Confidence Level Rating and Project Validation – Asset Management Based Decision Tools for Tough Capital Budget Times

The practice of asset management can be viewed as a systematic and continuous effort to develop and deploy a comprehensive set of integrated management/investment strategies (embracing operations, maintenance, and capital); these strategies are deemed to represent the lowest total cost of ownership for sustained performance at a defined level of service and an acceptable level of risk to the utility and stakeholders.Project validation is a core part of a systematic CIP (Capital Improvements Program) development process. Project validation is built on the concept of “confidence level rating” (CLR). Confidence level rating calls for the systematic evaluation and subsequent scoring of two elements that underlie all CIP investment decision making, namely;the breadth, depth, and quality of analysis underpinning each proposed capital project in the CIP, andthe quality of data on which the analysis was based.This paper presents the fundamental concepts of confidence level rating and its role in project validation.