By 1989, state finances were getting tight across the entire country. But none was in a worse condition than Tasmania which had always been a mendicant state, even in the best of times.
I had been invited to speak to the Tasmanian Municipal Government in May on the subject of priority setting on which I had spoken to the Infrastructure Forum the previous year. But that earlier paper was aimed at giving a message to the AFCC, my arch nemesis at the time for their interest – and more especially, their ability – to be funded for infrastructure without any obvious concern for community benefit. I could see that local government required a different story.
In Hobart that morning, the session had been completely concerned with road funding, which they decided could be solved only if the Commonwealth Government would give them more money. I said that while we could fix some problems with more money, we didn’t have enough to fix all problems that way. In those days, I was younger and braver and I told them that they needed to reckon with the fact that there was no more money money coming, that indeed, whatever money the Commonwealth had to give would be reached by those ‘with longer arms than theirs’. Their experience meant they did not doubt me. But, I said, there was an answer: they could spend what they had more wisely. I then explained what they could achieve with asset management.
Happily the paper was well received. I was even asked to give the same paper to the engineers’ conference the following day. And then, about a month or so later, I had an invitation from the Minister of Construction, Resources and Energy, who had been sent a copy of my paper. He could see the value of AM and asked me if I would ‘come down to Tasmania and help him run the show’ . Chapter 12 “Moving on – my story” tells of this incredible opportunity and part 4 of our continuing story will look at how it worked in Tasmania.
Is this the AM curse? Every election year we are presented with some impossibly expensive infrastructure project which generates great excitement – and acceptance. Invariably these projects are unaccompanied by any detailed analysis, for it is the idea itself that is so compelling, and so analysis just spoils it.
Is this the problem with AM? Are we trying to sell the detail, when all that is wanted – indeed all that can be absorbed by the general public – is the vision? This is not to say that detail is not needed but without an exciting vision, why will people listen?
I am looking for examples of good AM ‘visions’. Do you have, or know of, one?
After the Construction Minister’s Conference in 1987 where the PAC work had been presented, I was greeted by my CEO. He was well pleased with our contribution.
Not that the PAC’s work on renewing infrastructure was necessarily understood! “I’m the envy of all”, he said, “because at last we have someone who can tell us how much we should be spending on maintenance”. Intrigued, I asked who this was. “Why, you!” he replied happily. I tried to explain that my expertise was in capital component renewal, not in maintenance, but my protestations were considered modesty and did not diminish his happiness, or belief!
It was generally assumed by maintenance personnel (although not by anyone else) that maintenance should be 2%. (Of what was never well specified). Now it so happened that the PAC calculations of component renewal had averaged out, across all portfolios, to be approximately 2% of the replacement capital value. This was taken as validation of this popular maintenance figure. It was a misinterpretation, but I could see how it arose.
Chapter 11, “Reactions” of The Asset Management Quest (volume 1 of The Asset Management Story) which I have posted today looks at the many and varied ideas that people had about asset management at the beginning.
What are the mistaken ideas that you have to deal with now?
I have known – and quite probably, so have you – many who have fought their way to the end of their studies, perhaps in medicine, law or teaching, only to find that their chosen field is something for which they are quite temperamentally unsuited and they need to start all over again. Fortunately, for those who wish to make their career in the management of physical assets, this fate can be avoided.
In Leadership Assets, Dr Monique Beedles takes you through four stages of an asset management career – from an Apprenticeship role where your task is to learn and you are leading yourself, through the next stage as Advisor where you lead others and your task is to establish credibility, and on to being an Advocate where you are now ‘leading people who lead people’ and your role is as an influencer, and finally, if you wish, a role as Ambassador where you represent an industry and lead a community.
You don’t need to be at the beginning of your career to benefit greatly from this book, although if you are, you are lucky indeed. Even those considerably advanced along a particular pathway will be encouraged by seeing how much further they may still progress.
Whatever spot on this spectrum you choose for yourself, you will not only find here a clear outline of the key ‘smarts’ you require: ‘tech’ smarts, ‘biz’ smarts and ‘people’ smarts, but also, and importantly, how to develop your strength in the ones you need. This is the main core of the book. It is brightly written, brief, to the point and immensely useful.
This is one of those books that when you find it at the end of your career, as I have done, you are left with a great desire to start all over again – and do it properly!
The late 1980s saw a reduction of grant monies to the States from the Commonwealth with promises of further cuts to come. Peak construction funding was over. This concerned the large private sector firms that had arisen with Commonwealth patronage and they now cast their eye over public works. It is no coincidence that the ‘outsourcing’ movement that had started overseas, should now arrive in Australia. Private Sector think tanks began to speak adversely about government construction performance, whilst at the same time boosting their own chances by promoting the country’s need for more. This was when the word ‘infrastructure’ started to be heard. The Australian Federation of Construction Contractors (AFCC) funded annual ‘Infrastructure Forums’ held in Canberra (near the source of power) and claimed that there was an infrastructure gap.
I challenged this in my first presentation to the Infrastructure Forum in 1988 and said that, since we didn’t know what we had, and we didn’t know what we needed (both of which were indisputably true) we couldn’t know whether we had a gap or not. This annoyed the AFCC and they asked the CSIRO, who organised the forums for them and who had arranged my first presentation, not to invite me again. So they didn’t. But they did arrange for the NCRB (the National Committee on Rational Building) – and a group that the CSIRO was heavily involved in – to be invited and the NCRB asked me to speak on their behalf. So my next address focused on the expensive consequences for the recurrent budget in future years of increasing capital spend this year. They didn’t like this either.
I didn’t have the power that the AFCC had – and, unfortunately, neither did the public works departments around the country. Gradually work was ‘outsourced’ to the private sector and it became obvious that if Asset Management were to grow, it needed to reach out beyond the engineering and corporate planning base that had guided it in its early stages.
That is what I look at in Chapter 10 of our ongoing Asset Management Story, “Architecture, Audit and the Rise of Accounting”, posted today.
Which disciplines, groups, organisations and institutions do we NOW need to reach?
In the late 1950s, peaking in the mid 1960s, there was a great need for infrastructure as our population was growing rapidly. This was a time of full employment. We are again looking to infrastructure to get us out of the downturn that Covid has caused. But is it the ‘right’ solution now?
A little bit of history, 1950 – 1985
With its large land mass and tiny population, Australia had long feared invasion from their crowded northern neighbour, Indonesia. So, after the war it took advantage of the opportunity to build its population by encouraging both refugees and migrants. In addition to the overseas influx, the 1950s also saw the beginnings of the baby boom. Australia’s population rose extremely rapidly in a very short space of time and quickly outstripped growth in housing. At the time, two and even three families might have to share a house.
The private sector could not move fast enough so the Commonwealth took up the challenge.At the time, it was flush with funds for with women now entering the workforce in large numbers, tax revenues were greatly increasing, and with the need for social welfare very low, it could afford to spend – and it did. It created large rental housing estates, hundreds of new suburbs, all with supporting infrastructure in water, electricity, roads, etc. And so, for over 30 years, an entire generation, we experienced rapid construction growth, we didn’t know anything else.
More history, 1985 –
But by 1985, things were changing. Population growth was slowing. The Federal Government was no longer flush with funds. It was time for construction to slow down. The large expansion of infrastructure in the past thirty and more years was also presenting demands of its own. Logically we needed to consider switching our attention from growth to maintenance and over the next ten years this was to become even clearer.
But there was resistance, and it came from three sectors – industry, where the large construction companies built up during the building boom did not wish to see demand for their services reduced; politicians, who saw growth in State GDP and constant infrastructure announcements as proof of their ability to serve the people; and the construction professionals themselves, whose numbers greatly exceeded the fledgling asset management professionals.
With the change in history, came a change in justification for construction
With population increase slowing, and so much infrastructure now completed, we could no longer justify major construction by reference to urgent need – so we changed the justification. It was now argued that infrastructure ‘created’ employment. Many still believe that this is so. But actually, it is public spending that creates jobs – no matter where it is spent, on infrastructure – or on services.
We are also now rethinking ‘the goal’ for infrastructure.
What do you think the goal for infrastructure should now be?
Back in 1987, when the issue of renewing ageing infrastructure was first recognised as important enough by the South Australian Parliament for Asset Management to have its own Cabinet Sub-Committee, there was a lot of enthusiasm amongst the utilities and infrastructure agencies involved. However, with an eye on their budgets, each agency emphasized the immediate need for funds and, to avoid commitment, also emphasized the long term nature of asset management outcomes. The message that came across was that they needed to invest a lot of money now for unknown (but assuredly great!) benefits at some unspecified later date.
I felt that this was very much like saying “I am going to punch you in the stomach now and it will greatly hurt, but when the pain subsides (and I don’t know when that will be), I guarantee you will feel absolutely ecstatic!”
I could not see how this could possibly be a winning strategy, and of course it wasn’t. It was, however, the message that almost all infrastructure agencies across the country were to give in those early years. With pretty much the same results. I had suggested we frame our approach around the changed management and governance requirements that all were now facing but my agency colleagues said this was too difficult. They were right, it was. Yet somehow that is what we needed to do. Actually, what they meant was that it would take too long! They wanted to get their demands in straight away.
Chapter 9 of our Asset Management Story, uploaded today, looks at the early implementation of asset management in the late 1980s.
What has now changed? How have we moved on? Is ‘selling’ asset management any easier, or more successful? Why?
Or managed luck? I have not hidden the fact that an enormous amount of luck has blessed my work in asset management since the very beginning. But is it blind luck, ( just sheer good fortune)? Or did I somehow manage some of it, simply by being dedicated to making things work and being prepared to take advantage of any opportunities that presented themselves?
I have never been inclined to differentiate, just grateful for it all. However perhaps we should consider this for we all have luck (good and bad) and, while we know that we must take responsibility when things don’t work out so well, we are often far too modest about doing the same when things go well. But, surely, recognising what we did ‘right’ as well as what we did ‘wrong’ is equally important for progress?
Today I have posted Chapter 8 about the fortuitous events that made it possible to transit from a research position with the Parliamentary Public Accounts Committee to a position where I could try implementing some of the ideas we had learnt. All 8 chapters are now available.
Now, looking back over your own successes, why not think about why they happened.
And while you are at it, why not tell everybody in the comments below.
It would cheer us up. And we really need to have some good news now.
In the early 1990s asset managers were so absorbed in the culture conflict between engineers and accountants that we gave short shrift to another conflict, that between scientists and management. If asset managers are now to effectively deal with the climate and environmental issues around infrastructure today this is an issue that we need to address. For this, I don’t think that we can do better than start with the excellent article by marine ecologist, Peter Cullen – also dating from the early 1990s.
In this article, Peter looks at the reasons for conflict between scientists and managers and suggests that there are three major reasons why it is difficult for scientists and managers to ‘get on’
- Friction between scientists and managers is often the result of misunderstandings about the culture within which each works.
- Many of the question that both are trying to solve are value questions not scientific ones or management ones.
- Managers often misunderstand science and expect it to deliver a truth that is nonarguable. They fail to understand the very process of science demands no such truths, so that assumptions, methods and conclusions can always be challenged.
He believes that the answer to this problem is to develop a ‘broking role’ – for people who understand both the scientific and management approach to provide a translation.
His argument about managers expecting science to provide a ‘truth that is non-arguable’ is an important one – and those who are currently disputing the ‘truth’ of global warming would be well advised to read and think about this short but powerful article.
However, I want to draw attention to what he has to say about cultures.
Understanding the cultures
“It is necessary to appreciate that the cultures pervading science are quite different from the cultures that pervade management. Without appreciating these cultural differences we will continue to be frustrated at the inadequate communication in both directions. Within professional ranks there are various mind sets inculcated during training and professional socialization. They can be parodied.
- Engineers don’t care why it works as long as they think it does.
- Scientists don’t care if it works or not as long as they understand why.
- Economists don’t care either way if the internal rate of return is OK.
- Managers don’t know unless someone bothers to tell them.
- Planners know how it should have turned out.”
The culture of Scientists
This includes sharing and openness through publication, conference presentations, travel;
honesty limitations of data/evidence;
emphasis on peer review;
organized scepticism;
peer rewards from quality of insights, experiments, analysis;
peer rewards for ability to select appropriate problems that have intellectual difficulty rather than immediate usefulness;
low status of data collection unless it is to test some hypothesis;
higher status for explanatory theories over empirical models;
some independence about what problems scientists will work upon.
The culture of management
- Managers have as their goal the delivery of benefits to some group. These might be abstract or generalized (policy) or specific (service delivery).
- Managers make decisions in order to reduce risks and they make pragmatic decisions to try to achieve this.
- Decisions are normally made with imperfect information and there is little pressure to review subsequently the assumptions in the light of effectiveness.
- There is often pride in the ability of managers to make decisions with little knowledge, and a culture which does not encourage quantitative evaluation and accountability.
- Technical skills are not directly valued in organizational hierarchies, and professionals have to become managers if they seek advancement to higher levels.
The Source of Conflict
Science is valued as a weapon in the ongoing conflict with other interest groups or agencies for power, influence and resources. Scientific outcomes, and the kudos of success, may be less important than staking out the turf to keep other players at bay. Public sector management appears to be undergoing a paradigm shift at the moment, and so there are two conflicting models.
(a) The bureaucratic model. The bureaucratic model has rules that are made to be followed. Following procedure is more important than particular outcomes. These systems are characterized by due process and formal procedures, rule books, secrecy and avoidance of performance review. The system rewards rule conformity, error avoidance and attention to detail.
(b) The managerial model. The managerial model is characterized by quantifiable outcomes that are more important than following set processes. Services are seen as products to be delivered to customers. There are devolved responsibilities within an externally set cost framework, and managers are assessed through cost-effectiveness reviews. Hence economic rationality replaces the legal and procedural framework of the bureaucratic model. The organization is seen as a tool in the hands of the executive manager or Minister, and is responsive to short-term political agendas. Rewards are for achieving output targets and nonachievement may be punished. Creates an environment where there must at least be a facade of progress, so if a problem is intractable there will be attempts to abandon it so at least the impression of progress can be created by moving on to new and relevant problems” .
What action do we need to take?
As Asset Managers we often get frustrated and annoyed when our ideas of what needs to be done runs counter to what others want to be done. Unfortunately a common response is to consider the others wrong, ignorant or even malicious. But let us first understand what they need to do to achieve their desires and see if we can’t work together.
Your comments?
If you have science colleagues, please share this with them for their ideas for a joint solution.
Footnote; Peter Cullen “The turbulent boundary between water science and water management”. Freshwater Biology, Vol 2. Issue 1, August 1990. He was described as ‘provocative, constructive, brave and always grounded in good science’. Peter was an Adelaide ‘Thinker in Residence’ in 2004. Sadly, he died in 2008. His ideas, however, live on.
The continuing story of Asset Management. It is 1987 and reactions to AM information are mixed.
There was the horror of a board member of the Adelaide Hospital who, when he saw the extent of their future renewal costs, declared “My Goodness, we cannot let the board see this!” A too common response amongst those responsible for management, unfortunately.
But the Under-Treasurer was thrilled when the credit rating agencies saw the asset replacement values as indicative of the State’s wealth (ignoring our future renewal costs), and so we were able to keep our AAA rating.
In Chapter Seven of our Asset Management Story, “Reactions”, I look at the initial impact of the work of the Public Accounts Committee.
There must have been something in the ether in the mid 1980s for, almost simultaneously, major reports on future infrastructure costs were released in the UK, the USA and Australia. But Australia was the only one to focus on managing the costs.
In the UK the focus was on advising the Government of the size and costs of future infrastructure growth. In the USA, the ‘Fragile Foundations’ study included renewal, expansion and upgrade but with insufficient detail to enable these elements to be disentangled.
The aim [of the American study] was to make the figure as large as possible to convince politicians to take the matter seriously. (Later I was to meet with one of the authors of this report, an MP, and when I talked about how we might improve infrastructure decision making, she reacted negatively “If we can’t get the capital projects we want, it wouldn’t be worth going into politics!”)
Earlier I had observed that many in Australia thought that America would surely have discovered and dealt with the asset management problem ahead of us. Well, they certainly had discovered the problem. But they hadn’t dealt with it. And the reason for this is, I think, quite interesting.
America, as a rich country, was used to dealing with problems by throwing money at them, so their focus on the costs alone probably made sense. Australia, on the other hand, had no such illusions. We didn’t expect money to be easily forthcoming and knew that we would need to present a well documented case if this were to happen. We also knew priorities would need to be set. So our focus on management was understandable.
To see more, Chapter 7 has been uploaded today and Chapters 1-7 are now available at
https://talkinginfrastructure.com/the-asset-management-story/
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