
category is determined;
Valuation: Where the different impacts are normalised and weighted against
each other.
Environmental impacts to be quantified are selected for each operation, within each
stage of production. A major concern with LCA, like any impact assessment process,
is the way that values are attributed for different types of impacts. Regardless, once
values are quantified, LCA can be a useful decision support tool for comparing
project or process options within an agreed value framework. LCA is still developing.
An international standard (ISO) has been developed for LCA (ISO 14040-2).
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Assets Life Cycle Impact Assessment or Life Cycle Costing

(NSWT, 2004)
The determination of costs is an integral part of the asset management process and is a
common element of many of the asset managers tools, particularly Economic
Appraisal, Financial Appraisal, Value Management, Risk Management, and Demand
Management. In the past, comparisons of asset alternatives, whether at the concept or
detailed design level, have been based mainly on initial capital costs. Growing
pressure to achieve better outcomes from assets means that ongoing operating and
maintenance costs must be considered as they consume more resources over the
assets service life. Both the capital and the ongoing operating and maintenance costs
must be considered wherever asset management decisions involving costs are made.
Life Cycle Impact Assessment or Life Cycle Costing is a process to determine the
sum of all the costs associated with an asset or part thereof, including acquisition,
installation, operation, maintenance, refurbishment and disposal costs. It is pivotal to
the asset management process as an input to the evaluation of alternatives via
Economic Appraisal, Financial Appraisal, Value Management, Risk Management and
Demand Management. An Australian Standard on Life Cycle Costing (AS4536)
includes examples of the application of Life Cycle Costing.
The Life Cycle Cost (LCC) of an asset is defined as the total cost throughout an
assets life, including planning, design, acquisition and support costs, and any other
costs directly attributable to owning or using the asset. Life Cycle Impact Assessment
or Life Cycle Costing adds all the costs of alternatives over their life period and
enables an evaluation on a common basis for the period of interest (discounted costs).
This enables decisions on acquisition, maintenance, refurbishment or disposal to be
made in the light of full cost implications.
Asset Life Cost Planning:
Life Cost Planning concerns the assessment and comparison of options/alternatives
during the assets design/procurement phase. It utilises similar techniques as those for
Economic Appraisal in that future, nominal costs are discounted to today's value of
Discounted Cost. The application of Discounted Cost Analyses to Life Cost Planning
differs in assets economic appraisals, in that Life Cost Planning generally;
considers all cost components within asset options over the assets life;
does not directly consider benefits or revenue streams that are generally
assumed to be equal among the options being compared (benefits and
revenues are considered in the evaluation of options).
Life Cost Analysis:
Life Cost Analysis enables assets creation, usage, and disposal costs, to be monitored
throughout the assets life to enable timely decision-making as to how these costs can
be minimised. Where ownership of the asset changes over time, each owner, takes
responsibility for decisions required during the period of ownership only. Life Cost
Analysis is used as the basis for the monitoring and management of costs over an
assets life. It is essentially a financial management tool in which costs are generally
not expressed as real or discounted costs, but as nominal costs (i.e. estimated costs to
be paid when due) to enable a comparison of the predicted cost and the actual cost.
This enables better prediction and adjustment of the Life Cycle Costing (LCC) Model.
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A Life Cycle Costing Model

A Life Cycle Costing Model (LCCM) is an accounting structure containing terms and
factors which enable estimation of an asset's component costs. A number of
commercially available models can be used for LCC analysis. However, in some
cases it may be appropriate to develop a model for a specific application. In either
case, the LCCM should (NSWT, 2004);
represent the characteristics of the asset being analysed including its
intended life cycle usage, environment, operating and maintenance support
scenarios and any constraints or limitations;
be comprehensive enough to include and highlight the factors relevant to the
assets usage life cycle;
be easily understood to allow timely decision-making, future updates and
modifications;
provide for the evaluation of specific asset life cycle cost elements
independently of other elements.
Before selecting an appropriate LCCM, the purpose of the analysis and the
information it requires should be identified. The model should also be reviewed with
respect to the applicability of all asset usage cost factors, empirical relationships,
constants, elements and variables.
LCCM Breakdown into Asset Cost Elements:
Estimating total asset life cycle costs requires breakdown of the asset into its
constituent cost elements over time. The level to which it is broken down will depend
on the purpose and scope of the LCC analysis and requires identification of;
significant cost generating activity components;
the time in the life cycle when the work/activity is to be performed;
relevant resource cost categories such as labour, materials, overhead, etc.;
Asset cost elements may be further allocated to recurring and non-recurring costs.
Asset cost elements may also be estimated in terms of fixed and variable costs. To
facilitate control and decision-making and to support the Life Cycle Impact
Assessment or Life Cycle Costing process, asset cost information should be collected
and reported in a manner consistent with defined LCC breakdown structure.
Estimating Asset Cost Elements:
The method used to estimate asset cost elements in LCC calculations will depend on
the amount of information needed to;
establish asset usage patterns and operational characteristics and hence
expected asset useful life in the asset usage life cycle;
understand the technology employed in the asset.
Sources of Asset Cost Data:
By definition, detailed asset cost data will be limited in the early stages of the assets
usage life cycle, particularly during the design/acquisition phase. Cost data during
these early stages will need to be based on the cost performance of similar asset
components currently in operation. Where new technology is being employed, data
can only be based on estimated unit cost parameters.
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Developing and Applying a Life Cycle Costing Model:

A Life Cycle Costing Model should create or adopt a cost breakdown structure (CBS)
that identifies all relevant cost categories in all appropriate usage life cycle phases of
the asset. Cost categories should continue to be broken down until a cost can be
readily estimated for each individual cost element. Where available, an existing cost
breakdown structure may provide a useful starting point for development of the CBS.
The Model should also identify those cost elements that will not have a significant
impact on the overall LCC of the asset(s) under consideration or those that will not
vary between alternatives. These elements may be eliminated from further
consideration. Development of a LCC Model should include the following steps:
Select a method (or methods) for estimating the cost associated with each cost
element to be included in the model.
Determine the data required to develop the estimates, and identify data sources.
Identify any uncertainties that are likely to be associated with the estimation of
each cost element.
Integrate the individual cost elements into a unified LCC model, which will
provide the LCC outputs required to meet the analysis objectives.
Review the LCC model to ensure it adequately addresses analysis objectives.
The LCC model including all assumptions should be documented to guide and
support the subsequent phases of the analysis process.
Application of the LCC Model involves the following steps:
Obtain data and develop cost estimates and their timing for all the basic cost
elements in the LCC model. Validate the LCC model with available historical
data if possible.
Obtain the LCC model results from each relevant combination of operating and
support scenarios defined in the analysis plan.
Identify cost drivers by examining LCC model inputs and outputs to determine
the cost elements that have the most significant impact on asset LCC.
Quantify any differences (in performance, availability or other relevant
constraints) among alternatives being studied, unless these differences are
directly reflected in the LCC model outputs.
Categorise and summarise LCC model outputs according to any logical
groupings, which may be relevant to users of the analysis results (eg. fixed or
variable costs, recurring or nonrecurring costs, acquisition or ownership costs,
direct or indirect costs).
Conduct sensitivity analyses to examine the impact of variations to assumptions
and cost element uncertainties on LCC model results. Particular attention should
be given to assumptions related to asset usage and different discount rates.
Review LCC outputs against the objectives defined in the analysis plan to
ensure that all goals have been fulfilled and that sufficient information has been
provided to support the required decision.
The LCC analysis should be documented to ensure that the results can be
verified and readily replicated by another analyst if necessary.
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Life Cycle Costing Analysis Plan

The Life Cycle Costing process begins with development of a plan, which addresses
the purpose, and scope of the analysis. The plan should;
define the analysis objectives in terms of outputs required to assist
management decisions. Typical objectives are;
- determination of the LCC for an asset in order to assist planning,
contracting, budgeting or similar needs,
- evaluation of the impact of alternative courses of action on the LCC of
an asset (such as design approaches, asset acquisition, support policies or
alternative technologies)
- identification of cost elements which act as cost drivers for the LCC of
an asset in order to focus design, development, acquisition or asset
support efforts.
delineate the scope of the analysis in terms of the asset(s) under study, the
time period (life cycle phases) to be considered, the usage environment and
the operating and maintenance support scenario to be employed;
identify any underlying conditions, assumptions, limitations and constraints
(such as minimum asset performance, availability requirements or maximum
capital cost limitations) that might restrict the range of acceptable options to
be evaluated;
identify alternative courses of action to be evaluated. The list of proposed
alternatives may be refined as new options are identified or as existing
options are found to violate the problem constraints;
provide an estimate of resources required and a reporting schedule for the
analysis to ensure that the LCC results will be available to support the
decision-making processes for which they are required.
Life Cycle Costing can be carried out during any or all phases of an asset's life cycle.
It can be used to provide input to decisions regarding asset design, manufacture,
installation, operation, support and disposal. By the end of the concept and definition
phases, more than half of the assets life costs may be committed by decisions made
with respect to asset performance, reliability, technology as well as support resources.
The Life Cycle Costing Plan should be documented at the beginning of the Life Cycle
Costing process to provide a focus for the rest of the work. Intended users of the
analysis results should review the plan to ensure their needs have been correctly
interpreted and clearly addressed.
Methods of Asset Cost Analysis:
One or more of the following methods for analysing cost data should be used:
Engineering Cost Method involves the direct estimation of a particular cost element
by examining the asset, component-by-component.
Analogous Cost Method provides the same level of detail as the Engineering Cost
Method but draws on historical data from components of other assets having
analogous size, technology, use patterns and operational characteristics.
Parametric Cost Method uses actual or historical detailed asset component data that
is limited to known parameters. This data is used to develop a mathematical
regression or progression formula that can be solved for the cost estimate required.
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7. Assets Usage Life Cycle and

Maintenance Planning
Assets Life Cycle and Usage Life Cycle
To plan and manage an assets usage, consideration has to be given to critical life
stages that begin before the asset is purchased and continue through to its disposal.
The concept of a life cycle of physical assets is due to the possible shifting of an
assets useful life status from one critical life stage to another, both progressively
and iteratively. Thus, an assets life cycle can shift progressively from design to
fabrication, installation, commissioning, operation and maintenance, preservation or
rehabilitation, and iteratively back to re-commissioning and re-operation/re-utilisation
due to asset preservation or rehabilitation, prior to renewal/replacement or disposal.
An asset usage life cycle is therefore that portion of the assets whole-of-life that is
concerned with the physical application of the asset, and considers all the asset usage
elements, from asset consumption, operation, maintenance, modification, preservation
or rehabilitation, to asset replenishment through renewal/replacement and/or disposal.
Asset-intensive industries need to employ an assets usage life cycle strategy that takes
into consideration the type of asset to be used. It needs to address the type of planning
that is required to maximise an assets useful life, from a strategic, tactical and/or
operational perspective, and provide the appropriate planning to be able to integrate
asset systems and equipment at their respective levels of detail. Absence of long-term
strategic planning capability is a particularly expensive oversight that will greatly
diminish the overall effectiveness of an assets usage strategy. Such strategies must
incorporate an approach to assets usage life cycle management that addresses the
specific service delivery requirements of asset-intensive organisations, including long
term assets planning. Currently, most asset-intensive organisations practice work
management and short term application scheduling, which is an operational approach
to assets usage planning. While the need for assets life cycle management is often
identified, it is rarely practiced because organisations continue to adopt a short term,
reactive approach to asset management rather than exploiting their assets for
competitive advantage. Assets usage life cycle management is a proactive process that
compliments existing policies by not only providing a strategic perspective, but also a
tactical and operational focus on the efficient utilisation of assets. Medium term
tactical planning capabilities through the application of the appropriate assets usage
life cycle models and effective assets maintenance planning, will improve asset
equipment mean time between failures, reliability, and eventual asset useful life, to
ultimately result in a reduction of the total cost of ownership. Assets usage life cycle
management does not include asset conceptualisation and design, or even re-design.
Assets usage life cycle management can thus be defined as an integrated approach to
the efficient use of a physical asset, that considers all the elements that affect its
useful life, from acquisition through consumption, operation, maintenance,
modification and preservation or rehabilitation, to replenishment through renewal or
replacement and/or disposal. Asset usage life cycle management is an increasingly
important strategic, tactical and operational initiative for asset-intensive industries.
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Assets Usage Life Cycle Management

Assets usage life cycle management encompasses the operation, maintenance, and
disposal of physical assets. The management of physical assets from operations to
maintenance and disposition should be an integrated and seamless process, linking the
various asset usage phases. The usage of these physical assets should be accomplished
in a safe and cost-effective manner to ensure protection of workers, the public, and the
environment. This incorporates industry standards, a graded approach, and
performance objectives. In this context, the following definitions are applicable:
Physical Assets:
All land, land improvements, structures, facilities, utilities, systems, equipment and
components.
Infrastructure:
All physical assets that are capable of an intended service delivery, comprising of
rigid assets such as buildings, roads, bridges, and facilities, as well as flexible assets
such as utilities and facilities related to power, water, sewage, etc.
Facilities:
The buildings, structures, and other land improvements associated with an operation
or service and dedicated to a common function.
Utilities:
A system, or any of its components, that generates and/or distributes (via pipelines,
wires, buses, or electromagnetic waves) a commodity or service to itself and/or to
other facilities.
Asset Usage Life Cycle Management Requirements:
Asset owner organisations should use a value-added, quality driven, graded approach
to asset usage life cycle management. Asset management performance measures
should be based upon best industry practice, and should be commensurate with the
value and importance of the asset using a graded approach. Asset management
performance measures should also ensure formal, comprehensive, integrated,
documented planning, and control methods for the acquisition, use, maintenance,
leasing and disposal of physical assets, including infrastructure and facilities and
utilities. This should address, but should not be limited to, the following:
A comprehensive asset usage planning process with stakeholder involvement.
The effective acquisition, management, and use of facilities and utilities.
Management of backlogs related to maintenance, repair, and improvements.
A method for the prioritisation of infrastructure requirements.
A method to declare assets excess.
Asset Usage Life Cycle Process:
The assets usage life cycle process considers specific requirements for the following
assets usage phases;
physical asset acquisition;
physical asset usage;
physical asset maintenance;
physical asset disposal.
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Physical Asset Acquisition:

The process for physical asset acquisition should be an integrated, systematic
approach that should ensure, but should not be limited to, the following:
Use of a comprehensive asset-usage process with stakeholder involvement.
Use of a process tool, such as value engineering, to improve cost-effectiveness
and efficiency when analysing physical asset acquisition.
Specification of the appropriate state, regional, or national building codes to
which physical assets should be designed and constructed.
Consideration of maintainability, operability, disposition, life-cycle costs, and
configuration integrity in designs and acquisitions.
Consideration of current asset demand needs and appropriate scope of usage.
A project management system based on effective management practices that is
sufficiently flexible to allow for the size and complexity of the project.
For non-infrastructure assets, the following requirements are considered minimal:
Prior to the commencement of conceptual design, include the following in
Assets Procurement Project Planning for approval;
asset demand needs;
minimum technical functional requirements;
proposed cost and schedule ranges;
preliminary environmental strategy;
identification of project technical and organizational interfaces;
integration with other projects and activities.
Physical Asset Usage:
The process for the operation/use of physical assets should ensure, as a minimum, the
following:
A method for the prioritisation of infrastructure requirements.
The efficient and effective management and use of energy utilities.
A method to ensure that prior to the completion of operation activities, certain

actions are implemented.
These actions should include but not be limited to;

identifying and characterising hazardous and radioactive materials and
wastes remaining in asset systems/facilities and providing for their
stabilisation (if necessary), and adequate storage until they are removed from
the facility (unless otherwise agreed to prior to facility transfer);
assessment and adjustment (if necessary) of the facility authorisation basis to
ensure it continues to reflect conditions in the facility pending disposition;
conducting surveillance activities required to ensure that the asset
system/facility, and remaining hazardous and radioactive materials, wastes,
and contamination are in a stable condition pending facility disposition;
identifying and allocating resources needed to maintain stable and known
conditions pending disposition.
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Physical Asset Maintenance:

The process for the maintenance of physical assets should ensure, as a minimum, the
following:
A configuration management process to ensure the integrity of physical assets

and system.
The identification, inventory, and periodic assessment of the condition of

physical assets in the maintenance program.
The establishment of requirements, budgets, and a work management system to

maintain physical assets in a condition suitable for their intended use.
Planning and execution of corrective, preventive, and predictive maintenance to

ensure physical asset availability for planned use and/or proper disposition.
The management of backlogs associated with maintenance, repair, and capital

improvements.
Physical Asset Disposal:

The process for the disposition of physical assets should ensure, as a minimum, the
following:
A method whereby assets are either transferred, or are determined excess,
available for disposal, and disposal procedures are initiated.
For the transfer of contaminated facilities, as a minimum, the following apply:

completion of a pre-transfer review, with adherence to environmental and
safety and health requirements, for transfer of asset systems/facilities for
disposition whose scope should be commensurate with potential hazards;
development of a signed agreement by relevant personnel to document
scope, conditions, state of readiness, and associated funding, when
transferring asset systems/facilities. This includes a budget resources plan to
manage the asset systems/facilities until funding is provided to the receiving
program through the normal budgeting process.
For execution of contaminated facility disposition, as a minimum, a method to

ensure that deactivation, surveillance and maintenance, and decommissioning
operation activities are appropriately planned, conducted, and documented in a
manner consistent with the guiding principles and core functions of the
integrated safety management and facility disposition policies. The disposition
process should provide for;
the collection of baseline data to reflect changes in asset conditions.
surveillance and maintenance activities corresponding with asset conditions,
including changes resulting from disposition activities.
a method for identifying, assessing, and evaluating alternatives for
deactivating and/or decommissioning operations and for selecting and
documenting a preferred alternative.
an end-point process in deactivation and decommissioning operations that
identifies specific activities needed to achieve those end-points.
a method for detailed engineering planning and documentation to execute
the preferred deactivation and/or decommissioning operations.
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Assets Maintenance Planning

(NSWT, 2006)
The NSW Governments approach to asset planning is based on Total Asset
Management (TAM), which links assets to providing services. As part of this policy,
budget dependent Government Agencies are required to develop asset maintenance
strategic plans in support of submissions to the Budget Committee of Cabinet for
funding. These plans must be focused on ensuring assets continue to support the
planned delivery of services, identify any deferred maintenance requirements and
establish a funding plan.
The change in focus by Government from capital works asset creation to strategic
asset management places an increasing importance on maintaining the service
capacity of existing assets. In order to successfully implement maintenance planning,
Government Agency managers need to pursue initiatives that;
enhance the link between service delivery outcomes and the maintenance of
the assets involved in the delivery;
establish clear links between maintenance objectives and asset performance;
gain the commitment of operational maintenance managers and staff to
maintenance planning;
resolve uncertainty regarding the disposal of assets.
Benefits of Assets Maintenance Planning:
The adoption of maintenance planning offers a number of benefits to both
Government Agencies and Government as a whole:
Maintenance planning provides feedback to improve future application of the
maintenance process;
Maintenance planning provides feedback for continuous improvement;
Assets perform at optimum levels, reducing service disruptions and losses due to
asset failure;
The performance of the asset can be reviewed to determine whether the asset
suits service delivery needs;
Alternative asset and non-asset solutions can be compared to best suit service
delivery needs;
Asset costs associated with service delivery can be identified and minimised in
the long term;
Asset maintenance costs can be quantified and budgeted with confidence;
Asset maintenance costs can be benchmarked across Government Agencies and
different industries;
The value of public sector assets can be protected, where appropriate;
Risks to Government can be identified and ameliorated;
Risks to the Agency posed by its assets can be identified and ameliorated;
Reduced environmental impact by controlling resource usage.
Environmental responsibilities such as energy management, water usage, and
pollution control can be addressed.
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The Role of Assets Maintenance Planning:

Assets maintenance planning plays a key role in the strategic management of an asset
over its useful life span. It is initially undertaken during development of the asset
strategy and may indicate one of three options for the future of the asset:
Maintenance to meet the ongoing service role of the asset.
Renewal or adaptation to suit changed service needs by capital expenditure.
Disposal of the asset when it is no longer required for service delivery.
Asset maintenance planning is a detailed assessment of those assets or asset

equipment that require only strategic maintenance management in order to satisfy the
delivery of service. It is aimed at ensuring these assets remain productive at the lowest
possible long-term cost, and involves;
a detailed functional analysis of maintenance needs that meet the required
service delivery outcomes;
the institution of procedures to ensure adequate control of the
implementation of the Maintenance Management Plan;
the development of appropriate maintenance strategies;
Asset Deterioration and Asset Maintenance Planning:
Some equipment of an asset will fail before others. Timely attention to these failures
can allow the remainder of the asset system to continue in service. Maintenance slows
the overall deterioration of the assets equipment by restoring the condition of its
short-life components and allows its overall full service or useful life to be achieved.
The budgetary process requires Government Agencies to focus on maintaining their
current levels of service delivery. For Agency plans based on maintenance of current
service levels, asset maintenance planning should ensure the asset or asset base
continues to support delivery of existing service levels. Sometimes this will
unavoidably require upgrading the asset to comply with changes to codes and statutes,
or to address changes in service delivery risk. Where such factors are the drivers for
maintenance funding requests, a clear explanation of the basis for the funding sought,
and an evaluation of the risks if funding is not available, should be provided. Where a
Government Agency plans to maintain assets to support higher levels of service
delivery, it should first discuss the proposal with an analyst, as funding for any
proposal which increases service levels is subject to prior invitation from Treasury.
This has been implemented to ensure increased service delivery remains consistent
with Government priorities and provides maximum benefit overall.
Figure 9 shows the deterioration in asset condition over time, the deterioration being
regularly addressed with maintenance expenditure. The restored condition is usually
below that of a new asset. At less frequent intervals, more extensive refurbishment
and upgrading commonly occurs to replace asset equipment components, and to
change the assets functionality to accommodate changed service requirements.
Particular aspects of the asset or its overall performance standard may then exceed
those of the original asset. Regardless of the source of funds for such works, both
asset maintenance and asset upgrades should be identified in the Asset Maintenance
Plan. If the amount to be spent on maintenance or upgrading assets exceeds available
funding, then value management and economic appraisal techniques can be used to
test alternative maintenance action and disposal/replacement options.
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Figure 9. Effect of Maintenance Over the Life of an Asset

(NSWT, 2006)
The value of alternative maintenance options that may require significantly different
expenditure patterns over the life of the asset can be compared through the use of
asset life cycle costing methods. This allows for selection of optimised maintenance
strategies by adjusting the cost of each proposals value of money over time. While
the term backlog or deferred maintenance may be used for maintenance requirements
identified but not addressed within a timeframe, this distinction is not addressed in
this section. Asset maintenance is driven by the need to ensure assets continue to
support service delivery. Maintenance proposals that do not proceed in one year
should be reassessed along with other proposals in future years and specific priorities
set according to their impacts. Some proposals will remain valid. Others may change
or be combined. All maintenance proposals should be reviewed and tested to
determine whether they remain valid.
The Assets Maintenance Planning Process:
Assets maintenance planning is a structured and systematic process, which ensures
that an Agencys portfolio of assets supports Agency service delivery at the lowest
possible long-term cost. The application of the asset maintenance planning process
requires a detailed knowledge of the Agencys asset portfolio and good understanding
of its service delivery strategy. A well-defined and comprehensive service delivery
strategy aligned with an Agencys Results and Services Plan is essential to the
development of a meaningful and effective asset maintenance strategy. It must specify
the services to be provided in sufficient detail to assess asset options against each
service delivery component. Criteria should be developed for assessing existing asset
maintenance for its suitability to support service delivery objectives. This suitability
will be expressed as a performance gap between existing asset maintenance levels and
what is required, and should be measured at each step in an asset strategy framework
(eg. location, capacity, functionality etc.).
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This gap analysis should also highlight areas of waste, (such as under-utilisation of an
asset or operating cost above benchmark or standard), and clarify opportunities for
improving performance. An Agencys future direction is influenced by a number of
factors including Government priorities, budgetary constraints, advances in
technology, and changes in legislation. These factors impact on the way an Agency
delivers its services and need to be taken into account when determining future asset
maintenance requirements.
Asset maintenance planning involves:
An analysis of maintenance needs against Agency or corporate objectives and

service outcomes;
The development of maintenance strategies;
The instigation of procedures to ensure adequate control of the implementation

of the maintenance program.
The 7-step assets maintenance planning process illustrated in Figure 10 has been
developed to link service strategies with asset maintenance, and will be later
described in checklist format. The description of each stage is not intended to be
prescriptive but to rather present a range of issues, which should be considered. The
significance of each issue and the degree of detail evaluated in the Asset Maintenance
Management Plan will vary between organisations, and with the types of assets they
control. An asset maintenance strategy should align with the capital assets investment
strategy and asset disposal strategy, collectively reflecting the organisations overall
asset strategy. Preparation of the maintenance budget is part of the process of
preparing the Assets Maintenance Management Plan.
Figure 10. The Assets Maintenance Planning Process

(NSWT, 2006)
Stage 1: Define and Segment Assets to Meet Service Delivery Strategy:
An asset strategy should clearly define the assets which are to be kept and maintained
over their estimated service life. Assets of significant value or significant strategic
importance, should be grouped into segments according to the service outputs they
support. It may be necessary to link an asset to several services where it supports the
delivery of more than one service. It is necessary to establish why assets are needed
and what purpose they serve. Assets should be maintained to the level that best
contributes to achieving service strategy objectives over their planned service life.
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Stage 2: Determine Required Asset Performance:

The required asset performance level is determined by its role in delivering service.
The performance level allows asset maintenance needs to be established, and these
needs are communicated to the maintenance planners. There are many aspects or
attributes of an asset, which are vital to their service delivery support role, while other
aspects are less important or of no significance. Safety, availability, quality, and
durability are examples. Some attributes are more necessary than others for the asset
to perform a particular service role. Therefore, maintaining all attributes to their
original standard might be an unnecessary burden. For example, a building can be
structurally sound, quiet, secure, and aesthetically pleasing. Some buildings require
lighting maintained to very critical standards while security or aesthetics in the same
area might not pose a risk to delivery of the service.
It is necessary to define broad performance requirements that establish which
attributes must be maintained for each asset or asset segment and to what level. The
performance standard specified for a particular asset should allow it to satisfy its role
in service delivery. Any gaps between present and required asset performance level
should be identified. Once the significant aspects of particular assets or classes of
assets have been defined, a range of possible performance levels should be set for
each attribute. The minimum value of this range for each attribute, which achieves the
desired performance level for each asset segment, is then adopted as the asset
standard. The standard of each attribute required for an asset to support the delivery of
service can vary significantly throughout a facility, within a network of assets, or
across a portfolio of assets.
Asset performance is also determined by codes and legislation which can vary during
the service life of an asset. Where compliance is mandatory, this should be addressed
in the asset performance requirements. Even the way in which assets are required to
withstand weathering and general wear and tear varies with an assets service delivery
role, and is affected by factors including the risk of such events disrupting service
delivery and the remaining service life of the asset. Where the emergence of new
technologies affects the way in which services are delivered and the compatibility of
existing assets with these technologies, maintenance decisions will be affected by the
rate of planned obsolescence.
Stage 3: Define Maintenance Resources and Overall Strategies:
Maintenance resources include planning, technical procurement and trade skills.
These skills may be available in-house or on contract, or a mix of the two. Knowledge
of the asset base and systems to manage this data should also be seen as a
maintenance resource. A maintenance strategy that sought to prevent all failures from
occurring would be costly and disruptive. Similarly a strategy that attended to all
maintenance only after failure occurred, would also be costly and even more
disruptive. An optimal balance between preventive and corrective maintenance is
needed and will vary with each asset owners requirements, resources, and
circumstances. The most appropriate strategy will depend on the type of asset, its
condition, planned service life and specific circumstances. These may include the;
type of asset to be maintained and its failure modes;
consequences of breakdown or non-performance of the asset;
availability of resources to execute the maintenance.
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An organisations structure and its assessment of risk will affect its decision on the
maintenance resources required. The nature of the service delivery, the location and
complexity of the assets and the criticality of maintenance response times impact on
the maintenance resources the organisation has in house, whether they be located
centrally or regionally, and how effective resources can be obtained when required.
Different strategies may be adopted for various assets or for the assets equipment.
These generally fall under three categories;
fix when failed, breakdown or corrective maintenance;
planned routine and scheduled preventive maintenance;
condition-based, periodic or predictive maintenance.
For example, with infrastructure assets such as a building;
fix when failed maintenance is usually adopted for minor mechanical,
hydraulic and electrical utilities or when attending to unavoidable defects;
planned routine maintenance applies to infrastructure components and asset
equipment that require regular servicing, or where statutory requirements for
maintenance at prescribed intervals exists (such as fire control equipment),
whereas scheduled preventive maintenance usually applies to progressively
degrading infrastructure and operational asset systems and major equipment;
condition-based or predictive maintenance may be applied to infrastructure
components such as building fabric elements, as well as asset service
equipment, reflecting maintenance applied to achieve desired service levels.
Advances in technology may allow replacement of infrastructure components and
asset equipment with improved materials and functional properties, leading to
increased performance and service life. This should be taken into account when
planning for future replacements. Having defined maintenance resources available
and overall strategies, an organisation will be able to decide in broad terms how
maintenance work is to be delivered, using in-house resources or external contractors
through specifically scheduled works or performance-based maintenance contracts.
Stage 4: Assess Condition of Assets and Recommend Maintenance:
It is necessary to identify asset deficiencies that could be a risk to an asset owners
service delivery. This may be achieved by conducting condition surveys, to compare
actual asset condition and performance with required performance, or by statistical
analysis of a sufficient numbers of similar assets. In addition to asset segmentation
according to service output requirements undertaken in Stage 1, a thorough
understanding of the performance of a complex network or portfolio of assets may
require segmentation of the asset base by characteristics such as type, age, service life,
maintenance approaches, demographics, cost structures, etc. Each asset segment is
further broken into those components requiring different maintenance approaches,
skills or resources. Any important inter-relationships between these components
should be identified. For example, transport infrastructure will consist of bridges,
culverts, pavement types and traffic control systems; whereas a water supply utility
will consist of water reservoirs, pumping stations, treatment works, distribution
systems and monitoring/control systems; and a hospital building could be segmented
into departments consisting of the relevant electro-medical equipment, computers,
utility equipment and fit-outs attached to that department.
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The condition of the infrastructure components and asset equipment should be

assessed in the light of their service delivery role to;
identify any defects, deterioration and/or deficiencies either currently
effecting asset performance or likely to occur over the estimated life of the
Assets Maintenance Plan;
identify the impacts on their service delivery capability;
determine the maintenance or renovation required to bring the asset to the
state where it provides the specified level of service delivery support;
estimate the cost of maintenance.
Consider the risk and cost entailed in not rectifying deficiencies. In some situations it
may be cheaper to live with the defect or substandard asset.
Create an Asset Maintenance Task List:
An appropriate register of assets and maintenance work is vital to the success of the
Assets Maintenance Plan. Asset registers should allow for easy retrieval of the
information in a usable and flexible format. Regular feedback about asset
performance in achieving desired service outcomes needs to be provided to
maintenance planners.
Rank the Maintenance Tasks:
The maintenance tasks are ranked in order of priority based on supporting service
objectives. It is unlikely that funds will be available to carry out all the desired
maintenance tasks and therefore the tasks that are most important to supporting
service outputs should be identified and given priority. In response to limited funding
situations, organisations can experience pressure to defer maintenance liabilities in
favour of other resources to ensure continuing service delivery. Some assets
deteriorate slowly and threaten service delivery only incrementally. There is however
a risk that this strategy will accrue major cost liabilities for future funding, if the asset
related risk to service delivery becomes critical. An organisations asset performance
measurement, risk management, and asset maintenance planning should aim to ensure
such liabilities do not arise. The criteria that determine the importance and urgency of
maintenance may include;
statutory requirements;
occupational safety and health legislation;
service delivery and commercial risks;
Larger capitally funded maintenance and refurbishment projects may need to be the
subject of a business case, and require accredited project planners and managers to be
involved. The maintenance tasks are then evaluated and ranked against these criteria
with an organisation-wide perspective to remove the bias of regional or operational
units. This is particularly important with an integrated maintenance plan covering
constructed assets, ICT, mobile equipment/vehicle fleet, office accommodation, plant
and equipment. It is recognised that the assessment of asset condition may reveal
differing maintenance strategies, resources and/or contractual approaches to those
established in Stage 3 and hence Stages 3 and 4 must be treated as integrative and
iterative. Plans should also take into account the iterative nature of asset service
planning. Both must be balanced and delivered within the budgeted resources.
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Stage 5: Assess Maintenance Costs:

In assessing maintenance costs, it is important to carefully evaluate priorities and to
focus on appropriate standards along with the most cost effective solutions. Rarely
will funds be available to allow all identified tasks to be carried out. This will require
the development of a proposed funding strategy that may revisit the recommended
maintenance established in Stage 4, and to this extent Stages 4 and 5 are also iterative.
Planning should be done at three levels of detail; long-term planning, medium-term
planning, and short-term planning. Maintenance plans should be integrated with the
organisations capital asset investment and asset disposal strategies.
Long-term Planning:
Long-term planning should show the timetable for modification, rehabilitation,
renewal and/or replacement, and disposal of major assets, as well as any long-term
maintenance cycles and their funding. Long-term planning should allow for the most
appropriate decision-making. For example, if a scheduled maintenance cycle is
adopted, then the long-term plan should exceed the cycle times in order to encompass
at least one full scheduled maintenance cycle. For example, if a major asset is
scheduled for scheduled refurbishment in 5 years time, then the appropriate long-term
plan period should exceed 5 years. If service delivery methods or the demand for
service is likely to change greatly over 5 years, then this will have a major effect on
long-term asset maintenance planning.
Medium-term Planning:
Medium-term planning schedules major maintenance overhauls and downtimes, and
programs resources, thus becoming the basis for budget planning. Any shorter time
scale allows medium-term planning to be a more focused and accurate prediction than
a long-term planning perspective.
Short-term Planning:
Maintenance planning is a dynamic process. Priorities can sometimes change at short
notice. An annual short-term maintenance plan is in effect a final assessment of
maintenance priorities, and thus becomes the working maintenance plan. Annual
maintenance planning is also needed to confirm required annual funding.
Stage 7: Monitor and Review the Assets Maintenance Plan:
As with all management processes, it is necessary to monitor and review the
relevance, effectiveness and efficiency of the Assets Maintenance Plan in relation to
achieving the required service delivery levels. This continuous feedback is a most
important aspect of the maintenance planning cycle. Monitoring is most effectively
achieved through the use of key performance indicators (KPI). Guidelines on the
development of performance indicators specifically for maintenance planning are
considered later. Such measures should utilise best practice benchmarks to provide a
basis of assessing relative performance.
With the benefit of hindsight and the use of collected data, it is possible to improve
the previous decisions concerning management of assets and their maintenance so that
subsequent maintenance expenditures will be more effective. Actual performance
should be compared against the nominated performance indicators. This involves
reviewing asset and service objectives and achieved results.
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8. Assets Maintenance
Management and Optimisation
The Assets Maintenance Management Process
(QWSP, 2001)
The Assets Maintenance Management Process can initially be described according to
outcomes, outputs and phases.
Outcomes of the Assets Maintenance Management Process:
Effective assets maintenance management will ensure that;
assets life cycle costs are minimised;
there is efficient use of resources;
environmental compliance is not compromised through asset failure;
service levels are maintained or improved.
Outputs of the Assets Maintenance Management Process:
Outputs from the assets maintenance management process include;
an Assets Maintenance Management Plan;
assets maintenance plans (sub-plans);
an assets maintenance management system.
Phases of the Assets Maintenance Management Process:
The assets maintenance management process involves two interrelated phases:
a strategic phase;
an operational phase.
The Assets Strategic Maintenance Management Phase:
The strategic phase of assets maintenance management is illustrated in Figure 11. The
purpose of this strategic phase is to;
set a policy framework for the assets maintenance management;
identify the impacts of various maintenance strategies on:
- service levels,
- cost of maintenance (planned and unplanned);
- infrastructure investment costs (asset replacement or rehabilitation);
develop a strategy for the delivery of assets maintenance services;
develop a strategy for the management of the assets maintenance process.
Policies Relating to Assets Maintenance Management:
Assets maintenance management policies that may be developed would include;
policy on the delivery of assets maintenance services (e.g. level of
outsourcing; contractual arrangements);
overall policy clarifying the philosophy and direction in relation to the
maintenance of assets.
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Figure 11. Strategic Phase of Assets Maintenance Management

(QWSP, 2001)
The Strategic Assets Maintenance Management Process:
The strategic phase of assets maintenance management involves evaluating, as far as
possible, the impacts of various maintenance strategies as a whole. This could
possibly include evaluating the impacts of various maintenance delivery strategies.
This may also be addressed during the procurement phase for certain assets. Based on
the balance of costs and service levels, an optimised maintenance strategy should be
developed. This will include projected maintenance costs for the next 5 to 10 years.
The approach to this optimisation will vary between organisations, depending on the
availability of information and the size of the organisation in terms of physical assets.
For many organisations the initial approach may be very simple, using basic
spreadsheet models which would rely on coarse data and projections. Initially the
model outcomes will require a critical review by management. However, over time
the model can be refined on the basis of real verifiable data. Over the next few years,
as formalised asset management and supporting processes become well established
within a competitive environment, it is likely that optimisation of asset maintenance
and renewal costs against service standards will become a critical asset management
activity. The strategic phase will also address the issue of support systems for
managing maintenance activities such as;
assets maintenance planning;
directing and controlling assets maintenance;
management of asset plant and system shutdowns;
recording and reporting assets maintenance performance;
analysing and optimising assets maintenance performance.
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This will involve developing a strategy and action plans for implementing a
formalised maintenance management system. Options include one or more of the
following;
basic wall charts;
card-based system;
basic spreadsheet, database, or GIS-based system;
specialist computerised maintenance management system;
establishing an integrated asset management system (IAMS).
All these systems have advantages and limitations, with the simpler systems being
more appropriate for the smaller asset owners.
The Operational Assets Maintenance Management Process:
The operational phase of assets maintenance management involves the more detailed
implementation of the strategies developed in the strategic phase. The initial
development of strategies will be an iterative process, requiring the balancing of
resources and available budgets as determined in the strategic phase.
The operational phase is illustrated in Figure 12.
Figure 12. Operational Phase of Assets Maintenance Management

(QWSP, 2001)
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For the operational phase of assets maintenance management, maintenance strategy

adopted for each asset will depend on;
direction set in the strategic phase;
level of importance of the asset (directly related to consequence of failure);
probability of failure of the asset;
availability of the asset for maintenance (shutdown of irrigation channels);
recommended maintenance requirements;
optimal industry practices.
Available maintenance strategies to be adopted in the operational phase include:
planned shutdown maintenance;
scheduled preventive maintenance;
condition-based/predictive maintenance;
unplanned corrective maintenance.
A number of tools exist to assist in developing appropriate maintenance strategies for
assets, such as reliability-centred maintenance, which evaluates the following;
the operational and physical functions of an asset;
methods in which the assets functions could fail;
the effects and consequences of functional failure;
the causes of each functional failure;
options to predict or prevent failure;
options for managing a failure.
The process of documenting planned and unplanned assets maintenance procedures
can consume a lot of time and resources, so the following steps will be necessary:
Identify asset maintenance activities to be documented.
Prioritise the activities to be documented, according to issues such as:

- importance level of the asset;
- frequency of the activity;
- development of documentation.
Carry out peer review of the documentation to:

- ensure clarity and succinctness of information;
- ensure compliance with regulatory requirements;
- identify opportunities for more efficient procedures.
The documentation should have a consistent, user-friendly style that is suitable for
incorporation into a quality management system. Flow charts should be used where
appropriate. The documentation should include a section on risk management to
ensure that all risks are minimised. Risk is addressed under the following categories:
political/social (e.g. notification of consultation with customers);
public health (e.g. procedures required to protect public health);
safety (e.g. workplace health and safety issues to be highlighted);
environmental (e.g. procedures to minimise environmental harm).
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Procedures should also include a data collection sheet where appropriate. The
documentation can be compiled into an assets system or equipment maintenance plan
that outlines maintenance procedures and their frequency. In many instances the
documentation process may occur in parallel with the input of maintenance procedure
information into a computerised maintenance management system. A critical
maintenance management activity will be the analysis of asset performance data. This
analysis will be used to;
evaluate the cost-effectiveness of the adopted maintenance strategies and
their impact on service standards;
provide information to enhance and/or calibrate predictive models for
optimisation of asset maintenance, rehabilitation and/or replacement and
determine service level impacts.
Risk Issues Relating to Assets Maintenance Management:
Potential risks associated with assets maintenance management include;
industrial action;
competition for service;
failure of critical assets;
sabotage and/or vandalism.
poor contractor performance;
inadequate emergency response;
workplace health and safety risks;
sub-optimal maintenance practices;
public health, political or social risks;
environmental impacts of maintenance practices;
inadequate feedback to planners, designers and management;
selection of an inappropriate maintenance management system;
inaccuracy or unreliability of maintenance data and information;
non-compliance with service standards or regulatory requirements;
customer complaints and/or inadequate communication or consultation;
culture change from reactive/informal practices to planned/formal practices;
Development of an Assets Maintenance Management Plan:
The development of an Assets Maintenance Management Plan should include the
following deliverables;
asset maintenance manuals available for all key and critical assets;
asset maintenance optimisation through assets maintenance modelling;
evaluation of options for delivery of maintenance management systems;
linking of assets maintenance management systems to the financial system;
asset maintenance documentation as part of a Quality Management System.
Table 13 gives a layout of the content and development level of an Assets
Maintenance Management Plan and related maintenance management sub-plans.
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Table 13. Content of an Assets Maintenance Management Plan

(QWSP, 2001)
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Assets Maintenance Optimisation

((NRCC,
2002)
Asset owners and stewards are faced with the necessity to reduce total life cycle costs
of assets, as well as to improve their physical condition and long-term performance
while considering the relative consequences of their failure. An essential outcome of
such a necessity is a systematic decision-making approach for asset maintenance
management that combines asset performance prediction with asset maintenance to
determine the optimal allocation of maintenance funds and prioritisation of assets
maintenance tasks, inclusive of assets repair, rehabilitation, renewal or replacement.
Maintenance optimisation includes minimisation of assets maintenance costs,
maximisation of assets condition and performance, and minimisation of the risk
(weighted consequence) of assets functional failure. Benefits of a maintenance
optimisation approach can be compared to traditional maintenance prioritisation and
management practices. To assess the impact of prioritisation procedures on assets
maintenance planning and maintenance expenditures, a maintenance optimisation
approach is compared to age-based, condition-based and consequence-based methods.
For a single objective, the age-based prioritisation method assigns maintenance
activities purely on the basis of age, whereas a condition-based approach considers
maintenance costs for setting priorities, and the consequence-based method considers
maintenance tasks that will mitigate the risk of consequences (measured in cost),
without consideration of failure or condition. For maintenance budget allocation, the
lowest priced maintenance activities at given condition ratings, together with statutory
tasks for avoiding safety consequences of failure, are however given precedence.
A significant portion of annual expenditures on infrastructure and industrial assets is

for assets maintenance management. The main components of an asset life-cycle
maintenance management system to be examined, may be considered as;
condition assessment of asset systems and equipment;
prediction of future performance and remaining service life;
assessment of consequences of asset system and equipment failure;
selection of appropriate maintenance tasks against cost optimisation.
Condition assessment of asset systems and equipment is represented as discrete
condition ratings by mapping assessed degradation levels to a rating scale. These
techniques have been applied to various infrastructure assets. The condition and
performance of asset equipment deteriorate with time, due to environmental
degradation, loading, inadequate maintenance and workmanship etc. Uncertainty and
variability is associated with each of these factors. A model that will capture both
time-dependence and randomness of asset system performance is best used to assess
current assets condition, and to predict future condition. Performance predictions are
then combined with an asset condition assessment model to evaluate probabilities of
system failure. Consequences of system failure are evaluated from cost data on asset
system functional losses, which refer to the loss of functionality or serviceability.
Consequences of asset system failure is the outcome of system functional losses and
their associated probabilities of failure. The approach of prioritising assets for optimal
maintenance is based on asset systems interrelationships; a standardised framework
for collecting and processing data; probabilistic models for condition/performance
prediction and risk assessment; and maintenance optimisation procedures.
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Assets Preventive Maintenance Optimisation

(HSBRT, 2003)
A preventive maintenance program is effective when it puts emphasis on minimising
risk, which will lead to improved asset safety, reliability, availability and utilisation.
Developing an effective (or optimised) asset preventive maintenance program is a
component of overall assets life cycle management (LCM).
Assets Preventive Maintenance Program Optimisation:
This process consists of the following steps:
Identifying business objectives.
Development of asset systems technical model.
Condition assessment of installed assets.
Assets criticality and risk assessment.
Maintenance program development/review.
Loading of maintenance tasks to a CMMS system.
Maintenance spares strategy (not covered in this module).
Figure 14 shows a schematic flow chart of the assets preventive maintenance program
optimisation process.
Figure 14. Assets Preventive Maintenance Program Optimisation

(HSBRT, 2003)
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Identifying Business Objectives:

Business objectives are set at the corporate and asset plant levels. They reflect market
conditions, shareholders expectations, and regulatory compliance. Objectives at this
level include production levels, products qualities, safe operation policies and
requirements, environmental integrity requirements, and operating cost targets.
Objectives are then translated to specific performance expectations of major assets.
Measures at this level might include availability, asset utilisation, efficiency, specific
products qualities, overall asset equipment effectiveness, cost per unit produced, etc.
Target values are set by operating and maintenance personnel and approved by
management. Major assets or systems performance expectations are further refined to
the individual asset equipment level. Here target vales for measures, such as asset
system availability, asset equipment reliability, Mean Time Between Failure (MTBF),
Mean Time To Repair (MTTR), etc. are set and approved. This process is repeated
periodically, and the objectives are changed to reflect the organisations position
regarding the main business drivers. Figure 14 identifies the steps involved in
developing asset performance expectations. Business objectives and performance
expectations set the stage for defining asset equipment performance standards for high
risk equipment in which assets preventive maintenance programs are optimised.
Asset Systems Technical Model:
The asset systems technical model (also known as asset hierarchy) is composed of a
hierarchy of systems, sub-systems, assemblies, sub-assemblies and components that
gradually represent increased levels of detail in describing the asset. The model
reflects how asset systems and sub-systems fit together, interrelate and operate to
provide the intended business function. As such, the hierarchy reflects both the
structural and process flow characteristics of the asset. The model starts with the
process flow diagram representing the overall operation of an asset. This level
consists of the major asset systems or production units; utility systems such as
electricity, water, steam, air, fuel, etc. and their control systems; support facilities
such as feed and raw material preparation facilities and final product storage; and
infrastructures, etc. The next level breaks down each asset system into sub-systems as
depicted on unit process flow diagrams (PFDs) and pipe and instrumentation
diagrams (P&IDs). At progressively lower levels of the model, the breakdown of the
asset plant becomes more detailed until reduced to asset equipment and components.
Control and protective systems are incorporated in the hierarchy at the appropriate
levels. In the case where a control or protective system is dedicated to one asset
system or sub-system then it should be set up as a sub-element of that system. In the
case where a control/protective system is controlling/protecting multiple asset
systems, it should be set up as an element at the same level in the hierarchy. Every
asset hierarchy element - whether it is an asset system, sub-system or asset equipment
item - has a clearly defined boundary. Boundary definitions are standardised for
classes of asset system/equipment items. The steps involved in developing an asset
plant technical model are depicted in Figure 15 and grouped as follows;
collect technical information and drawings;
establish a standard for defining asset system boundaries;
develop asset plant technical hierarchy and load into CMMS;
define asset system functions.
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Figure 15. Steps in Developing an Asset Technical Model

(HSBRT, 2003)
Condition Assessment of Installed Assets:
The objective of condition assessment of installed assets is to provide sufficient
information on asset condition to allow informed assets strategic planning and
maintenance management decisions to be made. Assessment results, together with
functionality, utilisation and cost considerations, can be used to support a wide range
of asset decisions, particularly in relation to the following:
Assets Maintenance Planning
Asset Review and Analysis
Assets Disposal Planning
Assets Life Cycle Planning
The condition assessment process for built assets should rate asset condition,
determine the risks associated with letting an asset remain in that condition, and
identify maintenance work needed to restore and retain an asset in its required
condition. The benefits of effective condition assessment of installed assets include;
maintenance and capital funding can be established and evaluated;
asset condition trends can be analysed;
asset condition can be reported in a consistent format;
maintenance programs can be effectively targeted and prioritised;
maintenance requirements can be identified and quantified;
maintenance strategies can be assessed and adjusted if necessary.
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Risks associated with non-performance or ineffective condition assessment include;

asset condition cannot be adequately reported;
declining asset condition is not identified and addressed;
maintenance planning is not related to asset condition needs;
condition-based maintenance demand is not properly identified;
deferred maintenance liability cannot be assessed and reported;
provisions for future maintenance requirements cannot be reported;
poor quality of asset condition data leading to poor decision-making;
serious deficiencies can be overlooked and resources not used effectively.
Assets Condition, Maintenance and Risk:
Condition Ratings:
Asset condition inspections should be performed to be able to apply a rating for asset
condition. The rating provides an indication of the gap between actual asset condition
and that which has been specified .
Required Maintenance Action:
In the case where the condition assessment findings are to be used in the development
of an asset maintenance program, the following information should be collected;
the presence of any defect (existing or potentially arising within the period
of the Asset Maintenance Plan which is usually annual or up to three years);
the nature of the defect (e.g. corroded structural frames and/or fittings,
broken railings, faulty controls, etc.);
the location of the defect;
how the defect should be corrected (e.g. adjust, repair, refurbish, replace,
remove, etc.);
the quantity of corrective work (for estimation and specification purposes in
appropriate units of measure, i.e. square metres, running metres, items, etc);
the remedial cost for each defect;
when the defect should be seen to (i.e. immediately, or the date required).
Assessing the Risk:
The direct risks associated with asset condition should also be assessed. This
assessment should be based on both the likely impact and the probability of an event
occurring as a direct result of the assets condition. The need to undertake
maintenance action to bridge the gap between existing and desired conditions can then
be considered, taking into account the risks associated by allowing an asset to remain
in its existing condition. Risks that need to be considered include those that relate to;
workplace/occupational safety and health and security;
asset functionality and consequence of functional failure;
financial impacts (including the cost of consequential damage);
compliance with statutory requirements and related legal exposure;
losses incurred in regard to business disruptions and/or potential income.
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A risk rating is assigned based on an assessment of the risks resulting from the
condition of the asset element inspected. Typical risk ratings are shown in Table 14.
Table 14. Typical Asset Risk Ratings
(QGSAM, 1999)
Risk Status/Rating
General Description
Very High
Asset is unusable. Immediate high risk to security, health and
safety, property damage. Significant cost implication.
High
Major disruption to service capability. High probability of
risk to health and safety or property. High cost implications.
Medium
Constant inconvenience to asset operations/usage. Some risk
to health and safety or property. Medium cost implications.
Minimal
Intermittent minor inconvenience to asset operations/usage.
Probability of risk to health and safety or property is slight.
Low cost implications.
Nil
No effect on service capability. No risk.
Assets Criticality and Risk Assessment:
Criticality and risk assessment is a qualitative analysis of assets failure events and the
ranking of those events according to their impact on the business goals of the
organisation. The process consists of the following main activities:
Collect equipment condition assessment records or generic failure frequencies.
Define for each assessment criteria the failure consequences and their scores.
Select asset systems and/or equipment for assessment.
Determine failure frequencies and their ratings.
Perform systems/equipment risk analysis.
Establish criticality assessment criteria.
Define assets criticality ranking scores.
Define assets criticality ranking rules.
Rank asset systems/equipment by risk.
Rank systems/equipment by criticality.
Failure Frequencies:
Failure frequencies are defined based on asset systems and equipment performance.
When defining failure frequencies, consideration is given to aspects such as;
operational failure history (where available);
generic reliability data;
equipment redundancy;
mode of equipment operation;
equipment stress variations, etc.
In the case where actual failure frequencies are not available, failure frequency scores
are used in the calculation of relative risk to determine the likelihood of failure of the
assessed asset system/equipment. Table 15 shows example failure frequency scores.
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Table 15. Scores for Estimated Failure Frequencies

(HSBRT, 2003)
Failure Frequency
Score
Failures occur daily
10
Failures occur weekly
9
Failures occur monthly
8
Failures occur between one month and one year intervals
7
Failures occur yearly
6
Failures occur between 1 and 5 years
5
Failures occur between 5 and 10 years
4
Failures occur less frequently than once in 10 years
1
Assessment Criteria:
Criticality assessment criteria are defined according to the consequences of failure.
The following are some suggested criticality assessment criteria;
occupational safety and health;
production/process integrity;
environmental integrity;
assets functionality;
operating costs.
Failure Consequences:
Failure consequences within each criterion are defined and given an evaluation score.
Table 16 provides examples of occupational safety and health, production/process
integrity and environmental integrity consequences of failure and their scores.
Table 16. Criticality Assessment Criteria Scores
(HSBRT, 2003)
Score
20
18
14
6
0
10
5
0
10
8
6
5
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Consequence
Occupational Safety and Health
Fatalities.
Disabling injury.
Serious injury.
Minor or first aid injury such.
No injury.
Product/Process Integrity
Unacceptable quality resulting in TOTAL product loss.
Unacceptable quality resulting in TOTAL product rework.
No effect on product quality.
Environmental Integrity
Major damage or contamination of the environment.
Repairable damage or contamination of the environment.
Minor damage or contamination of the environment.
Potential damage or contamination of the environment.
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Figure 16 shows the assets criticality and risk assessment process.
Figure 16. Assets Criticality and Risk Assessment Process

(HSBRT, 2003)
The assessment starts by analysing the selected system and/or equipment failure
consequences. The most serious failure consequence in each defined consequence
criterion is identified and its score recorded. Asset system and equipment failure
consequences are analysed in terms of the resultant effects on the asset as a whole,
considering the impact of the failure on safety of personnel and on asset performance.
The analysis is conducted by answering a series of questions about each asset system
or equipment item. These questions assess both the consequence of system or
equipment failure and the frequency/probability of failure with respect to the
assessment criteria. The criticality number and relative risk are calculated during the
assessment from responses to the questions.
Questions are typically formulated in the following form:
If the system/equipment fails, could it result in a safety consequence?
If yes, how serious should the potential consequence be rated?
And;
If the system/equipment fails, could it result in a production/process consequence?
If yes, how serious should the potential consequence be rated?
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Results of Criticality and Risk Assessment:

Assets criticality and risk assessment produces the following results:
Systems/equipment criticality ranks.
Relative risk.
Total consequence scores.
Individual system/equipment scores.
Relative Risk:
The probability of failure is used in combination with the total failure consequence of
an asset system/equipment to determine the relative risk value of the asset
system/equipment. The concept of relative risk is used to identify those asset
systems/equipment that have the greatest potential impact on the asset owner. The
relative risk (RR) of an asset system or equipment is the product of the Failure
Frequency/Probability (F/P) Score and the Total Consequence Score (TC).
RR = F/P * TC
It is called relative risk because it only has meaning relative to the other systems and
equipment evaluated by the same method. The Total Consequence (TC) is the sum of
all the scores assigned to each of the criteria.
Maintenance Tasks Development/Optimisation:
The maintenance tasks development/optimisation process establishes a structured
framework for developing or assessing a maintenance program for in-service or newly
commissioned assets. The process emphasises the use of operation and maintenance
experience documented in a form of standard maintenance tasks. The steps involved
in the development/optimisation of maintenance tasks are as follows:
An asset system is identified for review by selecting an element from the asset
plant technical hierarchy. As described earlier, the selected system boundary
should be clearly defined. The selected system includes all lower level elements.
A risk analysis is performed according to the previous section. If an analysis

was conducted in the past, review of failure frequencies in lieu of the current
asset system/equipment items condition is conducted, and the frequency scores
changed as necessary. The asset system/equipment items selected are then
ranked by their risk ranking.
In the case that the system under review belongs to an equipment class group
that has a Standard Maintenance Task (SMT) documented, it is only necessary
to verify for low risk asset systems/equipment that any specific standards and/or
regulation requirements are applicable, and simple service activities are
adequate and cost efficient. For high and medium risk asset systems/equipment,
verification of all SMT elements is required.
When an applicable SMT is not available, a more detailed analysis is required

for high and medium risk asset systems/equipment. For high risk items, a
complete reliability-centred-maintenance (RCM) analysis is recommended,
while for medium risk items, failure modes and effects analysis (FMEA) is
sufficient to develop/optimise the maintenance program.
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The outcome of RCM is a set of proposed tasks, their frequencies, and the crafts
and skill levels of individuals performing the work, or recommended actions in
case suitable routine tasks cannot be found.
For low risk items that are not governed by any standard or statutory
requirements, a run-to-failure strategy is adopted. When such requirements
exist, routine tasks are developed and incorporated into work packages.
From the output of RCM, detailed routine task descriptions are developed and
then incorporated into work packages.
SMTs are developed to reduce task development time or effort, and to ensure
consistency when dealing with equipment from the same equipment group.
Developed SMTs are kept in a library for future reference. Routine updates are
made to SMTs to reflect the current condition of equipment, additional
maintenance and operating experience, and any new changes/modification to
asset systems and equipment.
The final step in the analysis is to upload the developed maintenance work
packages into a Computerised Maintenance Management Systems (CMMS).
This could include maintenance systems such as MAXIMO, SAP Plant
Maintenance, Document Management Systems, Inspection Systems, etc.
Monitoring developed/optimised maintenance programs is essential to ensure

their effectiveness in meeting the set objectives. An established method for
recording failure modes, failure effects, failure causes and failure consequences,
as well as the corrective actions taken to eliminate/reduce the failure effects is
critical to the successful implementation of any maintenance program.
Standard Maintenance Task (SMT):

An SMT is a set of maintenance activities, which demonstrate a technically feasible
and cost-effective maintenance strategy for a defined equipment group. An equipment
group is a set of equipment of the same class that functions in an identical operating
context. An equipment group has similar design, failure modes and frequencies.
Establishing a library of SMTs ensures consistent documentation of maintenance
strategies, reduces the RCM effort for developing maintenance programs for new
systems, ensures the application of uniform, consistent and cost-effective maintenance
activities, and facilitates analysis of equipment groups. It is recommended to include
the following information when documenting a standard maintenance task;
completed RCM, FMEA and FMECA analysis;
applicable standards and statutory requirements;
description of systems boundaries and references to drawings;
description of operating context (operational and environmental);
assumptions/requirements/analysis for asset system risk assessment;
dominating failure modes, causes and frequencies with probabilities;
maintenance activities to reduce the probability of identified failure modes;
maintenance activity intervals (time-based or performance/condition-based);
all condition monitored parameters with their sensitivity to faults or failures;
asset system/equipment performance measures including maintenance KPIs.
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In addition, the following information assists in any required problem solving during
a standard maintenance task;
experience from using a known maintenance strategy along with periodic
monitoring of established performance indicators;
for non-evident failure modes, the tests/inspections required to determine
equipment expected availability;
the required experience and competency of maintenance personnel, and
relative estimated person-hours for the maintenance activity;
estimated repair time and essential spare parts, tools, equipment, and logistic
support lead times.
The extent of documentation depends on the complexity and the risk assigned to the
asset system/equipment under review. For low risk assets, only the first three points
above are required for documentation and assessment if simple service activities are
adequate and cost effective. For high and medium risk assets, it is recommended that
the SMT documents all of the listed points. The flowchart in Figure 17 describes the
steps involved in carrying out a maintenance tasks development/optimisation process.
Figure 17. Maintenance Tasks Development/Optimisation Process

(HSBRT, 2003)
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Assets Predictive Maintenance Optimisation

(EPM, 2004)
Predictive maintenance is not new; it has been around in some shape or form for
many years. Studies have proven predictive maintenance to be a lower cost means of
performing maintenance, and indeed modern maintenance philosophies such as
reliability centred maintenance (RCM) and maintenance optimisation, all direct the
asset user towards predictive maintenance as a preferred strategy. Predictive
maintenance depends on the ability to measure and extrapolate asset health in order to
predict the moment that the asset will fail to fulfil its function. Other strategies that
can be used to complement predictive maintenance are corrective maintenance,
preventive maintenance and proactive or condition-based maintenance. Corrective
maintenance entails waiting for asset equipment to fail and then fixing it. For some
less critical assets, this may be the most economical means of maintenance.
Preventive maintenance involves performing scheduled, time based tasks that are
designed to replace components that are known to wear; this may also include routine
lubrication tasks although routine maintenance is considered separate from preventive
maintenance in that a routine maintenance task is not necessarily targeted toward
failure prevention, but rather toward maintaining asset operational condition.
Proactive or condition-based maintenance identifies asset degradation causes that may
lead to potential failure, and addresses these causes usually through modifications or
re-designing them out of the asset system or equipment functional operation.
Historically predictive maintenance has been targeted at rotating machinery which is
fine in a factory environment where asset equipment usually have motion, and include
such items as gearboxes. rollers and conveyors. However, modern asset plant consist
of many other types of asset equipment (sub-systems, assemblies, sub-assemblies and
components) that have the potential to fail. Many maintenance planners are already
utilising predictive maintenance techniques on rotating machinery such as vibration
monitoring, ultrasonics, infrared hot-spot identification, and oil debris analysis.
Because of the results obtained from applications with industrial assets, predictive
maintenance is expanding rapidly to other assets such as infrastructure, subject to
expansion/contraction and subsurface pressures and movement. In this context,
predictive maintenance has developed through use of electronic sensors and CCTV.
However, one of the barriers to the expansion of predictive maintenance has been the
difficulty in gathering consistent and accurate information on asset system/equipment
condition for overall asset health assessment. Such information has been difficult to
obtain because asset condition survey reports are generally inconsistent at best, and
inaccurate at worst.
Today's predictive maintenance programs rely largely on intelligent sensor signals
delivered to analytical software of advanced monitoring technologies. Typically, these
technologies also raise alarms if the components being monitored suddenly develop
symptoms of impending failure, so that immediate corrective action can be taken.
Accurate diagnostic information on the condition of field devices and service
equipment (valves, pumps, motors, fans, etc.), enables determining, with some
precision, whether immediate action is required to prevent a potential or impending
failure, or whether the work can be done at the next regular scheduled shutdown.
Actions based on predictions increase the reliability of critical components, and costly
interruptions diminish as a result.
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Improving Maintenance Schedules:

Maintenance schedules can be optimised to extend run times and plan maintenance
activities accurately. Making maintenance work processes more efficient is a
necessary step towards realising the full potential of automated maintenance systems.
Well organised maintenance work processes incorporate four phases:
Initiation/Prioritisation Diagnostic information should be a guide in evaluating

maintenance schedules and determining the order in which they should be done.
Purging should also be practiced to ensure that proposed schedules add value to
the operations while eliminating unnecessary maintenance work that might be
marginally beneficial.
Maintenance Scheduling - Capable personnel and necessary material must be

brought together at the right time and place. Careful maintenance scheduling can
eliminate wasted effort and cut 20 to 30 percent off the time required to
complete a maintenance task.
Execution - The use of asset management software and other software systems
can speed up the execution of routine and preventive maintenance tasks, such as
open/clean shuts and the configuration and calibration of field instrumentation.
Analysis - Accurate data collection, root cause analysis, and standard reliability
engineering principles should be used in determining whether maintenance was
really needed, which can be a guide in the future.
An ideal maintenance environment incorporates both a CMMS and AMS. An

Intelligent Device Manager and Machinery Health Manager receive reliable
information directly from the plant assets and scan those assets in real time for alerts.
When all of these technologies are used in a complementary fashion, the online
software delivers the data, and serves as the trigger to launch CMMS transactions.
When these technologies are integrated, asset users can effectively automate the
maintenance process from point of alert conditions through to completion of the
maintenance work order. Essential information is available later in the form of an
audit trail so that the work can be analysed and the benefits of automation measured.
Using the Internet can also facilitate analysis and accelerate decision-making for even
better returns. New technologies securely collect, consolidate, and distribute asset
information to the users who need it, wherever they are located. For example, users
can now open a web browser to view the status of the instrument and valves
controlling an industrial asset such as a boiler, the health of the pump and motor train
circulating condensate, and the overall performance of the entire boiler. In a plant
asset network, experts can compare device configurations, look far trends in faults, or
review asset system and equipment performance from a single web application.
Asset maintenance optimisation can be put into practice at any time and to any
degree, but making a commitment to a total assets maintenance program is the best
way to ensure significant results in the shortest amount of me. This will realise the full
benefits of asset predictive maintenance optimisation, as well as asset optimisation. In
the simplest terms, asset optimisation supports maximum output while incurring
minimum costs. Output is maximised by adopting predictive maintenance strategies
designed to ensure the reliability essential to production assets, and by utilising all
available asset information and diagnostics to identify potential problems and avoid it.
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9. Establishing Assets Condition

Auditing Benchmarks
Assets Condition Diagnosis
The primary use for condition monitoring is to predict failures in physical assets that
perform specific functions that could generate operational conditions such as
vibration, heat, friction, noise or electrical potential, that would eventually affect the
operational and physical functions of the asset. The use of condition monitoring in
performance analysis of physical assets is to compare the assets operational features
against expected values or operational limits and output indicators (e.g. level low,
level normal, level high, etc.). Condition monitoring for performance analysis may
also generate alerts based on defined operational limits and, when appropriate data are
available, may generate assessments of operational context (current operational state
or operational environment). Ultimately, this would lead to automatic assessment of
the operational condition of the physical asset, thereby reducing human inspection
tasks and unnecessary maintenance in addition to the periodic maintenance scheme.
Automated operational condition assessment would also provide valuable real-time
decision support data for operational planning. Automated systems for monitoring the
condition of assets for performance observe an assets operational performance for
signs of variation indicating possible asset equipment defects or degradation, then
diagnose the assets performance variation for determining corrective or preventive
intervention before any critical failure occurs (Stapelberg, 2008).
Systems for monitoring the condition of assets can range from simple instrumentation
to highly integrated monitoring systems usually coupled with process control.
Continuous online operational condition monitoring systems collect, measure, and
display asset operational condition variables in real time. All the incoming data is
correlated and continuously analysed by diagnostic tools and knowledge-based
decision-support systems (DSS) that effectively and systematically conduct root-cause
analysis and select the appropriate corrective or preventive actions. Actionable
information can be embedded in the knowledge-based decision-support system to
validate diagnostic information and automate the decision-making process.
Assets condition diagnosis (or assets health assessment) determines the root-cause of
problems in an assets system or equipment. Asset condition diagnostic systems
usually consist of advanced device resident algorithms or programs whereby asset
conditions are detected from within. Condition diagnostics can include off-line
diagnostics that are run outside the condition monitoring systems, usually on-demand;
and background diagnostics that monitor the assets system or equipment for
operational deviations and marginal events, and provide statistical data for failure
prediction and root cause analysis of potential failure conditions. Intelligent device
asset monitors are self contained microprocessor-based devices integrated in an
automated or continuous online condition monitoring system, and capable of process
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control or asset health diagnosis. NAMUR (2006) defines status levels for diagnosis;
Maintenance; Failure; Function Check; and Out of Specification (TSSS, 2005).
Benchmarking Assets Condition Assessments

(VGDI, 2005)
Assets condition assessment is a basic public sector responsibility and is required by
all State Governments. Government Agencies thus need to provide for regular assets
inspections and surveys; assets condition reporting; and assets maintenance and
rectification actions. Information on the condition of assets is fundamental to making
good management decisions. A balance is needed when making investment decisions
on assets. The challenge is to neither under-invest and inadvertently run assets down,
nor over-invest and put an unnecessary strain on funds.
Government Policy on Assets Condition:
Government policy requires agencies to establish and manage processes to monitor
the condition of assets under their control. The following summarises the policy
requirements for condition assessment in the State of Victoria (VGDI, 2005):
In 1993, the Cabinet Budget and Expenditure Review Committee gave the
governments view on assets condition assessment. The Audit Report stated
that asset conditions needed to be seriously addressed.
In 1994, the Financial Management Package called for a condition assessment

of all assets. The Minister for Finance guideline, Standards of Publicly Owned
Buildings, released pursuant to the Building Act 1993, requires strategic action
to be taken, especially in relation to public buildings.
In 1995, the Victorian State Governments Asset Management Series outlined

asset condition policy and practice requirements for constructed assets. Policy
documents, include an Integrated Management Cycle and Investment
Evaluation Policy and Guidelines that require asset condition information.
In July 1996 the Victorian Government released the Trial Consolidated

Financial Report on the operations and financial position of government
agencies. This is the first whole-of-government accrual-based financial
statement. The reliability of this report depends significantly upon realistic
condition assessments and valuation of assets.
All Government Agencies are responsible and accountable for making condition
assessment decisions on the assets they own or control. Government Agencies are
encouraged to seek advice on assessing the condition of their assets, but ultimately,
they must take responsibility for any decisions. It is important to clearly define the
required conditions for assets, as the range of possibilities may appear endless. A
good understanding of assets condition assessment requires practice and experience.
As skills and confidence increase, agencies will learn to optimise the effort and
direction put into assessments.
Consequently Government Agencies should focus attention on assets which offer a
high level of service and are significant to the organisation; should appropriately
assess assets which provide few services but are significant to the organisation;
experiment with assessment methods on assets which currently provide few services
but show potential; need only conduct minimal assessments, sufficient to satisfy
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management and reporting needs on assets which provide few services and are of
minor significance to the organisation.
Where Does Assets Condition Assessment Begin?
All physical assets, particularly constructed assets, must be assessed on an ongoing
basis. This need not necessarily be done all at once or by direct inspection. The most
effective asset management and reporting is achieved through a planned condition
assessment program, tailored to suit the organisation. A range of methods may be
required for comprehensive assessment. Predictive methods are commonly used for
planning purposes and direct inspection is often used to evaluate conditions for
operational needs. There is no single condition assessment method appropriate for
every situation. Government Agencies need to take individual asset circumstances
into account to obtain the best results from condition assessment.
What are Constructed Assets?
Constructed assets can be complex and may require different methods to assess their
conditions throughout their lives. Constructed assets, sometimes referred to as fixed
or non-current physical assets, include;
structures such as bridges, piers and dams;
built environment such as public buildings, schools, hospitals, etc.;
infrastructure such as road, rail, telecommunication and sewer networks.
The Primary Driver Behind Assets Condition Assessment is Service Delivery:
In 1996, Asset and Building Policy released the guideline: Assessing the Condition
of Constructed Assets (VGDI, 2005). This guideline applies to all government
constructed assets. The condition assessment process uses the same information for
asset reporting as required by asset and financial managers administering their asset
portfolios. Assessing the Condition of Constructed Assets provides a condition
assessment methodology. The guideline is divided into three phases:
Phase One Collect the Database:
This covers understanding the importance of assets within a whole-of-government
context; determining the appropriate asset condition for the required level of
performance, which will then provide a reference for measuring actual condition; and
conducting the actual condition assessment, which may be by predictive methods or
by direct inspection.
Phase Two Analyse the Database:
This covers establishing the asset's relative condition level, which is a comparison of
the actual condition and the required condition; identifying condition impacts, which
involves evaluating the impact of the actual condition on the provision of services,
operational costs, and health and safety; and identifying appropriate action together
with its cost and priority.
Phase Three Management Reporting:
The third phase provides performance reporting measures which give a broad view on
the management of an agencys assets. The guideline details the assets condition
index measure, and the assets condition trend performance indicator. These measures
also support reporting required by the Department of Treasury and Finance on
constructed assets. The guideline explains how to prepare and present the index and
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trend and provides advice on interpreting the results. Asset reporting requires a firm
commitment to effective condition assessment.
Benchmarking Assets Condition Surveys

Industry Assets Condition Surveys:
(BSRIA, 2000)
A condition survey deals with the physical condition of an asset, which is the time
period before an assets component wears out or breaks down. An assets condition
survey is a systematic process of evaluating the condition of asset equipment and
installations. The frequency of the condition survey will depend upon its purpose.
Single one-of surveys may be appropriate in dealing with the assessment of repair
liabilities in conjunction with a physical asset. On the other hand, if the purpose is to
ensure the cost effective long-term maintenance of a group of assets, the store of
condition data needs to be refreshed periodically to maintain the time horizon, allow
for actions taken, and monitor unpredictable deterioration.
An assets condition survey can consist of:
Visual Inspection:
Examination of the outside of the asset, together with internal examination of
the assets equipment.
Visual inspections with tests:

To ascertain a true condition of the asset equipment. For example, thermal
imaging can be used to identify defects.
Specialist surveys:
Certain assets equipment will need to be examined and tested by approved
contractors. Other specialist contractors also perform more in depth NDT
testing methods such as vibration monitoring, power quality surveys, eddy
currents and leak detection.
Conducting an initial condition survey can identify significant defects that can
adversely affect the performance of asset services and installations; when undesirable
conditions or defects would be reached; cause of defects and an indication of what
remedial or maintenance actions need to be applied; budgets required for remedial or
maintenance action; remedial or maintenance action recommended; and specialist
inspection outside the scope of the condition survey.
The information derived from condition surveys can also help to;
develop a condition database that can be used for other purposes such as
asset valuations and prepare long term asset investment plans;
achieve a balance between capital and maintenance funds and target scarce
maintenance resources (people and funds)
benchmark assets condition and maintenance expenditure.
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Assets Condition Data Collection:

The information associated with the condition of asset equipment and installations
falls into two generic categories:
Core data about the asset e.g. asset identity, description, age, location, etc.
Condition data about the asset.
Condition data recorded should include;

current condition;
whether a defective condition exists or not;
defects or non-conformity in comparison to acceptable condition;
condition grade;
maintenance action required to bring the asset up to the required condition;
any existing equipment lists that can be used to check off each asset item
as verification of the completeness of existing records.
The above condition data is typically supplemented with the following information;
method of inspection/data collection (including details of inspection
techniques used);
any limitation associated with the survey/inspection process, e.g. where
asset equipment could not be inspected and related reasons;
relevant documents inspected;
relevant interviews conducted;
observations including results of any tests and measurements carried out;
photographic or diagrammatic records to illustrate the conditions.
This assets condition information is used to justify the findings in a report. Typical
asset survey condition guides, such as the BSRIA Guide Condition Survey of
Building Services, AG 4/2000 (BSRIA, 2000), contain a series of condition survey
checklists and priority tables from various sources which enables the surveyor to
prioritise condition of assets equipment from checklist forms. BSRIA uses this guide
as a toolkit to conduct condition surveys of property for their clients, producing
comprehensive detailed reports on asset equipment serviceability and life expectancy.
Structural Assets Condition Surveys:
(CPS, 2007)
Condition surveys of infrastructure or structural assets provide a systematic uniform
and objective basis for obtaining information on the usable state of the assets. The
surveys identify the work necessary to bring infrastructure or structural assets up to a
good state of repair, and to comply with current legislation. Once in a good (or at least
maintainable) state, routine maintenance can be carried out under a pre-planned
programme. This approach also keeps any day-to-day (responsive) maintenance to a
minimum and deals only with restoring infrastructure or structural asset components
to an acceptable level.
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Scope and Extent of Structural Assets Condition Surveys:

Aspects on which a structural assets condition survey will primarily report are the
condition of the infrastructure or structural asset, and the electrical/mechanical
services of the infrastructure or structural asset. The surveys are non-invasive and do
not incorporate any specialist tests and/or inspections as routine. However the need
for any further surveys or tests are identified if deemed necessary. Typical examples
would be pressure testing of pipe work, drainage surveys or structural assessments
which would involve the opening up of building structure or fabric.
The survey does not ordinarily report on furniture, fixtures and fittings that are
considered not to be part of the asset structure or fabric. The survey reports
principally on elements for which costs are likely to be incurred, and to significant
items of repair or replacement in the next five years.
Asset Condition Survey Methodology:
All assets condition surveys make reference to a pre-determined classification system
to demonstrate that similar judgements are being made about asset condition and
priority. The existing assets condition, particularly of electrical and mechanical
service equipment, is assessed using a four grade assessment system A D, where:
Grade A = Good: Performing as intended and/or operating efficiently.
Grade B = Satisfactory: Performing as intended but with minor deterioration.
Grade C = Poor: Exhibiting major defects and/or not operating as intended.
Grade D = Bad: Life expired and/or serious risk of imminent failure.
Once the condition of the assets equipment have been assessed, a priority grading is
applied according to the seriousness of the condition revealed, and any urgency
associated with, and breaches of, legislation. This will have particular regard to the
possible consequences of maintenance deferment. The following priority grades are in
the context of a ten year planning period:
Priority 1: Urgent works that will present immediate closure of the asset
and/or address an immediate high risk to the health and safety of users and/or
remedy a serious breach of legislation.
Priority 2: Essential work required within two years that will prevent serious
deterioration of the asset and/or address a medium risk to the health and safety
of users and/or remedy a less serious breach of legislation.
Priority 3: Desirable work required within three to five years that will prevent
deterioration of the asset and/or address a low risk to the health and safety of
users and/or remedy a minor breach of legislation.
Priority 4: Long term work required beyond a five year planning period that
will prevent deterioration of the asset and/or restore equipment or services.
Cost to Repair or Renew:

An estimate is made at the time of assessment of the cost of repairing or renewing a
defective asset or asset services equipment. The costs indicate bringing the asset up to
Grade A condition. Costs include the cost of works including preliminaries and
contingencies, and the cost as appropriate of professional fees connected with such
work. The estimates do not include upgrading specifications to current standards,
except where the existing specification is no longer available or would breach
legislation. Costs associated with routine maintenance e.g. servicing, and day-to-day
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(responsive) maintenance e.g. replacement of consumables and adjustments etc., are

not included as part of the condition survey, but are added and reported separately.
Recording of Assets condition Survey Data:
Survey data is recorded on spreadsheets, enabling the survey information to be
utilised for technical and presentation purposes and as part of the overall Assets
Condition Assessment Plan.
Facilities Condition Surveys:

(IHS, 1997)
Facilities engineering is a complex challenge to any facilities manager because it
involves managing the operation, maintenance, repair, and renovation of a facilitys
physical assets. Use of an assets equipment will have an effect on the life span of any
asset. However, different asset equipment serving similar functions will deteriorate at
varying rates. Even identical asset equipment within the same facility will have
varying life spans. There is no single method to predict the actual economic life of a
facility and/or its assets and asset equipment. However, good scheduled preventive
maintenance and scheduled periodic maintenance and repair or replacement of some
asset equipment will extend the economic life of the facility. Extending the economic
life of the facility is the ultimate goal of each facilities manager. Conducting facilities
condition surveys at periodic intervals help to accomplish this goal.
A facilities condition survey is a continuing program of comprehensive assessments
of a facilitys assets. The surveys require competent personnel examining all facility
buildings, grounds, and service equipment, and evaluating their condition. A report is
generated that lists facility deficiencies, including physical condition deficiencies,
violation of codes and standards, and required space utilisation improvements. This
information is incorporated into a report that lists each deficiency along with a
recommended corrective action and an associated budget cost estimate. The data is
entered into a Facilities Engineering Deficiency System (FEDS) that is contained
within the structure of an integrated Facilities Database. The FEDS can then be used
to establish and prioritise projects for the upcoming fiscal year and subsequent years.
An annual report, derived from the FEDS, establishes a plan for corrective actions on
the facility deficiency data. The FEDS data collected during a survey provides sound
management information and allows control of economic elements that are essential
to an effective and economic facilities management program. However, in order to
maintain and extend the life span of a facility the deficiencies identified in the survey
must be corrected. This can only be achieved with management's concurrence and
positive actions taken toward correcting identified deficiencies. The most challenging
portion of a facilities condition survey is the detection of worn and/or deteriorated
components along with the estimating and planning of their repair or replacement
before an actual breakdown occurs.
The primary survey areas include:
Operations and maintenance activities and capabilities
Physical conditions of the facilitys assets
Compliance with codes, standards and guidelines.
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The Facilities Condition Survey document is developed to:

Provide a standard format for execution of the physical survey
Prepare the final facilities condition survey report
Outline responsibilities, and provide instructions to teams that will examine
facilities for existing deficiencies and potential problems.
The information contained in the document allows:

An overview of the planning process for execution of the condition survey
An overview of the survey process so that team members, management
officials, and the Facilities Manager will have an understanding of what to
anticipate during a survey
Detailed instructions and standard formats to be used in completing the report.
Benefits of implementing the survey recommendations include:
Facilities related accreditation requirements are corrected
Building systems operate more effective, efficient, and are easier to maintain
Life expectancy of facility buildings and building service equipment systems
are prolonged
Environmental conditions adequate to the needs of the programs are appraised
and the work environment is improved
Each facility is analysed for physical condition, economic life expectancy,
deficiency corrective action priority, project completion time span, and
estimated cost of correction
Needed additional resources are justified with better planning for the facilities
budget, which may result in additional funding in the future
Customers are better satisfied with services provided.
Type of Facilities Condition Surveys:
Two types of surveys are used to assess facilities and their installations. These are
annual general inspections and facility condition surveys.
Annual General Inspection:

It is recommended that an annual general inspection is conducted to review the
status of the most current FEDS information, provide other corrective actions,
review new problem areas, revise estimates, survey any buildings that may have
been added to the facility inventory since the last annual general inspection or
facility condition survey, and evaluate recently developed problems. The annual
general inspection is the primary means for facilities staff to review the status of
all existing FEDS corrective items at an installation.
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Facility Condition Survey:

This is an in-depth evaluation of the physical condition and functional
performance of the facility (i.e., structure, appurtenances), building service
equipment, utilities, grounds, and program space utilisation, conducted every
five years The survey team consists of qualified building professionals
including, but not limited to, architects and engineer(s) of appropriate
discipline(s) including civil, structural, mechanical, and electrical who will
review and document existing and potential facilities related problems.
Components of a Facility Condition Survey:

There are three main components of a facility condition survey:
Planning - The planning stage is initiated through the submission of an annual

consolidated report which contains a listing of the facility condition surveys
scheduled for the upcoming fiscal year. The Facilities Engineer determines
whether the facility condition surveys are to be conducted by in-house staff or
by a contracted Architect/Engineering (A/E) firm. The planning component
ends with finalisation of on-site dates and times. The Facilities Engineer
coordinates the schedule with each Facilities Manager.
Site Survey - The site survey stage includes an initial briefing with local
installation personnel prior to the start of the actual site survey; on-site
examination and evaluation; and the exit briefing at the conclusion of the visit
to summarize the survey findings and recommendations.
Report - The report stage includes finalisation of the deficiency reports,

preparation, distribution, and review of the draft report, and incorporation of
comments/corrections and distribution of the final report.
Conducting the Facility Conditions Survey:

Planning - The Facilities Engineer initiates the planning with a determination of
which facilities are due for a facility condition survey. The Facilities Engineer also
determines the best option for conducting the survey. The scope of work should
include the following for each facility to be surveyed:
(1) The facility designation (name, building number(s), address) of each
building at the location to be inspected.
(2) Area map and/or location plan for the facility to be utilised for the site
survey and inclusion in the final report.
(3) Latest FEDS printout for the facility with completed items noted and a
listing of the backlog of maintenance and repair projects.
(4) Current floor plans for each building, facility site plans, and utility layout
plans, suitable for use during the site survey and inclusion in the final report.
(5) Any special requirements or information to be included in the report.
(6) Any limiting factors, such as portion(s) not to be included in the survey.
(7) Real property inventory.
(8) Listing of applicable codes, standards, and/or guidelines that must be applied
when conducting the survey
(9) Current environmental assessment, surveys, and testing.
(10) A Statement of Condition for each building as required by accreditation.
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The next part of the planning stage is scheduling the survey. For in-house surveys,
this includes designation of the team and determining availability for completion of
the survey. The survey date must be coordinated with the Facilities Manager. For
contract surveys, this starts with negotiating the delivery order and award of the
delivery order. The remaining coordination includes briefing of the survey team
members on their responsibilities, survey procedures, and the scope of work.
Each survey team member will be responsible for providing the following
information:
The descriptive narrative of each detected deficiency or corrective action
related to the subject deficiency code.
Prepare rough sketches as necessary.
Recommendations defining the method of correcting the deficiency, and
an estimated cost to correct the deficiency.
If the deficiency is beyond the capability to be accomplished in-house,
then a total dollar cost estimate will suffice,
If the deficiency is within the capability of in-house maintenance force,
the estimate should reflect the number of estimated labour-hours by
trade, estimated material costs, and other resources required to
accomplish the scope of work.
Each team member should review the checklist for familiarity with the
subject matter. The team member should begin facility component
examination by beginning outside the building and then progressing to the
inside. Each team member should compare the intent of the checklist to the
facility components or the facility management methodology. Facility
components or facility related management items that do not favourably
compare with the compliance criteria are to be considered as deficiencies.
Each member should prepare the descriptive narrative at the time of
deficiency detection, recording deficiencies, recommendations, and cost
estimates.
Each team member brings the necessary items required to conduct the
survey. If photographs are used to support narratives, ensure that entering
the corresponding installation number, building number, and temporary
task number on the reverse side of the photo identifies each photo.
Upon completion of the survey, each team member will review respective
survey notes. Team members complete the prescribed forms and submit
them within a specific period after completion of the survey.
All photos must be retained with the original narratives, recommendations,
and cost estimates. The original survey forms are filed for future surveys,
and to review progress of recommended corrective action.
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Assembling the Facility Condition Survey Team:

A typical survey team includes the following discipline specialists:
Architect
Civil/structural engineer
Mechanical engineer
Electrical engineer
Facilities Manager.
It is extremely important that the team members have both operation and design
experience needed for these surveys.
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10. Assets Condition Audit and

Maintenance Reporting
Assets Condition Audit Reporting
The overall asset condition audit reporting process documents the evaluated condition
of the organisations assets, based on condition criteria and end-of-life criteria that are
indicative of asset condition and consistent with industry practices. The organisations
assets are grouped into asset classes and prioritised into categories, for example,
Priority 1 (P1), Priority 2 (P2), and Priority 3 (P3), based on their value to the
organisations business (in terms of customer/community service, reliability, finance,
health and safety, regulatory/legal/environment requirements) and importance of
acquiring the condition information. These prioritised categories include:
P1 assets (inclusive of their asset classes) represent the highest priority assets
and are of high value in terms of total sustainment program expenditures, and
also high risk in terms of sustainable asset costs.
P2 assets (inclusive of their asset classes) are second in priority with moderate
value and high risk;
P3 assets (inclusive of their asset classes) are lowest in priority with lower value
and low risk.
The assets condition audit report usually presents the condition assessment results of
the P1 and P2 assets. For the low priority P3 assets, only a review of industry
practices is presented any available condition assessment is not assessed.
The Assets Condition Audit Report is prepared by selected staff of the organisation in
consultation with assets condition assessment specialists. The condition assessment
analysis and its conclusions are based on the findings of the condition assessment
specialists, and the results compiled in the assets condition audit report by selected
staff. This approach is adopted since the relevant analysis is normally well advanced
at the time of commencement of the assets condition audit report, and it is more
appropriate that the organisations selected staff objectively develop the audit report.
The condition assessment specialists in this case usually limit their involvement to
applying condition assessment analytical methods and providing assessed condition
results for the auditing process. In general, a very careful and thoughtful evaluation of
condition assessment results is undertaken, and follows a steady and measured
program of data collection to secure the information needed to assess the condition of
the assets. The data collection methods, tools and technologies are generally
appropriate to the task of measuring asset condition, and providing the right data at
the appropriate cost. These methods need to be consistent with industry practices.
Methods and procedures for data collection are usually well documented in head
office procedure documents and specifications for data collection services. Except for
a few exceptions that might not result in any significant impact to the assets condition
audit results, the identified data collection procedures need to be executed according
to set specifications, and useable data collected and stored in centralised databases.
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The Assets Condition Audit Report Outputs:

The Assets Condition Audit Report documents the methodology employed in the
investigation and the philosophical approach used, along with summary output results
for all asset classes. To gather detailed condition information on every asset is not
practical and economically infeasible, thus all assets are grouped into asset classes
and prioritised in three categories, Priority 1 (P1), Priority 2 (P2), and Priority 3 (P3).
The output results present condition assessment results of the P1 and P2 assets.
Limited information is to be provided on the P3 assets because acquiring asset
condition information on these assets is of low value for any of the following reasons:
The assets are of low value in terms of ongoing investments and it is not cost
effective or practical to collect condition information on these assets.
When these assets fail, risks are considered relatively low and a process exists to
identify and repair or replace the assets that have failed, or are about to fail.
The assets included in each asset group (P1, P2 and P3) and the corresponding
sections of the output results report dealing with these assets are listed in a table.
Usually a comprehensive asset condition assessment for all P1 and P2 assets is
completed in accordance with the condition assessment scope of work. However, the
Assets Condition Audit Report should provide details of the condition assessment
methodology and strategy detailed previously. It should also include high level
discussions of strategy and address the investment needed to maintain the service
potential condition of existing assets as well as investment needed to replace and
upgrade existing assets, and acquire new assets to enhance service delivery of outputs.
The information could be textual and may be supported by tables including data. It
should basically include:
Current Assets describe current assets applied in achieving the required
service delivery
Non-asset solutions - describe non-asset solutions available as alternatives to
asset based solutions (i.e. demand management, insurance, managed failures,);
Current processes - review current condition assessment processes and levels of
service being provided by the assets, and identify related asset performance
Method of analysis - provide details on the condition assessment analysis related
to the desired level of service, especially where the level of service is different
from what is currently being provided by the assets.
Reporting on Assets Descriptions:
A detailed description should be prepared for each of the assets in the P1 and P2
categories, and some in the P3 asset classes that have been specifically investigated.
The descriptions focus on the nature of the assets, their function within the system,
and key characteristics of the assets including the critical asset subsystems or
equipment that make up the assets.
Reporting on Assets Demographics:
Detailed demographics are prepared for all assets in the P1 and P2 asset classes,
focusing on the total population size of each asset class, and the distribution of this
population by various salient asset characteristics, such as asset types, operating
characteristics, ages, and geographic locations.
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The objective of the demographic breakdown is to quantify population sizes within

definable groupings, which then form the basis for extrapolation of sampled condition
results to the respective target populations. The data for the demographic analyses is
usually from a variety of data sources, including the Maintenance Work Order system,
Asset Surveys and Asset Condition Assessment Surveys. An example of a typical
asset demographics chart for power distribution is illustrated in Table 17.
Table 17. Example of a Typical Asset Demographics Chart
Reporting on the Assets Condition Assessment Process:

A review of asset condition assessment processes for each of the P1 and P2 asset
classes needs to be included in the Assets Condition Audit Report. This review is
carried out in comparison with an idealised framework for a hierarchical and
prioritised asset condition assessment process, as described in the beginning of this
section. Elements of the review include;
an analysis of asset deterioration and failure modes;
description of the organisations condition assessment process;
a review of industry practices;
benchmarking of the organisations practices against industry practices;
recommendation of practices for use by the organisation,
analysis and recommendation of composite Health Indices.
Reporting on the Assets Condition:
In the asset condition assessment process, assets condition information is aggregated
and indicators of asset management effectiveness developed. Information at this level
provides an internal management tool and assists in reporting for the Assets Condition
Audit Report. Reports on the condition of public assets are required at two levels internal agency reports, and reports to the Department of Treasury and Finance.
Internal agency reports are generated on the overall condition of the agency's assets,
condition trends, and projected improvements or deterioration of assets over time.
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They also require well substantiated recommendations for all asset management
decisions, including re-deployment, refurbishment and maintenance. Reports to the
Department of Treasury and Finance have been defined in accordance with the
Minister for Finance introducing 'whole of government' reporting to monitor the
condition of the State's assets. Agencies need to prepare their reports in a uniform
format so Treasury can aggregate the information. The reports are based on
information gathered as part of their assets condition assessment. Agencies also need
to aggregate their reports at both agency and Ministerial portfolio level. Separate
reports are prepared for each Asset Category, allowing analysis based on relative
strategic importance. This is a key factor at both agency and government level.
The reports need to provide information on:
Condition Index - a weighted average expressing the current overall

condition of a group of assets. A weighted average achieves a balanced view
by representing individual assets in proportion to their relative size.
Condition Trend showing movements in the Condition Index over

successive years, indicating whether overall asset conditions are improving ,
stable or deteriorating.
Reports to the Department of Treasury and Finance are at both agency and Ministerial
portfolio level. However, agencies also need to disaggregate their figures by grouping
assets. This serves both internal management purposes and requests from Treasury for
more detailed information to support or explain aggregate figures. The appropriate
asset groups need to be selected for these purposes. The key asset groups are the six
Asset Categories indicated in Table 1. Further breakdown may not be necessary if all
an agency's assets in a particular Asset Category are of the same class. For example in
Asset Category 4 an agency's assets may be all office buildings. An agency with more
than one class of assets in a particular Asset Category will need to develop sub-groups
to reflect the different functions and to support benchmarking. For example in Asset
Category 2 the agency may have both bridges and highways. For internal
management purposes, an agency may choose to create sub-groups of assets related to
expected assets life-cycles.
Reporting on the Asset Condition Assessment Analysis:
The inclusion of asset condition assessment analysis in the Assets Condition Audit
Report specifically focuses on technical justification, namely asset condition, of the
risks associated with certain assets condition levels. Judgement is applied to assess
risks concerning asset performance, health and safety, environment, reliability,
technical obsolescence, etc. This has resulted in a need to understand the condition of
assets in more detail than was previously necessary. Companies are moving towards
condition-based management strategies for their major assets. This requires an
understanding of the present condition of the assets, and how this relates to a desired
level of service and future assets performance. While this is a very understandable and
necessary approach, there are some significant difficulties in implementing the
conclusions from condition assessment processes to deliver the outcomes required.
For example, utility organisations such as electricity distribution systems are made up
of a very large number of individual components, which are widely distributed.
Conventionally, in order to make a decision about the future of an individual asset,
relatively detailed condition information is required.
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This immediately raises a very significant practical problem for electricity companies.
To attempt to gather detailed condition information and to respond to the outcome of
the analysis for every individual asset would not be practical. In order to overcome
this situation, a hierarchical approach to condition assessment is applied to enable
prioritisation and a focused gathering of detailed condition information. There are a
number of ways in which this prioritisation and focusing can be achieved. These
include the use of existing knowledge and simple, low cost, condition assessment
procedures to progressively identify items at high risk, so that resources necessary for
detailed condition assessment can be concentrated on these items. Alternatively, a
sampling approach may be adopted within definable subgroups of assets.
Reporting on the Assets Condition Index:
An assets condition index is defined as a weighted average of the condition of a group
of assets. It is calculated using the Relative Condition Level of assets multiplied by
the relevant unit of measure. The unit of measure used for a group of assets depends
on the nature of the assets. A condition index has three key values for interpretation:
Value of 0: indicates that the current condition of assets in the group is on

average satisfactory.
Positive value: indicates that the current condition of assets in the group is
on average better than required. The closer the value is to the maximum of
+2 the wider the variation from Required Condition.
Negative value: indicates that the current condition of assets in the group is
on average lower than required. The closer the value is to the minimum of -2
the wider the variation from Required Condition.
Table 18 shows how the Condition Index is calculated for a group of assets.
Table 18. Assets Condition Index
(VSG, 1996)
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Each step followed in Table 18 is explained as follows:

(i)
Column 2: List the Relative Condition Level of each asset;
(ii)
Column 3: List the total units of measure of each asset;
(iii)
Column 4: Multiply Column 2 by Column 3 for each asset;
(iv)
Add Column 3
(v)
Add Column 4
(vi)
Column 5: Divide total of Column 4 by total of Column 3
The resulting weighted average gives the Condition Index for the whole group of
assets. In the example in Table 18, the Condition Index has a negative value (- 0.8)
indicating that overall the group of five buildings is not satisfactorily maintained.
Reporting on the Assets Condition Trends:
Table 19 shows an assets condition trend with nine possible interpretations.
Table 19. Assets Condition Trend
(VSG, 1996)
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An assets condition trend is defined as a comparison of the current year's condition

index with that of preceding years. An assets condition trend is used to monitor
variations in overall asset condition over time. In particular, measurement of trends is
a tool for protecting the long term viability of assets by maintaining optimum
condition. It can also show whether expenditure on assets is above or below that
required. The trend period must also be calculated. Useful information is gained by
comparing the condition index of two successive years. However, a longer monitoring
period gives a fuller picture of trends.
Reporting on Asset Deterioration and Degradation Processes:
When considering asset condition assessment, it is important to understand the
differences between defect or corrective maintenance and regular routine maintenance
versus long-term asset degradation and condition-based maintenance. Defects are
usually well defined and associated with failed or defective components mostly in
ancillary systems that affect the operation and reliability of the asset well before the
assets end-of-life. These defects do not normally affect the life of the asset itself, if
detected early and corrected. Defects are routinely identified during short-interval
inspections, and are dealt with by corrective maintenance activities to repair or
replace failed components to ensure continued operation of the asset. However, long
term degradation is generally less well defined and is not easily determined by routine
inspections. The purpose of asset condition assessment in this case is to detect and
quantify long term degradation and to provide some means of quantifying remaining
asset life. This includes determining assets that are high risk or near end-of-life that
will require major capital or maintenance expenditures to either refurbish or replace.
A proper understanding and reporting of asset degradation and failure processes in the
Assets Condition Audit Report is vital if condition assessment procedures and the
appropriate remedial maintenance actions are to be effectively applied. It is important
to identify the critical modes of degradation, the nature and consequences of asset
failure, and, if possible, the time remaining until the asset is degraded to the point of
failure. Unless there is a reasonable understanding of the degradation and failure
processes, it is impossible to establish sensible assessment criteria or to define
appropriate end-of-life criteria.
Reporting on Asset Performance:
Appropriate performance measures should be included in the Assets Condition Audit
Report to enable adequate understanding of the way in which assets are being
managed, used and consumed within the context of service delivery operations.
Review of assets performance against the following measures should be reported in
respect of all the classes of controlled assets:
Maintenance expenditure
Asset condition
The amount of deferred maintenance
Asset utilisation.
Appropriate financial accounting ratios should also be included to provide a balanced
view of asset performance from both an asset management and asset financial
accounting viewpoint.
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These ratios should be qualified with reference to the capital structures that are
required to support service delivery operations. It may also be possible to use some
financial ratios in support of information presented with regard to derived asset age,
derived effective useful life, etc.
Comparison of Asset Performance with Industry Practice:
A benchmarking exercise should be undertaken to compare the organisations asset
performance with those of similar organisations. This benchmarking exercise is
conducted informally through information obtained from the Assets Condition Audit
Report in regard to every type of asset class. The benchmarking should focus on
points of reference for several classes of assets, and every asset class should be
benchmarked against at least three organisations within each geographic area. The
benchmarking should also focus on the types of testing and inspection undertaken for
each class of asset, the frequency of testing and inspection, and the use of
maintenance and condition assessment data. Attention should be paid to development
of composite Health Indices for different classes of assets, although organisations are
reluctant to reveal the details of the particular algorithms used for such Health Indices.
Reporting on Assets Operations and Maintenance:
Information is provided on the operations and maintenance of the existing asset base.
The impact of proposed new investments on operations and maintenance strategies
and resources should be included in the Assets Condition Audit Report, including
strategies for ensuring that the service potential of existing and new assets will be
maintained to the appropriate condition standard for output production. The risks
associated with funding level adjustments in the current budget year, which impact on
whole of life costs and outline options to address maintenance needs, are identified.
Comment should also be provided on the management tools adopted in regard to the
level of service performance of assets for inclusion in an operations and maintenance
strategy, cost benefit analysis, and whole of life costs, as well as any high priority
deferred maintenance works and how the proposed strategies would address this issue.
Information in regard to a Strategic Maintenance Plan should consider the following;
current and future levels of service;
forecast of planned maintenance work (type and budgets);
forecast magnitude of unplanned maintenance work (budgets);
deferred maintenance and related risk (long-term effects of deferral);
risk management (trends and analysis);
how maintenance will be funded.
Reporting on Assets Disposal Strategy:
Disposal is any of the activities associated with disposal of an asset, including sale,
demolition or relocation. The assets disposal strategy should;
forecast proposed disposal of assets, including timing and costs;
forecast cash flow of income from disposals;
forecast cash flow of expenditures;
destination of disposal proceeds such as a funding source for acquisition;
identify any business risk associated with the disposal.
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Reporting on Assets Usage Life Cycle Management

Reporting on assets usage life cycle management is predominantly in the form of
assets usage documentation, as the assets usage life cycle spans a protracted period
over the life of an asset, which can last from 10 to 20 years, and even longer when
assets rehabilitation or replacement is taken into account. Thus assets usage
documentation ranges from documentation covering assets commissioning or post
modification re-commissioning, operations, maintenance, modification, preservation
or rehabilitation, through to renewal or replacement and/or disposal.
Assets Design Intent Document:
The initial assets design intent document was developed using the requirements
outlined in the asset owner/users requirements and the design professionals plan in a
narrative description of the various asset systems and their intended modes and
conditions of operation. This initial document forms the basis used to clearly define
the benchmarks for how each system is to be commissioned or re-commissioned.
Assets Commissioning and Re-Commissioning Report:
Upon completion of commissioning activities, the commissioning agent will produce
a written report documenting commissioning activities and their results. Any
deficiencies found will be identified with suggested remedies, and any corrective
action taken will be reported. The commissioning agent will also need to compile a
re-commissioning manual to outline the design criteria and measurable standards and
tests that are required to re-certify and validate that the commissioned systems are
meeting functional performance standards for future use.
Assets Maintenance Documentation:
Many asset owners, as part of their quality management system, document their
planned maintenance procedures. The process can have a heavy consumption of time
and resources, so the following steps will be necessary;
identify activities to be documented;
prioritise activities to be documented, according to issues such as importance
level of the asset, frequency of the activity, and development of
documentation;
carry out peer review of the documentation to ensure clarity and
succinctness of information, ensure compliance with regulatory
requirements, and identify opportunities for more efficient procedures;
include a section on risk management to ensure that all risks are minimised.
Review Operations and Maintenance Documentation:
The timely submittal of operations and maintenance documentation is crucial for the
successful coordination of testing requirement development and requirements for the
commissioning process execution. The review of this documentation is also a key
objective to make certain of completeness. The content of the final documentation
manuals will comprise of approved final submittals reflecting any modifications.
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2008 CIEAM

CIEAM APCC Assets Condition Auditing PDF

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Best Practice in

AAMCoG Best Practice

The Australian Asst Management Collaborative Group (AAMCoG)

Coordinate transfer of technology and knowledge sharing of asset management R&D

Promote skills development in asset management

Host the annual National Forum for Asset Management

Act as a communication channel between member bodies

Inform asset owners/custodians of the critical aspects of whole of life asset

Phone: +617 3138 1471

AAMCoG Best Practice

Assets Condition Assessment and Analysis

Assessment Criteria for Assets Condition

Conducting Assets Inspections and Surveys

Assets Condition Scoping, Profiling and Modelling

Assets Health Monitoring and Life Cycle Management

Assets Life Cycle Analysis and Life Cycle Costing

Assets Usage Life Cycle and Maintenance Planning

Assets Maintenance Management and Optimisation

Establishing Assets Condition Auditing Benchmarks

Assets Condition Audit and Maintenance Reporting

AAMCoG Best Practice

Compliance can be considered the extent to which an asset complies with

AAMCoG Best Practice

AAMCoG Best Practice

An assets condition survey or condition auditing, is a systematic process of evaluating

AAMCoG Best Practice

1. Assets Condition Assessment

Physical condition - the condition of an asset that enables it to meet intended

Demand/capacity - the capacity of the asset to meet existing application

Functionality - the ability of the asset to meet service or operational delivery

AAMCoG Best Practice

Benefits - The benefits of performing effective condition assessment include;

Risks - The risks associated with non-performance or ineffective condition

The Assets Condition Assessment Process:

AAMCoG Best Practice

Figure 1 illustrates the Maintenance Management Framework (MMF) flow diagram.

Figure 1. Maintenance Management Framework Flow Diagram

Figure 2. The Four Phases of the Condition Assessment Process

AAMCoG Best Practice

AAMCoG Best Practice

Items to be inspected - Where funds are limited and an indicative assessment is

AAMCoG Best Practice

Assets Condition Assessment Audits:

AAMCoG Best Practice

Condition Assessments are fundamentally evaluations of a physical assets service or

AAMCoG Best Practice

Record, Analyse and Report Findings:

Statistical analysis of condition ratings to identify an average condition across

Analysing condition trends over time to assess the effectiveness of

Prioritisation of identified remedial works to enable the development of works

Presentation of the assessment results should focus on establishing a priority of the

AAMCoG Best Practice

Analysis of Assets Condition Assessment

Physical condition the condition of an asset that enables it to meet intended

Demand/capacity the capacity of the asset to meet existing service

Functionality the ability of the asset to meet program delivery

AAMCoG Best Practice

Figure 3. Condition Index Score Chart

AAMCoG Best Practice

Demand/Capacity Analysis of Tangible Capital Assets:

AAMCoG Best Practice

A proper condition assessment of an asset will involve:

Forecasting the future condition of the asset.