Asset Management – Is It Really Your Saviour?

Andrew HenryBy Andrew Henry
Past President, OMWA

I’m going to make a shocking statement. Many of you might get offended, downright shocked, or possibly even think I’ve gone completely insane. Nonetheless, I’m going to risk it because it needs to be said…

The fact that you have an Asset Management Plan will not solve your infrastructure problems.

There it is. I’ve said it. But before you call to have me committed to a psychiatric institution, please let me explain.

Whether you’re operating a water or wastewater utility, or a municipality with a mesh of services and responsibilities, an asset management plan is a ‘road map’ of sorts. It should distill your policies to fundamental principles with regard to how you intend to manage your assets; how you maintain them, how you reinvest in them, and how you will eventually replace them. It should set out a planned and systemic approach to effective and efficient asset utilization, ensuring their entire lifecycle is maximized to the extent that is reasonably practical.

But here’s the rub: this is only one element of the solution, and if this is the only piece that you’re focused on then it will never be the be-all and end-all that you were made to believe it is. It is not The Saviour of our communities. It cannot slay that dragon… at least not alone.

The approach that I advocate is that an Asset Management Plan is only one of four “pillars of good management and governance”. Without the other three elements, you only have a document that sits on a shelf somewhere and collects dust. A document that is virtually useless a mere hours after you’ve celebrated its triumphant completion.

In my version of the omniverse, the “four pillars of good management and governance” are:

  1. An Asset Management Plan, tailored to your particular needs and areas of focus, and adjusted to accommodate your processes and policies.
  2. A Master Plan outlining the long-term drivers of change and growth, including a growth-management strategy.
  3. An Operations Plan which sets out your principles and policies with regard to how you operate, safeguard, and manage your systems including assets and other resources.
  4. A Financial Plan which outlines the financial principles and policies, and incorporates the financial implications of the Asset Management Plan, the Master (growth) Plan and Operations Plan.

In support of these ‘pillars’ might be various foundational elements, threads that stitch your business activities together and support your initiatives, including established levels of service framework, risk mitigation strategies, maintenance and work management systems, environmental and quality management systems, and emergency plans. All of these elements must work synergistically to comprise a management and governance structure that maintains your assets throughout their lifecycle and ensures your business is sustainable and cost efficient.

Often a common mistake is to confuse and merge an Asset Management Plan with financial information and assume that this is also your Financial Plan. Sure, there are financial elements within an Asset Management Plan but this is not the Financial Plan. If you believe it is, then your Asset Management Plan is fundamentally flawed and the dragon will surely slay you before you even get started.

The Financial Plan is separate and distinct from asset management. It incorporates the unconstrained financial requirements to support the Asset Management Plan, but it also has to incorporate the financial implications of your operating strategy and your long-term growth. They work together, but they are each an iterative process which evolves over time to address changing circumstances.

Your Master Plan and growth strategies may identify new assets that are required in future to address a growing need, and once constructed it will need to be incorporated into your Asset Management Plan. The construction of the asset, its operation, the ongoing maintenance and refurbishment, and eventual replacement all will be incorporated within your Financial Plan.

In essence, the Asset Management Plan should present financial information related to the ongoing management, maintenance, refurbishment, and eventual like-for-like replacement of assets with an unconstrained financial view; that is, “if we had unlimited dollars available at any given time”. In practicality, the Financial Plan would shed the light of reality on the circumstances, and coordinate with other financial constraints such as affordability, fiscal timing, growth management, and potentially new services and infrastructure.

After all of this, I’d like to circle back to my original statement: “the fact that you have an Asset Management Plan will not solve your infrastructure problems”. The answer is that if you have an Asset Management Plan that is synergistic with your Master Plan, your Operations Plan and your Financial Plan, then you’re well on your way to being able to solve your infrastructure issues… or at least manage the gap in a responsible and effective manner.

Each of these plans will need to be periodically reviewed and updated, causing the need to review and update other plans and initiatives, requiring the Financial Plan to be updated… and on and on… a never ending cycle that’s undertaken over time. The degree of success of your Asset Management Plan and your continual improvement processes, in part, are contingent on the extent in which these are integral to your day-to-day activities, as well as your business practices and governance.

None of this happens overnight, but the journey is well worth it.

As the Province of Ontario rolls out the requirements for municipal Asset Management Plans, I look forward to the discussions and the journey ahead of us all.

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