performance measure namely effectiveness and efficiency (NSW Treasury, 2004). ... Whole Life Value in Infrastructure and Buildings. ... Brisbane: Queensland.
COVER SHEET This is the author version of article published as: Too, Eric G. and Betts, Martin and Arun, Kumar (2006) A strategic approach to Infrastructure Asset Management. In Sirikijpanichkul, Ackchai and Wai, Shih Hoi, Eds. Proceedings BEE Postgraduate Infrastructure Theme Conference 2006, Gardens Point Campus, Queensland University of Technology. Copyright 2006 (please consult author) Accessed from http://eprints.qut.edu.au
A Strategic Approach to Infrastructure Asset Management
Eric TOO1, Martin BETTS2, Arun KUMAR3
Abstract Infrastructure asset management has grown in importance in recent years. In practice, many approaches and models have been adopted by organisations managing different infrastructure assets. The aim of this paper is to synthesise various asset management practices currently in use. The paper will also provide in brief, the concept of an integrative strategic infrastructure asset management framework. The framework broadly consists of three main components: strategic analysis, strategic choice and strategic implementation. An integrative strategic infrastructure asset management framework is important as it is presented as a process model, is generic and can be applied to various types of infrastructure assets.
Keywords: Infrastructure; Asset Management; Strategic
1. Introduction World-class infrastructure is vital to the nation economy. It underpins the delivery of essential services, drives economic growth, supports social needs and is closely linked to the high quality of life (Hardwicke, 2005). With the growth in capital investment in infrastructure assets to support the nation’s economic development, emphasis must be placed on developing holistic approaches of infrastructure asset management to significantly reduce the cost of owning assets. This paper aims to develop a framework to manage infrastructure assets. It begins with a discussion
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PhD Candidate, School of Urban Development, QUT Professor, School of Urban Development, QUT Professor, School of Urban Development, QUT -1-
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on the concept of infrastructure asset management. Following this, the existing literature will be synthesised to provide a working definition for strategic infrastructure asset management. Finally, an integrated framework for strategic infrastructure asset management is proposed through synthesising the many frameworks and guidelines adopted in practice.
2. The concept of infrastructure asset management The practice of infrastructure asset management begins when asset owners acquired a new piece of infrastructure asset. As owners, operators and maintainers of infrastructure assets, these organisations assume a significant responsibility in ensuring the successful performance of the assets to meet the service needs of their customers. At the heart of asset management is the concept of continuous improvement. Any organisation should be striving to improve its operations, whether from the point of customer satisfaction, increased productivity, better asset quality, better environmental performance or any host of other performance indicators. The asset manager’s role embraces all of the concerns to some degree as the physical infrastructure asset must support the organisation’s activities in ways that allow the organisation to service its customers in the best possible way.
There are essentially two levels of infrastructure asset management i.e. operational and strategic. Operational infrastructure asset management deals with the practical business of keeping the infrastructure in working conditions. The strategic level involves the integration of the user needs, the environment and the business functions of the organisation. In the past, many asset management systems have been used and these systems have inherent investment analysis capabilities. Most of these systems are used to monitor conditions and then plan and program their projects on a ‘worst off’ basis. These existing systems typically function at the operational level and focus on one particular asset.
In reality, contemporary practitioners are faced with considerations of social objectives and political goals both which play an important role to dominate the resource allocation and project selection process. Public scepticism of government, combined with an increasing preference in recent years for using private sector management approached in the public sector, has led to demands that government
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be more accountable and operates more like a private business (FHWA, 1999). This shift has forced the design, procurement and decision-making on infrastructure asset to be based on whole life value (National Audit Office, 2005). Whole life value encompasses economic, social and environmental aspects associated with design, construction, operation, decommissioning, and where appropriate, the re-use of the asset or its constituent materials at the end of its useful life (Mootanah, 2005). Hence, infrastructure asset management decisions need to be based on a proper evaluation of options which take into account all costs and benefits over the life of asset, and incorporate an explicit analysis and determination of an acceptable level of risk (Government of South Australia, 1999). This represents the optimum balance of stakeholders’ aspirations, needs and requirements, and the costs over the life of the asset (Bourke et al., 2005).
Accordingly, there arises an urgent need for the adoption of infrastructure asset management from a strategic perspective. Strategic infrastructure asset management is aimed at achieving organisational long term goals and effectiveness through dynamic alignment of the required infrastructure assets to meet changing customer needs. For asset management to become a true value-adding pursuit within a corporate framework, it must be primarily concerned with filling a strategic role, i.e. asset manager must be proactive not reactive in their approach (Best et al., 2003). Increasingly, asset managers are devoting their attention to a very broad range of concerns that combines engineering principles with sound business practices, information management and economic theory as well as the more traditional operational concerns related to maintenance of asset. Thus, asset management embraces much more than the operational concerns of providing and maintaining infrastructure. In short, a strategic approach to infrastructure asset management provides a better understanding of how to align the asset portfolio so that it best meets the service delivery needs of customers, both now and in the future (LGV, 2004).
3. Definition of strategic infrastructure asset management Increasingly, more organisations are adopting a strategic approach in infrastructure asset management. This new direction can be observed from the many reports, guidelines and best practices published by these organisations. Despite the different in emphasis and perspectives, some common themes can be -3-
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identified and can be categorised as follows: •
Systematic Management - In the past, infrastructure investment and maintenance decision were made in accordance to tradition, intuition, personal experience, resource availability, and political considerations. This unstructured approach means success was often measured in terms of controlling backlogs and not in optimising system performance. To optimise asset performance, asset management must adopt a systematic and structured process of maintaining, upgrading, and operating physical assets in a cost effective way (Austroads, 1997; FHWA, 1999).
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Whole Life Cycle - Due to the relatively long life-cycle of infrastructure asset, the consideration of whole life cycle approach is becoming increasingly important in investment decisions. Thus, life cycle approach is central to asset management by taking account of the total cost of an asset throughout its life (LGV, 2004; NSW Treasury, 2004).
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Resource Allocation - Limited funding, higher expectations and increased need for various types of assets have complicated investment and operation decisions. As such, asset owners need to have a transparent and accountable methodology to allocate the limited resources amongst diverse objectives. To this end, asset management can also be described as a methodology to efficiently and equitably allocate resources amongst valid and competing goals and objects (AASHTO, 2002).
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Service - In the past, the success of asset management is measured based on the provision of better asset at a cheaper cost. However, a better asset that does not meet the need of the users is no longer acceptable. The emphasis should be on service delivery to the community through minimising the creation of new infrastructure asset but utilising efficiently the existing asset base (Queensland Government, 1996). In short, a better service, not a better asset, is a key indication of successful asset management (LGV, 2004).
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Strategic Focus - Asset management also represents an approach to managing infrastructure that is strategic (AASHTO, 2002). This strategic view is important as it takes a long term view of infrastructure performance and cost. Strategic approach considers the assessment of costs, benefits and level of service provided to ensure that the present needs are met without compromising the ability of future generations to meet their needs (NSW Treasury, 2004). -4-
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To achieve the above themes, asset management needs to develop systems that allow decision-makers to have ready access to quantitative data on organisation resources and its assets current and projected future performance. It is a process for ensuring the requirements of organisations, users and other stakeholders are clearly understood and integrated into an asset management framework that optimises the outcomes achieved from policy and investment decisions (Austroads, 2002). Synthesising the above themes, this paper defines infrastructure asset management as: A strategic and systematic process of optimising decision-making in resources allocation with the goal of achieving planned alignment of infrastructure asset with service demand throughout its lifecycle
4. A Framework for Strategic Infrastructure Asset Management (SIAM) A review of some of the current infrastructure asset management practices also revealed that different frameworks have been adopted. This is summarised in Attachment 1. Despite differences in the sequence, terms and approaches adopted in each framework, it is noted that the strategic infrastructure asset management processes can be grouped into three key main sequential processes namely strategic analysis; strategic choice; and strategic implementation (See Figure 1). These key processes fit within the generic strategic management framework proposed by Johnson and Scholes (1999). All the frameworks adopted in the asset management practices are cyclic and include some form of reassessment, review or control that is used as feedback to improve the overall process. In addition, effective asset management needs reliable data and effective decision support tools. Hence, information is important in each stage of the processes.
4.1 Strategic Analysis Strategic Analysis is the process of identifying the direction that will contribute to the best utilisation of assets in the delivery of services to the customers. In so doing, it must ensure the compatibility between current asset portfolio and the changing environment within which it operates. Thus it involves three components, (1) analysing the business environment; (2) reviewing and analysing its current asset portfolio; and (3) conducting strategic “gap analysis”
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STRATEGIC ANALYSIS Business Environment
Current Assets Portfolio
Strategic Gap STRATEGIC CHOICE Non-Asset Solutions
Optimization STRATEGIC IMPLEMENTATION Procurement Approach
Project Management
FEEDBACK
INFORMATION
Asset Solutions
ASSET PERFORMANCE Figure 1 Strategic Infrastructure Asset Management Processes
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The purpose of analysing the business environment is to establish the service that an organisation needs to provide and serve in the most effective way (MAV, 2003). It involves forecasting the service delivery needs and the capacity to meet them on a short term and long term basis. The key outcome is the provision of services responsive to the customer’s needs within available resources (LGV, 2004).
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Review and analyses of current asset portfolio is a structured and systematic process which involves the identification, collection and analysis of relevant data for the purpose of assessing the current performance of an asset portfolio. The purpose is to get a clear understanding of the current situation of the organisation assets and their management. The outcome is a coherent picture of the current asset stock, its contribution to service delivery and the current costs of providing the assets (LGV, 2004).
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Having identified the current assets and what assets are likely to be acquired in the future to meet the service needs, a ‘gap analysis’ can be undertaken to identify the necessary adjustment to be made to the asset base (Queensland Government, 1996). The purpose here is to identify whether existing assets are aligned to support the services needed in the most appropriate, effective and efficient way (NSW Treasury, 2004). This analysis can also facilitate the -6-
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identification of strategies to be developed to cater for changes, in accordance with economic, social and environmental considerations (LGV, 2004).
4.2 Strategic Choice The purpose of Strategic Choice stage is to identify and select intervention options to close the performance gaps identified in the Strategic Analysis stage. The Strategic Choice stage consists of two sub-components namely; option identification; and option evaluation and selection. a. Options Identification - Identification involves establishing the potential ways to address the service needs identified during the ‘gap analysis’. These options should include both: •
Asset Solutions (capital investment, maintenance, disposal)
•
Non-Asset Solutions (demand management)
b. Options Evaluation and Selection - From the many options identified, optimisation and/or prioritisation will next be conducted to select the “best” and optimal solutions to close the gap (Austroads, 2002). This will ensure that the most suitable asset solutions are chosen to address the stated service needs. An important goal in this stage is asset optimisation i.e. maximising asset life and benefits (economic, social, safety, environmental) while minimising the life cycle cost (Austroads, 2002). As such, it usually incorporates the tools such as LCC, risk management, value management, and sustainable development, in the evaluation.
4.3 Strategic Implementation The implementation stage describes how the selected options can be achieved. Key challenges in the implementation of selected options include maximising efficiency and effectiveness of organisation resources, meeting customer expectations, minimising adverse customer impacts and adhering to project scope, schedule and budget, and managing needed changes in projects and programmes (AASHTO, 2002). To optimise the implementation of capital programmes, maintenance activities, and operations plans, it is necessary to consider (1) the procurement option and (2) the project management process. •
Procurement
Option
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Assessment -7-
of
procurement
options
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consideration of relative costs, benefits and risks is necessary before embarking on any particular options. Selecting the right procurement option can help to reduce time to completion, improve cost effectiveness, address project complexity, supplement staff skills with specialised expertise, and use in-house resources more effectively (AASHTO, 2002). •
Project Management - Project management is necessary for an organisation to implement a capital or maintenance programme effectively. By applying a project management approach, organisation can ensure that the delivery program is implemented within the available fund and resources(AASHTO, 2002). In addition, project status and achievements can be communicated to the public, legislative bodies, and other stakeholders. This will strengthen an organisation’s credibility and accountability.
4.4 Performance and Feedback The main purpose of performance measurement is to ensure the achievement of goals laid out in the strategic analysis stage. There are broadly two groups of asset performance measure namely effectiveness and efficiency (NSW Treasury, 2004). Effectiveness measures demonstrate how well the asset portfolio supports the service needs of users. Some of the service performances indicators include quality, quantity, safety, capacity, fitness for purpose, aesthetics, reliability, responsiveness, and environmental acceptability (NSW Treasury, 2004; Queensland Government, 1996). Efficiency measures demonstrate how well the assets are managed in terms of costs and profitability. Understanding the performance of the assets will provide necessary feedback for the development of a more effective strategy in meeting the need of service in future.
5 Conclusions The changes in the practice of asset management landscape require asset managers to be more proactive in the management of their infrastructure asset. This leads to a need to adopt a strategic view on infrastructure asset management. The effective management of infrastructure asset requires a clearly defined and integrated set of asset management processes. A descriptive framework for Strategic Infrastructure Asset Management is proposed through synthesising current practices of infrastructure asset management. The framework, presented as
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a process model, is generic and can be applied to various types of infrastructure assets such as roads, rails, utilities, airports, seaports, etc. It is hoped that this framework will serve as a guide to organisations in the management of their infrastructure assets in order to achieve their strategic goals.
References AASHTO. 2002. Transportation Asset Management Guide, prepared for the National Cooperative Highway Research Program (NCHRP). Washington D.C.: AASHTO Publication RP-TAMG-1. APCC. 2001. Asset Management. Deakin, ACT: Australian Procurement & Construction Council Inc. Austroads. 1997. Strategy for Improving Asset Management Practices. Sydney, Australia: Austroads Incorporated. Austroads. 2002. Integrated Asset Management Guidelines for Road Networks. Sydney, Australia: Austroads Incorporated. Best, R., Langston, C., & De Valence, G. (Eds.). 2003. Workplace Strategies and Facilities Management. London: Butterworth Heinemann. Bourke, K., Ramdas, V., Singh, S., Green, A., Crudgington, A., & Mootanah, D. 2005. Achieving Whole Life Value in Infrastructure and Buildings. Garston, Watford: Building Research Establishment. FHWA, F. H. A. 1999. Asset Management Primer: Federal Highway Administration, US Department of Transportation. Government of South Australia. 1999. Strategic Asset Management. Adelaide: Government of South Australia. Hardwicke, L. 2005. Australian Infrastructure Report Card. Barton, ACT: Engineers Australia. Johnson, G. & Scholes, K. 1999. Exploring Corporate Strategy (5th ed.). Hempstead: Prentice-Hall. LGV. 2004. Asset Management Policy, Strategy and Plan. Melbourne: Department of Victorian Communities, Local Government Victoria. MAV. 2003. Asset Management Improvement "Step" Program. Melbourne: Municipal Association of Victoria. Mootanah, D. 2005. Researching Whole Life Value Methodologies for Construction. London, UK: Construction Industry Research and Information Association (CIRIA). National Audit Office. 2005. Improving Public Services through Better Construction. London: National Audit Office. NSW Treasury. 2004. Total Asset Management, TAM 2004. Sydney. Queensland Government. 1996. Strategic Asset Management Manual. Brisbane: Queensland Department of Public Works. -9-
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(Austroads, 2002)
(AASHTO, 2002)
(Queensland 1996)
1. Define Objectives 2. Form Asset Strategies
1. Goals & Policies 2. Asset Inventory 3. Condition Assessment 4. Performance Modelling
1. Planning • Strategic Planning
3. Develop Investment Program 4. Identify asset requirements
5. Alternative evaluation & Program Optimisation 6. Project selection 7. Performance monitoring
Government,
(NSW Treasury, 2004)
•
Strategic Analysis 1. Community Expectation 2. Government Priorities 3. Services Plan Asset Review 4. Corporate Plan Demand Management
•
Community consultation
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Strategic Choice 2. Capital investment planning 5. Asset Strategy 3. Maintenance Planning • Capital investment 4. Building Management • Maintenance • Asset registration • Disposal • Energy conservation • •
Leasing
(Government of Australia, 2006)
South
(APCC, 2001)
1. Government strategy 2. Corporate Planning 3. Establish asset performance
1. Community needs & expectations 2. Government policy framework 3. Corporate Plans 4. Service delivery strategy 5. Resources strategies & Plan
4. Asset strategy development • Capital investment
6. Asset Strategic Plan • Capital Investment
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Management of existing
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Maintenance Operation
assets
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Disposal
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Asset disposal
Workplace Health & Safety
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Security
Communication Performance Indicators Condition Assessment Asset Reference System Gap Analysis Optimisation Framework Life Cycle Costing
Environmental assessment Benefit/Cost analysis Tradeoff Analysis Condition and Performance Forecasting Life Cycle Costing Performance Evaluation
5. Implement work programme
8. Program implementation
• Heritage 5. Disposal Planning Analytical Tools & Techniques for Optimisation Risk management Asset Portfolio Value management Demand management Life-cycle Costing Risk management Condition Assessment Asset performance measure Management of Projects Functionality of Assets Ecological sustainable development Continuous improvement Strategic Implementation 6. Implementation 6. Implementation
6. Audit 7. Review
9. Feedback
7. Feedback
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Performance Evaluation and Feedback 7. Feedback
Too, Betts, Kumar
Building Asset Compliance Demand Management Value Management Information system
Gap analysis Demand management Life Cycle Costing Risk Management Value Management Economic Evaluation Benchmarking Communication
5. Implementation • FM contracts
7. Implementation
6. Review
8. Feedback
