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STRATEGIC

ASSET MANAGEMENT
FRAMEWORK
FOR

WESTERN AUSTRALIAN
PUBLIC SECTOR AGENCIES
August 2005

Department of Treasury and Finance


Government of Western Australia

STRATEGIC ASSET MANAGEMENT FRAMEWORK

Preface
Table of Contents
Foreword ........................................................................................1
Chapter 1: Introduction ................................................................2
1.1 Background ..........................................................................2
1.2 Scope ....................................................................................3
Chapter 2: Planning ......................................................................4
2.1 Corporate Planning..............................................................4
2.2 Asset Planning......................................................................4
2.3 The Strategic Asset Plan ......................................................6
Chapter 3: Implementation ..........................................................8
3.1 Delivering the Strategic Asset Plan ....................................8
3.2 Capital Investment Plan ......................................................8
3.3 Maintenance Plan ..............................................................10
3.4 Asset Disposal Plan ............................................................11

CONTENTS

Table of Figures
Figure 1: Agency Planning within the Outcome Based
Management Framework..............................................5
Figure 2: Asset Planning Process ..................................................7
Figure 3: Implementation Processes ............................................9

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Foreword
The Functional Review Taskforce recommended the development and implemention of appropriate
strategies to strengthen asset management policies and practices, having particular regard to the
recommendations of the Pricewaterhouse Coopers 2002 report on governance and management of
Western Australian public sector assets.
To address this, the Department of Treasury and Finance has worked in collaboration with the Department
of Housing and Works to develop a framework that:
promotes linkages between the agencies management of their asset portfolios with asset planning
and corporate planning processes;
outlines the processes to manage assets through the life cycle from planning to disposal, including an
increased emphasis on maintaining existing assets; and
provides support to agencies in following the processes.
The results of this work have been the development of the Strategic Asset Management Framework.
The Framework, developed in consultation with agencies, comprises the four key components of the
asset management life cycle. These components are asset planning, capital investment, maintenance,
and asset disposal.
To support the Framework, previously published policies such as the Project Evaluation Guidelines have
been updated and condensed to ease accessibility, readability and usage by agencies. In addition, new
policies have been developed, to provide clearer guidance to agencies in the areas of asset planning and
maintenance.
Reporting requirements under the Framework have been kept to the minimum necessary, to encourage
use and application of the Framework and supporting policies, and assist agencies to improve the
performance of their assets, and, thereby, the organisations financial performance.

Timothy Marney
UNDER TREASURER
August 2005

STRATEGIC ASSET MANAGEMENT FRAMEWORK

Chapter 1: Introduction
1.1 Background
Managing government assets requires a strategic approach, to enable government to meet
community needs, provide and sustain public assets and to achieve service outcomes.
Asset management assists government, through its agencies, to meet its desired outcomes
effectively and efficiently by:
making the best possible use of existing assets;
maximising value for money when investing in new assets; and
making decisions to invest in, retain or divest assets that take into consideration and protect
the needs of current and future generations.
This Strategic Asset Management Framework is designed to assist agencies to make informed
decisions on the assets it needs to support service delivery. It builds on the 1998 policy Strategic
Asset Management Policy An Overview.
The key objectives of the Strategic Asset Management Framework are:
to integrate the Governments asset management policies and make them more accessible;
and
to make stronger links between planning asset needs and implementing asset decisions.
The Framework also highlights the need for agencies to ensure that their corporate planning
processes are integrated with their asset planning processes. In this context, agencies are also
encouraged to explore alternative solutions to purchasing new assets or retaining any existing
assets that are under-performing or under-utilised.
This Framework document outlines the major components of asset management, and shows the
broad relationships between them. In addition, supporting policies have been developed to
provide guidance for each component.

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1.2 Scope
This Strategic Asset Management Framework is to be applied by general government agencies,
public financial corporations and public non-financial corporations in accordance with all relevant
legislation, Treasurers Instructions and related government policies.
However, agencies that are required, by legislation, to produce Statements of Corporate Intent
(SCI) and Strategic Development Plans (SDP) are not bound by this policy, but are expected to
adopt the principles of the Framework in meeting their statutory obligations, although there are
several reporting requirements, predominantly relating to the capital investment process, with
which all agencies are expected to comply. Further guidance about reporting requirements is
provided in Strategic Asset Plans.
In addition, as agencies vary widely in terms of their size and nature, the Framework may have
limited application to some agencies. In this context, each agency should adopt a common
sense approach towards implementation. Any document that is developed to meet external
reporting requirements should be clear and concise, and prepared to an appropriate level of length
and detail.
If there is any doubt about the applicability of any aspect of the Strategic Asset Management
Framework, or how to address any reporting requirement, please contact your Department of
Treasury and Finance analyst for advice.
Where an Information and Communications Technology (ICT) project is being considered, the
agency should also consult the Office of e-Government in the Department of the Premier and
Cabinet and the Government Procurement Division of the Department of Treasury and Finance.

STRATEGIC ASSET MANAGEMENT FRAMEWORK

Chapter 2: Planning
2.1 Corporate Planning
Corporate planning has an important influence on asset management.
Agencies invest in, and retain, the capital resources required to deliver agreed levels of services to
achieve the desired outcomes.
The resources utilised by the agency should be clearly aligned with the agencys desired outcomes,
and at least one goal in the Governments strategic planning framework.1 Agencies performance
against these agency-level outcomes is assessed using key effectiveness and efficiency indicators.
Figure 1 illustrates how agencies may conduct planning at strategic and business levels, to identify
and secure the resources required to deliver agreed services through Outcome Based Management
(OBM).2 Such planning, which may include consultation with the community or key stakeholders,
is usually conducted on a cyclical basis, perhaps every two to three years.

2.2 Asset Planning


Asset planning, management and review should be undertaken on a cyclical basis, in association
with corporate and other planning activities (see Figure 2).
The asset planning process should draw on the information gathered from the business and
operational planning processes, which should be conducted around human, information, financial
and physical resourcing needs, either to develop or to meet the level of services (or output targets)
agreed with Government from within an approved level of funding.
This planning is largely undertaken internally by the agency, although key decisions to invest
or dispose of significant assets must be endorsed by the Governments Expenditure Review
Committee. Consideration should be given to seeking community input to the asset planning
process, where community support for strategic asset management decisions is critical to ensuring
cost-effective implementation.
The broad asset needs identified through the asset planning, management and review processes
should be highlighted in the agencys strategic asset plan, which should then be articulated
through appropriate capital investment, maintenance, and/or asset disposal planning processes.

1
2

Better Planning: Better Services. Department of the Premier and Cabinet, 2003.
Outcome Based Management: Guidelines for use in the Western Australian Public Sector. Department of Treasury
and Finance, 2004.

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Figure 1: Agency Planning within the Outcome Based Management Framework

Government Goals and


Strategic Outcomes
(Better Planning: Better
Services)

Agency Mission
Statement

Agency strategic
planning processes

Agency business
and operational
planning processes

Human
Resources

{{

Agency Level
Outcomes
Key Performance
Indicators of
effectiveness and
efficiency
Agency Services
(delivered to achieve
outcomes)

Input resources
required
to deliver services:

Information
Resources

Financial
Resources

Agency Internal
Performance
Measures (optional)

Physical
Resources

STRATEGIC ASSET MANAGEMENT FRAMEWORK

2.3 The Strategic Asset Plan


The asset planning process should result in the formulation of a Strategic Asset Plan (Figure 2).
This plan is the means by which an agency aligns its asset portfolio to Government desired
outcomes. It defines the strategic actions that it intends to implement to ensure that its assets
best meet its service delivery requirements. A common sense approach should be taken to
determine the appropriate level of detail and complexity at which the planning process is
undertaken.
Asset planning balances the service delivery potential, and cost, of existing assets against the cost
of other resources required to achieve agency service objectives, timeframes and budgets. Nonasset solutions should also be considered at this point.
Strategies for the management of individual assets and portfolios should be based on defined
service delivery objectives.
The primary stages for an agency to develop a Strategic Asset Plan are:
to demonstrate a need to acquire physical assets from the business planning process, after
consideration of alternative solutions that do not require assets, such as changes to service
delivery;
to identify the agencys ideal asset mix;
to review the agencys existing assets, in terms of reviewing and optimising existing capacity,
asset performance and the condition of existing assets at an appropriate level of detail;
to undertake a gap analysis between the ideal and the existing asset mix; and
to summarise the conclusions formed from this planning process in the Strategic Asset Plan.
The resulting plan should outline the capital investment, maintenance and asset disposal
implications for the agency over the short- to medium-term.
Further guidance on developing Strategic Asset Plans is provided in the policy document Strategic
Asset Plans.

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Figure 2: Asset Planning Process

Demonstrated need
for physical assets
from business
planning process

Consideration of
non-asset solutions

Identify ideal
asset mix

Review
existing assets

Review and optimise


capacity, performance
and condition of
existing assets

Planning
Undertake
gap analysis

Formulate
Strategic Asset Plan

Development of a
Capital Investment Plan

Development of a
Maintenance Plan

Development of an
Asset Disposal Plan
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Implementation

STRATEGIC ASSET MANAGEMENT FRAMEWORK

Chapter 3: Implementation
3.1 Delivering the Strategic Asset Plan
This chapter outlines the key processes to implement each of the capital investment, maintenance,
and asset disposal implications that were identified in the Strategic Asset Plan.
These processes are outlined in Figure 3.

3.2 Capital Investment Plan


The capital investment plan details the new assets, or the major changes required to support the
agencys service delivery.
This plan should address all relevant factors, including flexible long-term service delivery
requirements, demographic trends, periodic refurbishment, life cycle costing and the impact on
future budgets, Government priorities, and the risks of change to service delivery requirements.
The primary stages for an agency in managing the capital investment implications of the Strategic
Asset Plan are:
to identify capital investment implications arising from the agencys business and asset strategic
planning processes;
for the agency to undertake sufficiently rigorous evaluation of proposed new assets, to justify
its inclusion of the proposals in the 10-year capital investment plan, which may include
consideration of financing options such as Public Private Partnerships (PPPs)3;
to develop sufficient project definition, to establish a clear understanding of the project and a
plan for its implementation, and determine whether the project is sufficiently defined to
proceed into detailed design and documentation;
to deliver the project; and
after commissioning has been completed, to undertake a review of the projects readiness for
service.
Further guidance on the capital investment process is available from the policy document Capital
Investment Policy.

Partnerships for Growth: Policies and Guidelines for Public Private Partnerships in Western Australia, Department
of Treasury and Finance, 2002.

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Figure 3: Implementation Processes

Strategic
Asset Plan

Maintenance
Plan

Capital
Investment Plan

Review Current
Maintenance Program

Asset
Disposal Plan

Concept Development
& Evaluation

Prioritise
Maintenance Needs

Agency
Evaluation

Project
Definition

Define
Tolerable Limit

Implementation

Delivery

Assess Current
Resources

Review

Review

Develop Maintenance
Schedule

STRATEGIC ASSET MANAGEMENT FRAMEWORK

3.3 Maintenance Plan


Agencies must ensure existing assets sustain service delivery and are appropriately maintained,
operated and fully utilised.
Through asset management, agencies should plan and undertake maintenance programs for all
assets. A Maintenance Plan should be developed to identify existing maintenance requirements,
and the approach to manage these requirements within approved funding limits. As part of this
plan, assets should be retained in, or restored to, conditions that are specified to support
service delivery.
Maintenance Plans need to be consistent with the Strategic Asset Plan, and aligned with
investment and disposal plans and properly accounted for in agency budgets.
Issues relating to under-utilisation of assets, the suitability and accessibility of assets, and the
recurrent costs associated with the asset should be fed back into the asset planning process.
The primary stages for an agency in managing the maintenance implications of the Strategic Asset
Plan are:
to review the current maintenance program in the light of the issues raised in the asset
planning process;
to assess the risks inherent within the current maintenance program;
to prioritise maintenance needs;
to define the appropriate balance between maintenance that should be undertaken in the
short-term, and that which may be deferred;
to define the available funding resources; and
to prepare a maintenance schedule, aiming to ensure that assets are maintained in a costeffective manner with minimal disruption to the occupants, or the delivery of services.
Further guidance on maintenance is provided in the Maintenance Policy.

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3.4 Asset Disposal Plan


Agencies should develop contingency plans for asset disposal at the end of the assets useful life.
Disposal of assets can release capital for other uses, and there may be grounds or incentives for
agencies to dispose of surplus capital stock, or to relocate, where the value of the asset is greater
when used for other purposes. Alternatives to closure of under-utilised or under-performing
assets should be considered.
The primary stages for an agency to manage the asset disposal implications of the Strategic Asset
Plan are:
1. to evaluate surplus assets for potential disposal;
2. to implement the disposal process; and
3. to review the effectiveness of the disposal process.
Further guidance on asset disposal processes is available from the Asset Disposal Policy.

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STRATEGIC ASSET MANAGEMENT FRAMEWORK

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Contacts
Further information is available from the following sources:

Issue

Contact

General Queries

Assistant Director
Asset Planning and Management
Department of Treasury and Finance
(08) 9222 9380

Budget Formulation and Monitoring

Agency Resources
Department of Treasury and Finance
Reception - (08) 9222 9336

Building Procurement

Evaluation and Risk Management Branch


Department of Housing and Works
(08) 9440 2256

Asset Disposal

Land Asset Management Services


Department for Planning and Infrastructure
(08) 9216 8911

Department of Treasury and Finance


Government of Western Australia

ISBN 0 7307 4535 X