Risk and Uncertainty

The third in our series on ‘words matter’ by Douglas Bartlett, Manager Asset Planning, City of Kalamunda.  Do you agree? As usual, Doug welcomes your responses and alternatives.

Grenfell Tower Fire June 14

Grenfell Tower Fire June 2017

Risk management, when taken to its root cause, is about the potential harm to an individual. But not just any individual, it is the harm to the person assessing the risk. We are all, by nature, selfish and will always assess and measure things against ourselves (no matter how gracious and service oriented we may be). If I assess the risk of a Bike Plan failing to deliver its outcomes, I can talk about how the community won’t get the health benefits or maybe safety improvements that it needs, but whether these things happen or not is irrelevant to me unless I (personally) can be affected by it. I can be affected by getting blamed for the failed outcomes, or by losing reputation. So the core perception of risk comes down to how the individual perceives the threat of harm.

Risks are ‘managed’ by introducing practices that are thought to decline the level of risk. Risks (in terms of AM planning) are typically recorded only for significant events, and treatments are also typically not analysed in detail. So the activity of risk management in AM may suffer from a lack of detail, and also may suffer from the assumption that management practices will manage the risk.

In my job, I am uncertain on a day to day basis. I am uncertain when I reply to a request for a new path, because I can’t be sure if the path is really needed. I am uncertain when a developer wants to discharge stormwater into the drain pipe, because despite the calculations and standards there are a huge number of assumptions being made. From an analytical and statistical perspective, I am uncertain most of the time.

So which term is more useful? In consideration of our selfish natures, is it more harmful to me to be uncertain or to try to manage risk? I am uncertain on a day to day basis and it does not appear to be causing me harm. By implication then I won’t try to change practices where they appear to be working (no matter how uncertain they may be). So, I think Risk is the better term as it will drive a reaction from the individual.

Adaptability, what do we mean?

 Continuing our blog post series by Douglas Bartlett, Manager Asset Planning, City of Kalamunda.  Here he looks at how we might define and use the word ‘Adaptability’.  Again, Doug welcomes your thoughts and alternatives.

‘sustainable’ but ‘adaptable’?

Sustainability is an undefined concept, but so is Adaptability.  How do we describe what an adaptable asset is? Adaptability suggests that the service being provided by the assets will need to change

But are adaptable assets expected to last forever? Perhaps not at the component level but, through adaptability in the design, ensure the network or higher order asset will last forever?   Roman roads in Italy are still being used today but in a current form different to their original form. It is difficult to think of examples of buildings (or other infrastructure) that have lasted a very long time, because the original designs would not have incorporated adaptability concepts. Those buildings that have lasted centuries or one to two thousand years have continued to be used for the same purpose as originally constructed (or converted to a tourist attraction which essentially involves keeping them unchanged).

Adaptability could be designed for reduced resource consumption, or perhaps greater resource consumption as an accepted offset for the higher level of adaptability (air conditioning in a larger room for example which enables the room to have more uses, but which increases overall energy load).

Perhaps the solution is not to change the word from sustainability to adaptability, but to instead drive greater levels of adaptability in the design and management of assets. This can be done by expanding what sustainable means with a fourth element. Sustainability for asset management means for a defined time period and service level:

1    The asset will last (provide its full function) for the time period

2    The service provided by the asset will last for the same defined time period (the service may be subject to change but this is not limited by the asset)

3    The asset and service will require no expenditure of resources beyond what is defined in the service (noting that resource consumption efficiency should be defined in the service),  and

4     The asset is designed to be adaptable to a wider range of services, and also to the changing service needs over time.

Sustainability, what is it?

Douglas Bartlett, Manager Asset Planning, City of Kalamunda, and a member of the Perth City Chapter is our blog poster for the next four posts. Here he looks at how we might define sustainability. Do you agree? Doug welcomes your responses

In considering what ‘sustainable asset management’ means we first need to recognise that ‘sustainable’ is poorly understood. It implies a quasi-positive future benefit but is usually not defined. How else can we express ourselves if not using the word sustainable?

Thomas Rau of Turntoo (http://turntoo.com/en/) is a designer, architect and thinker who is exploring a wider view of the selection and use of materials for buildings (or for any purpose). The idea is that every piece of material should be used, as long as possible, and then used again, not recycled. This includes practices such as:

  • Having the United Nations adopt a Declaration of Materials Rights that prevents throwing anything out,
  • Reusing existing old buildings by giving them new functions and extensions,
  • Deliberately taking the building materials and parts (bricks, windows) and reusing them, but also ensuring their original design is to be reused without generating waste, and
  • Asking for light, not lights. This means it becomes the supplier’s responsibility to supply the specified level of lighting for say 15 years. The supplier wears the costs of any failures so is pushed to manufacture lights that last the longest and require the least maintenance.

We could define a sustainable asset as being an asset that lasts forever and provides its service forever, with no net expenditure of energy (resources). But nothing lasts forever, so a sustainability statement is needed that defines sustainability in terms of time and resources, while continuing to provide the specified service (Lighting is sustainable if provided at the specified level, for 15 years, at agreed cost, where cost represents the energy consumption and any waste at end of life). Perhaps our asset management plans should include a definition of sustainability in terms of the assets in this manner.


Wilful Blindness

‘Just the facts, ma’am’ – was a catchphrase made popular by Detective Joe Friday in the TV detective show, Dragnet.  The implication was that it was he, the detective, who would interpret the facts, for we do not make decisions based on the facts, but rather on our interpretation of the facts.

Interpretations can vary widely. In 1987 when the PAC revealed for the first time, the full extent of the cost of replacing all of South Australia’s public infrastructure in South Australia, I interpreted this as a liability to be planned for so I was unprepared for the State Treasurer to thank me most sincerely for ensuring that the State retained its triple A rating!   A triple A rating when it was facing a quadrupling of its asset renewal within the next 15 years and had no idea of what to do about it, how was that possible?  Simple: the ratings authority had been persuaded (as, unfortunately, so had the government itself) to interpret the replacement cost of assets as the ‘value’ of the assets and, since this value exceeded the measured value of the debt (ignoring future replacement considerations), all was considered to be well.

At least if the facts are clear, we can debate the interpretation (see Evidence based decision making).   But what if the facts are wilfully distorted?

The ABC reported last Thursday (June 14) that 40% of infrastructure spending is now ‘off-budget’.   This translates to being invisible for most.  Even Saul Eslake (the former ANZ chief economist and member of the Parliamentary Budget Office’s panel of expert advisors) is reported to have ‘only noticed the scale of such spending days after the budget lock-up, as he went through the finer details in hundreds of pages of Treasury papers”.  The ABC says that he isn’t the only one now paying attention – and perhaps we all should!

The Government is effectively treating this infrastructure as a ‘financial investment’ which implies a financial return. A case of wilful blindness since most of its infrastructure spending not only will not provide a financial return but will require further commitment of resources to manage and maintain.

We need to see the facts as they are, not how they have been massaged to appear.  This can happen in major cases such as the above, but also in smaller ways in our own organisations.

With infrastructure, what we choose to see – and choose NOT to see-  may have serious impacts for many generations to come.

This is a case to follow.


The Budget 2018 Sliced and Diced.

The 2018 Budget contains hidden investment time bomb



What’s not missing – but should be!

In the last post I took up Eli Goldratt’s contention that most of us are focussed on efficiency (doing what we are currently doing but doing it better) because that is what we feel we have most control over.  I asked what was missing.  But another way of looking at this problem is not at what is missing – but at what should be!  Policies or practices that we have hung onto that are no longer serving us well in the new environment we are trying to instigate.   Let’s again turn to Goldratt who argues that

“Technology can be beneficial if, and only if, it diminishes a limitation.”

This may be a limitation that we are so used to we take it as the way that life is.  For example 200 years ago, travel was so slow that it was not feasible to work a full day AND also travel ten miles. This meant that if you got a job in another town you moved to that town.  Today many travel much further. Workers 200 years ago would likely not have seen travel time as a constraint, it was ‘just the way that life is’.  The iPhone and the Ipad were great innovations but many of us were not consciously aware of the limitations they diminished – until we got them!

The importance of limitations is that humans are intelligent. When we have a limitation we develop work arounds, rules that help us manage.  But if we do not change the rules (e.g. our work practices, our policies, our regulations) we cannot get the full benefits of the innovation.

Which leads him to ask 4 questions that might be useful for you.

  1. What is the power of the new technology or innovation?
  2. What limitation does it help alleviate?
  3. What is the cost of the work around rule for that limitation?
  4. What is the new rule? and its cost?

These questions are not easily answered, especially the last one, but the more I look at them, the more critical they seem to be.


What’s missing?

The reason why we focus on efficiency is because we can.   Doing what we are currently doing – only doing it better, cheaper, faster – is not only within our capabilities it is also within our responsibility levels.  Effectiveness requires going beyond, looking at how what we are doing interrelates with what others are doing.   Doing our thing better will fail to achieve real benefits unless we do. So while efficiency is desirable, it is not enough.  Here is a case in point.

The asset management team proposed that the government build an asset register that would provide information to enable the transfer of property from departments that no longer had need for the resources to those that did.  This, they argued, would enable great savings in both capital and maintenance funds.  So the asset register was built.  It took a number of years and cost many millions of dollars and when completed it did exactly what it was intended to do –  it showed where property was underutilised and where capacity was under strain.

The  expected benefits, however – the transfer of surplus property saving both capital and maintenance funds – did not arise.  Why not?   Because information by itself is not enough.  We also need people and processes that want to and can make use of the information.

In this case no department with surplus property was willing to admit it and hand it back to the Treasury. It knew that if their demands should increase in future, getting expansionary funds would be very difficult, so there was an incentive to disguise and minimise the true extent of under-utilisation.

There was no organisational mechanism. Departments needing to expand would make the case to their Minister, usually done by proposing a specially designed facility.  On approval, these departments had no incentive to settle for hand-me-down space and there was no organisational means to make it happen.

QUESTION:  What project benefits have failed to materialise not because of what you did, but because of what others didn’t?

Weekly RoundUp

What’s new this week?

Announcement :  Categories have been added to all of the posts we have uploaded so far.  Existing categories are

  • Understanding Infrastructure
  • New Perspectives
  • The Four Transitions, namely
    • From Efficiency to Effectiveness
    • From Sustainability to Adaptability
    • From Risk to Resilience under Uncertainty
    • From Growth to Prosperity for all
  •  The Weekly RoundUp

Explanations of these categories can be found by clicking on “Categories” in the main menu or by clicking on any of the individual categories.

Commentary;  This week we have four extremely thoughtful and extensive comments by Doug Bartlett, one each to the last four posts as a start to further conversation, so join in, comment on the post or on any comment.  And just a reminder to all, to see the comments associated with each post, remember to click ‘comments’ in the post menu

Who decides?

“We can’t let politicians make decisions, they are so irresponsible!” This was the reaction by a group of academics to the suggestion that politicians should be free to allocate their own weights to various criteria (cf last post on multiple criteria decision making)

I was first introduced to multiple criteria analysis when a UK researcher presented his work on the third Heathrow runway to a university staff seminar. The presentation was enlightening – and so was the reaction of those present.  The senior public servants, who needed to get elected members focussed on the issues, were enthusiastic about the potential to present clear information not artificially constrained by dollar equivalents. But the academics  were truly horrified when the presenter argued that elected members should allocate their own weights. As the people’s representatives – it was their objectives that were key.

In the last post, I asked who should be deciding on the weights.   This is not a trick question but it is a difficult one.  It bedevils serious public servants everywhere, staffers who desire to produce good quality ‘finished staff work’, to be able to anticipate all the problems, all the issues, all the questions, that decision makers could ask, and ensure that they have been addressed.

But this can then slip into believing that, having done all the analysis,  the staffer now knows best what option should be selected and so we get the three card trick –  presenting the decision makers with only three options, two of which are obviously out of consideration for cost or other reasons, so that effectively the decision makers are forced to choose what the staffer has determined.

Multiple criteria analysis, presented honestly without weights, allows decision makers to seriously and knowledgeably to consider the issue. The final decision may not be so predictable but it is likely to have their greater long term support.

On 9 September I wrote a post “Are Politician the real decision makers?” which attracted more comment than most other posts and the commentary was good.  Have a look.

Also see Kim Geedrick’s comment   on the last post



Making the Decision

In our post on May 29 we introduced the problem of finding the best solution to the problem of a high number of road accidents on a certain stretch of road in the Adelaide Hills. The Government had decided to address the problem but what was most important to them – reducing the number of accidents, maintaining speed of traffic without congestion, aesthetics (or the ‘general look’ of the solution), minimising social disruption, or containing the cost?

Multiple Criteria Analysis

In this case a multiple criteria solution was adopted.  Each option was analysed by specialists in the particular criteria who estimated the expected outcomes for their criteria, e.g. likely number of accidents reduced, or likely impact on aesthetics, so that each option ended up with five scores, one for each of the criteria examined. No option clearly dominated all others on the five criteria.

To weight or not to weight

At this stage there was a staff debate.  Some thought that each criteria should be allocated a weight which would enable them to reduce each solution option to just one score and thus they would be able to rank the options, as is often recommended in the textbooks on the subject.

Others thought that they, the staff, were not the right group to assign weights but rather that this was the right and responsibility of the decision makers themselves (i.e. the government decision group).  They pointed out that in previous circumstances where staff had assigned their own weights and ranked the options accordingly, the decision makers frequently ignored their ranking recommendations.  Moreover they argued, since the decision makers were unable to see the analysis that had been done on each criteria, it was not taken into consideration and so was wasted.  This group argued that the decision makers should be presented with the results and allowed to decide what weights to assign.

Question for today.  

Which group has the right of it, and why?

Weekly Roundup

Some of the more Interesting ideas arising from commentary and communication this week.

Kathy Dever Todd commented on The Third AM Revolution and in subsequent conversation spoke of her work in New Zealand on Resilience.  This has caused me to rethink the third transition which I had previously positioned as ‘from risk to uncertainty’. Resilience, however is a better word for the goal of dealing with uncertainty for it has positive connotations (as well as a developing literature), so, thanks to Kathy, I am repositioning the third transition as ‘From Risk to Resilience’.

The Third AM Revolution also drew thoughtful comment from John Falade who acknowledged that plant asset managers aimed at 95% efficiency for critical assets but argued that “Whilst we can celebrate the emphasis on critical assets as a paradigm shift from the pre strategic asset management era mindset of ‘all assets must be maintained’, it still stops short of asking the questions:  What do I or my organisation want to achieve with our assets?  What assets re really critical towards the achievement of our objectives? Do we need 95% reliability or availabilit of these assets to achieve our objectives. In other words, do I need so much efficiency to be effective? (my emphasis)  See his full comment.

Milos Posavijak commented on A Strange Business, providing a link to manufacturing process and product life cycles and contrasting manufacturing plant and community infrastructure in terms of variety and standardisation. See comment and link.  In his comment on Is There Still a Role for Common Sense? he put forward the intriguing proposition that ‘the model is not the predictor of future reality, but a JIT factory for future scenarios from the most granular asset information to the overall network’  Definitely worth further consideration, see comment.

In email discussion over Do Efficiency and Effectiveness conflict?  Sandy Dunn referred to the Transport Department that, with the appointment of a new Head, realised that their function was not to build and maintain roads, but to minimise traffic congestion.  This brought on quite a bit of work in analysing and resequencing traffic signals – and they have achieved some good results.   This led me to think how many of us have ‘process determined’ objectives such as ‘build and maintain roads’ when we would be better served with ‘outcome determined’ objectives such as minimise traffic congestion.  Your thoughts?

In conversation with Ron Riegel-Huth over Understanding the Objective, he queried whether ‘reduce road accidents’ or ‘improve road safety’ was really the main determining objective of the government. Surely, he suggested, the real determinant was ‘how do we get this road accident public pressure off our backs?  And, he added, unless we start with the real objective, our research and analysis will be ineffective.  Again, your thoughts?

Enjoy the weekend. Penny