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  1. 1. Municipal Association of Victoria Asset Management Improvement "Step" Program PROGRAM OUTLINE CMG Group Ensuring Infrastructure Sustainability and Good Governence 1 Asset Management Improvement "Step" Program
  2. 2. Contents 1. The Councillor’s Responsibility 3 1.1 Non Feasance 3 2. Project Objective 4 2.1 Program Outline 4 2.2 Consultants Role 5 2.3 Typical Council Timeframe 5 3. Asset Management 6 3.1 What is Asset Management? 6 3.2 Key Asset Management Principles 6 3.3 Best Appropriate Practice (BAP) in Asset Management? 7 4. Conclusion 9 Ensuring Infrastructure Sustainability and Good Governence 2 Asset Management Improvement "Step" Program
  3. 3. 1. The Councillor’s Responsibility Councillors, as elected representatives of the community, are the custodians of a sizeable investment in infrastructure by past, present and future generations. Understanding the long-term implications of management decisions is essential for providing a cost effective sustainable service and an equitable distribution of the cost burden across generations. The roles of the custodian are: • To ensure the Council’s legal obligations are met • To represent the community as the asset owners • To ensure the asset/service is maintained for future generation at an equitable cost It is the responsibility of Council’s staff to provide the correct technical and professional advice so that the Councillors can make the best decisions on behalf of the community they represent. There is a growing concern that the infrastructure assets within Councils are being allowed to deteriorate to a point that will become an unreasonable burden to future generations. To ensure this does not occur, it is necessary to promote sound and sustainable management of local government infrastructure assets. This will require the preparation of long term asset management plans, in consultation with the community, and the provision of funding to cater for the loss of asset service potential, ie depreciation. Long term planning is necessary to ensure: • Intergeneration Equity • Smooth funding requirements • Maintenance of Services (and assets that deliver them) 1.1 Non Feasance Non-feasance has suddenly increased the profile of asset management within local government. The law of negligence is a fault-based system where a person who carelessly causes injury or loss to another person should compensate that person. The High Court has recently ruled that this should also apply to an authority that does not maintain its assets to an appropriate standard. This has prompted the need for Councils to demonstrate responsible stewardship of its assets. Irrespective of the financial capacity of a Council it must demonstrate a minimum level of process in approaching asset management. The improvement process arising from this audit will assist Councils to achieve this minimum standard. Ensuring Infrastructure Sustainability and Good Governence Asset Management Improvement "Step" Program
  4. 4. 2. Project Objective The principal objective of the Step program is to assist Councils to achieve a minimum standard of asset management process within two years. This will help to minimise the risk of claims against Councils which may now arise because of recent legal decisions. The program aims to assist participating Councils to improve their overall asset management and as a consequence, helps improve Victoria’s Asset Management quality level generally. At an operations level the potential benefits to Councils include: • Extending the life of existing assets through optimal maintenance practices, thereby deferring major capital expenditure. • Identifying assets at risk and rehabilitating or renewing them at a lower cost before they need total replacement. • Enabling gains in productivity, service delivery and managerial effectiveness 2.1 Program Outline The MAV will assist participating Councils through the following ongoing program: 1. Consultants visit with participating Councils and: – Present an introduction program to the CEO and interested Elected Members – Interview CEO and Executive Management Team (EMT) members – Assess Council’s Asset Management Process through the completion of the “Asset Management Balance Score Sheet” to ensure that major issues have been addressed – Assess the data derived from the MAV Benchmarking activity originally carried out in 2001. (For those businesses that did not participate, the questionnaire needs to be completed and the data results generated by GHD) – Identify the key AM issues and priorities from the Council’s perspective – Work with Council to derive a suitable improvement program for the next 12 months, matching this with Council’s capability and available resources – Gain the commitment of the CEO and officers to the agreed program – Set up a reporting framework 2. During the ensuing year the consultants will then: – Provide “help desk” support to the Councils asset management (AM) staff via telephone and email – Visit the Council for half a day every six months to review progress and provide assistance wherever needed. 3. In May 2003 the MAV will undertake the next AM Benchmarking Study and these results will be used to amend and introduce the program for the second year. Ensuring Infrastructure Sustainability and Good Governence Asset Management Improvement "Step" Program
  5. 5. 2.2 Consultants Role Consultants have been appointed by the MAV to facilitate this improvement. This will be approached using three core strategies as outlined below Awareness Providing Developing a self- self- Raising Tools assessment and improvement framework • Presentations and • Organisation structures • Complete a balanced workshops with staff • Templates for: scorecard and present and councilors –AM Policy to each council during • Develop councilors a –AM Improvement first visit ‘questions to ask’ guide Strategy • Develop a simple two • Focus on establishing –AM Plans year improvement councilors as asset • Providing examples framework with each management leaders • Providing references council on first visit based on scorecard • Establishing networks outcomes and user groups • Review these during • Provide a help desk subsequent visits 2.3 Typical Council Timeframe First Six Months Visit Review (Oct – Dec ’02) (Mar – Apr ’03) Interviews Review Balanced Scorecard Workshops Review Improvement Program Complete AM Balanced Scorecard Progress report Develop Improvement Program Establish regional networks Ongoing CMG Help Desk (Guidance and Advice) Develop AM Improvement Strategy Implement AM Improvement Strategy Adopt AM Policy and Strategy AM Develop AM Plans (target > 50% of asset base) Ensuring Infrastructure Sustainability and Good Governence Asset Management Improvement "Step" Program
  6. 6. 3. Asset Management 3.1 What is Asset Management? “The goal of infrastructure asset management is to meet a required level of service in the most cost effective way through the creation, acquisition, maintenance, operation, rehabilitation and disposal of assets to provide for present and future customers. … “A formal approach to the management of infrastructure assets is essential in order to provide services in the most cost effective manner, and to demonstrate this to customers, investors and other stakeholders.” (International Infrastructure Management Manual – Version 1.0) 3.2 Key Asset Management Principles Life cycle asset management planning approach is best shown diagrammatically in the following figure. STARTING MANAGEMENT POINT REVIEWS ASSET PLANNING ASSET AUDIT STRATEGIES ASSET DISPOSAL / ASSET CREATION/ RATIONALISATION ACQUISITION ASSET ACCOUNTING & ASSET REPLACEMENT ECONOMICS ASSET REHABILITATION / ASSET OPERATIONS RENEWAL ASSET CONDITION & PERFORMANCE ASSET MAINTENANCE MONITORING Ensuring Infrastructure Sustainability and Good Governence Asset Management Improvement "Step" Program
  7. 7. 3.3 Best Appropriate Practice (BAP) in Asset Management? An organisation that is delivering Best Appropriate Practice (BAP) in asset management should be able to make the following claims: 1. We know what we own or have responsibility or legal liability for 2. We have recorded these assets in a register down to a identifiable level 3. We monitor the condition, performance, utilisation and costs of assets down to the managed component level and aggregate this data up to give outputs of cost and performance at the following levels: • Asset • Facility • Sub system or • Full system/program 4. We thoroughly understand and have recorded the current levels of service in terms of quantity and quality of service 5. We understand the likely future levels of service required based on population growth, demographic changes and community expectations 6. We understand the long term (20 years) funding needs of our municipality to meet these customer expectations in both capital and recurrent expenditure 7. We monitor and report on the condition, performance and functionality of our assets against prescribed service levels and regulatory requirements 8. We have uniform processes across our whole organisation for the evaluation of any investment in: • Capital works • Maintenance • Operations The process involves an assessment of the relative risks and benefit costs of these investments 9. We only make decisions on individual projects when all service programs have completed these outputs and the funding needs of the whole organisation is known together with the knowledge of its impact on rates and charges 10. We always approve the necessary renewal programs to sustain the existing levels of service before other works, providing they are justified through our process 11. We only approve capital for new works and services with the commitment of the necessary recurrent expenditure 12. We assess the indirect or ancillary cost impacts of inadequate asset condition or performance on the community in terms of the economic consequences of failing to meet our agreed standards or service levels Ensuring Infrastructure Sustainability and Good Governence Asset Management Improvement "Step" Program
  8. 8. 13. We link our corporate goals to our investments and ultimate action plans To do this efficiently and effectively we need to: • Apply best appropriate life cycle Processes and Practices to our valuable community assets • Acquire and maintain the necessary Data and Knowledge needed by these processes • Store this data and knowledge in the most appropriate Asset Management Information Systems • Prepare an Asset Management Plan so that the strategy is known to all • Adopt Commercial Tactics which means that we carry out the work using a ‘best value’ process that ensures we are getting the best combination of value from the service provided and price 14. To ensure the sustainability of these asset management (AM) activities we support the AM program through: • Our corporate structure, roles and responsibilities • Policies and resulting strategies Although it is hoped that Councils will endeavour to achieve BAP in asset management, this needs to a long-term goal. In the meantime, Council should aim to achieve a minimum standard for each major asset group. This is the main aim of the Step Program. Ensuring Infrastructure Sustainability and Good Governence Asset Management Improvement "Step" Program
  9. 9. 4. Conclusion It is only when all the asset management principles and key success factors are adopted and put into place that asset managers, owners, regulators, shareholders or stakeholders can be assured that the work being completed on expanding, maintaining and renewing our valuable community asset portfolios is of sufficient quality to ensure sustainability in both the short term and the long term. This is the first step in what is hoped will be an ongoing process to improve the quality of municipal asset management in Victoria. Ensuring Infrastructure Sustainability and Good Governence Asset Management Improvement "Step" Program