Asset management in the public and private sectors – is there a difference?

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Asset Management has not been embraced in North America as much as it was expected by those who saw the benefits realized in other countries through the use of PAS 55, which was the precursor to the development of ISO 55000 suite and how organizations found value and success in managing the organizations.

Recently, only 14 or 15 organizations were certified to ISO 55001 in North America, out of over 300 worldwide. Across the world, we see uptake from utilities, airports, transportation, facilities management, infrastructure, and engineering as well as a smattering of government type organizations.

Obviously, there is an opportunity for North American organizations to adopt asset management as their approach to doing business, but we haven’t seen it yet. This is not a new phenomenon, as those of us who were around for the outburst of lean manufacturing around the world in the 1990s and 2000s can testify; many North American organizations took parts of the lean process and used it in conjunction with their existing processes and called themselves lean, but very few adopted all of the facets that would have realized the benefits of the lean approach.

Some, in fact, thought it simply meant doing more with less, and reduced their workforce and claimed to be lean.
The interesting take on asset management in North America, especially in Canada, is the uptake of asset management by governments and municipalities. It is unlikely that municipalities will certify to ISO 55001, as there is no perceived benefit other than, maybe, reputational, as opposed to the private sector that has always considered ISO certification as being a way to demonstrate their commitment to quality, environment, and value in their marketplace, and by inference, a company you’d like to do business with.

What has driven governments to suggest asset management has been the belief that money, such as grants, taxes, etc., has not been utilized to the fullest value?

The belief in asset management in Ontario was so strong that the government enacted Ontario Regulation 588/17 – Asset Management Planning for Municipal Infrastructure, which required municipalities to provide detailed asset management plans with justification, initially for their core assets, such as water, wastewater, roads, bridges, and culverts and expanding to all of their assets (COVID-19 has forced the due dates to be a little bit fluid).

This Ontario Regulation is detailed in what it requires from the municipalities, but, in a somewhat similar way to ISO 55000, it doesn’t prescribe how or what these details should result in; it presents itself more as a report card rather than a road map for continuous improvement.

So, let’s look at some of the differences that applying asset management in the municipal or government sector brings.

Of course, the focus of asset management is providing value for the stakeholders, so how do the municipalities demonstrate that?

The first challenges they face are; the number and different types of stakeholders; the government that provides grants and funds; the residents and businesses who pay taxes in one form or another; the employees at the municipality who are meant to oversee all of this; and the council. There is such a wide range in the stakeholder group of residents and businesses, which makes it very difficult to come up with a statement of what represents value.

What is of value to some, will be meaningless to others, so how do we determine value?
This usually ends up with strategic objectives as general as “deliver exceptional service” or “promote a high quality of life”, which mean many different things to different people. When the municipality then tries to cascade these objectives into meaningful measures so they can identify success, they find it difficult to do so, and this then cascades through the organization, with each level struggling to find those measures that really impact the strategic objectives.
When some departments find themselves in this situation, they become internal focused; what’s important to them and what’s their priority, which is the exact opposite of the intent of asset management.

As mentioned earlier, there is an ultimate responsible body that exists in municipalities – the council. The obvious challenge with this is that they can change every four years and then possibly their priorities do. Council members are elected very often by proposing how they will deal with issues that are important to their residents or a significant or vocal part of them, and not the municipality as a whole. They have the authority and ability to question and even refuse recommendations made to them, and so any proposals made regarding asset management, or actions relating to it, have to be phrased in a way that gives it the best chance of being approved.

Whereas this oversight is how the government works, it can be an impediment to doing what is actually necessary from an asset management perspective, as items that are not likely to be passed by council may not be presented to them.

Back to the idea of value. In the private sector, this is usually, but not only, thought of as profit (or loss), and the means for companies to stay in business. If they don’t meet their strategic objectives or stakeholder expectations, they may find that they will not stay in business for long.

How does this play out in the municipalities? How do they measure their profit or loss? What happens if they find they need an increased budget, or there are unexpected costs during the year, or there are significant failures in their service delivery?

In many instances, there won’t be a choice but to go ahead and address then as they legislated requirements. In other instances, the inconvenience and disruption will not be acceptable, and so they will spend what is necessary, but you’ll never see a municipality go out of business. As a friend who worked in the municipal sector most of his career explained to me: “If it’s needed, there will always be money available, and this in turn is one of the disincentives of trying for continuous improvement.”

If it’s difficult to try and identify the stakeholder needs, it will be difficult to show value in meeting them, and will be even more difficult to hold accountability for what might not meet them. The direction given to municipalities by the government demonstrates the faith in asset management as “the way to do business” as has been seen around the world, but the ability to show the results may be a little bit more difficult. MRO
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Cliff Williams is author of the bestselling maintenance novel People – A Reliability Success Story. He is a maintenance and asset management educator, and a keynote speaker at conferences around the world, who believes success is achieved through people. Currently Cliff shares his knowledge and experience as an advisor on maintenance and reliability for people and processes, and asset management with TMS asset management and is a facilitator for PEMAC’s Asset Management Program.