Core/Non Core Activities
The asset management function covers a wide range of activities, from high-level issues of culture and policy, to low-level matters of tactics and maintenance or service delivery procedures.
The first step towards a sustainable commercial tactics plan is to list all functional activities and assess their importance by defining them as core, non-core and marginal.
Typically, core activities should remain with the owner, while the non-core activities may be delegated to a suitable contractor or service provider.
The marginal activities may be contracted out depending on the organization's ability to:
- Do the tasks in-house
- Manage contractors.
A sample allocation of asset management activities is below:
Core Asset Management Activities
- Overall philosophy and culture
- Policy
- Strategic planning
- Program identification (capital and operating)
- Overall project management
- Overall contract supervision
- Detailed analysis
- Data overview
- Performance assessment
Marginal Asset Management Activities
- Detailed strategy plans
- Some works programs
- Project management of specific projects
- Some maintenance and operations
- Specialized analysis fields (ORDM/FMECA)
- Data collection and maintenance
- Review of performance
Non-core Asset Management Activities
- Independent reviews
- Expert assistance
- Project management of general maintenance works
- Peak load maintenance
- Project management of maintenance
- Data collection
- Independent quality assurance review.
The diagram below is an example flow chart to determine whether or not an activity should be retained.
Benefits of Contracting Out
- Generally reduced costs (15-20%)
- Known future costs (tender period)
- Competitive environment
- Greater flexibility
- Penalties and rewards for contractor performance
- Higher level of services through potential for innovation
- Greater efficiency
- Less capital requirements (equipment).
Risks of Contracting Out
- Loss to company of asset-specific knowledge, skills and experience
- Can lead to a reliance upon certain contractors - thus reduced commercial negotiating power
- Penalty and rewards systems can drive inappropriate behaviors unless carefully selected and designed
- Increased difficulty in creating a flexible environment in which work focus can be quickly varied (due to contractual changes being required)
- Contractor insolvency.
Division of Responsibility
The division of responsibility between owner and contractor should be based on the principle that whilst activities may be shared, the owner must retain the ability to monitor and assess the performance of a contractor and ultimately bears the risk for performance of the activities.