Local Government Magazine
Assets & Asset Management

Push me / pull you: Can less be more when it comes to levels of service?

What happens if a council decides to check the condition of its road network less frequently? Or maybe it reckons it can shave a teeny bit off the quality of horticultural design for a new park. Or notch up community profile a gear by appointing a renowned, award-winning service supplier. Or find a cheaper contractor: perhaps one with less technical experience but a very knowledgeable local workforce.

When councils pull each of the ‘levers’ at their disposal – duration, frequency, cost, performance and quality – how can they know with any degree of certainty what’s likely to happen?
Calibre Consulting’s Priyani de Silva-Currie and Tony Anderson sparked a lively debate on such questions, and more, at the IPWEA NZ Conference in Dunedin earlier this year.
Their paper “Levels of service levers” noted that while complex analytical tools are available to support the impact of lever adjustments, most local authorities still rely mainly on “humanistic decisions and judgement”, aka past experience and a healthy dose of gut feel.
Priyani is the New Zealand asset management leader for Calibre Consulting. She says she has noted that, over the past decades, infrastructure investment has been the easy way to reduce spending when money is tight. “It has become the whipping boy of funders, politicians and customers when it comes to saving costs.
“As there are short- and long-term consequences of this type of action,” she says, “the question has been raised: do we really understand the impacts of the decisions when we change either the levels of service or provision of our assets?”
Take, for example, NZTA’s roll out of the One Network Road Classification (ONRC) and the levels of service that have been set for roads funding and performance.
“How do we know,” asks Priyani, “that this new classification system and the implementation of long-term decisions – because of the new criteria and thresholds – will have the desired effect 30, 50, 100 years from now?”
Tony, a senior asset manager at Calibre Consulting, acknowledges that a whole-of-New-Zealand approach is key to the success of the methodology.
“However, there must be flexibility in any methodology to accommodate specific community needs and desires.”
Priyani questions whether the current level of benefits analysis, risk assessment and modelling has been completed not just from a technical perspective but also with consideration of ‘unknowns’ and ‘little knowns’, to ensure the new framework will meet transportation performance and customer needs both now and into the future.
“There are criteria and thresholds for each category, based on the functions the road performs within the network,” she says.
“To be included in a particular category a road must meet the agreed criteria and thresholds, including moving people and goods, and economic and social factors creating transport linkages and places.
“By redefining current status and definitions this may impact the long-term funding streams and subsequent level of investment and / or performance that each road achieves.”
These roading lever changes could be significant, she says. “But will we recognise the effects and impacts, either positively or negatively, at the right time to make appropriate decisions at a macro level for NZ Inc and also at a micro level within each community?”

Take-aways

• Levers include duration, frequency, cost, community needs, performance, risk and quality.
• Every lever has communities of interest, ranging from technical experts to end-customers.
• Asset management practitioners are not in charge of all the levers. The CFO and CEO are most likely to be in charge of the final financial lever applied.
• A key advantage is to articulate impacts in compelling and everyday language. Try to make the risks understood as a story with a beginning, a middle and an end.
• Matters which are future-orientated are often not yet known or evidenced. We don’t know what we don’t know.
• Councils’ mandatory 30-year planning horizon is going to impact both the number of levers faced and asset managers’ ability to predict all impacts on them.

QUESTIONS
At the conference, Priyani and Tony ran through four key questions which helped focus the wider debate on levers.
1  How sure are asset management practitioners of the effects and impacts of changing levels of service?
Priyani notes that practitioners recognise an “up or down” of the levers will, in all likelihood, affect cost, performance and delivery. Technical or customer impacts will also be felt. Yet, in many cases, asset managers just aren’t sure how strongly these effects will be felt. They rely on judgement and past experience to shape their decisions and analysis.
Every push and pull of a positive lever usually has an equal and opposite effect on a negative one.
Yet, as Priyani points out, the level of understanding of the impact of a lever change is relative to the role and knowledge of the individual.
“Highly technical people may have good theoretical knowledge of cause and effect. But an elected member may tend to rely on gut instinct and the level of support or complaint they may receive from their decisions. This feedback may often have no direct correlation to the lever in their hand.”
The organisational perspective of understanding these levels of service will be based on the sum knowledge of the individuals within the organisation, its risk framework and its maturity. Every lever has communities of • interest ranging from technical to customer and not all of these are considered when a change is made.
“It’s logical to conclude that, with a likely lack of hard evidence and supporting analysis, levels of surety around lever changes are weak,” says Priyani.
What are the short- and longer-term consequences of adjusting levers? And could these be managed differently?
There are always consequences. What matters is the significance and materiality of the resulting change on performance and outcomes. Consequences can range from a null effect to a major impact. Priyani says the obvious consequences are cost benefits or liabilities, performance enhancements or detractions, risk improvements or detriment, time savings or deficits, resource availability or constraints.
“Some consequences that may not be so obvious are those which will affect brand, statutory obligations, reputation and risk profile.”
She also notes that when some levers are interrelated, strange permutations can occur. For example, resource availability may improve but there is a consequent time deficit. Or cost liabilities may escalate while risk benefits look better.
“What we often see is a push-pull effect between levers: one positive and one negative,” says Priyani. She suggests a different way of managing levers to minimise detrimental outcomes could be to group internal levers such as cost and resource together, and group external levers such as risk and time together. “Then think about what would happen.”

Hypothetical

Imagine that a medium-sized council wants to put out to tender a new maintenance contract for its roading network. The specific challenges for the network stakeholders may be:
• They must reduce costs as the renewals budget has blown out.
• They want to lift the resilience of the network. They need to be prepared for a potential major weather event.
• The CEO is demanding optimal network performance to minimise a rate increase.
• A road safety initiative requires an improved safety profile: there have been too many incidents in the past.
The possible levers at play may include: cost; safety and risk; quality; community needs over time; political impact; and funding.
Priyani de Silva-Currie and Tony Anderson, from Calibre Consulting, trialled the scenario with delegates at the IPWEA NZ conference. They asked delegates to push and pull the various levers in different combinations and groupings to see how each move affected the other levers.

Is there a critical mass where negative outcomes occur? And can councils recognise this before damage is done?
Priyani notes that risk assessment may help councils recognise critical tipping points. She emphasises that all lever changes carry consequences. “The key is the level of impact and effect on performance and outcomes.
“There are a number of ‘tipped over’ points. If, for example, a council loses its financial rating from a lending or rating institution because its debt level is too high and it can’t service its loans – an easily-identifiable hard threshold has been crossed.”
A loss of face or reputation is harder to quantify, she says. “The tipping point could be that a council has received 100 times the level of complaints from the service level change and a staff member is asked to resign over the matter.”
Are asset management practitioners able to articulate the true impacts of lever changes?
Priyani and Tony say a fundamental premise is that asset management practitioners are not in charge of all the levers.
“Some are unknown or external to their sphere of influence. Asset managers’ ability to recognise and articulate impacts of external levers are less advanced than when assessing internal levers such as cost, resources and performance which are easier to gather discrete data on and analyse.
“Collective wisdom also tells us asset management practitioners are not good storytellers. They often lack the key advantage of being able to articulate impacts in compelling and everyday language that most people can relate to.
“An example of this is where elected members may not have a technical understanding of what a service (asset) delivers but are being asked to make a decision on a change to that service or asset with an incomplete picture of the effects of that change.
“Our knowledge base is generally limited or we don’t know what we don’t know. This is the Johari Window quadrant where information is not known to self or others, creating both a blind spot and an unknown risk.”
The asset management community cannot easily articulate matters not yet known or considered.
And while technical knowledge is often well supported by evidence or history, future-orientated matters are often not yet known or evidenced.
“The speed and quality of our reaction to disruptive changes is critical.”


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

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