Reviewing Asset Management

This topic has a brief overview and covers:

As public sector service authorities move into a greater commercial environment, the need to review their performance in asset management and in particular the maintenance of a service delivery capability is of prime importance.

It is of importance to the organization itself and more so it is of importance to the stakeholders in the services it provides.

Governments have concluded that privatization is a logical path to follow for some of these organizations. In these monopolies, it is vitally important that the regulatory body can complete reviews to ensure that the privatized companies are delivering the most effective and efficient service for present and future generations.

Catering for intergenerational equity issues and matching these to current operational and economic circumstances requires an in-depth knowledge of the condition of the assets that provide the service. Special expertise will be required to review these activities.

The Operating Environment

Service authorities throughout the world are radically restructuring from the fully owned multi-disciplined organizations that covered every facet of the life cycle of assets. These organizations are being restructured and right sized to form management organizations where many of the roles are being carried out by contract, with in-house services being retained where they can be proven to be on a competitive level.

Irrespective of the form of the organization, old pyramidal structures are being flattened substantially, with responsibility being devolved to lower levels.

In line with this devolution of responsibility, organizations need to ensure that the following activities take place:

  • That there is a clear definition of the roles and responsibilities for the various organizational units in the functions of asset management
  • That clear policies and guidelines are produced that outline the framework within which the various organizational units operate
  • That minimum monitoring and reporting functions are determined and complied with
  • That the necessary information systems are established and maintained to provide the information necessary for effectively and efficient asset management for all levels within the organization, namely:
    • Corporate
    • Divisional Business Units
    • Facilities
    • Workforce.

Responsibility Issues

As part of the change management process, organizations have rapidly adopted commercial environments including the creation of independent business units within the corporate structure. Responsibilities have been shifted to these business units in the process of creating semi-autonomous operational units.

As with any management change, there will be disputes over responsibility and this has occurred in the key area of asset management.

Although independent business units may have delegated responsibility for the assets within their area of service delivery, they must accept that they operate within the strategic framework of the entire corporation. Although they may manage the assets, the executive management of the organization and the Board of Directors are the delegated owners and hold custodial responsibilities for these assets. In other words, the buck stops here rather than at the business unit level.

The Issues of Accountability

It is important that adequate accountability and review or monitoring provisions accompany this devolved responsibility. All business units should be clearly aware of:

  • The functions of asset management for which they are responsible
  • The outputs that are considered necessary from the corporate viewpoint and for them to effectively manage their assets.

In organizations that have multiple business units with different functions using different assets, then it is important that each of the business units are carrying out their asset management functions in a way that achieves the objectives of the organization.

This is similarly true for organizations where the business units perform a similar function with identical assets. In these organizations it is important to ensure that each business unit is approaching the issue of asset management in an appropriate manner as part of the whole. This needs to be done without killing the individual initiative and creativity of the business units. Overall minimum standards need to be adhered to.

A conflict often occurs where "corporate standards" are imposed on so-called "autonomous" business units. Some degree of co-ordination is necessary. This corporate role should be carried out in the most unobtrusive manner to enable innovative and creative approaches to be taken to asset management within the individual business units. The organization can then monitor and select the best practices that are derived and transpose those throughout the organization for a form of "organizational best practice".

No matter how many business units are involved, their size, assets and functions, some form of asset management review or overview is required. An internal peer group review is less intrusive and less threatening to the efficiency of these "autonomous" business units.

The asset management team or some other skilled specialist group are ideally suited to carry out this internal review role.

For larger organizations, an internal review section may exist. However such groups operate in a far more formal environment and cannot play the role as intended for the Asset Management Group. The internal review role aligns more fully with the external independent activity.

The Internal Review (Overview Role)

The Asset Management Team (AMT) can perform this internal review or overview role by completing the following formal activities:

  • Clarifying the various roles and responsibilities between corporate and the business units
  • Developing specific reporting and monitoring standards required from the autonomous business units
  • Producing guidelines and proven procedures for the management of the organization's key asset types
  • Completing assessments of the status of asset management activities within the various business units, the identification of weaknesses and the development of strategies to overcome these weaknesses
  • Monitoring continuous improvement programs in asset management.

These formal roles will help play a vital part in the overall asset management activities of the organization.

Where business units are large enough, similar review activities should be undertaken within their own units to ensure effective and efficient practices are being undertaken throughout.

Internal AM Review— Role of AMT

  • Policy adherence.
  • Performance monitoring assessment.
  • Develop review procedure manual/techniques.
  • Monitor and assess continuous improvement program and milestone achievements.
  • Co-ordinate external review.
  • Identify blocks to effective asset management and develop strategies to overcome these.

The External Independent Review

It is essential that internal review is supplemented with an appropriate independent external review, which should include:

Assess Internal Review Activities

Assess the internal review activities and assess the validity of their processes, verify their conclusions and assess the strategies adopted.

Compare Status with World's Best Practice

Judge the relative status of the organization and its performance in asset management with respect to other like service authorities, and comparisons with "worlds best" practice.

Assess Improvements Since Last External Review

Assess the relative improvement achieved since the previous external review and compare this performance with what was capable of being achieved.

Assist Internal Review Team

Assist the internal review team to improve their activities and to derive better guidelines and assessment procedures.

It is desirable that the reviewers selected to carry out this external review role are highly skilled and experienced in reviewing the types of assets and activities.

Custodial Responsibilities

As public sector service authorities and local government move down the path of commercialization towards privatization, the clear corporate custodial responsibilities to maintain the value of the business will be legally linked to the directors and executive management. Through delegation the same legal responsibilities will be transferred to a business unit and/or other lower level managers. These responsibilities will be clearly stated in their job specifications or contracts.

At the same time the service authorities' customers and stakeholders are becoming more aware of their rights and this will become a driving force for the accountability of the organization's performance.

Governments, ministers, elected representatives, directors and executive staff will all be held accountable for the service delivery provided by these infrastructure assets. The problem is the assets are unique in that they can be neglected for many years and yet still perform to an acceptable standard of service.

It is only with an in-depth assessment of the current status of the assets and the appropriateness of the management techniques used, that stakeholders can be sure that an organization can continue to provide the level of service in the most cost effective way in future years.

It is therefore vitally important that management and the organization as a whole allows regular external review of their activities to provide a more appropriate judgment of their performance in this complex area of management.

Appropriate Structures

In a small service authority or local government organization, the asset management team will combine the first two roles with the internal review role being carried out primarily by the asset management coordinator who may not even have a full-time asset management workload.

For larger organizations the number of staff permanently involved on asset management will increase significantly and, for those officers with full-time asset management responsibilities, internal review should form a key part of their activities.

For very large service authorities where internal review is a key corporate function, the work completed by this group needs to be integrated with those activities of the asset management team in the most appropriate manner.

Continuous Improvement / Performance Monitoring

All service organizations cannot hope to practice "world’s best asset management practice". In fact, many will be far from it and may only rate at a 50% level.

Be the organization currently the worst or the best, the key is for continuous improvement towards the vision of "world’s best".

A key role of the external reviewer is to:

  • Judge the current performance
  • Determine an achievable improvement program for the next review period
  • Revue and assess whether this target has been achieved
  • Comment on whether the effort being made to improve is sufficient to achieve an acceptable practice.


Service delivery is the key result area for service organizations. The status of the business is equivalent to the health of its assets and the effectiveness with which they are managed in the current term and their perceived viability in the long term.

Accountability in this area can only be checked by appropriate review and this is best completed by an internal peer group review backed up by regular independent external reviews.


It is recommended that all asset owners develop an appropriate structure within their organizations for the satisfactory completion of this asset management review role.

The organization should:

  • Determine which person or AM group should play the role of internal reviewer
  • Determine the roles and responsibilities of the position and adopt policy on this function
  • Determine the interval at which external AM Reviews will be completed (3 years recommended)
  • Appoint an external reviewer and complete the first base review
  • In conjunction with the external reviewer determine an appropriate improvement program and method to monitor progress.

Asset Review Methods

Asset review is an important function of life cycle asset management.

The environment in which an asset operates is not static. Changing technology, government regulations, consumer expectations, rising awareness of environmental issues, and market forces require that the objectives, focuses, practices, and the attitudes of the people managing these assets have to be reviewed and modified to suit contemporary requirements. Particularly important are the reviews of services and its management established by tradition and long term practices.

Asset review should be carried out at different stages during its life cycle:

  • Planning
  • Acquisition
  • Operations and Maintenance
  • Performance Review and Accounting.

Several methods are available to management for conducting the reviews, depending on the purpose and the degree of sophistication required.

The Simple Review Matrix

A simple review can take the form of a matrix which measures the progress of asset management practices.

An example of the continuous improvement performance matrix for the various asset lifecycle phases is shown below:






Operation and Maintenance

Performance Review and Accounting



Based on Historical Trends. Technical Aspects only

Ad-hoc, informal.

Price Sensitive

Decision at line level

Based on Historical trend. Reactive Maintenance. No condition assessment and Performance Monitoring

Corporate focused. Performance/cost management for major assets only.



TLC costing for capital investment but no financial reporting. Some Risk Analysis

TLC cost, technical function, work practices OHS & W, environmental issues, O&M feasibility

Maintenance strategy for major assets only. Asset reliability, risk assessment/ cost benefit analysis considered. Training needs identified

Key PIs identified and communicated

Asset Register in place

Training needs/no knowledge of financial management addressed

Process responsibilities established

Skills/training needs identified. Well documented/prioritized processes and practices. Formal review plans


Business Oriented and performance based. Project Evaluation/ Benchmarking

Full Economic Evaluation, TLC, Performance/Productivity Indicators. Project Management. Risk/sensitivity analysis

Integrated financial/O&M plans well documented. Specific costing activities

Responsibilities well defined

Familiarity with AM practices

Adequate skills. Well-defined roles/ responsibilities. LOS/COS regularly reviewed. System capability periodically reviewed

Business/market oriented. Avoid unnecessary risk, use new technology, close monitoring


AM integral to Business Planning. Risk Management/Contingency Plans Target Setting

"Value" selection. Performance guarantee, support, technologies.

Financial/Technical/Risk, Supplier credibility

O&M based on business and performance objectives. Strategic ranking of assets

Risk management practiced

Proactive O&M. MIS & DSS

Strategic Review based on importance

Analyze trends/cause/effect

Review support decision-making. True cost/ROA available

System "ownership" embraced by staff. Participative decision making environment. Training completed


Based on Corporate Objectives: Finance/Marketing/

Production. Risk Management.

Industrial Relations

Long Range Strategic Planning, Social, Environmental, Technological, market forces

Individual asset O&M strategy based on performance and evaluated against ROA

Risk Management

Preventive Maintenance

Review process eminent and exemplary. Generates economic value and advancement

Able to achieve benchmark efficiency/effectiveness

Independent review available.

Level 1 — Ignorance Level 2 — Awareness Level 3 — Wisdom Level 4 — Competence Level 5 — Excellence

The Advanced Review Matrix

This is when the objectives and scope of the review have been well established. The intention is to review the effectiveness and completeness of sound asset management for all phases of the asset life.

The advanced review can be accomplished by going through a checklist of questions, the answers to which will provide an assessment of effectiveness of management practices.

An example of the self-review checklist (for asset creation/acquisition) is shown in the following table.

Qualitative asset review and review could be highly subjective and may be "airy-fairy". However, the process to self-review could be further enhanced if the overall review could be scored, i.e. each function can be weighted and its effectiveness can be rated. A quantifiable measure will provide easy comparisons as well as highlighting the relative importance of each function.




Asset Creation/Acquisition

Has the need for a new asset been determined and has the full project evaluation process been followed?

Today, more so then ever, justification of any expenditure on major capital items requires a full project evaluation. This process should consider the life cycle costing of the asset, including the true depreciation of that asset to provide for future replacement.

For non-passive or short life assets such as mechanical and electrical equipment, a similar process should be applied, however, the strategic framework for the asset applies to a shorter period of time.

Generally, organizations look after shorter-lived assets better than longer-lived assets.

Have risk and sensitivity options been accessed?

In acquiring or creating a new asset, an organization is increasing its level of service to its customers, and as such reducing its overall risk (which could be defined in terms of safety, customer expectation, spare or extra capacity, replacement of assets at risk, etc.). The degree or quality of the replacement service can vary and affect the risk reduction accordingly.

While management of assets results in a reduction or management of risk, an overall reduction of risk should be part of the asset acquisition/creation objectives.

What is the strategic objective for the asset?

At all times up to the creation or acquisition of a new asset, the strategic objective for that asset should be closely checked. This would especially apply in cases where the development phase involves a lengthy process eg, investigation, design and subsequent approvals etc, where the time periods are such that strategic objectives of the organization could change.

Clear definition of the strategic objectives is important as it sets a broad framework in which project evaluation and life cycle costs are determined and ultimately justified.

What is required:
A new asset — build or buy?
A second hand asset?
An enhancement or augmentation of an existing asset?

All alternative options must be considered before the introduction of a new asset.

The use of an existing asset, which previously operated at a much higher standard or capacity, could be one option. The enhancement or augmentation of existing assets could be another option.

Purchasing or creating an asset should only be an option once it has been determined as being economically viable from a total life cycle perspective.

An Example of an AM Information System Overall Review Score

Asset Management Systems


Your %
Effectiveness Rating


Plans and Records (Non Electronic)




Asset Registers/Strategic Planners:
Static Assets
Major Assets
Dynamic Assets.




Operations Manuals.




Operations & Operating Systems.




Authority Equipment & Plant:




Data Collection, Processing
and Performance Monitoring:
Incl. performance indicators.




Maintenance Management:
Static Assets
Major Assets
Mech./Electrical Facilities
Other Dynamic Assets.




Integration of AM Systems:
Cost Control
Customer Service
Individual asset costs
Property Records
Other systems.








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