In the economically more advanced countries of Western Europe, the Americas and Asia, asset management has become normal practice in most of the water and energy utilities, no matter if they are small or big. Regulatory, investor - and stakeholder requirements have accelerated the process, as well as the need for resource conservation and cost reductions.
However, asset Management is still a hardly known, understood or applied concept in many emerging and developing countries. Utilities often operate their systems without understanding what precisely happens. Also they do not have the sufficient financial and human resources for adequate maintenance. When there is a pipe break, an overflowing reservoir or sudden loss of pressure, they take action, repair a pipe, close a valve, or do whatever else may be needed. They often call this “maintenance”, in fact it is corrective maintenance, and it has nothing to do with a systematic or strategic well-informed asset management approach. The same problem may pop up over and over again, without structurally improving the system’s performance. This situation partly explains the persistent problem of high Non-Revenue water in such utilities, sometimes up to 50 or 60% of production. In general low operational efficiency is explained by a lack of asset management. E.g. also energy efficiency is low and water quality is not optimal.
How could this lack of care for the very expensive infrastructure be explained and what can be done about it? A few points are mentioned below.
Investments in water infrastructure are mostly public investments. The government is the owner of the infrastructure and utilities have to operate and maintain the systems and deliver the services. Since the utilities are not the asset owners, they don’t have an incentive to seek the lowest life cycle costs; they focus on their role and performance as operator in the first place.
In many countries, a lack of proper legislation and sector regulation causes a lack of ownership and widespread political interference which cause inadequate tariffs and insufficient resources. In addition there is a lack of knowledge, skills and capacity which make the situation for the utilities even worse.
Tariffs usually barely cover operation and maintenance costs. The revenue base of most utilities therefore only allows for minimal repairs and necessary maintenance. Through this approach, expensive infrastructure is deteriorating faster and replacement is needed earlier.
In the 1980’s it was already understood that if newly built infrastructure was to be transferred to utilities without proper arrangements for O&M, the systems would suffer from the start. This understanding led to the development of OMT programs (Operation, Maintenance and Training or Organization, Management and Training). These programs were executed alongside capital investments meant to develop the capacities of the utilities to properly operate their systems.
In later years, during the 1990’s and 2000’s, up to the present, such programs were often called “accompanying measures” by the IFI’s. Utilities which didn’t have the necessary capacities to operate and manage a bigger system, had to be trained, and made familiar with new concepts of utility management. Those measures extend beyond OMT, and include also billing and collection, business planning, financial management, non-revenue water reduction, asset management, etc.
Since the 2000’s and the 2010’s the FOPIP concept emerged, Financial and Operational performance Improvement Programme. This is an extended and integrated approach to strengthen the capacities of batches of water utilities at the same time, mostly also in parallel to major capital investments. A FOPIP could be related to aggregation or regionalization of former municipal utilities into larger regional water operators, such as in Romania. Or it could be established as a support for utilities having to operate wastewater treatment plants, with which they had no experience until then.
Most of these accompanying measures or FOPIP type of projects fall short of sufficient resources and time to implement sustainable changes, develop capacities and new management systems. Sustainable changes at utility level require strong political support, regulatory change and overall sector reform.
The documents below provide additional background on the Asset Management key elements and processes.
ADB water-utility-asset-management-guide.pdf