Connecting Waterpeople

A paradigm shift to setting priorities for water infrastructure investment

  • paradigm shift to setting priorities for water infrastructure investment
    Gage Muckleroy, PE, BCEE, Principal and Business Group Leader for Integrated Water and Asset Management, GHD
  • paradigm shift to setting priorities for water infrastructure investment
    Hector Ruiz, PE, Executive Advisor, GHD Advisory and Water Market Lead - Asset Management, GHD

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About the entity

GHD
GHD is one of the world's leading professional services companies operating in the global markets of water, energy and resources, environment, property and buildings, and transportation.
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Municipalities across the US are faced with the following complex and inter-related challenges while working to manage greater demands for transparency, a changing workforce, and the digital age:

  • Aging infrastructure – many pipes, facilities, and other assets are at or near the end of their service life, perhaps a century old, deteriorated or incapable of meeting today’s needs.
  • Decades of under-investment in maintenance, rehabilitation, and replacement of assets.
  • Greater risk factors – climate change and stricter environmental regulations are taking a toll and stressing the existing infrastructure.
  • Higher expectations by stakeholders on the protection of surface and groundwater, safeguarding the natural environment, and the need to address disadvantaged or underserviced communities.

One of the biggest challenges for good decision-making has been the lack of data. Fortunately, today we’ve become much more data-rich with more data sources, data collection technologies, and more data analytics and visualization tools, which are being applied as part of risk-based management approaches to proactively set priorities. Infrastructure owners increasingly need to meet the needs of the ever-expanding list of stakeholders and to satisfy ratepayers and investors that the funding is wisely spent to deliver the results required.

It’s about doing the right project, at the right time, at the right cost, and for the right reasons.

New priorities to proactively build and replace infrastructure

Many water professionals are used to working on tight budgets – there’s never enough money to do what needs to be done, much less think about the future and go beyond the standard by building better, more resilient, sustainable and smarter infrastructure.

This leaves us constantly working in a reactive mode. For example, failure of aging infrastructure too often results in an emergency. This can result in immediate impacts -- loss of service, environmental degradation, etc.

Projects can demonstrate ROIs beyond a single type of service and bring a greater value or solution to the needs of more stakeholders

Lack of investment and not using risk-based planning may result in misdirection of resources to areas that are not the greatest need versus directing resources to renew assets before they fail or re-build in a more resilient and sustainable manner. This requires a new way of thinking and a holistic approach.

Most projects are undertaken to provide a single benefit, have a single purpose and provide a single type of service. What’s needed is a proactive, risk-based and integrated planning approach. Providing evidence-based assessments (data driven) to identify priorities enables consideration of multi-criteria, multi-benefit solutions while also bringing resiliency and sustainability to the project.

It begins with getting the right data out of the dark and into the hands of the managers and decision-makers!

For example, in seeking funding from the expected federal infrastructure program and certain states, the most competitive projects will be those bringing more than just the single benefit. This means we need to move beyond the traditional Return on Investment (ROI) as an economic consideration and start to look at the Return on Asset (ROA), Return on Community (ROC) and the Return on Environment (ROE). This approach can help identify investments that include benefits to disadvantaged or underserved communities, have multiple uses and provide multi-benefit solutions and may also present a lower risk and overall improvement to the circular economy for the community.

While these quantified benefits to the community or environment may result in a higher cost, projects can demonstrate ROIs that go beyond a single type of service and bring a greater value or solution to the needs of more stakeholders and improve the economy of the community as a whole.

Identifying new priorities for a more resilient and sustainable project

Projects that include the following go beyond the traditional approach, expand on more benefits, and will be more resilient and sustainable:

  • Prioritizes the essentials – such as public health and maintaining an acceptable level of service for water infrastructure.
  • Provides value to the non-tangibles – such as quality of life, wellness, biodiversity, and social equity.
  • Helps disadvantaged or underserviced communities be heard – if a sound information gathering system is used, it gives a voice to people and causes that typically don’t get attention.
  • Meets a wider variety of needs – a deeper understanding of priorities indicates how a project can serve multiple needs, many of them non-traditional.
  • Supports evidence-based, defensible decisions – if based on verifiable, hard data; decisions are easier to “sell” to stakeholders and financial sources and defend when questioned by special interest groups.
  • Supports budgetary choices - which should be based on the agreed-upon priorities, so the funds are spent on projects providing the best returns (ROI, ROA, ROE, ROC).
  • Helps compete for funding – Financial sources face many competing demands for the funds available and are more likely to choose entities that have demonstrated a proactive and evidence-based approach.

Risk-based methodology helps with proactive priority-setting

How can you place a value on new priorities or non-traditional needs and find a transparent measure to prioritize them? Many of these can be further evaluated with a proactive approach including risk-based strategies that monetize benefits and impacts for determining ROIs. Through this approach, the Environmental, Social and Economic impacts are addressed with data, beyond the traditional single benefit or single purpose and financial cost of a project.

Making better decisions starts by incorporating financial, environmental, and social criteria with asset management risk-based strategies

Risk-based methodologies involve considering two aspects – the likelihood and the consequence of failure. The likelihood of failure is based on physical condition and performance, e.g., erosion or sediment buildup in natural assets like a retention basin. Consequences may include costs and impacts of a flood to a business or residential community downstream of that basin. Add to this, the value of creating a public amenity, environmental restoration, or other benefits. These add to the costs, but result in a reduction in risk and greater returns from a community and environmental perspective. 

While this is not a new idea, what is new is the availability of more data sources, data collection technologies, and advanced data analytics. Using dashboards (e.g., MS Power BI, GIS, etc.) data can be visualized and get into the hands of the decision makers.  

In summary, municipalities not taking a proactive approach to going beyond a single purpose and replacing in kind mentality are missing out on the potential to do more and truly increase returns where they really matter (ROA, ROC, ROE, and ROI) in a way that supports a community’s circular economy. Making better decisions that really matter starts with incorporating financial, environmental, and social criteria with asset management risk-based strategies. It requires using economic analyses and data sciences coupled with decision support and data visualization tools. Using the right data, with a transparent approach that is focused on more than just an ROI will give municipalities an edge in the competition for funding and provide greater benefits to a wider range of stakeholders, while at the same time building more resilient and sustainable communities and infrastructure.

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