Executive summary

Asset management for public entities: Learning from local government examples.

The beginning

We have published this collection of notable examples of asset management (most good, some bad), along with our commentary, to help improve performance in this important (and sometimes neglected) area of public management. The examples illustrate how organisations have tackled aspects of asset management effectively. We encourage you to reflect on these examples and think about whether any of them might help you improve your own organisation’s performance.

This executive summary provides an overview for chief executives, senior managers, financial and corporate planners, business analysts and those in governance roles. It is supported by the more detailed commentary and the examples in Parts 2 to 8. We encourage senior managers in particular to read Part 5 – the most effective improvements we believe you could make.

Why is asset management important?

Asset management is important for a number of reasons. First, many public services rely on assets to support their delivery. Unless the assets are well managed, the services they support will suffer. Secondly, assets represent a significant investment by New Zealanders that needs to be protected. Thirdly, assets are often taken for granted until they fail. A failed asset can have both social and economic effects on the country. To avoid this, someone has to be actively managing assets – they cannot be taken for granted by everyone.

Asset management essentials

Our work at Audit New Zealand has led us to conclude that there are some asset management essentials that senior management have to get right:

  • asset management needs a planned approach, with those involved well organised and clear about what is expected of them;
  • asset management needs to be integrated with other planning, considering funding sources and available finance;
  • good planning relies on good quality data but data systems can only be as good as the way in which they are operated;
  • levels of service need to be clear, explicit, and make sense to asset managers and service users alike;
  • lifecycle asset management strategies need to be comprehensive and clearly set out the rationale for what is planned;
  • service delivery arrangements need to be clear;
  • demand needs to be understood in order to respond to it;
  • risks need to be recognised and managed;
  • financial forecasts need to be complete and ready to inform the budget so that those in governance roles can make informed choices; and
  • planning improves only if the improvement is planned and monitored.

What the best organisations are doing

The best organisations go beyond the basics:

  • Professional asset managers are a scarce resource in New Zealand, so the best organisations make the most of the people they have available.
  • Updating an asset management plan can be a huge task if left too long – the best keep their planning fresh.
  • The best are moving "sustainability" from being a buzz word to something meaningful at the asset level.
  • The best at managing assets recognise that levels of service are the absolute heart of good asset management.
  • Risk management is a structured process, but the best keep it real so that it means something to managers in their day-to-day work.
  • The best know the reliability of their forecasting, which helps decision-makers avoid getting locked into budget figures that were originally only rough estimates.

Learning to avoid the pitfalls

You should avoid some of the pitfalls we have observed, which include:

  • being seen to be doing "something", exemplified by long plans, incomplete templates, and generic content that says nothing about local issues;
  • "running before you can walk", exemplified by initiatives such as optimised decision-making that does not result in an optimum solution;
  • insufficient interest by senior management;
  • failure to use scarce resources effectively or share experience with other organisations;
  • unclear "levels of service" with poor distinction made between technical and customer-facing levels of service; and confusion between levels of service, levels of provision, customer satisfaction surveys, performance measures, performance indicators, and performance targets;
  • failure to consider services from a range of perspectives (for example, quantity, availability, quality, convenience, responsiveness, environment, cost, and system efficiency);
  • not joining up the rationale for work on the assets with levels of service and budget setting processes; not striking the right balance between affordability and asset need;
  • deferring work without recognising the risk to current levels of service as well as the funding and service-level problems this stores up for the future; and
  • lack of external scrutiny to expose planning to fresh perspectives.

The most effective improvements you could make

Improvement planning is an important part of asset management. Things change and there is usually scope to improve. However, there may not be the time, resources, or the need to push forward on all fronts. We have seen some examples that we think are among the most effective improvements you could make, if you are not doing these things already:

  • Make it matter: make asset management part of your organisation’s culture. Changing your mindset is not costly. It requires leadership.
  • Make it fit: asset management is an integrated process that needs to be carried out in a co-ordinated way. It is a multidisciplinary process that involves engineers, financial and corporate planners, and policy makers who need to work together and respect each other’s contribution.
  • Support it: have a champion, someone who can co-ordinate your asset management. This person does not need to be an asset manager, but needs good project management skills.
  • Make it easy: managing assets can be complex, but you can use templates, clear standards, and concise plans to make the task of writing a plan manageable.
  • Keep on top of your asset information: continually maintain the information you need to manage your assets to build up its accuracy and reliability.
  • Make performance management real: performance data should be useful. It should enable managers to make decisions, or help guide staff in their work on assets, or provide information to the public (or other stakeholders) about the services they are getting.
  • Use your asset management to make more informed budgetary choices: the outputs from your asset management planning should drive your budget (your budget should not drive your asset management practice).
  • Manage risk, but do not over-complicate: using a consistent risk-management framework across the whole organisation will help save time, allow you to compare risks across services, and to identify the highest priorities.
  • Manage demand: consider factors other than just demographics, make sure that assumptions are consistent across your organisation, and consider a range of demand management options. As a result, you might find that you do not need to invest in more assets and incur the ongoing costs of maintaining them.

Talk to your community

It is important to talk to your community: they use your services now, and are likely to have a strong interest on behalf of future customers (who will include their children and grandchildren). You also need to consider "inter-generational" fairness – you should not be incurring unsustainable debts or creating other problems for future taxpayers.

Your community can help you determine priorities and levels of service. The local context is an important factor in asset management planning. Local people can give you an informed view about priorities and how assets work in their community.

Finally

Remember that the purpose of asset management is to provide a desired level of service through the management of assets in the most cost-effective manner for present and future customers.1 Asset management is about the long-term sustainability of assets and the services they support.

1: National Asset Management Steering (NAMS) Group, Association of Local Government Engineering NZ Inc (INGENIUM) (2006) 3rd edition (Version 3.0), International Infrastructure Management Manual, National Asset Management Steering Group, Association of Local Government Engineering NZ Inc. (INGENIUM), page 1.3.