Topic 1
Topic 1
Prepared by:
MOHAMAD ZAIN BIN HASHIM
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Chapter 1.0 - Introduction to Asset Management
LEARNING OUTCOMES:
The student should be able to:
Definition of asset management;
The types of industry to which asset management is particularly important;
Definitions of assets, liabilities and related terms from an accounting viewpoint;
An outline of the asset management life cycle;
Relate the significance of studying asset management to work performance.
Appreciate and understand the role and responsibility of an asset manager.
Understand the asset management process.
Begin developing skills necessary for holding management positions
The broad types of assets which organizations have;
The place of asset management within and throughout an organizational structure;
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Chapter 1.0 - Introduction to Asset Management
Asset Management: Advancing the State of the Art Into the 21st Century Through Public-Private Dialogue. Federal Highway
Administration and the American Association of State Highway and Transportation Officials, 1996, page 3.
Asset management is a systematic process of maintaining, upgrading, and operating physical assets
cost-effectively. It combines engineering principles with sound business practices and economic theory,
and it provides tools to facilitate a more organized, logical approach to decision-making. Thus, asset
management provides a framework for handling both short- and long-range planning.1
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AASHTO: As defined by the AASHTO Standing Committee on Highways, Planning Subcommittee
on Asset Management,
Transportation Asset Management is a strategic and systematic process of operating, maintaining,
upgrading, and expanding physical assets effectively throughout their lifecycle. It focuses on business and
engineering practices for resource allocation and utilization, with the objective of better decision making
based upon quality information and well defined objectives.
http://www.transportation.org/sites/scoh/docs/Motion_ Trans_Asset_Management.doc
PAS 55 defines asset management as “systematic and coordinated activities and practices through
which an organization optimally and sustainably manages its assets and asset systems, their
associated performance, risks and expenditures over their life cycles for the purpose of achieving its
organizational strategic plan.” Other wordings and definitions are in use in various industries, but the
most robust ones all include the key elements of this PAS 55 definition: They identify the coordination
and systematic approach, the need for optimization, and the combined consideration of expenditures, asset
performance, and risk exposures. They recognize the need for a whole lifecycle or sustainability view
(i.e., the long term) and for asset management to be directed toward a clear corporate goal. For many
organizations, such aspirations represent a significant challenge, yet the prize for getting it right is
substantial.
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definitions are provided, which describe a comprehensive, strategic, and integrated system of Asset
Management.
“…a methodology needed by those who are responsible for efficiently allocating generally insufficient
funds amongst valid and competing needs.”
— The American Public Works Association Asset Management Task Force
“…a comprehensive and structured approach to the long-term management of assets as tools for the
efficient and effective delivery of community benefits.”
— Strategy for Improving Asset Management Practice, AUSTROADS, 1997
“Asset Management…goes beyond the traditional management practice of examining singular systems
within the road networks, i.e., pavements, bridges, etc., and looks at the universal system of a network of
roads and all of its components to allow comprehensive management of limited resources. Through
proper asset management, governments can improve program and infrastructure quality, increase
information accessibility and use, enhance and sharpen decision-making, make more effective
investments and decrease overall costs, including the social and economic impacts of road crashes.”
— Organization for European Cooperation and Development Working Group, Asset Management
Systems, Project Description, 1999
“In the transportation world, asset management is defined as a systematic process of operating,
maintaining, and upgrading transportation assets cost-effectively. It combines engineering and
mathematical analyses with sound business practice and economic theory. The total asset management
concept expands the scope of conventional infrastructure management systems by addressing the human
element and other support assets as well as the physical plant (e.g., highway, transit systems, airports,
etc.). Asset management systems are goal driven and, like the traditional planning process, include
components for data collection, strategy evaluation, program development, and feedback. The asset
management model explicitly addresses integration of decisions made across all program areas. Its
purpose is simple—to maximize benefits of a transportation program to its customers and users, based on
well-defined goals and with available resources.”
— Blueprint for Developing and Implementing an Asset Management System, Asset Management
Task Force, New York State Department of Transportation, April 22, 1998
What is “infrastructure”?
IPWEA: The Institute of Public Works Engineering Australia (IPWEA) represents a significant
number of stakeholders responsible for the management of infrastructure assets across the public works
and local government sector - essential infrastructure on which our communities rely.
Hence, in our context, we are dealing with the local road network, stormwater drainage systems, water
and sewerage systems and community buildings that comprise the essential foundation of the fabric of our
community. This local community infrastructure underpins the nation’s economy and provides significant
support for State and National infrastructure.
It is noteworthy that local government owns and manages some 85% of the total road network in
Australia - and accordingly is a vital player in the management of infrastructure and the overall economy.
Too little regard is given to the importance of existing local community infrastructure.
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A person or thing possessing valuable qualities that is useful and contributes to the success of
a specific purpose.
The common definition of ASSET MANAGEMENT is:
The management of assets to ensure valuable qualities are maintained, extended and used for
successful outcome.
The international definition of INFRASTRUCTURE ASSET MANAGEMENT (IAM) is:
Infrastructure asset management (IAM) is an integrated process of decisionmaking, planning
and control over the acquisition, use, safeguarding and disposal of assets to maximise their
service delivery potential and benefits, and to minimise their related risks and costs over their
entire life.
This definition indicates that IAM:
a) Takes an organisation‐wide perspective and draws upon applicable principles and techniques
in the management, engineering, accounting and social sciences (including human resources).
b) Has an outcomes focus (i.e. a focus on outcomes such as maximisation of service delivery
potential, protection of the ability of the infrastructure network(s) to deliver services, cost
effectiveness and efficiency).
c) Confers a custodianship role on the managers of infrastructure and their political leaders – i.e.
that they are the “custodians”, responsible for the lifelong sustainable operation of the
infrastructure, and for service delivery not only to the current users of the infrastructure, but
to future users as well.
d) Must take into account both consumer expectations (including levels of service, and cost of
the service) and the legislative environment (e.g. financial and environmental legislation,
including any regulatory regime (e.g. regulation of drinking water quality).
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Healthcare projects
Other
Timber
Industrial infrastructure
Parking garages / car parks
www.brookfield.com 15/2/2013
Adopted from: Prospects of Mind Maps for Better Visualization of Infrastructure Literature; Tarek Hegazy,
M.ASCE1; Abdelbaset Ali2; and Mohamed Abdel-Monem3, JOURNAL OF PROFESSIONAL ISSUES IN
ENGINEERING EDUCATION & PRACTICE © ASCE / OCTOBER 2011
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Adopted from: Prospects of Mind Maps for Better Visualization of Infrastructure Literature; Tarek Hegazy,
M.ASCE1; Abdelbaset Ali2; and Mohamed Abdel-Monem3, JOURNAL OF PROFESSIONAL ISSUES IN
ENGINEERING EDUCATION & PRACTICE © ASCE / OCTOBER 2011
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WHAT IS ASSET MANAGEMENT? D. J. ‘‘Dana’’ Vanier
The asset managers' technical challenges, as identified in the first three sections, are indeed
complex, but they are not intractable in the author's view. In an attempt to classify and to
describe examples of existing decision-support tools for asset management as well as to
juxtapose them opposite discrete stages for asset management implementation, the author
presents his six “Whats” of asset management:
What do you own?
What is it worth?
What is the deferred maintenance?
What is its condition?
What is the remaining service life?
What do you fix first?
Anecdotal information from a number of typical organizations maintaining municipal
infrastructure indicate that many of these organizations fare well with the first two questions,
then may fail miserably on the remaining four. Discussions with asset management professionals
also indicate that there is a scattering of responses depending on the discipline domain (i.e.
roadways, bridges, parks, buried utilities, buildings).
D. J. ‘‘Dana’’ Vanier, J. Comput. Civ. Eng. 2001.15:35-43.
“All the property of a person or company which may be made liable for his or their debts.”
(OED, 2007)
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The importance of considering this ordinary meaning of the word ‘asset’ is that we want our
concept of an engineering asset to be consistent with basic, everyday ideas. The main points to
note about the dictionary definition are that there is (a) an object (‘property’) to which (b) a legal
entity (‘person or company’) attributes (c) a value (‘debt’). Thus an asset is more than just a
physical thing. It is part of a relationship between an object and an entity and a value is attached
to the object by the entity.
“… the active management of the financial and other assets of a company, etc., esp. in
order to optimize the return on investment.” (OED, 2007)
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Table 1. Brief Definition of Important Asset Management Concepts
Concept Definition
Asset Physical entity describing the whole (e.g., building) or its
components (e.g., roof assets, road assets, and boiler
assets); assets are owned by public or private organizations
Infrastructure asset Systematic process of planning, operating, maintaining,
management upgrading, and replacing assets cost effectively to meet the
performance criteria described subsequently, over the
asset’s life cycle
Primary asset management programs
Maintenance Two types: Preventive (i.e., planned) for daily scheduled
maintenance; and reactive (i.e., unplanned) for resolving
unforeseen damage or failure
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Concept Definition
Capital Planned program for replacing an asset to improve its asset
renewal/replacement performance in any number of the criteria described
subsequently; it involves various functions (see subsequent
cells) to determine which asset, when, how much, and what
action is best to do in a multiyear multiasset plan under
budget limits
Repair/rehabilitation Planned program for improving the performance of an old
asset by repairing or restoring it to its previous condition; it
involves various functions (see subsequent cells) to
determine which asset, when, how much, and what action
is best to do in a multiyear multiasset plan under budget
limits
Financing/privatization/PPP Joint venture between the public and private sectors to
appropriately share the resources, risks, and rewards of
financing the development and the operation and
maintenance of assets
Performance criteria for capital renewal/repair and rehabilitation programs
Sustainability Environmental, social, and economic developments from
the asset that meet the present needs without compromising
the ability of future generations to meet their own needs
Key performance indicators Set of metrics measuring the performance of assets against
(KPI) the organizational objectives, including sustainability, level
of service, safety, and security
Level of service Index indicating the quality of service provided by an asset
to various stakeholders; for example, a road serving
vehicles, trucks, pedestrians, and cyclists
Green buildings/LEED Recognized standards measuring the environmental (i.e.,
green) sustainability aspects for new and existing
buildings, including measures of energy and waste savings
Risk Sum of (i.e., probability of x consequences) potential risk
events often assessed for the critical and costly equipment
in a building to avoid interruption to asset operation
Reliability Probability that asset will perform specified functions
within a specified period under specified conditions
Capacity/future demand Assessment of whether a particular asset still provides the
service for which it was designed used to predict future
demand
Remaining useful life Estimated number of years until an asset reaches the
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Concept Definition
minimum acceptable condition, performance, or level of
service
Functions involved in capital renewal/repair and rehabilitation programs
Condition Process of inspecting assets and assessing their condition
assessment/inspection/ indexes, extent of various defects, and performance,
performance assessment according to any desired performance criteria described
previously
Deterioration behavior Graph showing asset deterioration with time; simple
models assume linear deterioration with age; more detailed
Markov chain models use condition data to estimate future
deterioration
Repair options and costs Optional methods of repair (e.g., light, medium, and
extensive), each with estimates of cost as a percentage of
asset replacement cost and performance improvement
result
Life cycle cost analysis Study of asset costs throughout its life cycle to determine
(LCCA) best short-term and long-term actions, extending the asset’s
life span
Prioritization Techniques for ranking assets according to their
performance index/condition/importance to facilitate
decisions related to repair type and fund allocation
Fund allocation Allocation of funds to assets on the basis of repair type and
repair year decisions; a simple approach is according to the
asset priority rank; a better approach is the use of an
optimization model
Optimization model A framework linking decisions (i.e., repair types and repair
timings) to costs, performance, deterioration, and
constraints; optimization tools can then help determine
optimal decisions maximizing performance with minimum
cost
Execution planning Planning the delivery of capital renewal/repair and
rehabilitation programs of multiassets within time, cost,
and resource constraints by using in-house resources and
outsourcing
Adopted from: Prospects of Mind Maps for Better Visualization of Infrastructure Literature; Tarek Hegazy, M.ASCE1; Abdelbaset Ali2; and
Mohamed Abdel-Monem3, JOURNAL OF PROFESSIONAL ISSUES IN ENGINEERING EDUCATION & PRACTICE © ASCE / OCTOBER
2011
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Why infrastructure?
Investor interest in infrastructure has increased dramatically in recent years. The combination of
global population and economic growth, much-needed spending on infrastructure and a
deficiency in government budgets around the world has provided an opportunity for private
sector involvement.
Current estimates indicate global infrastructure spending will average $2 trillion annually through 2015 —
presenting incredible potential for private sector involvement.
Brookfield believes investment in infrastructure is set to flourish due to a number of critical factors:
1. On a global scale, population and economic growth is increasing, therefore creating demand for
new infrastructure;
2. Existing infrastructure around the world, much of it built over 50 years ago, needs to be replaced;
and
3. Government budgets, the traditional source of funding, are shrinking, requiring other sources of
funding from the private sector
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trend in the data without worrying about the correlation problems associated with regression models. Sewer demand forecasting
allows asset managers to predict the future sewer demand, thus asset rna-uagers can identify "critical" sewers (i.e., current
hydraulic capacity not meeting the future demand) by comparing the current hydraulic capacity with the future demand.
dentifying and
rehabilitating "criti(~tl" sewers before any major failure occur can prevent health and environmental hazards and lead to cost
savings.
Keywords: arti~eial neural networ~ infrastructure asset management sewer demand forecasting
Adopted ppt entitle “TOTAL ASSET MANAGEMENT IN THE PUBLIC SECTOR” By Ir. Hj. Abu Bakar Bin Hj. Azit
,Asia Pacific Institute of Good Asset Management (APIGAM), SEMINAR ON PROFESSIONALISATION OF ASSET AND
PROJECT MANAGEMENT; -Organized by The Malaysian Asset and Project Management Association (MAPMA), 6thand
7thAugust 2009, PWTC, Kuala Lumpur
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e) flood protection and land drainage systems
f) solid waste facilities
g) educational and health sector facilities
h) libraries, administration and other community facilities
i) telecommunication networks
7. Why do Government needs AM? Infrastructure assets <> related public services
• Though closely linked, 2 different management systems
• Infrastructure & buildings = tangible assets
—managed by one lot of agencies
• Services stemming from these assets are intangible
—need a different lot of agencies to manage
• Network relationship of Infrastructure assets related public services is complex
—need AM to assist in coordinating, developing & managing them for
sustainability
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8. ASSET DETERIORATION CHARACTERISTICS WITH AND WITHOUT MAINTENANCE
Source: KC Leong, 2004, The Essence of Asset Management —A Guide, a.k.a. the Green Book, published by UNDP
Malaysia & EAROPH-APIGAM
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The US has attitude problems; they believe Uncle Sam is super rich, hence can
enjoy the luxury of “Build and Replace”!
• Here’s a warped planning policy:
The pedestrian remains the largest single obstacle to free traffic
movement.
Los Angeles Planning Report, David Engwicht 1992
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13. ASSET FAILURES &CHAIN REACTIONS -WITHIN A SINGLE ASSET SYSTEM
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14. ASSET FAILURES & CHAIN REACTIONS-WITHIN MULTIPLE ASSETS SYSTEMS
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Infrastructure assets include:
Transportation
Toll Roads, Bridges, Tunnels, Ports, Airports, Rail,
Energy and Utilities
Electricity transmission and distribution networks, generation; Oil and gas pipelines
and storage; Water and waste water
Communications
Wireless communication towers; Broadcast satellites; Cable networks
Social
Education facilities; Healthcare projects
Other
Timber; Industrial infrastructure; Parking garages / car parks
END
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