AWWA ACE61640

Black & Veatch has developed a decision-making process that consistently and transparently evaluates a wide variety of projects and issues that confront utilities. The analysis uses a probabilistic approach utilizing Monte Carlo simulations and is quantified through Net Present Value tornado diagrams and probability distributions. The evaluations are accomplished by assessing the condition and failure probability of components; identifying and evaluating rehabilitation, repair, and replacement needs; developing cost estimates of necessary improvements; and producing a capital improvement program that is prioritized using a defendable and statistically-based process. This paper examines the detailed cost, probability, and timing estimates within a customized financial evaluation model in order to analyze the value and risk mitigation effectiveness of proposed capital projects. In particular, this paper discusses: in-depth definition of issues, possible outcomes, and probabilities; fully quantified value-at-risk specification of the inter-relationships among projects and issues; and, identification of innovative capital action programs with improved expected outcomes and reduced exposures. This capital prioritization process provides water and wastewater utilities with the ability to obtain a strategic direction in very uncertain environments and to develop proactive capital plans and investments that are evaluated on a consistent basis. In addition, this process provides an easy-to-understand framework that facilitates "buy-in" and support across all organizational units. Includes 2 references, table, figures.