The role of Asset Managementin the Public Sector

Ernst Swanepoel

SAAMA Council Member

What is thepurpose of Asset

Management?

TOPICS

• Accountability for Asset Management

• Physical asset management: Strategic Business Process Model

• Asset Management “Best Practices”

• Business and Asset Life Cycles

• Life Cycle Asset Management Costs

• Best Practices:

– Asset Management

– Maintenance Management

• Who is accountable for the condition of the asset?

• What is our core service to our customers?

Accountability for Asset Management

• Treasury systems’ requirements

–“The effectiveness and appropriateness of systems and procedures used to manage state assets is vital”

–“Great emphasis should be placed on ensuring better accounting practices and procedures, to ensure that state assets are managed and utilized in the most effective way to achieve the required results as defined for each entity within the Public Sector”

a) Accountability & PFMA

• Treasury’s systems requirements

“Good asset management is critical in any business environment and more so in the public sector as they are vital to providing a foundation for economic activity”

• PFMA Section 38

–places the responsibility on the accounting officer for financial and risk management of the entity as well as the effective and efficient use of the resources thereof. The section further specifically tasks the accounting officer with the management, including the safeguarding and maintenance of assets and the management of liabilities.

b) Accountability & PFMA

• Asset and work

–enterprise-wide visibility and lifecycle management for your physical assets to decrease costs, increase asset availability and minimize downtime.

• Material and Procurement

–Leverages your corporate buying power by centralizing purchasing for multiple locations and helps you manage and optimize spare parts inventory while minimizing carrying costs and providing inventory visibility across your entire organisation

c) Accountability & PFMA

• Safety and Compliance

–Helps you comply with all regulatory issues in your

industry while reducing non compliance penalties and

improving asset utilisation and uptime.

• Design Engineering

–Utility engineers can create accurate plans for new

construction, including necessary equipment and

budgets in a fraction of the time

d) Accountability & PFMA

• Adhere to all applicable legislation

• Implement and maintain a compliance

management system for each construction and

maintenance project

• Compliance with the requirements of the OHSACTand its Regulations

–Attract personal liability, penalty and criminal record

e) OHS Act & PFMA

Until July 2003

• Liability for health and safety vested with the asset owner, and ………

• Section 37 (2) agreement implemented to ensure that contractors accept joint responsibility

– which is project managed

f) OHS Act & PFMA

1

1Identify Infrastructure

(What do we have?)

3Supporting Systems

(Do we have right

information?)

3

4Record Keeping

(Do we have the right

documentation?)

42

2Resourcing & Skills

(Who is responsible

and accountable?)

5Aligned Reporting

(Does our reporting make

business sense?)

5

6Business Architecture

(Consolidate on Logistics

For Life Cycle Management)

6

8System Architecture

(Consolidate Systems,

Strategies & Interfaces)

8

7PPSG Formulation

(Policies, People, Processes

Standards & Guidelines)

7

9Critical Systems & Processes

(Head Office, Regional Support

Structures and Compliance)

9

10Different Asset Condition

(Differentiation, Prioritisation

Strategizing and Reporting)

10

11Reliability & Modeling

(Service Delivery Structures

Life Cycle Assessment)

11

12Financial Optimisation

(Service Delivery Structures

Enhanced to Estate Management)

12

Configuration

Design

Maintenance

& Workflow

Master

Planning

IMS, BPR

Integration

Asset Life

Optimisation

2 3 44

5

6

5

6788

9

Asset Condition

Modelling

101

1

1

11

2

Complete Organisational EAM

EAS-14/03-11

BUSINESS PROCESS MODEL

CONSIDER NON-

ASSET SOLUTIONS

• Failure Management

• Insurance

• Demand Management

CUSTOMER

EXPECTATIONS

• Level of Service

• Cost

LEGISLATIVE

REQUIREMENTS

• Financial

• Environmental

STRATEGIC PLANNING PROCESS

SERVICE LEVEL REVIEW PROCESS

ASSET MANAGEMENT PROCESS

CONSIDER ASSET

SOLUTIONS

• Maintain/ renew/ upgrade/

dispose of existing assets

• Create new assets

IMPLEMENT ASSET MANAGEMENT

SOLUTION

Strategic

Planning

Tactical

Planning

Operational

Planning

Reference: The Total Asset Management Process International

Infrastructure Management Manual, 2006-2012

EAS-14/03-12

Asset Management “Best Practices”?

Requirements of Property Users

As defined by Business Planning Strategy

Current property user requirements

are delivered?

Possible future property user

requirements known

Demands on the future property base

Current property base

Property Management

strategies to close the Gaps

Current

GapFuture

Gap

Future

Demand

Property

Gap

User Needs

PropertyRespon

se

Dem

and

Supply

EAS-14/03-13

Property Management “Best Practices”?

Business Mission

OrganisationalStrategy

DivisionalObjectives

ProjectPortfolios

ExecutableProgrammes

Projects

CONCEPT

FEASIBILITY

IMPLEMENT

HANDOVER

IDEA

DEVELOP

Projects

Business Life Cycle

a. Project Life Cycle

SCM Cycle

Business and Asset Life Cycles

EAS-14/03-14

Issue TR

Briefing

Session

EvaluateTechnical

Financial

Screening

Approve/

Reject

PN & BudgetRequirements

Start(Originate from

AMU - PMO)

(Business CaseURS)

(Briefing)

(Note theExistence of PPSG)

(PM Governance)

(Asset Management Unit)

(AMU Leadership)

(AMU and StrategicPMO)

b) SCM CYCLE (Generic)

Legend:• AMU = Asset Management Unit• PMO (Organisational Programme Management Office)• PPSG = Policies, Procedures, Standards & Guidelines

EAS-14/03-15

Co

nd

itio

n

Routine w

ork

only

Main

tain

Ma

inta

in

Rehabilitate

Routine w

ork

only

100%

SP

SL

A C

riti

cal T

hre

sh

old

EOL1

Cost effort – Time Frame

X

EOL2

Replacement Condition

“Serviceability” Threshold

Ro

uti

ne

wo

rk o

nly

Ma

inta

in &

C

risis

Re

pa

ir

EOL3

X X

EOL4

X

Rehabilitate(“partial” upgrade)

Rehabilitate(“Major” upgrade)

c) Maintenance Cycle (Generic)

Co

nd

itio

n

Routine w

ork

only

Main

tain

Cri

sis

Ma

na

ge

me

nt

Rehabilitate

Routine w

ork

only

100%

SP

SL

A C

riti

cal T

hre

sh

old

EOL1

Cost effort – Time Frame

X

EOL2

Replacement Condition

“Serviceability” Threshold

Ro

uti

ne

wo

rk o

nly

Ma

inta

in &

C

risis

Re

pa

ir

EOL3

X X

EOL4

X

Rehabilitate(“partial” upgrade)

Rehabilitate(“Major” upgrade)

c) Maintenance Cycle (Generic)

1. General Requirements

(ISO 5500x)Master IntegratedAsset Management

Programme)

2. Asset Management Policy (PPSG)

3. Asset Management Strategy

4. Asset Management Enablersand Project Performance

5. Asset Management Plans(Implementation)

6. Performance Assessment and improvement

7. Management Review

PLAN

DO

CHECK

ACT

Asset Investment Policy Maintenance Management Policy Programme Prioritisation Policy

Master (Investment) Plans Technology Plans Asset types and Life Cycles Programme Management PPSG

Maintenance (Strategic & Operational) Routine Maintenance Fault Management Replacement Management

Programme Upgrade Cycles

Condition Monitoring (ON LINE) RCM (Reliability Centered) Audits (DYNAMIC) Compliance Evaluations Differentiation New technologies (Impacts) PMO streamlining (Technology)

Organisational Alignment Business Plan Impact & Updates Values, Policies, etc.

Full Life Cycle Asset Management ISO 5500+

PRASA Business Vision

Macro-economic Impact

H/L Transformation Plan

ISO 9000 Compliant

IIMM supported

BCI compliant

RSR Compliant

EAS-14/03-18

Project Governance and Structures Configuration and documentation Management of Change Training, awareness & competence Contingencies Management Production Systems

Integrated Asset Management GIS and Spatial Drawing Offices

Information Management Risk and Legal

Life Cycle Planning Maintenance Policy Tools, Facilities & Equipment PMO and Project Support

IMPLEMENT THE AMPINFORMATION FLOWS

Information flows

Information Management

SERVICE DELIVERY ISSUES

Defining core services

Contract types/ delivery

mechanisms

Contract issues

THE AM PLANPREPARE AM PLAN

Purpose (ST, MT)

Steps in preparing AM plan

Plan structure

Key Stakeholders

DEVELOP LIFE CYCLE

STRATEGIES

Develop strategies for each

stage of asset life

AMP REVIEW & AUDITCyclic audit of:

AM Performance

Technical content of AMP

Compliance with legal requirements

Internal/ external audits

ASSET MANAGEMENT IMPROVEMENT PLAN

Condition Assessments

AM status reviews

The improvement program

Pilot studies

SERVICE

LEVEL

REVIEW

Reference:

Flow chart for developing and using Asset Management Plans (AMP)

International Infrastructure Management Manual – version 1

CORPORATE AM DIRECTION Corporate need defined

Obtain organisational commitment

Adopt corporate AM goals and

objectives

Define AM roles and responsibilities

Involve key stakeholders

THE AM TEAM Oversee AM implementation

Co-ordinate AM activities

Internal Audit (Configuration Audits)

LEGISLATIVE

REQUIREMENTS

CUSTOMER/STAKEHOLDER EXPECTATIONS

EAS-14/03-19

PREVENTATIVE MAINTENANCE

Enterprise Asset Management

(EAM)

Continuous

Improvement

Total

Productive

Maintenance

Financial

Optimisation

Predictive

Maintenance

Operations

Involvement

Reliability

Engineering

Work Flow &

Documentation

System

CMMS (Computerised

Maintenance

Management

System)

Technical and

Interpersonal

Training

Stores and

Procurement

Configuration Management

Asset Condition Management

EAM: Best Practices Model

Our Challenge

Asset OptimisationAchieved

EAS-14/03-20

Revenue GeneratorsProject Life Cycle

Product Life Cycle

AssetCreation

AssetDesign

AssetConfiguration

Delivery

Warrantee Period

Routine Maintenance

Preventive Maintenance

Front Line Maintenance

First Line Maintenance

Profitable Facilities

Management

Post Warrantee

Routine Maintenance

Preventive Maintenance

First Line Maintenance

2 nd Line Maintenance

Front Line Maintenance

Repairs & Refurbishment

High Cost Facilities

Management EAS-14/03-21

Life Cycle Asset Management Costs

Life Cycle Cost Schematic

Asset DesignLife Labour rates Disposal Process

Costs

ScrapCosts

TOTALCAPITALCOSTS

DISPOSALAMOUNT

Throughput(e.g. commercial)

Availability MTTR MTBF

Composite Yield(Maintenance)

Asset Management Costs

Availability MTTR MTBFFacilities Management

OperatingCosts

Investment CapitalCost

Investments

Operations

“Calculator”

Project Life Cycle

Product Life Cycle

Life Cycle Asset Management Costs

EAS-14/03-22

FUNDS

EQUIPMENT & MATERIAL PEOPLE

FACILITIES

&

INFORMATION

RELIABILITY MAINTAINABILITY

No OF

FAILURES/

ANNUM

DETERIORATION

SKILLS BENEFITS

Unavailability &

Environmental

Safety & Quality

Effects, etc.

Spare parts

Cost/Failure

Repair

TimeWages( + x )

CAPITAL COSTS

RESOURCE COSTS

CONSEQUENCE COSTS

TRAINING COSTS

Maintenance Services,

Tools & Depots,

Energy Costs

Costs of Systems

& Documentation

JOB COSTS

Costs of Lost Production,

Safety & Quality effects

Extra Capacity Costs,

Refurbishment & Upgrade

Lost Opportunity Costs

The COST Model

TRAINING COSTS

Maintenance Services,

Tools & Depots,

Energy Costs

Costs of Systems

& Documentation

JOB COSTS

Extra Capacity Costs,

Refurbishment & Upgrade

Lost Opportunity Costs

Crisis Management

EAS-14/03-23

Life Cycle Asset Management Costs

Asset to be

replaced

Optimum Life Cycle Investment CostsTota

l C

ost o

f O

wners

hip

(accu

mu

lative)

(TC

O)

30

20

10

40

50

60

70

80

90

100

%

Years30% 100%

Acquisition

(Project Costs)

Operating &

Maintenance

Real Time

Total Cost

Of Ownership

TCO (100%)

Latest Start of

Replacement

Acquisition

50%

X

EAS-14/03-24

Operating &

Maintenance

Asset to be

replaced

Cost OverrunTota

l C

ost o

f O

wners

hip

(accu

mu

lative)

(TC

O)

30

20

10

40

50

60

70

80

90

100

%

30% 100%

Acquisition

(Project Costs)

(~40% to 50%)

Operating &

Maintenance

• Dramatic Increase in Total Costs

• Substantial REDUCTION of total Asset Life

• ORG forced into new acquisitions prematurely

• Major IMPACT on MTEF

EAS-14/03-25

Real Time

The maintenance system DoMaintenance

Work

ActivateMaintenance

Work

DevelopMaintenance

Strategy

DetermineEquipmentImportance

DevelopMedium-term

Plan

DevelopBusiness

Plan

DevelopProduction

Plan

MaintainInfrastructure

PlanInfrastructure

MeasureWork &Improve

ImprovementAdministration

Work management cycle

MeasureInfrastructure

& Improve

Infrastructure management cycle

ProvideResources

MeasurePerformance

& Improve

Asset management cycle

DevelopPeople

MaintainOrganisation

Structure

MeasureOrganisation

HUM & improve

Organisation management cycle

Produce

Measure

Safety &

Improve

Maintain Safety

Awareness

Methodology (SAM)

Do Safety

Awareness Field

Education (SAFE)

Safety management cycle

The desired asset management strategyEAS-14/03-26

DoMaintenance

Work

ActivateMaintenance

Work

DevelopMaintenance

Strategy

DetermineEquipmentImportance

DevelopMedium-term

Plan

MeasureWork &Improve

ImprovementAdministration

Work management cycle

ProvideResources

MeasurePerformance

& Improve

Asset management cycle

Produce

Crisis Management will get us stuck here …

(manual measurements)

EAS-14/03-27

MAXIMUM

UTILISATION

OF RESOURCESVISION

TRAINING

LEADERSHIP

AND

INVOLVEMENT

VALUE

FOR

MONEY

COMMUNICATION

Maintenance VISION

Maintenance Focus: AMU

EAS-14/03-28

ORGANISATION

POLICIES

ORGANISATION SYSTEMS

ACTIVITIES

DEVELOPMENT

PEOPLE

PLANNING

CONTRACTING

CONTROL

COMPUTER

SYSTEM

SOLUTIONS

ASSET

MANAGEMENT

SUPPORT

AUDITS

Maintenance Governance

EAS-14/03-29

Maintenance Focus: AMU

Asset Condition

based ManagementCircumstantial

Management

“Fix-it” Mentality

Planned & Predictable

“Wait until Disaster

Strikes, then go out and

fix it”

“Can you plan a

disaster?”

(Fix it while it breaks!!)

“Working harder,

distribute maintenance

teams, fix it in a

workshop”

“Working smarter,

prevent the asset to fail!

Asset Management (Evolution)

EAS-14/03-30

This is where we come from

CURRENT

PREDICAMENT

TURN-AROUND

THRUST

SUSTAINABLE

GROWTH

“Fire Fighting

Maintenance”

Preventive

Maintenance

Ad hoc

Maintenance

Apply

Systems

Maintenance

Integration

Continuous

Improvement

Availability

Life Cycle

Profit

Business Approach

Asset Condition

Monitoring

Asset Condition

Management

PAS 55 – ISO 5500+

ISO (9000+14000)

Planned & Predictable

Circumstantial

Management

Asset Condition

based Management

“Fix-it” Mentality

Asset Management (Evolution)

EAS-14/03-32

RCMMURAMUDAMURIJIDOKAPOKA-YOKEADNONJIT

• The management of physical assets is the cornerstone of our Economy

• Asset Management Practitioners should take the lead in the management of assets towards maturity.

• Programme and Project Management are the most critical focus areas for the restructuring of our assets and the creation of jobs for the years to come.

CONCLUSION

Context of Asset ManagementData management

Condition monitoring

Risk management

Quality management

Environmental management

Systems and software engineering

Life cycle costing

Dependability (Reliability, Availability, Maintainability, Supportability)

Configuration management

Sustainable development

Inspection

Non-destructive testing

Pressure equipment

Financial management

Value management

Shock and vibration

Acoustics

Qualification and assessment of personnel

Project management

Property and property management

Facilities management

Equipment management

Commissioning process

Energy management

ISO

55000

THANK YOU !!!

YOUR TIME HAS RUN OUT !!!!!

EAS-14/03-35