Part 1: Learnings from our 2009 LTCCP audits

Our 2009 audit of 72 local government LTCCPs showed us that, in some respects, asset management performance has improved between 2006 and 2009. However, our overall conclusion is that the degree of improvement has been disappointing.

Of the 67 councils for which we can compare their 2006 planning to that of 2009, we concluded that 27% have improved, 19% seem to have gone backwards, and the majority (54%) have stayed broadly the same. Within any sample of entities, it is expected that performance in some areas will have declined over time, perhaps because of the loss of a key person with the skill to drive asset management practice forward. We regard such entities as exceptions, and consider that they are likely to bounce back when they have overcome whatever setback they suffered.

Of more concern are the 54% of councils where performance seems to have reached a plateau. This would not be a problem if all these councils were at the level of practice that they aspire to. However, this was not the case. We concluded that the majority of councils needed to improve some aspects of their asset management planning.

Learning from our audit findings

We analysed the findings from our 72 audits, and came up with examples that we thought were notable from 24 of them. The 24 councils we quote in this publication are a cross-section from the big metropolitan centres to the small rural districts. We think these examples demonstrate what is possible, even for a small organisation. In fact, for a small organisation with limited resources, learning from others can be a cost-effective way of improving practice.

The challenges and the areas of notable practice seem to fall into two categories – those at organisation level, and those at a detailed asset management level.

Organisational issues

The better organisations recognise the need to take a project-managed approach to planning, although the quality of project management varies widely. Good quality project management skills seem to be in short supply. In the organisations we reviewed, a lack of good project management often left asset management issues unresolved by the time the information was needed to inform the LTCCP or other corporate planning. The value of good asset management planning is undermined if it does not join up with wider service and financial planning.

The better organisations have a clear policy framework covering asset management as well as the related topics of sustainable development and performance management. These policies make it much clearer where asset management fits with service and financial planning.

Links between performance management at the organisation and asset levels vary, with issues including:

• unclear definitions and mixed-up terminology in the performance framework;
• a lack of clarity about where certain measures fit in the performance hierarchy; and
• a lack of clarity about what measures are reported when and to whom.

The better organisations have well-defined quality assurance, checking, review, and sign-off processes for:

• asset information flowing into LTCCP and other planning (both financial and non-financial); and
• asset management plan review to ensure that a consistent approach is taken throughout the organisation.

We found that asset management was improving most strongly where the organisation recognised the importance of improvement planning and adopted a structured approach. Organisations that have progressed seem to do so in one of two ways:

• continuous improvement; or
• major rewrite.

In our view, the continuously improving approach is more effective as it is clearly driven by active use of plans and planning.

Effective asset management needs resources dedicated to it. The most effective organisations:

• recognise and support the cost of asset management plan development and review;
• are proactive at attracting and retaining people with the right skills, supplemented with consultants where necessary; and
• ensure that their staff have the guidance they need.

Asset management issues

The most effective organisations have developed a policy that sets out which services need asset management plans, and the level of sophistication² that is appropriate.

Data quality

Good quality planning is impossible without good quality data. While all organisations have some data about their assets, the better organisations know the accuracy of the data and are working to improve it. They have quality assurance regimes over data collection, data entry, and maintenance of their asset information systems. They are continuously and proactively collecting condition and performance information.

Links between levels of service and performance management

We found that many councils struggle to link the levels of service that they have defined at asset level to any sort of performance management framework. It is often not clear what the "community outcomes" mean for the way the assets are managed. The better organisations link performance measures, indicators, and targets to their levels of service. However, many confuse all these elements, so it was not clear to us what the levels of service actually were.

Lifecycle management

While we found that most councils have done some work to consider the lifecycle management needs of their assets, there were three areas that we concluded were consistently weak:

• Definition of management processes and service delivery arrangements. Most councils had not documented their service delivery arrangements, contracts, or the rationale for their way of working. Most, similarly, did not have documented maintenance plans linked to standards and performance criteria for their contractors to meet. Where this detail did exist, it was often in contracts, not in plans, which, in our view, is the wrong way around.
• Risk management. Where risk management was formally documented in planning, it tended to be at either corporate or service level. Few considered risks at both levels. The better organisations made the link between levels of service and risk, rather than just focusing on natural disasters or health and safety.
• Demand management. The growth and demand sections of many plans only considered changes in demographics rather than the other factors that could affect demand (such as people's changing preferences). Ways of addressing demand, other than through more assets, were not often explicit, except in the better organisations.

Financial forecasts

Our audit found that financial forecasting was one of the weakest areas overall.

We expected financial forecasts to be developed based on asset need, and for these to flow into the corporate budget-setting process. We expected budget decisions to focus mostly on "discretionary" capital spending. Where changes were made to maintenance and renewal forecasts, we expected an accompanying statement in the asset management plan highlighting the rationale for, and implications of, the change. Too often we saw budgets being compiled in isolation from asset management planning.

We found that asset management plans are often unclear about the reliability of the forecasts and the assumptions supporting them.

The better organisations have a structured approach to internal and external review of their planning. The worst have an unstructured approach to their planning or have not opened up their planning to the different perspective that an external reviewer could bring.

What we learned from our 2009 audits

An effective organisation needs to get its asset management right at both the organisational and asset levels. While both of these themes are present in the examples of notable practice provided in this publication, we have decided to feed back what we have learned from the 2009 audits using the following structure:

• What are the asset management essentials that you must get right? These are the basics as we see them.
• The best of what we found, and what makes it so good. These are real examples that show you how to go from the "core"³ level to a more advanced (that is, sophisticated) level of asset management practice.
• The worst of what we found, and why it matters. These are the pitfalls you need to avoid.
• The most effective improvements you could make. We have concluded that concentrating on these elements can be an effective way forward.
• What looks good but does not add value. Asset management needs to be real and kept in proportion. No one has time for things that do not add value.
• What should you be talking to your community about? Assets are there to support services, and the views of service users are important.
• Why does an audit and other external review matters? We believe they do and the better-performing organisations seem to agree.

2: See the glossary in the Appendix for guidance on this term.

3: For more guidance on "core" and "advanced" asset management, refer to Section 2.2 (page 2.11) of the International Infrastructure Management Manual. See footnote 1, above.