When governments poorly manage assets

October 22, 2015

At all levels of government, managing vital assets throughout their lifecycle plays a pivotal role in creating and maintaining a productive organisation and in turn, supporting community wellbeing. Given the wide and varied nature of work conducted by the public sector, vital assets covers a myriad of equipment types from physical tools like vehicles and street sweepers, to computers, public Wi-Fi [i], office fit-out and telephony systems. All of these assets are required to deliver quality services to the public. In addition, all of these assets have varying life spans and as such it’s important to ensure that each is operated based on its optimum cycle.

Importantly, managing this equipment throughout its lifecycle requires a commitment to service and maintenance – it also requires appropriate planning to transition to new assets once items reach the end of their useful life. Failure to do so will result in detrimental impacts on productivity from an organisation standpoint – this in turn will have flow on effects for the communities that governments serve.

Governments working with unproductive assets

While many in the public sector recognise the need for effective asset management, research [1] reveals this group is struggling to keep up with requirements for new equipment. More than 60 per cent of government organisations note negative impacts stemming from equipment that is overdue for replacement, a figure that has increased steadily over a 12 month period.

This challenge stems in part from tightening capital expenditure budgets, with 71 per cent of government agencies saying their budget for FY16 will remain unchanged and a further 17 per cent indicating it will decrease [2]. Positively however, there is a group seeking to address their productivity issues via the acquisition of new assets during the December 2015 quarter. However, this group represents less than 30 per cent of government agencies, which means that a significant portion will continue to struggle with unproductive equipment at least in the short term.

Effective asset management

Effective asset management begins with procurement and ends with equipment disposal. In between these two points, organisations must also manage maintenance, add-ons and upgrades. However, in most cases, it’s an ongoing loop as the equipment being retired generally needs to be replaced.

Our research supports this, with computers, cars and trucks in high demand from those government departments seeking to acquire new equipment during the December quarter 2015. These types of assets generally fall into the category of equipment that would follow a continuous lifecycle loop.

The research also reveals that governments, potentially to their detriment, may be failing to consider the financial implications of lifecycle management. Close to 60 per cent of government agencies do not currently bundle the total cost of asset ownership into their equipment finance packages, which means costs such as software upgrades, vehicle maintenance, deployment, decommissioning, recycling, adhering to environmental and legal regulations and logistics may come as an unbudgeted surprise. To avoid this scenario, it is critical for every asset management plan to include a financial component, which covers how an organisation will fund its capital equipment requirements across the lifecycle of all assets.

Asset management has the potential to deliver a number of benefits, including [3]:

  • better understanding of large scale infrastructure;
  • maximisation of equipment output and productivity;
  • stakeholder transparency, including making sure that taxpayer funds are being spent wisely;
  • improved engagement with the community; and
  • sound long-term financial planning.

As governments strive to deliver for their constituents in a budget constrained environment, the need for an effective asset management plan becomes even more crucial. Failure to implement the right strategy will ultimately cost governments, and hence tax payers, more money – it will also have a detrimental impact on productivity.

 

 


[i] Alleasing worked with the Town of Victoria Park to fund what is believed to be the longest continuous stretch of free public Wi-Fi in Western Australia.

[1] The Alleasing Equipment Demand Index – September 2015

[2] The Alleasing Equipment Demand Index – July 2015

[3] The Australian Local Government Association’s 2014 State of the Assets report

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