Here is another actual event demonstrating the immediate benefits of having an AM Plan.
Free gifts are never really free. This is why Joe Brown, the ageing art dealer, was finding it so difficult to get the Victorian Government to accept his offer of an outstanding art collection worth many millions of dollars. The capital and ongoing costs associated with housing and maintaining the collection were themselves quite extensive. The quality of the collection was not in dispute but what was in dispute was the value to the Victorian community of allocating scarce resources to an art collection, resources that could otherwise be spent on health or education or any of a large number of other uses.
The decision would, of course, be influenced by the Government’s strategy for community arts at the time, as well as the nature and extent of its existing portfolio. This AM information in the Plan would help to determine what this collection could add to the total art coverage. (Remember “All strategic questions are portfolio questions”)
The Strategy and associated plans were well documented, enabling the opportunity to acquire this collection to be compared with the existing methods of meeting the State’s Art and other strategies, as documented in the Plans. This made it possible to tell whether this was a ‘wanted’ or an ‘unwanted’ gift.
Without this information, elected members were at serious risk of being emotionally blackmailed into possibly poor community decisions. Protect your agency by protecting your elected members!
What other ways can you suggest to strengthen the case for AM Plans? Please share your experiences.
Lobbyists are the bane of a CEO’s life – and an Asset Manager’s! This presents another good use for an AM Plan. Unlike last week’s story where the council was well prepared with its AM Plan, in this instance it was not. But YOU could be!
The council members had been well educated in asset management thinking and were aware that the acquisition of an old, non-heritage listed building with limited functionality was not in the best interests of the community. But how did they deal with a small, but extremely vocal and active, lobby group that was pressing them to acquire it?
At this stage their asset management plan had not yet been constructed but suppose it was, then they could have shown the lobbyists that council’s resources were fully allocated to projects which had each been justified in terms of benefits and costs to the community and they could have said:
“We appreciate your interest but here is where council resources are going. All of these projects have been carefully analysed, costed and evaluated. Provide us with a costed evaluation and the benefits of your proposal for the wider community and if the benefit:cost analysis shows that it is better than the least of our current projects we will reconsider.”
This puts the onus back on the lobbyists to estimate both costs AND benefits and this will often be sufficient to stop the lobbying pressure but if the lobby group do demonstrate greater value then council knows that it is not disadvantaging the community by agreeing to their wishes.
Some many years later the Mornington Peninsula Shire Council in Victoria actively employed this approach – very successfully.
What experience have you had that would strengthen the short term benefits case for AM Plans?
While we get better at being able to produce AM Plans, CEOs seem less willing to use them. This is not surprising when you think about it – from their point of view! They are responsible for performance today.
They know that reducing long run renewal costs is good for the community but they are acutely aware of the costs involved which they see as reducing their ability to meet today’s requirements. So let’s show them that the short term benefits outweigh the short term costs and that, therefore, the long term benefits are just sheer bonus.
Consider the following. This actually happened.
A woman tripped on a cracked footpath and her lawyer encouraged her to sue the local council. In its defence the council said that yes, many of its footpaths were ageing and in need of repair. Many other assets were also in need of attention. Council was now facing the need to replace many assets constructed during growth times some many years ago. In total, the costs of renewal were far more than the council could manage in any one year’s budget. The Community had been consulted and the council had carried out a condition audit on its footpaths. It had scheduled the worst areas for immediate attention and had a program to address the rest over a period of years. Each year, the capital works list was re-prioritised to ensure that council was allocating its scarce resources to the areas most in need. They demonstrated this by reference to council’s asset management plans and condition audits.
The judge awarded the case to the council. In his summation,he said that the council was demonstrably not negligent in the way that it was tackling its repairs and maintenance. Not only did he find for the council, but he also awarded costs against the complainant. The woman then sued her lawyer for poor advice!
How else can we sell the short run advantages of AM Plans so that organisations want them (rather than simply hammering the mandating of AM which immediately sets it up as a cost to be minimised)?
What positive short term benefits from AM plans have you experienced?
Image from James Webb Telescope: Interacting Galaxies
After taking three months off – impressed how much surgery slowed me down! – I am taking stock.
I find I am almost totally not interested in Asset Management as a technical subject. Or rather, that I have no hope that something technical (like ‘AI’) will sort it for us.
And yet, there is still a large problem to be sorted, that surely requires new, and clever, thinking.
The Talking Infrastructure board is more or less convinced that we have not yet made Asset Management stick. In particular, to get where Penny saw 40 years ago: business as usual longer term planning to meet infrastructure demand. And more recently, planning ahead in a changing world.
One painful example is the retreat from meaningful AMPs in Australian councils, their first home.
Why infrastructure organisations don’t face the future has been a puzzle. Vested interests, for example in the construction industry, sure; lack of skill or vision in the decision-makers, yeah. Is it basically that the pain of not planning adequately doesn’t fall on the people failing to plan?
Our inability as a species to think beyond a few years?
But I am not yet that pessimistic. I don’t believe it’s biological.
What most grips me is the problem of culture. Yes, we happen to live in a peculiarly short-termist culture. But let’s, as clever people, tackle it as a Meadows-type system challenge.
In the past decade some of us have asked how we can get an organisation to plan sustainably: to have a process, a system to plan out our assets, that outlives any CEO, or any individual asset manager for that matter. A few years ago, a network of us in North America looked at how to ensure that an incoming CEO took an AMP process as given. Useful and entrenched enough not to be their focus for change.
Did we succeed anywhere?
Watch this space…
From script by Lou Cripps
The lifecycle-based Asset Management Plan was Penny’s solution to the issue of short-term thinking.
In particular, she wanted us all to look ahead at budget requirements for renewals – replacements and refurbishments of aging assets.
But planning and lifecycle thinking are needed for other challenges, too.
For me, the fundamental point is the importance of thinking ahead. Of being proactive rather than reactive, of exploiting what we already know about our assets to stop being surprised by things we can work out ahead of time.
In a week when many of us are trying not to think about WW3, we know we don’t know everything about the future. But we need to make better use of what we do know.
The problem, 40 years on, is that so many organisations don’t.
Here are just some of the questions I would wish – fairy godmother style – everyone to be able to give better answers to.
- 101, if we think we need to build some new infrastructure asset, what will it cost to maintain and operate it?
- What are the different realistic solution options – and what opportunities will we lose in choosing any of them?
- What’s the evidence that we have understood the problem and scoped our preferred option correctly? What else has to be considered in with the capital cost – like the cost of new facilities when we buy new electric fleet, for example?
- What costs and disbenefits should we also cost into the materials we choose, such as embodied carbon or damage to other communities?
- What costs and disbenefits will continue long after the physical asset is gone (think the loss of species or habitats, long-term damage to communities)?
- Do we really have any fact basis for the costs, risks and benefits of something new, as opposed to sustaining what we have?
All of these are elements of whole life cost modelling. Too bad many organisations still don’t even use basic lifecycle costs for their budgeting or strategies.
The underlying problem… is a system that doesn’t plan for the future. Is it lack of the right skills in the right place, or vested interests? Laziness??
One thing I am pretty sure is that it isn’t a lack of available information.
What do you think: just how bad, on a scale of 1 to 10, are our current infrastructure business cases?
Further good reading: Penny’s Infrastructure: we can afford to buy it, can we afford to keep it? Louise Hart, Procuring Successful Mega-Projects: How to Establish Major Government Contracts Without Ending up in Court. Joseph Berechman, The Infrastructure We Ride On: Decision Making in Transportation Investment.
If Asset Management is to deliver better asset planning, we have a challenge. Are we living up to it?
The most obvious thing about AM is that it’s about physical assets. And for most of its history, the assumption has been that the main quality of an asset manager is that they need a background in those areas most concerned with physical assets: that is, engineering, operations, or maintenance.
Who else knows or cares about physical assets? And without that interest, AM might be unmoored: a branch of finance or corporate planning that simply doesn’t know or care enough.
The dilemma is that we need other skills that don’t come for free with delivery backgrounds.
Worse, we need perspectives that definitely go against what we learn in engineering school, or the motivation of operations.
- How do we nurture a profession of people who really like the realities of physical assets but think in a new way about them?
- How early do we need to reach potential asset managers?
There are some good signs – Dr Monica Beedles’ Street Smarts and Biz Smarts, for example, and the Canadian Network of Asset Managers (CNAM) work on AM competences. (And shout out to pioneers of new ways of getting to undergraduates – hello, Valerie Marcolengo!)
But, as CNAM points out, we have a chronic shortage of asset managers.
And many who struggle in post without the tools of effective asset management planning.
How do we reach those with the environmental, analytical, process, culture change and bigger picture skills we need?
What is your ideal undergraduate syllabus to grow the next generation of asset managers?
Thanks to the British Columbia South Island AM Community of Practice for the opportunity to discuss competences this week!
From script by Lou Cripps
What’s the responsibility of Asset Management? In my mind, there’s no question.
The output from an effective Asset Management system is a better allocation of resources to physical assets. It’s all about allocating $ and people where they are most needed, and not to spend or do where that is not needed.
And that can mean only one thing. AM – the system, not the team – should be the major input to the budgeting process for asset-intensive sectors such as power. And a major input wherever there is a significant amount of budget at stake.
The Asset Management input to the budgeting process is what Penny originally called the AMP. Given that ISO 55000 didn’t quite get it, I wonder if we should now spell it out – the asset management planning process (AMPP). One integrated, co-ordinated process that looks across the whole asset base with consistent principles on which to base decisions about priorities for the medium and long term.
We should expect – hope, indeed! – that this will over time have a major impact on business budgeting. That asset-related budgets will change significantly when we have a more optimising system, to make better use of information and plan further into the future.
The focus is not individual decisions, but the wider decision processes.
- What are the priorities for asset renewals, that is major work to replace or refurbish assets?
- What is the appropriate level of planned maintenance to optimise cost, risk and performance?
- Given the current state of the asset base, what is a realistic level of allocation to reactive work going forward?
- How do any growth or new assets fit within the overall strategy (and how important are they in relation to sustaining the assets/ services we already have)?
And this is not planning just about the physical assets. Both the money and the resources have to be considered: there is little point in arguing for money if there is not also a realistic plan for the people to deliver the work.
If we agree this is what Asset Management has to deliver, that also tells us what the main job of a dedicated AM function is and its key relationships with other functions. We can work through what kind of skills and capabilities we require, and where AM sits in the organisation.
It’s why I don’t consider Asset Management in any sense a sub-branch of Engineering – or the capabilities what we teach on current engineering degrees. It’s also not Finance, or HR, or Procurement, though it involves all of these.
And the bigger the amount of dollars at stake, the more vital that we do good Asset Management.
Talking Infrastructure is looking again at the AMP and the asset planning we require for future-friendly infrastructure. If you would like to be involved, contact us!
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