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How to Prepare an Asset Strategy

CONTENTS

INTRODUCTION 3

Part 1 – Service Requirements 5

Part 2 – Asset Portfolio 6

Part 3 – Risks and Risk Management 8

Part 4 – Performance Measures 9

Part 5 – Proposed Actions / Asset Strategies 10

Attachment A – Alignment of Asset Strategy to RSP 11

Attachment B – Process Map using Corporate Plan and RSP to develop the Asset Strategy

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INTRODUCTION

All agencies are required to submit Total Asset Management (TAM) plans to NSW Treasury regardless of their portfolio size. While common TAM principles apply, reporting requirements are flexible, commensurate with the nature of an agency’s services and asset portfolio. Typically, the plans of agencies with few assets are briefer than those with extensive portfolios and broad service delivery responsibilities. However in both cases the role assets play in service delivery and/or an agency’s business, and the efforts to best manage the portfolios within resource limits should be made clear.

The Asset Strategy is the top level strategic plan in the TAM process and is where the service - business/asset relationship is analysed. A robust Asset Strategy provides the platform for subsequent detailed planning for capital investment, maintenance and disposal. NSW Treasury has produced this document to assist agencies, especially those with a small assets base, to develop an Asset Strategy.

This document provides instructions which supplement existing TAM Guidelines and outline what information an agency needs to include in its Asset Strategy as well as how to present that information.

Note: This illustrative case study document should be read in conjunction with:

Instructions for Preparing the 2006-07 Result and Services Plan, available to Government Agencies through Treasury’s web site at www.treasury.nsw.gov.au

What You Do and Why: An Agency Guide to Defining Results & Services (TPP04-4), available on the Treasury website.

Asset Strategy Planning guide in the TAM Manual, available on the Treasury website.

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http://www.treasury.nsw.gov.au/

WHAT IS AN ASSET STRATEGY?

The Asset Strategy is the top level strategic plan in the Total Asset Management (TAM) process. It is your agency’s ‘asset response’ to the high level service delivery requirements presented in either the Result and Services Plan (RSP) or Statement of Business Intent (SBI). While this document refers to alignment with the RSP, it also applies to those that produce an SBI. Regardless of agency classification, the key element is the alignment between assets and services.

The Asset Strategy helps your agency to demonstrate the relationship between the performance of their physical asset portfolio and the services they deliver. It also enables your agency to determine whether the proposed services and resultant physical asset requirements are sustainable within realistically anticipated funding levels.

Treasury uses your agency’s Asset Strategy and supporting TAM plans, together with its Corporate Plan and (either) RSP or SBI, when considering funding proposals and advising Government. The Asset Strategy will also help you communicate how your agency plans to manage assets to best support service delivery with their current Budget allocation. When funding, policy, or asset issues arise, the Asset Strategy enables your agency and Treasury to discuss the merits of the issues in terms of how they impact on your service delivery.

You prepare an Asset Strategy by: Developing an Asset Portfolio which best responds to each asset-reliant service identified

from the RSP, necessitating a sound knowledge of your agency’s existing assets. Some assets will support more than one service.

Identifying Risk and developing Risk Management strategies to address risk of assets not supporting services to the required level, and also not protecting the optimal value of assets at every stage of their life cycle.

Developing Asset Performance Measures to evaluate the effectiveness and efficiency of assets in their role of supporting service delivery.

The key to developing the Asset Strategy is to demonstrate the alignment between services presented in the RSP and the supporting physical asset portfolio. For those agencies that prepare an RSP, the results logic from that plan provides context for this relationship. Attachment A illustrates this alignment.

HOW TO DEVELOP AN ASSET STRATEGY

These instructions tell you what information you need to include in your Asset Strategy as well as how that information should be presented.

You need to complete all parts of the Asset Strategy, but you must start with Part 1. If you cannot demonstrate how your asset portfolio supports the services presented in the RSP, Statement of Business Intent (SBI) or similar business planning documents, you will find it hard to answer the remaining questions in the Asset Strategy.

Your agency should focus on establishing the links between services identified in their RSP, Statement of Business Intent or similar business planning documents and their proposed asset portfolio, including asset performance measures that demonstrate asset support to these services.

For more detailed guidance on developing an Asset Strategy refer to the Asset Strategy Planning guide in the TAM Manual. For further assistance with preparing your Asset Strategy please contact your Treasury analyst.

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PART 1 SERVICE REQUIREMENTS

WHAT IS THE PURPOSE?

Agencies should be able to describe the services that they deliver and show how these support results achieved for the community.

Part 1 should answer the following questions about service delivery:

What services does your agency provide? When? Where? To whom? To what level?

WHAT INFORMATION SHOULD BE PROVIDED?

Part 1 is where you select from the RSP those services that depend on physical assets. Attachment B illustrates this process.

Use existing corporate and strategic plans and recent policy documents to help identify asset-related service details such as location, capacity, and users’ needs and expectations.

WHY IS THIS SECTION IMPORTANT?

In this section you consider all aspects of services your agency plans to deliver. This will allow you to evaluate the requirements of the asset portfolio (Part 2). By looking at specific details of each service you can identify asset dependency and determine characteristics required of the supporting physical assets in terms of location, capacity, functionality, etc.

HOW LONG IS THIS PART?

The narrative for this part should be no more than one page. It is suggested one paragraph will suffice for each service, though you should include as much detail as is necessary to adequately explain the service.

Where your agency prepares an RSP, you should include the “results logic diagram” from that plan, which demonstrates how the key services that your agency plans to deliver will support results that it is trying to achieve, and how those results will support Government priorities.

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PART 2 ASSET PORTFOLIO


Your agency should look closely at physical asset needs to support each service presented in the RSP and develop an asset portfolio which aligns with these services.

Part 2 should answer the following questions about your agency: What is the optimum asset portfolio to support proposed services? What ‘gaps’ exist between the optimum asset portfolio and your current portfolio?

Portfolio alignment and proper gap analysis rely on integration between service and resource planning. Therefore this part should be developed through consultation between Asset Managers, Finance Managers and Corporate Planners.


Part 2 requires development of a diagram/process map that shows which assets or asset groups support each of the dependent services. This is a visual tool to illustrate the linkage between assets and the services identified in an agency’s RSP and Corporate Plan (as applicable), and enable more focussed portfolio analysis. Creating such a map assists agencies with the remainder of Part 2 (as illustrated in part 2 of the appended Example Asset Strategy).

In Part 2 you analyse how well your agency’s existing physical assets support each service (or service group) and identify ‘gaps’ between performance of the existing assets/portfolio and that required to support service delivery needs. This ‘gap analysis’ enables you to develop an asset portfolio that will best support service delivery needs in the short and long term. As part of this analysis you are required to evaluate your agency’s asset portfolio by looking at specific characteristics of the asset-service relationship. In this process, each characteristic represents a ‘gate’ through which assets must pass for analysis. You can assess how well asset performance supports service delivery needs by answering the following questions at these five assessment gates. Where an asset fails to satisfy the requirements of a particular gate, corrective action must be considered and a solution proposed. When answering these questions remember the Asset Strategy is a very high level plan; specific detail is generally not required.

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Gate 1 - Service dependency on physical assets How can service delivery be made less asset dependent?

(Examine proposed service levels and alternative means of delivering services) Can use of IT or HR replace or reduce overall use of assets? Can you share components of services/assets with other agencies?

Gate 2 - Asset utilisation Are assets fully utilised in delivery of identified services? Can any surplus capacity be used to consolidate service delivery currently using other assets? Can any surplus capacity be used by other agencies? Is there private sector demand for any surplus capacity? Can any surplus capacity be disposed of?

Gate 3 - Asset location Are assets appropriately located to optimise current service delivery? Are assets appropriately located to support proposed future service delivery needs? Are assets appropriately located to support demographic changes? How do you plan to deal with any inappropriately located assets (e.g. disposal, procure new

assets, change service delivery, manage service demand)?

Gate 4 - Asset capacity What will the demand be for service delivery in the future? Are assets capable of supporting expected demand for service delivery in the short and long

term (quantitative demand and level of service)? How do you plan to deal with any insufficient asset capacity (e.g. procure new assets, change

service delivery, manage service demand)?

Gate 5 - Asset functionality Are assets functionally suitable to support optimal service delivery? Do assets comply with legal requirements or relevant standards? How do you plan to deal with any sub-optimally functional assets (e.g. planned maintenance,

procure new assets, change service delivery)?

See the Luna Park Reserve Trust Asset Strategy – Illustrative Case Study as a guide.

HOW LONG IS THIS PART?This part should consist of:

1. A diagram/process map identifying what physical assets (or groups of assets) are needed to optimally support each of the asset-dependent services. Where your agency prepares an RSP, this process map may be linked to your results logic diagram.

2. One schedule for each asset-dependent service identified in the RSP, assessing performance for existing assets in supporting service delivery. Each schedule should be in tabular form (approximately one page), and address each of the five ‘assessment gates’.

3. An analysis of the ‘gaps’ between the performance of the existing asset portfolio and that required to best support service delivery needs. This analysis should also be in tabular form, and approximately one to two pages.

Sound knowledge of your agency’s existing physical assets is central to developing the optimal asset portfolio it needs to support service delivery. An up-to-date asset register is a key tool. For more detailed guidance see the Asset Information guideline in the TAM Manual, available on the Treasury website.

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PART 3 RISKS AND RISK MANAGEMENT


Your agency’s risk management strategies should ensure that services are delivered to the required standard/level and that government’s investment in physical assets is protected.

Part 3 should answer the following questions about your agency: What are the major risks that service delivery, to the required level, will not be supported by

assets, or that services will not be delivered? What are the likely consequences to service delivery if these risks occur? What are the major risks to asset value not being protected? How do you plan to manage each of these risks?


Part 3 consists of two schedules that identify major asset related risks to service delivery. Each schedule should present this information in a table.

The risks identified in this part should be discussed in the context of the service delivery performance and risks identified in the RSP, and also in the context of protecting asset performance in its own right.

Schedule 3A - Service Risk shows service-related risk i.e.

Risk that asset performance will prevent services being delivered as planned. Risk that asset performance will not support required service levels.

Schedule 3B - Asset Risks shows asset-related risk i.e.

Risk that the expected life of assets will not be realised. Risk that assets will not comply with statutory requirements.

Management strategies to address each of these risks should also be included.

For more detailed guidance on risk assessment and management see the Risk Management Guideline available on the Treasury website.


Each of these two schedules should be presented in tabular form. While the length of the schedules will be determined by the number of identified risks for your agency, it is suggested each schedule be approximately one page.


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PART 4 ASSET PERFORMANCE MEASURES


Your agency should be able to demonstrate that physical assets are managed efficiently and that those assets should support services in the long term. Your agency’s service performance measures should be used to establish targets or levels against which the performance of its assets, in supporting service delivery, can be measured.

Part 4 should answer the following question about your agency:

How will you know how well your asset portfolio is supporting service delivery to the required level (what measures will you use)?


Part 4 consists of two schedules that set out key performance information for your agency. Each schedule should present this information in a table.

Schedule 4A - Effectiveness Measures (service-focussed) show how well your agency’s assets support service delivery needs and reflect the most important measures used by your agency to assess asset performance. Examples of relevant measures include client satisfaction, program/course participation rates, response times, and rate of staff injuries.

Use the RSP to identify the two or three most important measures for each of your agency’s services.

Select measures that demonstrate the relationship between service performance and associated asset performance.

Schedule 4B - Efficiency Measures (asset-focussed) show how well your agency’s assets are being managed in their own right, for example maintenance costs per sqm, return on investment, and compliance with industry standards or statutory requirements.

Identify the three or four most important efficiency measures for each of your agency’s assets. Demonstrate how efficiently assets are being managed over time or by comparison with

similar assets.


While the length of each of these two schedules will be determined by the number of services for your agency, it is suggested each schedule should be approximately one page.


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PART 5 PROPOSED ACTIONS/ASSET STRATEGIES


As a high level plan the Asset Strategy is designed to support strategic discussion between your Minister, the Budget Committee of Cabinet, and Treasury (and other central agencies). Internally it supports strategic discussion between Asset Managers, Finance Managers and Corporate Planners.

Part 5 should inform other TAM plans about short term and long term strategies to ensure continuous physical asset support to services, and efficient use of financial and other resources available to your agency. It identifies assets that are, or will, no longer be needed to support service, assets that need to be procured to ensure required service support, and required level of maintenance for remaining assets. In short, Part 5 is a brief summary of capital investment, disposal, maintenance and office accommodation needs, which will then be developed in the corresponding TAM plans.

Part 5 should answer the following question about your agency:

What actions are recommended to ensure that physical assets support service delivery needs in the short and the long term (consider capital investment, disposal, maintenance and accommodation needs)?


Part 5 should provide sufficient information about required asset performance to enable development of a:

Capital Investment Strategic Plan Asset Disposal Strategic Plan Asset Maintenance Strategic Plan Office Accommodation Strategic Plan


While the amount of narrative for this part will vary with the size and nature of each agency, approximately half a page for each strategic plan is suggested.

Detailed guidance on developing each of the abovementioned Strategic Plans, together with assessment and decision making tools, is available in the TAM Manual, on the Treasury website. The Manual also contains the non-mandatory TAM Template, provided previously to help agencies develop their TAM plans. The Template contains notes which all agencies should find useful, regarding the scope and depth of key information sought.

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ATTACHMENT A

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CORPORATE PLANCORPORATE PLANCORPORATE RSPRSPRSP ASSET STRATEGY PLANASSET STRATEGY PLANASSET STRATEGY PLAN

In what areas does your agency really need to make a difference over the next three years?KEY RESULT AREAS

In each of these areas what specifically do you want to achieve?INTENDED OUTCOMES

What INTERMEDIATERESULTS do you want to achieve?

STEP ASelect those results which will be dependent on the agency’s assets working well

STEP BSelect those intermediate results which will be dependent on the agency’s assets working well

How will you judge how successful you have been?PERFORMANCE INDICATORS

STEP DSelect services which will be dependent on the agency’s assets working well

STEP CIdentify asset-related risks which may prevent the achievement ofresults

How will you know how well you are delivering your services? -SERVICE MEASURES

STEP EDevelop asset portfolio to support services

STEP GIdentify any existing asset performance standards relevant to the asset types identified

STEP HDevelop performance measures to report on how well the assets meet• the standard necessary to support service and

to address risks• the existing standards for the asset types

STEP IAnalyse and report on actual performance

STEP JIdentify benchmarks and compare performance to them

What will you do to achieve the outcomes and manage the risks?STRATEGIES

What impediments are there to your intended outcomes that you can do anything about?RISK ANALYSIS

STEP FIdentify the level of performance required by the assets to achieve the planned service performance level, results and to address risks

What eventual RESULTS for the community do you want to achieve?

What are the major RISKS that services will not be delivered as planned, or that expected results will not be achieved?

How will you know how well you are achieving your results?- RESULT INDICATORS

What are the likely consequences if these risks occur?

How do you manage these risks?

What SERVICES do you provide?

What STRATEGIES or initiatives do you have to improve value for money?

What services could be scaled back or temporarily suspended in order to free up resources for higher priority services?

What major strategies or initiatives need to be in place to ensure that you have the organisational capability to deliver the services and achieve the results?

ATTACHMENT B

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