Getting asset management right: a new framework

by Rami Affan, Executive Director, Asset Management, Infrastructure NSW

The management and use of NSW’s assets must become smarter, more productive and efficient to manage the upward pressure on maintenance requirements and expenditure, and the 2018 NSW State Infrastructure Strategy has recommendations for how best to do this.

The 2018 NSW State Infrastructure Strategy recommendations demonstrate the critical asset management response by the NSW Government, which currently manages assets worth more than $340 billion, to the challenges of population growth, climate change, expectations of level of service offered by infrastructure and the age profile of assets.

A strong asset management framework is critical to extract maximum benefit from the asset portfolio of NSW and to ensure that the state’s infrastructure spending remains sustainable to meet future service demand.

This article outlines the whole of NSW Government approach, as led by Infrastructure NSW, to develop a new modern NSW Asset Management Framework that is focused on improving the asset management capability and accountability of the NSW public sector. This approach was in response to the anticipated challenges of population growth, climate change, expectations of level of service offered by infrastructure and the age profile of assets as outlined in the NSW State Infrastructure Strategy 2018–2038.

The need for change

In February 2018, the State Infrastructure Strategy 2018–2038 (Infrastructure NSW, 2018) was released. This strategy set out a 20–year vision for the state to have the right infrastructure in the right places, that is well managed and put to good use, boosting productivity, global competitiveness and improving the quality of people’s lives.

NSW currently has the largest state infrastructure investment program in the nation (over $87 billion from 2018/19 to 2021/22), supported by the strongest state economy in Australia (NSW Treasury, 2018). Unlike prior state infrastructure strategies, this strategy looked beyond existing infrastructure needs.

The recommendations in the State Infrastructure Strategy 2018–2038 identify investment and policy priorities that are achievable, affordable, and that deliver the highest economic, employment and liveability benefits to the people of NSW.

This strategy is less about a recommended list of projects — NSW already has a healthy pipeline of capital works — and more a set of policies and strategies required to make more efficient use of existing and new infrastructure with a focus on optimising efficiency, better asset management and managing peak demands while delivering essential infrastructure in the most cost-efficient way.

As outlined in the State Infrastructure Strategy 2018–2038, the demand for infrastructure to meet growth is increasing, but governments alone cannot afford to build its way out of demand. Population growth, climate change and increasing service expectations (as shown in Figure 1) offered by infrastructure are placing risks on asset performance and the NSW economy, which is forecast to grow from $539 billion today to $1.4 trillion by 2056.

Figure 1 – Forecast of demand on services in the next 20 years (Infrastructure NSW, 2018).

Figure 1 – Forecast of demand on services in the next 20 years (Infrastructure NSW, 2018).

In response to these challenges, the State Infrastructure Strategy 2018–2038 makes recommendations for the NSW Government to introduce an asset management policy that includes a new assurance model managed by Infrastructure NSW by the end of 2018 to transition NSW state agencies into a new asset management framework in line with modern accepted asset management standards and practices.

At the 2018–19 NSW State Budget (NSW Treasury, 2018), an anticipated growth of 22 per cent in assets from the significant level of investment noted previously by 2022, is placing significant pressure on maintenance funding. In addition, the current age profile of assets and service expectations is placing significant upward pressure on maintenance requirements and expenditure in the near term.

Further compounding these challenges is the current asset management capability in the NSW public sector and industry. In April 2018, the Asset Management Council of Australia (Asset Management Council, 2018) surveyed a cross section of organisations from a variety of industries throughout Australia and determined that the state of asset management capability within the industry remains a current challenge across Australia, as summarised in Figure 2.

Figure 2 - Asset Management Council Industry Survey (Asset Management Council, 2018).

Figure 2 – Asset Management Council Industry Survey (Asset Management Council, 2018).

Without the right kind of investment in asset management capability and improved efficiencies in the NSW public sector we may end up in a very similar situation to the US. During my time consulting in the US across various states and cities, I encountered many public sector agencies without visibility of their asset portfolio and limited understanding of asset risks and challenges in service delivery, as summarised in Figure 3. The one common thread within these US public sector agencies was a significant lack of investment in their asset management capabilities.

Figure 3 – Current asset management experience in the US (American Society of Civil Engineers, 2017).

Figure 3 – Current asset management experience in the US (American Society of Civil Engineers, 2017).

In response to these challenges, and the asset management recommendations contained in the State Infrastructure Strategy 2018–2038, a new Asset Management Policy for the NSW public sector is being developed by Infrastructure NSW in collaboration with NSW Treasury and in consultation with NSW state agencies. The NSW Asset Management Policy is designed to achieve a consistent approach to parts of the asset management cycle across the NSW public sector in line with industry accepted asset management standards, enabling agencies to:

  • Make better use of their existing assets
  • Adopt clear and consistent definitions and methodologies to report and manage the size of any maintenance backlog in their sector
  • Broaden assessments of asset performance to take into account economic, social and environmental outcomes
  • Develop a whole–of–asset lifecycle and whole–of–government approach across interconnected   infrastructure networks to drive an integrated vision of infrastructure provision and management that creates value, reduces costs, manages risks, and improves the performance of assets
  • Adopt innovative, contemporary technologies and innovative approaches to improve the operations and maintenance of infrastructure
  • Use quality data that will support evidence-based decision-making the NSW Government to balance cost, risk and performance

Importantly, in addition to supporting a consistent and improved approach across state agencies, the policy demonstrates value to the state, communities and customers through the core focus to build and sustain a level of asset management capability in the NSW public sector that aims to deliver the following improvements to state outcomes in response to the relevant strategic challenges identified (above) as outlined in Table 1.

Table 1 – Response to key strategic asset management challenges for NSW

Table 1 – Response to key strategic asset management challenges for NSW

Approach and implementation

The success of a new NSW Asset Management Policy in delivering on its strategic goals is critically dependent on a robust and effective implementation program across all NSW state agencies. Outlined below in Figure 4 is Infrastructure NSW’s implementation framework for a whole–of–government approach to adopt this critical change.

At first glance the approach may look similar to that taken by Victoria in developing and implementing its Asset Management Accountability Framework (Department of Treasury and Finance Victoria, 2016). However, many of the lessons learnt from Victoria’s implementation (in consultation with the Department of Treasury and Finance of Victoria), have been incorporated by Infrastructure NSW.

Figure 4 – The pathway to improving asset management practice in NSW

Figure 4 – The pathway to improving asset management practice in NSW

The four key components of NSW’s approacH (Figure 4):
  1. Determine an understanding of current state

This step involved obtaining detailed insight in collaboration with NSW Asset Managers and Executives on the current asset management challenges faced within agencies including the use of a formal industry accepted asset management maturity assessment and benchmarking (as provided by the Asset Management Council). This initial diagnostic established a baseline of current asset management practice across NSW state agencies.

  1. Establish NSW Asset Management Policy requirements

The requirements of the NSW Asset Management Policy will be aligned to current accepted industry standards (ISO55000) so that the overall asset management practice in NSW state agencies can be improved, and includes:  

  • Agencies to have a fit-for-purpose Asset Management Framework which includes Strategic Asset Management Plan (SAMP), an agency-level Asset Management Policy, Asset Management Plans (AMPs), and an Asset Register
  • Accountable Authority of each agency attest annually to compliance with the policy
  • Agencies undertake a periodic assessment of their asset management maturity
  1. Leadership commitment and recognition of incremental improvement

The evolution of asset management practice by state agencies starts with the level of commitment by their leadership. Only then can there be a genuine understanding of what their organisation will need to change through improving current asset management capabilities or consideration of organisational reform to support creating the right culture within their organisation for asset management to thrive. The policy recognises this and outlines transitional arrangements for agencies through the adoption of maturity road maps that aim to improve asset management practice over a period of time (through interim states), moving towards full compliance with the policy.

  1. Infrastructure NSW Influence and Support

The NSW Government expects agencies to demonstrate strong transparency and accountability as part of their role as stewards of public assets. The attestation process and the independent asset management assurance is to be led by Infrastructure NSW (under its role as the independent strategic advisor to the NSW Government).

This process provides a level of confidence to the NSW Government that agencies are meeting their obligations in relation to asset management, and that their performance remains relevant, consistent and reflects contemporary and good asset management practice. Further to this, the partnership with the Asset Management Council of Australia has been critical in enabling Infrastructure NSW to provide policy implementation support to state agencies through:

  • Availability of accredited asset management training for agencies
  • Availability of a formal industry recognised Asset Management Maturity Assessment
  • Quarterly NSW Asset Management Community of Practice events

The quarterly NSW Asset Management Community of Practice forums (as chaired by Infrastructure NSW) commenced in May 2018 and has grown to over 70 members across NSW agencies. This forum alone has been key to the success of developing and implementing the new NSW Asset Management Policy as each event provided:

  • A dedicated asset management forum for NSW Government agencies and asset management practitioners focused on improving the understanding, capability and application of asset management knowledge and practice in NSW Government
  • Opportunity for Infrastructure NSW to collaborate across NSW Government on the development of the NSW Asset Management Policy and Asset Management Assurance Framework
  • Alignment, improvement and efficiencies in cross-sector and agency relationships on key challenges and priorities for NSW
Next steps and opportunities

The NSW Government Asset Management Policy will drive a whole-of-life approach to asset management by agencies, which will minimise the long-term cost of service provision. The policy also specifies that agencies have in place robust and defensible Asset Management Plans, supported by clear evidence on asset performance, cost and outcomes to the state. This approach will be supported by promoting the adoption of new technology innovations that reduce whole–of–life costs.

Further, the introduction of an Asset Management Assurance Framework, managed by Infrastructure NSW, will assist the NSW Government in determining the maintenance requirements of agencies by objectively assessing the maturity of an agency’s asset management framework and evidence base. This critical function previously did not exist in NSW.

Infrastructure NSW has also commenced a review to establish a consistent methodology for the state to best quantify, understand and manage the NSW maintenance backlog. As outlined in the 2016 NSW Audit Office reports (Audit Office of NSW, 2017), there is no consistent definition for backlog maintenance and measurement methods across NSW Government agencies. This lack of consistency renders it difficult to determine the actual levels of future maintenance expenditure required, risk and quantum of the current maintenance liability, and the relationship to social, economic and financial outcomes.

More efficient maintenance practices

Asset management in the NSW public sector has focused primarily on individual infrastructure sectors to date, with an emphasis on inputs. The new Asset Management Policy will now for the first time mandate consideration of environmental, social and economic outcomes, as well as interdependencies between infrastructure sectors. Through this policy, the management of NSW assets is anticipated to become smarter, more mature, more productive and more efficient to avoid infrastructure spending increasing unsustainably and risk impacting the delivery of services to communities.

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