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1.0 Introduction
The Western Australian State Government has announced its preferred model of 15 local governments (reduced from 30) in the Metropolitan area of Perth. In order to allow an orderly transition to the new structure, the Western Australia Local Government Association (WALGA), Local Government Managers Australia (LGMA) and the Department of Local Government & Communities (DLGC) have commissioned the development of a Local Government Structural Reform Toolkit (Toolkit).
To develop the toolkit, the project partners sort input from key stakeholders as subject experts. The Institute of Public Works Engineering Australasia, WA Division (IPWEA) was asked to provide input to the toolkit in relation to asset management.
2.0 Amalgamation and Boundary Changes (Structural Reform)
Due to the nature of some of the submissions made to the Local Government Advisory Board regarding structural changes, some local governments are recommending boundary adjustment not amalgamation. Either way, structural reform needs to take into account such things as;
· Income
- Grants
- Fees & Charges
- Developer Contributions
· Expenditure
· Financial Reserves
· Debt arrangements
· Forward Capital Works
· Leasing
· Land Tenure
· Assets
- Infrastructure Assets
- Plant & Equipment
· Staff
· Contractors
· Contracts
· Works in progress
3.0 Integrated Planning and Reporting
Local Governments in Western Australia are required to undertake integrated planning and reporting. This involves development of a Strategic Community Plan (SCP) and Corporate Business Plan (CBP) in accordance with the State Government’s Integrated Planning and Reporting (IPR) Framework. Both the SCP & CBP need to be influenced by key informing strategies based around Asset Management, Financial Planning, Workforce Planning and Service Strategies etc. Each local government was required to have an SCP and CBP in place bay June 30 2013.
The transition process of amalgamation/adjusting boundaries should ideally be an orderly process. The IPR Framework provides an excellent standardised framework to transition to amalgamation.
The initial implementation of the IPR Framework in WA was heavily focused on the development of both SCP and CBP, particularly the community engagement processes that feed into the SCP. Although detailed as being important, there was less emphasis and rigour around the informing strategies.
When two of more local governments come together to amalgamate, what in fact happens is that at a predetermined point in time, the original local governments cease to exist and a new local government commences. In the short term, the new local government focuses on consolidating what is passed on by the original local governments but also developing new systems and processed that will be applicable to the new local government. In the medium term the new local government then focuses on planning for the future.
To develop a meaningful SCP & CBP, it is essential that a local government has credible information relating to level of service and the cost to deliver the level of service in order to have a meaningful discussion with the community and understand whether or not the communities aspirations can be afforded or not and the implications this may have on the local government’s sustainability.
4.0 IPR & Asset Management
The IPR Framework aligns with the Local Government Sustainability Framework (National Sustainability Framework). The framework provides guidance on the key elements of asset management for local governments such as;
• development of an asset management policy
• strategy and planning
• governance and management arrangements
• defining levels of service
• data and systems
• skills and processes
• evaluation
The IPR Framework includes an Asset Management (AM) Framework which addresses the above points. Both the IPR and AM Frameworks provide an excellent basis upon which to plan the transition to amalgamation.
5.0 Level of Service
In addition to the National Sustainability Framework, the IPWEA’s publication, the International Infrastructure Management Manual (IIMM) sets out that level of service is categorises as follows;
Community Level of Service – the expectations of the customer in relation to a service.
Technical Level of Service – the technical standards / parameters applied by the organisation to achieve the customer expectations.
The IIMM describes that one of the first steps in developing an asset management plan is to document the current community and technical levels of service. Once this has been done the local government should then develop and document target community (through community engagement) and technical levels of service. Once these have been agreed upon and put in place, the local government should then monitor and report its success in achieving the target community and technical levels of service.
6.0 Asset Management Working Group
It is recommended that a combined cross-functional asset management working group is formed with representatives from finance, community development, property management and engineering (and any other key asset planning staff) from each local government. As there may be competing interests and disparity between local governments, it is recommended that the asset management working group is facilitated by an independent resource experienced in asset management and familiar with this transition process.
The aim of the AM Working Group is to assist with planning the transition process, i .e. assisting with the data audit, normalisation process, documenting current technical level of service.
The role of the AM Working Group is not to determine the best asset systems and software going forward. This is a task best left to the new local government.
7.0 Asset Management Planning
There are three levels of asset management planning;
· Strategic
· Tactical
· Operational
The strategic level of planning would ideally tightly align with the objectives of a local government’s SCP, however as noted above, during the amalgamation process, the SCP’s of the original local governments will likely be of little use to the new local government. In the short term it would be better to focus on the tactical and operational aspects of asset management planning so as to ensure that the new local government is well placed to commence the development of a new SCP & CBP as soon as is practicable.
The focus over the amalgamation transition should be on tactical and operational planning as follows;
Objective / Reason / Tactical Response /Operational Activity Planning / The amalgamation process can potentially be disruptive with staff changes etc. It is important to ensure that operational activities are not forgotten about in order to minimise adverse publicity and maximise efficiency. / Document and cost the current technical level of service for operational activities.
Maintenance Activity Planning / The amalgamation process can potentially be disruptive with staff changes etc. It is important to ensure that operational activities are not forgotten about in order to minimise adverse publicity and maximise efficiency. / Document and cost the current technical level of service for maintenance activities.
Upgrade Works Planning / The original local governments may have upgrade work programmed and may have not included provision for ongoing operation and maintenance expenditures in future years. / Review the local government’s plans for upgrades in order to determine whether sufficient future funds have been allowed for in the LTFP for increased Operation and Maintenance costs
Objective / Reason / Tactical Response /
Renewal Works Planning / The new local government will develop its own capital budget which may be focussed on different priorities to the original local government’s budget. There may be several areas where optimum renewal of assets have been programmed and locked into the budget or long term financial plan in the short term. If the new local government’s priorities differ significantly there is potential for these critical renewals to be missed which may result in accelerated deterioration of the asset and higher renewal costs in the future when assets are eventually renewed. / Undertake a risk assessment on each local government’s renewal component of their Forward Capital Works Plan in order to prioritise the asset renewal component of their capital works. Note that where a local government does not have a detailed Forward Capital Works Plan split by Renewal, Upgrade and New, one should be developed prior to the amalgamation proceeding.
New Works Planning / The original local governments may have upgrade work programmed and may have not included provision for ongoing operation and maintenance expenditures in future years. / Review the local government’s plans for upgrades in order to determine whether sufficient future funds have been allowed for in the LTFP for increased Operation and Maintenance costs
8.0 Transitional Asset Management Plan (TAMP)
The IIMM sets out the structure for an Asset Management Plan. Additionally both the State AM Framework under the IPR Framework and the Asset Planning Framework under the National Sustainability Framework detail the areas that an Asset Management Plan should cover.
The current level of maturity in term of asset management planning across local government in WA is still low with a high degree of variability in sophistication of asset management plans from one local government to another. Many of the current asset management plans are largely inventory plans with little or no forward financial projections or realistic information relating to level of service (either current or target).
For the purposes of amalgamation it is recommended that amalgamating local governments prepare a cut down version of the IIMM suggested format, i.e a Transitional Asset Management Plan (TAMP). The main purpose of the TAMP is to equip the new local government with sufficient information to commence the new SCP / CBP development process post amalgamation.
9.0 Format of the Transitional Asset Management Plan (TAMP)
The following is the suggested Table of Contents for the TAMP. It is a cut down version of the asset management plan format detailed in the IIMM. It is proposed that each section detail each information specific to each transitioning local government and then a summary of the combined information representing the new local government.
· Executive Summary
· Introduction
- Scope & Purpose of the TAMP
- Amalgamation Process
- Plan Format
· Level of Service
- Current Customer & Technical Service Standards
- Asset Classes
- Asset Sub Classes
- Functional Hierarchy
· Risk
- Risk Framework
- Risk Assessment
· Lifecycle Management
- Physical Parameters (Defined by Asset Class, Asset Sub-Class & Hierarchy)
- Asset Modelling Parameters
§ Asset Life
§ Asset Unit Rates
§ Asset Condition
- Work Category Definitions
- Operation & Maintenance Strategy (Document Current Technical LOS)
- Renewal Strategy (Document Current Renewal LOS)
- Capital Investment Strategy (Document Upgrade, New & Disposal)
· Financial Projections
- Recurrent Intervention Condition Level (RICL Defined by Asset Class)
- Current Expenditure on;
§ Maintenance
§ Operation
§ Renewal
§ Upgrade
§ New
- Renewal Demand Projections
- Renewal Gap Projections
· AM Practices, Performance Monitoring & Improvement
- Asset Data Audit Results
10.0 Asset Classes
One of the first tasks to amalgamate assets is recommended to be the standardisation of asset classes.
These can vary from local government to local government and can very within a local government when it comes to asset classes for financial reporting purposes and asset classes for asset management purposes. The ideal scenario would be to standardise asset classes across all amalgamating local governments and map each local governments existing asset classes to the new asset class structure.
Whilst group of amalgamating local governments are free to select their own asset classes, it is recommended that the starting point be in line with the DLGC’s Local Government Accounting Guidelines as follows;
· Land / · Investment Property· Buildings / · Furniture and Equipment
· Plant and Equipment / · Plant and Equipment - Under Lease
· Intangibles / · Infrastructure - Roads
· Infrastructure - Bridges / · Infrastructure - Drainage
· Infrastructure - Parks, Gardens and Reserves / · Infrastructure - Footpaths and Cycleways
· Infrastructure - Airports / · Infrastructure - Sewerage
· Infrastructure - Other / · Work in Progress
The above classes will need to be broken down further into sub-classes and ideally split by asset hierarchy, for example;
Infrastructure – Roads
- District Distributor A
§ Seal (included in all sub-classes below)
§ Pavement (included in all sub-classes below)
§ Sub Pavement (included in all sub-classes below)
§ Formation (included in all sub-classes below)
§ Kerb
- District Distributor B
- Local Distributor
- Local Access
11.0 Asset Systems
It will be highly likely that each local government has different asset systems and locations for storing asset data. A worthwhile exercise will be to undertake an asset data audit documenting (but not limited to) the following;
- Data source
- Date of Capture
- Data quality and completeness assessment.
- Data system
- Dataset version
- Data location
- Data custodian
12.0 Renewal Demand Modelling Parameters
In order to provide a sound basis upon which to allow the new entity to plan, it would be beneficial to produce both individual and combined renewal models. To do this it is important to standardise the parameters upon which each model is based. These parameters include;
· Asset lives
· Unit rates
· Recurrent Intervention Condition Levels (RICL)
13.0 Condition
An important aspect of accurately modelling a local government’s asset renewal demand is having an understanding of the condition profile of the asset class being modelled. Where assets classes have condition, a condition profile should be constructed. Where a local government does not have condition for a particular asset class, the local government should attempt to construct a profile based on informed assumption utilising the knowledge of the asset class from staff that look after the asset on a daily basis.