Switch Content View

Funding the Implementation Program

Each agency or organization needs to consider the method by which the advanced asset management implementation program is to be funded. Capitalization processes need to be examined to determine if initial costs can be capitalized.

From a philosophical perspective, one could say that the program was a "necessary management activity" and should be funded out of the normal "operating budgets".

However, this typically does not apply to these programs as they represent:

  • An increase in the management responsibilities for the organization in terms of service responsibilities to the owner
  • The previous management and asset owners have not developed the necessary maintenance management systems and equipment condition data to complete the outputs now required.

Arguments are often made that new:

  • AM processes, practices, data and information systems have an effective life of 10 - 15 years, and should therefore be treated as capital
  • Assets should be started up or completed with all elements in place as part of the "handover process" and are capitalized as part of the "creation / acquisition" process.

The proposed AM implementation program is therefore seen as a "backlog management" issue.

With the AM implementation program completed and the asset management systems and asset data in place, there will be ongoing activities that need to be maintained, such as:

  • Providing the asset management staff for the detailed asset management query investigation phase activities such as risk assessment and works prioritization, optimized renewal decision making and maintenance optimization
  • Training staff in advanced asset managment activities.

Provision must also be made for maintenance of a living asset database, as the condition of  some assets will change through refurbishment or deterioration, and new assets need to be added and some assets deleted.

Due to the focus on the asset's intended life, provision should also be made for:

  • Information system maintenance, license, upgrades, etc.
  • Updating processes and practice instruction manuals (operation and maintenance manuals)
  • Specialist external assistance, such as quality assessment or audit from specialist consultants.

These activities are generally periodic and therefore they should be funded from recurrent or operating budgets.

However, the initial set up of an "appropriate asset management system" is a long term investment that can justify the use of capital. Many of the newly privatized utilities have funded these asset management system works as capital projects, valuing and depreciating them as an asset in their own right.

The following tables show the program cost elements that could be allocated to capital and those that should be operations / recurrent:

 

Cost Element
Capital
Recurrent
DATA CAPTURE  
Basic Attributes  
Location (GPS)
Intermediate Data
Valuation (initial)
Condition (initial)
Advanced Data
EXTERNAL INPUTS
AM Advisors / Consultants
Specialist Reports
AM Program Audits
AM Training (initial)
AM Manuals
AM Training (ongoing)  
IN-HOUSE INPUTS
Management Program
AM Staff Inputs
IT Staff Inputs
Major IT Systems Upgrades    
Normal IT Systems Upgrades  
IT Software Licenses  
AM Training Programs  
Data Maintenance  
AM Management  
AM Audits  
AM Analysis  
Production of Rolling AM Plans  
Major IT Systems Upgrades  
Normal IT Systems Upgrades  

previous home next
Resourcing the AM Program   Implementation Phase Activities