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Can we afford to cut infrastructure budgets?

Historically, asset renewal was the poor relation of budgeting, and the first to be cut in times of cost pressures in deference to front line operating service budgets. This was clearly evident in social infrastructure such as health and education, but transport and utility infrastructure were also far from immune, says Brian Johns of Parsons Brinckerhoff.

With clearer definition of responsibility between service commissioning and provision, major infrastructure and estate responsibility has moved increasingly from public to private sectors via regulated industries, long-term privately financed and other service provider contracts. These place an obligation on infrastructure managers to maintain or even improve the quality of the asset base, with failure often incurring financial penalties. Many privately financed contracts have dazzlingly complex formulae to verify asset condition on handback to government at contract completion.

As legacy private finance contracts reach maturity, without new arrangements, the pendulum will swing back as infrastructure responsibility reverts to the public sector. Already, many original privately financed highways contracts are entering the final few years of their term.

In these circumstances, it is vital for infrastructure owners, managers and investors to develop coherent strategies to sustain or enhance the value of the asset base and to avoid balance sheet deterioration. To deliver a successful asset management strategy, three fundamental requirements must be in place: a comprehensive asset inventory, an asset condition index and a target condition state. Using these basic data, a long term asset management plan can be developed to achieve the target condition at lowest whole term/life cost.

The asset plan usually follows a well-established cycle, a sort of “asset wheel”, which includes: inspection, analysis, deterioration modelling, intervention identification, design, procurement, delivery and handback to maintenance. Successful management of the asset depends upon lean management of these cyclical processes. This in turn relies upon an asset management IT system appropriate to the asset complexity. This should include an inventory tool to record and monitor condition changes, deterioration scenario modelling capability and a decision support tool to facilitate optimisation of investment to deliver condition criteria at lowest whole life cost.

Despite all this gadgetry, however, engineers and engineering judgement is, and always will be, fundamental to establishing and achieving the optimal balance between safety, quality, environmental determinants and the associated level of investment.

Infrastructure owners, public and private, are increasingly realising the balance sheet value of their asset bases. And underpinning this value management is good old engineering skill and judgement!

Brian Johns is performance and investment director for Connect Plus and UK asset performance director at Parsons Brinckerhoff

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