By Domenic Fonte - CEO, AssetFuture
This week, as part of the AMC’s Asset Management Ladscape Insight Series, I was invited to present on Decision Making in AM. I’d like to share a summary of my thoughts on my presentation.
Decision making can be very hard in Asset Management. Often, we rely on expertise and knowledge and being focused on keeping the lights on. But ultimately decision making influences an organisation’s Asset Management Strategy and Planning, which is the heartbeat of an asset-intensive organisation.
It can be a difficult balance between logic and intuition, particularly when we don’t have enough quality data to generate the insights we need. Unfortunately, relying purely on instinct and gut, may lead to short term operationally focused outcomes.
3 Steps to Better Decision Making
So how can we make better, more strategic decisions? There are three things that that improve our ability to make decisions.
1. TOTEX Thinking
This is about better understanding the trade-off between CAPEX & OPEX, while taking a lifecycle view. Too often, decisions are influenced by short term savings or gains. But this can lead to more costly problems, such as critical asset failure, further down the line.
2. Breaking Down Silos
To make the best decisions, we need the whole team’s knowledge and insight. This means improving collaboration across organisational teams aligned to SAMP objectives. To do this requires leadership impetus and cultural alignment to ensure the organisation can realise the benefits.
3. Asset Information
Consistent and reliable information in a scalable framework is critical for informed decision making. It’s exceptionally important as organisations evolve, and transfer responsibility to new team members. A scalable framework will underpin both current and future success.
TOTEX Thinking: PPPs
When it comes to PPPs (Public-Private Partnerships), Facilities and Asset Management organisations are usually on the hook for capital and operational expenditure over the entire concession period, typically somewhere from 20-30 years. Lifecycle value realisation is at the forefront of the engagement even prior to a contract being agreed.
The initial challenge is estimating the TOTEX for the asset (or portfolio) over 25 years while it’s still in concept phase. Then the challenge becomes managing performance to ensure the asset functions as desired, meeting operational KPIs, while maintaining financial viability.
To ensure success, this form of delivery model requires delicate management of TOTEX, which includes CAPEX and OPEX costs, ensuring there is no pre-mature failure of any assets. Failure to proactively manage the performance could potentially result in costly, early intervention and penalties or abatements.
Having an Asset Management Plan ensures consistent operation of the infrastructure, while providing Asset Managers with the appropriate levers to inform capital or operational/maintenance expenditure over the life of the asset.
Breaking Down Silos: Aged Care
Aged Care is an industry that has received a lot of press in recent months, particularly relating to the Royal Commission and changes to legislation pertaining to Asset Management Planning. This is driving significant evolution from the previous "cottage industry", and providers are still in the early stages of their AM journey.
Major providers have grown through acquisition and aggregation, which has resulted in silos within organisations. Breaking down silos across capital delivery, lifecycle upgrades and planned maintenance is vital to create efficiency in AM decision making.
Uniquely, legislation mandates that AMPs must be shared with residents of communities. With this required level of transparency, accurate and reliable data is paramount. For this transition to be successful it will require leadership direction and cultural adjustment across the aged care industry.
Asset Information: Education
As an example of how Asset Information can drive better decision making, consider the education sector. Schools play an incredibly crucial role in society and at the core of their AM strategy is the individual student and how their education will benefit from an appropriate, well-functioning, quality environment.
The major challenge for schools is ensuring alignment across a myriad of stakeholders including AM, Principals, teachers, students, parents and service providers. With such an extreme variety and density of stakeholders, decision making for this asset class must be objective and evidence-based. Using a scalable asset information framework has been a critical success factor in education, removing subjectivity while prioritising investment and enabling short, medium and long-term decision making. It has provided a single, consistent view of the portfolio, ensuring alignment to the State Infrastructure Strategy.
Asset Information is now foundational in planning for population growth, estimating current and future CAPEX & OPEX and was even critical in planning for COVID management including shutdowns.
Let’s not forget AM is a journey, it’s about making incremental steps towards improving these pillars, whether it be understanding TOTEX, removing silos or leveraging asset information. This focus will set you forth in improving your approach to AM decision making.
Domenic Fonte - CEO, AssetFuture
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