Local Government Magazine

Far horizons: Asset management and long-term planning

Far horizons - NZ Local Government Magazine May 2017

How well are councils adapting to the longer timeframes and deeper analysis now required under 30-year infrastructure planning regimes? Ruth Le Pla takes a look at a recent Audit New Zealand report.

Six councils got a pat on the back for good performance by Audit New Zealand in its first major review of asset management plans since 2010. The report, Asset management and long-term planning: Learnings from audit findings 2015 to 2017, is the first significant look at these plans since councils were required in 2015 to switch to 30-year horizons for their infrastructure strategies. Prior to then, councils were only required to report on their strategies for the next 10 years.
But overall, the latest report reveals a mixed bag of results. Audit NZ said not enough organisations have made a clear policy decision about the level of sophistication that is appropriate. “The majority of asset owners can improve some aspects of their planning.”
The report covers plans by public entities but makes it clear that many of its findings are drawn from its research into work by local authorities.
The plans by the six councils singled out for particular praise demonstrated a range of attributes including strong data analysis, clarity, comprehensiveness and honesty.
These provide some strong indicators from Audit NZ about the direction it expects local authorities to take in their plans in the future.
The change requiring councils to look 30 years ahead chimed with the launch of the National Infrastructure Unit’s (NIU) Thirty Year New Zealand Infrastructure Plan in August 2015.
LGNZ president Lawrence Yule noted in that plan at the time that local authorities together own about $120 billion worth of assets. He added that local government manages all of the country’s drinking, waste and stormwater infrastructure and 88 percent of the country’s roads.

Councils show good practice
In its latest report Audit New Zealand singled out the following councils:
Thames Coromandel District Council – for its succinct and easy-to-read strategy.
Hamilton City Council – as a good example that covers more than just the core assets.
Whangarei District Council – for learning as it went through the planning process and coming out with a much stronger document as a result.
Tasman District Council – for presenting its strategy clearly.
Horowhenua District Council – for its honesty about its challenges.
Wellington City Council – whose strategy is underpinned by significant data analysis.

When, a year later, the NIU added up councils’ planned projects between 2016 and 2025 alone, it reckoned they could be spending some $51.1 billion across the board including transport, water and social projects.
In its recent report Audit NZ raised concerns about whether asset management performance across the sector has plateaued. “This was an issue we raised in 2010,” it said, “and it remains an issue today.”
Tony Urquhart is director – strategic asset management at AECOM which provides engineering, consulting and project management services for infrastructure projects. He says the notion of a plateau describes the current situation very well.
New Zealand local government organisations were once heralded as world leaders in developing the science of asset management, he says. But this is no longer the case.
“I recently moved back to New Zealand after 16 years working overseas and was surprised by the lack of real change across local government. If you look back to 1995, asset management was just starting to be recognised as an important element of local government planning,” he says. “Twenty-two years on we are still trying to collect base data on our infrastructure assets.”
Tony suggests there seems to be a real lack of discipline in this area, given the inherent risk in the essential infrastructure provided by local government.
“You could have written the latest Audit NZ report 20 years ago and it would have drawn the same conclusions.”
Tony notes that many council departments managing infrastructure assets are subject to frequent restructures, changes in direction or focus, and the possibility of amalgamations as a result of the political arena in which they operate.
“On many occasions this has resulted in loss of asset information, corporate knowledge or key individuals. It has also resulted in the watering down of key asset management systems and processes, and as a result organisations can, and frequently do, go backwards in asset management capability.”
He thinks it could be difficult for councils to resolve such issues. Although, he suggests a focus on both capability and understanding will help.
“Too often I see asset management undervalued by organisations and responsibility for asset management delegated too deep in the organisation. Large telephone book-type documents are produced as asset management plans and / or infrastructure strategies more as a ‘tick-box’ exercise than with any real understanding of their value.”
Cushla Anich is a senior consultant at Australasian management consultancy Morrison Low. A specialist in strategic asset management, Cushla says councils can significantly boost the value of their 30-year infrastructure strategies by ensuring they inter-relate them with other documents.
“If it’s not used to inform decision-making, it’s just another plan that sits there,” she says.
The practice of inter-linking myriad in-house and external documents is no simple task. As Cushla points out, there’s no shortage of connections that need to be made – there’s now a new National Policy Statement for Urban Development Capacity, for example.
“People are getting planned out,” she says. “Some people get swamped. They have lots of asset information but what do they do with it?… So how everything inter-relates and how each document informs decision-making is important.”
The Audit NZ report highlighted areas where smaller entities consistently seem to struggle. It noted that addressing them would “significantly strengthen practice”.
Most changes needed were “organisational improvements”, it said, rather than technical issues – “ensuring that policies are clear, governing bodies are well informed, learning from peer review, and adopting a more structured approach to maintaining data”.
Yet in both Cushla’s and Tony’s experience, many larger councils suffer from what Tony calls corporate inertia.
As Cushla says, “It can be hard for small organisations, but large ones often have so many teams and departments, you have to get them to inter-relate and things are hard to change. So big is not always good.”

Fast track

Want to lift your game fast at asset management?
Audit New Zealand says three of the greatest opportunities for improvement relate to asset information:
1. Ensure that there is complete and accurate data on your asset base;
2. Supplement basic data with up-to-date assessments of asset condition and performance; and
3. Make sure that asset data is consistent across systems, so that financial forecasting is accurate and budgets reflect real asset need.

Among its key messages to asset managers, Audit NZ says it expects planning to operate at strategic and operational levels, and for the linkages between them to be clear. “We expect planning to be based on a strong foundation of reliable asset information and good quality analysis.”
It also repeated earlier pleas for good quality data, which, it says, must lie at the heart of effective planning. “It allows accurate and informative analysis to help manage risk and facilitate forecasting. It allows trade-offs to be determined with confidence so that the best value whole-of-life strategies can be developed.”
Audit NZ says more could be done to improve the reliability of asset data and the way it is used.
It also says councils could do more to improve their reporting on how they manage their assets.
“The poorer strategies met legal requirements but no more. The best are not constrained by the legislation. They meet the minimum requirements but consider what more is needed in a document that hangs together strategically.”
Breadth of coverage was a concern. Councils included their core infrastructure in their strategies – water supply; the collection, treatment and disposal of sewage; stormwater drainage; flood protection and control; roads and footpaths.
But Audit NZ says the best plans also considered the strategic importance of other assets. “We were disappointed with councils that excluded their other assets first time but plan to include them next time. The benefit of time may allow more consideration of what to include, but ultimately all strategically important assets should be covered.”
Among many other practical suggestions, Audit NZ said many local authorities struggled with how long an infrastructure strategy should be.
“Our reviews indicate that 40+ pages is typically about right to cover the issues effectively,” it said. “Much shorter and important issues are missed or insufficiently detailed. Much longer and the document is no longer strategic. Of course, the length is really dependent on the extent and complexity of the issues. Templates can be useful but the key is in how well they are completed.”
Audit NZ also noted that local authorities need to explicitly tell readers what their strategy is. “It is not enough to discuss issues. It is important to be clear what approach is being taken to address the issues and why.
“Most councils identify significant issues, but often they do not make the link back to the infrastructure and the implications for the assets. Some do not explain why they have judged an issue to be important.”
Affordability is a key example. “Many councils raised affordability as an issue,” said Audit NZ. “But they did not explain what the limits on funding were, what work could not be afforded that was otherwise planned, what effect this might have on the assets, and what the strategy for dealing with that effect is.
“Unless the reader is clear why an issue is important, and what its implications are, the strategy is not as effective as it could be.”
Ultimately, though, as Cushla points out, the value of any plan lies in how it is used. To that end, she recommends councils use the set of questions provided at the end of the Audit NZ report to guide their thinking.
Audit NZ calls them “the top 10 questions that governing bodies and senior managers need answered”.
They range from broad ideas such as whether the organisation has a strategy for the long-term sustainability of its assets, to crunchy questions such as how it plans to handle any backlog of repairs.
“A good 30-year infrastructure strategy should inform good decision-making,” says Cushla, who argues such questions help keep people on track.
She agrees that some of the ideas can be “a bit of a mother statement”. “But they’re agnostic – it doesn’t matter if you’re looking at roads, water, buildings or facilities. They’re good questions.
“You might do the flashest infrastructure strategy but if councillors just say ‘no, we want to keep with a certain rate increase’ your report isn’t going to go anywhere.”

This article was first published in the May 2017 issue of NZ Local Government Magazine.

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