Industry_News_October

The hot new buzzword in the public infrastructure world these days is “Asset Management,” which is defined by one major federal agency (FHWA) as:

. . . a business process and a decision-making framework that covers an extended time horizon, draws from economics as well as engineering, and considers a broad range of assets. The asset management approach incorporates the economic assessment of trade-offs among alternative investment options and uses this information to help make cost-effective investment decisions.

Frankly, to an experienced engineer, that sounds like nothing more than good, old-fashioned civil engineering. If you know ahead of time that you are going to design, build, operate, and ultimately demolish or decommission a facility, it is prudent to factor all of these issues “up front.” Only then can you answer such fundamental questions as “Will this facility provide sufficient benefit to society to justify building it?” and “Is this the best use of our limited resources?”

Life Extension
With the aging of public works across the U.S., many cities, counties, and government agencies are compelled to operate their PW facilities long past their original design lives. Public utilities require a significant amount of capital to invest in property, new construction, and maintenance. However, the amount of capital required is more substantial relative to the amount of revenue generated. In many cases, it is not unusual to find force mains, sewer pipes, or water storage tanks with a “30-year design life” still in service 50 years or more after they were built.

Happily, with the kind of infrastructure improvements possible today, the useful life of public utility assets can be greatly (and safely) extended. By applying a coating to a tank, installing cathodic protection on a pipe, or installing a liner inside an existing pipe, the initial investment will pay off by extending the design life of these facilities. But the key to extending useful life is to detect and document their condition before the cost of their repair exceeds the cost to replace the facilities.

Several recent studies of pavement maintenance programs have shown a very straighforward correlation: if damage to pavement is repaired before 40 percent of the useful life of the pavement is reached, then the cost to repair it is relatively small. However, if the pavement is allowed to deteriorate beyond 60 percent, the cost to make the repairs increases very sharply.

Turning to the water infrastructure, we see that in traditional management practice, many or most public utilities use a number of indicators to determine, indirectly, the existing condition of their water or sewer systems. The signs most commmonly looked for are:

Pipe age;
Leak records and frequency of breaks;
Soil resistivities along a sewer or water pipeline alignment;
Structural degradation due to hydrogen sulfide (H2S) attack; and
Decreased water quality in water distribution systems.

The arguments against the traditional management practice—waiting until these indicators appear before taking action—is also straighforward: by definition, it entails costly (because delayed) repairs and it virtually ensures a lower quality of service to the customers.

Today, however, a wide range of newer, more efficient, proactive methods are readily available to assess the condition of a pipeline. These include:

Indirect methods, such as water audits and installing and monitoring cathodic protection systems;
Remote field inspection for gray cast iron and ductile iron pipes;
Acoustic emission monitoring for pre-stressed concrete cylinder pipe (PCCP);
Remote field transmission coupling inspection for PCCP with broken pre-stressed wires;
Non-destructive methods to evaluate the interior and exterior of existing pipes, tanks, sedimentation basins, etc.; and
Destructive methods, such as excavating and cutting a force main (which has no manholes) and inspecting the interior through the new access point.

Once the condition assessment has been completed, the public utility can take a proactive approach to asset management, and utilize more cost-efffective but equally reliable alternatives to pipe and structure replacement, such as:

Pipeline rehabilitation using trenchless technologies, including plastic liners, cured-in-place-pipe, and/or directional drilling;
Installing cathodic protection on metallic pipe as a preventative measure; and
Repairing H2S-attacked structures with mortars, coatings or plastic liners.

With these options available, it would be possible to identify areas of potential problems before failure can occur and before the facility is beyond repair. Such a practice would reduce maintenance costs and increase the level of service and reliability to the customer.

Our experience indicates that a similar situation exists in the cost of repairs to public works facilities (pipelines, storm and sewer pump stations, water storage tanks, and concrete structures). If a structure has suffered some damage but is still structurally sound and in such condition that it can be repaired, then the various repair alternatives can be compared over their life cycles. Factors such as initial cost, design life of repairs, annual maintenance costs, environmental risk, feasibility of shutdown of the facility (e.g., for maintenance and repair) and allowable duration of the shutdown must be woven into the analysis.

Life Cycle Cost Analysis
The cost of various alternatives can be evaluated by analyzing the cost of a project over its anticipated life cycle, aka “Life Cycle Cost Analysis” or LCCA. With LCCA, public utility owners can evaluate different alternatives of infrastructure projects, based on the estimated or calculated costs of each alternative over its design life. Depending on the nature of the facility, the inputs for analysis are likely to consist mainly of initial costs and discounted future costs, including maintenance, user (operating) costs, capital costs (interest plus depreciation), reconstruction and/or rehabilitation, and eventual demolition/decommissioning.

We have found it helpful to add a new factor to this analysis: to look at existing facilities and quantitatively determine the current level of deterioration by:

Using UT data to assess the internal/external corrosion in a non-destructive manner
Using soil resistivity data and a soil lab analysis to determine the corrosivity of the environment
Using concrete penetration tests and pH tests to determine the condition of concrete or cement mortar lining

Some existing structures are so incredibly well built, that even after they have become functionally obsolete, demolition may require heavy equipment and careful planning.

The calculations in the following table illustrate an example of a life cycle cost analysis (of coating a tank, in this instance) which may be of assistance to some of our readers. This analysis compares two coatings with different initial costs and different estimated lives. A basic assumption of this analysis is that if the tank is not recoated it will be damaged by the environment.

For illustrative purposes, the analysis period is assumed to be 20 years, with a 9-percent interest rate, with no annual operation and maintenance costs. For simplicity, the analysis also assumes that the systems can be shut down at any time.

Life Cycle Cost Analysis Revisited

By Jose L. Villalobos, P.E.


	Vol 1. No 4, October 2003 *Industry News*		for previous articles, visit the Infrastructure Preservation News archives and V&A's web site at www.vaengr.com
	Life Cycle Cost Analysis Revisited By Jose L. Villalobos, P.E. The hot new buzzword in the public infrastructure world these days is “Asset Management,” which is defined by one major federal agency (FHWA) as: . . . a business process and a decision-making framework that covers an extended time horizon, draws from economics as well as engineering, and considers a broad range of assets. The asset management approach incorporates the economic assessment of trade-offs among alternative investment options and uses this information to help make cost-effective investment decisions. Frankly, to an experienced engineer, that sounds like nothing more than good, old-fashioned civil engineering. If you know ahead of time that you are going to design, build, operate, and ultimately demolish or decommission a facility, it is prudent to factor all of these issues “up front.” Only then can you answer such fundamental questions as “Will this facility provide sufficient benefit to society to justify building it?” and “Is this the best use of our limited resources?” Life Extension With the aging of public works across the U.S., many cities, counties, and government agencies are compelled to operate their PW facilities long past their original design lives. Public utilities require a significant amount of capital to invest in property, new construction, and maintenance. However, the amount of capital required is more substantial relative to the amount of revenue generated. In many cases, it is not unusual to find force mains, sewer pipes, or water storage tanks with a “30-year design life” still in service 50 years or more after they were built. Happily, with the kind of infrastructure improvements possible today, the useful life of public utility assets can be greatly (and safely) extended. By applying a coating to a tank, installing cathodic protection on a pipe, or installing a liner inside an existing pipe, the initial investment will pay off by extending the design life of these facilities. But the key to extending useful life is to detect and document their condition before the cost of their repair exceeds the cost to replace the facilities. Several recent studies of pavement maintenance programs have shown a very straighforward correlation: if damage to pavement is repaired before 40 percent of the useful life of the pavement is reached, then the cost to repair it is relatively small. However, if the pavement is allowed to deteriorate beyond 60 percent, the cost to make the repairs increases very sharply. Turning to the water infrastructure, we see that in traditional management practice, many or most public utilities use a number of indicators to determine, indirectly, the existing condition of their water or sewer systems. The signs most commmonly looked for are: Pipe age; Leak records and frequency of breaks; Soil resistivities along a sewer or water pipeline alignment; Structural degradation due to hydrogen sulfide (H2S) attack; and Decreased water quality in water distribution systems. The arguments against the traditional management practice—waiting until these indicators appear before taking action—is also straighforward: by definition, it entails costly (because delayed) repairs and it virtually ensures a lower quality of service to the customers. Today, however, a wide range of newer, more efficient, proactive methods are readily available to assess the condition of a pipeline. These include: Indirect methods, such as water audits and installing and monitoring cathodic protection systems; Remote field inspection for gray cast iron and ductile iron pipes; Acoustic emission monitoring for pre-stressed concrete cylinder pipe (PCCP); Remote field transmission coupling inspection for PCCP with broken pre-stressed wires; Non-destructive methods to evaluate the interior and exterior of existing pipes, tanks, sedimentation basins, etc.; and Destructive methods, such as excavating and cutting a force main (which has no manholes) and inspecting the interior through the new access point. Once the condition assessment has been completed, the public utility can take a proactive approach to asset management, and utilize more cost-efffective but equally reliable alternatives to pipe and structure replacement, such as: Pipeline rehabilitation using trenchless technologies, including plastic liners, cured-in-place-pipe, and/or directional drilling; Installing cathodic protection on metallic pipe as a preventative measure; and Repairing H2S-attacked structures with mortars, coatings or plastic liners. With these options available, it would be possible to identify areas of potential problems before failure can occur and before the facility is beyond repair. Such a practice would reduce maintenance costs and increase the level of service and reliability to the customer. Our experience indicates that a similar situation exists in the cost of repairs to public works facilities (pipelines, storm and sewer pump stations, water storage tanks, and concrete structures). If a structure has suffered some damage but is still structurally sound and in such condition that it can be repaired, then the various repair alternatives can be compared over their life cycles. Factors such as initial cost, design life of repairs, annual maintenance costs, environmental risk, feasibility of shutdown of the facility (e.g., for maintenance and repair) and allowable duration of the shutdown must be woven into the analysis. Life Cycle Cost Analysis The cost of various alternatives can be evaluated by analyzing the cost of a project over its anticipated life cycle, aka “Life Cycle Cost Analysis” or LCCA. With LCCA, public utility owners can evaluate different alternatives of infrastructure projects, based on the estimated or calculated costs of each alternative over its design life. Depending on the nature of the facility, the inputs for analysis are likely to consist mainly of initial costs and discounted future costs, including maintenance, user (operating) costs, capital costs (interest plus depreciation), reconstruction and/or rehabilitation, and eventual demolition/decommissioning. We have found it helpful to add a new factor to this analysis: to look at existing facilities and quantitatively determine the current level of deterioration by: Using UT data to assess the internal/external corrosion in a non-destructive manner Using soil resistivity data and a soil lab analysis to determine the corrosivity of the environment Using concrete penetration tests and pH tests to determine the condition of concrete or cement mortar lining Some existing structures are so incredibly well built, that even after they have become functionally obsolete, demolition may require heavy equipment and careful planning. The calculations in the following table illustrate an example of a life cycle cost analysis (of coating a tank, in this instance) which may be of assistance to some of our readers. This analysis compares two coatings with different initial costs and different estimated lives. A basic assumption of this analysis is that if the tank is not recoated it will be damaged by the environment. For illustrative purposes, the analysis period is assumed to be 20 years, with a 9-percent interest rate, with no annual operation and maintenance costs. For simplicity, the analysis also assumes that the systems can be shut down at any time. From the analysis above it can be seen that although the initial cost for coating B is $2,775 lower than for coating A, over the 20-year analysis period coating A in fact appears to be the more cost-effective option. If you add in the considerable problems associated with managing a coating project every 10 years, a 20-year coating life is easily worth—many times over—the extra $2,775. Similarly, a cost analysis can be made for investing in a cathodic protection system on a pipeline, or in providing a new lining for an existing pipe. Although initial cost differences may sometimes be obvious, a cost analysis should be made, since many situations can be misleading. This is especially true when dealing with high-value projects or long life cycles, which are typical for public facilities. As demonstrated above, failure to perform a life cycle cost analysis may lead to poor decisions involving thousands of dollars and needless work. For this reason, a life cycle cost analysis should always be considered. Jose L. Villalobos, P.E. is the founder and president of V&A Consulting Engineers, Inc.