There are two main broad reasons for asset management:
- To fulfil legislative, regulatory, audit and reporting requirements;
- To strive to ensure that assets are managed in the most cost effective & ratepayer acceptable way possible.
Specific Reasons for Asset Management
There are a lot of very good positive reasons for doing Asset Management, including:
- to minimise the life-cycle cost of an asset, by considering all costs including; acquisition, maintenance, operational and disposal costs.
- the ability to communicate effectively with the public about balancing levels of services, risk, and funding and thus inform subsequent policy trade-offs and decisions. And support those conversations with real data and analysis, not only anecdotal stories.
- Extending life of asset by maintenance, rehabilitation and replacement prioritisation based on strong understanding of asset condition deterioration
- Improved emergency response
- Securing and safeguarding assets
- Capital expenditure and operational cost reduction
- Meeting service delivery requirements
Consequences of not doing Asset Management
Asset Management Manuals quite rightly tend to focus on the positive reasons for asset management, but in reality it is the consequences of not doing something that often motivates us. It is possible that some Council's and organisations will only adopt asset management practices, because of the consequences of not doing so.
The consequences of not doing Asset Management could include:
- receiving an audit qualification;
- being named and shamed by a government department;
- being seen as less competent or progressive than neigbouring councils;
- an unrealisticly high public expectation of what service level should be delivered;
- need for sudden cutbacks to service levels or increases to rates as a result of unanticipated peaks in asset renewals and or maintenace.
State & Federal Government reasons for promoting and mandating asset management
In Australia at least the Federal and State Governments are keen for Local Government to adopt a range of asset management practices. The irony is, that not all government departments seem to be doing asset management all that well themselves. Why then are they pushing Asset Management on Local Government? Are they:
- hoping it will make Councils more efficient & financially sustainable?
- responding to pressure from lobby groups?
The Victorian Local Government Act 1989 mentions the management of assets in a couple of places:
- Section 136 notes that a Council must manage financial risks faced by the Council prudently, including risks relating the management and maintenance of assets;
- Section 140 (2) notes that "a Council has a duty to do all things necessary to ensure that adequate control is maintained over assets owned by or in the custody of the Council."