Asset Management: beginnings, pt 1.

In Australia, interest in asset management arose as the result of a series of eight parliamentary reports in South Australia in 1986/1987 modelling the likely cost and timing of renewing all the State’s major infrastructure assets.  

The projected costs were so large that they would have absorbed  the State’s total capital budget within the next 10 years if urgent action was not taken.  To address this problem, the recommendations in the reports covered possible planning and accounting reforms as well as engineering and maintenance changes.  

Following the Public Accounts Committee’s Reports,  a major SA Government Task Force was established that reviewed,  then agreed and  reinforced all the ideas presented in the reports.  This led to the formation of a Cabinet sub-committee to consider the issues raised, This provided high level impetus for the development of asset management. 

Further support was provided by the Auditors-General who were appalled to find that no public sector department. not even the statutory authorities, had decent asset registers and they made this a requirement. 

But the most significant change was that led by the Australian Accounting Standards Board.  At this time the board covered accounting standards in both the private and the public sectors.  The private sector used commercial standards with accrual accounting but the public sector used cash accounting. The board wanted to standardise on accrual accounting for both but was concerned about how this would be received. When it learnt that the Parliamentary Public Accounts Committee in South Australia was promoting the idea of accrual accounting to better understand and deal with infrastructure asset management, it was encouraged to push ahead. Within two years of the release of the final PAC report, the board had released Exposure Draft 50, the model of accrual accounting for local government.

The introduction of accrual accounting meant that local, state and federal government departments were required to move from their previous practice of simply recording annual cash in and cash out, to establishing balance sheets and recording, for the first time, the depreciated value of their infrastructure and other assets,

You might think that an accounting change would be of no interest to maintenance engineers.  Fortunately @Roger Byrne was not your ordinary maintenance manager.  He had already been in the habit of including economic and planning issues in briefing notes for his clients and he quickly seized on the opportunity this change presented for maintenance engineers.

It was these briefing notes that later provided the content for the first local government asset management manual which subsequently became the IIMM we all use today.  So through top down interest and bottom up capacity building, Australia took an early lead in the development of asset management.

The Parliamentary Reports created a lot of interest Australia wide. No other state was prepared, or even able, to duplicate the research for their own constituency but all infrastructure agencies recognised that the conclusions reached applied as much to them as it did to their South Australian counterparts.  The CSIRO’s Engineering and Construction division took an active interest, as did State Treasuries and the Auditors-General.

With these organisations,  I continued to develop the ideas that had arisen and, after advising governments, commissions of audit, and infrastructure agencies themselves, I created ‘The Asset Management Quarterly’ publication in 1994 to share with others what I was learning.  Then, in 1996, noting that lots of interesting things were being done in the name of asset management – but nothing was being documented, I launched the International Asset Management Competitions where the awards went to the best documentation of good asset management practice.  They ran between 1996 and 2000 and in 1998 AMQ International launched the world’s first asset management website with information on asset management freely available to all.

The term ‘asset management’ started to become very popular and everyone wanted to get in on the act.  One day, flying from Sydney to Canberra my seat companion described herself as an asset manager – on questioning it turned out that she was actually a real estate developer!  Once off the plane and into a taxi,  on the taxi radio I heard an advertisement for ‘asset management services’ – which turned out to be office cleaning!   Yes, asset management had become the buzzword  ‘de jour’.

To be continued….