Prioritising asset renewals in these changing times
With the current times upon us and the uncertainty that they bring, councils will find it harder than usual to manage capital works budgets in the face of changing revenue streams particularly with impacts of reduced rates or conversely additional funding as the economy recovers.
A recent notice of advice by the QAO highlighted the difficulties that councils will face during these times to manage their budgets, and it offers thoughts on how to manage cash flow into the foreseeable future. One example is to reduce Services Levels for Assets to manage costs. With funding for projects in limited supply, knowing which projects have a higher priority will allow for quicker decision making on those projects to pause and those to accelerate.
Prioritisation of projects is crucial, particularly to support effective decision making. Having a robust asset management decision making process will allow councils to streamline their decisions. To support the sector, Peak on behalf of the LGAQ, developed the Asset Management Decision Making framework available on Peak’s website. This framework provides guidance for the preparation and development of project prioritisation and ultimately supports the decision-making process.
One of the first steps for project prioritisation is the development of an Asset Renewal Program (ARP) for your existing assets that require replacement. This is in addition to your ‘new’ and ‘upgrade’ projects.
An ARP is important to ensure the service levels of your assets are maintained. The additional benefit of the ARP is that it will provide a forward works plan for asset renewals not just for the current financial year, but forward years as well. This provides valuable information to decision making, notably having the ability to move renewals to meet budget constraints whilst understanding the priority of the renewals.
Without an ARP you are literally flying blind as an asset could need replacement and you may not be preparing for a potential failure. If that asset then fails, additional costs with emergency works are incurred. An example of this is a deteriorating sewer main, where, without repair could cause a sinkhole. This not only provides significant risk to council and community; it also results in additional costs in emergency works to repair the main and potentially the road or surrounding structures.
So, where to begin with a renewal program or an ARP as we like to call it? Council needs to begin preparing a renewal program utilising the asset register data that you already have, including valuation data. By using your existing data, a high-level renewal program can be developed. This will create a first cut of your renewal program for your council to develop and prioritise.
Once the basis of the renewal program is developed, council can then review and prioritise projects to meet council’s service priorities and enable council to understand whether there are funding opportunities to support those projects, or whether it needs to come out of councils operational or capital works budget.
If needed, where a council may not have capacity or capability, we can assist in developing your ARP, as well as reviewing your data and providing insights into the condition and remaining life of your assets. By doing this, we will also provide insights to where the condition and useful life do not align and highlight further areas to be reviewed.
If you would like to know more about the Asset Management Decision Making framework or if you would like to discuss anything asset management related please contact Hans Muller on 0404 314 157 or email firstname.lastname@example.org for further information.