Transcript No Slide Title

Asset Management in the
Community Housing Sector
Sydney 5 December 2007
Welcome
1
Introductions
 Name
 From
 Role / experience in asset management
 Your expectations of the Day
2
Course Goals
 Towards best practice in asset management through:
Improved understanding
 asset planning
 planning and managing maintenance
 planning and managing capital projects


A framework approach – key steps and checks
Networking
3
Some Key Themes
• Applying strategic thinking
• Asset life cycles and planning cycles
• Asset planning frameworks and processes
• Applying appropriate methods
4
Select work groups and project
Purpose:-To give a practical focus – “learn by doing”
 Form groups of 3 / 4
 From the projects below, choose a project
o DADHC Group home - 5 high needs tenants (mental illness) +
o
o
o
o
carers
Juvenile Justice detention facility, low security, 20 residents +
staff
??
??
??
5
Asset Strategic Planning
An Overview
6
Cumulative % of Life Cycle Costs
100%
Use
80%
*
Production
Full
Scale
Development
50%
30%
20%
Concept
Validation
Concept
Formulation
10%
Source : Internal company studies at:
Westinghouse, GM, Ford, Rolls Royce and others
7
Different plans have different roles
 Corporate Planning
Resource & Business Planning
Resource Plans
Corporate
Plan
sets strategic
direction
• HR, IT and Physical Assets
• identify strategies and resources
needed to achieve service outcome
targets
Services
Plan
converts
corporate outcomes
to service outcome
targets. Specifies the
preferred delivery methods,
outputs and indicative resource
allocations.
Business Plans
identify the operational goals,
strategies, budgets and programs of
business units
8
Strategic Thinking
and Planning
9
Analysis: (where are we now)?
• External environment / clients ? competitors
• Internal issues eg skills and resources
SWOT
10
Direction Setting (where do we want to be)
• Formulate objectives
• Define Key Result Areas
11
Choice (how will we get there)
• Identify strategic alternatives
• Evaluate the strategic alternatives
• Select the preferred alternative/s
12
Strategic objectives
Where to in next 10 years? Eg:
• Affordable, appropriate, long term housing for low-income earners, many
disabled………and
• Affordable, appropriate short term housing for people with immediate need.
13
Strategic objectives
How do we get there and measure progress?
a.
b.
c.
d.
e.
f.
g.
Houses aligned to priority needs.
Socially appropriate.
Affordable - rents based on ability to pay, not costs.
Flexible - can be modified if circumstances change.
Cost-effective - low life-cost, market-competitive.
Financially sustainable.
Risks can be managed pro-actively.
14
What are your organisation’s main goals over :
 1 year ?
 3 years ?
 10 years ?
For your organisation’s future, what are the important:




trends in demand?
service delivery issues?
social factors?
financial factors?
15
Developing an Asset
Planning Model
16
Definitions
 Assets are physical items of value with a life
exceeding 12 months
 Asset Management is a process to manage
demand and guide acquisition, use and disposal of
assets to make the most of their service delivery
potential and manage risks and costs over their
entire life
17
The Function of Asset Management
 To support cost effective service delivery
 To consider the level of investment in assets, the benefits and
costs that flow from the investment and how well the assets are
maintained and operated
 To establish a management framework which defines:

the criteria for ownership and management of assets

strategies and processes for procurement, maintenance,
disposal and risk management

priorities for allocating resources
18
Asset management (ctd)
If houses are to continue to meet tenant needs and be safe, and to be in
good condition and keep their value, every step of the house’s life cycle
must be carefully managed. “Asset management” is the term used to
describe this whole-of-life process.
It covers:




understanding the need for assets and the service they deliver;
selecting the right house and managing the acquisition;
upgrading and / or redeveloping the house to meet tenant needs;
repairing and maintaining the house throughout its life so that it is kept
in good condition and complies with appropriate regulations;
 disposing of the house at the end of its useful life.
19
Typical Asset Planning Framework
Corporate Plan
Asset Strategic Plan
Capital Investment Plan
•Set corporate objectives in line
with Government Policy
•Set asset output targets
•Assess performance of
existing assets
•Identify the gap between
outputs needed and existing
performance
•Determine responses to the
identified gap; investment,
maintenance and disposal
•Identify capital projects and performance outputs arising
from ASP
•Assess delivery methods and financing options
•Apply appropriate decision tools (EA,VM,RM)
•Prepare programs and budgets (1 year, 10 year)
Service Delivery Plan
•Set service outcome targets
•Assess past delivery
performance:
•Forecast future demand and
impact on performance
•Determine service strategies
eg.
-Manage expectations/demand
-Change delivery methods,
-Improve output-to-input
efficiency
Maintenance Plan
HR Strategic Plan
•Set asset standards
•Assess asset condition against required standards
•Identify maintenance response (tasks and strategies)
•Prepare programs and budgets (1 year, long term)
•Review achievements
IT Strategic Plan
Disposal Plan
Other Strategic Plans
…. sets outcomes and required
outputs
…. establishes the need for
resources (asset, human,
information etc)
…. provides strategic overview of
resource use
…. identifies, evaluates and selects
courses of action
…. links inputs and outputs
•Identify surplus
•Assess disposal options
•Prepare programs and budgets (1 year, 3 year)
Other Operating Plans
…. identifies and plans specific programs and projects
…. leading to detailed budget inputs
20
Typical strategy questions
 What external factors will affect our business, e.g. Metro strategy,





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sector policies, building industry trends etc?
What no. and type houses are needed to meet demand, now / future?
Where should they be, both from a service and financial perspective?
What can we afford to provide and maintain
What opportunities might exist to increase funding levels?
What partnerships could we / should we seek with other agencies?
What is our current portfolio (no., location, type, financial performance,
etc) and how does it match up with where would like to be)?
What risks has as a result of our asset situation?
What action should we take to acquire additional dwellings, modify
current dwellings, improve condition, or dispose of properties?
21
Group Work Task
 Develop and document what your group
perceives as the main asset strategies for your
case study project.
 Report your findings to the other groups.
22
Capex Steps (1)
Stage 1 Prepare a Project Outline
 Identify what is required – e.g. new asset, alteration, upgrading,
extension, etc.
 Define the project – e.g. set performance levels for asset functionality,
asset capacity etc, identify stakeholders, identify environmental
concerns and any other relevant factors.
Stage 2 Identify and Analyse Options
 Generate project options (e.g. buy, demolish and build, lease etc,
what locations are suitable, how can it be funded e.g. equity, debt, are
partnerships appropriate etc).
 Evaluate the options - conduct risk assessment, conduct a financial
evaluation of the options (ensure that whole-of-life costs are included),
assess cash flow requirements.
 Compare the options / select preferred option / document the findings.
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Capex Steps (2)
Stage 3 Prepare Capital Investment Strategic Plan and
Business Cases
 Rank the potential capital projects in priority order and
prepare a summary spreadsheet.
 Prepare a Business Case (where appropriate) for projects
to be submitted for funding approval. Include a risk
assessment in appropriate detail.
 Commit any maintenance works covering the life cycle of
proposed new assets to the Maintenance Strategic Plan,
and cross-reference. Ensure that these costs are allowed
for in the agency’s asset maintenance budgeting.
Stage 4 Monitor and Review
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Maintenance
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Maintenance
What is maintenance?
 The work necessary to retain a house in, or
restore it to, an agreed condition.
Why?
 To keep houses safe and secure, to protect their
amenity and to allow them to continue in service.
 Without it, materials deteriorate & expensive
repairs and replacements become necessary.
 Statutory obligations must be observed.
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Maintenance:
Largest operating cost of community housing sector.
If unmanaged - unacceptable risk, but if effectively managed – real benefits.
Basic principles:
- Always keep properties to standard.
- Maintenance to be programmed / cycled where feasible.
- Coordinate workload for efficient delivery.
- No deferred liabilities without OCH consent.
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Maintenance (ctd)
Reliable data on maintenance costs, trends is crucial.
Develop a culture of sustainable maintenance by:
-
-
structured and systematic planning and delivery
delivery via planned rather than reactive approach.
 Capital incentives exist
 Link to accreditation
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Maintenance Management
 Maintenance management is a process to:

evaluate maintenance needs

plan actions to meet these needs

implement the actions

monitor the performance

initiate improvements
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Maintenance Management -Seven
Key Steps
The process can be described in seven steps:
1.
Understand the assets to be maintained
2.
Determine asset performance standards
3.
Select maintenance strategies
4.
Identify where maintenance is needed
5.
Prepare maintenance programs and budgets
6.
Implement the maintenance
7.
Review performance & initiate improvements
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Step 1 - Understand the asset
 Identify relevant asset policies and strategies
 Identify any relevant capital procurement, refurbishment &
disposal linkages
 Describe the functions the asset is intended to support
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Step 2 - Determine asset performance
standards (aka service levels)
 Specify the standards the asset should attain:
 Functional, eg:
 accessibility
 appearance / image
 safety / security
 Technical, eg:
 reliability
 maintainability
 statutory obligations to be observed
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Step 2 - Continued
 Financial, eg economic life, life cycle cost targets
 Some levels are mandated, eg the RT Act, DoH
standards, Ccl regs
Service levels are standards against which performance
may be measured.
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Step 3 - Select maintenance strategies
 The main options are either:

Responsive

Planned

cyclic/preventive

condition based/predictive
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Types of Maintenance
Maintenance
Planned
Responsive
 Cyclic
 Condition based
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 Planned maintenance - work that can be
anticipated in advance. It can be scheduled to
be carried out when it is needed, e.g. painting,
carpet replacement, inspecting smoke alarms.
 Responsive maintenance - work that is attended
to as it arises. Eg fixing broken window panes or
clearing blocked sewers. (Aka day-to–day,
unplanned, urgent and emergency maintenance).
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Which is better?
Planned maintenance.
 items can be bundled with other work to gain savings
 the work can be scheduled to suit tenants & contractors
 the results can be specified and controlled effectively
 long-term budgets can be prepared.
Responsive maintenance
 emergencies / urgent work
 small items
 items that cannot be anticipated
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Step 4 - Identify where maintenance is needed
Information sources:
 Condition surveys
 Tenants / client reports
 Maintenance staff / contractor reports
 Logs and history records
 Staff experience
 Life cost plans
 Manufacturer’s specifications/warranties
 Statutory requirements
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Step 4 - Identify where maintenance is
needed ctd
Issues:
 Maintenance management information systems
 The cost of data
 The “shelf-life” of data
 Accountability and audit trails
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Step 4 (ctd): Inspect Your Houses
Every property should be inspected:
 annually (at a minimum) to reveal maintenance
requirements and to determine priorities
 when a specific problem arises, or when
significant work has been done
 before a tenant moves in, to set a baseline for the
occupancy
 when a property becomes vacant, to assess the
work needed before it is re-tenanted.
40
Step 4 (ctd): Inspect Your Houses
 Who By?
 people who understand the standards specified




for community housing;
for technical matters, should possess appropriate
qualifications.
Use inspection pro-formas
Encourage tenants to report problems
Use inspections to ensure the safety of
properties
41
Step 5 - Prepare maintenance programs
and budgets
 Determine actions to achieve the nominated standards
 Develop schedules
 Assemble cost estimates
 Assign priorities
 Prepare programs and budgets, eg:

statutory programs and budgets

preventive programs and budgets

predictive programs and budgets

backlog programs and budgets
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Step 6 - Organise & Arrange the Work

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

simple repairs / more complex work
assign responsibilities
written contracts (Dept of Fair Trading )
a standard financial Chart of Accounts




tender, award and manage contracts
standards letters and forms
standard policies and procedures
probity and conflict of interest
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Step 7 - Review performance / initiate
improvements
Develop performance measures:
 Do assets perform at their intended standard?
 Are maintenance service providers satisfactory?
 Are stakeholders satisfied (clients, tenants, staff)?
 Is the organisation’s asset investment protected?
 Is risk exposure managed?
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Step 7 - Review performance /
initiate improvements
 Evaluate the maintenance outcomes

were schedules achieved?

is the process effective?

was the maintenance delivered effectively?
 Take corrective actions as necessary
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Maintenance Review Checklist
 Is there a clear link between the delivery of services
& the proposed maintenance?
 Are reporting systems & control processes in place?
 Are you measuring outcomes or performance?
 Is the focus sufficiently long term to pick up major life
cycle expenditures, including replacements &
refurbishments?
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Group Work Task
 Prepare a maintenance strategy, schedule and
budget for your case study project.
 Report your findings.
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DELIVERING PROJECTS AND PROGRAMS
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Initiate the Project / Prepare a Business Case




o
o
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Assign responsibility - appoint a project officer or team.
Engage the various stakeholders. Who needs to be
consulted?
If appropriate, prepare a Business Case. Consider the
potential financial, environmental and social benefits and
impacts. Undertake a risk assessment.
Identify potential service providers:
Who are the potential service providers in the market?
Can other organisations that use similar assets help? Do
they have lists of suitable pre-qualified service
providers?
Seek funding approval.
49
Select a Procurement Strategy
 Select a procurement strategy / form of
contracts.
 Select the tender method e.g. open, selective,
pre-registered, invited, direct negotiation.
Consider pre-qualification of a limited number.
 Prepare a Procurement Plan and determine the
evaluation criteria / key weightings.
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Prepare a specification
Specifications should provide sufficient detail for a
service provider to understand your needs. They
should:
 be clear, concise and unambiguous.
 The degree of detail should match the degree of
complexity, risk and value of the procurement.
 Identify and include other requirements such as
warranty, timeframes, quality standards, etc as
appropriate.
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Prepare the tender documents
 conditions of tendering – the content and
submission of tenders and the conduct of the
tender process;
 general conditions of contract;
 special conditions of contract;
 specifications of the requirements;
 tender forms and schedules.
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Prepare a tender evaluation plan
This should cover:
 how tenders will be evaluated
 the role, composition and functions of the
evaluation team
 the governance of the evaluation process.
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Evaluate the tenders
Consider:
 the price and value for money;
 the contractor’s experience, expertise, capacity
and financial credentials;
 the contractor’s track record on other work;
 any other relevant factor.
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Prepare an evaluation report
 Attach copies of the review to the Property File.
 Delegations to approve acceptance of tenders should be
listed in the Delegations File.
 Where the tender exceeds the estimate by more than 10%
and is recommended for approval, recommendations
should include an explanation as to why the higher price
should be accepted.
 Where more than one quotation was received, the
unsuccessful tenderers should be advised in writing that
their quotation was not accepted.
55
Manage Variations and Disputes






Require the Contractor to submit the Variation in writing,
setting out the scope of work, reasons and price and/or
time variation claimed;
Assess the claim – is it a valid variation to the contract,
are the reasons, costs and time delays reasonable?
Negotiate any aspects of the claim where appropriate
and seek additional substantiation if necessary;
Recommend approval or rejection of the negotiated
variation;
Obtain approval of the recommendation within
appropriate delegations;
Refer any matters that cannot be resolved to OCH.
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Progress Reports
The Project Manager should submit a monthly
progress report for each project. Include:
 A description of the work completed to date;
 Actual progress against the predicted progress;
 Expenditure to date against predicted
expenditure;
 Any variations or issues that may have arisen.
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Group Work Task
 To be advised.
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Performance Management
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MONITORING PERFORMANCE
PLANNED OUTCOMES
DEFINED SUCCESS
PERFORMANCE INDICATORS
BASIS FOR COMPARISON
Intended objective of service
Key Result Area of outcome,
Measuring units for assessing
Target value of Performance
or activity
which will reflect successful
the level of achievement
Indicator which indicates
achievement of objective
success or failure of service or
activity
Physical assets are available
Assets are available within
Downtime as a proportion of
and serviceable as required.
appropriate levels of downtime
total operating time (%)
Target
and/or service disruption
Assets comply with appropriate
OH&S defects reported/period
Trend over time
Target
health and safety requirements
Maintenance is conducted
Cost of maintenance is
Maintenance cost to facility
both cost-efficiently and
reasonable
replacement cost (%)
time-efficiently
Maintenance cost to total
Target
operational cost (%)
Response time is adequate
Proportion of services in excess
of agreed standard
Target/trend
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Developing a Performance Indicator
 What is the issue or outcome?
 How can we describe success?
 What indicates that this is achieved?
 How do we measure this indicator?
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Some Principles for Performance Measures
 Measure only those things that matter
 Measures should be by-products of day-to-day
processes
 Measures should be ‘transparent’ to all managers
and staff
 Measures should lead decision making and not
just reflect historical activity
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Life Cycle Costs
63
Life Cycle Costs
Whenever costs are considered, think in terms of life costs
 Acquisition costs
 Costs in use:
 Operating costs
 Maintenance costs
 Cleaning costs
 Alteration and refurbishment costs
 Support services costs
 Disposal costs
64
Applications of Life Cycle Costing
 To choose between alternatives
 To facilitate long term budgeting
 To provide measures for future performance
monitoring
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Risk Management
66
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Risk Management
Risk Management is:the systematic process of identifying,
analysing, assessing and treating risks that
may impact on an organisation’s objectives
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Risk Management
The process can be described in four phases
1.
Establish the context
2.
Identify, analyse and assess risks
3.
Treat risk
4.
Document, implement and monitor the Risk
Management Plan
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Risk Management
Likelihood
H
M
H
H
M
L
M
H
L
L
L
M
Risk Ranking
L
M
H Consequence
Rapid Risk Ranking Matrix
Like’hd
Cons’nce
Risk
L
H
M
M
M
M
Damaged public image
L
L
L
Poor service/wasted money
M
H
H
Substantial change
H
M
H
Seriously reduced functionality
L
H
M
Moderately reduced functionality
L
M
L
Project Functional Brief
Consequence
Base assumptions not valid
Design of building seriously
wrong
Design of bldg moderately
wrong
Community expectations not
known
Emerging trends not accounted
for
Political intervention
Integration of old and new
unsuccessful
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Risk Management
Treat the risk
 There a always options 
accept the risk

reduce likelihood

reduce consequence

transfer in full or part

avoid
 evaluate the options
 document the analysis and outcomes
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Building Hazards
 Lead Paint
 Asbestos
 Firewalls
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Policies and References
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POLICIES AND PROCEDURES
 Administrative practices
 Financial practices
 Tenant responsibilities for maintenance and repairs
 Property inspections
 Managing the work (emergency, urgent, routine, cyclic)
 Managing contractors
 Insurances
 etc.
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SOME USEFUL REFERENCES
 Housing NSW Asset Standards, NSW DoH.
 AS/NZS 4360 2007 risk management.
 AS 1428, Design rules for access by the disabled
 Simple Procurement” from NSW Commerce
OH&S Act 2000 and Regulation 2001.
Useful websites are:
 Dept of Fair Trading www.fairtrading.nsw.gov.au
 Workcover www.workcover.nsw.gov.au
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Review
1. Cover all housing assets.
2. The Plan should:
 Define the required service levels; and
 Provide the information needed to ensure effective
accounting and reporting for each separate program.
3. Set out:
 Levels of service and key performance indicators
 Long-term financial forecasts
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4. The Planning Timeframe:
 Cover the full life that the assets will be able to deliver the required
service.
 In practice, start with a 5 year plan and extend later to 10 years (or
longer).
5. The Asset Register
 Physical identification - identifier code, location, description,
construction materials, year built (or estimate);
 Financial Information - original cost (if known), replacement cost,
estimate of residual useful life; and
 The ability to aggregate and disaggregate both physical and financial
information (e.g. by location or by program).
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6. Strategies to Manage Risk
 Incorporate a strategy to manage all risks associated with
the assets involved.
7 . Financial Information
Estimated costs should:
• be based on known costs;
• be logically and clearly compiled and available as evidence;
• be updated annually;
• be easily assimilated into financial recording systems.
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8. State Assumptions. Eg:
• Indicate the degree of confidence of the reliability of the data (condition of
assets, cost estimates, remaining useful lives of assets etc)
9. Outline an Improvement Program
State what needs to be done to improve processes, systems, data,
commercial tactics, organisational / people issues.
•
What are the weak areas?
•
What are the improvement targets?
•
The actions need to address the “gaps”;
•
The timeframe over which the improvements will take place; and
•
The resources (human and financial) needed.
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10. Have Clear Linkages to other Strategic Documents
• The management plan should be approved and adopted by the Board.
• The AM plan should link the business plan, the 3-year corporate plan
and the budget.
• The AM plan should be internally consistent.
11. Regularly Review
• The AMP should be reviewed and updated annually.
•
Revise the plan in the light of the improvement program. Therefore, in
the first few years’ reviews are likely to result in revisions.
•
Changes in the Corporate plan that affect levels of service should be
reflected in the asset management plan and long-term financial plan.
Page
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Thank You