Functional and residual capital values as criteria for water pipe renewal

Abstract

Water pipes are considered as tangible assets designed to provide a level of service throughout an expected lifetime. The asset can be characterised by two types of values: capital or accounting value and functional value. The capital value of assets depreciates according to a specific rate per time period. The depreciation is assessed by the annual amortisation of the capital asset, which constitutes a potential self-budgeting for future renewal. The development in the last 20 years of public sector accounting standards boards dedicated to tangible capital assets management has encouraged water and wastewater utilities to consider capital depreciation as a decision-making criterion for asset prioritisation. At the same time, when the capital depreciates the asset function deteriorates, but this deterioration is more difficult to assess. In fact, each asset can be evaluated according to a functional value that indicates the capacity of the asset to deliver the designated service at the required level. This value declines during the service life because of the occurrence of unexpected events (failures, breaks, leaks and degradation). The functional deterioration, also referred to as ‘obsolescence’ or ‘reliability’, is still misunderstood for water pipe assets. This study addresses the following questions: How can the functional value be estimated for water systems both at the pipe and at the network scale? How can the decision-making process for pipe renewal be improved by incorporating specific indicators based on both functional and accounting values? The current research focuses on the definition of an appropriate time-dependent functional value, based on the following hypothesis: the functional value depends on both structural and hydraulic deterioration of the pipe asset, but is partially restored by curative maintenance actions. The calibration of the functional value is mainly based on historical incident data, roughness data and managers' opinions. In order to carry out the decision-making process, the evolution of the functional value is simultaneously analysed with the depreciation of the capital asset value. The implementation of the approach at the pipe and the network level leads to an assessment of innovative criteria for the purpose of assessing possible renewal policies.

Keywords::

• asset
• capital
• depreciation
• deterioration
• functional
• pipe network
• residual value

Notes

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