How To Develop Asset Management Policy Strategy

Chapter 1: Asset managementas a systemThis chapter provides an introduction to the concept of asset managementand describes at a high level what an asset management system looks likein a municipality. It also introduces the four key foundational elementsrequired to develop and implement an asset management system: Asset management policy Asset management strategy Asset management framework Asset management governance structureGuidance on how to develop these elements in your municipality can befound in chapters 2, 3 and 4.In this chapter:1.1 Introduction to municipal asset management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.1.1 Asset management as a business model and a management system . . 31.1.2 Achieving strategic objectives through asset management . . . . . . . . . . 41.2 The hierarchy of an asset management system . . . . . . . . . . . . . . . . . . . . . . . . . 51.2.1 Municipal strategic plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.2.2 Asset management policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.2.3 Asset management strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.2.3.1 Asset management framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.2.3.2 Asset management governance structure . . . . . . . . . . . . . . . . . . . . 71.2.4 Asset management plans (AMPs) and operations andmaintenance plans (OMPs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.3 Integrating sustainability into asset management . . . . . . . . . . . . . . . . . . . . . . . 91.4 Review and improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111.4.1 Timelines for review and improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . 121.5 Additional resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Chapter 1: Asset management as a system 1

1.1 Introduction to municipal asset managementLocal governments provide a wide range ofservices that are essential to our communities’quality of life, like clean drinking water,transportation systems, waste management,drainage and flood protection, public art, parksand recreation services. The services they deliverdepend on physical infrastructure assets likewater treatment plants, wastewater retentionponds, roads, buses, buildings and emergencyvehicles. Natural assets also support municipalservice delivery. For example, wetlands cansupport flood control and filtration, whileaquifers can provide safe drinking water tosome communities, with minimal treatmentrequirements.In Canada, local governments are the stewardsof about 60 per cent of all public infrastructureassets. These assets are the foundation thatenables our communities to thrive. However, ourlocal governments face some significant social,economic and environmental challenges that willaffect their ability to manage their assets anddeliver services sustainably over the long term.The way local governments manage and investin infrastructure assets, including natural assets,will therefore have a significant impact onwhether our communities move toward becomingsustainable and resilient.Asset management (AM) is an integratedapproach, involving all municipaldepartments, to planning for and managingexisting and new assets in order to maximizebenefits, reduce risks and provide satisfactorylevels of service to the community in asustainable manner. Good AM practices arefundamental to achieving sustainable andresilient communities.Asset management thinking has evolved over thelast 60 years and many definitions of AM havebeen used around the world. The traditional viewof AM was focused on maintenance activities. Itgradually evolved into a much broader discipline,leading to the publication of the ISO 55000international standard for asset managementin 2014.1 This modern view of AM features thefollowing concepts:1. Assets exist to deliver value and services tothe community.In modern asset management literature, theassets exist to deliver value for customersand stakeholders. For municipalities,these customers and stakeholders are thecommunity that the municipality serves —including residents, businesses and all otherlocal stakeholders living or working in thejurisdiction. In addition, any regulatory bodieswith a remit within the municipality should alsobe considered stakeholders.2. Assets must be managed over their full lifecycle, considering both the current and futureneeds of the community.3. Decision-making should be evidence-basedand support the delivery of clearly definedlevels of service and other performancemeasures.Asset management involves the balancingof costs, opportunities and risks against thedesired performance of assets, to achievethe municipality’s objectives over the longterm. This is achieved by using analyticalapproaches to manage the assets over thedifferent stages of their life cycles, which canstart with the conception of the need for theasset, and lasts through its creation, operationand maintenance, rehabilitation and disposal ordecomissioning.1 The ISO committee behind ISO 55000, Technical Committee #251, published a paper entitled, “Managing Assets in thecontext of Asset Management,” that explains the bigger picture and outlines the benefits that asset management providesan organization.2 How to develop an asset management policy, strategy and governance framework

4. AM is an ongoing practice within amunicipality — one that both uses andinfluences many aspects of the municipality’sstrategic, planning and operational processes.It is not something that occurs at a fixed timein an annual cycle (it’s about much more thanjust writing a periodic asset managementplan) and it should be regarded as a key partof the municipality’s culture.5. People “do” AM, so good asset managementrelies on people’s knowledge, competence,motivation and teamwork.6. AM is multidisciplinary and involves thecollaborative work of many people andgroups within the municipality, includingcouncil, management, finance, planning,sustainability directors, service managers,public works, and operations andmaintenance. To be effective, it also requirescommunity engagement and input.1.1.1 A sset management as a businessmodel and a management systemAsset management is a discipline that supportssustainable service delivery. Its many elements(called AM practices) lead to the sustainablecreation, acquisition, maintenance, operation,rehabilitation and disposal of the assets requiredto deliver municipal services.Did you know? One of the mostcompelling reasons for implementing assetmanagement is its focus on evidence-baseddecision-making. It is required by legislation insome countries and in some Canadian jurisdictions.The Province of Ontario first mandatedmunicipalities to have AM plans in place to secureGas Tax funding, and now other provinces arefollowing suit.The Government of Canada now requires allprovinces to show that municipalities in theirjurisdiction are progressing in AM in order for themto receive federal infrastructure dollars.AM is a way of doing business, and a key part ofa municipality’s culture. AM practices need to bealigned with strategic objectives from executivemanagement through to front-line servicedelivery.To guide staff in delivering services, municipalitiestypically adopt policies and define managementpractices and processes. These policies,practices and processes are often referred toas management systems. A good exampleis a management system focused on safetyor environmental management (e.g. ISO14001). Similarly, effective AM also requires amanagement system to control and direct theway that AM is applied within a municipality.When the global AM community refers to a“management system for asset management”they commonly use the term “the assetmanagement system.” Developing an AM systemin your municipality is much like developingany other management system.2 It will includea collection of interrelated objectives, policies,management practices, and processes, togetherwith other documents and tools that you will useto manage the assets required to deliver servicesin your community.The asset management system is notspecifically an IT system. It is themunicipality’s broad collection ofinterconnected processes and documentationdesigned to effectively direct and deliver thediscipline of asset management. This systemmay be supported by various tools andIT systems.Your AM system should work alongside othermanagement systems in your municipality, suchas financial management, health and safetymanagement and others. These managementsystems should be aligned and integrated, whereappropriate, to ensure a consistent approach toachieving your municipality’s strategic objectives.2 ISO defines a management system as “a set of interrelated or interacting elements of an organization to establish policiesand objectives and processes to achieve those objectives.”Chapter 1: Asset management as a system 3

The illustration below provides an overview of the typical corporate functions of a municipality, themanagement practices used, and the key components of an AM system.Figure 1.1: Key components of an asset management systemCorporate functionsUrban ublic worksParks,recreation andcultureCommunityengagementand commsFire nomicdevelopmentIntegrated (corporate) management practicesEnvironmentalmanagement(regulatory, etc.)Health and safetymanagementRisk managementAsset managementInformationmanagement(corporate and IT)Financial managementPerformancemanagementAsset management systemOrganizationalcontextGovernance andleadershipPlanning anddecision-makingOperation (servicedelivery)1.1.2 Achieving strategic objectivesthrough asset managementMunicipalities are often faced with competingpressures and must frequently make tradeoffsbetween performance, cost and risk and betweenshort- and long-term objectives. Decidingwhich tradeoffs to make to achieve the bestoutcome for the municipality as a whole is verychallenging, because discrete functions in amunicipality can often operate in their own silos,with little coordination with other functions.Performanceand simprovementResources andsupportcollaboration. It is also vitally important thatexecutive management and other municipalfunctions (such as urban planning andcommunity engagement) are engaged to ensurethat stakeholder needs and expectations are fullyunderstood and reflected in defined objectivesand associated decision-making processes.Key insightYour municipality can address this problemby building a clear “line of sight” from yourmunicipality’s high-level objectives (Why arewe here? Where do we want to be?) down tothe asset management objectives that will drivefront-line decisions and activities (What will I dotoday on this asset?). This line of sight showshow the various functions and individuals acrossthe municipality fit into the bigger picture, andensures they are working toward the same goals.“I can’t understate the importance of full systembuy-in for asset management starting from thetop down. Without buy-in, these documentsbecome items on the shelf to collect dust. Everyday your managers must be thinking about thispolicy and following the processes it sets up.If even one department does not buy in, thebig picture is lost, and asset investment will nolonger be based on data and the triple bottomline. I will show it to my managers on a regularbasis to keep the process fresh.”Many municipalities develop their assetmanagement systems by bringing togetherengineering, operations, maintenance andfinance to break down silos and promote moreChris Bruce, Director of Community Services,City of Melville, SK4 How to develop an asset management policy, strategy and governance framework

1.2 The hierarchy of an asset management systemThere are several documents you can develop toensure that your municipality is building an assetmanagement system with a clear line of sightbetween your municipality’s strategic objectivesand its daily AM decisions. These documentsform a hierarchy. From the highest level, workingdownwards, they are: organizational strategicplans, AM policy, AM strategy (which outlines theframework and governance structure for AM),and AM plans (AMPs).3 This guidebook providesguidance on developing four key elements ofyour AM system — the AM policy, strategy,framework and governance structure.Why do we exist? What are we trying to achieveas an organization?1.2.2 Asset management policyThe asset management policy should spell outthe underlying principles that your municipalityintends to follow when using AM practices tomeet the requirements of your municipality’sstrategic plan(s).A council-adopted AM policy instructs themunicipal administration to implement an AMsystem and provides guiding principles andexpected outcomes for the system.Figure 1.2: The hierarchy of an asset management systemOrganizational strategic plansAsset management strategyAM frameworkAM governanceLine of sightFoundationelementsAsset management policyAsset management plans (AMPs)Operational strategies and plans1.2.1 Municipal strategic plansYour municipality’s strategic plan sets outits high-level vision, mission and overarchingstrategic objectives. For some municipalities inCanada, this content is included in the officialcommunity plan (OCP). Others may havestrategic objectives defined across severaldocuments. It can be beneficial to think aboutwhich strategic documents in your municipalityanswer the following questions: Who are we?3The AM policy typically has four parts:1. Intent: The policy document clearly articulatesthe intended outcomes of the policy.2. Scope: The policy document describes theassets and services to which the policy applies.3. Principles: The most important part ofthe policy, the statement of principlesprovides direction on applying AM within themunicipality, and guidance on what the AMISO 55000 promotes the use of this hierarchy.Chapter 1: Asset management as a system 5

system should cover. The principle statementsshould be aligned with the community visionand existing strategic plans to ensure the“line-of-sight” connections between themunicipality’s strategic direction and assetmanagement efforts. The principles willdirectly influence staff decision-making.4. Responsibilities: The policy documentidentifies who is responsible for: approvingthe AM policy; providing resources forimplementation of the policy; definingcommunity priorities and setting municipalpriorities; and leading implementation of theAM policy.Chapter 2 includes an explanation of eachsection in more detail and a template that yourmunicipality can adapt to its own context.1.2.3 Asset management strategy4The asset management strategy should definehow the municipality’s context and strategicobjectives translate to AM objectives (such aslevels of service) and associated decision-makingcriteria.Asset management objectives should beSMART: Specific, Measurable, Achievable,Realistic and Time-boundThe AM strategy also defines how the AM systemwill implement the principles set out in theAM policy and support the delivery of the AMobjectives.Core elements of an AM strategy include:1. Scope and applicability of the AM system(i.e. the assets and departments to which itapplies).2. Business context (including stakeholder needsand expectations)4. AM objectives and performance targets5. Key AM improvement initiatives6. AM roles and responsibilities7. Risks to the AM strategy, and monitoring andevaluationA common approach is to have an overarchingmunicipal AM strategy that may be furtherelaborated within more detailed departmental AMstrategies. These departmental documents shouldalign with the overarching municipal AM policyand strategy documents.Developing a municipal AM strategy can bea challenging task for a municipality and willrequire some time and resources. The key is tostart where you are, using available knowledgeand data, and to use the development processto help identify gaps and areas for furtherimprovement. The actions you identify to makeimprovements can then be captured in theroadmap / improvement plan section of yourAM strategy.The asset management strategy will help yourmunicipality make the practice of AM realand tangible, and is the basis for driving realimprovements in evidence-based decisionmaking and more reliable financial planningand forecasts.Practical tips“The policy is more conceptual, and the strategyis how you put things into practice.”City of Airdrie, AB Write your AM strategy to make sure it’s“something you can execute. It becomes moreprescriptive of what your policy really means.”City of Windsor, ON3. AM decision-making approaches4 The asset management strategy can also be referred to as the Strategic Asset Management Plan (SAMP). The term “SAMP”was introduced by the ISO 55000 International Asset Management Standard Committee and many industries refer to theasset management strategy as a SAMP.6 How to develop an asset management policy, strategy and governance framework

Chapter 3 gives guidance on how to develop anAM strategy, provides a template outlining thesections to include, and offers some suggestedcontent for each section.1.2.3.1 Asset management frameworkAn asset management framework describes, at ahigh level, the key practices, processes, tools anddocuments that make up the AM system and thefunctional relationships between those elements.It generally includes a reference diagram toillustrate how these pieces fit together.For ease and simplicity, it is common for theAM framework to be included as part of the AMstrategy. Chapter 3 provides some examples ofAM frameworks, as well as guidance on how todevelop your own municipality’s AM framework,which should be customized to your municipalcontext.1.2.3.2 Asset management governance structureAs municipalities seek to formalize and embedtheir asset management systems, it is importantto ensure that AM practices and processes alignwith the municipality’s strategic direction andare consistent across the municipality’s variousdepartments. It is common for municipalitiesto implement an AM governance structure thatlinks various functions within the municipalityand assigns accountabilities and responsibilitiesrelated to AM. By doing this, the municipalitywill help to ensure that its AM system supportsconsistent and c

asset management (AM) building blocks that underpin a well-governed asset management system: An asset management policy An asset management strategy, including a framework An asset management governance structure These AM building blocks help strengthen infrastructure planning and