Asset Management is not
about presenting problems.
It is about solving them.
– Penny Burns
How to Implement
Asset Management Plans
“Buildings”
Aligning Services, Assets and Financial
Resources
Agenda
•
•
•
Context - The Sustainable Foundation
Asset Management Plans – How to!
Focus – Buildings
Canadian Landscape
• Feds & Provinces
• Funding programs require evidence of AM progress & plans
• Ontario legislation = a compliance exercise?
• General public expectations = more significant role:
• Customer levels of service, Canadian Infra Report card
• Build upon existing AM efforts:
• InfraGuide, IIMM/NAMS, PAS55, ISO 55000.
• PSAB:
• PS 3150, SORP #3 – Assessment of TCAs,
• Measuring Financial Performance in Public Sector
Financial Statements ???
• CNAM, AMBC/GFOABC, AM Alberta& Saskatchewan,
OCSI (Ontario) & CERIU (Quebec)
• FCM/UBCM – looking at developing a National AM Program
The Sustainable Foundation
1. Cost = Green field
development vs
Brown field
development
2. Three/four year
mandates vs 100
year asset life
cycles
3. Raw lands sales
are finite and not a
sustainable practice
In the beginning
New Assets
built by
developers
then given to
municipalities
Current state
$170 Billion
Infrastructure
gap and
growing
Current State
Demand for Services – growing
& costing more
Infrastructure - Aging
Funding - Constrained
Asset Management
Policy
AM Framework –
Vision, Mission,
Ultimate Goal, Top
Down & Bottom Up
Asset Management Strategy = corporate
vision and performance reporting
Asset Management
Roadmap
Asset Management Plans
and Risk Registers
Public Sector Accounting
Board (PASB) Audited
Asset Inventories
The Sustainable Foundation
What = ISO 55000 Series
How = Financial Sustainability Indicators
(LGASA) and Long Term Financial
Planning Best Practices (GFOA)
How = National Asset Management
Strategy (NAMS) or whatever you use
How = International
Infrastructure Management
Manual (IIMM)
How = Public Sector
Accounting Board
(PASB) Audited Asset
Inventories
The Sustainable Foundation
Alignment
(Services = Assets = Funding)
Financial
Plans
•
•
•
•
Balanced Budget
Taxation Requirements
Debt Requirements
Alternative Funding
Sustainable
•
•
•
•
Infrastructure
Levels
of
Gap
• LOS Delivery
• Demand Management
• Staffing
Service
Service
Delivery
Asset
Management
Plans
Inventories + FMV
Condition
LOS & Risk Mgmt
Long term funding
Inventories – Why PSAB?
Inventory & Valuation Status
Land
Land Under Roads
Land Improvements - Golf Courses
Land Improvements - Parks - Trails
Land Improvements - Natural Hazards
Land Improvements - Parking Lots
Land Improvements - Land Fill
Land Improvements - Wharves
Parks Infrastructure & Land Improvements
Buildings & Components
Water - Linear
Water - Infrastructure (Non-Linear)
Sanitary - Sewer Linear
Sanitary - Storm Linear
Sanitary - Non-Linear
Transportation - Road Surface
Transportation - Road Base
Transportation - Sidewalks
Transportation - Bridges
Transportation - Culverts
Transportation - Street Light Networks
Transportation - Traffic Controllers
Transportation - Traffic Signal Networks
Transportation - Retaining Walls
Inventory Audit Package Internal Audit
Data
Narrative
Review Notes
1203429
1334868
1252328
1169110
1166177
1171496
N/A
1219132
1165772
1246996
1022507
1189987
1043670
1057386
1181100
1247907
1247907
1247908
1175751
1202494
1070632
984228
984228
1259299
1202433
1262330
1252396
1209681
1179156
1219609
N/A
1221326
1179404
1257155
992164
1193296
1212731
1212739
1187427
1248254
1179493
1204011
995001
999228
999184
1256470
•
1216181
N/A
1243243
1219139
1247254
N/A
1245385
1216267
1262664
1243659
1213791
1213676
1213536
1216456
1260708
1260713
1260714
1216145
1216152
1230612
1245371
1245374
N/A
•
•
•
Subject to audit
review every year
Rules for
additions and
disposal / removal
from service
Interdisciplinary
buy-in
Corporate
alignment
Inventories at Replacement Value
AMPs Completed
Bridges
Buildings & Components
Culverts
IT
Parks Assets
Retaining Walls
Roads - Surface only
Sewer mains
Street Light Networks
Traffic Signal Networks
Trails
Lift Stations
PRV Stations
Pump Stations
Water Reservoirs
Water Mains
AMPs Pending
Drainage
Wharves
Sidewalks
Total Assets under AMPs
$
44,618,943
379,964,066
65,035,015
14,931,376
48,231,930
6,219,343
79,822,380
264,149,780
18,980,787
14,478,917
5,904,591
14,113,120
5,400,218
11,229,502
9,943,920
324,340,225
1,307,364,113
3%
24%
4%
1%
3%
0%
5%
17%
1%
1%
0%
1%
0%
1%
1%
21%
83%
230,575,657
2,282,740
35,759,640
268,618,037
1,575,982,150
15%
0%
2%
17%
100%
• $1.3B AMPs
• $269M to go
• Road Base
$400M
Asset Condition LOS
Poor or Very Poor
Total $86 million
Buildings $35 million (41%)
Buildings Asset Management Plan
•
•
•
•
•
•
•
•
Executive Summary!
Stakeholder & Benefits
What is the Asset?
What do We Own?
What is it Worth?
What Need to Be Done and When?
How Much will it Cost?
What is Next?
Executive Summary
•
•
High level description of the assets
• 98 of buildings
• Like-for-Like replacement value = $380 M
Describe Current State
• Portfolio = physical condition
• Profile criticality, risk, funding/financial
resource gaps
• Life cycle cost needs for a minimum ten years
• State what the AMP will do and will not do to
address
• Next Steps
(Don’t expect most to get past the Executive
Summary)
Stakeholders and Benefits
•
Many people are affected by standards and
performance:
• Identify stakeholders
• Tell them what they will get from this AMP
= benefits
What is the Asset?
•
Describe in some depth:
• The assets and components (if any)
• Explain physical life versus economic life
(if relevant)
• What is needed for success
• What is in and out of scope
Buildings and Components
•
•
Breadth and depth of the asset portfolio
Purpose:
“To accommodate the statutory based
activities for the District as well as to support
cultural, economic, and community
development activities which, while not part of
the District’s core business, have historically
been carried out by the District.”
• Describe major components
• What is in scope and out of scope
Buildings and Components
Select major components listed below:
Component
Site Improvements
Description
Driveway, fence, gates, retaining walls,
landscaping, surface parking lot, exterior fixtures
(bike racks, flagpoles, free standing signs, light
fixtures)
Structure
Foundation, wall structure, roof structure
Envelope
Roofing, siding, windows, exterior doors,
glazing, insulation
Interior Finishing
Painting, floor finishes, interior partitions, interior
doors, permanent fixtures
Electrical Systems
Electrical wiring, distribution, lighting, end
devices, fire alarm, security, Audio/Visual
Mechanical Systems
Plumbing, HVAC, fire suppression system,
controls
What do We Own?
Department
Community Recreation Centres (CRC)
Corporate Buildings – Hall and Operation
Centre
Community Service Buildings
Commercial Buildings
Parks Buildings
Fire Halls and Fire Training and
Maintenance Centre
Libraries
Other (Animal Shelter, Old LV library and
Keith Lynn school)
Golf Buildings
Residential Buildings
Recycling Depot
Grand Total
Number of
Buildings
8
7
14
4
35
7
3
3
9
6
2
98
What is it worth = $380 Million!
•
•
Total Replacement
Costs (TRC) =
Current
Replacement Costs
(CRV) + Other
Project Costs
CRV is the sum of
all building
components in
today’s constant
dollars
What condition is it in?
• The building industry standard condition
measure FCI is used to evaluate physical
condition of the buildings.
• FCI is obtained by aggregating the total cost
of any outstanding repairs and component
renewal requirements of a building compared
to the sum of the replacement cost of all of its
components or CRV.
• It is the ratio of the “deferred maintenance
(backlog)” to CRV expressed in percentage
terms.
What condition is it in?
100%
80%
60%
40%
Poor & Very Poor
$35 Million
20%
0%
F - Very Poor
D - Poor
C - Fair
B - Good
A - Very Good
What to Do and When!
•
•
Levels of Service – Occupants, Corporate
Goals, Legislative
For Buildings LOS can be evaluated against
asset conditions and criticality of the asset
What about Criticality?
Consequence? Likelihood of Failure?
•
Consequences of facility closure or system failure are
evaluated on five best practice criteria:
• personal injury
• loss of service
• environmental impact
• financial
• reputation
What about Criticality?
Criticality
CR1 – Most
critical
CR2 - Critical
Description
High profile purpose with
critical results
Good public appearance and
high quality working
environment necessary
CR3 – Regular
Functional focused buildings
CR4 – Less
critical
CR5 – Noncritical
Ancillary buildings
Buildings
District Hall, CRC with
Swimming Pool/rink
Operations Centre,
Libraries, CRC without
pool/rink except LV
CRC, commercial
buildings, Fire Halls #1
LV CRC, other Fire
Halls, Parks
washrooms and field
houses, Animal Shelter,
recycling depot, etc.
Sheds, shelters
Buildings no longer
operational
Old LV library, small
sheds
Risk Rating Matrix
Risk Rating
Consequences
Likelihood
Insignificant
Minor
Moderate
Major
Catastrophic
Rare
L
L
M
M
H
Unlikely
L
L
M
M
H
Possible
L
M
H
H
H
Likely
M
M
H
H
VH
Almost Certain
M
H
H
VH
VH
•
•
•
Improved risk management (Likelihood & Consequence)
Better capital budget prioritization
Informed Decision-making
Risk Registers !!!
What to Do and When! = LOS
What to Do and When! = Risk
•
When assessing risks associated with service delivery it is
helpful to:
• Evidence “what needs to be done” by identifying risks
that need mitigation plans
• Prioritize work to address High Risk items
• Understand what the risk assessment process
identifies
What to Do and When! = Risk
What can
happen?
(initiating
event)
physical
deterioration
•
Failure after
Likelihoo
Overall
Risk
initiating event
d
Consequen rating
ces
Structural/syste
m failure
Likely
Major/
moderate
High
Risk
Action
required
Prioritised
action
required
The risk assessment process identifies:
• the “likelihood” of a risk event occurring,
• the “consequences” should the event occur,
• develops a risk rating, and
• a treatment plan for non-acceptable risks.
Through the risk analysis, it is clear that no high risk ratings will
exist if all buildings are maintained to their target physical condition
(FCI).
What to Do and When! = Life
Cycle Management
The underlying philosophy of life cycle management is to
maintain the defined level of service at the lowest possible
cost over the asset’s life. The lowest life cycle cost is
achieved by managing the assets with the right strategies at
the right time
Accountants = Cradle to Grave
Engineering/Ops = Construction to Demolition
What to Do and When! = Life
Cycle Management
•
Acquisition, Replacement (Construction) = business case
A business case for adding a building should be required no
matter how the building is to be acquired, since the on-going
operation and maintenance costs, over the lifecycle of the
building alone averages 80% of total costs while construct a
new building averages 20%.
•
Contributed Assets = require attention re: operating and
maintenance costs.
What to Do and When! = Life
Cycle Management
•
Operation, maintenance and alteration costs:
• are incurred in relatively small annual amounts and
over a long period of time.
• have historically attracted far less attention from the
organisation and the public.
• In fiscally-constrained environments, such
expenditures risk being driven lower (efficient without
being effective)
• If such decisions continue over long period of time,
assets deteriorate and manifest as infrastructure gaps.
What to Do and When! = Life
Cycle Management
•
Maintenance = Component Renewal
• Major building
components require
replacement or
renewal b4 a whole
building reaches the
end of its life
• Timing & cost of
this work are based
on expected life,
asset conditions, and
replacement value of
each component
How Much will it Cost?
Two key indicators for service delivery sustainability:
1.Can we afford annual lifecycle costs?
2.How much cash required to pay for them?
• Project expenditures outlays over next 10 years
• $16 Million PA or In total, the next 10 year
projected outlays are $206 million with $149
million in capital, $57 million in operating
How Much will it Cost?
•
Annual “funding” gap total $2.9M
Operation Maintenance
Minor
maintenance
2.0
Next 10
year Annual
costs
Budget
classification
Next 10
Annual
Budget Total
2014 Budget
Gap
3.7
End-of-life
Total
replace/dispose
Component
Replacement Disposal
renewal/backlog or major
reduction
renovation
2.8
12.0
0.15
20.6
Operating
Capital
5.7
14.9
20.6
4.7
(1.0)
13.0
(1.9)
17.7
(2.9)
What is Next?
•
•
•
Integration with Long Term Financial Plan
Confirm Levels of Service for each building
Update all data for 2015 AMP
Long Term Financial Plans
•
•
How can you have a robust long term
financial plan without good asset
management plans?
LTFP block funds the “built environment” 80%
• High risk gaps are addressed by informed
decisions using AMP
Turning the Corner…
What Does It Take?
(Senge)
•
Change management competence
•
Developing champions at all levels
•
Belief that we can continuously improve
•
Acknowledge the Limiting Forces of Success
•
Collective learning capabilities that emphasize
“measuring to learn”
•
Group Trust & Interdisciplinary team work
Sustainability Measures
“Fair Value”
Financial
Performance
•
Financial
Position
•
Asset
Performance
•
0% to 15% Operating surplus ratio (inclusive of
Fair Value Depreciation) = sufficiently funded to
sustain built environment
(100%) Maximum Net financial liabilities ratio
(the significance of net amount owed compares to
revenue) = okay to borrow strategically
90% to 110% Asset sustainability funding
ratio/Asset renewal funding ratio (the extent to
which assets are being replaced over the required
funding in Asset Management Plans).
Indicator #1
Operating Surplus Ratio
2009
2010
2011
2012
2013
-11%
0%
-8%
0%
-5%
0%
-3%
0%
0%
0%
Net Financial Assets (Liabilities) Ratio
2009
2010
2011
2012
2013
Operating Surplus (Deficit) Ratio
Minimum Benchmark Target
Indicator #2
Potential Debt Room
$
Indicator #3
Asset Sustainability Ratio
2009
2010
2011
2012
2013
75%
90%
75%
90%
70%
90%
Three Year Moving Average
Minimum Benchmark Target
174
$ 193
90%
$ 211
$ 230
$ 252
SA Local Government Sector
Financial Indicators Report
2013
•
Within ten years South Australian Councils were in fact spending 3½ times
as much on asset renewal and at the same time had effectively eliminated
operating deficits (inclusive of Fair Value Depreciation).
Final Comment
In the interest of maintaining a standard of living for ourselves
and the next generations we must focus on steady state
replacement of assets augmented by reasonable reserve
levels and debt financing
Sewer - Condition Based Steady State Funding versus End of Useful life
60000000
50000000
40000000
30000000
20000000
10000000
2081
2079
2077
2075
2073
2071
2069
2067
2065
2063
2061
2059
2057
2043
2041
2039
2037
2035
2033
2031
2029
2027
2025
2023
2021
2019
2017
2015
2013
2011
0