Are Our Assets Not Performing, Or Is It Us?
Tony Anderson and Priyani de Silva-Currie – Calibre Consulting
ABSTRACT
Just-In-Time, Run-to-Failure, Sweating the Asset, Deferring Expenditure. Hands up if you can relate!
These terms are ugly for people who plan for the future, but we're using them in modern and brave
asset management departments' around the country. What's really going on out there people? Two
adages to consider 'why put off for tomorrow what you can do today' and 'a stitch in time saves nine'.
Are these wise words still relevant in today's asset management practices? There's a collective need
for improved understanding.
Tony and Priyani will investigate the following concepts in an interactive session designed to
stimulate group discussion:
a) If the goal posts have moved, what does lifecycle management planning look like today?
b) Are your programme targets too ambitious, too many new deliverables and carryovers?
c) Can you afford to fund your renewals programme? Is the funding gap too large to fill?
d) Do the policy, engineering and finance teams talk early in the process?
e) Where have all people gone? Do you have enough delivery agents on the ground to
implement your asset management work programmes?
f) You know what's just around the corner - legislation changes, demographic change,
centralisation, and environmental impacts.
KEY WORDS
New Zealand, asset management, funding gap, depreciation, infrastructure, lifecycle, programme,
renewals, sweating the asset, run-to-fail, just-in-time, delivery, methodologies, carryover, planning.
INTRODUCTION
The intent of this paper is to discuss the
performance of New Zealand’s ‘assets’ and
asset managers who complete lifecycle planning
and programme delivery, the techniques used,
issues and ‘home truths’. This analysis has come
about as in our industry we are exposed to
examples and scenarios which range from
inadequate to model practice and we think
sharing these examples is valuable.
Assuming the goal posts are moving, public
works organisations have to decide whether to
deliver what is considered best practice or just
sufficient and adequate. Where do we sit on the
continuum?
A perception exists from within the industry that
our assets are not performing well, that we are
lagging behind the rest of asset management
world leaders, even with sophisticated tools,
models and methodologies. Is this true and if so
is it a result of ignorance, bad practice or a lack
of incentive to change? The contrary argument;
is change even necessary? Is our current
practice good enough?
This paper examines a number of asset
management practices from around NZ in local
and central government and seeks to
understand why certain methodologies are
favoured over others and if there is any
consistent good behaviour and management
occurring.
As asset management is such a wide ranging
topic we have limited the scope of this paper to
include the areas of financial management,
programme delivery management, and life cycle
planning.
This paper is a culmination of anecdotal
conversations from within the sector, specific
research into current publically released
information via a literature review, interviews,
and questionnaires with a sample of asset
managers, representing various organisations.
The following assumptions/notes have been
made:
1. Where information from a third party has
been provided it is a personal
perspective from an asset manager
within the surveyed organisation.
2. The survey size was limited to 12 people
for simplicity.
3. The
analysis
reviews
current
methodologies and systems rather than
past iterations.
4. The examination is restricted to the New
Zealand context.
NEW ZEALAND POLICY CONTEXT
In November 2014 New Zealand’s Office of the
Auditor General (OAG) Lyn Provost released a
report reviewing the long term challenges facing
Local Authorities with funding their assets.
Collectively these authorities are responsible for
more than $100B of community assets. The
report, Water and Roads: Funding and
Management Challenges (2014) focused on the
four key asset classes managed by Local
Authorities, roading, water supply, wastewater
and storm water services.
Over the period reviewed (2007 to 2013) Local
authorities consistently spent less than they
intended on capital works, including asset
renewals. The OAG analysis showed that most
local authorities' planning and decision-making
about their infrastructure services, assets, and
associated funding were adequate for short- to
medium-term
planning.
However,
local
authorities needed to do more to manage
infrastructure and financial strategies for the long
term, given the wider economic and population
changes faced.
The ratio of forecast renewals expenditure to
depreciation in local authorities’ 2012-22 longterm plans also presented a downward trend in
asset reinvestment. If actual spending trends
continue to match forecast it was estimated that,
by 2022, the gap between asset renewals
expenditure and depreciation for the local
government sector could be between $6B and
$7B.
The OAG (2014) analysis also found that local
authorities tend to have a lot of data, but they do
not necessarily use it well, or use the best data
to support decision making. Local authorities
had better and more reliable information about
their above-ground assets than their belowground assets and were likely to know more
about newer assets than older assets and were
more likely to reinvest more in their roading
assets than in their "three waters" assets due to
the above.
Current spending trends raise questions about
local government asset planning, depreciation
practices, and capital expenditure management.
Local authorities should consider the effect of
life-cycle costs – including operations and
maintenance, renewals, and deprecation –
during the life of the asset alongside their
financial strategies and funding mechanisms. It
was Provost’s (2014) view that the evidence
base for good decision making and learning is
not consistently available but it needs to be.
NZIER (2014) state that Infrastructure
development waves create investment echoes.
In its analysis of the last hundred years, NZIER
identified two clear waves of investment for
assets other than roads: in 1920-30 and from
1950 to 1986. Investment in roads peaked
around 1965, then trended lower until 1990. It
then trended higher between 1990 and 2013.
Borrowing by local government for capital
investment has tended to be synchronised with
infrastructure investments. Local authorities
need to be prepared to manage these
infrastructure renewal cycles. Industry experts
and practitioners in a NZIER's workshop session
advised that many roading assets could be
approaching second or third renewal cycles, with
bridges next approaching a renewal cycle in
about 2025. Although the timing for three waters
assets is difficult to predict, because councils are
more likely to take a "run-to-fail" approach to
underground assets, experts advised that a
significant renewal cycle of three waters assets
is likely to occur during 2040 to 2060.
The National Infrastructure Unit (NIU) released
its Thirty Year Infrastructure Plan in August
2015. Central and local government own over
$116 billion of infrastructure assets and in the ten
years to 2025, the forecast infrastructure spend
is over $50 billion.
This value, the opportunity cost it presents, the
long life nature of the assets and the importance
of infrastructure to our economy and social wellbeing make it critical that infrastructure is well
planned, managed, delivered and used. The
Plan provides a new approach to infrastructure
management and planning to tackle the
challenges of the next 30 years, along with
supporting actions. This provides national
direction to infrastructure development in New
Zealand and confidence to the private sector.
NZ Council for Infrastructure Development
(NZCID, 2103) report that while long term asset
management across councils is generally good,
it is not uncommon to see robust plans being
compromised by annual budget processes,
causing projects around the country to be
deferred, down-sized or cancelled in an effort to
limit short term rates increases.
NZCID (2013) state that good quality asset
management practices compromised by
electoral cycles, is creating a bow wave of
investment that future ratepayers have to meet.
Thirty year spatial plans set out a long term
growth strategy. As Councils now have to
produce a 30 year infrastructure strategy which
ensures
that
investment
and renewal
programmes support planned development and
are backed by good asset management practice.
Our research found that there is a body of work
being undertaken by various sectorial working
groups tasked to rationalise the funding of
significant renewal programmes over the next 30
years.
There
are
sub-sector
groups1
representing the three waters, transportation
and building/housing. As these organisations
represent in most cases our largest portfolio
owners, decisions these groups make will have
a significant impact on the financial
expenditure/management on a major portion of
the New Zealand public infrastructure assets.
Collectively they will also influence the scale of
the funding gap and the way future funding will
occur. In short these are legacy decisions being
made by legacy decision makers. Are they up for
it? Are these decision makers being given the
empowerment and tools to make these
decisions for NZ Inc.?
The Scale of the Dollars $:
• 2022 estimated funding gap between $6B
and $7B. This is 4.1% of NZ 2015 GDP.
• Local Authorities roading, water supply,
wastewater and storm water services asset
worth $100B.
• Potential Auckland Transport Investment next
30 years $60B.
• Christchurch Crown capital spend $4.0B.
• Three Waters Asset Replacements estimated
between $30B - 50B.
These figures are estimates based on the New
Zealand Infrastructure Plan (2015) documented
values. We have not been able to verify the
accuracy on the figures as there is limited
detailed asset data available publically and
assets noted are being valued inconsistently
around New Zealand. Of concern when
1 Transport Advisory Governance Group (TAGG), Water
Advisory Governance Group (WAGG), Building and Housing
Advisory Governance Group (BHAGG) NZTA Road Efficiency
(REG) Group, National Infrastructure Advisory Board (NIAB) and
a recent MOU Collective of the Quake Centre, University of
Canterbury (QC) and Institute of Public Works Engineers
Australia New Zealand (IPWEA NZ) and Water New Zealand
(Water NZ)
examining the scale of value is the potential that
the funding gap for future renewals could be
billions of dollars collectively under/overestimated.
Definitions
For clarity and to enable the crosssector/organisation discussion it is necessary to
define a number of frequently used terms. Below
is a list of these terms and the
definitions/scope/context they are used within
this paper.
Term
Sweating
the asset
Run-to-fail
Just-in-time
Capital /
Renewal
Expenditure
Definition
To extract the most possible work
out of the most productive
employee. A colloquial phrase
meaning to extract more value from
an asset beyond its original intended
value-exchange. That is, extract
more use/output from it than it was
designed for.
Assets are deliberately allowed to
operate until they break down, at
which point reactive maintenance is
performed.
No
maintenance,
including preventative maintenance,
is performed on the asset up until
the failure event. However, a plan is
in place for ahead of the failure, so
that the asset can be fixed without
causing any production issues.
The Just-in-Time asset replacement
strategy is both an art and a science.
A renewal project that occurs too
early does not have adequate
proximity to functional failure such
that the asset manager has failed to
extract the full useful life from the
asset. The only legitimate cases
where this may occur are the early
replacement of an asset to meet
some form of obsolescence—
typically economic obsolescence or
legal obsolescence.
These are funds used by a company
to acquire or upgrade physical
assets. These expenditures can
include everything from replacing a
roof to building, purchasing a piece
Deferred
Expenditure
Funding
Gap
of equipment, or building a brand
new asset.
Is required maintenance or capital
expenditure that has been delayed
(or ‘deferred’) due to funding,
operational or other reasons.
This is the difference in the
increasing renewal costs for an
asset and decreasing ability to fund,
as detailed and explained in the
graph below:
DISCUSSION
determined from the AMP, carry overs do exist
and can be due to a lack of resources e.g. staff
absence. Tight staff levels mean it is a cost
sensitive issue, significant or not, whether to
bring in additional resource, e.g. use of
consultants.
Can you afford to fund your renewals
programme? Is the funding gap too large
to fill?
Considered the most challenging aspect as
there is a need to balance the ability to pay with
desired levels of service. Generally the final
programmes were not as large as had been
originally recommended, but an increase was
normally achieved. Most were funded by
depreciation reserve with the balance by loan
and/or targeted rate. If the funding gap is too
great then rates have to go up and this has a
major impact on the customer. Some did not
understand what could be done to rectify this
situation.
Did the policy, engineering and finance
teams talk early in the process?
Key Findings from the Sector
If the goal posts have moved, what does
lifecycle management planning look like
today?
A mix of lifecycle planning types were mentioned
with “sweating the asset” the most common and
“just-in-time” an aspirational target. This results
in reactive versus proactive maintenance and
renewals. Those using “sweating the asset”
would like to be more “just-in-time” even though
they will not get it right all the time, some will fail.
Roading is an asset often “sweated”. Some
assets are lasting longer than thought and others
are not. It was noted that “a bit of just in time
with the treatment plant assets”.
Are your programme targets too ambitious,
too many new deliverables + carryovers?
It was noted that historically there is a gap
between capital and renewal funds allocated
versus spent. This has been due to two main
factors; insufficient staff resourcing to execute
the volume of works and delays with major
resource consents and delivery. This has been
seen where there are specific sector reasons
such as significant government subsidies
(Ministry of Health) on the water and waste area
being available. Otherwise the programme is
The review team is generally included in the
process, but normally well after the first iteration
of the plan/budget has been generated. Some
hold workshops to discuss the issues and
priorities although this depends on the
sector/organisation. Some get involved quite
early or when the annual funding request is
made. It was noted that it is a struggle to get
them involved and “they don’t necessary follow
through with money”.
Where have all people gone? Do you have
enough delivery agents on the ground to
implement your asset management work
programmes?
This was a mix of resourcing constraints
depending of the geographical location. For
example contracting resources have been drawn
to Christchurch for infrastructure rebuilds. In
general as the programmes get bigger with the
contractors when they are busy, so pricing
tension is apparent. Different tendering methods
are being considered. Panels seem to be a
common attempt at a pre-qualification solution.
But it was noticed that those not on supply
panels left the area, hence weakening the
market.
Is your lifecycle/renewals planning
fixed or flexible? Is it $X per year
cycle, assessment prior to
deterioration modelling or
methodology?
process
over life
budget,
another
This is varied depending on asset type and
organisation mainly operating on a fixed value
amount, set by an annual planning cycle. The
ideal was perhaps fixed, but at the “appropriate
level” as ratepayers/customers need surety.
When you look at the depreciation curves these
have peaks and troughs as they relate to times
in history when there were high and low capital
spends. Staff are budgeting as part of a 30 year
plan. This is considered a good modelling
exercise. There is some flexibility, probably not
enough to respond to the changing priorities of
the portfolio owner.
Interpretation of the Key Findings
The key findings from the above research has
yielded the following key points:
 It is widely acceptable now to sweat the asset.
 The asset managers would like to be “just in
time” but this rarely happens.
 Tight staffing levels/skills mean delivery
programme can be compromised.
 Funding is the most challenging aspect and
the ‘gap’ is being funded through loans or
targeted rates.
 The gap funding method is a solution but has
political and community ramifications.
 The policy, finance and engineering teams
need to talk more often and earlier.
 Obtaining sufficient contractor resource will
be dependent on location. This can be
improved via additional tendering processes
and packaging work to increase scale.
 The planning cycles are fixed and need to be
more flexible to allow for the evolving nature
of levels of service, demand and future
priorities.
 There was a lack of knowledge on alternative
methods or tools to use.
We have also included two case studies as we
believe they are applicable to the topic. Tasman
District Council are changing their funding model
and downscaling their renewals programme to
reduce their forward debt levels. NZTA have a
reality check of field assessments for
programme prioritisation that also acts as a
litmus test for their timeliness. These case
studies are attached in Appendix 2.
Are Improvements Necessary?
If the goal posts have moved, what does lifecycle
management planning look like today?
Yes, the goals posts have moved. Lifecycle
planning is different now to what it was twenty
years ago when ‘Asset Management’ was a new
art. Our practitioners are telling us that they are
doing fixed value planning but would like to be
more flexible in their planning, but evidence
demonstrates the majority are resisting change
and doing what they’ve always done. This is an
improvement area. Another improvement is
better tools and industry knowledge to assist in
better decisions being made.
Are your programme targets too ambitious, too
many new deliverables + carryovers?
Programmes are large and getting larger as
customers
want
more
and
technical
expectations increase to avoid risk of failure and
future-proof. A more stringent way of prioritising
programme delivery so that realism can be
applied is required. Additional time needs to be
allowed for correct and accurate cost estimating.
All costs should include an inflation adjustment
as the time between programme/costing and
tender/construction can be significant.
Can you afford to fund your renewals
programme? Is the funding gap too large to fill?
The funding gap is getting larger at a “NZ Inc.”
level as well as within communities.
Government financial assistance exists but is
applied inconsistently. Consistency of funding
for depreciation is required. A recent quote; “I
challenge any Council to not have a funding
gap”. The accuracy of Engineers Estimates
versus the actual tender price(s) has caused
budget increases and needs to be addressed
through more accurate inflationary estimating
and comparable measurement in quantity
surveying.
Did the policy, engineering and finance teams
talk early in the process?
It is obvious from discussions that finance,
engineering and policy teams are not talking the
same language, to prepare the programme
estimates and forecasts. Sometimes they are
not talking at all. All parties need to understand
the consequences of doing (or not doing)
something and its impact on the lifecycle
plan/forecast, but more importantly the actual
asset itself.
Where have all people gone? Do you have
enough delivery agents on the ground to
implement your asset management work
programmes?
There are not enough skilled people in asset
management
or
delivery.
Government
procurement and fair market principles are being
applied inconsistently. Training opportunities in
asset management, procurement and project
management are required. Industry needs to
play its part to strengthen from within. We are
unsure of the effectiveness of the recent move to
panel contract for delivery. Time will tell if this
has had a positive (or not) impact.
CONCLUSIONS
At a ‘New Zealand Inc’ level good headway has
been made into policy which supports
consistency and thinking collaboratively about
lifecycle planning, such as the NIU direction via
their 30-year Infrastructure Plan.
The
implementation of this plan is underway and it is
too early to judge its effectiveness. The recent
industry focus groups are also a good start,
however the representatives on these industry
groups are obviously constrained by the elected
cycle nature of government to make short term
decisions for the long term future.
There is a real deficit of knowledge and resource
skills at a sector/community level to
appropriately plan, evaluate and deliver lifecycle.
This majority is exacerbated by a lack of
supporting tools that will help these people make
a real difference in their planning. Asset
managers, it seems, will do what they have
always done until they are strongly encouraged
to change for the better. Model examples exist
and should be promoted.
To conclude, whilst these statements are valid;
'why put off for tomorrow what you can do today'
and 'a stitch in time saves nine' the
consequences of making the wrong decision
within an inappropriate timeframe creates major
issues for future decision makers. This is a
vexing issue for all asset managers who need
tools and support to understand the
consequences of their decisions.
Sweating the asset and just-in-time are great
methodologies for assets that are not critical or
have lifeline responsibilities. An appropriate
level of responsibility and due diligence is
therefore required if the intent is to extend useful
life to its maximum or indeed run-to-fail for our
critical assets.
Fig. 1. Care is attempting to slow down or reserve the sands of time so that he can undo the
deferred maintenance. A futile but valiant attempt.
APPENDIX 1: COLLATED SURVEY RESULTS
Question
Responses
We’ve done some simple renewal decision modelling using existing
30 year budgets – on the basis of this we can see that most will be
programmed for renewal well after their expiry date simply because
of affordability issues. So that means sweating them, but you’d
have to make an assumption that the will be failures along the way.
Do you consider yourself to be
managing your asset portfolio on a
basis of “run-to-fail”, “sweating the
asset”, “just-in-time” or something
else?
Mixture of all three with a new one we will also invoke is “shrinking
the asset”. Last strategy driven by funding cut backs from NZTA
where Council intends to have a closer look at justifying continued
maintenance of some road assets. “Run to fail” we would suggest
is more a consideration of reactive versus proactive maintenance
and renewals. Pumps for instance where you have a duty standby
system is an example where we are currently reactive. One pump
fails but then go to standby while you replace the other pump.
Reactive on some pipe lines when you get a burst failure. Ideal is
through more condition assessment moving more to JIT but there
is also a cost on doing condition assessments. Another issue is
currently the population is overall static. Future issues may also
arise if population decline in relation to reducing funding base to
sustain infrastructure (that is underutilised). This is another reason
why it is in everybody’s interest to sustain and grow communities
and the economy. Note also this is on top of continuing drive to find
ways to be more effective and efficient.
Sweating the asset although would like to be more just-in-time. Not
too many major problems have come up, mainly legacy issues with
building assets.
Just in time is what we are trying to achieve, but will not get all right,
some will fail, certainly ‘sweating’ some assets e.g. roading.
Prudent reseals lasting longer than what was expected – volumes
of traffic are down, keeping a close eye on it. ‘Sweating’ main trunk
main (steel) and replacing sections every 3-5 years as is lasting
longer than expected and not the entire network will fail at
once.120m head high pressure, gravity fed system.
Sweating the assets, seeing the condition of asset deteriorate, and
pushing them to their limit. Some are lasting longer than thought
and others are not. A bit of just in time with the treatment plant
assets. Better regime in place now to do that.
Historically there is a gap between capital funds allocated vs. spent.
This has been due to two main factors, insufficient staff resourcing
to execute the volume of capital expenditure and delays with major
resource consents. Both gaps have been have been reduced.
Is your works programme too big?
I.e. Do you have current carryovers or do you achieve your
yearly delivery plan?
Yes. This is partly due to significant government subsidies (MoH)
on the water and waste area being available at the time. Basically
if we did not apply for them when they were available would have
missed out. Did cause a resourcing issue, but we are slowly
working through backlogs. Programmes have been reduced in part
because the subsidies are no longer available and in part because
we are more aware of the resourcing issues. There is another
bigger issue here which I have touched on below.
Not generally no, although there is some inconsistency between
years. Generally works plan achieved in the buildings/property
area. Recently had issues with not enough internal project
managers.
Works Programme determined basically from AMP, carry overs
exist, lack of resources e.g. staff illness. Small staff levels means
it is a pertinent issues, debilitating or not, bring in some else or not
e.g. consultants. Organise work on a year by year basis haven’t
been in a position where projects are ready to go, ahead of the
annual plan process. Design tender and procure in the year that it
is allocated. NZTA are assisting by having 3 year rolling
programmes. Accounting issues on this not well understood.
We have a few carry overs, other reasons such as tendering issues
etc.
Please clarify financial resources – opex funds are generally
sufficient, however the programme and funding requirements are
not separable in terms forward planning.
How do you allocate financial
resources to your programme, is
there a funding gap?
This is always the most challenging aspect as we have to balance
ability to pay with desired levels of service. In addition to providing
Council with graphs showing renewal levels versus depreciation,
also provide as much factual information on the actual condition
and performance of assets. Do this through workshops which
include senior technical staff, management (including finance and
policy) and Council. Most recently Infrastructure Strategies and
Financial Strategies has helped. We have also held public meetings
in communities (for instance Runanga) where we were proposing
significant increases in renewals to explain and justify the works.
The final programme was not as big as we had original recommend
but we did achieve an increase. Note this also related so Q6.
Depreciation reserve with the rest by loan and/or targeted rate.
Accumulated depreciation main fund source and funding gap is by
loans. If gap is too great then rates will have to go up and there is
a huge impact of this. Negative growth and downturn in industrial
factors in. 12 months ago positive growth so complete turnaround.
Depends on the Council, 3 do it based on condition and funded
through depreciation for renewals and 2 Councils borrow money
and don’t depreciation. Yes there is a funding gap.
The AP review team is briefed prior to first run of the financial
model, and then following each subsequent run of the model.
Early on – see below. Note this is for AP, for LTP more advance
workshops.
At what point in the Annual Plan
process are your policy and
finance teams briefed on your
recommendations?
Very late. Has been an ongoing issues. Have been setting budgets
by rolling over the previous years and then adjusting. Started to
complete from scratch and that has caused some problems.
Early in the process. First part put budgets together and then
develop together at that stage.
Depends on the council, some quite early and some only when you
do the LTP annual budget or funding request. A struggle to get
them involved. Don’t necessary follow through with money.
No.
Are you having any challenges
procuring adequate contracting
resource for programme delivery?
Yes, contracting resources were drawn to Chch for infrastructure
rebuilds and this was understandable. Situation still not the best.
Deferring some works. Larger NZTA NOC contracts have also not
helped as we have seen two major contracting companies leave
Greymouth. The NOC’s are also tying up the availability of local
contractors for Council work.
On occasion. Never quite sure how many tenders will be received.
Trying to get additional contractors from further afield to respond.
Getting bids – haven’t noticed any large scale differences over the
years. Reseals 3 – 4 bidders, water project 1-2 tenders. NOC
contract NZTA may be game changer. One large contract for
roading – one national and one significant regional player moved
out of the district. $3-4million for large companies to come back into
the region. More pressure.
In general as the programmes get bigger with the contractors, they
are full up so pricing tension is there. Different tendering methods
[panels] considered.
The $ are fixed according to the LTP or Annual Plan as suggested
through the LTP review process. Specific programmes i.e. which
roads are up for treatment or which pipes are to be renewed are
reviewed prior to each year.
Is your lifecycle/renewals planning
process fixed or flexible? Is it $X
per
year
over
life
cycle,
assessment prior to budget,
deterioration modelling or another
methodology?
Interesting as I think the ideal is fixed but at the “appropriate level”
as ratepayers/customers need surety as to what their rates bill is
going to be. When you look at the depreciation curves these have
peaks and troughs as they relate to times in history when there
were high and low capital spends. “Ideal” is to have a fixed funding
level which balances out the highs and lows in renewals. That is in
some years you would over fund and in others underfund but over
the long term it balances out. To clarify further we are at a fixed
funding level but moving forward we need to confirm if this is at the
right level to allow flexibility in actual levels of renewals in any one
year.
Fairly fixed. Has been dollar value of lifetime. Some specific
programmes may be different.
Inflation, first 10 years fixed by BERL and then guessed at 3% after
that. Engineering staff are budgeting as part of the 30 year plan.
Identified every main replaced and increased LOS and larger pipes
inserted (even though this is not required, it is cheaper), 50mm
instead of 25mm to reduce strain on network. Good modelling
exercise. Asset replacements, renewals and upgraded based on
time rather than condition especially for underground services.
Challenge anyone to produce modelling better than that given small
rural community with not a lot of money to put towards complex
models.
Some flexibility, probably not enough. Renewals forecast is not
straight-line, it is increasing. Varying 8 methodologies across 5
councils. Predictive modelling for at three of them. Results mirror
what is happening. Water supply good system. They do what they
can and only a certain amount of money is spent investigating.
APPENDIX 2: CASE STUDIES
Tasman District Council Case Study
Tasman District Council (TDC) have made a fundamental change to their approach. They are;
 Moving to fully funding the wearing out of assets over their lives (funding depreciation). This
will result in improved cash flows into the Council, so it needs to borrow less to fund the
replacement of existing infrastructure. This will be fully implemented by 2025,
 Reprioritisation of capital works,
 Reducing the overall capital expenditure programme,
 Ensuring there is sufficient funds or borrowing capacity available to fund the planned capital
programme (i.e. provide essential infrastructure and services);
Close monitoring of assets and better managing their maintenance means the assets last longer.
TDC will still see the same level of service, and improvements will still happen in the future. The
improvements may happen slightly less often, and be part of the larger asset renewal programme.
Perhaps best of all TDC able to stop the ‘bow-wave’ effect of future borrowing. Pre-funding
renewals means that future borrowing can be dramatically reduced, as money has already been
set aside.
The proposal to turn the tide on debt is partly based on reducing overall capital expenditure.
However the goal to keep overall levels of service the same. This will be achieved by:
 Reducing the trend of previous borrowing;
 Reducing the number of service level improvements by focusing on and prioritising
essential improvements;
 Prioritising new capital works that provide the greatest benefit to the community and
facilitates growth; and
 Sensibly managing asset renewal risks by ensuring investment is justified on economic and
service level grounds. This can be done by making better use of information about our
assets.
NZ Transport Agency Case Study
The review process is referred to by the Transport Agency as their RAPT review (Review and
Prioritisation Team). The RAPT process is the closing stage of the renewals programme
development before the projects comprising the programme are committed to contract.
The programme for the upcoming year which is reviewed through the RAPT process is drawn from
year one of the forward works programme. This is an optimised programme of forward works which
is derived using a number of inputs including dTIMS analysis.
It is considered important that prioritisation and review processes start from a programme which
considers the most cost effective whole of life strategies to maintain the network. The intent of
prioritisation and review is not to revert to a worst first maintenance strategy. The outcome results in
a high degree of confidence that the renewals programme is robust and adequately tensioned.
This is an annual process carried out between January and March each year. Amongst other things
it results in fine tuning to focus the right treatments applied at the right places in the right time and
decisions that have measurable cost saving impacts, but also the associated learning benefits also
have significant value. It typically results in deferral of upwards of 10% of the ~$130M programme
by at least one year. Left with confidence that the remainder of the programme is well justified (the
right treatments in the right place at the right time).
The Transport Agency achieves significant benefit from including in the team all parties that should
have a part in optimising the renewals programme. They also review the deferral decisions to ensure
they are appropriate, learning from previous decisions.
Using a simple scoring and analysis system to record if a treatment is ‘too early’, ‘on time’ or ‘too
late’ it is possible to get a very quick picture of the proportion of the programmes that are about right,
undertaken early or late. This is a useful benchmarking tool. When monitored over time, this analysis
may give a useful insight into whether a “bow wave” of deferred work is developing.
If the percentage of ‘too late’ is increasing, and ‘on time’ decreasing, possibly a backlog of work is
developing. If the ‘too early’ is growing, possibly more tension should be applied. The extent of ‘too
late’ will provide an indication of whether programmes are conservative and how much risk is being
taken.
It is important that any review process and in particular the prioritisation and deferral element of this
starts from an optimised forward works programme. Otherwise there is a risk that the maintenance
strategy would revert to a worst first scenario which is generally not the most economic strategy is
whole of life terms. Prioritisation of works within the context of an optimised programme produces
short term expenditure efficiencies but it is important that these do not override network based whole
of life economic balances.
NZTA do expect to be take risks and that there will be a proportion of treatments that are carried out
‘too late’ – perhaps up to 10 percent.
Several lessons learned in recent years have been, for example:
1. Introduced the possibility of some very short (e.g. 300m) rehabilitation to stretch the life of
longer upcoming rehab sections. The short lengths addressing the first sections to fail which
are generally associated with the poorly drained and lower construction quality.
2. Tension applied to Net Present Value analysis.
3. Challenged the life being achieved from some resurfacing work and prompting further
investigation of failure mechanisms (and what that is telling us about future treatment
designs).
REFERENCES
National Infrastructure Unit (NIU). (2015). The Thirty Year New Zealand Infrastructure Plan
[Online] Available from: http://www.infrastructure.govt.nz/plan/2015/nip-aug15.pdf I ISBN: 978-0908337-00-2
NZ Council for Infrastructure Development ( NZCID) (2013). Changes to local government planning
a step in the right direction [Online] Available from:
http://www.nzcid.org.nz/story?Action=View&Story_id=79
NZ Institute of Economic Research (Inc). Eaqub, Shamubeel. (2014). Part 3: Local government
finances – A historical perspective Water and roads: Funding and management challenges.
[Online] Available from: http://www.oag.govt.nz/2014/assets/part3.htm
Office of Controller and Auditor-General Provost, Lyn. (2014). Water and roads: Funding and
management challenges [Online] Available from: http://www.oag.govt.nz/2014/assets ISBN 978-0478-44202-1
REG The Road Efficiency Group Best Practice Asset Management Working Group (2013) NZ
Transport Agency Programme Review Process Initiative Number 2013_01 [Online] Available from:
https://www.nzta.govt.nz/assets/Road-Efficiency-Group/docs/best-practice-case-study-summary2013.pdf
Tasman District Council. (2015). Newsline 10 April 2015 Issue 347 [Online] Available from:
http://www.tasman.govt.nz/tasman/newsline-online/earlier-editions/newsline-online-2015/newsline347-10-april-2015/
BIOGRAPHIES
Priyani de Silva-Currie
Priyani is the New Zealand Asset Management Leader for Calibre Consulting and is responsible for
the direction and growth of asset management as a technical discipline and valuable service. Priyani
is a national leader in many fields including asset management, energy management, diversity and
women in leadership. Her former roles include Partner at Opus, President of the EMANZ and
Multicultural New Zealand. Priyani has undertaken technical asset management roles for entities
such as HNZC, NZQA, EECA, Spark (Telecom NZ), AIAL, Auckland Transport and IPWEA. Priyani
knows that for companies, government and industry to improve their asset management outcomes,
they need to ensure the basics are done well. Priyani trains and assesses asset management
professionals to gain NZ asset management qualifications, and is an accredited Better Business
Case Practitioner®. Contact details: [email protected], +64 21 1928114.
Tony Anderson
Tony is a Senior Asset Manager and has worked with numerous clients on national contracts
including: Ministry of Education, community facility development, HNZ Property Condition
Assessments, NZ Defence Force site inspections, property acquisition and tertiary provider Asset
Management reviews. He has led the project management services for a number of schools in the
Taranaki region, providing property and facility support on 10YYPs and project construction
management. In his role as University Property Manager at Massey University, Tony was
responsible for the management of property acquisition/disposal processes, risk assessments and
asset management practices. He was part of the team that implemented asset management
planning at Massey and was instrumental in the development of the University’s first formal Asset
Management Plan. Since then Tony has been involved in a number of aspects of the property sector
within New Zealand, including working within the asset management framework of local authorities,
assisting with external auditing and review of existing plans. As part of the Tertiary Education
Commissions (TEC) rollout of their CAM process. Tony can be contacted on +64 21 831480 or at
[email protected].