Development of Rationalization and Disposal Strategies

The development of disposal strategies should be linked to the asset's service delivery requirements, its current performance and its value to the organization.

The rationalization and disposal strategy for the asset may be designed well in advance of the actual disposal, to match up with planned service delivery requirements or asset life cycle events.

This forms the basis of the 5 - 10 year disposal plan.

Considerations should include:

• Identify and Quantify the future Demand for the Asset
• Establish the True Costs of the Asset to the Service Delivery
• Identify Future Costs of Retaining the Asset
• Establish the Asset's Value to the Organization
• Set Disposal Strategy Criteria
• Evaluate and Rank Disposal Strategies.

Identify and Quantify the future Demand for the Asset

• Do we need to use the asset until it is disposed of or replaced?
• If so, what must we do to maintain the asset to ensure health and safety compliance?
• Are there any Economically Sustainable Development (ESD) implications if the asset continues to be used?
• If the asset cannot be used to support service delivery, can it be used elsewhere? e.g. can it be used in another utility or by a community organization or for a short-term commercial use?
• What are the decommissioning requirements for the asset?
• How will these affect the ability to use it or the timing of its disposal?
• How long will the disposal process take and what resources will be needed to achieve the disposal?

Establish the True Costs of the Asset to the Service Delivery

You will need all asset lifecycle costs to:

• Find the true financial performance
• More accurately understand the costs of the asset to service delivery.

Identify Future Costs of Retaining the Asset

If the asset is kept even for a short time there will be costs such as:

• Capital cost charges for the funds tied up in the asset
• Security so that the asset is not damaged or so that people cannot get access and possibly injure themselves
• Complying with health and safety requirements for staff, public or contractors who might need to continue to access or work with the asset ·
• Protecting ESD resources because the site contains a scarce natural resource (e.g. habitat or provides a community hub e.g. for the aged or youth)
• Operational inefficiencies that the asset imposes on the service delivery
• Refurbishment or other maintenance works
• Storage or custody costs
• Depreciation
• Contractual or licensing costs.

Establish the Asset's Value to the Organization

Consider the following:

• What is the current 'book value'?
• What is the possible net return if disposed of 'as is'?
• What is the cost to replace the asset in order to continue the functional performance - i.e. not what it is but what it does?

Set Disposal Strategy Criteria

The development and selection of the preferred disposal strategy will be influenced by:

• The nature of the asset
• Operational needs
• Health and safety requirements (including public liability)
• Contractual commitments
• Legal and statutory requirements
• Alternative uses
• Heritage, cultural concerns or ESD attributes such as ongoing provision of services to ensure equity of access for the aged or disadvantaged in the community
• Asset condition
• Capital and recurrent funds required to implement
• Estimated net profit or loss
• Market conditions
• Risks including that to natural environment or outrage from the local community
• Time required to implement.

Evaluate and Rank Disposal Strategies

Having identified potential strategies for the disposal of assets in the short and long term, evaluate them before making a final choice and developing an asset disposal program.

Economic Analysis

An economic analysis of the asset disposal strategies will help you:

• Confirm that disposal funding is allocated to the projects that will deliver the best return to the organization and improved service delivery to the community
• Evaluate the resource options for the disposal program
• Make sure that the disposal financial benefits are realistic and achievable within the current budget period
• Understand the overall impact that the disposal may have on the performance of the service delivery
• Understand the overall impact that the disposal may have on higher or lower operations funding.

If there are no other constraints, you should base your choice between competing disposal options on:

• The lowest risk to sustainable development of the community's natural and built environment
• The highest Net Return Value of the asset disposal
• The continued delivery of services at best value for money that supports or enhances existing social and environment values.

Environmental Analysis

Doing an environmental analysis will help asset managers to determine ecological sustainability impacts including:

• Conservation of natural and community heritage resources
• Protection of environmental health from on-site contamination/pollution
• Economic considerations
• Due diligence responsibility (under environmental legislation etc) to manage and avoid these impacts.

Financial Analysis

Asset managers should review the budget for the disposal program each year to confirm that the levels of disposal are appropriate and achievable. They should consider:

• Previously approved financial returns for projects that are still outstanding
• Costs of preparing assets for disposal
• The source/s for investment for the disposal funding
• Adequacy of previous disposal estimates
• Impact and risks that asset disposal may have on the delivery of asset operations and services particularly to disadvantaged, remote, rural and regional communities
• Other risks such as market conditions, planning approvals etc.

Social Analysis

Asset managers should analyze the social impacts of their Asset Disposal Programs where it is likely that the disposal activities will:

• Cause significant shifts in costs and benefits between and within communities particularly across remote, rural and regional communities
• Substantially affect employment or -trade
• Cause disproportionate disadvantage to a particular sector or community
• Provoke appreciable community concern
• Require changes in organization policy and direction.

An analysis of the social impacts of asset disposal should:

• Identify any significant social and cultural issues or opportunities in the disposal
• Show the extent to which they affect the disposal
• Develop strategies to deal with these issues.

Management of Risk

It is important to understand and take into account any risks or uncertainties when evaluating disposal options. Typical factors asset managers should consider include:

• Social and cultural issues
• Environmental and ecologically sustainable development issues
• Special conditions
• Industrial relations
• Safety
• Resource availability
• Program scheduling
• Funding implications
• Functionality and service.