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Asset management 2009

Black and White paper, issue 3 (August 2009)

Public sector services are underpinned by a complex infrastructure of assets. These need to be managed so that services delivered by and through assets are effective and efficient.

Top three things you need to know:
  • Assets underpin the delivery of core public services and need to be actively managed.
  • It is important to be clear on the level and type of service that assets are supporting.
  • Asset management requires good quality asset information and an approach that balances the needs of current and future service users for the life of the asset.

From roads, water, and drainage systems to parks, libraries, and swimming pools, in many instances, assets are the main aspect of public services that people experience. In other instances, assets provide the basis for delivering a service, through hospital buildings and equipment, schools, universities, office blocks, and galleries.

The purpose of holding assets varies according to the type of organisation, and the scope and nature of its activities. In the public sector, the goal of good asset management is to support the delivery of a level of service (whatever the service may be) in the most cost-effective manner, taking into account current and future customers.

Asset management means thinking about assets in the context of the services they are supporting, and being clear on the purpose of holding the asset. This might include supporting services today, enabling some future project (for example, by banking a piece of land now so that it is available in future), or for investment. An effective approach to asset management requires a focus on eight key elements.

  1. Plan for the useful life of an asset. Asset management requires a lifecycle approach that recognises that an asset’s needs will change during its lifespan. Adopting this approach ensures that assets are properly managed and maintained, and that their replacement is planned for.
  2. Choose cost-effective options. It’s important to have reliable information about your assets and the services they support. It is key to developing and implementing a strategy for their long-term, cost-effective management. This includes deciding when to intervene, perhaps by replacing assets when this option is more cost-effective than maintaining or refurbishing them. Sometimes the most cost-effective option may be not to invest in an asset but support services in a different way. Business cases and optimised decision-making tools help inform these decisions.
  3. Recognise that assets support public services only to the extent they provide a level of service, whether this is a safe and comfortable travel experience on a road, or sufficient space and equipment to teach a group of children at a school. It is important to understand the service that an asset is providing in order to monitor its performance or consider alternatives.

    An asset can become impaired if something happens to reduce its ability to provide a level of service, and as a result, its value. This might include:
    • physical damage or the asset wearing out earlier than expected;
    • changes in technology that makes an asset obsolete (for example, new computers); or
    • changes in the service that mean the asset is no longer needed.
  4. Be responsive to changes in demand. This may mean more people wanting to use assets (growth) or users having new or different wants and needs. Effective asset management considers whether responding to demand means spending more on providing additional assets, or whether demand can be managed, perhaps by spreading usage across available assets (for example, increasing opening hours at a gallery) or trying to limit demand (for example, water conservation campaigns).
  5. Manage the risks of asset failure. Risks need to be seen in the context of the levels of service that the asset is delivering. Effective asset management means identifying risks and assessing their likelihood and consequences. Then, well-informed decisions can be made about how to treat risks. Some risks might be best avoided, for example, by ceasing a particular service; others can be mitigated, for example, by putting in spare capacity. Other risks can be insured against, while some may have to be accepted.
  6. Asset use needs to be sustainable. Good asset management balances the needs of current and future service users.
  7. Good asset management requires planning whether this is for regular maintenance, renewal of assets that have reached the end of their useful life, or development of new or upgraded assets to meet demand. Considering funding requirements well in advance is crucial to ensuring that spending matches asset need while remaining affordable.
  8. Asset management practice is continually evolving with new tools being made available all the time to meet changing needs and expectations. Therefore, good planning should also focus on continuous improvement in order to maintain an appropriate level of practice.
    Good asset management planning is best documented in an Asset Management Plan, but the planning process is more important than simply producing a document.

Seek additional advice as needed

Your organisation may benefit from assurance over your asset management. Audit New Zealand’s in-house experts can review your asset management arrangements and work with you to develop and implement solutions. Contact Martin Richardson, Associate Director, Specialist Assurance Services, on 021 222 6102 or

Advice for your sector

Central Government, Crown entities, Health, and Tertiary education institutions

Infrastructure is one of the Government’s priorities. The Treasury is leading a review of Capital Asset Management in the state sector and has developed a new capital asset management framework. The Government has defined a set of capital-intensive agencies, sectors, or services. This includes a number of government departments, district health boards, and tertiary education institutions. Agencies in this category are expected to work towards advanced asset management practice.

The Government sees our infrastructure, our assets, as one way to lift the sustainable growth rate of the economy by increasing productivity. It has set up a National Infrastructure Unit (NIU) within the Treasury, and a National Infrastructure Advisory Board to help improve the way public assets are managed.

Local government (including council-controlled organisations)

Schedule 10 of the Local Government Act 2002 sets out the information that local authorities are required to include in long-term council community Plans (LTCCPs). Much of this information will flow out of effective asset management, and may best be documented in asset management plans (AMPs). Local authorities have to set out:

  • how they assess and manage the asset implications of their services;
  • how maintenance, renewal, and replacement of assets will be carried out and paid for; and
  • the levels of service that will be provided.

Council-controlled organisations should apply similar standards where they are managing key public assets.

Energy sector

In accordance with Section 57V of the Commerce Act 1986 (Act), the Commerce Commission annually reviews disclosed asset management plans (AMPs) of Lines Companies. It publishes a summary of each review in order to promote greater understanding of the relative performance of individual electricity distribution businesses and their change in performance over time. These reviews assess the degree to which AMPs comply with the Commission’s requirements.

The Commerce Commission’s interest in AMPs stems from their regulatory role, because these entities are perceived to be monopolies with the potential to extract monopoly rents from consumers. Control over tariffs (that is, price path restrictions) therefore extends to maintenance of their networks to maintain levels of service at any given tariff (that is, to address the risk that the operator will run down the network).

There is less regulation of other parts of the energy sector.

Where you can get more information

Page last updated: 27 August 2012