Addressing delegates at the Innovations Session of the National Assembly of Local Government held in Canberra last year, John Howard from Tasmania’s Devonport City Council suggested that postponing attention to asset management to such time as when you faced a coronial inquest is not recommended.
Devonport, with assets valued at $200 million, has taken a concerted approach to managing these assets to minimise costs and maximise value in the long term. Based on the recommendations in the National Asset Management Manual, Council first divested itself of surplus assets.
Secondly, it concentrates its management efforts at the concept or planning stage to minimise life cycle costs. John Howard pointed out that Local Government is good at estimating project costs but not so good at estimating ongoing costs of maintenance for the life of an asset.
He said it is essential to recognise and account for hidden costs, such as depreciation and operating costs. He cited an overseas example where a Council constructed an eternal flame to commemorate war dead only to find the cost of gas was prohibitive and the flame had to be extinguished.
Asset failures, he pointed out, attract a lot of unwanted attention and can add considerably to costs.
“Forward thinking can increase an asset’s value, extend its life and lower its maintenance costs,” John Howard said.
Life cycle costs he noted, including design, construction, operations, maintenance and disposal, may exceed initial capital costs many times over.
Devonport’s program includes the following.
- A fully integrated information system with corporate data available throughout the organisation
- Activity based strategic planning, budgeting and financial reporting
- Full funding of depreciation
- Critical analysis of new projects
- Support information for Council maintenance management systems to improve performance and planning.
A schedule of asset replacements, covering 50 years, is in place together with a five year forward financial position estimate for Council. It has also appointed an Asset Management Task Force, including representatives from engineering, finance, information technology and corporate services, to monitor and oversee asset management.
For further information contact John Howard, telephone (03) 6424 0511.
