CONCLUDING REMARKS

This audit has found that overall SCA demonstrates a high level of compliance with the requirements of parts 7.1 and 7.2 of its licence. In summary, thirteen licence requirements have been audited. The audit has found that SCA demonstrates full compliance with two requirements of the audit. High levels of compliance are assessed against ten and for one requirement it has been determined that there is no requirement applying to SCA.

WorleyParsons has found that SCA is currently implementing a complete suite of processes and tools for asset management, covering the full spectrum of asset management activities, from condition monitoring and the documentation of individual assets to return on investment analysis. It terms this its Maintenance Outcomes Hierarchy. SCA has self assessed its progress in the implementation of these processes and tools over the last six months, claiming significant progress. SCA does not, however, appear to have a documented implementation plan, including timeline, for incorporation of the remainder of its assets into the Maintenance Outcomes Hierarchy. Whilst SCA has defined a materiality limit of an asset value of $10,000 for the application of the asset management processes, WorleyParsons has not sighted documentation of the rationale for this materiality limit, nor evidence that it considers risk adequately.

SCA has designed its asset management processes around the requirements of the NSW Total Asset Management (TAM) guidelines, around its licence requirements and around other regulatory

requirements such as occupational health and safety regulations. It has documented how it considers that specific requirements of its licence are satisfied (The Sydney Catchment Authority Asset

Management Framework). The available evidence of compliance with regulatory requirements identified has been sufficient for WorleyParsons to assess full compliance against item 7.1 (a) of the licence.

SCA has demonstrated that it undertakes strategic planning relating to asset management through both its Asset Strategy and its Asset Management Strategic Plan. It has also established a plan for asset disposal in its Surplus to Needs Assets Report, although it has been identified that this plan should be reviewed and updated. This evidence, alongside the evidence of compliance with TAM guidelines has resulted in the assessment that SCA demonstrates high levels of compliance with item 7.1 (b) of its licence.

WorleyParsons has found that SCA has developed Asset Lifecycle Cost Analysis processes for application to all of the types of assets it is responsible for. These Asset Lifecycle Cost Analysis processes include Lifecycle Assessment, Risk Costing, Predictive Analysis and Return on Investment Analysis. SCA is in currently implementing these processes for its assets, and has provided a summary of recent progress. Whilst progress indicated by SCA and evidence of the implementation of the processes show commendable commitment to the full implementation of full Lifecycle Costing, WorleyParsons recommends that SCA identify, document and report on timeline targets for the

INDEPENDENT PRICING AND REGULATORY TRIBUNAL (IPART)

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implementation of the processes. WorleyParsons has assessed that SCA demonstrates a high level of compliance against item 7.1 (c) and item 7.1 (d) of its licence.

Risk analysis forms an important aspect of asset management planning. SCA has provided evidence of the adoption of a risk management framework based on AS 4360. It has completed a risk analysis and classification of its assets and developed action plans in response to the outcomes of the risk assessment, demonstrating a high level of compliance with the requirements of item 7.1 (e) of its licence.

Item 7.2 of SCA’s operating licence requires it to provide information on the status of each group of its assets. Whilst SCA has provided information covering the areas of asset management it is required to under item 7.2 of its licence, this information is provided in numerous documents and is not collated into a specific state of the assets report. Whilst it is recognised that the development of a state of the assets report would impose an additional cost on SCA, it is recommended that SCA develop this consolidated report in future to simplify the process of determining compliance with the operating licence and to harness the benefits of the consolidated knowledge regarding the state of its assets that the report would provide.

SCA has provided documentation designed to demonstrate how specific plans and processes in its asset management arsenal are intended to address the requirements of its operating licence. This documentation, however, does not detail how the plans and processes satisfy the legislative

requirements. This is left to the audit team to interpret. Whilst it is recommended that SCA compile a State of the Assets Report, it is considered that SCA provides adequate information to show high compliance with item 7.2.1 of its licence. Items 7.2.2 (a) and (b) are assessed largely on the same basis as item 7.2.1. The level of compliance for 7.2.2(a) is considered to be high rather than full due to the lack of a documented plan for the full implementation of the Maintenance Outcomes Hierarchy and the fact that its implementation is incomplete. The framework developed for asset management by SCA has resulted in an assessment of full compliance for item 7.2.2 (b) of the licence.

The assessment of SCA’s provision for future asset investment expenditure has identified that there are inconsistencies between investment plans identified in the Asset Strategy and SCA’s current capital and operational expenditure plans. SCA has provided evidence of the review of its capital expenditure plan and information regarding discrepancies in forecasts of its operating expenditure, however this evidence does not fully explain all inconsistencies and it is recommended that the expenditure forecasts in the Asset Strategy be updated to reflect SCA’s current assessment of forward expenditure requirements. The inconsistency between documented expenditure

requirements for asset management has resulted in an assessment of high compliance against items 7.2.2 (c) and 7.2.2 (e).

This audit’s assessment of overall high performance by SCA in the area of Asset Management is supported by assessment of SCA’s asset management during the Water Services Association of Australia (WSAA) 2008 Asset Management Benchmarking Project. The benchmarking project has previously (in 2004) identified opportunities for improvement, such as in Maintenance Management

INDEPENDENT PRICING AND REGULATORY TRIBUNAL (IPART)

AUDIT OF SYDNEY CATCHMENT AUTHORITY'S ASSET MANAGEMENT SYSTEM

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Systems. The most recent assessment has shown significant improvement against the improvement opportunities identified in the 2004 assessment.

Appendix

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Appendix 1 : Scope of Audit (Schedule 3)

Appendix

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Appendix 2 : SCA Asset Management Framework