With the maturation of Asset Management Plans (AMPs), methodologies and data, AMPs now provide the transparency and a wider understanding that didn’t exist 30 years ago. This is thanks to the wealth of information we are now able to capture and distil efficiently within tried and true asset planning methodologies.
However, according to David Walker, Market Development Lead - GHD Advisory New Zealand, there are still some prevalent challenges which can be effectively addressed through consideration of a number of key areas:
- We continue to see large assets delivered without early asset management input which has a direct effect on the maintainability and a negative impact ongoing operating cost.
AMPs play a pivotal role across the asset lifecycle from planning, handover and right through to maintenance. Involving asset teams in the design and planning phases of projects can also help to make sure what is built can be maintained. - Lack of adherence to AMP recommendations sees organisations continue to invest in ‘nice-to-have’ or non-essential upgrades, while critical assets fall into disrepair. This highlights both process and integration issues within the planning and funding phases.
- Often the information being developed points to growing asset challenges that are not always acknowledged by decision makers; critical commentary is all too often buried in voluminous AMP’s and therefore overlooked. This issue has the potential to lead decision makers falling into a cognitive bias trap of not heeding warning signs from key information and acting upon it.
- AMPs are naturally focused on the assets in question, but due focus needs to be shifted up the value chain to understand customers and their needs for who these assets serve. This alignment is critical to making sure the value customers receive from the assets is optimised.
- Risk assessments in some instances are not given enough prominence at the strategic level of the AMP documents, another potential cause of AMP adherence and decision maker engagement.
There are also four key sector specific drivers of asset management principles, which for better or worse, directly impact the relevance and credence of AMPs. If understood and taken account of these can be utilised as a basis for continuous improvement in the way AMPs are evolved and executed and account for differing levels of quality and effectiveness when comparing across sectors:
1. Regulated versus non-regulated
For example, within the energy sector regulation is rigorous and the utilisation of ISO 55001 or alternate methodologies is critical for satisfying regulators of appropriate processes, asset condition and for defence of price paths.
2. Legislated versus non-legislated
This is well illustrated across the public infrastructure sector where on average there is a positive correlation between the degree of legislation driving AMP development and the quality of them. In New Zealand, the Government has partially recognised this in areas like local government where under S101B of the Local Government Act 2002, councils are directed to develop infrastructure strategies triennially for waters specifically, leaving other activities such as property and buildings discretionary.
3. Profit versus non-profit
One of the areas where quality of asset management generally stands out is in the high grade property space such as high quality CBD and shopping malls. Owners of these portfolios to maintain profitability have to triangulate premium rentals with demanding client and customer needs so to make the equation work, require very good quality and robust asset management processes.
4. Self funding versus shared funding
The ability or degree to which direct funding is linked to assets and the services they enable, can strongly influence the quality of AMPs. This is often observed in the public sector where fully customer funded water utilities contrast starkly with rate or tax funded activities such as leisure and recreation facilities. The latter is usually subject to trade off decisions across the broader portfolio of assets which can negatively impact both the quality and intent of asset planning.
5. Asset intensive versus non asset intensive
Ordinarily asset intensive sectors would be expected to have more focus asset management. Practices and policies developed from these sectors can be equally applicable to others. For instance Treasury and the Tertiary Education Commission (TEC) in New Zealand use Investor Confidence Rating and maturity reviews to track progress of government departments and agencies with capital intensive asset portfolios. Because these reviews are tied to senior executive performance, it encourages ongoing progress towards better asset management practice.
In summary, to evolve AMPs to the next level, there are a number of factors that need to be considered for their improvement and impact. These include an explicit awareness of the sector context and understanding some of the better practices from a cross sector basis. In addition there are a number levers that can be adopted or reinforced to both improve overall quality of the planning and the resulting decision maker impact.
About David
With 35 years’ experience, David is an executive leader with a broad experience base across governance, strategy, economic evaluation, funding, performance management, restructuring and business commercialisation.
T: +64 9370 8280 E: Email David Walker