The risk based approach to pipe replacement helps manage future costs but is reliant on good information

The cost of replacing the ageing network of pipes is significant and growing

The Water Corporation identifies and targets pipes for replacement based on asset, condition and performance information, and likelihood and consequence of failure. This risk based approach helps to manage the financial impact of a significant increase in the number of pipes reaching the end of their standard economic life over the coming decades.

Under its risk based approach, the Water Corporation predicts that the cost of replacing pipes between 2010 and 2019 would be $318 million. However, if pipes were replaced on the basis of standard economic life alone, then the estimated cost would be $421.5 million. Between 2020 and 2049, the economic life approach would also potentially see replacement costs climb to a total of $3.4 billion or an average of $107 million per year. This would involve replacing 16 000 kilometres of pipe, or 47 per cent of the total pipe network, across the metropolitan area and country regions.

Metropolitan pipes

The metropolitan area is facing a steep increase in the number of pipes reaching the end of their standard economic life. These pipes are predominately reticulation pipes made from steel, cast iron, reinforced concrete and asbestos cement.

The estimated cost of replacing metropolitan pipes on the basis of standard economic life is $76.5 million between 2010 and 2019. Thereafter, the cost of pipes needing to be replaced would rise significantly into the foreseeable future (Figure 5).

Figure 5 Standard economic life and potential replacement costs by pipe type for the metropolitan area

Country pipes

The estimated cost of replacing pipes on the basis of standard economic life in country regions between 2010 and 2019 is $345 million – a much higher cost than for the metropolitan area. All of the cost would be in the Goldfields and Agricultural region.

Looking further ahead, under a standard economic life approach to replacing pipes, costs are forecast to triple in the two decades commencing 2040 (Figure 6). The majority of the cost based on standard economic life would again be in the Goldfields and Agricultural region.

Figure 6 Standard economic life and potential replacement costs by country regions

 Repair and replacement strategies vary for different types of pipes

The Water Corporation repairs trunk and distribution mains based on the results of regular inspections or when there are reported leaks and bursts. Reticulation pipes which are below ground and cannot be easily or cost effectively inspected are generally repaired only when there are reported leaks and bursts.

Water Corporation uses a risk based assessment process to determine which pipes are proactively managed. The initial risk assessment considers the consequences of failure. Where the consequences are significant, proactive condition assessment work is carried out so that replacement decisions can be made prior to pipe failures occurring. Where the consequences are low, pipes are managed reactively based around measurement of failure history, customer impact and the costs to replace.

Replacement of reticulation pipes in the metropolitan area is considered after three bursts in a 12 month period. By comparison reticulation pipes in farmland areas are usually not considered for replacement until they reach the end of their standard economic life. This is because leaks and bursts in farmland areas are unlikely to cause significant service interruption, environmental damage or a regulatory breach such as if water pressure and flow standards are below required levels.

Using asset, condition and performance information to target pipe replacement reduces the risk of under or over investment

The Water Corporation’s risk based approach to pipe replacement is more targeted than replacing pipes when they fail or when they have reached the end of their standard economic life. The risk based approach lessens the likelihood of under or over investment faced by the Water Corporation’s ageing asset profile.

Using its risk based approach, Water Corporation will invest over $318 million in pipe replacement from 2009-10 to 2018-19. The Water Corporation invested $69.6 million between 2009-10 and 2012-13 (an average of $17.5 million per year) and plans a significant increase to $249.3 million between 2013-14 and 2018-19 (an average of $41.5 million per year) (Table 2).

Table 2 Water pipes forecast replacement expenditure from 2014-15 to 2018-19

The Water Corporation’s investment plans are reviewed annually. This enables it to respond to issues that may arise. For example, in June 2013, $12 million in planned pipe replacement in the Perth Central Business District (CBD) was brought forward from the 2014-15 to 2018-19 program after reticulation pipes in Wellington Street burst.

The Water Corporation believes that its planned level of investment is sufficient to manage future risks and to ensure continued performance. This is based on the pipe deterioration modelling of its decision support tools like the Linear Asset Risk Model (LARM) and the Pipeline Asset and Risk Management System (PARMS), as well as investment and risk analysis carried out as part of its SIBC process. It considers that the knowledge it has about the useful life of the different types of pipes it manages, in conjunction with information about their current condition and performance means that it can make reliable investment decisions about replacement. However, the Water Corporation continues to research the failure of assets to improve its deterioration modelling and understanding of the actual useful life of its pipes.

The Water Corporation’s replacement program was introduced in 2009-10 with $9 million allocated for pipe replacement. Expenditure on replacement prior to 2009-10 is very difficult to identify because it was not separately classified but was included under a variety of different funding lines, such as minor works and operational expenditure.

It makes economic sense and will remain appropriate for many low risk pipes to only replace them when they fail. However, maintaining the 2009-10 level of investment would not have met the increasing need for future pipe replacement based on the Water Corporation’s ageing asset profile. It would have resulted in significant under investment for higher risk parts of the network and reduced the ability to effectively plan future investment. Since then expenditure has increased to $27.5 million in 2012-13, a 205 per cent increase from 2009-10 (Table 3).

Table 3 Water pipes actual replacement expenditure from 2009-10 to 2012-13

Conversely, replacing pipes at their end of the standard economic life has potentially significant estimated costs of $421.5 million between 2010 and 2019 and up to $3.4 billion between 2020 and 2049. This approach risks over investment if the pipes have not reached the end of their useful life. Useful life is affected by a range of conditions and factors and can significantly vary from standard economic life.

The effectiveness of Water Corporation’s pipe assessment and replacement relies on accurate and accessible information

The Water Corporation’s risk based approach to pipe replacement is reliant on accurate and accessible asset, condition and performance information. Since 2009-10, the Water Corporation has used this information in a structured way to identify and target high risk pipes for condition assessment.

There is a range of important asset, condition and performance information that helps
to more accurately determine the actual useful life of pipes. This includes pipe asset condition and performance information like the rate of leaks and bursts. Other related information such as the construction material of the pipes, their size and the surrounding geology and environment is also important. This broader information helps better identify the remaining useful life of pipes and enables more targeted replacement decisions than standard economic life alone (Table 4).

Table 4 Illustrative examples of the impact of other factors on the useful life of water pipes

The Water Corporation has structured decision support tools that use this broader information to identify and target its condition assessment on those pipes with the highest likelihood and consequence of failure. These industry-based computer software tools are the LARM which is focused on metropolitan trunk and distribution mains and the PARMS which is focused on reticulation pipes.

LARM and PARMS have been used to provide a consistent methodology for prioritising pipes for risk assessment and, if appropriate, condition assessment. The Water Corporation commissioned independent analysis as part of the development of PARMS to predict the deterioration of individual pipe performance over time. The analysis produced a model that uses failure history and other pipe characteristics such as length, diameter, construction material and location for example. This supports determining the cost benefit of condition assessment, maintenance and replacement and provides a method to track changes in risk over time for replacement forecasting.

The LARM tool uses a range of information to better assess future risks. This includes location, diameter, asset age, construction material, failures and faults, soil condition, surrounding environment and location from other infrastructural assets and the cost of repair. This information is used to create a risk matrix which scores trunk and distribution mains on a risk level to provide a range of investment scenarios over time.