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Is PAS 55 a Panacea for Oil Rig Disasters?

Like many people, I consider myself a logical, rational person.  I like to analyze issues before I make decisions and I am uncomfortable when I am forced to proceed without understanding the potential risks and benefits of different choices.    Not surprisingly, I expect others to do the same and am upset when I hear of calamities that could have been avoided with proper forethought.     

It’s natural for people like me to embrace and develop conceptual models for areas where we make many decisions.   ARC’s ALM models and PAS 55 are good examples for asset management.  They provide a structure for understanding relationships and highlight the major factors that influence asset performance.   They also establish criteria for evaluating alternatives and making decisions.  Most importantly, using these models gives us comfort because we can know that we have considered all of the issues and understand the rationale behind our decisions.        

Conceptual models have another important characteristic – they can be shared.  So they give us a way to explain our decisions to others and evaluate their decisionmaking.    Standardizing models, as is being done with PAS 55, is important because it encourages broader use of logical, rational decisionmaking.    It also provides a basis for mandating such behavior in industries that impact the public.   And I support this because it feeds my own belief in logic and rationality.    

I have read several blogs lately suggesting that use of PAS 55 might have avoided the recent Deepwater Horizon disaster. As might be expected, most postings were from people with a vested interest the promotion of PAS 55.   But the suggestion and subsequent comments still intrigue me and raise a couple of important questions. 

First, what should people really expect from standards and models like PAS 55?  Apparently, some people think that PAS 55 is a panacea for all asset management ills.  But the simple truth is that PAS 55, and many other useful asset management models, focus on the asset management system, not the actual assets.  They provide guidance for organizations as to the processes and procedures that they should implement with the underlying assumption that this will ultimately lead to better asset management performance.  Requiring an organization to use PAS 55 would therefore give comfort to stakeholders that their investments are being managed in logical and rational manner.  But it does not guarantee that there will be no asset problems. 

Second, should we expect that logical and rational asset management programs will always insure us against failures of critical things like blowout preventers?  Obviously, not.  Logical and rational decisions for a company may not be optimal from the public’s perspective.  Costs for backup equipment and people can be enormous and rationally lead to decisions that put the public at excessive risk, even if the probability of failure is low.  So regulators and regulations will always be required.  I hope that all people, even those who normally oppose regulation, will accept this fact if the lack of regulation is shown to be a major contributor the the Deepwater Horizon catastrophe.  And, in that case, we might all benefit by suggesting that the regulatory agencies themselves consider PAS 55 or some other rational model in the development and management of  their regulations.       

Finally, let me comment on the blogs themselves.  As you might imagine, I was discouraged by those that blindly recommended PAS 55 as a solution.  They revealed a lack of understanding of PAS 55 and a lack of logical thinking in recommending solutions with no knowledge of the root causes of the disaster.  But my confidence in the asset management community was rapidly restored when I saw other, possibly more experienced, people offering them help on both counts.  Logic and rationality are alive and well and I am happy!

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