Decision time for asset managers

Britain’s infrastructure is creaking. With the Victorians’ great industrial legacy, the railways and the sewers to name but two, reaching the end of their working lives, there’s a lot of fixing to do.


Government estimates put the amount of UK infrastructure in urgent need of renewal at £300bn across all sectors. Of this, a significant proportion is on the railway network – a factor much exercising the minds of asset management (AM) leaders in organisations such as Network Rail and London Underground (LU).

Aging assets

So how exactly do organisations decide what to do with their aging assets? Well, until recently, everybody just had to work it out for themselves.

And the pressure to get it right has never been greater. In its annual efficiency assessment of Network Rail, published in September, the Office of Rail Regulation
(ORR) criticised the organisation for being “unlikely to deliver the potential 23.5% efficiencies identified for operations, renewals, maintenance and asset management by the end of control period four (2009-2014)”. And with continued ORR pressure to do more with less over the next control period, that pressure won’t ease any time soon.

In the capital, London Underground (LU) faces equally significant challenges to get more from existing assets. The latest Government spending review resulted in cuts of 12.5% to the Transport for London budget. For good measure, Mayor Boris Johnson also announced a target of 30% improved reliability by 2015.


Opening SALVO

But help for beleaguered asset managers could be at hand. A group of major infrastructure organisations – including London Underground, utility and oil sector companies – has joined forces with industry experts and Cambridge University to produce a set of principles for guiding asset management decision-making across all industries.

Known as the SALVO project (or Strategic Asset Life-cycle Value Optimisation amongst friends), the results of the three-year research programme were unveiled last month. Project director John Woodhouse explained the thinking behind the project.


“Britain is facing a perfect storm – a significantly aged asset base, combined with increased demand for services, increased service expectations, and ever-increasing scrutiny from regulators and the public,” he said. “Even more crucially, we’re facing increased skills shortages as ‘silver surfer’ asset management engineers walk out the door. Once they’ve done that, their expertise is lost, so we need to find a way of capturing it while we can.


“The SALVO project is a people-oriented method for helping asset engineers decide what to do, how much to do and when; and for helping them translate those decisions into business language a financial director can understand, and present a sound business case. It helps people decide between different intervention options, in terms of value for money. For example, whether it’s better to service a generator, and at what intervals; or to replace it, and if so when.

“A major component of SALVO is making effective use of what we call ‘tacit knowledge’ – the accumulated wisdom and experience of the engineers who’ve worked on assets for years. You can gather all the hard, historical data you want, but you can never hope to get a complete picture from data analysis alone. Organisations need to consider what might happen if they don’t do things, and consider the changes they’ll face in the future, so the input of those at the sharp end is crucial.”

Underground assets

Gareth Powell, director of strategy and service development, London Underground, explained why his organisation had chosen to join the project.

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“We’re constantly improving and expanding our network, but demand is outstripping supply,” he stated. “There are over a billion journeys every year on the Underground. Demand has increased by 45% since 2003 and will continue to rise. We have 426 escalators and 670 trains on the existing network, and we’re investing in new infrastructure in areas of London where employment and population is likely to grow most.

“We’ve got no choice: we have to improve our asset management to benefit our customers, in terms of reliability, efficiency, capacity, delivery and technology.”

Planning strategies

Powell cites escalators as one area where SALVO methodology is already helping LU plan its asset strategies.

“Some of our escalators are 50 years old. We don’t have any plans that tell us what reliability we can expect, so it’s not easy to decide the best time to refurbish them. “We can’t easily take one out of service because it can cause overcrowding and delay. If one breaks down, however, it’s even worse.

“SALVO is a process to help us reach the right solution for situations like these, and helping to balance the trade-offs involved. It won’t necessarily be the perfect solution – just the right one in the context of the knowledge available at the time. Interventions have to be done at the right time, because there’s no point doing more than you need, and you also have to decide on them collaboratively. That’s very important.”


Network Rail model

Network Rail chose not to get involved with the SALVO project, but says it continues to maintain a close dialogue with the team.

A spokesperson added: “We’ve developed a whole-life cost model to gain a better understanding of three areas: asset degradation, failure and consequences; the effectiveness of maintenance and renewal interventions; and the unit cost of these interventions.

“The models that resulted from our programme have been recognised by the ORR as being ‘at the frontier of best practice’. We are now looking at developing them to apply to other parts of our business such as route planning and procurement – with the added advantage that we own them.”

Common standards

The importance of getting asset management right is reinforced by government bodies such as Infrastructure UK – the Treasury body set up to promote long-term infrastructure priorities and encourage private sector investment.

“Through the Infrastructure Cost Review programme, we’ve been working with industry to explore and agree the common standards the custodians of our infrastructure should apply to the management of their assets,” said a spokesperson.

“There’s a lot of variability across different industries, and some are better than others – for example, at knowing the condition or relative state of their assets.

“Whatever technical standards are available – and there are a lot of them about – the starting point is to get some common language and understanding across different infrastructure sectors. We need to establish a framework for that understanding, so it can filter up to decision makers.

“We’re not going to mandate any one solution, but where we’re in control of public infrastructure, we’ll always aim for clarity and consistency of standards.”

Disciplined decisions

For SALVO’s John Woodhouse, that sounds exactly like the right approach.

“We’re just trying to clarify the steps and disciplines needed for good asset management decision making,” he says.

“Once you’ve got those in place, you reduce a lot of the tensions and competing priorities, and you get greater transparency over why things need to be done, and when’s the right time to do them.”




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