ARBA MINCH UNIVERSITY

INSTITUTE OF TECHNOLOGY
Faculty of Civil Engineering
MSc in Construction Technology and Management

Course: Asset Management

Code: CoTM 7071

Prepared by: Hiwot Tsegaye (PhD)

 CONTENT
2. Types of Assets and Asset Management
2.1. Asset management for tangible assets
2.2. Asset management for intangible assets
2.3. Hard and soft infrastructure
Introduction 3. Life Cycle of Asset Management
1.1. Assets and Asset Management 3.1. Asset Management Maturity
1.2. Types of Assets and Asset Management 3.2. Asset Life Cycle Management
1.3. Life Cycle of Asset Management 4. Challenges, Criticality and Risks
1.4. Benefits of Asset Management 4.1. Challenges in Asset Management
4.2. Criticality and Risk Analysis
 CONTENT

5. Asset Depreciation
5.1. Asset Depreciation
5.2. Compute Asset Depreciation Expenses
6. Asset Management Plan
6.1. Prepare Asset Management Plan
6.2. Framework of Integrated Asset Management Plan
7. Sustainable Asset Management
7.1. Major Concepts of Sustainability
7.2. Major Factors for the Success or Failure of Asset Management
7.3. Work for Sustainable of Asset Management
8. Best Practices in Building Asset Management
8.1. Experiences of Different Study Areas
8.2. Transportation Oriented Asset Management Focusing on the Transit Management and Highway
8.3. Lessons from Experiences
 INTRODUCTION

• What is asset ?
• Asset Management ?
 INTRODUCTION

What is asset ?
• An asset is anything that delivers value to its owner and the
stakeholder(s) it serves.
E.g.
Stocks, bonds, residential properties, and commercial office
buildings
CLASSIFICATION OF ASSETS
 CLASSIFICATION OF ASSETS
1. Convertibility: Classified as either current assets (short-term) or fixed assets (long-term).
 Current Assets: Current assets are assets that can be easily converted into cash and cash
equivalents
• Current assets are also termed liquid assets and examples of such are:
• Cash: Cash assets include the cash you have on-site and the total amount of money in all
of your bank accounts, certificates of deposits and prepaid expenses.
• Mutual funds: This account consists of money from various investors and is part of a
portfolio of mixed assets.
• Money market account: This is a low-risk savings account that pays interest.
• As a significant part of the world’s financial system, it’s an investment of short-term
debt wherSe shares sell for about $1 each.
• Marketable securities: These may include equity that you can liquidate, treasury bills
and stocks.
 CLASSIFICATION OF ASSETS

• Accounts receivable: Accounts receivable are payments clients owe you for
products you sold or services you rendered.
• These are short-term assets because you can collect the money within a
year.
• Goods and products: These can be items you or a business own or your
current inventory of products you haven’t sold.
• These also are short-term assets.
• Supplies: Supplies can include office equipment, such as paper products,
and manufacturing supplies, such as wood, textiles and plastic.
• Promissory Notes: This is an official document that’s signed and includes a
written promise to pay back a sum of money to a specific person on a
specific date or demand.
 CLASSIFICATION OF ASSETS
Fixed or Non-Current Assets
• Non-current assets are assets that cannot be easily and readily converted
into cash and cash equivalents.
• Non-current assets are also termed fixed assets, long-term assets, or hard
assets.
• Fixed assets, or capitalized assets, are the tangible assets of a company.
• These help companies produce goods or provide services that result in
future income.
• You can’t convert these assets quickly to cash or use them to cover daily
expenses.
• Accountants consider fixed assets as long-term tangible assets you keep for
long periods and that often depreciate.
 CLASSIFICATION OF ASSETS
Fixed or Non-Current Assets
• You typically sell fixed assets only if there’s an emergency and they’re more
profitable than your current assets.
• Fixed assets can be freehold fixed assets or leasehold fixed assets.
• The owner legally holds freehold fixed assets, meaning no other entity
has an ownership claim to them.
• Leasehold fixed assets are assets a borrower leases for a specific time,
and an owner may or may not renew them
 CLASSIFICATION OF ASSETS
o Fixed assets include:
• Buildings and land: This is any property or land a business purchases and
owns.
• Machinery: Are any machines help produce goods that bring in revenue,
making them assets.
• Vehicles: Any vehicles, including work trucks and cars, a company
provides to its also are fixed assets.
• IT equipment: This includes computers, servers, routers and other related
equipment a company owns.
 CLASSIFICATION OF ASSETS
2. Physical Existence
If assets are classified based on their physical existence, assets are classified as either tangible
assets or intangible assets.
o Tangible assets
• Tangible assets are ones you can touch, feel or see.
• Meaning they’re any physical or measurable items a company uses for its operations.
• These assets often provide a way for a business to operate. Some common examples of
these include:
• Machinery
• Buildings
• Equipment
• Cash
• Supplies
• Land
• Inventory
 CLASSIFICATION OF ASSETS
o Intangible assets
• Intangible assets are non-physical assets of a company that add to its value.
• Because of their nature, these assets can be more difficult to assign a
monetary value to, but they also can be more valuable than tangible assets.
These assets can include:
• Intellectual property
• Patents
• Copyrights
• Goodwill
• Brand equity
• Logos
• Trademarks
• Customer lists
• Business licenses
 INTRODUCTION
3. Usage: assets are classified based on their usage or purpose, assets are classified as
either operating assets or non-operating assets.
 Operating Assets
• Operating assets are assets that are required in the daily operation of a business.
• These are used to generate revenue from a company’s core business activities Examples
of operating assets include:
• Cash
• Accounts receivable
• Inventory
• Building
• Machinery
• Equipment
• Patents
• Copyrights
• Goodwill
 INTRODUCTION
 Non-Operating Assets
• Non-operating assets are assets that are not required for daily business operations but can still
generate revenue. Examples of non-operating assets include:
• Short-term investments
• Marketable securities
• Vacant land
• Interest income from a fixed deposit
 INTRODUCTION

Asset Management ?
• Asset management is the process of planning and controlling the
acquisition, operation, maintenance, renewal, and disposal of
organizational assets.
• This process improves the delivery potential of assets and minimizes the
costs and risks involved.
• Adequate maintenance and proper deployment of systems, people, and
processes ensure a positive enhancement of capital over the asset lifecycle.
 INTRODUCTION

Asset Management is
• Management paradigm and body of management practices
• Applied to the entire portfolio of infrastructure assets at all levels of the
organization
• Seeking to minimize total costs of acquiring, operating, maintaining, and
renewing assets…
• Within an environment of limited resources
• While continuously delivering the service levels customers desire and
regulators require
• At an acceptable level of risk to the organization
 INTRODUCTION
Types Asset Management
• Asset management vastly classified into three types: physical, financial, and contractual.
• Physical asset management :
• Stands for the process of handling things like fixed asset management, inventory
management, infrastructure, and public asset management.
• Financial asset management :
• Refers to the process of managing procurement, developing an investment strategy,
controlling budget and costs, handling cash, bonds, and stocks.
• Contractual compliance:
• Streamlines processes like IT asset management, digital asset management, contractual
maintenance, and management of intangible assets.
 BENEFITS OF ASSET MANAGEMENT

 Extending asset life and assisting in rehabilitate/repair/replacement decisions

through efficient and focused operations and maintenance.
 Meeting consumer demands with a focus on system sustainability.
 Setting rates based on sound operational and financial planning.
 Budgeting focused on activities critical to sustained performance.
 Meeting service expectations and regulatory requirements.
 Improving response to emergencies.
 Improving security and safety of assets.
 ASSET LIFECYCLE MANAGEMENT

• Asset lifecycle management is a strategic and analytical approach used to determine each
stage of an asset’s life cycle to maximise operational efficiency and generate a greater
overall return on investment.
• Is the process of understanding, improving, and learning from the asset life cycle.
• It is a set of rules put in place from the collection and analysis of asset data to help improve
the way a business purchases, uses, and disposes of its assets.
• The asset lifecycle can be broken down into four stages:
• Planning :
• Procurement/Acquisition :
• Operation and Maintenance :
• Disposal/Archive:
ASSET LIFECYCLE MANAGEMENT
 BENEFITS OF ASSET MANAGEMENT

Asset management is an important service for many corporations that invest as a

means to improve their cash flow and develop opportunities for internal
investments. This can help them improve their information technology
infrastructure, upgrade their workplace or reinvest the funds into their
employees to promote growth. Because of an increase in online brokers, asset
management is a concept that’s growing more accessible for the public, giving
companies of all sizes the ability to take part in it to improve profits.
This concept also allows businesses to better monitor their assets, which can help
keep them in better condition and encourage growth. This can lead to them
being able to make better financial decisions because it allows them to align their
policies and directions with their assets, giving finance professionals a better
understanding of a business’s financial health. Other benefits of asset
management include:
 BENEFITS OF ASSET MANAGEMENT

• Asset management is an important service for many corporations that invest as

a means to improve their cash flow and develop opportunities for internal
investments.
• This can help them improve their information technology infrastructure,
upgrade their workplace or reinvest the funds into their employees to promote
growth.
• Allows businesses to better monitor their assets, which can help keep them in
better condition and encourage growth.
 BENEFITS OF ASSET MANAGEMENT

• Other benefits of asset management include:

 Ensure compliance: Tracking your assets, whether digitally or manually can improve a
company’s organization and record-keeping.
• This can allow it to locate its investment information more quickly during reporting
periods and ensure asset managers account for everything.
 Reduce loss: Similarly, implementing a process to monitor assets can help a company find
any flaws in its reporting system and avoid loss, whether as a result of expiring inventory
or a depreciating infrastructure.
 Simplify audits: Proactively managing your assets throughout the year can reduce the
effort it takes to verify your investment information and the time it takes to gather the
information for outside parties.
 Save on costs: Using asset management can help a company minimize life cycle costs,
which may reduce its maintenance and operating costs. This also can help a company
analyze its cost patterns to determine areas where it can be more efficient.
BENEFITS OF ASSET MANAGEMENT

Chapter TWO
2.0 Types of Assets and Asset Management
2.1. Asset management for tangible assets
2.2. Asset management for intangible assets
2.3. Hard and soft infrastructure
 ASSET MANAGEMENT FOR TANGIBLE
ASSETS
What are Tangible Assets?
• Tangible assets are assets with a physical form and that hold value. Examples
include property, plant, and equipment
• Tangible assets are seen and felt and
• They can be destroyed by fire, natural disaster, or an accident.
 CHARACTERISTICS OF TANGIBLE ASSETS

• They come in physical form, which means they can be seen, felt, or touched.
• They are depreciated over a period of time.
• They possess a scrap or residual value
• They can be used as collateral to obtain loans.
• They are used in the daily operations of the business.
 VALUING TANGIBLE ASSETS

• Asset valuation simply pertains to the process to determine the value of a

specific property.
• Tangible asset valuation is the assessment of a company’s physical property to
determine economic value.
• Tangible assets can include working capital, land, buildings, and real (or
“business personal”) property like machinery and equipment.
• These assets require annual appraisals for property tax purposes, as well as in
the event of a merger or acquisition.
 Methods for Valuing tangible assets
1. Appraisal method
2. Liquidation method
3. Replacement cost method
 VALUING TANGIBLE ASSETS METHOD

1. Appraisal method
• Under the appraisal method, an appraiser is hired to determine the true fair market value
of a company’s assets.
• The asset appraiser will assess the current condition of the assets, including the degree
of obsolescence and level of wear and tear.
• Then, the appraiser will compare these values to the values such assets can fetch in the
open market.
2. Liquidation method
• The assets can be converted into cash.
• Thus, it is important for a company to know the minimum value it would receive from a
quick sale or liquidation.
• An assessor is hired and determines the value that an sale house, equipment seller, or
other bulk asset buyers would be willing to pay for such categories of assets as those
owned by the company.
 VALUING TANGIBLE ASSETS METHOD

3. Replacement cost method

• An insurer generally uses the replacement cost method to calculate the value of
the asset for insurance purposes.
• It helps to determine how much it would cost to replace the asset.
 ASSET MANAGEMENT FOR INTANGIBLE
ASSETS
• What are Intangible Assets?
• Intangible assets lack a physical form or do not possess a physical existence.
• In other words, intangible assets cannot be felt or touched.
• Intangible assets are regarded as long term assets that are useful for the
business over a period of more than one accounting period.
• In other words, intangible assets generate revenue for the business across
accounting periods.
• Intangible assets consist o things such as intellectual property, trademarks,
patents, etc
 ASSET MANAGEMENT FOR INTANGIBLE
ASSETS
Types of Intangible Assets
1. Identifiable intangible assets
• The identifiable intangible assets are referred to as those assets that can be sold by the
business and can also be separated from the business.
• The example of such intangible assets are trademark, patent, copyrights, etc.
2. Unidentifiable intangible assets:
• The unidentifiable intangible assets are referred to as those assets that cannot be
physically separated from the business.
• Asset that can't be bought or sold because they only exist in relation to the company.
• The example of such an asset are reputation, client relationships, goodwill, and brand
recognition.
 CHARACTERISTICS OF INTANGIBLE ASSETS

• These assets do not have a physical existence.

• These assets cannot be used as a collateral for obtaining loans for business
expansion.
• Intangible assets are amortized (except goodwill) over the useful life of an
asset.
• Are long-term in nature,
• Are non-monetary assets.
 IMPORTANT OF INTANGIBLE ASSETS

• Despite their lack of physical presence, intangible assets are valuable.

• Here are some of the key reasons why they are so important and what businesses can
expect from their useful lives.
1. Creates a Open market Edge
• Patents, trademarks, and copyrights can all lend themselves to the creation of a sense of
exclusivity.
• While this distinction in the mind of consumers gives competitors significant incentive
to “poach” on a company’s intangible assets
• Robust (strong/healthy) intellectual property protections often make it possible to defend
these assets through legal mechanisms, including litigation against violation if
necessary.
• An experienced intellectual property (IP) attorney may be able to advise you on the IP
protections available to protect your company’s intangible assets.
 IMPORTANT OF INTANGIBLE ASSETS

2. Boosts Brand Recognition and Reputation

• A strong brand helps companies to attract customers, increase sales, and command
premium pricing.
3. Builds Customer Lists and Relationship
• Customer lists, databases, and established customer relationships are considered
intangible assets.
• The useful life of these assets can vary significantly based on factors like
• Customer loyalty,
• Industry dynamics, and
• Changes in consumer preferences.
 IMPORTANT OF INTANGIBLE ASSETS

4. Utilizes Modern Software and Technology

• Software programs, computer code, and technology-related intangibles can have useful
lives that vary depending on the rapid pace of technological advancements.
• Upgrades and obsolescence can impact the value and useful life of these assets
• For this reason, direct-to-consumer businesses often opt for a subscription model when
their intangible assets are a significant portion of what they actually sell;
• Rather than selling a single, fixed version of a program or digital record, they lease
access to regularly updated versions that keep pace with hardware innovations and
shifts in cultural and economic expectations.
5. Increases the Opportunity for Contracts and Licenses
• Long-term contracts, licensing agreements, and franchise agreements can be examples
of intangible assets.
• The useful life of these assets typically corresponds to the duration of the contract or
license agreement.
 DETERMINING THE USEFUL LIFE OF
INTANGIBLE ASSETS
• The useful life of intangible assets can be challenging to determine since it often depends
on shifting combinations of internal and external factors.
• Companies assess the useful life of their intangibles periodically and may need to adjust
them based on
• changing circumstances,
• market conditions, or legal considerations
 WHAT IS THE MOST IMPORTANT
INTANGIBLE ASSET?
• Intellectual property is widely recognized as the most valuable class of intangible assets.
• These creations of the mind are used in business, as per the World Intellectual Property
Organization.
• There are four primary classifications of intellectual property:
• Trademarks
• Trade secrets
• Patents
• Copyrights
 HOW TO VALUE INTANGIBLE ASSETS

Prior to valuing determining the value of your company’s intangible assets.

1. Understand what is company’s intangible asset: The intangible assets include intellectual
property, brands, trademarks, patents, non-compete agreements, customer lists, and the rest.
2. Hire an expert It is a good idea to hire an expert evaluator or appraiser to determine your
company’s value.
• This will remove the possible dispute between the business owner and the potential buyer.
• The appraiser or evaluator you are hiring should know your industry.
 HOW TO VALUE INTANGIBLE ASSETS

3. Understand the process

• The evaluator or appraiser gets the whole company’s value during valuation.
• The value established covers the value of all your intangible assets and the tangible ones.
• One of the standard methods used is calculating a multiple EBITDA, (earnings before
interest, taxes, depreciation, and amortization)
• EBITDA is a parameter for determining the earnings a company can generate.
• The suitable multiple of your company has many factors that it depends on, such as market
conditions and growth prospects.
• The value of your company’s intangible assets is gotten from removing the net assets value
that appears on the balance sheet from the business’s overall value.
• The remaining is commonly called goodwill.
 HOW TO VALUE INTANGIBLE ASSETS

4. Do a particular valuation
• The evaluator you hired can find the value of your intangible assets and choose one
method out of others for the valuation.
• He can choose from the methods, including the royalty method, the excess earnings
method, and the cost method.
 THE BUSINESS PURPOSES OF INTANGIBLE
ASSETS
Boost Business
• Strong brands, innovative technologies, or exclusive intellectual property rights can all
increase a company’s marketability, draw new customers, and build a devoted clientele.
Increase Revenue
• These resources support in generating income.
• An individual or business can also profit by licensing intellectual property, such as patents
or copyrights.
• Additionally, strong and well-recognized brands can command higher pricing for their
products or services, increasing their profitability.
 THE BUSINESS PURPOSES OF INTANGIBLE
ASSETS
Offer Security
• The availability of relatively strong protections for many types of intellectual property
classed as intangible assets means that companies can defend these types of assets
aggressively through legal channels.
• This can sometimes make it possible to preserve intangible assets from depreciation to a
degree, and over a period of time, that is rarely practical for physical items that require
secure storage, locks, and keys.
Provides Investment Opportunities
• A major element in increasing a company’s request to potential investors is the possession of
valuable intangible assets.
• These resources reveal a business’s long-term potential and competitive advantage, which
investors highly value.
• Strong intangible assets can significantly boost a company’s perceived value and
stability, which attracts investors and may result in more funding or a favorable
valuation.
 HARD AND SOFT INFRASTRUCTURE

• What is infrastructure?
• What is Hard and soft infrastructure
 HARD AND SOFT INFRASTRUCTURE

• Infrastructure is defined as the basic physical systems of a business, region, or nation and
often involves the production of public goods or production processes.
• Examples of infrastructure include
• Transportation systems,
• Communication networks system
• Sewage system
• Water system
• School systems
• Infrastructure is categorized as
• Hard infrastructure
• Soft infrastructure.
 HARD AND SOFT INFRASTRUCTURE

“Hard” infrastructure
• Refers to the large physical systems and networks required for a modern, productive, and
industrialized nation to function.
• A few examples of hard infrastructure that impact common citizens, businesses, and
governments alike include telecommunications, transportation, energy, and water
supply and sanitation services.
• Systems such as roads, bridges, and airports, as well as the assets used to make them
function, such as vehicles, public transit buses, and aircraft,
Soft infrastructure
• Refers to all the institutions which are required to maintain the economic, health, and
cultural and social standards of a country
• A few examples of Soft infrastructure are financial system, education system, health
care systems, System of government, and law enforcement, as well as emergency
services.
 CHAPTER THREE

Life Cycle of Asset Management

3.1. Asset Management Maturity
3.2. Asset Life Cycle Management
 CONCEPT OF ASSET MANAGEMENT
MATURITY
• Asset management maturity is an organization ability towards predict and respond to its
environment by managing its asset whereas continuing to meet the needs of its stakeholders
(Asset Management Council, 2014)
• Asset management maturity is an organizational assurance, capabilities, performance and
ongoing to fit its aim to meet the present and future needs of its stakeholders, that include
the organization ability to foresee and respond to its operating context.
• In an asset management maturity, it requires an organization to deliver outcomes such as
customer satisfaction, safety, assurance and profit with the resource’s allocation within the
appropriate delivery period.
• It’s the dynamic process which is able to answer both the stakeholder and business
environment changing in a way an organization will be compatible with other functions
(AMBoK)
• Asset Maturity management also means a degree to which asset management is coordinated
and integrated into an organization.
 CONCEPT OF ASSET MANAGEMENT
MATURITY
As described by AMBoK (2014) an asset management maturity can be seen as;
a) Organizational elements set; which include structuring, governance, and
business asset structured.
b) Maturity lenses selection that focusses on and asset management analyzation
in all four companies’ components.
• These maturity lenses are used to evaluate asset management important
aspects.
c) The set of qualities which help the organization in the description of the
essential nature of the asset managfour companies’ componentsement maturity.
 PRINCIPLES OF ASSET MANAGEMENT
MATURITY
The following principles apply to Asset Management maturity:
a) Consideration must be given to the capabilities of an organisation across the Asset
Management Landscape, including the integration of these capabilities to achieve the
organization's objectives
b) Consideration must be given to the performance and value that an organisation is
delivering to its stakeholders, including the achievement of the organisation’s objectives;
c) Consideration must be given to the extent to which the Asset Management System is
embedded and integrated with other business systems and processes;
d) Consideration must be given to these perspectives: Assets, Processes (Structured),
Governance (Assurance) and Culture (Structuring)
e) Asset Management maturity is not the same as complexity, for example, a simple solution
may be a mature solutions for certain organisations or operating contexts;
f) Asset Management maturity can be measured on a scale with defined bands and and
assessment results should be time-limited.
 PRINCIPLES OF ASSET MANAGEMENT
MATURITY
• g) Moving through the lower maturity bands can be characterized as becoming more process
aligned, disciplined and integrated.
• The degree to which this is achieved can therefore be assessed in terms of conformance
with management system requirements such as ISO 55001:
• moving through the high maturity bands will be assessed using more holistic,
proportionate and ‘behavioural’ characteristics;
h) Whilst the requirements for ISO 55001, which defines ‘good practices’ in a management
system, may remain relatively stable, best practices in Asset Management will continually
evolve.
• Definitions and maturity bands will need to reflect this;
i) Best practices may be context, industry, culture and stakeholder specific; and
ii) Past maturity assessments may not be a reflection of current maturity due to this evolution
of best practices.
• Assessments are therefore be less dependable as time passes and assessment results
should be time-limited.
 BENEFITS OF ASSET MANAGEMENT
MATURITY

a) A clear, staged path for improving Asset Management;

b) More objective demonstration of existing capabilities, competencies and progress;
c) Helps in setting realistic targets and improvement objectives;
d) Provides consistent language with which to discuss strengths and weaknesses in asset
management; and
e) Enables benchmarking, even between organisations managing different assets in different
operating environments.
 OVERVIEW OF MATURITY MODEL

• Maturity model can be seen as features, indicators, and attributes collection or

patterns which indicate an ability and sequence in a particular displine (Rea-Guaman
et al., 2017).
• Therefore, maturity model provides a reference point for an organization to evaluate
its existing activities, procedures and methods at a level and establish objectives and
priorities for improvement.
• Generally speaking, maturity models (MMs) are structured to determine maturity
based on more or less a set of parameters, together with competency, capability and
complexity.
• MMs was developed to assist administrations by way of basis for evaluation and
comparative degree for organizational enhancement (de Bruin et al., 2005).
• MMs described a specific entity evolution in the organizations over time, so that
organizations recognize the types of activities in each area and wish in achieving
potential results.
 OVERVIEW OF MATURITY MODEL

• It is also argued that MMs are normative and informative, and not prescriptive.
• This defines any degree of maturity, without prescribing how to get there
(Tapia, 2009).Röglinger, (2012) mentioned that the organization capabilities
assessment in application domain can be analyzed easily using maturity model.
Several methods of maturity process can be form via these logical paths.
• In the maturity model, organizational capabilities assessment both in the
process and specific application domain are indicated through the maturity
level.
• In a situation where an organization aimed to achieve higher maturity level,
maturity model can be used to assess its maturity level and the result can be
use as reference (White,2011)
 NEED FOR A MATURITY MODEL FOR
INFRASTRUCTURE ASSET MANAGEMENT
• To improve infrastructure asset management capability from an immature
process to a continuous improved or optimised (mature) process.
• To improve infrastructure asset management outcomes and deliver value for
money
• Enable an organization as an owner of infrastructure
• To identify what practices should be prioritised and what actions are needed
• To improve the organisation’s “as-is” position
• In order to ensure infrastructure delivery and lifecycle (service life)
management produce successful infrastructure project outcomes which are
sustainable and realize value for money.
 TYPES OF MATURITY MODEL

•
Mehravari (2014) consider that the types of maturity model are of three
categories;
• Progression maturity models,
• Capability maturity models and
• Hybrid maturity models
 PROGRESSION MATURITY MODELS (PMM):

• This refers to simple succession or scaling of an attribute, prototype, follow

or characteristic
• (mehravari, 2001). In PMM level
• Explain the upper states of accomplishment, progression, completeness, or
advancement.
• Higher levels can be described as "tool-enabled" while lower levels can be
described as "primitive"
 CAPABILITY MATURITY MODEL:

•
The Carnegie Mellon University developed the first Capability Maturity model (CMM)
(Paulk et al., 1993).
• It was used as a tool for assessing contractors' abilities which operated for the department of
defense US. Capability maturity model has evolved from an appraisal method for software
processes to other areas, such as human resources, systems engineering and acquisition of
software
• it can be viewed as a set of structured guidelines describing in what way different domains
of an organization can be contributed to a set of organization predetermined outcomes
• (Volker et al.,2011)
• The benefit of the Capability Maturity Model as defined by Mehravari (2001) includes;
• Allows for core competency estimation,
• Provides detailed capability measurement and
• Provides a route to quantitative estimation.
CAPABILITY MATURITY MODEL:
 HYBRID MATURITY MODEL:

• This model can be formed through the overlay of progressive model features with capability
characteristics from capability maturity models (Saco,2008).
• Smart Grid Interoperability Maturity Model (SG-IMM) and Electricity Sub Sector
Cybersecurity Capability Maturity Model (ESC2M2) are examples of hybrid maturity
models (Saco, 2008).
• It reproduces conversions amongst level which are similar to a capability model but
architecturally use the patterns, features, attributes, or progression model indicators
(Caralli, Knight, and Montgomery, 2012).
• Among the advantage of the hybrid maturity model is that, while picking up the ease of use
and clarity of the progression models, it provides the thoroughness of a capability maturity
model
(Caralli et al. 2012).
• While the disadvantage of this model as identified by Mehravari (2001) includes "Maturity“
theory is approximated (i.e., not as accurate as CMM) and the combination of qualities at
each stage with institutionalizing uniqueness may be unreasonable.
 THE MATURITY MODEL FOR
INFRASTRUCTURE
• Asset Management comprises five levels of maturity ranging from immature
practices to mature practices
• Level 1: ad-hoc - an improvised process capability;
• Level 2: basic - a basic, disciplined process capability;
• Level 3: structured - a fully established and institutionalized process capability;
• Level 4: integrated - a level characterised by full integration with other
organizational processes resulting in synergistic benefits; and
• Level 5: optimized level - processes focus on continuous improvement and
adoption of lessons learned and best practices
Eg. DESCRIPTIONS OF THE BOOK ENDS OF THE
MATURITY MODEL
 ASSET LIFE CYCLE MANAGEMENT

• Asset lifecycle management is a technique of asset management where facility

managers maximize the usable life of assets through planning, purchasing,
using, maintaining, and disposing of assets.
• The main aim of asset life cycle management is to reduce costs and increase
productivity.
• Since tracking assets’ life cycles with the appropriate software enables a
constant data supply, organizations invest in asset life cycle management.
• It improves responsibility while facilitating on-time equipment maintenance and
planning.
ASSET LIFE CYCLE MANAGEMENT
 ESSENTIAL PHASES OF ASSET LIFE CYCLE
MANAGEMENT
1. Planning
• When current assets cannot satisfy the needs of your business, planning for new assets is the first stage of
its life cycle.
• Your procurement team may collaborate with several departments to identify unique needs.
• When buying an asset, consider budgetary restrictions as the main concern should be whether it will meet
the organization’s needs.
2. Acquiring
• The next stage is to purchase the asset after you’ve identified your requirements.
• This entails doing market research on many suppliers and selecting the one that offers the best equipment at
an affordable price.
• Deployment involves assembling, testing for any problems and checking for flaws, which are also a part of
the acquisition step.
• After installing the asset, the maintenance team determines whether it requires replacement parts.
• The spare parts for the asset should fit within your inventory. Perform additional testing after you deploy
the asset to ensure it functions properly.
• Train your personnel on using and maintaining the asset.
 ESSENTIAL PHASES OF ASSET LIFE CYCLE
MANAGEMENT
3. Using
• This stage involves the initial use of the asset before any maintenance.
• During this point, you put the asset to use as intended, anticipating the production to
boost your organization’s profitability.
• It’s vital to remember that although you should start planning before acquiring an asset, it
continues during this phase for the asset’s life cycle and maintenance.
• Numerous factors affect how long an object may operate without needing initial
maintenance.
• These factors include the asset’s kind, frequency of usage, complexity, availability of the
organization’s maintenance resources and maintenance strategy
4. Maintaining
• A new asset enters the maintenance stage of its life cycle once it needs its first
maintenance task.
• Preventive and reactive maintenance are the two categoriesmaintenance
 ESSENTIAL PHASES OF ASSET LIFE CYCLE
MANAGEMENT
3. Using
• This stage involves the initial use of the asset before any maintenance.
• During this point, you put the asset to use as intended, anticipating the production to
boost your organization’s profitability.
• It’s vital to remember that although you should start planning before acquiring an asset, it
continues during this phase for the asset’s life cycle and maintenance.
• Numerous factors affect how long an object may operate without needing initial
maintenance.
• These factors include the asset’s kind, frequency of usage, complexity, availability of the
organization’s maintenance resources and maintenance strategy
4. Maintaining
• A new asset enters the maintenance stage of its life cycle once it needs its first
maintenance task.
• Preventive and reactive maintenance are the two categories maintenance
 ESSENTIAL PHASES OF ASSET LIFE CYCLE
MANAGEMENT
Preventive Maintenance
• Preventive maintenance helps you avoid machine breakdown and production delays .
• Computerized maintenance management system (CMMS) software eases preventive
maintenance scheduling with precision and consistency
To keep assets in top shape, preventive maintenance programs comprise a list of tasks. A few
typical examples include:
• Lubricating machine parts
• Replacing furnace filters
• Changing the oil in a service vehicle
• Painting a building’s wall
 ESSENTIAL PHASES OF ASSET LIFE CYCLE
MANAGEMENT
Reactive maintenance : Corrective Maintenance and Emergency Maintenance
• Corrective Maintenance
• You perform corrective maintenance when an asset experiences a problem,
• its goal is to fix the issue and restore the asset’s proper operation.
• This is the most prominently used form of maintenance because you carry
out the corrective repair as needed, regardless of how intricate a maintenance
team’s plan is.
Emergency Maintenance
• When an asset completely breaks down and you must fix the problem
immediately, it is called emergency maintenance.
• A task that is part of emergency maintenance may eliminate a threat to safety
or prevent harm to a machine, product or structure.
 ESSENTIAL PHASES OF ASSET LIFE CYCLE
MANAGEMENT
5. Disposing
• Disposing of the asset represents the final phase of the asset’s life cycle.
• When a fixed asset reaches the end of its useful life, disposal occurs as part of the asset’s
life cycle.
• The type of asset and the material it is made of will determine whether it should be
recycled or discarded.
• Before you dispose of an asset, you may be able to repurpose it in several sectors.
• Repurposing of production assets doesn’t take place very frequently, however.
• When you replace an asset, the life cycle restarts with the new asset.
• Determining whether your company can upgrade to a better product while reducing costs
is always a good idea at this point.
 ESSENTIAL PHASES OF ASSET LIFE CYCLE
MANAGEMENT
5. Disposing
• Disposing of the asset represents the final phase of the asset’s life cycle.
• When a fixed asset reaches the end of its useful life, disposal occurs as part of the asset’s
life cycle.
• The type of asset and the material it is made of will determine whether it should be
recycled or discarded.
• Before you dispose of an asset, you may be able to repurpose it in several sectors.
• Repurposing of production assets doesn’t take place very frequently, however.
• When you replace an asset, the life cycle restarts with the new asset.
• Determining whether your company can upgrade to a better product while reducing costs
is always a good idea at this point.
 IT ASSET LIFE CYCLE MANAGEMENT

• Maintaining track of all the devices inside a business would be difficult without IT asset
documentation and management.
• IT asset life cycle management involves keeping track of a resource from when you acquire
it to when you retire it.
• This entails monitoring and keeping track of the item and making sure employees use, secure
and dispose of it when it is no longer required.
• It can also assist in lowering the cost of maintaining and upgrading assets.
Primary Benefits
IT asset lifecycle management offers many benefits, such as helping organizations make
informed decisions, increased efficiency and productivity, and reduced co
 BENEFITS OF PERFORMING IT ASSET LIFE
CYCLE MANAGEMENT
Improve Business Outcomes
• To improve business outcomes, IT teams can ensure that the organization’s technology aligns with its
strategic objectives.
Increase Efficiency
• Creating a strategic asset management life cycle plan can also improve the efficiency of your IT
department.
• IT personnel can save time by automating crucial procedures like software upgrades and asset management
so that they can focus on more important responsibilities.
Reduce Costs
• Cost savings are another vital advantage of good IT asset lifecycle management.
• IT professionals may make more informed judgments about when to upgrade or replace assets since they
have better insight into their equipment.
• As a result, your company can spend less on unneeded upgrades and asset replacement.
Raise Productivity
• When manufacturers correctly design assets and you properly maintain them, they can function smoothly
and increase user productivity.
 BENEFITS OF PERFORMING IT ASSET LIFE
CYCLE MANAGEMENT
Minimize Risk
• Managing IT assets’ life cycles can also help lower risk.
• You can prevent the loss or theft of expensive equipment by keeping track of assets and knowing where
they are.
• Additionally, by keeping up with asset maintenance, you can lower the chance of data breaches and other
security issues.
Enhance Decision-making
• Results in better decision-making.
• You can choose which assets to invest in and how to use them most effectively by having visibility into all
assets
• This results in enhanced resource management and general improvement in outcomes.
Maintain Compliance
• Improves your ability to adhere to legal requirements.
• For instance, laws and regulations govern data management and storage protocols in many different
businesses.
• By monitoring assets and being aware of where they are, you may ensure that you’re abiding by these
requirements.
 4.0 CHALLENGES, CRITICALITY AND RISKS

4.1. Challenges in Asset Management

4.2. Criticality and Risk Analysis
 CHALLENGES IN ASSET MANAGEMENT

• Improper management of your fixed assets can cost you dearly in the form of
inefficiencies that lead to
• Delays,
• Dissatisfied customers,
• Long closing of quarterly or annual books,
• Audit risks,
• Non-compliance, and more.
• The larger the organization, say, one with hundreds of assets in multiple locations the
more daunting the task becomes
• Asset management is a challenge for many construction companies, mainly because
construction isn’t exactly data-driven.
• To manage equipment properly, you have to rely on data and find a way to gather it in real
time.
 CHALLENGES IN ASSET MANAGEMENT
1 Manual Errors and Inefficiencies
• Manual management and tracking of assets through their lifecycles
including procurement, transfer, disposal, maintenance, additions, and more, is time-
consuming and tense with the possibilities of errors.
• This can cause you to miss deadlines for closings, and overworked, overburdened staff
• Data manipulation, planning taxes, performing settlements, etc. can strain your resources substantially.
2. Lack of Visibility: Is one of the biggest asset management problems.
• It is likely that you simply don’t know what you have or how functional it is.
• It probably also takes you a long time to even notice that a piece of equipment has gone
missing, and you can never pinpoint exactly when or who last had it.
• This type of practice might keep you afloat for a while, but eventually, you’re going to crack
under pressure.
• You’ll be wasting money on the depreciation of assets you don’t own, repairing equipment
you’re better off selling, underservicing machinery, and thus lowering its expected lifespan.
• You cannot make intelligent decisions with regard to your assets if you don’t have a clue
about what you already have, and where it is located.
 CHALLENGES IN ASSET MANAGEMENT
3. Sharing Data Across the Organization: Lack of Integration Between Systems
• The lack of information sharing is a pain point in construction asset management
• With manual and paper-based systems, or outdated software, it is very difficult to share
important tax information across the whole organization.
• In today’s competitive business environment, it is critical that there is crystal clear visibility
among departments in real-time.
• Many companies still don’t tag and track equipment, which stops them from accessing relevant
data such as maintenance stats, availability, and utilization on time.
• If you don’t know who, if anyone, is using a machine, you’re wasting money.
• With tracking software, you’d simply use the keyword ‘crane’ in your app to see how many
you have, which ones are currently available, and when the remaining ones will be available
next.
• You could also reserve these cranes for the managers in question so nobody else could check
them out on those dates.
 CHALLENGES IN ASSET MANAGEMENT
4. Maintaining Robust Controls :Today, fixed asset management is a lot more than just ensuring
compliance
• They have to be a vital element of your strategy to maintain effective operations, and be
efficient and reliable in your financial reports.
• Proper asset management helps decrease the number of equipment service issues.
• For one, having all the manuals and specifications listed in the same place ensures that all of
your maintenance specialists, no matter how inexperienced, know what to check.
• The manufacturer’s instructions usually list possible problems you might encounter with the
machine, along with the possible causes and solutions to each issue.
• Therefore, the manuals are an indispensable part of your maintenance plan and help your team
immensely.
• Having access to equipment manuals also decreases safety risks associated with maintenance.
• Each manual comes with instructions on how to perform repairs safely, as this often differs
from machine to machine.
• Allowing your team access to all manufacturer’s documentation means you’re helping them
stay safe, too.
 CHALLENGES IN ASSET MANAGEMENT
5. Minimizing Downtime
• Merely having the right equipment, machinery, and vehicles is not enough
• you need to make sure they are at peak operating condition, and minimize downtime.
• By implementing a robust asset management solution
• To reduce unexpected downtime and save costs
• ensure that you schedule all machines and vehicles for regular maintenance checks and
servicing,
• carry out minor repairs or replacements before they become big problems.
6. Obsolete Software : Software that you installed a couple of decades ago
• It may be quite inadequate for the requirements of today.
• Your legacy system may not help you maintain compliance with new regulations
 CHALLENGES IN ASSET MANAGEMENT
7. Repair Vs. Replace Decisions
• Deciding if an asset must be replaced or repaired is a common dilemma that asset managers
face.
• If you take the incorrect decision, the business can be badly affected; either because you had
to pay too much, or because you have to face the expenses caused by machine breakdown and
downtime.
• When you don’t have the correct data to evaluate and guide the managers, the decision to
repair or replace is pure guesswork – you might as well draw lots
8. Warranty leakage
• When a machine breaks down while it’s still under warranty, you may be entitled to a repair
and a replacement item at the expense of the seller.
• Of course, if you don’t keep up with warranties, you will have to fix everything at your own
expense, thus wasting money you could have saved otherwise.
• Most companies lose savings by paying for repairs the warranty should have covered or by
assuming it covers something it doesn’t
 CHALLENGES IN ASSET MANAGEMENT
9. Difficult Strategic Decision Making
• In any company’s budget, a significant portion is assigned to spends on capital assets and
equipment; this does have a substantial effect on your profitability.
• To be able to make huge decisions, like investing in new equipment requires
• access to accurate, detailed, clean, and current data across the location portfolio; only then will the
decisions be strategic and intelligent.
• It is vital that a business has proper knowledge of asset inventory, the cost per asset through
its life cycle, its service and maintenance history
• Proper asset management can help you achieve company goals faster.
• Many businesses don’t invest in managing their assets.
• Instead, they put all their money towards goals and wonder why it is not working out for
them.
• As a construction company, one of your main goals is to decrease your delay time and stay on
track with your projects.
• If the company manage his assets well and are informed of their current conditions,
utilization, and worth, it’s easy to stay on top of schedule.
 CRITICALITY AND RISK ANALYSIS

• Criticality is a risk assessment process.

• The overall risk is determined by the probability of failure and the consequence of failure.
• The assets that have the greatest probability of failure and the greatest consequences due to
failure will be the assets that are the highest risk and therefore the most critical.
• The assets that have low likelihood of failure and low consequences if there is a failure will be
the least critical assets.
• To determine which assets are critical, two questions are important:
• How likely the asset is to fail (probability of failure)
• What are the consequences if it does (consequence of failure)
 CRITICALITY AND RISK ANALYSIS

• The criticality and risk assessment (CARA) method serves as a comprehensive approach for
developing an understanding of asset criticality and risk.
• It includes a step for classifying assets based on criticality and the risk associated with
failure.
• This enables companies to apply resources towards managing the risks of the assets with the
highest ranking.
• To calculate the criticality of an asset, the probability of failure of that asset needs to be
quantified.
• Systems can quantify the probability of failure by creating a probability of failure rating
structure that includes a numeric rating as well as a description of each rating.
• One of the best ways to develop these standardized criteria is to engage a cross-section of
system personnel who have different viewpoints and different experiences with the assets.
• Staff should choose a rating scale, such as 1 to 5 or 1 to 10, and keep the descriptions broad
enough so the ratings can apply to any assets (gray and green) in the system.
• Creating these ratings does not have to be a long, time-intensive activity
 CRITICALITY AND RISK ANALYSIS

• Criticality analysis (CA) is a structured and systematic method of assessing the risk asset
failures pose to a business.
• The method is used to rank the criticality of assets relative to each other.
• This supports the implementation of targeted plant maintenance strategies proportional to the
failure’s impact.
• The structured process removes considerable subjectivity while optimizing maintenance
spending.
• It helps improve asset availability and reliability, plant safety, and equipment uptime.
What is the purpose of completing an asset criticality assessment?
• Criticality analysis is not just another maintenance tool for the engineering and maintenance
department to save money.
• It’s a strategic business process requiring involvement and input from a broad range of
company departments if it is to deliver company-wide benefits.
 CRITICALITY AND RISK ASSESSMENT
(CARA)

Note: Wipro : is an Indian multinational corporation that provides information

technology, consultant and business process services.
 CRITICALITY AND RISK ANALYSIS

• Table: Probability of failure ratingswith descriptions

 Table 2. In-depth probability of failure ratings with descriptions

Rating Descriptions
1 Asset is brand new or like new. Failure not anticipated within the foreseeable future.
2 Asset is not brand new but shows no more than cosmetic signs of wear and tear. Asset failure is not
anticipated in the near future. The asset receives regular maintenance.
3 Asset shows signs of wear but has not yet entered a potential failure state. Asset has the potential to be
maintained at a level 3 for some period of time if the proper maintenance is completed and repairs are
made. Asset may show light rust, some light wear and tear, or be nearing, but not at, physical capacity.
4 Asset is in potential failure, but not functional failure mode. Functional failure not expected within the
next year (if so, should be PoF of 5). Potential failure means the asset is showing signs of failure, such
as cracks, root intrusions, vibration, noise, excessive rust, but is still delivering all or most of the
required service. The potential failure issues will need to be addressed to prevent a functional failure.
Functional failure occurs when the asset is in one of the four failure modes.
5 Already in functional failure mode (Mortality – already broken, collapsed; Level of Service - not
doing what it’s supposed to; Capacity – not sufficiently sized; Financial Inefficiency – costing too
much to continue to use) or expected to be in functional failure mode within 1 year. A failure of one of
the four types is imminent, if the asset is not already in failure mode.
 BENEFITS OF CARA

• Enhances visibility and understanding of assets’ criticality and ranking

• Increases confidence in a roadmap to condition-based maintenance
• Optimizes deployment of resources
• Assists in establishing equipment spares strategy
• Provides input to risk management
FEATURES CARA
FEATURES CARA
 5. Asset Depreciation

5.1. Asset Depreciation

5.2. Compute Asset Depreciation Expenses
 ASSET DEPRECIATION

• Tangible assets, such as buildings, equipment, vehicles and so on, are purchased in large lump
sums.
• The value of these assets decreases over time after their purchase because of wear and tear (i.e. use
of the asset) and obsolescence.
• Depreciation represents the estimate for how much this value has declined in a given fiscal period.
• Accumulated depreciation is the total amount of depreciation of a company's assets,
• Depreciation expense is the amount that has been depreciated for a single period.
• Depreciation is an accounting entry that represents the reduction of an asset's cost over its useful
life.
• In other words, depreciation spreads out the cost of an asset over the years, allocating how much of
the asset that has been used up in a year, until the asset is obsolete or no longer in use.
• Without depreciation, a company would incur the entire cost of an asset in the year of the purchase,
which could negatively impact profitability.
Straight-line depreciation (SL)
Sum-of-years-digits (SOYD)
Declining Balance Depreciation
 ACCUMULATED DEPRECIATION

• The accumulated depreciation account is a contra asset account on a company's balance

sheet.
• It represents a credit balance.
• It appears as a reduction from the gross amount of fixed assets reported.
• Accumulated depreciation specifies the total amount of an asset's wear to date in the
asset's useful life.
• The amount of accumulated depreciation for an asset or group of assets will increase over
time as depreciation expenses continue to be recorded.
• When an asset is eventually sold or put out of use, the accumulated depreciation associated
with that asset will be reversed, eliminating all records of the asset from the company's
balance sheet
 ACCUMULATED DEPRECIATION

• Accumulated depreciation is used to calculate an asset’s net book value, which is the value
of an asset carried on the balance sheet.
• The formula for net book value is cost an asset minus accumulated depreciation.
• For example, if a company purchased a piece of printing equipment for $100,000 and the
accumulated depreciation is $35,000, then the net book value of the printing equipment is
$65,000.
Bt= $100,000 - $35,000 = $65,000.
 ACCUMULATED DEPRECIATION

• Accumulated depreciation is used to calculate an asset’s net book value, which is the value
of an asset carried on the balance sheet.
• The formula for net book value is cost an asset minus accumulated depreciation.
• For example, if a company purchased a piece of printing equipment for $100,000 and the
accumulated depreciation is $35,000, then the net book value of the printing equipment is
$65,000.
Bt= $100,000 - $35,000 = $65,000.
 6. ASSET MANAGEMENT PLAN

6. Asset Management Plan

6.1. Prepare Asset Management Plan
6.2. Framework of Integrated Asset Management Plan
 INTRODUCTION

• An Asset Management Plan (AMP) is a tactical plan for managing an organization’s

infrastructure and other assets to deliver an agreed standard of service.
• Asset Management Plan: will cover more than a single asset, taking a system
approach – especially where a number of assets are co-dependent and are required to
work together to deliver an agreed standard of service.
• Acording to International Infrastructure Management Manual, Asset Management
Plan is a plan developed for the management of one or more infrastructure assets that
combines multidisciplinary management techniques (including technical & financial)
over the life cycle of the asset in the most cost effective manner to provide a specific
level of service.
 INTRODUCTION

• Typically, existing assets have different lifecycles, which require technical and financial
experts based on the condition of each asset to determine the need for rehabilitation or
replacement.
• As such, AMPs incorporate preventive maintenance and risk management
considerations.
• The preventive maintenance considerations are to ensure that day to day wear and tear
of the assets are being dealt with to ensure the asset can reach its expected lifecycle.
• The risk management considerations ensure that administration anyhow manages the
risk of early failure of the asset through proper provisions and due diligence
 BENEFITS OF AN ASSET MANAGEMENT
PLAN
Developing an AMP has several benefits to, which include:
1. Prolonging asset life and aiding in rehabilitation, repair, revaluation and replacement
decisions through efficient and focused operations and maintenance;
2. Increased knowledge of the location of the assets;
3. Increased knowledge of what assets are critical to the utility and which ones aren’t;
4. Meeting consumer demands with a focus on system sustainability;
5. Setting rates based on sound operational and financial planning;
6. Budgeting focusing on activities critical to sustained performance;
7. Meeting service expectations and regulatory requirements;
8. Improving response to emergencies; and
9. Improving security and safety of assets
 PREPARATION OF AN ASSET MANAGEMENT
PLAN
• The responsibility of preparing an AMP lies with the management of departments in a
company.
• The key activity in the AMP is to prepare an overview of the state of all existing assets and
a strategy for their renewal and replacement, the technical and the finance
departments of the company are key players in developing the AMP.
• Once a draft AMP has been completed by these departments a top level management
meeting of at least the Chief Executive Officer and departmental heads shall be held to
discuss all issues and decide on the final version of the plan.
• The final AMP shall then be submitted to the Board of Directors for approval
PREPARATION OF AN ASSET MANAGEMENT
PLAN
 PREPARATION OF AN ASSET MANAGEMENT
PLAN
Needs and opportunities, taking
into account the current asset
Infrastructure portfolio
Project initiation
planning

Project planning processes

Strategic resourcing New, renewal, upgrading? Does the project require a feasibility
yes study?
Portfolio planning

no yes no
processes

Preparation &
Prefeasibility
Proceed with procurement briefing

Concept &
Project terminated Feasibility
viability
Implementation deferred
Implementation
Detailed design processes authorised Close out processes

Is there sufficient information to

Design development no proceed? yes

Works

processes
Production information Package

Site
completion
Manufacture, fabrication and Hand over
construction information
 PREPARATION OF AN ASSET MANAGEMENT
PLAN
An asset management plan deals with all activities associated within an asset portfolio:
• Regulations and objectives
• Needs (demand)
• Conceptualisation
• Funding
• Procurement and creation
• Operations
• Performance and maintenance
• Renewal
• Decommissioning and rehabilitation
• Accounting
 PREPARATION OF AN ASSET MANAGEMENT
PLAN
• The responsibility of preparing an AMP lies with the management of departments in a
company.
• The key activity in the AMP is to prepare an overview of the state of all existing assets and
a strategy for their renewal and replacement, the technical and the finance
departments of the company are key players in developing the AMP.
• Once a draft AMP has been completed by these departments a top level management
meeting of at least the Chief Executive Officer and departmental heads shall be held to
discuss all issues and decide on the final version of the plan.
• The final AMP shall then be submitted to the Board of Directors for approval
 CONTENTS OF AN ASSET MANAGEMENT
PLAN
• In order for an AMP to fulfil the rationale of asset management, it should contain the
following minimum sections.
I. Introduction
II. Assets and Value of Assets
III. Level of Service
IV. Risk Management
V. Lifecycle Management
VI. Funding of the Asset Management Plan
VII.Review of the Asset Management Plan
 INTRODUCTION

• The introduction should describe briefly

• The objectives and contents of the asset management plan
• How it was prepared,
• Emphasizing the extent to which employees and other stakeholders have been involved in
the process
 INTRODUCTION

• The introduction should describe briefly

• The objectives and contents of the asset management plan
• How it was prepared,
• Emphasizing the extent to which employees and other stakeholders have been involved in
the process
 ASSETS AND VALUE OF ASSETS

• The first core component of asset management is the asset inventory.

• This component is probably the most straightforward of all.
The types of questions that company will ask themselves in this component are:
• What do I own?
• Where is it?
• What condition is it in?
• What is its remaining useful life? And
• What is its value?
The best practices to address these questions include:
a) Preparing an asset inventory and system map.
b) Developing a condition assessment and rating system.
c) Assessing remaining useful life by consulting projected-useful-life tables or decay
curves.
d) Determining asset values and replacement costs.
 ASSETS AND VALUE OF ASSETS
a) Asset Inventory and System Map: An asset inventory helps company identify
what they own and where assets are located.
• A system map can help operators and managers conceptualize the system as whole.
• A map should show everything that the company owns, and identify where the assets are
located.
• In order to understand the current state of assets, company shall maintain an assets
register which shall include the minimum of the following:

(i) Name and Location (vii) Functional purpose;

(ii) Historical cost/value or Re-valued amount; (viii) Size and/or capacity;
(iii)Estimated remaining useful life; (ix) Construction materials;
(iv) Annual depreciation; (x) Construction / Installation date
(v) Accumulated depreciation; (xi) Manufacturer.
(vi) (vi) Replacement cost;
 ASSETS AND VALUE OF ASSETS

b) Conduct an assessment of the condition of each asset.

• It is critical that utilities have a clear knowledge of the condition of their assets and how they are
performing.
• All management decisions regarding maintenance, rehabilitation, and renewal revolve around these
two aspects.
• Not knowing the current condition or performance level of an asset may lead to the premature
failure of the asset, which leaves the utility with only one option: to replace the asset (generally
the most expensive option).
• There are many ways to assess the condition of the assets.
• Some assets can be visually assessed,
• Water lines can be pressure tested, or leak tested,
• Buildings can be monitored for energy efficiency, etc.
• Sometimes the only suitable way to assess an asset is to compare its performance (repair
history) to its expected life.
• This assessment will provide accurate information about the current as well as the
expected future level of performance of the asset
 ASSETS AND VALUE OF ASSETS

c) Estimating remaining useful life;

• All assets will eventually reach the end of their useful life.
• Some assets will reach this point sooner than other assets.
• In addition, depending on the type of asset, it will either reach that point through amount
of use or length of service.
• For example, a pump will wear out sooner if it is used more and will last longer if it is
used less.
• The actual age of the pump is not as important as the amount of work the pump has one.
• On the other hand, pipe assets wear out based more on the length of time in the ground.
• If a pipe is in the ground for decades it has had considerable time to contact the soil around
it and the water within it and may start to corrode.
• There are many additional factors that will affect how much life a given asset has.
• Factors such as poor installation, defective materials, poor maintenance, and corrosive
• environment will shorten an asset’s life, while factors such as good installation practices,
high quality materials, proper routine and preventative maintenance, and non -corrosive
environment will tend to lengthen an asset’s life. Because of this site -specific
 ASSETS AND VALUE OF ASSETS

c) Estimating remaining useful life;

• Factors such as poor installation, defective materials, poor maintenance, and corrosive
environment will shorten an asset’s life,
• Factors such as good installation practices, high quality materials, proper routine and
preventative maintenance, and non –corrosive environment will tend to lengthen an asset’s
life.
• It is best to make judgments on asset life based on past experience, system knowledge,
existing and future conditions, prior and future operation and maintenance, and similar
factors in determining useful life.
• In the absence of any better information, a system can use standard default values
(life span of various assets) as a starting point.
• However, over time, the system should use its own experiences to refine the useful lives.
 ASSETS AND VALUE OF ASSETS

d) Replacement Cost;
• Replacement cost is the cost of rebuilding the existing infrastructure using present day
technology while maintaining the originally designed level of service.
• Assuming presen technology ensures that any additional cost of outdated and expensive
methods of construction is not reflected in the valuation.
• The straight-line method to estimate the annual cost of renewal and replacement is the
simplest and most often used technique,
• in which estimates the length of time over which an asset will be used (useful life), and
will expense a portion of original cost in equal increments over that amount of time.
• Over time, as assets are rehabilitated, repaired, re-valued or replaced, inventory
will become more accurate.
ASSETS AND VALUE OF ASSETS
 LEVEL OF SERVICE

• The levels of service determine the amount of required funding to maintain, renew and
upgrade the asset in order to provide customers with the levels of service specified.
• Level of Service should not go below the requirements of the regulator as specified in the
Performance Agreement (the minimum level of service ) and
• Level of Service should not go above the maximum capabilities of the assets (the
maximum a system can provide.)
• Company set any Level of Service in between these two boundaries it believes
appropriate, acceptable to the public, management, and is affordable.
• Changes to the levels of service will impact on funding requirements.
• Company is responsible to provide information on its level of service in the quarterly and
annual reports and keep in a Database.
• The projected levels of service shall be the same as those which are projected in the
Business Plan.
 RISK MANAGEMENT

• Risk management process is defined as the systematic application of management policies,

procedures and practices to the tasks of identifying, evaluating, managing, mitigating and
monitoring those risks
• Risk could prevent a company from achieving its strategic or operational objectives or
plans or from complying with its regulatory and legal obligations including attaining its
performance targets and quality of service levels.
• As assets wear out/ fail due to passage of time and usage, managing the consequences of
failure is vital
• Not every asset presents the same failure risk, or is equally critical to the company and
operations.
• Therefore, it is important to know which assets are required to sustain a given
performance.
• Critical assets are those that have a high risk of failing (old, poor condition, obsolete
technologically etc.) and major consequences occur if they do fail (major expense, system
failure, safety concerns, security failure etc).
 RISK MANAGEMENT

• As a first step in determining the risk of failure, a utility needs to look at what it knows
about the likelihood that a given asset is going to fail.
• The data available to assist in this determination is: asset age, condition assessment,
obsolete technology, failure history, historical knowledge, experiences with that type of
asset in general, and knowledge regarding how that type of asset is likely to fail.
• An asset may be highly likely to fail if it is old, has a long history of failure, has a known
failure record in other locations, and has a poor condition rating.
• An asset may be much less likely to fail if it is newer, is highly reliable, has little to no
history of failure and has a good to excellent condition rating.
 RISK MANAGEMENT

• In terms of the consequence of failure, it is important to consider all of the possible costs
of
failure.
• The costs include: cost of repair, social cost associated with the loss of the asset,
repair/replacement costs related to collateral damage caused by the failure, legal costs
related
to additional damage caused by the failure, environmental costs created by the failure, and
any other associated costs or asset losses.
The consequence of failure can be high if any of these costs are significant or if there are
several of these costs that will occur with a failure.
(a) identify and highlight those assets that could cause a major system breakdown;
(b) evaluate their risk of failure either as high, medium or low;
(c) list major technical data such as age and condition of the asset;
(d) list the history of failure of these assets; and
(e) outline strategies and measures in place to prevent failure and to minimize disruption
if
RISK MANAGEMENT
 LIFECYCLE MANAGEMENT

• Assets have a life cycle as they move through from the initial concept to the final disposal.
• Depending on the type of asset, its lifecycle may vary from 5 years to over 100 years.
• Life cycle management has a direct impact on the provision of specific services to the
customer.
• The lifecycle management plan identifies the measures that require to be implemented
to achieve and maintain these levels of service.
• The adoption of this approach allows
 LIFECYCLE MANAGEMENT

1. Key stages in the asset life cycle are:

(a) Asset planning; when the new asset is conceived.
• Decisions made at this time influence the sustainability of the asset, the cost of operating the asset
and the lifespan of the asset. Alternative, non asset solutions must also be considered .
(b) Asset creation or acquisition; when the asset is purchased, constructed.
• Sustainability, capital cost, designs and construction standards, commissioning the asset, and
guarantees by suppliers influence the cost of operating the asset and the lifespan of the asset.
(c) Asset operations and maintenance; when the asset is operated and
maintained.
• Operation relates to sustainability, efficiency, power costs, throughput etc, and is usually more
applicable to mechanical plant rather than static assets such as pipes.
• Maintenance relates to preventative maintenance where minor work is carried out to
prevent more expensive work in the future and reactive maintenance where a break is
fixed.
 LIFECYCLE MANAGEMENT

1. Key stages in the asset life cycle are:

(d) Asset condition and performance monitoring; when the asset is examined
and checked
to discover when and how an asset will fail, what corrective action is required
and when (i.e. maintenance, rehabilitation or renewal).
(e) Asset rehabilitation and renewal; when the asset is restored to ensure that the
required level of service including sustainability can be delivered.
(f) Asset disposal and rationalization. Where a failed or redundant asset is sold
off, put to another use, or abandoned
 LIFECYCLE MANAGEMENT

. Options for Dealing with Assets Over Time

There are four basic options for dealing with the actual assets over time:
a) Operate and maintain the existing assets
b) Repair the assets as they fail
c) Rehabilitate the assets
d) Replace the assets
• These options are intimately connected to each other.
• Choosing to do more or less of one impacts how much of the others is done, whether or not
the other is done at all, or the time frame in which one of the others is done.
• For example, choosing to spend more on operating and maintaining assets will decrease
the need to repair the asset and will increase the amount of time until the asset is replaced.
• Choosing to rehabilitate an asset will eliminate the need to replace the asset in the short
term and will increase the amount of time until the asset ultimately needs to be replaced.
• The rehabilitation will also reduce the amount of operation and maintenance that needs to
be done and reduce the need for repairs.
LIFECYCLE MANAGEMENT
 FUNDING OF THE ASSET MANAGEMENT
PLAN
• Funding for the Asset Management Plan is incorporated in the overall funding of the
Business Plan as follows;
(a) The timing of operation, maintenance and repair activities of various assets and
corresponding costs in above Table are an input to the forecasting operation and
maintenance in section 7 of the Long term financial planning guidelines.
(b) The timing of the rehabilitation and replacement of various assets and
corresponding costs in above Table is an input to the forecasting of
rehabilitation/renewal and replacement on Long term financial planning guidelines
and Business Planning Guidelines.
 MONITORING AND IMPROVEMENT

• The effectiveness of the AMP will be monitored in various ways, including statutory
external audit, internal audit and benchmarking.
• Customer surveys will be carried out to monitor the attainment of minimum and targeted
service levels and the customers’ perception of the service being provided.
• Compliance with Level of Service will be monitored by internal audit system on daily
basis.
• The annual capital and renewal works programme will be monitored through
performance
audits to be carried out by an appointed auditor and shall be reported through theAnnual
Report.
• Company should ensure that the works are completed as per designs, on time and within
the budget.
• The maintenance works will be monitored to ensure that the works are carried out
within the required response times, to the required standard, and in a cost effective
manner.
 REVIEW OF THE ASSET MANAGEMENT
PLAN
• The Asset Management Plan will be reviewed and updated annually to incorporate
progress on achieving goals, changing technical requirements, and updated information on
asset condition.
• The Asset Management Plan will be revised at least every three years in line with the
revision of the Business Plan.
• It will update progress on achieving goals, changing technical requirements and re-
valuations.
 FRAMEWORK OF INTEGRATED ASSET
MANAGEMENT PLAN
• Integrated Asset Management brings together economics, engineering, informaton
technology, sustainability and human elements to form a holistc approach to the delivery
of built assets.
• This approach recognises the combinaton of these elements into a greater whole as well
as their interrelatonships and interdependencies.
• It focuses on the long term directon for overall management of infrastructure and
engineering assets,while considering the immediate operational maters.
 PRINCIPLES

The following principles guide how Strategic Asset Management integrates with
broader government and organisatonal planning:
▪ Assets exist to support service delivery. Therefore non-asset solutons should
be considered.
▪ Agencies should manage assets consistent with whole-of-government policy
frameworks and take into account whole of life costing, future service demands
and, balance between capital expenditure and maintenance requirements.
▪ Asset management should be integrated with agency strategic and corporate
planning.
▪ Asset management decisions should holistcally consider sustainability
outcomes: environmental, social, economic and governance.
▪ Governance arrangements should clearly establish responsibility for functonal
performance of, and accountability for, the asset and service delivery
 FRAMEWORK OF INTEGRATED ASSET
MANAGEMENT PLAN

• An integrated approach to monitoring,

operating, maintaining, upgrading, and
disposing of assets cost-effectively,
• while maintaining a desired level of
service and is intended for improving the
overall business performance.”
 7. Sustainable Asset Management

7.1. Major Concepts of Sustainability

7.2. Major Factors for the Success or Failure of Asset Management
7.3. Work for Sustainable of Asset Management
 MAJOR CONCEPTS OF SUSTAINABILITY

• Sustainable asset management is the process of overseeing and maintaining

physical assets (such as machinery and infrastructure) in a manner that is both
socially and ecologically responsible.
• Utilizing programs for up cycling, recycling, and disposal, cutting back on
energy use, and utilizing more environmentally friendly materials throughout
the production are a few examples of what this may include.
• It could also entail ensuring that investments reflect the values and objectives
of the organization by taking into account their social and environmental
effect.
• The objective of sustainable asset management is to maximize physical asset
performance while reducing environmental effects and guaranteeing a
favorable social impact.
 MAJOR CONCEPTS OF SUSTAINABILITY

• The first step towards sustainability is developing an effective asset

management system that considers economic, environmental and social
factors in decision making.
• Data and measurements must be leveraged to set goals and track progress.
• Finally, policies and governance are needed to embed sustainability
throughout company operations.
 BENEFITS OF SUSTAINABLE ASSET
MANAGEMENT
•Reduced costs: Energy efficient technology and streamlined processes lower
utility bills and operational expenses.
•Increased competitiveness: Sustainable companies are 60% more likely to
attract and retain talent according to MIT Sloan research..
•Improved risk management: By identifying environmental and social risks,
companies can avoid costs from regulatory fines, reputational damage, and
stranded assets.
•Innovation: The transition to sustainability spurs new technologies that can
transform industries and cultures.
 Major Factors for the Failure of Asset Management

• Lack of visibility: Without adequate tracking and monitoring tools in place, it can be
difficult to keep track of all assets and their utilization, making it impossible to make
choices regarding their disposal or repurposing.
• End-of-life asset tracking challenges: As ssets near the end of their useful lives, it may be
challenging to monitor and appropriately dispose of them, creating security concerns and
compliance problems.
• The complexity of managing numerous suppliers and product lines: It can be
challenging to standardize and streamline systems and procedures because IT assets may
come from a range of vendors and product lines.
• Data security issues: Since IT assets can also include sensitive data, they should be
properly disposed of and eliminated with data security in mind.
• Resistance to change: The workforce can resist changes to established IT asset
management processes, making it difficult to implement sustainable practices within the
organization.
 Major Factors for the Failure of Asset Management

1. Notknowing what you have

2. Over/Under-maintenance
3. Improper operation
4. Improper risk management
5. Sub-optimized asset management systems
 CONTENT

8. Best Practices in Building Asset Management

8.1. Experiences of Different Study Areas
8.2. Transportation Oriented Asset Management Focusing on the Transit Management and Highway
8.3. Lessons from Experiences