Beyond the Spreadsheets

Why a Finance-First Approach Limits the Real Value of Asset Investment Planning

As I heard recently, “…there’s no ‘F’ in AIP”, yet we consistently find ourselves anchored to the financial aspects when discussing AIP. Sure, those budgetary limitations are a reality we all operate within. They are the guardrails, and the boundaries we must respect, but those financial constraints are arguably the easy part of the equation. Let’s face it, everyone knows the allowable expenditure and cascaded budgets (even when they change).

Financial Drivers and Constraints are Just the Beginning

For this simple reason, the conversation around Asset Investment Planning (AIP) usually leans towards the objectives of the Finance team. That’s very much a necessary factor of AIP as we do need to respect the budgets that are in place. However, we leave value on the table by planning asset interventions as a purely financial exercise.

The real opportunity to maximise value lies in the nuanced decision-making process of how to invest those finite OPEX and CAPEX dollars to the right assets at the right time. This moves away from simple financial constraints to orders of magnitude more complexity as we analyse millions of asset attributes and network operational targets.

Firstly, we need to consider the assets themselves. Often breaking them down into classes and sub-classes we start to understand the different risks and benefits that those asset classes exhibit. Once again, we are dealing with large volumes of assets or a large volume of variables. This is where asset management principles convert engineering-speak into finance-speak. If we get this right, we’re really starting to see which asset classes need the most investment in any given year.

But…

Asset Investment Decisions made in a Vacuum?

An asset doesn’t provide value in isolation, and asset investment shouldn’t be done in isolation either. Investment allocation must be made within the intricate context of the overall network configuration.

That’s reasonably obvious and logical, but the permutations quickly make it a complex web of decisions. You simply cannot calculate the true benefits of risk reduction or the potential for operational efficiencies in a vacuum, divorced from the physical reality of your network. Simple questions, are not easily answered:

• Is that aging asset located in a critical network segment with high demand and limited redundancy due to recent failures of other connected assets?
• Or is it in a less critical area with multiple layers of redundancy?

The financial risk associated with its failure is drastically different in each scenario, yet a purely finance-driven AIP might treat them with the same level of urgency based solely on age, condition or where it sits on the corporate risk matrix.

Optioneering at Scale

This is where understanding the “as-operated” and “as-designed” network becomes paramount. Are we considering today’s reality of how the network is currently functioning i.e. outages, changes in demand, seasonal variations. How does this tie in with original network design and all the interdependencies, critical links . All of which are a critical factors that determine where our investment will yield the greatest return. Ignoring these operational nuances is like navigating Sydney’s streets with a paper map, devoid of any information about traffic flow, road closures, or new one-way streets that now exist! I’m sure you’ll get there eventually, but the journey will be inefficient, costly, and potentially at a higher risk of incident. Not to mention unenjoyable for all involved.

The transformative power of integrating true network context into AIP is immense. It allows us to move beyond a simplistic, often reactive approach of replacing assets based on age, condition or risk. Instead, we unlock the potential for genuine optioneering at scale. With full network context we can analyse the impact of various interventions, such as replacements, targeted repairs, strategic upgrades, or even planned downgrades. This maximises the overall network performance, reduces safety risk, and improves network resilience. And all within those original financial limits.

The Critical Questions

By understanding the asset connections and dependencies within our networks, we can answer critical questions with far greater precision:

• Will replacing this specific section alleviate a known capacity issue downstream?
• Is upgrading this pumping station the most cost-effective way to improve flow and reduce energy consumption across a wider area?
• Could a targeted repair on a critical switch prevent a much larger and more costly failure down the line?

Operational Context in Asset Investment Planning

These are the types of nuanced decisions that a finance-led AIP system struggles to address effectively. By bringing operational context to the forefront, we connect Planning to Operations. This ensures that the day-to-day activities bring tangible improvements to network performance and a demonstrable reduction in real-world risks. Do the right work at the right time.

A holistic approach to AIP that deeply integrates network context means smarter, more strategic investments that meet the financial constraints, align to the strategic objectives and make sense to the experts in the field. It’s about moving beyond financial constraints and instead focusing on how to allocate those limited OPEX and CAPEX dollars in a way that delivers the greatest value, resilience, and efficiency for our utilities and the communities we serve.