Introduction: The Operations and Maintenance (O&M) Imperative :
The O&M Opportunity
There is significant potential for improving O&M of existing infrastructure assets
Figure 5: Comparison of Asset Management across Industries
Note: Asset management maturity measured on a scale between 1 (lowest maturity) and 5 (best-practice) based on 23 questions. 112 public and private entities from 24 European countries and 23 industry sectors contributed to the survey. “Process industries” includes extraction, mining and quarrying companies; “Manufacturing” includes food products, wood, paper and electronic equipment; “Infrastructure” includes production and distribution of electricity, water supply, roads and railways etc.
Source: How organizations manage their physical assets in practice – EFNMS Asset Management Survey 2011, 2011. European Asset Management Committee within EFNMS
Current management of infrastructure assets is a cause for concern. According to a survey by the European Federation of National Maintenance Societies, asset management practices of the European infrastructure industry are rated below those of the manufacturing and process industries, not just in the overall ranking but in every one of the key subcategories (Figure 5).11 Publicly owned infrastructure assets have been managed suboptimally in developed countries, and even more so in developing countries. In any country, O&M is often the victim of pressured public budgets and political priorities – O&M projects win few votes relative to greenfield projects.
Figure 6: Overview of the Global Infrastructure Asset Base
Note: Data describes the global infrastructure stock.
Source: CIA World Factbook, https://www.cia.gov/library/publications/the-world-factbook/, 2012
Trillions of US dollars have been invested over the past decades to build the global infrastructure asset base, which includes 43,000 airports, 33 million kilometres (km) of roads and 1.2 billion fixed-line connections (Figure 6). With worldwide infrastructure assets worth about US$ 50 trillion,12 the value is roughly the same in magnitude as the global stock market capitalization (US$ 55 trillion)13 and global GDP (US$ 72 trillion). 14
Infrastructure, as one of the world’s great capital stocks, cannot be neglected, and governments need to make a long-term effort to unlock this potential value. Pursuing the “power of one per cent” can make a dramatic impact, as each percentage point of O&M optimization brings substantial financial and economic rewards. But asset optimization yields more than cost savings; it can also provide social and environmental benefits, which makes it well aligned with governments’ public service mission.
The O&M opportunity is realistic
The chances of successfully optimizing O&M are enhanced by three factors: existing role models of good practice, technological innovation and relatively modest implementation costs.
Role models. Many private as well as public infrastructure assets have already optimized their O&M, and thereby have set an industry benchmark and indicated various best practices. Infrastructure managers can emulate their counterparts’ work in their own sector, or adapt the work of those in other sectors. They can also learn lessons from other capital-intensive industries, such as oil and gas or heavy industry. The potential for laggards to improve is clear.
Technological innovation. Infrastructure, with its long innovation cycles, has generally not been a front-runner in innovation, but it could soon experience an impressive productivity gain from innovative technologies promising new O&M solutions. The technology revolution in remote sensing, advanced analytics, integrated scheduling and control, and autonomous operations will also have a transformative effect on the infrastructure industry. As they say, “the Bits will become just as important as the Bricks”. Just consider the differences made by applications such as smart meters, dynamic traffic management and e-tolling, and next-generation air traffic control systems. These technologies are increasingly moving beyond the pilot phase and becoming more affordable, with cost-effective roll-outs at scale either a prospect or already a reality.
Relatively modest implementation costs. In the otherwise capital-intensive infrastructure industry, O&M solutions usually carry a very reasonable price tag; payback is quick, and economic benefit-to-cost ratios are high. Regarding the costs of supplying water: estimates are that building new dams and rainwater harvesting facilities, for example, would cost US$ 0.04-0.06 per cubic metre (m3), whereas rehabilitation of existing infrastructure would only cost about US$ 0.02/m3, and demand-side measures far less than that.15