Public Sector Property Asset Management Public Sector Property Asset Management Malawi Ngwira and David Manase School of Engineering and Built Environment Glasgow Caledonian University This edition first published 2016 © 2016 by John Wiley & Sons, Ltd Registered office John Wiley & Sons, Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom Editorial offices: 9600 Garsington Road, Oxford, OX4 2DQ, United Kingdom The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com/wiley-blackwell The right of the author to be identified as the author of this work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher Designations used by companies to distinguish their products are often claimed as trademarks All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners The publisher is not associated with any product or vendor mentioned in this book Limit of Liability/Disclaimer of Warranty: While the publisher and author(s) have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom If professional advice or other expert assistance is required, the services of a competent professional should be sought Library of Congress Cataloging-in-Publication Data Ngwira, Malawi Public sector property asset management / Malawi Ngwira, David Manase pages cm Includes bibliographical references and index ISBN 978-1-119-08576-8 (hardback) Real estate management Government property–Management I Manase, David II Title HD1394.N49 2015 352.5–dc23 2015019383 A catalogue record for this book is available from the British Library Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books Set in 10.5/13.5pt, MinionPro by SPi Global, Chennai, India 2016 This book is dedicated to Valentah, Lamal, CJ, Xavyera, Gladys and Wezi Contents Acknowledgements Asset Management Concept and Development in the Public Sector 1.1 Introduction 1.2 The concept of asset management 1.2.1 Definition of asset management 1.3 Benefits of asset management 1.4 Asset management development in the public sector 1.4.1 Origins of asset management 1.5 Chapter summary Practice of Asset Management 2.1 Introduction 2.2 Drivers of asset management reforms in the public sector 2.2.1 Internal factors behind asset management reforms in the public sector 2.2.2 External forces behind asset management reforms in public sector organisations 2.3 Trends in the development of asset management in the UK public sector xi 2 11 13 14 14 15 22 29 vii viii Contents 2.4 2.5 2.6 2.7 2.8 Asset management development in Scotland 2.4.1 Prudential Code 2.4.2 Publication of the asset management guidance by the Scottish Government 2.4.3 Decision of Audit Scotland 2.4.4 Publication of ‘Value for Money’ by audit bodies 2.4.5 Duty by local authorities to achieve best value Structure of operational property assets in the public sector Role of property assets Asset management development in other parts of the world 2.7.1 Asset management development in New Zealand and Australia 2.7.2 Asset management development in the USA Chapter summary Asset Management and Organisational Management Theory 3.1 Introduction 3.2 Asset management and organisational management theories 3.2.1 Strategic management theory 3.2.2 Change management theory 3.2.3 Management theory 3.2.4 Leadership theories 3.2.5 Organisational structure theory 3.3 Relationship between asset management and organisational management theory 3.3.1 Significance of strategic management approach in asset management 3.3.2 Asset management as a significant change management event 3.3.3 Asset management team and project management approach 44 44 45 47 47 47 50 52 52 52 54 55 57 58 58 59 61 62 64 66 67 68 69 70 References 181 Wilson, A., Uncapher, J., McManigal, L., et al (1998) Green Development: Integrating Ecology and Real Estate, New York, NY, Wiley Woodhouse.J (2009) Asset Management: latest thinking, Canadian Network of Asset Managers (CNAM) Workshop, Calgary, May 2009 Accessed: http://www.cnam.ca/uploads/Documents/Workshop/2009/CNAM09_ Program.pdf Woodhouse, J (2010) Asset management: the way forward, chapter 10 in: Asset Management: Whole Life Management of Physical Aspects, C Lloyd (ed), London, Thomas Telford Worley International Ltd (2000) Strategic Municipal Asset Management World Bank Background Series Paper No on Municipal Finance Yiu, C.Y (2008) A conceptual link among facilities management, strategic management and project management, Facilities, Vol 26, No.13/14, pp 501–511 York Consulting (2007) Evaluating of Corporate Capital and Asset Planning in Local Authorities, Department for Communities and Local Government, London, available at: www.communities.gov.uk (accessed October 2009) Index accessibility strategies, 46 accommodation, 88, 148 accountability, 6, 7, 9, 15, 25, 26, 32 and fragmented management, 18 and New Public Management, 22 accounting accrual, 28, 53 reform of, 28 accrual accounting, 28, 53 acquisition, 37 administrative offices, 50 affordability, 45 AHP see analytic hierarchy process AMIS see Asset Management Information System AMP see asset management plan analytic hierarchy process (AHP), 126–7 assessing non-financial factors, 127–42 asbestos, 85 asset accessibility, 84 asset condition, 84, 140 assessment, 55 asset control, 92–3, 146–9 asset disposal, 87, 140 asset gaps closing, 106–8 identification, 106 asset information, 83–5 asset knowledge, 69, 83–5, 87 asset maintenance, 87, 140 see also maintenance; property maintenance asset management and capability building, 72 and efficiency savings, 33–4 and leadership skills, 71–2 and motivation, 72–3 and New Public Management, 26–9 and organisational management theories, 58–75 Public Sector Property Asset Management, First Edition Malawi Ngwira and David Manase © 2016 John Wiley & Sons, Ltd Published 2016 by John Wiley & Sons, Ltd 183 184 Index asset management (continued) and organisational structure, 70–1 and social objectives, 41 and stakeholder management, 73 and value theory, 73–5 as change management event, 69 assessment of current status, 102–6 audit, 93, 142, 149–50 barriers to, 32–3, 43 basic principles, 36 benefits, 6–8 best practice techniques, 10, 45 capacity building, 83 definition, 2–5 drivers of reforms, 14–29 effective, 147–8 enablers of, 79 enterprise-wide approach, 9, 11 evolution of, 8–11 guidelines, 14, 38, 45–8 in Australia, 52–4 in New Zealand, 52–4 in Scotland, 44–50 integration, 35, 36 integrative approach, 11 in the US, 54–5 key datasets, 85 minimum requirements, 10 objectives, 87 organisational capability, 35–7 origins, 9–11 outcomes, 93–7 policy, 100–1 processes, 95 recommendations for improvement, 43–4, 48–50 review, 93, 149–50 skills for, 35, 38 strategic management approach, 27, 32, 34–5, 39, 41–3, 68–9 team, 70, 88, 101, 149 templates, 34 trends in development, 29–44 asset management improvement planning, 102–27 see also asset management improvement plans asset management improvement plans, 53 see also asset management improvement planning Asset Management Information System (AMIS), 83–4 asset management plan (AMP), 32, 33, 39, 41, 43, 49, 55, 87–8, 152–70 aim of, 152–3 content, 154–63 corporate vision and strategy, 160–3 defined, 152 implementation of programmes, 166–8 monitoring, review and evaluation, 168–70 organisational aims and objectives, 158–60 programme development, 165–6 property asset aims and objectives, 158–60 property asset implications, 158–60 purpose, 153–4 review of current property assets, 163–70 strategy development, 156–8 asset management planning, 31, 45, 46, 78, 87–93, 100–50 Index asset monitoring and control, 92–3 audit and review, 93 defined, 87 strategy formulation, 88–90 strategy implementation, 90–2, 142–6 tactical, 101–42 asset monitoring, 69, 92–3, 140, 146–9 asset operations, 140 asset performance, 85, 140 asset rationalisation, 140 asset registers, 10, 55, 104 lack of, 20–1 Scotland, 20 asset rehabilitation, 140 asset renewal, 10–11 asset replacement, 140 asset review, 142 asset risk, 74 asset solutions, 88–9, 106 asset strategy, 69 asset sufficiency, 84 see also sufficiency asset suitability, 84 see also suitability asset usage, 85 asset users, 16 asset value, 84 Audit Commission, 3, 29–33, 43, 48, 50, 51, 68, 97 Audit New Zealand, 58 audits PAM, 37 pricing, 54 Audit Scotland, 47, 48 Australia, 25, 52–4 Austrian school, 24 autocratic leadership, 65 185 BCA see benefit–cost analysis behaviour, 64–5 benchmarking, 20, 35, 37, 38, 92 benefit–cost analysis (BCA), 109, 111, 116, 126, 167 using NPV method, 116–22 best practice, 10, 31, 45 best value, 27, 33, 47–50, 50, 82, 88, 153 indicators, 33 Better Measurement, Better Management, 36, 37 BREAM, 85 British Standards Institution (BSI), 10, 11 BSI PASS, 55 10, 11 BSI see British Standards Institution building depth, 96 Building on Strong Foundations: A Framework for Public Sector Organisation Asset Management, 40 buildings environmental impact, 124 grading condition, 46 built-up properties, 51 Canada, 25 capabilities, 35–7 management shortfalls, 85 technical, 73 see also capability building; capability descriptors capability building and asset management, 72 capability descriptors, 37 capacity building, 67, 83 capital expenditure, 44, 110 capital investment, 87 valuating affordability, 45 186 Index capital planning, 48 capital strategy, 49 carbon emissions, see also CO2 emissions change, 39, 61 and asset management, 69 resistance to, 61 see also change management culture; change management theory change management culture, 83 change management theory, 61–2 classical school, 62, 63 contingency approach, 63 human relations school, 62–3 Chartered Institute of Public Finance and Accounts (CIPFA), 51, 84, 85, 146, 154 Chicago school, 24 CIPFA see Chartered Institute of Public Finance and Accounts CLAW see Consortium of Local Authorities in Wales CO2 emissions, 20, 49, 85, 124 see also carbon emissions collaborative working, 94, 148 co-location, 94 commercialisation, 26 common ownership, 25 communication, 67 competition, 25 Competitive Advantage Model, 60 competitiveness, 23 conflicts, 67 Conservative Party, 24 Consortium of Local Authorities in Wales (CLAW), 80, 154 consultation process, 85–6 contingency theory leadership, 65–6 management, 63 contracting, 26 corporate asset occupancy costs, 68 corporate asset strategy, 79–80 corporate capital strategies, 39 corporate culture, 41 corporate goals, 86 corporate governance, 36 corporate objectives, 80, 86, 129 Corporate Project Management Approach, 92 corporate project management systems, 40 corporate strategy, 69, 86 cost containment, 23, 24 cost control, 10, 18, 19 cost effectiveness, 26 cost minimisation, 75 cost reduction, 32 costs corporate asset occupancy, 68 evaluating, lifecycle, 45, 139–40 managing, operating, 97 running, 29, 48, 52, 96 whole-life, 49 CRINE initiative, criteria weighting, 131–2 critical success factors (CSFs), 79 cross sector, 38 cross-service working, 94 CSFs see critical success factors customer satisfaction, data collection, 33, 83–5 data validation, 104 DCF see discounted cash flow Index DCLG see Department for Communities and Local Government decentralisation, 26 decision-making, see also optimised decision-making (ODM) demand, 46 demand management, 89, 107–8 democratic leadership, 65 Department for Communities and Local Government (DCLG), 40–2, 91, 92, 96, 143, 147 Department of Provincial and Local Authority (DPLG), 85, 100, 102, 107, 108, 137 Department of the Environment Transport and the Regions (DETR), 31 DETR see Department of the Environment Transport and the Regions devolution policies, 82 direct operational properties, 50 Disability Discrimination Act, 2008 46, 82, 94 discounted cash flow (DCF), 112, 124, 125–6 disposal, 37, 108, 139 DPLG see Department of Provincial and Local Authority economic inefficiencies, 17, 19 see also financial efficiency economic overload, 24 economic underutilisation, 20 education assets, 50 education property assets, 45 effectiveness, 38, 39 187 efficiency and policy, 39 economic, 25 energy, 95, 148 improving, 27, 28 measuring, 37–8 savings, 33–5 see also financial efficiency elderly persons’ homes, 50 Energy Certification, 85 energy efficiency, 95, 148 energy performance, 20, 85 energy usage, 85 England asset registers, 21 portfolio assets of public sector organisations, 51 environmental footprints, 124 environmental issues, 82 environmental performance, 20, 95, 148 Environmental Protection Agency (EPA), 70 environmental sustainability, EPA see Environmental Protection Agency estate management, 4–5 facilities management, 4–5 financial efficiency, 6, and asset registers, 21 and fragmented management, 17, 19 and New Public Management, 26 and privatisation, 10–11 see also efficiency financial forecast, 110 financial management, 139–40 financial performance, 75 fire risk, 85 fiscal crisis, 24, 25, 52 188 Index ‘fitness for purpose’, 46, 84 see also suitability Five Forces Model, 60 flexible working, 94 functional theory, 64 GAAP see Generally Accepted Accounting Principles GASB see Government Accounting Standards Board Generally Accepted Accounting Principles (GAAP), 28 goal achievement, 23, 25 good practice arrangements, 91–2, 143 governance, 6, government accountability and transparency in operations, 26 decentralisation of service responsibilities, 26, 27 efficiency and relocation plans, 28 framework for public sector organisation asset management, 42 Spending Review, 33–4 Government Accounting Standards Board (GASB), 55 ‘Green Book’, 110, 164 group dynamics, 58 group theory, 64 health and safety requirements, 46 health and safety surveys, 20, 85 High Performing Property (HPP), 35, 36 hot-desking, 94 HPP see High Performing Property human factors, 67 human resources, 72 IAM see Institute of Asset Management indirect operational properties, 50 industrial properties, 51 infrastructure assets, 53–5 Institute of Asset Management (IAM), 10, 11 integrated service, 32 inter-agency property sharing, 32 internal rate of return (IRR), 113–15, 125 comparison with NPV, 115–16 International Infrastructure Management Manual, 82 in-use performance, 37 IRR see internal rate of return joint occupancy, 30 joint property sharing, 50 key performance indicators (KPIs), 38, 93, 148, 150, 169 KPIs see key performance indicators laissez-faire leadership, 65 land ownership, 51 leadership, 35, 41 and asset management, 71–2 autocratic, 65 defined, 64 democratic, 65 laissez-faire, 65 theories of, 64–6 lease documents, 21 ‘Levels of Service’, 86 libraries, 50 lifecycle asset management, 136–42 asset creation or acquisition, 138–9 Index financial management, 139–40 planning strategies, 137–8 lifecycle costs, 45, 139–40 lifecycle operations, 110 local authorities asset information, 83–5 asset knowledge, 83–5, 87 data collection, 83–5 future strategies, 82 objectives, 79–80 operating environment, 80–3 organisation goals, 80 localism, 82 MAA see Multi-Area Agreements maintenance, 108, 139 and fragmented management, 18, 20 and privatisation, 10–11 backlog, 49 spending patterns, 20 management, 58, 62 capability shortfalls, 85 private-sector approaches, 26 structures, 66–7 see also management theory; organisational management theories management theory, 62–3 market mechanism, 23 market value, 59 MCA see multi-criteria analysis Ministry of Defence, 28 motivation, 72–3 Multi-Area Agreements (MAA), 42 multi-criteria analysis (MCA), 90, 109, 111, 167 analytic hierarchy process, 126–7, 129–36 189 evaluating non-financial factors, 126 multidisciplinary management teams, municipal services, 54 NAMS Group see National Asset Management Steering Group National Asset Management Steering Group (NAMS), 87, 90, 102, 108, 109, 110 National Audit Office, 29 net present costs (NPC), 122, 128 net present value (NPV), 112–13, 125 benefit–cost analysis, 116–22 comparison with IRR, 115–16 New Public Management (NPM), 82 and asset management reforms, 26–9 ideological beliefs, 22–4 reasons for emergence, 24–6 new work, 108, 139 New Zealand, 25, 52–4 asset registers, 21 NHS, 29 non-asset solutions, 88–9, 106 non-financial factors, 127–9 non-operational properties, 50 NPC see net present costs, 122 NPM see New Public Management NPV see net present value occupancy density standards, 34 ODM see optimised decision-making Office of Government Commerce (OGC), 34–8, 152, 154, 156, 160, 163, 167, 168 190 Index OGC see Office of Government Commerce operating environment, 80–3 external, 80, 82 internal, 80, 82 operational assets, 52 operational properties, 50–2 direct, 50 indirect, 50 management, 68 operational suitability, 128 operations, 108, 139 optimised decision-making (ODM), 7, 90, 109–11, 138, 167 option appraisal, 45, 90, 108–27 non-financial evaluation, 124–6 option weighting, 133 organisational behaviour, 58–9 organisational cultures, 26 organisational goals, 74 organisational management theories, 58–67 and asset management, 67–75 organisational structure, 70–1 organisational structure theory, 66–7 organisations, 62–3 owner-occupied properties, 68 pairwise comparison, 133–4 partnership working, 94 PCT see Public Choice Theory performance, 23, 26 and New Public Management, 26 benchmarking, 31 indicators, 6, 47, 86 management, monitoring, 25, 26, 31 reviews, 37 shortfalls, 87 targets, 20, 86 see also performance measurement performance measurement, 31, 33, 36 and management, 37 and OGC, 38 PESTLE categories see political, economic, social, technological, legal and environmental (PESTLE) categories physical underutilisation, 20 Poland, 51 policies, 15–16, 27, 41, 42 policy-making, 26 political controls, 25 political, economic, social, technological, legal and environmental (PESTLE) categories, 82 Porter, Michael, 60 Presidential Executive Order (E.O.) 13327, 55 pricing audits, 54 PRINCE2 gateway process, 92 private-sector management approaches, 26 privatisation, 10–11, 26 productivity, 62, 95–6 productivity strategy processes, 73 project management, 145–6 project management approach, 70 Property Asset Management (PAM) audit, 37 capability, 36 information systems, 37 Maturity Matrix, 36, 37 planning, 37 policy, objectives and strategy, 37 Index property asset management board, 71 property assets knowledge about value and running costs, 29 stewardship of, strategic approach to management, 28–30, 39 property asset strategy, 80 Property Benchmarking Service, 38 property data, 40, 44 see also property information property information, 20, 31 see also property data property maintenance, 15, 96–7 property management, 4–6 and asset management reforms, 14–22 fragmented, 16–18 information system, 32 property managers, 16 property objectives, 79–80 property operating costs, 93 property performance indicators, 96 property rationalisation, 93, 147 property requirements, 28 property reviews, 18, 35 property rights, 25 property running costs, 48, 52 property sales, 15 property services, 3–4 customer focused, 33 Prudential Code, 44–5 Public Choice Theory (PCT), 24–5 and NPM ideology, 26 public parks, 50 Public Sector in Scotland Act 2003, 47 public sector revenues, 27 191 public sector services, 27–8 public support, 23 qualities theory, 64 quality improvement, 23 quasi-markets, 23 rail companies, 10 regeneration, regeneration policies, 42 renewal, 108, 139 resource allocation, 23, 25 resources monitoring, 82 revenue costs, 84 RICS see Royal Institute of Chartered Surveyors risk management, 6, 7, 135–6 and privatisation, 10–11 PSM audit, 37 risk minimisation, 75 Royal Institute of Chartered Surveyors (RICS), 90, 154, 156, 165, 168 asset management guidelines, 38 definition of asset management, 2–4 grading building condition, 46 on long-term change, 39 school estate, 45–6 schools, 50 Scotland, 20 asset management guidance, 45–6 development of asset management, 44–50 portfolio assets of public sector organisations, 51–2 Scottish Executive, 44–7, 80, 104, 158, 163, 164 192 Index service delivery, 7, 75 and ownership of properties, 50 appropriateness for, 128 improving, 27, 94–5, 147 innovations, 32 separation from policy-making, 26 service level gaps, 85–9 service level shortfalls, 86 service level targets, 86 service management, 6, service provision and competition, 25 and fiscal crisis, 24 inefficiency, 23–4 service user satisfaction, shops, 51 SMoLTA see strategic management of long-term assets space utilisation, 34, 38, 40 spatial quality, 96 staff, 72–3 staff efficiency, 147 stakeholder management, 73 standards, 35 strategic asset management, 78–97 overview, 78 strategic management approach, 27, 32, 34–5, 39, 41–3, 68–9 strategic management of long-term assets (SMoLTA), 69 strategic management theory, 59–61 strategic planning, 61, 69, 78 strategic property considerations, strategic tasks, 85–7 strategies, 59 see also strategic management theory strengths, weakness, opportunities and threats (SWOT) analysis, 80, 83, 85, 87 styles of leadership theory, 65 sufficiency, 20, 45, 46 see also asset sufficiency suitability, 45, 46, 49, 104 operational, 128 see also asset suitability sustainability, 36, 46, 49, 82, 110 enhancement, 124–5 environmental, Sustainability Code, 85 sustainable development, 47 see also sustainability SWOT analysis see strengths, weakness, opportunities and threats (SWOT) analysis synthesisation, 133–4 systems theory, 63 TAMP see Total Asset Management Process team-working, 67 technical capabilities, 73 Total Asset Management Process (TAMP), 170 town halls, 50 traits theory, 64 transparency, 15, 22, 26, 49 ‘turnaround management’, 23 underutilisation, 17, 30 economic, 20 physical, 20 United Kingdom fiscal crisis, 24–5 trends in development of asset management, 29–44 Index United States asset management development in, 54–5 asset registers, 21 utility companies, 10 value for money, 25, 27 Value for Money in Public Sector Corporate Services, 47 value theory, 73–5 Virginia school, 24 visions, 80 Warsaw, 51 Washington DC, 21 193 water hygiene information, 85 water usage, 85 welfare state, 24 whole life costing information, 85 whole life costs (WLC), 49, 90, 112, 113 whole lifecycle approach, 139–40 WLC see whole life costs work groups, 96 work management, 10 workforce motivation, 67 workplace environment, 95–6 workspace, 88, 148, 149 York Consulting, 91, 92, 96, 143 WILEY END USER LICENSE AGREEMENT Go to www.wiley.com/go/eula to access Wiley’s ebook EULA ... their property assets Practice of Asset Management 15 2.2.1 Internal factors behind asset management reforms in the public sector Prior to the introduction of asset management, all public sector. .. operational property assets in the public sector Role of property assets Asset management development in other parts of the world 2.7.1 Asset management development in New Zealand and Australia 2.7.2 Asset. .. Acknowledgements Asset Management Concept and Development in the Public Sector 1.1 Introduction 1.2 The concept of asset management 1.2.1 Definition of asset management 1.3 Benefits of asset management 1.4 Asset