16 May Drip, Drip, Drip: The Cost of Doing Nothing

As environmental risks and technological advances continue to shape the way organisations protect critical infrastructure, it’s no longer a secret that in today’s climate, a passive approach to resilience and protecting key assets isn’t a viable or cost effective option.

This is because the costs of doing nothing have never been higher, especially for utilities and water companies.

There are those who have had to learn this the hard way, believing that because assets have not shown explicit signs of corrosion, wear and tear, or potential failure they are resilient.

All too often this is not the case.

As the seemingly sudden collapse of the Oroville Dam Spillway has so clearly demonstrated, where proactive investment and intervention are neglected, disaster will inevitably strike. Major infrastructural damage or pollution incidents might not happen today, tomorrow, or even a month from now, but eventually organisations will be severely punished unless resilience and PPM are made a priority.

For water companies, damaging events are particularly costly and have far reaching negative impacts

AMP7 Budget Cuts

With AMP6 clearly focussed on customer outcomes, asset serviceability and reliability need to be high on the agenda for water companies looking to secure funding for AMP7.

This is because interruptions to supply, pollution incidents, or leakage will significantly impact on the funding water companies can access in the subsequent AMP cycle.Asset downtime must be avoided at all costs.

To ensure continued service and to avoid potential budget cuts, water companies need to embrace PPM and adopt a Totex approach to resilience that, as I’ve outlined here, is specifically designed to deliver against ODIs and extend the life of key assets.

With a number of factors placing increased pressure on key assets – ageing assets and exponential population growth for instance – organisations need to implement measures to ensure assets can meet both current and projected demand. They also need to take steps to mitigate the increased likelihood of damage or downtime that comes with this increased demand.

Emergency Response and Asset Restoration Costs

AMP funding aside, the damages caused by a passive approach to maintenance and asset protection present a number of financial challenges for the organisations affected.

No matter the scale of the incident, these direct costs likely fall into one of two areas, emergency response and asset restoration.

Relative to the costs of resilience measures such as polyurea spray linings for structural integrity, or cathodic protection to prevent corrosion; the costs of emergency response – which will typically have to be outsourced to organisations with specialist experience and resources – are considerable.

In instances where pollution incidents such as sewer leakages have occurred, land remediation and site clean-up operations may be necessary, incurring a number of inflated costs that could have been prevented through periodic asset refurbishment and ongoing investments in resilience measures such as bund lining and structural reinforcement.

When we also factor the downtime caused by these disruptions and resulting emergency response into the costs, the financial argument for resilience becomes even more persuasive.

Then there are the costs of restoring and refurbishing the affected assets.

While asset refurbishment and restoration are generally more cost-effective and less disruptive than capital replacement, restoring damaged assets to their former states is still more costly than implementing resilience measures in preparation for the worst case scenario before it happens.

Regulatory Fines

As highlighted in a previous article fines are to be expected when organisations sit back and do nothing to combat the growing risks assets and infrastructure currently face.

Given no-one actively sets out to breach regulations, and even the least proactive companies take steps to ensure compliance, the real danger comes when a number of hidden, seemingly innocuous issues cumulate or go unnoticed long enough to create major disruptive events that catch everyone off guard and ultimately lead to hefty fines from Regulatory bodies or in the worst case through legal channels.

This is testament to the importance of going beyond due diligence to anticipate risks and identify where weaknesses exist in key assets and critical infrastructure. While water companies might have once been able to bury their heads in the sand and absorb the cost of doing nothing, today the costs are simply too high and a proactive approach to asset resilience is essential.

Tim Farley is Utility Resilience Advisor at Adler & Allan, working collaboratively with water companies, contractors and industry forums to promote innovative solutions that deliver AMP6 outcomes.