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Should I Keep It or Replace It? A Risk-Based Approach to Making Asset Rehabilitation and Replacement (R&R) Decisions.
Author: Pervaiz Anwar, Pam Koester, and Ken Harlow
Date: 10/05
From WEFTEC Conference 2005

Most of the US wastewater assets that went into operation 25 to 30 years ago in response to the Clean Water Act are nearing retirement. As a result, many agencies now face huge rehabilitation and replacement (R&R) costs for assets initially funded mostly by federal or state dollars. This is the very first time many of these agencies will see the full cost impacts of the significant improvements made years ago. These impacts, coupled with new regulatory mandates such as CMOM, are sure to strain the financial resources of many agencies beyond their means. Is there a way to make “just-in-time” asset rehabilitation or replacement investments to meet performance objectives while saving money? The experience of Orange County Sanitation District (OCSD), California, demonstrates the answer is a resounding “yes.” In deciding whether and when to rehabilitate or replace ageing assets, we have traditionally counted on our best judgment based on qualitative assessments of “remaining useful lives” of assets. The capital investment decisions we have made have been just as good as the quality of these assessments. OCSD is perhaps the first major agency in the nation to take a quantifiable and repeatable risk-based approach to R&R decisions. To prepare for a digestion system rehabilitation project, this approach included three key components: Failure Modes and Effects Anaylses (FMEAs), Condition Assessments, and Business Case Evaluations. This paper addresses the first component, FMEAs, which were performed to decide: a) whether or not a detailed condition assessment was warranted for specific assets, and b) which assets needed further review, through a business case evaluation process, to decide their fate. The results show that the traditional “remaining useful live” criteria currently employed by many agencies do not necessarily paint a complete picture when making asset R&R decisions, and that asset life-cycle costs can be reduced substantially through this risk based approach.