Funding the Implementation Program

Each organization needs to consider the method by which the implementation program is to be funded.

From a philosophical perspective, one could say that the program was a "necessary management activity" and should be funded out of the normal "operating budgets".

However, this does not apply to these programs as they represent:

• An increase in the management responsibilities for the organization in terms of service responsibilities to the owner
• The previous management and asset owners have not developed the necessary systems and data to complete the outputs now required.

Arguments are often made that new:

• AM processes, practices, data and information systems have an effective life of 10 - 15 years, and should therefore be treated as capital
• Assets should be completed with all elements in place as part of the "handover process" and are capitalized as part of the "creation / acquisition" process.

The proposed AM implementation program is therefore seen as a "backlog management" issue.

With the implementation program completed and the systems and data in place, there will be ongoing activities that need to be maintained, such as:

• Providing the asset management staff for the questionable phase activities such as risk assessment and works prioritization, optimized renewal decision making and maintenance optimization
• Training staff in AM activities.

Provision must also be made for database maintenance as the condition of an asset might change through refurbishment or deterioration, and new assets need to be added and some deleted.

Due to the focus on the asset's intended life, provision should also be made for:

• Information system maintenance, license, upgrades, etc.
• Updating processes and practice instruction manuals (operations manuals)
• Specialist external assistance, such as quality assessment or audit from specialist consultants.

These activities are generally periodic and therefore they should be funded from recurrent or operating budgets.

However, the initial set up of an "appropriate asset management system" is a long term investment that can justify the use of capital. e.g. the improvement programs are one-off costs.

Many of the newly privatized utilities have funded these works as capital, valuing and depreciating them as an asset in their own right.

The following tables show the program cost elements that could be allocated to capital and those that should be operations / recurrent: