Project overview
Our UK asset management and strategic advisory subject matter experts undertook a collaborative project with Aarhus Vand A/S (AAV), one of Denmark’s largest water utility companies, to develop a value framework (VF) and prioritisation methodology. Building on a previous project delivered with AAV (‘data driven asset management’), there was further desire from the client to link asset investment to value creation against AAV’s strategic purpose: to create health through the supply of clean water – to the population and the planet. A purpose which is specified using specific United Nations Sustainable Development Goals (UNSDG). AAV has selected a number of UNSDGs relevant to the nature of the business to target. Making the connection between investment decisions and achieving the greatest value while working towards these objectives is a high priority for the business.
The aim of the AAV VF was to develop a consistent method of assessing and prioritising investments that deliver value to the organisation and their commitment to achieving the UNSDGs, where ‘value’ is anything that enables organisational objectives and provides benefit to the business (e.g., improved quality service). The criteria used to assess the value of a piece of work are aligned with the organisational direction and asset management system.
Our role
Our first activity was to gain an in-depth understanding of the existing process for assessing and prioritising projects to determine scope for the enhanced framework. We needed to establish value metrics and map alignment to business objectives. The value metrics are referred to as key performance indicators (KPI) by AAV and are the components of strategic outcomes, closely aligned to select UNSDGs. They are set and targeted to achieve service and are directly affected by decisions, projects or programmes of work. For instance, a project to re-use final effluent for water supply applications may contribute value towards a variety of KPIs, which can be mapped back to UNSDGs using AAV’s hierarchy. A constructive approach was adopted to align the KPIs, service measures and UNSDGs to the AAV sustainability strategy terminology, which focuses on three areas of capital: social, natural and financial.
A multi-component methodology was implemented to yield a final value score for use in project or portfolio prioritisation. This included confidence assessment, KPI weighting and designated achievability score.
The result was the construction of a VF methodology that enables projects that are creating value to be compared against KPIs with fair horizons rather than long-term enterprise-level objectives. The clarity from this project meant that there is now enhanced ability to delineate between existing risk-based projects and potential value-creating projects. Through the test and refinement process, five crucial projects were tested against the new methodology and performed satisfactorily.
There is scope for long-term implementation of the VF into the AAV business-as-usual process for asset and investment planning. This will become a key enabler for the achievement of AAV’s business outcomes (and therefore UNSDGs) and improve the information available to prioritise portfolios to maximise realisable value for money.
- Some established KPIs are set at enterprise level over a long term; individual projects may not impact them proportionately to value offered
- Comparing risk reduction to value creation was challenging, and there was the potential need to repeat the risk reduction step to integrate into the value framework
- The current approach in AAV is to perform a criticality assessment for every asset; this is time consuming and may result in a delay in assessing the true value of projects
- Some of the longer-term KPIs were broken into shorter-term KPIs that would enable the incremental value of projects to be represented
- Risk KPIs were grouped within the framework, recognising that consequences in the criticality assessment were already aligned to these and weighting had been undertaken
- During testing, an alternative method to assess the risk generated by specific assets targeted by project was adopted
