Overview

In accordance with modern commercial practice there is a direct linkage between efficiency and a competitive commercial environment.

This commercial environment impacts heavily on all aspects of asset management but more significantly on the areas of staff productivity and overall efficiency.

Management practices now expose virtually every function and level of management to competitive pressures, and even executive managers are tied to performance-based output-related contracts and have no guaranteed tenure of position.

In many instances, the performance of in-house groups has been improved by treating them as service providers in competition with private companies offering the same service.

The question of where to strike the balance between employing in-house staff and using external contractors for asset management tasks is now a major issue for most public sector organizations.

Good commercial tactics will allow the organization to strike the correct balance and develop sound managerial and support systems.

The first step is to identify core and non-core activities. Subsequently, this process will lead organizations to consider whether to retain non-core activities in-house or have them delivered as contracted services. Typically, core activities are kept in-house and non-core activities can be contracted out, as shown below:

 

Organizations typically keep core activities in-house so they can:

• Control key aspects of their business
• Direct areas of growth and maintenance.

Commercial tactics look at the way in which the organization ensures that business activities are either placed under contestable pressure or structured and managed to ensure effectiveness and efficiency.

Contracting out non-core asset management services has been demonstrated to provide many benefits, but also entails some risks. The benefits include greater efficiency and an equal or sometimes higher level of service at a generally reduced cost.

However, the extent to which these benefits will be realized both initially and in the long-term will depend upon how well the organization:

• Manages the transition
• Handles the increasing sophistication of asset management contracts
• Selects and manages the contractor.

Some organizations have achieved the benefits without contracting out, by establishing business units with clear objectives and managing their performance effectively.

Information on in-house activities is found in Specification Quality and Information and Data Availability, and on contracted activities in these sections and the rest of this guideline.