Managing infra assets

India's rapidly growing infrastructure asset base needs to be properly managed in order to ensure investor confidence. G Sathiamoorthy seeks to provide an overview of the new ISO 5500X suite of International Standards for Asset Management and its implications and applications for the effective management of India's burgeoning infrastructure asset base.

There is an interdependency between India's economic and infrastructure development. Investment in infrastructure during the last decade has been unprecedented, and in the eight fiscal years from 2003 to 2010, the Indian economy achieved growth rates exceeding 8 per cent in every year except one.

Although our economy faces greater challenges now than in recent years, predicted levels of infrastructure investment remain high. For example, in the principal sectors of power, water and telecommunications projected spending between 2012-2017 is: electricity $322 billion, oil and gas pipelines $65 billion, telecommunications $274 billion, and water supply and sanitation $43 billion.

Asset creation, however, is only half the story. To deliver the standards of customer and environmental service and ensure investor confidence, we need India's rapidly growing infrastructure asset base to be properly managed.

To make industry more efficient and effective the International Organisation for Standardisation (ISO) has developed standards and specifications used across the world for products, services and good practice. The organisation has published the world's first international standard for asset management in January 2014.

The ISO 5500X suite of International Standards for Asset Management aims to provide “a management framework for the coordinated activity of an organisation to realise value from its assets in order to support the delivery of its strategic plan and objectives.” This article seeks to provide an overview of the new standard and its implications and applications for the effective management of India's burgeoning infrastructure asset base. In 2004, UK's Institute of Asset Management (IAM) developed PAS 55, a publicly available specification for the optimised management of physical assets which was subsequently updated in 2008. As an asset management framework, PAS 55 has proven successful, with adoption by organisations in Australia, Canada, Finland, Hong Kong, the Netherlands, Republic of Ireland, South Africa, UAE, the UK and the US. As a result, PAS 55 has become the default international standard for asset management.

For PAS 55 to be applicable to a broader range of organisations and the management of assets in its broadest sense, improvements were required including:

• Need for a common asset management language so concepts such as 'line of sight' were understood and translated internationally
• The perception of a lack of applicability beyond large scale utility and infrastructure companies and physical assets

Using PAS 55 as a foundation, the International Organisation for Standardisation (ISO), has produced three standards for asset management. These are intended to be equivalent to established management systems such as Quality Management (ISO 9001) and Environmental Management (ISO 14001), and comprise:
ISO 55000: Provides an overview of the principles, concepts, terms and definitions relating to assets, asset management and asset management systems
ISO 55001: Specifies the requirements for the establishment, implementation, maintenance and improvement of a management system for asset management
ISO 55002: Provides guidance for the application of an asset management system as laid out in ISO 55001

The fundamental objective of the standards is to guide and influence the design of an organisation's asset management activities by embedding a number of key concepts and principles within the asset management system. These are: Value to the Organisation and its Stakeholders; Alignment and Strategic Planning for Asset Management; Leadership and Culture; and Assurance. International development of the standards through ISO has resulted in a broad and common set of practices and terminologies that form the basis of a management system for asset management. This is likely to help address concerns about the wider applicability of PAS 55.

This also means that while the standard mainly applies to the management of physical assets, it is intended that it can be extended to other types of assets. For example, what is more valuable to a water utility, its physical asset base or its licence to operate? Can the service contracts between non-asset owning operator/service providers and the asset-owners now be considered as legitimate assets because value is derived by both parties from the contracts?

This broader scope of ISO 55001 and the more all-embracing definition of an asset are just some of the key differences between the international standard and PAS 55.

Asset management organisations
The alignment between PAS 55 and ISO 55001 means transition should be reasonably straightforward for organisations advanced with PAS 55 implementation. The business case for transition between the two, however, will have to be better articulated by the asset management community.

Working with asset management organisations globally, we often discover similar areas of weakness that impact on asset management maturity scores.

These areas are also within the scope of ISO 55001. Organisations seeking to make asset management improvements in advance of the standard's publication while ensuring a solid base from which to pursue ISO 55001 certification, may wish to focus on these areas.

Common areas for improvement:

• Development of clear and concise asset management policy, strategy and approaches to strategic planning
• Defining levels of service and linking these to interventions and desired outcomes
• Evidence of proactive external stakeholder engagement and management
• Integrating outsourced activities with the asset management system
• Implementing strategic and asset risk management and demonstrating its use in influencing asset management decision making
• Business case development and integrated investment planning over multiple time horizons
• Whole-life costing

Governance
Like PAS 55, the standard will continue to help provide guidance on the right approaches, practices and processes to improve asset management capabilities. However, there should be a clear emphasis on a 'Beyond ISO 55001 approach,' whereby continuous improvement of the management system and asset management capabilities is actively sought.

Asset Management
An article in the IAM's Assets magazine observed, “4,000 organisations were predicted to sign up to gain certification for ISO 55001 in the first five years after publication, compared with approximately 1,000 who signed up to PAS 55.”1 This represents opportunities and huge challenges for the asset management community, such as preventing ISO 55001 becoming just a sought-after 'badge' and ensuring the competency and consistency of assessors. However, the standard is likely to add significant value to the field, especially in terms of increasing the exposure of asset management globally. As the same article notes the standard moves the discipline in a “more financial and strategic” direction, “while retaining the key tenets” of PAS 55.

Like PAS 55, the standard focuses on the 'what' part of an asset management system, not the 'how-to.' This 'how-to' information will still need to be provided from the large body of evidence, examples, case studies and continual improvement gained from organisations that have implemented or are seeking to implement robust asset management practices and PAS 55.

With the size and expected growth of the Indian economy, and the Planning Commission of India's recognition that inadequate infrastructure is a significant barrier to continued strong economic growth, asset-intensive sectors should fully utilise the principles and concepts of Asset Management coupled with ISO 55001 to challenge their current business models and approaches to asset lifecycle management. More and more Indian utilities and organisations are recognising the need to implement an asset management approach as a way of achieving their goals. The accumulation of decades of international asset management experience and learning within ISO 55001 means targeting its implementation represents an enormous opportunity for organisations to significantly benefit from the new standard by becoming 'early adopters'.

India's asset managers need to understand if and how adoption of ISO 55001 could help improve asset management practices, performance, service and compliance within the context and environment in which they work. For organisations want to fully realise the value and business benefits from standards such as ISO 55001 or PAS 55, senior managers need to complement asset management improvements with supporting organisational, cultural and leadership transformation programmes and changes.