This second article on digital transformation for utilities will cover the benefits of an enterprise portfolio management (EPM) system to help in targeted capital investment planning and to gain better control over a utility’s capital expenditures. For most utilities their capital expenditure is among their largest annual spends, however planning and executing the capital program can be a major challenge with budget and schedule overruns often being the norm. As pressure mounts from regulators, rate payers and commercial/industrial customers to control costs utilities are increasingly having to look at ways to better plan and manage their capital programs. An EPM system can provide a platform to do risk-based capital investment planning and then track projects while bringing clarity and auditability to the whole capital program.
An Enterprise Portfolio Management (EPM) system is based on a central database system that houses information such as financial, human resources, material, schedule, regulatory and work orders about capital expenditures as well as assets information such as asset age, maintenance/inspection history and failure log. It has several modules that run algorithms and display information in a fashion that is suitable for various departments, functions and levels of an organization. Utilities have all kinds of useful data about their assets, people, projects, contractors, facilities, inspection and maintenance, warranty, connection requests, regulatory commitments and documents, however, this data is not often centrally stored and harvested for valuable information. The next sections will explore how this data can be utilized for capital planning and program management to produce better results.
Capital Asset Planning
Many utilities are being challenged with competing priorities vying for a limited amount of capital to achieve their safety, security, environment, regulatory, performance, reliability targets. At the same time, the overall budget levels are being managed to keep the rates competitive and service levels high. In this environment questions on top of mind for many utilities include:
- What is the right level of investment into their system and what areas is the investment most valuable in?
- How much risk of equipment failure is being taken today and tomorrow?
- Which projects are the highest priority to achieve targets, what can be delayed or cut?
The process starts by pulling together information and input from multiple groups and data sources to identify projects needed such as master plans, condition assessments and asset management. Then business case assumptions for each project including failure scenarios with probabilities and consequence are populated. The project business case evaluation provides a robust economic evaluation, objectively incorporating project risk through monetization of consequence and quantification of probability of failure. The individual project input forms are all mapped to a standardized financial model template.
Once project details have been captured for all projects being analyzed in the portfolio, the individual project input forms are all mapped to a standardized financial model template. Then a modeling technique, Monte Carlo simulation, is used to quantify and visualizes risk. The result is a risk-weighted distribution of cost for the project over the model period. Finally, portfolio business case evaluation is done by scheduling all projects to maximize the portfolio net present value while maintaining both budget and other technical constraints.
In summary this approach provides a methodological mechanism to prioritize capital investment decisions based on assets data, key metrics and business objectives.
It is not uncommon for a mid-size utility to annually spend hundreds of millions of dollars on projects in capital and operational expenditures. Some larger utilities may even spend a billion or more dollars each year. Utility infrastructure projects tend to be complex because they involve large geographical areas with many stakeholders, movement of equipment over large distances at times through challenging terrain, soil conditions and a very prescriptive regulatory permitting process and elevated safety risks. Such programs also have multiple moving parts and scenarios that require elevated planning, monitoring and reporting. These tasks can be time consuming and detrimental to the projects for its successful completion. This is where the need for program management comes-in to deploy an experienced team, processes and tools to baselines and track project schedule, budget, risk and operational targets of a program from beginning to end is critical.
Program management involves combining projects of similar scope and setting up one integrated team, with defined tools, processes and reporting requirements to execute the projects. An enterprise resource planning tool is needed to track all project related data such as project scope, schedule, financials, safety, resources, regulatory commitments, contractors, equipment and crossings involved with dashboards to communicate and report on project progress to various internal and external stakeholders. The ERP creates a one source of truth that is accessible with the most recent information making decision making easier and placing mechanisms in place that allow the project team to be understand when things are going off-rail. It also gives the project team the ability to look ahead and track the upcoming risks and identify mitigation techniques while allocating appropriate contingency. One such tool that allows an integrated platform for data exchange is Burns & McDonnell’s OneTouchPM® tool that were specifically developed as program management tools for managing linear infrastructure projects.
OneTouchPM® integrates engineering design information with key project management software and mashes all of that information into a three-dimensional virtual model based on a Google Earth interface. By pulling information from several information systems and combining them in a single, easy-to-use interface, OneTouchPM® delivers critical information to decision makers and project stakeholders. The Google Earth proprietary method of streaming large amounts of geospatial data allows remote users to access information in near real-time with little delay. The data collaboration tool integrates information from various sources providing information on environmental issues, permitting, community relations, design specifications and construction status. OneTouchPM® has also proven helpful in communicating with regulatory authorities, who can access project cost and project schedule data as part of their approval process, particularly during procedures that are highly dependent upon community and public acceptance.
As this data is placed in the hands of operators and decision makers from planning, project teams, asset management specialists, operations and construction folks then they will have greater visibility to analyze areas of system weakness, resource constraints, performance, associated risk, and can predict reliability, safety, cost and schedule outcomes giving them insights to better allocate their capital. You can’t control what you can’t see, and data gives visibility into what would otherwise be a blackhole. Gathering pertinent data, creating various dashboards and setting-up appropriate user access and making it available to everyone who could benefit from it. This makes the resources more productive, reduces chances of mistakes and keeps the teams aligned, resulting in operational effectiveness.
An EPM system today is a crucial tool for utilities to apply a strategic approach to investment planning and to bring greater visibility to the workflows, resource availability, productivity levels, stakeholder commitments and asset management. Data reveals insights and access to good data leads to better decision making.