System for the management of assets MODULE 2

TOOLKIT EDITION 1 2018

MODULE 2
System for the
management of assets
MODULE 2 System for the management of assets

MODULE PURPOSE
An asset management system comprises the people, policies, processes, plans and information to deliver value from assets.
This module:

1. Describes the scope, content and requirements of a city asset management system;
2. Provides the means for identifying internal and external stakeholders who establish requirements for the asset management
system;
3. Defines an asset management policy, states its purpose as providing the principles according to which asset management
objectives are established, and that the asset management system and assets must respond to, states requirements for an asset
management policy, provides guidance for developing such a policy, and attends to matters relating to policy approval; and
4. Describes requirements for and the elements of asset management strategy. The asset management strategy contains asset
management objectives for both the asset management system and assets, as well as strategies for delivering on these objectives.
The asset management strategy is presented in the city’s strategic asset management plan.

WHY
1. An asset management system ensures that city investments, assets and actions deliver value from assets, contribute towards
achievement of a city’s strategic objectives and lead to stakeholder satisfaction.
2. A well-designed asset management system enables cross-functional integration and collaboration, generates new insights and
innovations, and generally stimulates improvements in key organisational processes and outputs.
3. It supports the creation of an asset management value centric organisation with a strong learning culture.
4. Organisational decision-making is improved and decision-making is risk-based.
5. City decisions and implementation actions increasingly contribute towards sustainability and future resiliency.

OUTPUTS OF MODULE 2:
1. Identification of both external and internal stakeholders and their requirements for the asset management system.
2. Establishment of a city asset management policy that articulates the intentions of city leadership and provides direction for the
establishment of asset management objectives, as well as stipulating requirements for asset accounting treatment.
3. A strategic asset management plan that establishes asset management objectives for the asset management system and for
assets, states the strategies and programmes for service delivery, infrastructure investment, the asset management system
and for managing organisational change, and that coordinates and optimises between immovable asset-based portfolios and
services, and other organisational functions and priorities.

KEY RELEVANT NATIONAL REGULATIONS, POLICIES AND STRATEGIES:

1. SABS: South African National Standard 55000: Asset management – Overview, principles and terminology
2. SABS: South African National Standard 55001: Asset management – Management systems – Requirements
3. SABS: South African National Standard 55002: Asset management – Guidelines for the application of ISO 55001
4. Standard for Infrastructure Procurement and Delivery Management

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 System for the management of assets MODULE 2

CONTENTS
Module 2 System for the management of assets

2.1 PURPOSE OF THIS MODULE 2.1

2.1.1 What is asset management? 2.1
2.1.2 What is an AM system? 2.3
2.1.3 Asset management scope of practice 2.11
2.1.4 Why implement an asset management system in cities 2.14
2.1.5 Objectives of this module 2.14

2.2 DEFINING THE SCOPE OF THE AM SYSTEM 2.15

2.2.1 Elements and dimensions of the scope of the AM system 2.15
2.2.2 Asset portfolios managed or controlled 2.15
2.2.3 Functions, policies and processes 2.19
2.2.4 Stakeholder requirements 2.23
2.2.5 Plans within the AM system 2.31

2.3 AM POLICY 2.33

2.3.1 What is an AM policy? 2.33
2.3.2 Requirements for an AM policy 2.33
2.3.3 What goes into an AM policy? 2.34
2.3.4 Concluding remarks on the AM policy 2.38

2.4 AM STRATEGY 2.39

2.4.1 AM objectives 2.39
2.4.2 AM strategies 2.39
2.4.3 AM system strategy 2.40
2.4.4 Service delivery strategies 2.43
2.4.5 SAMP planning horizon and template 2.54
2.4.6 Preparation, approval and updating of the SAMP 2.57

2.5 CONCLUSION 2.57

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MODULE 2 System for the management of assets

LIST OF
Figures that appear in this toolkit

FIGURE 2.1: Asset lifecycle management 22

FIGURE 2.2: The South African city asset management system 2.4
FIGURE 2.3: Levels of asset optimisation 2.5
FIGURE 2.4: AM objectives and stakeholder requirements 2.8
FIGURE 2.5: Some of the key disciplines involved in asset management in a city 2.11
FIGURE 2.6: 39 Subjects comprising the asset management landscape 2.12
FIGURE 2.7: Process for developing the AM system 2.14
FIGURE 2.8: Identifying key processes and activities within the supply chain (potable water service) 2.24
FIGURE 2.9: Stakeholder analysis using the asset lifecycle 2.27
FIGURE 2.10: City external stakeholder classification system 2.29
FIGURE 2.11: Plans within the AM system 2.31
FIGURE 2.12: Structure and components of an AM policy 2.38
FIGURE 2.13: Key components of city AM strategy 2.39
FIGURE 2.14: Graphical illustration of asset system (potable water supply, Buffalo City) 2.45
FIGURE 2.15: Graphical illustration of a solid waste system (Buffalo City) 2.46
FIGURE 2.16: Service provision objectives matched to the city spatial structure (potable water supply) 2.47
FIGURE 2.17(A): Customer LOS strategy (all customer categories – potable water) 2.52
FIGURE 2.17(B): Costing LOS strategy (all customer categories – potable water) 2.52
FIGURE 2.A.1 Illustrative condition distribution for various asset portfolio health grades 2.59

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 System for the management of assets MODULE 2

LIST OF
Tables that appear in this toolkit

TABLE 2.1: Risk types 2.6

TABLE 2.2(A): Criticality of the service 2.16
TABLE 2.2(B): Asset intensity 2.17
TABLE 2.2(C): Revenue capacity of service 2.17
TABLE 2.2(D): Risk to service delivery if assets fail 2.18
TABLE 2.3: Scope and importance of assets to be managed: identification and ranking table 2.18
TABLE 2.4: Identification of AM functions within the “Strategy and Planning” domain 2.19
TABLE 2.5: Policies and processes relating to AM functions (selected/limited linkages for illustrative 2.21
purposes)
TABLE 2.6(A): Identifying stakeholders within the supply chain (Internal stakeholders: potable water service) 2.25
TABLE 2.6(B): Identifying stakeholders within the supply chain (External stakeholders: potable water 2.26
service)
TABLE 2.7: Suitability of stakeholder analysis methods 2.27
TABLE 2.8: Key issues imbedded in the policy principles offered 2.36
TABLE 2.9: Conventions and systems for inclusion in the AM system strategy that are detailed in this 2.41
CIDMS Toolkit
TABLE 2.10: Establishing time-bound customer level of service targets for customers that are currently 2.51
underserved and for future customers (limited to informal residential customers)
TABLE 2.11: SAMP template 2.54
TABLE 2.A.1: General interpretation of asset consumption ratio 2.58
TABLE 2.B.1: Process performance requirements: Asset data 2.65
TABLE 2.A.2: AM objectives relating to asset data confidence 2.67

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MODULE 2 System for the management of assets

2.1 PURPOSE OF THIS MODULE

2.1.1 What is asset management?

SANS 55000 (Asset Management – Overview, principles and terminology) defines asset management as “the coordinated
activity of an organisation to realise value from assets”. The overarching goal of asset management (AM) is to manage assets
in such a way that city strategic and customer service requirements are met in the most cost-effective manner for the benefit
of present and future customers.

Key elements of infrastructure asset management in the

South African urban space include:

• Providing defined levels and standards of service.

• Managing the impacts of changes in demand as well as
changes in supply relating to climate change through
spatial optimisation, demand management, infrastructure
investment and other strategies.
• Adopting a full lifecycle approach to the management
of infrastructure which includes cost-effective, long term
strategies that meets defined service requirements.
• Optimising asset portfolios in relation to the desired spatial
structure of the city.
• Identifying, assessing and managing risk in accordance with
the risk appetite of the city.
• Pursuing optimised decision-making by
1. Balancing opportunities, performance, costs and risks,
2. Designing sustainable, net-benefit solutions that
support the strategic objectives of the city and
3. By supporting long term city strategy through
analysis of policy options, scenarios and other impacts.
• Developing long-term financial plans indicating lifecycle
expenditure needs, probable revenue to be generated from
asset portfolios and how lifecycle needs are to be funded.

The nature of asset portfolios Accordingly, AM is not only AM therefore adopts a

(e.g. roads network, potable concerned with current sustainable approach
water system and real estate customers and infrastructure, comprising lifecycle
portfolio) in the city space tends but also with sustainability management over multiple
to be characterised by longevity, and intergenerational equity. human generations.
with the lives of assets typically
measured in decades.

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 System for the management of assets MODULE 2

FIGURE 2.1: Asset lifecycle management

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MODULE 2 System for the management of assets

2.1.2 What is an AM system?

Asset portfolios are managed to deliver on the strategic objectives of the city, they are not an end in themselves. The SANS
55000 series of AM standards specify a management system for the establishment of AM policies and objectives, processes to
achieve AM objectives, and control instruments. The following SANS AM standards have been published, which exactly mirror
their ISO counterparts:

• SANS 55000 Asset Management – Overview, principles and The scope of such an AM system comprises people, policies,
terminology processes, plans and information. To avoid confusion, the
• SANS 55001 Asset Management – Management systems – AM system is the framework of all elements involving AM
Requirements decision-making and execution of those decisions. Software
systems used in the AM environment are referred to as asset
• SANS 55002 Asset Management – Management systems –
management information systems, and form one element of the
Guidelines on the application of SANS 55001
AM system. The following figure illustrates the AM system for a
South African city.

01 STAKEHOLDERS
ISO/SANS 55 000 defines a stakeholder as an individual or affordability constraints or other constraints). As shown in
organisation that can affect or be affected by a decision or Figure 2.2, stakeholders include both external parties such as
activity of the city. Note that the stakeholder does not actually other spheres of government, the community and investors, as
need to be affected, but must only perceive to be affected, well as internal stakeholders, such as Council and employees.
to be regarded as a stakeholder. Stakeholders are of critical Given the importance of stakeholders, and the need for the asset
importance to the AM system. They establish both needs management system to respond to stakeholder requirements,
and expectations (such as service delivery requirements) as this module presents several techniques for identifying and
well as constraints (whether regulatory constraints, customer analysing stakeholder requirements.

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 System for the management of assets MODULE 2

FIGURE 2.2: The South African city asset management system

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MODULE 2 System for the management of assets

02 STRATEGY AND PLANS 03 LIFECYCLE DELIVERY, OPTIMISATION

AND FINANCIAL MANAGEMENT
As noted in Section 2.1.1, the asset management system and To be effective, AM plans must be implemented through
asset portfolios must support the city strategy. Asset managers activities, projects and programmes across the lifecycle.
interpret city strategic objectives and undertake demand Modules 9 to 11 describes the Infrastructure Procurement and
analysis to identify stakeholder requirements and then develop Delivery Management System (IPDM) for cities. It is through this
AM policy, objectives, strategy and plans to achieve city system that the lifecycle activities, projects and programmes
strategic objectives and to address stakeholder expectations. specified in the AM plans are actioned, services are delivered,
Section 2.2.4 provides guidance on determining stakeholder assets optimised and AM objectives related to asset portfolios
requirements, Module 4 deals with customer profiling and achieved.

04
levels of service, and Module 5 with future demand. Sections
2.3 and 2.4 deal with the development of AM policy, objectives AM CAPABILITY DEVELOPMENT
and strategy. The preparation of asset management plans are AM strategy and planning, and the delivery of those plans,
dealt with in Module 7. together with other AM activities, require coordinated
capability. The nature of capability required will depend on the
The AM plans cover the whole lifecycle (see Figure 2.1) of each AM objectives decided upon, and the service delivery model(s)
asset portfolio. These plans also feature asset lifecycle strategies agreed to deliver on AM objectives. Various service delivery
aimed at asset lifecycle optimisation, and more advanced models are available, ranging from full inhouse capacity through
plans pursue asset portfolio optimisation. Module 6 provides to outsourcing – these are discussed in Section 12.2.5. Regardless
guidance on asset lifecycle planning, and the figure below of the service delivery model(s) chosen, across lifecycle activities
shows a continuum of asset optimisation. Starting on the left, and asset portfolios the city will require AM capacity in the form
a city may simply opt to renew or replace an existing asset, of a dedicated AM unit and formal organisational roles, functions
with no regard to matters such as changing demand, cost or and processes. There are also likely to be suppliers of goods
operating efficiency. No optimisation is achieved. Moving to and services, and as these suppliers form part of the supply
the right, asset portfolios are rightsized in relation to service chain that ultimately delivers services to the city’s customers,
demands and acceptable levels of risk, cost and affordability. they are considered part of the city’s AM capability. Module 12
provides guidance on AM capability development, inclusive of
organisational arrangements, competency development and
FIGURE 2.3: Levels of asset optimisation service delivery models.
CURRENT REPLACEMENT
COST VALUATION

Reproduction of Excess assets Obsolescence Over-design System

existing asset eliminated eliminated eliminated reconfiguration

Low DEGREE OF OPTIMISATION High

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 System for the management of assets MODULE 2

05 RISK AND PERFORMANCE MANAGEMENT

Asset management follows a risk-based approach to realise
value from assets, by managing risk and opportunity to achieve
the desired balance between cost, risk and performance. As
such the consideration of risk, in relation to performance and
cost, carries through in all asset management decisions and
activities. Risk comes in many forms, some examples of which
are shown below:

TABLE 2.1: Risk Types

RISK TYPE RISK SOURCE/TYPE

Community resistance to services offered, the cost thereof, or nature or location of assets
Developers/construction companies damaging municipal infrastructure supply lines
Informal settlers locating in demarcated flood lines
Informal settlers locating in demarcated servitudes
External risks Legislative/regulatory requirements
External strike action affecting municipal supply chain
Anti-social behaviour or criminal activity in public spaces
Cyber attack
End-user abuse e.g. vehicle overloading causing damage to road surfaces
Operators resisting technology/new assets, intent on damaging/breaking it
Protest action resulting in damage/destruction of municipal property
Sabotage
Malicious/unlawful intent
Terrorism
Theft/burglary
Vandalism
Financial risks
Information risks
People risks
Management risks
System/control risks
Contagious diseases
Drought
Earthquakes/unstable soils/seismic activity
Electrolytic activity
Natural phenomena and Floods
disasters Lighting
Rising water table
Veld fires
Communication failure
Control failure

Operating risks Procedural failure

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MODULE 2 System for the management of assets

RISK TYPE RISK SOURCE/TYPE

Design error
Substandard construction
Gradual deterioration/ageing
Physical asset risks Insufficient or inappropriate maintenance
Operator error/unintended misuse
Communication and consensus risks
Climate change
Demand uncertainty
Planning risks
Information risks
Insufficient number of CIDB-registered contractors in all categories required
Procurement risks
Project management risks
Supply chain/delivery risks Contract risks
Supplier performance failures

The above table shows that there are both asset and non-asset
risks related to the delivery of services. Asset management
concerns itself with both the risks and performance of (1) asset
portfolios and (2) the AM system itself.

A robust asset management system follows a structured

approach to the identification, assessment and management
of both asset and non-asset risks. As a general approach, asset-
related risks are identified and assessed using the failure mode,
effects and criticality analysis (FMECA) method, described in
Section 3.3.5. Assets are also rated in terms of criticality and
managed accordingly; this is also dealt with in Section 3.3.5.

ISO 31000:2009 Risk Management provides the principles, framework and process for managing
risk. ISO 31010:2009 describes risk assessment concepts, processes and deals with the selection of
risk assessment techniques.

Performance monitoring and improvement ensures that the city achieves objectives established for the AM system and for assets. It
requires that outputs and outcomes are specified and monitored (see Figure 2.4). Performance monitoring is not a static reporting
function. The AM system demands two more functions of performance monitoring and improvement. The first of these is feedback
from performance monitoring, focused on continuous improvement in AM practice within the current framework of AM policy,
plans and procedures. The second is strategic review, which may indicate that to improve performance, changes are required to the
AM policy, procedure, strategy or AM plans.

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 System for the management of assets MODULE 2

FIGURE 2.4: AM objectives and stakeholder requirements

Asset management objectives City strategic objectives

ECONOMY EFFICIENCY EFFECTIVENESS

Cost Input Activities Outputs Outcomes Impact

e.g. construction e.g. nr of e.g. nr of e.g. improvement

(laying of water households households with in human health,
pipes and connected to access to potable dignity and social
connecting municipal water water inclusion
households) supply system

EQUITY CONSIDERATIONS (WHAT CAN BE LEVERAGED E.G. JOB CREATION)

VALUE FOR MONEY

PLANNING
IMPLEMENTATION CLOSE OUT
Acquire inputs of the
Convert inputs into
right quality at the right Evaluate whether outputs achieve desired outcomes
outputs
price

RISK & PERFORMANCE MANAGEMENT

The AM system should be periodically audited, for the following reasons:

• An audited opinion stating that a city has a well performing them. An audited opinion on the performance of the asset
AM system provides assurance to the investor and regulatory management system supports the principles of good
communities that funding applications have been well governance and transparency, and provides the community
thought through, that investments will deliver net benefits, and other stakeholders with the assurance that management
and that a city is able to both deliver value from assets and systems appropriate to the scope, scale and complexity of
to care for those assets. A favourable audit opinion, and the assets are in place, and performing well.
assurance it provides, reduces risks to investors that may • An independent audit provides an objective assessment
result in higher uptake rates in municipal bonds issued, or of the appropriateness and performance of the asset
more favourable lending conditions for cities. management system, and confirms that the AM practices
• Communities and other stakeholders have an interest in (system) improvement plan of the city pursues levels of
knowing that city assets are well managed. City assets practice appropriate to the scope and complexity of assets,
represent community wealth, effectively held in trust by and the demands of regulation and customers. It provides
the metropolitan municipality on behalf of the community management with the opportunity to reflect on past, current
as a whole. Communities, who pay rates and tariffs, invest and future performance, and to identify scope for further
in community assets and expect those assets to benefit improvements.

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MODULE 2 System for the management of assets

06 ASSET INFORMATION
The asset portfolio of even a small city is worth billions of Rands quality of life of citizens and the economic performance of the
whilst in a larger metro the replacement value of asset portfolios city. Informed decisions based on sound information is therefore
can measure well over a hundred billion Rand. Most cities highly desired. Furthermore, there are also legal requirements
spend several billion annually to augment, renew, operate and on the structure, quality, availability and reporting of asset
maintain these portfolios. Since infrastructure assets typically information. GRAP, for example, demands that a municipality
have lifespans measured in decades, and in several instances, in prepares and annually maintains and updates its asset register.
generations, decisions made tend to lock in expenditure levels This asset register is the subject of annual scrutiny by the
and patterns for a very long time. And because infrastructure Auditor General, and performance in this regard is a major cause
assets have such long lives, deterioration patterns are not of many municipalities receiving undesired audit outcomes.
always evident until such time that a renewals bow wave hits
a city. Moreover, decisions on infrastructure directly affect the

07 DECISION-MAKING,
THE “UNSEEN” ELEMENT
A decision is a choice made between two or more alternatives, and decision-making is the process followed in selecting the best
alternative to meet an AM objective. Many asset management decisions are made at multiple levels in a city on an ongoing basis.
These decisions can be categorised by the nature or type of decisions made, and by the scope of decision-making i.e. the things or
issues about which decisions are made. Many types of asset management decisions are made, some of which include:

• Complex decisions: such as decisions on system

reconfiguration and capital budget optimisation. Decisions of
this type normally require the availability of large quantities of
data and information, and tend to involve the efforts of several
people to analyse information, develop and assess alternatives,
to present the business case, and to make the decision.
• “Yes/No” decisions: In these instances there are only two
options, you either proceed with a course of action, or you
don’t.
• Original decisions: This type of situation requires the
development of original alternatives by the city – they are
non-standard decisions. An example of an original decision is
the decision to implement a waste-to-energy plant, assuming
that the city has not done this before. Design options must
be generated and evaluated, and careful thought is required
on appropriate management and operational arrangements,
probable expenditure and likely revenue, and other relevant
matters, such as appointing or training capable operators for
the plant.
• Programmed or routine decisions: These are repetitive

“
decisions governed by policy and standard operating
procedures, examples of which are decisions on appointing Governance is a key requirement and
new staff, the ordering of stock, and appointment of suppliers. feature of modern, successful societies.”

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 System for the management of assets MODULE 2

Asset information can, however, be costly to develop and

maintain. Clear thought is required to determine what
information is necessary on a continuous basis, e.g. to measure
performance of the AM system or asset portfolios, or to
determine asset life trends and expected useful lives, and which
datasets are necessary only when the need arises or are required
at periodic intervals. Thought also needs to be given to the
depth (detail) and accuracy required for data and information.

Good AM practice dictates the adoption of an asset information

strategy and formal, documented asset information standards.

Many standard decision rules apply in an asset management • Capital investment decision-making
environment, some examples of which are: • O&M decision-making
• To depreciate an asset over x number of years. • Lifecycle value realisation
• To replace a pipe of a certain diameter size and material after • Resourcing strategy
x number of bursts. • Shutdown & outage strategy
• To rewire a motor of a certain size for x number of times, until
the power loss factor becomes unacceptable. Module 8 provides financial appraisal techniques to assess the
• To assign a particular condition rating to the wall of a concrete financial merits of decisions. It also presents a multi-criteria
reservoir given evidence of crack widths within specified analysis (MCA) system for capital investment decision-making.
ranges. Take some time to become familiar with the MCA, and then
return to this section.
In asset management, all decisions must contribute towards
the achievement of AM objectives. The AM policy, described in This MCA system serves as an exemplar of the approach to
Section 2.3, describes the dimensions or outcome areas that asset management. It interprets stakeholder and organisational
AM must contribute towards, e.g. social upliftment, economic objectives, which are formulated as key outcome areas (e.g.
competitiveness and environmental sustainability. The AM environment sustainability, spatial efficiency, and financial
strategy interprets these outcomes and defines specific AM health and sustainability). Within each of these impact areas
objectives, taking into account stakeholder requirements. specific outputs are identified, that can be positive or negative.
So, within the outcome area of, say, spatial efficiency, an output
Governance is a key requirement and feature of modern, measurement can be “compact city”, and a capital investment
successful societies. Since public money is involved, cities proposal can be measured as to whether it contributes or acts
should adopt robust decision making criteria or rules of against city compactness, which can be measured in terms of
decision-making. This supports sound decision making, and (a) average gross residential density/ha, (b) redevelopment of
provides transparency as to how decisions are made. The ISO/ greyfields and (c) land use intensification. Each outcome or
SANS 5500x series of AM standards requires an organisation impact area is ascribed a value, as is every specific impact in the
to develop and implement decision-making criteria for the MCA system – these comprise the decision rules for the MCA
following (scope of AM decisions): system.

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MODULE 2 System for the management of assets

2.1.3 Asset management scope of practice

Cities are asset-intensive entities, with large and varied asset portfolios. Their asset worth is measured in billions, and these
assets provide the essential services such as water, energy and transport without which cities can simply not function. Asset
management is not the exclusive domain of any particular profession. Instead, asset management as a discipline draws on
techniques from many fields, and as a set of processes within the system defined in this module it serves an integrating
function within the city. Many departments and functions in a city are involved in the management of assets, or otherwise
have an interest in assets and the management thereof.

Engineers design, operate, maintain and manage civil and practitioners. They are extensively involved in many asset
electrical engineering asset portfolios, these being the key management activities, including funding strategies, budget
asset portfolios in cities. The way in which assets are funded, compilation, investment appraisal and tariff setting, to mention
their lifecycle needs and revenue potential directly determine a few. Furthermore, the finance departments of cities have to
the financial viability of metropolitan municipalities, and report on asset values and consumption in the statement of
hence asset management is also of great interest to finance financial position.

ENGINEERING AND TECHNICAL PROFESSIONS URBAN PLANNERS

Engineering Capital
Lifecycle Spatial Housing
Pre-planning standards investment IDP
management optimisation delivery
and designs framework

Engineering asset portfolios e.g. potable water Several immovable asset portfolios e.g. public
supply, roads and electricity distribution amenities and open space system
MULTI-
DISCIPLINARY,
YET INTEGRATED Spatially-
Spatially-
AM policy & SCM policy & PRACTICE linked Accessibility
FAR linked FAR
procedures procedures customer analyses
database

Long term financial

Budgets Tariff setting Infrastructure profiling Lifecycle modelling
strategy & plans

FINANCE PRACTIONERS GIS & DATA MANAGEMENT PRACTIONERS

FIGURE 2.5: Some of the key disciplines involved in asset management in a city

Urban planners are responsible for establishing the spatial on the nature and extent of infrastructure, and should also be
vision of cities and to spatially optimise cities. Infrastructure informed by available infrastructure capacities, costs and risks.
investment is one of the key tools that urban planners have at Urban planners generally also prepare city IDPs and facilitate
their disposal to restructure and optimise cities and, recognising consultations with communities regarding their needs and
this, SPLUMA places the responsibility for the city’s capital requirements, including for infrastructure provision. In several
investment framework on the urban planning function as part cities urban planning functions also have responsibility for
of the process of preparing the city’s spatial development housing delivery and the management of community, sport
framework. Urban planning decisions such as changes in and recreation services, inclusive of the asset portfolios required
land use, relaxation of the urban development boundary or to deliver those services. Urban planners therefore clearly also
instituting controls geared towards compaction directly impact have a role in asset management.

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 System for the management of assets MODULE 2

The Global Forum on Maintenance and Asset Management defined the “Asset Management Landscape”, comprised of 39
subjects across six subject groups (see Figure 2.6 below). This landscape aptly demonstrates that asset management touches
on most functions in a metropolitan municipality.

STRATEGY AND PLANNING ASSET MANAGEMENT DECISION-MAKING

Asset management policy Capital investment decision-making

Asset management strategy & objectives O&M decision-making

Demand analysis Lifecycle value realisation

Strategic planning Resourcing strategy

Asset management planning Shutdown & outage strategy

ORGANISATION AND PEOPLE ASSET INFORMATION

Procurement & supply chain management Asset information strategy

Asset management leadership Asset information standards

Organisation structure Asset information systems

Organisation culture Data & information management

Competence management

LIFECYCLE DELIVERY RISK & REVIEW

Technical standards & legislation Risk assessment and management

Asset creation & acquisition Contingency planning & resilience analysis

Systems engineering Sustainable development

Configuration management Management of change

Maintenance delivery Asset performance & health monitoring

Reliability engineering Asset management system monitoring

Asset operations Management review, audit and assurance

Resource management Asset costing and valuation

Shutdown & outage management Stakeholder engagement

Fault & incident management

Asset decommissioning & disposal Source: GFMAM, March 2014

FIGURE 2.6: 39 Subjects comprising the asset management landscape

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MODULE 2 System for the management of assets

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2.1.4 Why implement an asset management system in cities?

Each city should implement and operate an asset management system, the performance of which should be periodically
audited and reported.

Why implement an asset management system?: • Integration is not only horizontal (between functions), but
also vertical. It carries through from Council, who establish
• The interdisciplinary nature of asset management requires
the growth and developmental agenda for the city, to
an enterprise-wide, integrated systems approach. This
executive management who provide strategic leadership, to
ensures that all departments and disciplines coordinate
operational staff involved in the creation and maintenance
their thinking, resources, processes and activities to deliver
of assets and the ongoing delivery of services. A properly
optimal value from assets in a systemic manner.
designed and implemented asset management system

“
establishes a clear line of sight towards the strategic
...AM system establishes clear line of sight objectives of the city, and ensures that all staff contribute
towards the strategic objectives of the city...” towards meeting those objectives.

2.1.5 Objectives of this module

This module describes the scope, elements and relationship between elements comprising the AM system in cities. It also
provides specifications for each element in the AM system, such as for the AM policy, and offers guidance on how to go
about developing, integrating and implementing these elements, and over time to improve on the AM system. The following
process is recommended for developing the AM system:

1 DEFINE THE SCOPE OF THE AM SYSTEM 2 IDENTIFY STAKEHOLDER REQUIREMENTS

This includes ID of asset portfolios managed/controlled; First identify all stakeholders, internal and external, and
the policies, plans and processes forming part of the AM then proceed to record their expectations of both the AM
system; and linkages to other policies, plans and processess system and of assets

3 DEVELOP AM POLICY 4 DEVELOP AM STRATEGY

Prepare “state of city assets” report and “state of service

provision” report, Considering these capabilities and
limitations, interpret stakeholder requirements and
establish AM objectives for both the AM system and for
Prepare, adopt and then communicate the approved AM
asset portfolios. Document AM practices, approaches,
policy to all stakeholders, both internal and external
methodologies, models, standards and decision rules.
Prepare sub-strategies as necessary, e.g. AM systems
improvement strategy and infrastructure investment
strategy

FIGURE 2.7: Process for developing the AM system

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MODULE 2 System for the management of assets

2.2 DEFINING THE SCOPE OF

THE AM SYSTEM
2.2.1 Elements and the dimensions of the scope of the AM system

The first step in defining and establishing or reviewing the AM AM system scope documentation forms part of the City
system is to define and document its scope, inclusive of the Integrated Infrastructure Plan, discussed in Module 7 of this
following: Toolkit. SANS 55001, CI 4.3 requires that the following should
be considered in determining the scope of the AM system:
• The asset portfolios managed or controlled.
• The policies, plans, functions and processes within the • Asset management objectives.
AM system. • External and internal issues relevant to the purpose of the
• Main internal and external linkages in the AM system, within city which affect its ability to achieve the intended outcomes
the city and to other organisations such as regulators, of its asset management system.
auditors, funders, service providers and suppliers. • Stakeholders relevant to the AM system, their requirements
• The current and desired future level of maturity of the and expectations with regards to AM, as well as their
AM system. requirements for the recording and reporting of information.
• Criteria for AM decision-making.
• The interaction and linkages with other management
systems.

These elements are described in the remainder of this module.

“ The first step in defining and establishing

or reviewing the AM system is to define and
document its scope...”

2.2.2 Asset portfolios managed or controlled

The following factors should be taken into account when deciding the scope of asset portfolios:

• The city’s service commitments, and the extent to which

those services are discretionary in nature e.g. does some
law compel the city to provide the service, or is rendered by
decision of Council?
• To what extent is the service dependent on assets for
achieving the intended outcomes?
• Is the service rendered directly by Council, or through a third
party on behalf of Council?
• Does the service generate revenue for the City?
• What is the risk to service delivery should assets fail?

These factors are rated for each service provided to the

community, using the rating tables provided below (Table 2.2a
– d):

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 System for the management of assets MODULE 2

TABLE 2.2(A): Criticality of the service

CRITICALITY DESCRIPTION RATING

Priority 1 function: Critical High

Priority 2 function: Important Medium
Priority 3 function: Discretionary Low

Service priorities have been determined by the Municipal Demarcation Board, as follows:

PRIORITY 1 FUNCTIONS PRIORITY 2 FUNCTIONS PRIORITY 3 FUNCTIONS

(CRITICAL) (IMPORTANT) (DISCRETIONARY)

Potable water Air pollution Municipal parks and recreation

Electricity reticulation Beaches and amusement facilities Local sport facilities

Sanitation Cleansing Public places

Refuse removal Control of public nuisances Local tourism

Cemeteries Fencing and fences Local amenities

Fire fighting Sell food to public Municipal airport

Municipal health services Noise pollution Licensing of dogs

Municipal planning Pontoons and ferries Child care facilities

Municipal roads and stormwater Pounds Sell liquor to public

Traffic and parking Street lighting Markets

Building regulations Street trading Burial of animals

Municipal public transport Trading regulations Municipal abattoirs

It is generally easy to identify asset portfolios by considering the type of services offered by a city,
such as for municipal parks and recreation. Cities however also have other asset portfolios not
reflected in the priority ranking list offered by the Municipal Demarcation Board. Examples of such
asset portfolios include:
• Information and technology networks
• Municipal operational buildings (e.g. administration buildings, workshops, depots, stores and yards)
• Investment properties (e.g. international convention center, blocks of flats)
Therefore, take care not to limit the identification of service and asset scope only to the list provided
above.

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MODULE 2 System for the management of assets

TABLE 2.2(B): Asset intensity

ASSET INTENSITY DESCRIPTION RATING

The service can’t be rendered without a dedicated asset portfolio uniquely designed for the
High
purpose of that service
Service delivery to some extent dependent on the availability and use of assets Medium
Service can be delivered without the use of assets Low

TABLE 2.2(C): Revenue capacity of service

REVENUE CAPACITY DESCRIPTION RATING

Trading service: the service generates a surplus of income for the city High
Economic service, operating at breakeven: it generates neither a loss nor a surplus Medium
Subsidised service: the service operates at a loss, and is subsidised Low

Typical classifications for revenue capacity are as follows:

REVENUE CLASSIFICATION SERVICE

Abattoir

Electricity

Markets

Trading services Potable water

Sanitation

Solid waste

Traffic and parking

Beaches and amusement facilities

Cemeteries
Economic services
Halls

Sport facilities

Child care facilities

Public spaces

Subsidised services Roads

Stormwater

Street lighting

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 System for the management of assets MODULE 2

TABLE 2.2(D): Risk to service delivery if assets fail

RISK TO SERVICE DELIVERY IF ASSETS FAIL RATING

Major to severe: (e.g. injuries or loss of life, notable negative media coverage and public
High
perception, damage to property, revenue losses)
Moderate: (e.g. minor service interruptions, minor injuries, passing media interest) Medium
Low: managed through normal operating procedures Low

Using the rating system provided above, all services can now be ranked to determine their reliance on assets, and the criticality of
asset portfolios to be managed. An example of such ranking is provided in Table 2.3 below.

TABLE 2.3: Scope and importance of assets to be managed: identification and ranking table

CRITICALITY OF ASSET PORTFOLIOS TO SERVICES RENDERED BY THE CITY

SERVICES RISK OF
SERVICE ASSET REVENUE OVERALL
SERVICE
CRITICALITY INTENSITY CAPACITY RANKING
FAILURE
Air pollution M M L L M
Beaches and amusement
M H M L M
facilities
Cleansing M M H M M
Electricity H H H H H
Local sports facilities L H M L M
Noise pollution M L L L L
Parks and recreation L H M L M
Potable water H H H H H
Public transport H H M H H
Roads H H L H H
Sanitation H H H H H
Solid waste H H H H H
Stormwater H H L H H
Etc.

Information from this ranking exercise can be used as follows: and dealt with in one asset management plan. A function
such as electricity, or water, is asset intensive and failure of
• To determine the scope of asset portfolios
such assets can have a major to severe negative set of impacts
• To determine the criticality of asset portfolios for the city. Consequently a function such as electricity or
• To determine appropriate arrangements (plans, processes water will each have a dedicated asset management plan,
and resource) for asset portfolios. It would for example not be and if the asset portfolio is sufficiently extensive and the city
necessary to prepare a dedicated asset management plan for has the administrative capacity, probably a dedicated asset
the noise control function, as it does not rely on assets. Public management planner for each such function as well.
amenity functions, generally rated “Medium” can be grouped

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MODULE 2 System for the management of assets

2.2.3 Functions, policies and processes

The next step is to identify functions and processes within the AM system. The 39 subjects comprising the asset management
landscape (see Figure 2.6) provide a basis for identifying AM functions. Functional analysis of the first subject group of the
asset management landscape may result in identification of the following AM functions (first three subjects in the “Strategy
and Planning” domain):

TABLE 2.4: Identification of AM functions within the “Strategy and Planning” domain

AM SUBJECT
AM SUBJECT FUNCTIONS
DOMAIN

Analyse the city’s long term strategic plan and identify requirements
for the delivery of services that are reliant on assets

Identify statutory requirements for asset management

Determine the principles that will direct the management of physical

assets and which will enable, facilitate or support the achievement
of both the requirements of the city’s long term strategy and of
legislation

Identify linkages with other corporate policies and ensure alignment

with such policies as appropriate

As a specific, significant element of the AM policy, establish, maintain

and update the asset data model (see Module 3)
Strategy and planning AM policy
Establish roles and responsibilities, inclusive of committee mandates,
structures and responsibilities, and delegations

Include requirements for periodic review of the AM policy, or as city

strategy, legal requirements or business drivers change

Prepare draft AM policy

Subject the draft policy to inputs and review, and finalise for approval

Formal approval of the AM by senior management

Communicate the AM policy

Periodic review and updating of the AM policy

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 System for the management of assets MODULE 2

AM SUBJECT
AM SUBJECT FUNCTIONS
DOMAIN
Establish a framework for levels and standards of service (see Module 4)
Establish a spatial segmentation system for service delivery and asset
portfolio analysis and reporting (see Modules 3 and 4)
Establish a customer classification system (see Module 4)
Establish decision-making criteria (see Module 8)
Establish AM objectives relating to both the performance of (1) the AM
AM strategy and system and (2) performance of each service and asset portfolio
objectives Establish AM performance, output and outcome indicators linked to
AM objectives, and the framework for reporting on such
Establish current and desired levels of AM practice
Preparation of AM strategy as part of the City Integrated Infrastructure
Plan, and submission for approval
Formal approval of the AM strategy
Strategy and planning
Periodic review and updating of the AM strategy
Develop consolidated current customer profile
Determine current demand for land and infrastructure per customer
type and per infrastructure service
Prepare one consolidated customer growth forecast for the city as
a whole

Demand analysis Spatial apportionment of future customer growth

(see Module 5) Approval and communication of the consolidated city customer
growth forecast
Interpret customer growth forecasts per sector and calculate net
additional demand
Formulate appropriate asset and non-asset responses to demand
Formulate demand response plan

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MODULE 2 System for the management of assets

Next, identify policies and processes relating to the above functions. Considering the functions identified in the above table,
the following policies, processes and stakeholder relationships:

STAKEHOLDER ACRONYMS:

AG Auditor General MDB Municipal Demarcation Board

DCoG Department of Cooperative Governance NGO Non-Governmental Organisation

DEA Department of Environmental Affairs PMU Project Management Unit

Department of Rural Development and Land
DRDLR NT National Treasury
Reform
IDP Unit Integrated Development Planning Unit SG Surveyor General

AM RELATED POLICIES, PROCESSES INTERNAL EXTERNAL

FUNCTIONS
SUBJECT AND PLANS RELATIONSHIPS RELATIONSHIPS
Asset Finance Department
Asset accounting policy and procedures AG
accounting Internal Audit
Risk
Corporate risk management policy Corporate Services ---
management
Community
Disaster Disaster management policy, plan and
Protection DCoG
management processes
Department
AM policy Environmental
Environmental Environmental management policy,
Management DEA, NGOs
management framework, plan and processes
Department
Financial Financial policies, strategies and plans (e.g.
Finance Department NT
management policies on investment and insurance)
Finance Department
Supply chain Supply chain management policy and
Project NT
management processes
Management Unit
Community (current
Customer service charter IDP Unit and prospective
customers)
Free basic services policy Finance Department DCoG, NT
Levels of DCoG, Community,
service Community consultation and the IDP Business Chamber,
IDP Unit
process NGOs, sector
AM departments
Urban Planning
strategy Municipal spatial development framework DRDLR, DCoG
Department
Spatial structuring elements defined in the Urban Planning
DRDLR, NT
municipal spatial development framework Department
Spatial “Regional Segment” of mSCOA Finance Department NT
segmentation
system Ward system IDP Unit MDB, DCoG
Regional administrative/service delivery Senior management
---
system team

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 System for the management of assets MODULE 2

AM RELATED POLICIES, PROCESSES INTERNAL EXTERNAL

FUNCTIONS
SUBJECT AND PLANS RELATIONSHIPS RELATIONSHIPS

Rates and tariff policy Finance Department NT, DCoG

Customer classification system adopted in
Finance Department NT
Customer the financial reporting system
classification Land use classifications adopted in Council’s Urban Planning
system DRDLR
land use management scheme(s) Department
Land use classification adopted in the
Finance Department DCoG
municipal property valuation roll
DCoG, NT,
Community,
Long term growth and development Senior management
Business Chamber,
strategy team
NGOs, sector
departments

Integrated development plan IDP Unit DCoG

Corporate Services
Performance management system DCoG
Department
SDBIP Finance Department NT
Finance
AM objectives, Grant & funder required reports NT, funders
Department, PMU
outputs and
outcomes AG, NT, community
GRAP Finance Department
and stakeholders
AM
MFMA Section 71 & 72 reports Finance Department NT
strategy Finance
Department, all
mSCOA NT, AG
units with budget
votes
Sector-specific
Sector departments/
Sectoral regulatory requirements departments e.g.
regulators
Water
Billing system data Finance Department AG
Long-term city growth and development Senior management
DCoG, NT
strategy team
Urban Planning
Municipal spatial development framework DRDLR, DCoG, NT
Department
Municipal housing plan and committed Housing Department of
housing projects Department Housing
Future Pending and approved township Urban Planning
demand DRDLR, SG
applications, changing land use patterns Department
Sector
Sector-specific
Sectoral master plans departments/
departments
regulators
Bulk providers e.g.
Capacity/master/investment plans of bulk Sector-specific
Eskom and water
providers departments
boards

TABLE 2.5: Policies and processes relating to AM functions (selected/limited linkages for illustrative purposes)

2.22
MODULE 2 System for the management of assets

2.2.4 Stakeholder requirements

VARIOUS MEANS OF IDENTIFYING STAKEHOLDERS IDENTIFYING STAKEHOLDERS BY WAY OF SUPPLY

The previous sub-sections demonstrated how the listing of CHAIN ANALYSIS
asset management functions can assist in identifying core and Using the supply chain analysis method to identify stakeholders,
related asset management processes and policies, as well as the first step is to identify an infrastructure service. For
internal and external stakeholders. Table 2.4 identified such demonstration purposes, a potable water service is selected.
stakeholders at a high level, for demonstrative purposes. The second step involves identifying key processes or steps
along the supply chain.
When identifying stakeholders, it is necessary to be specific, and
to identify all relevant stakeholders. Large cities for example For a potable water service, this may include, at a high level,
are advised to identify not only the local business chamber as abstraction, treatment and distribution. More detailed processes
one stakeholder only, but also economic sector representatives or steps could include abstraction, bulk conveyance, treatment,
(e.g. manufacturing, logistics and transport, hospitality, and storage, reticulation, billing etc. Now, having decided on the
wholesale and retail services). Also consider large parastatals as main processes in the potable water supply service, the third
key stakeholders where relevant, for example Portnet, ACSA and step is to list key activities comprising each process. An example
Telkom. of key activities per process is provided in Figure 2.8.

Using the Asset Management Landscape is one means to Next, identify stakeholders involved in, affected by or interested
identify stakeholders. Stakeholders can also be identified, at the in the various activities identified. Table 2.6 lists internal and
level of infrastructure service provided, by way of supply chain external stakeholders associated with various processes and
analysis and asset lifecycle analysis. activities.

2.23
 System for the management of assets MODULE 2

BULK ABSTRACTION/SUPPLY TREATMENT DISTRIBUTION

• Catchment management and water release • Purchasing of chemicals • Network master planning (hydraulic
• Asset creation, upgrading and renewal • Purchasing of electricity modelling)
• Bulk conveyance • Processing water to be safe for human • New customer connections
• Metering consumption • Purchasing of electricity for pumping
• Water quality testing • Network operations (storage and
• Asset creation, upgrading and renewal reticulation)
• Plant operations & maintenance • Asset creation, upgrading and renewal
• Maintenance & repairs
• Metering & billing
• Responding to customer queries

FIGURE 2.8: Identifying key processes and activities within the supply chain (potable water service)

2.24
MODULE 2 System for the management of assets

STAKEHOLDER BULK ABSTRACTION/SUPPLY TREATMENT DISTRIBUTION

GROUP
• Water Services Planning Unit
• Urban Planning (IDP, Capital • Urban Planning (IDP, Capital (Master planning)
Investment Framework and MSDF) Investment Framework and MSDF) • Urban Planning (IDP, Capital
Planning for water • Finance (budgeting and sourcing of • Finance (budgeting and sourcing of Investment Framework and MSDF)
services finance) finance) • Finance (budgeting and sourcing of
• Council (strategic visioning and • Council (strategic visioning and finance)
approval of budgets) approval of budgets) • Council (strategic visioning and
approval of budgets)

• Bid Adjudication Committee • Bid Adjudication Committee • Bid Adjudication Committee

Capital activities • Supply Chain Management Unit • Supply Chain Management Unit • Supply Chain Management Unit
• Project Management Unit • Project Management Unit • Project Management Unit

• Supply Chain Management

• Supply chain management unit
• Unit (external purchases and stores)
(external purchases and stores)
• Suppliers (own dams & other • Electricity department (electricity
Suppliers • Electricity department (electricity
abstraction sources/points) and asset-related electrical services
and asset-related electrical services
support)
support)
• Purchasing of electricity for pumping

• WTW operators • Network operators

• Bulk asset operators
Water operations • Laboratory services (internal) • Maintenance crews (internal)
• Bulk asset maintenance crews
• Maintenance crews (internal) • Finance (meter reading & billing)

• Land Administration Division

(Council Building Services)
Internal customers • Fire and Emergency Services (Fire and
ambulance stations, fire hydrants)
• Parks’ Division

• Council • Council • Council

The Executive
• City Manager • City Manager • City Manager
(Council, City
• Director: Infrastructure Services • Director: Infrastructure Services • Director: Infrastructure Services
Manager and Senior
• Finance (asset register, spending • Finance (asset register, spending • Finance (asset register, spending
Management Team)
performance, Section 71 & 72 reports) performance, Section 71 & 72 reports) performance, Section 71 & 72 reports)

TABLE 2.6(A): Identifying stakeholders within the supply chain (Internal stakeholders: potable water service)

2.25
 System for the management of assets MODULE 2

STAKEHOLDER BULK ABSTRACTION/SUPPLY TREATMENT DISTRIBUTION

GROUP
• Department of Water Affairs and
Sanitation
• Department of Water Affairs and • Department of Water Affairs and
Policy & planning • Department of Cooperative
Sanitation Sanitation
community: Governance and Traditional Affairs
• Department of Cooperative • Department of Cooperative
Planning for water • The National Treasury
Governance and Traditional Affairs Governance and Traditional Affairs
services • Office of the Premier
• The National Treasury • The National Treasury
• Provincial Planning Commission
• Relevant Water Board

Regulatory
• Department of Water Affairs and • Department of Water Affairs and • Department of Water Affairs and
community:
Sanitation Sanitation Sanitation
approvals to
• Department of Environmental Affairs • Department of Environmental Affairs • Department of Environmental Affairs
construct or operate

• The National Treasury • The National Treasury

• The National Treasury
Investment • Donors • Donors
• Donors
community: funding • Financial institutions • Financial institutions
• Financial institutions
& financing • Equity markets • Equity markets
• Equity markets
• Private sector developers • Private sector developers

• Consulting engineering services

• Consulting engineering services
• Feasibility assessment services
• Feasibility assessment services
• Construction materials and services
• Construction materials and services
• Manufactured plant and machinery
• Consulting engineering services • Manufactured plant and machinery
• Chemical suppliers
• Feasibility assessment services • Meter connection providers
• Energy suppliers
• Construction materials and services • Energy suppliers
Suppliers: goods and • Software system and associated
• Manufactured plant and machinery • Software system and associated
services service providers
• Bulk water provision service providers
• Training services related to water
• Asset inspection services • Asset inspection services
treatment
• Maintenance and repair services • Maintenance and repair providers
• Laboratory services
(parts and services)
• Asset inspection services
• Third party payment service providers
• Maintenance and repair providers
(e.g. Pick & Pay and Postnet)
(parts and services)

• Residential
• Business and commercial
• Mining
Customers • Industrial
• Agriculture
• Institutional
• Public sector infrastructure

• Department of Water and Sanitation

• Department of Water and Sanitation • Department of Water and Sanitation • The National Treasury
Regulatory oversight
• The National Treasury • The National Treasury • Auditor General
(within government
• Auditor General • Auditor General • Department of Cooperative
structures)
• SALGA • SALGA Governance and Traditional Affairs
• SALGA

Community • The Media (TV, radio, print and • The Media (TV, radio, print and • The Media (TV, radio, print and
transparency and electronic media) electronic media) electronic media)
accountability • Special pressure group/lobby groups • Special pressure group/lobby groups • Special pressure group/lobby groups
structures (outside (e.g. those concerned with the (e.g. those concerned with the (e.g. those concerned with the
of the government environment) environment) environment)
structure) • The general public • The general public • The general public

• Water Research Commission • Water Research Commission • Water Research Commission

The professional • Water Institute of South Africa • Water Institute of South Africa • Water Institute of South Africa
water community • Engineering associations and • Engineering associations and • Engineering associations and
institutions institutions institutions

TABLE 2.6(B): Identifying stakeholders within the supply chain (External stakeholders: potable water service)

2.26
MODULE 2 System for the management of assets

Identifying stakeholders by means of asset lifecycle analysis Using this method, stakeholders are identified for each lifecycle activity,
commencing with “requirements definition”, and terminating with “decommissioning/disposal”.
Professional water community

(TV, radio and print)

(e.g. WISA, WRC)

The media
Built environment community

Special interest groups

COMPARISON OF STAKEHOLDER ANALYSIS METHODS

In general, method 1 (AM landscape) is more appropriate when designing the corporate asset management system. Methods 2 and
3 (supply chain analysis and asset lifecycle analysis) are generally more suitable for sectoral analysis (a specific infrastructure service).

TABLE 2.7: Suitability of stakeholder analysis methods

NR DESCRIPTION COMMENTS/NOTES

ID of
stakeholders • Very comprehensive, time-consuming technique
1 using the AM • Most appropriate for AM system design
Landscape as • Probably overkill for preparing one sectoral iAMP
reference

2.27
 System for the management of assets MODULE 2

• Policy and planning community: • Suppliers: construction firms

Planning for water services • Customers
• Suppliers: manufactured plant & • Regulators: service provision
• Customers equipment
• Potential fixed capital investors/ monitoring
• Suppliers: professional services • Suppliers: chemicals, energy and
developers • Investment community: financing other goods
& funding • Suppliers: maintenance & repair
• Regulators: reporting on outputs & providers
outcomes achieved • Suppliers: software systems and
associated services
• Third party payment service
• Suppliers: consultants specialising providers
• As for “Asset creation” • Meter connection providers
in asset management planning
• Suppliers: consultants specialising
in water master planning
• Suppliers: consulting engineers for
design work
• Suppliers: consultants for
feasibility assessment and support
with regulatory approvals • Customers
• The community (public)
• Regulatory community: approvals • The regulatory community
• The regulatory community
to construct • Suppliers: asset assessment
• Buyers of second-hand equipment
• Investment community: financing services
& recyclable materials
& funding • Suppliers: maintenance & repair
• Suppliers: construction firms
providers

FIGURE 2.9: Stakeholder analysis using the asset lifecycle

NR DESCRIPTION COMMENTS/NOTES

• Very handy technique where there is incremental beneficiation or processes involved in

ID of delivering services (e.g. water, sanitation, electricity and solid waste)
stakeholders by
2 • Requires a depth of understanding of some sectors to apply (e.g. linking roads with the broader
way of supply transport system)
chain analysis
• Not very well suited to standalone facilities or functions (e.g. operational buildings)

• Intuitively easy to apply

• Can be applied to all sectors/asset portfolios
ID of
stakeholders • Bulk linkages not always so easy to pigeon hole
3 • Well suited to functions such as operational buildings and most public amenities, barring
by way of asset
lifecycle analysis those that link into larger open space systems, where the private sector offers similar or
complementary services, or where scalability is required for higher levels of service and greater
catchments, in which case the supply chain analysis may be better suited

2.28
MODULE 2 System for the management of assets

IDENTIFY STAKEHOLDER REQUIREMENTS

AM objectives are formulated to achieve city strategic objectives, taking into account stakeholder requirements. As shown in the
preceding sub-section, a city will have multiple internal and external stakeholders interested in municipal infrastructure and the
value delivered from these assets. External stakeholders can be grouped as follows:

FIGURE 2.10 City external stakeholder classification system

Note that stakeholders can assume various roles, and therefore may have more than one set of requirements of the city, its AM
system and the value delivered from assets. Consider, for example, the Department of Water Affairs and Sanitation. It is a supplier,
because it provides bulk raw water. It is a regulator, because it establishes national water policy, determines bulk water abstraction
limits, and issues permits for municipal water works. It may also be a customer, receiving municipal services in locations where it has
offices and other facilities. In the broadest sense, stakeholders, of which there are many, will generally have four broad categories of
requirements for a city’s AM system and the value derived from assets. These categories are:

01 REQUIREMENTS RELATED TO THE EFFICIENT

FUNCTIONING OF THE AM SYSTEM 02 CORE REQUIREMENTS RELATED TO LEVELS
AND STANDARDS OF SERVICE
Requirements in this category relate to aspects such as cost- These relate to the type and quality of services that customers
efficiency: customers want to know that they do not pay more achieve, for example receiving potable water connected to
for services than is necessary, and that their rates, taxes and their houses at a certain pressure, with no more than three (3)
investments are properly accounted for. interruptions during a calender year, with each interruption
lasting no longer than x hours. Also included in this category
of requirements are other dimensions of the quality of service

“ ...Customers want to know...that their

rates, taxes and investments are properly
rendered, such as accuracy of billing and the professionalism of
the city in dealing with customer queries. Levels and standards
of service are dealt with in detail in Module 4.
accounted for.”

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 System for the management of assets MODULE 2

03 VALUE-FOR-MONEY
The AM system of a city will establish the inputs, activities and
outputs necessary to achieve the impacts desired in the city’s
long term vision and strategy, considering the requirements
Value-for-money is the additional value added over and above
the core investment. Value-for-money is the sum total of the of stakeholders, as demonstrated in Figure 2.4. Regulators
core output required (e.g. a new access road) plus additional however also in many instances dictate practice and reporting
equity realised (e.g. number of jobs created, road-side servitudes requirements, and these must also be taken into account in the
beautified and improved public safety). design of the AM system.

04 IMPACTS ACHIEVED
Measured in terms of how the value that assets provide achieve
the strategic objectives of the city.

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MODULE 2 System for the management of assets

2.2.5 Plans within the AM system

The AM system for cities comprises several plans that function within a hierarchical context, to ensure vertical alignment
aimed at giving effect to the city’s long term strategy in greater levels of detail as plans cascade down the hierarchy.

LONG TERM CITY STRATEGY

ORGANISATION VISION, OBJECTIVES AND DESIRED OUTCOMES, INCLUSIVE OF
SPATIAL VISION AND OBJECTIVES.

ASSET MANAGEMENT POLICY

AM principles derived from organisational strategic objectives, requirements and AM
responsibilities.

STRATEGIC ASSET MANAGEMENT PLAN

Strategic context, issues and options. AM objectives for both the AM system and for asset
portfolios. Strategies and prioritised programmes and projects to deliver on AM objectives.
Long term infrastructure financial plan.

ASSET MANAGEMENT PLAN (PER MAJOR ASSET PORTFOLIO OR SERVICE)

Service and asset description. Current and proposed levels & standards of service. Demand
forecast & management. Risk assessment & responses. Lifecycle strategies, activities &
programming. Cash flow forecasts.

MASTER PLANS, OPERATIONAL PLANS, PROGRAMMES AND PROJECTS

Guides and schedules activities of both staff and contractors

FIGURE 2.11: Plans within the AM system

Whilst the city’s long term strategy sets the scene for AM plans, they in turn also inform the city’s overarching strategy. The following
two sections focus on the AM policy and the AM strategy, which, for the purpose of cities, are included in the City Integrated
Infrastructure Plan. AM plans and the City Integrated Infrastructure Plan are discussed in Module 7. Future versions of this Toolkit
will include a module on operational plans.

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System for the management of assets MODULE 2

2.32
MODULE 2 System for the management of assets

2.3 AM POLIC Y
2.3.1 What is an AM policy

Many cities already have AM policies, but with limited scope focused on the approach to accounting for assets. They tend
to stipulate asset recognition criteria, the valuation model (cost or revaluation method), useful life expectations, method of
depreciation, asset impairment and other matters relating to the accounting for and reporting on assets. These are important
aspects of AM, dealt with in the asset data model presented in Module 3.

As important as these elements are, they do not provide direction A good AM policy therefore provides directives or policy principles
for the management of assets. Critical aspects such as what is to that clearly spell out the city’s approach to AM, and the outcomes
be achieved from investments, assets and the AM system are not desired from assets and of the AM system. It provides direction for
addressed in such a limited scope asset accounting policy. the development of AM objectives and strategies.

2.3.2 Requirements for an AM policy

A good AM policy satisfies the following requirements:
• Appropriate to the purpose, complexity and scale of the city’s • Spells out key roles and responsibilities for the AM system.
service commitments, AM activities and asset portfolios. • Includes a commitment to continual improvement of the AM
• Well understood, because it is presented in clear, simple system.
language, made available to and communicated to all • Includes provisions for sound governance, monitoring and
stakeholders and employees. review, including scheduled internal review and external
• Meets all statutory requirements, the dictates of government audit.
policy and of best practice, including the provisions of SANS • Emphasises that Council and top management support the
55001 and GRAP with respect to assets. AM policy.
• Supports or is otherwise consistent with the city’s strategic

“
plans and policies.
A good AM policy...supports or is
• Articulates the principles that set the approach and decision-
making framework for the management of assets, sufficiently otherwise consistent with the city’s
so that AM objectives and strategy can be developed which strategic plans and policies.”
support the objectives and desired outcomes of the city.

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 System for the management of assets MODULE 2

2.3.3 What goes into an AM policy?

Cities have two options regarding the format of their AM policies: They can keep a principle AM policy which contains the
asset accounting component, and create a separate policy which focuses on strategic asset management. Alternatively they
can retain the asset accounting component of the AM policy but expand it to address the requirements stated above. The
following are possible sub-sections and content of such a policy (not addressing the asset accounting component of the
policy), using the fictitious Protea Metropolitan Municipality as an example:

ORGANISATIONAL CONTEXT AND INTRODUCTORY STATEMENT

An introductory statement sets the scene for the policy, and informs readers of the policy as to what it is about. The following serves
as an example of an introductory policy statement:

BOX 2.1: A POSSIBLE INTRODUCTORY STATEMENT FOR AN AM POLICY

Successive generations of the Protea community have invested in the creation of infrastructure and social
welfare assets since 1896. This diverse asset portfolio comprises electricity, potable water, roads and transport,
solid waste and sanitation infrastructure, as well as parks, recreation facilities and other buildings. These assets
underpin our way of life, enable economic growth and provide the means for social upliftment, integration and
satisfaction. They represent the wealth of the community.

The community of Protea entrusted its municipality with custodianship of these assets. It expects Council, the
management and employees of the municipality to sustainably manage these assets to deliver benefit to both
current and future generations of the community.

This policy spells out the principles according to which the Municipality manages assets on behalf of the community
and demonstrates responsible stewardship of these assets.

The municipality may also opt to define in the introductory statement what asset management is, and note what it involves, such as
deriving value from assets, and that it entails the balancing of performance, cost and risk through appropriate asset and non-asset
responses.

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MODULE 2 System for the management of assets

KEY PRINCIPLES DRIVING AM IN THE MUNICIPALITY

The Council and management team of the Protea Municipality
will actively strive to implement the following principles in all
planning, decision-making and implementation activities:

Note that the following are possible primary policy principles

derived from the discussion on the South African urban
legislative and policy framework presented in Module 1. They
serve as a good guide to the type of principles to be included
in the policy, however, each city should still analyse its own
strategies to ensure that policy principles support the city’s
overall strategy.

Note the following on the list of potential principles offered

above:

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 System for the management of assets MODULE 2

POLICY PRINCIPLE KEY ISSUES/CONSIDERATIONS

Provided that services are delivered on the back of assets, and that the need for services will
Sustainable service
remain in perpetuity, maintaining the productive capacity of assets through a structured
delivery
programme of renewals is a key requirement

Cities with well-developed, functioning infrastructure systems are more likely to attract fixed
Economic development capital investment, that in turn leads to land value capture and the creation of business and
employment opportunities

Environmental sustainability is generally concerned with the quality of the environment and
its ability to deliver a range of services to humanity (e.g. recreational, medicinal and health
services). A key issue for continued environmental sustainability is climate change adaptation
Environmental
and resilience, which, if not addressed, threatens our way of life. Some cities may opt to separate
sustainability
state policy principles for environmental sustainability and climate change to give particular
recognition to the latter. This is not wrong, but these two issues are intimately related and
separating them should be handled with care

Key dimensions of financial health and sustainability include (1) investing in productive capacity
Financial health and
necessary to deliver services (building an asset portfolio) and generate revenue, (2) maintaining
sustainability
that productive capacity, and staying (3) solvent and (4) liquid

This principle has three main dimensions. It is firstly concerned with equitable service provision,
with special emphasis on spatial justice i.e. ensuring access to persons and areas previously
excluded from service delivery. The second dimension is concerned with community health
Social upliftment
and safety. These first two dimensions provide citizens with basic liveable conditions. The third
dimension is concerned with higher-order needs such as community empowerment and social
integration.

Forging a unifying city

This principle is concerned with protection of cultural heritage whilst creating the common
identity whilst celebrating
ground that unifies a city, and that distinguishes it from other cities
cultural diversity

Organisational
This includes issues such as improving resource and cost efficiencies, as well as productive, and
effectiveness and
retaining human capital through an attractive, fit-for-purpose work environment
efficiency

A safe, capable and Key issues include work place health and safety, investing in human capital development, and
efficient workforce enabling employees to perform

TABLE 2.8: Key issues embedded in the policy principles offered Each policy principle should be described in concise terms, but
sufficiently so that its intent is clear to all who read it. Consider for
example the principle “spatial efficiency”. How does this principle

“
direct AM decision-making and action? The following is an
Cities with well-developed, functioning example of how the spatial efficiency principle can be formulated
infrastructure systems are more likely to in the AM policy, thus satisfying the requirements of SPLUMA, the
attract fixed capital investment...” urban transformation agenda and of organisational efficiency:

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MODULE 2 System for the management of assets

BOX 2.2: EXAMPLE OF DESCRIBING A POLICY PRINCIPLE

Spatial efficiency principle:
We commit to:
• Optimise existing infrastructure capacities in the city.
• Adopt levels of services and asset lifecycle responses tailored to the desired status and outcomes for spatial
entities as envisioned in the City’s Spatial Development Framework.
• Prioritise infrastructure investment in locations that promote a compact, integrated city structure with the benefits
of optimal economic functioning, citizen mobility and full realisation of social potential for all.
• Consider the cost of development in various spatial locations.
• Develop and implement spatially-based decision-making systems to ensure that infrastructure delivery maximises
benefits to the community, and minimises negative financial, social, economic and environmental impacts.

KEY ROLES AND RESPONSIBILITIES REGULAR INTERNAL REVIEW AND AUDIT

Key roles and responsibilities at a corporate level should be The policy should include a section requiring regular internal
noted in the AM policy. review, and scheduled periodic external audit of the policy.

These may be addressed in a separate section of the policy, Note the following:
or under each policy principle or other matter dealt with, as • The requirements noted in this section apply to the strategic
appropriate. More guidance on roles and responsibilities are AM component of the AM policy. Accounting standards
provided in Module 12: Enablers. require that the asset accounting component of the policy
is reviewed on an annual basis, specifically with regards to
COMMITMENT TO CONTINUAL IMPROVEMENT matters such as useful life expectations and depreciation
The policy should specifically include a section committing the methods.
city to continual improvement in AM practices. • The requirement for regular review by management should
be set at intervals not greater than every three (3) years, or
whenever there is a change in the regulatory or operating
environment of the city.

“
• Independent audits should be scheduled at three (3) year
The policy should specifically include
intervals, and external audits to be conducted by certified
a section committing the city to continual asset management auditors meeting the requirements
improvement in AM practices.” of ISO/IEC TS 17021-5: 2014(E) Conformity assessment –
Requirements for bodies providing audit and certification of
management systems – Part 5: Competence requirements for
auditing and certification of asset management systems.

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 System for the management of assets MODULE 2

2.3.4 Concluding remarks on the AM policy

The AM policy interprets organisational objectives and provides the approach and principles directing the management of
assets and the services enabled by those assets. It should be succinct, but provide clear direction for the establishment of AM
objectives, and for decision-making on all aspects of AM.

STRATEGIC ASSET MANAGEMENT POLICY ASSET ACCOUNTING POLICY

• Introduction, context and purpose • Recognition

• Key principles • Classification of fixed assets
• Commitment to continual improvement • Identification
• Review and external audit • Asset register
• Roles and responsibilities • Measurement at recognition
• Commitment by Council and top management • Measurement after recognition
• Depreciation
• Impairment
• De-recognition
• Insurance
• Asset safeguarding policy
• Appendices: asset hierarchy, expected useful
lives and residual values

ISO 55000/1 GRAP

FIGURE 2.12: Structure and components of AM policies

In developing the policy, take care not to include the following: Once the policy has been approved, it should be clearly
communicated to all members of Council, the city’s management
• Too many principles. Principles must at some point be
team and the employees of the city. Simply distributing the
converted into AM objectives which cascade down into
policy is not sufficient – management should take active steps
the organisation. AM objective multiply at each successive
to ensure decision-makers and employees understand and
level down into the organisation and into asset portfolios.
support the policy. Where other stakeholders are required to
Too many principles may very well result in too many AM
abide by the policy, such as service providers and suppliers, the
objectives that may overwhelm the AM system and the
policy should also be communicated to them.
resource capacity of the city.
Finally, management should ensure that responsibility for
• Commitments that the city is not able to meet. Once the implementing the AM policy is allocated with sufficient
policy is approved, it commits the city and it can be held resourcing, including funding.
accountable against the commitments made in the policy.

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2.4 AM STR ATEGY

2.4.1 AM objectives

The AM policy establishes AM principles, derived from the strategic objectives of the city. AM objectives are formulated based
on these AM principles. There are two types of AM objectives, these relating to:

• Performance of the AM system, its effectiveness and efficiency AM objectives must be documented in the city’s AM strategy,
– these relate to the required level or maturity of AM practice. which is contained in the City Integrated Infrastructure Plan.
• Performance of the asset network – these relate to levels
and standards of service, described in Module 4: Customer
profiling and levels of service.

2.4.2 AM strategies
There are a number of focused strategies comprising the city AM strategy, as indicated in the figure below. These are discussed
in more detail in the following sections.

AM system strategy Service delivery strategy

(processes, practices, data, electronic systems and skills) (levels and standards of service and service delivery models)

• Stakeholder requirements • Customer profiling and growth expectations

• System scope and objectives • State of assets’ report
• Current state of practice • State of service provision report
• AM system improvement plan • Target levels and standards of service

Performance expected from the AM system Performance expected from assets

CITY AM
STRATEGY

Infrastructure investment strategy Organisation change strategy

(expenditure and revenue projections, smoothing, funding strategies) (levels and standards of service and service delivery models)

• Long term expenditure forecast • Stated conditions for a value-centric organisation

• Long term revenue forecast employing an AM system
• Matching and smoothing of cash flows • Identification of stakeholders and desired behaviour
• Funding strategies and assessment of financial impacts • Stakeholder management plan

Sustainable investment and financial performance Creating an AM culture focused on delivering value from assets

FIGURE 2.13: Key components of city AM strategy

The AM strategy should, regardless of which focused strategy it addresses (e.g. service delivery strategy):

• Formulate AM objectives. • Assess the impacts of options selected.

• Consider options for achieving AM objectives, as well as • Document key assumptions.
risks and opportunities in delivering on asset management • Ensure vertical and horizontal alignment of AM objectives.
objectives.

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 System for the management of assets MODULE 2

2.4.3 AM system strategy

DESIGN A FIT-FOR-PURPOSE SYSTEM

When planning, reviewing or auditing the city’s AM system, the city’s internal and external contexts should be considered, inclusive
of stakeholder requirements and the risks and opportunities presented or inherent in these contexts. The AM system to be
implemented, reviewed or audited needs to:

• Provide assurance to stakeholders that the AM system can

achieve its intended outcomes, defined by the AM principles
adopted in the AM policy and the AM objectives adopted in
the city’s AM strategy.
• Capitalise on opportunities and prevent or mitigate
undesired effects as appropriate.
• Accomplish continual improvement.
• Achieve the above within the financial, administrative and
technical capacity of the city.

Table 1.1 in Module 1 described the AM Maturity Index for

South African cities, ranging from “Initiate” level through to
“Innovator” level. Appendix 2.1 defines maturity in practice for
AM activities, and can be used to assess current and expected
levels of maturity in practice. What is the appropriate level of
maturity in AM practice that cities should strive for? One may
instinctively want to pursue “Innovator” level practice, as it
is the most mature or sophisticated level of practice. This is
however not necessarily the most appropriate level of practice.
Developing a mature AM system requires a sizeable investment
in managerial attention, skills, processes, electronic systems and
data. The decision on the required level of practice will depend
in large part on whether the higher level of practice will deliver
benefits over the costs incurred to effect the improvement.
The following needs to be understood when deciding on the
“appropriate” level of practice:
Consider the last point. An older city faced with an aging asset
• The “appropriate” level of practice is the level which delivers portfolio and limited growth prospects will likely require more
on stakeholder requirements and that capitalises on sophisticated practices relating to asset data and asset care
opportunities whilst dealing with risks. Adopting higher levels (maintenance and renewal) regimes. A city experiencing high
of practice may exceed the requirements of stakeholders growth rates will likely require more robust demand analysis
with regards to the cost they are willing to spend. and response as well as investment planning practices. Likewise,
• It is neither feasible nor desirable to determine that all AM a city that has a wealth of available land but limited access to
activities should be practiced at a particular level of maturity water resources is likely to require more advanced demand
in practice, or even that the same level of sophistication analysis and management practices for its water services
in practice should be adopted across all services or asset function, and less advanced practices for, say, its cemeteries’
portfolios. function.

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REQUIREMENTS FOR THE AM SYSTEM STRATEGY SYSTEM DOCUMENTATION

The AM system strategy should: Cities are advised to:
• Document the processes, practices, conventions, models and • Document all approaches, methodologies, systems,
decision-making criteria and information systems comprising processes and standard operating procedures within the
the AM system. scope of the AM system.
• Profile the current level of maturity (sophistication) of • Document how these approaches, methodologies, systems,
practice. processes and procedures relate to other functions in the city.
• Establish desired or targeted level of practice. • With respect to approaches, methodologies and conventions,
• Present a phased plan for the improvement of the AM system. cities are specifically advised to pay attention to the content
of Table 2.9.
• Note roles and responsibilities relating to the above.

CONVENTIONS AND
GUIDANCE
SYSTEMS

Two options are available:

1. When a city does not have a formal risk management system:
• Workshop with Council and senior management, and calibrate to city operating
environment as appropriate
• Specifically focus on value ranges in relation to the materiality limit established for the
city, and its risk tolerance
Risk management system • Document the risk management system in the AM strategy
– see Module 2
• Where specific resources are required to assist in modification or calibration of the
model, record an improvement activity in the improvement plan
2. When a city has a formal risk management system, but it does not cater for asset
failure modes:
• Document the risk management system in place in the AM strategy, and note the gap
• Record the improvement activity necessary to expand the risk management system
to accommodate asset failure modes

1. Calibrate to city conditions as appropriate

2. Focus specifically on the range of assets, depreciation methods, useful life calibration,
and adoption of spatial segmentation rules
Asset data model 3. Establish unit rates, and document both the approach and methodology used in
– see Module 3 establishing unit rates, as well as source data
4. Ensure alignment with the asset accounting policy
5. Where cities have electronic AM systems on which they host asset registers, ensure
the necessary database reconfiguration

1. Adopt as a corporate convention, from which one city customer profile is made available
Customer segmentation system to all planning departments (strategic planning, urban planning, engineering services
– see Module 4 planning, community services planning and housing)
2. Document the customer segmentation system in the AM strategy

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 System for the management of assets MODULE 2

CONVENTIONS AND
GUIDANCE
SYSTEMS

Spatial segmentation system for

1. Align with spatial development framework and mSCOA as appropriate
AM planning and reporting –
2. Document the spatial segmentation system adopted in the AM strategy
see Module 4

1. Decide the grouping of AM plans to be prepared, reviewed and updated over time
(taking account of amongst other organisational functions, responsibilities and
budget allocations)
Type and structure of asset 2. Decide the formats for AM plans and the strategic asset management plan
management plans and city
3. Decide the frequencies and trigger events for review and updating of these plans,
integrated infrastructure plan – taking into account city planning and budgeting cycles
see Modules 7 and 12
4. Decide and allocate responsibilities for the preparation, approval, review, updating
and communication of these plans
5. Document the above in the AM strategy

Three options are available:

1. A city already has a decision-making criteria system in place. If so, check for
consistency and alignment with the strategic AM policy described in this Module 2
and the AM objectives articulated in the asset management strategy. If alignment
exists, document the decision-making criteria system. Where alignment is required,
the system is still documented, and a system improvement activity is recorded in the
Decision-making criteria (multi- improvement plan
criteria analysis system) – see 2. The decision-making criteria system presented in Module 8 is fit-for-use without
Module 8 modification, and is documented in the AM system strategy. Do not simply assume
fit-for-use, first workshop with Council and senior management, and obtain formal
approval
3. Present and workshop the decision-making criteria system with Council and senior
management, modify or calibrate as necessary, and document in the AM strategy if no
specific improvement project is necessary. Otherwise document the system provided,
and record an improvement activity in the improvement plan

TABLE 2.9: Conventions and systems for inclusion in the AM system strategy that are detailed in this CIDMS Toolkit

Guidance on assessing current AM practice and developing a strategy for improvement in AM practice is provided in Section 12.2.8.

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2.4.4 Service delivery strategies

Service delivery strategies comprise (1) customer service levels, (2) asset service levels and (3) service delivery models. The
stakeholder requirements analysis will have identified what customers and other stakeholders require in terms of service.

Module 4 demonstrates that customers are concerned not only with receiving a “core” service, such as potable water supply
connected to households, but also with service attributes such as water pressure, the quality of the commodity itself (clear water,
no discernible taste) and minimum disruption. Cities should however only commit to provide the services that they are able to offer.
The alternative is well founded community distrust when Council does not keep its promises that may in turn lead to community
resistance expressed in a number of ways, including public protest action, non-payment or even violent or destructive behaviour.
Service delivery models are discussed in Module 12, Section 12.2.5, and contracting methods in Module 11.

STATE OF ASSETS REPORT

A good starting point for any service delivery strategy is the presentation of a “State of Assets” Report. Assets provide the means with
which to deliver services, whereas infrastructure capacity limits and factors such as condition and performance present constraints
as to what the city can deliver. A good state of assets report will provide insight into:

The scope of asset Extent and value of The geographic The state of assets,
systems assets. reach of the City’s with specific
and operations. Items for inclusion assets. Where can reference to
include asset extent, it provide services, condition. Are assets
asset age profiles, and where not? Do still able to deliver
replacement cost capacity constraints now, and will they be
value, depreciated hamper service able to deliver into
replacement cost value delivery capabilities in the future?
and accumulated particular areas?
depreciation, for each
asset class and for the
city as a whole.

Techniques for asset profiling are presented in Module 3: Asset Data Model and Infrastructure
Profiling.

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 System for the management of assets MODULE 2

With respect to the requirement to describe the asset system or

portfolio: A graphical example of the description of a potable
water supply system is provided in Figure 2.14.

Note the following about this graphical presentation of a

potable water supply system:
• It presents the water supply system in an easy-to-follow
manner suitable for sharing with non-technical stakeholders
such as politicians and communities.
• It packs a fair bit of information. It demonstrates the potable
water supply chain, inclusive of sources of supply and
treatment arrangements. It also shows that if demand is to
increase, the capacities of the water treatment works will
become constrained.
• It also presents a high-level water balance.

Considering the above, a presentation of this nature is a What is the condition profile of assets in general, and critical
valuable communication instrument. Examples of asset profiles assets in specific? Are assets generally in acceptable condition,
are provided in Module 3.4. When preparing the State of Assets or are they being sweated with a major wave of renewals
Report, be sure to provide a helicopter view of the main issues looming? Having provided the high-level view, also specifically
that would be of interest to decision-makers and stakeholders. address known major issues that can threaten service delivery,
Is there sufficient bulk? Is there sufficient capacity, or are assets such as aging electricity sub-stations that feed the CBD with
being over-utilised? major risks of outages.

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MODULE 2 System for the management of assets

FIGURE 2.14: Graphical illustration of asset system (potable water supply, Buffalo City)Toolkit

Graphical presentations of asset systems or asset portfolios can be prepared for various asset portfolios, not just potable water
– consider the following example of a solid waste management system:

CUSTOMER AND SERVICE PROFILING

Since services are delivered to customers, it is necessary to know who
they are, how many of them there are, and where.

Customers are not homogenous, the needs of industrial customers, for

example, differ to those of residential customers. So it is also necessary to
“ ...it is also necessary to differentiate
between different types of customers.”
differentiate between different types of customers.

Techniques for customer identification, classification, measurement and spatial recognition are
provided in Module 4: Customer and Services Profiling. Module 4 also provides level of service
options for each standard type of municipal service, and a standardised service attribute structure
applicable to all municipal services.

Examples of customer and service profiles are provided in Module 4.2.5 (customer profiles) and Module 4.3.4.

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 System for the management of assets MODULE 2

FIGURE 2.15: Graphical illustration of a solid waste system (Buffalo City)

Having profiled customers, it is also necessary to profile the state of service provision. This is a critical departure point for the
following:

Determining who has access Are the services provided Who does not receive services,
to services where, the nature appropriate, or must they be and where? Should they be
of the service provided, and upgraded? e.g. from gravel provided with services? If so,
the ongoing requirements for roads to paved roads. what types of service, and at
delivering services. what cost?

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MODULE 2 System for the management of assets

ESTABLISH LEVELS OF SERVICE OBJECTIVES

These may already exist, whether formally and documented (preferably in a customer services charter) or informally as the
undocumented de facto approach to service provision.

MOVEMENT
NODES ZONES
NETWORKS

Arterials/collectors/
CUSTOMER DENSITY

Neighbourhood/

activity corridors

(transition) zone
nodes/precincts
Special function
CATEGORY CATEGORY

transit corridors

Suburban zone
Freeways/mass

General urban
anchor node

Natural zone
Urban zone
Local street
local nodes

High street
Secondary

Rural zone
Primary
node

node
CBD/

Formal High
residential: Medium
High income Low

Formal High
residential: Medium
Medium income Low

Formal High
residential: Medium
Low income Low

Formal High
residential: Medium
Poor Low
Informal
residential
Backyard shacks
Business
Commercial &
industrial
Public sector
infrastructure

SERVICE PROVISION OPTIONS

Case-by-case assessment 15 - 25 mm connection to building (multiple taps)

Communal standpipe less than 200m distance 40 - 100 mm consumer connection
Yard tap connection (single tap) 150 mm or larger consumer connection

FIGURE 2.16: Service provision objectives matched to the city spatial structure (potable water supply)

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 System for the management of assets MODULE 2

A rudimentary approach to determining levels of service A more advanced approach is to state levels of service objectives
objectives is to establish levels of service for each customer type. per customer type, per spatial region and/or spatial structuring
An example of such an approach is to determine that indigents element. An example of such an approach is provided in Figure
will receive RDP levels of service, such as water at communal 2.16 which establishes levels of service objectives at the service
standpipes, VIP toilets, and gravel roads. Paying customers function level, matching customers, areas and types of service.
will then normally receive water pipes to their residences,
flush toilets connected to the sewer system, and tarred roads. When establishing such a level of service decision instrument,
The benefit of such an approach is its simplicity. But there are care should be taken to align it to the Municipal Spatial
shortcomings. The provision of rudimentary services may not Development Framework and the spatial segmentation system
always be feasible in high density settings, or in each terrain, adopted for the asset management system. Do not divorce
such as in marshlands. Likewise, it may not be feasible to decision-making here from the state of asset reports’ report.
connect high income residential estates outside the urban edge Infrastructure capacities may vary in different regions, and
to the municipal sewer system in the short to medium term. therefore nuanced levels of service may need to be adopted,
With respect to public amenities, the idea that all residents have even for customers of the same type.
access to these within walking distance may not be financially
feasible, and it may be more desirous to cluster such facilities to Also note that level of service objectives are not just about which
support the strengthening of nodes. types of services are provided, but also about the standards of
services provided, such as response times to failures such as
pipe bursts, electrical outages and potholes.

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 System for the management of assets MODULE 2

PREPARE A CORPORATE CUSTOMER GROWTH FORECAST

A corporate customer growth forecast should be prepared and adopted for the city as a whole. The asset management system
should specify the following:

The demand forecasting Responsibility All assumptions made Each department that
horizon. This CIDMS for preparing the in preparing the undertakes forward
Toolkit recommends a forecast. It is proposed corporate customer planning on the basis
30-year horizon. that the corporate growth forecast must be of customer growth
asset management documented. or decline is bound to
committee appoints a use the forecast, but
standing task team to has the flexibility to
prepare, and annually interpret this forecast
review and update the in the context of its
corporate customer sector.
growth forecast.

Guidance on preparing customer growth forecasts is offered in Module 5: Future Demand, and an
example of a customer growth forecast is presented in Box 5.2.

Note that it is not sufficient to prepare a customer growth forecast. Where that growth materialises in future may have a great impact,
depending on the availability and capacity of infrastructure, which tends not to be distributed evenly over the city space. A key task
of the standing committee on demand is to project where such growth will materialise over time (guidance provided in Module 4).

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ESTABLISH LEVELS OF SERVICE TARGETS FOR CURRENT AND FUTURE CUSTOMERS

Having established what services are offered to current customers, and the expected growth in customers over the forecast
period, the following will likely emerge:

Current customers who are under-served Future customers to be served

Table 2.10 demonstrates how these can be profiled, and targets established that specifically indicate the desired level of service per
customer group that are time-bound.

NEW GROWTH
RETICULATED
LAND STATUS

UN- & UNDER

UNSERVICED
CUSTOMERS

TARGET LOS

TARGET LOS
DEVELOPER

DEVELOPER
CUSTOMER

BACKLOGS
DENSITY &

DURATION
SERVICED
SERVICES

SERVICES

CURRENT

(YEARS)
(LOS 0)
NR OF
LAND

BULK

% OF
TYPE

CU’S
Proc - high Entity Private Sector 2 078 0 2 078 1,3% 4 4 4
Proc - Med Entity Private Sector 1 167 0 1 167 0,7% 4 4 5
Medium Proc - low Entity Private Sector 589 0 589 0,4% 4 4 1
income UnProc - high Entity Private Sector 0 0 0 0,0% 4 4 0
UnProc - Med Entity Private Sector 14 0 14 0,0% 4 4 1
UnProc - low Entity Private Sector 4 121 0 3 798 2,4% 4 4 2
Proc - high Council Council 376 0 376 0,2% 4 4 1
Proc - Med Council Council 132 0 132 0,1% 4 4 1
Low Proc - low Council Council 268 0 268 0,2% 4 4 1
income UnProc - high Council Council 230 0 230 0,1% 4 4 1
UnProc - Med Council Council 434 0 434 0,3% 4 4 1
UnProc - low Council Council 1 302 0 1 302 0,8% 4 4 2
Proc - high Council Council 26 562 0 26 562 16,9% 4 4 15
Proc - Med Council Council 15 650 0 15 650 10,0% 4 4 6
Poor
Proc - low Council Council 15 707 0 15 707 10,0% 4 4 5
UnProc - high Council Council 17 125 0 17 125 10,9% 4 4 5

Having established target levels of service for both current and TABLE 2.10: Establishing time-bound customer level of service
future customers and a phased programme of achieving these targets for customers that are currently underserved and for future
targets, a picture will emerge as demonstrated in Figure 2.17(a). customers (limited to informal residential customers)
This indicates progressively how service access backlogs are
eradicated, how many customers are upgraded, and how new
growth is addressed.

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 System for the management of assets MODULE 2

SERVICE DELIVERY: CU’S SERVICED

Un- and underserviced Upgrading Serviced (Current) Growth (New)

1 400 000

1 200 000

1 000 000

800 000

600 000

400 000

200 000

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
FIGURE 2.17(A): Customer LOS strategy (all customer categories – potable water)

All of this naturally comes at a cost, and it is necessary to quantify this cost to determine whether the proposed programme is
affordable. Figure 2.17(b) provides an example of an expenditure profile to meet service level targets.

LEVEL OF CAPEX (R’MILLION)

Upgrading Growth

180 000

160 000

140 000

120 000

100 000

80 000

60 000

40 000

20 000

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
FIGURE 2.17(B): Costing LOS strategy (all customer categories – potable water)

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SELECTION OF SERVICE DELIVERY MODELS

Having decided what services are to be provided, to whom, and having defined and costed level of service objectives, the asset
management strategy should assess available service delivery models and select from these the most appropriate for implementation.

A range of service delivery options are available, including:

• In-house service delivery
• Contracted goods and services Guidance on selection of the most
• Partnerships, whether public-public partnerships or public- suitable service delivery models is
private partnerships presented in Module 12: Enablers.
• Municipal entities
• Outsourcing

The AM strategy should specify which service delivery models have been selected for which functions, as well as the decision-
making criteria applied in selecting these models.

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2.4.5 SAMP planning horizon and template

The SAMP is prepared for a rolling 30 year period, updated annually. The structure and content of the SAMP is provided below.

TABLE 2.11: SAMP template

SECTION DESCRIPTION OF PURPOSE AND CONTENTS

• Document title
• Name of city and city logo
Plan cover page • Date
• Planning period
• Version number
• Plan approval date and Council resolution reference
Approval and • Planning period, stating effective start and end dates
change history • Document version number
• Change history details
Executive
• Presents key issues, decisions and actions
summary
This section states the purpose of the plan. It presents an environmental analysis and identifies
Purpose the city strategic objectives and stakeholder requirements that asset management, infrastructure
investment, assets and lifecycle delivery actions must respond to.
Section 1:
• Purpose of the plan
Stakeholder
• City context (environmental analysis)
expectations
• Stakeholders and their expectations – internal and external stakeholders, notable expectations
and city strategic
Contents and ranking thereof
objectives
• City strategic objectives and future vision, inclusive of spatial vision and structure
• How this plan supports city vision, strategic objectives and future spatial vision and structure
• Status of this plan
This section describes the capabilities, limitations and risks associated with asset portfolios to
Purpose
provide services, now and in the future.
• Scope of asset systems/portfolios and operations
• Extent and value of assets – asset extent and age profiles, replacement cost values, depreciated
Section 2: State of
replacement cost values and accumulated depreciation, for each asset class and for the city as
city assets
Contents a whole
• Geographic profile of assets. Which areas are serviced, and which are not?
• The state of assets, presented in terms of failure mode analysis and risk exposure.
• Highlight known key risks that impact on city strategic and spatial objectives
This section profiles existing customers by type and spatially, as a basis for determining current
demand, access to service provision, current revenue potential for the city as well as expenditure
Purpose
requirements. It furthermore presents a customer growth forecast for the city, to be interpreted
by various services or sector departments when undertaking future demand planning.
Section 3: • Current customer profile, segmented and spatially presented
Customer profile • Customer growth forecast for the next 30 years – present the customer growth forecast in
and growth tabular and graphical formats, and provide a narrative, and be sure to note key assumptions
expectations • Future spatial apportionment of customers – indicate where future customer growth is expected
Contents
to materialise, considering current housing projects, pending and approved development
applications and land use management dictates such as the urban edge, densification
requirements etc.
• Identification of key risks and opportunities, and responses to these

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SECTION DESCRIPTION OF PURPOSE AND CONTENTS

This section articulates AM objectives related to levels and standards of service, for each service,
by type of customer and spatial segment or spatial structuring element, as appropriate. It
profiles the current state of service provision, and quantifies current backlogs and future service
Purpose
requirements. This section also articulates the city’s approach to the selection of appropriate
service delivery models, and presents the cash flow impacts of meeting levels and standards of
service targets.
• Levels and standards of services adopted – per type of customer and spatially, for each
Section 4: Service infrastructure or community service
delivery strategies • Current state of services provision and existing service access backlogs – per type of customer
and spatially, for each infrastructure or community service, and for the city as a whole. Also
present service accessibility maps
Contents
• City approach/directives to selection of suitable service delivery models
• Lifecycle delivery plan, per sector and for the city as a whole
• Cash flow impacts of delivering on levels and standards of service for each infrastructure and
community service, for current and future customers
• Identification of key risks and opportunities, and responses to these
This section presents the infrastructure investment strategy to meet city strategic objectives and
level and standard of service targets as they relate to infrastructure and community facilities.
This section demonstrates the affordability of the service delivery strategy to both the city and
Purpose
its customers, and presents the strategy for the funding of fixed capital investments, inclusive of
fund sourcing, revenue strategy and timing of investments. It also states financial and investment
Section 5:
objectives and how the proposed service delivery strategy will impact on these objectives.
Infrastructure
• Key service delivery, financial and investment objectives
investment
• Modelling of cash flows (revenue and expenditure) per service/asset portfolio and for the city
strategy
as a whole
Contents • Funding strategy
• City affordability
• Customer affordability
• Identification of key risks and opportunities, and responses to these

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SECTION DESCRIPTION OF PURPOSE AND CONTENTS

This section establishes the scope of the AM system and states its objectives. It profiles the current
state of practices within the AM system, and sets an improvement plan to meet its objective. This
Purpose
section also contains a change management strategy to ensure acceptance of the AM system
and to create an AM-focused culture intent on delivering value from assets.
• System scope and objectives
• Stated conditions for a value-centric organisation employing an AM system
• Description of sub-systems and practices, inclusive of the following:
• Risk management system
• Asset data model
• Customer segmentation system
Section 6: AM
• Spatial segmentation system
capability
• Type and structure of asset management plans
Contents • Decision-making criteria
• Practice and process interfaces, noting input and output requirements, as well as alignment
needs
• AM organisational requirements and arrangements
• Competency requirements, current capabilities and skills development plan
• Practices improvement plan
• Identification of stakeholders and desired behaviour
• Stakeholder management plan
• Identification of key risks and opportunities, and responses to these
This section presents an overall asset management risk profile, encompassing risks associated
with growth/decline (customer and economic growth/decline), assets, service delivery, financial,
Purpose management and technical risks. It describes the overall gross exposure of the city to risks
associated with both assets and the AM system, how this plan reduces risks and what residual
Section 7: Risk risks remain following implementation of this plan.
management • Profiling of risks associated with assets and the asset management system, inclusive of a city risk
exposure profile quantifying gross risk exposure – to be presented by type of risk, per service
Contents and spatially using tabular, graphical, spatial and narrative means of explanation
• Risk mitigation actions to be implemented through this plan, and residual risks remaining
thereafter
This section ensures technical, spatial and budgeting alignment between sector plans,
Purpose programmes and actions, provides annual directives for sectoral compliance, and presents an
integrated set of performance metrics for AM objectives to be tracked over time.
Section 5:
• Directives relating to technical, spatial and budgeting alignment, e.g. priority to be given to
Infrastructure
development in particular regions/precincts, and/or targets for job creation, SMME development
investment
or conversion to green technologies
strategy Contents
• Programme and project alignment
• Integrated set of AM performance metrics, both in terms of AM objectives established and the
tracking of performance against these metrics over time
Section 9:
Presents key recommendations where explicit approvals are required.
Recommendations
Include additional documentation or detail as necessary in appendices to ensure a tight focus in the main
Appendices
document, and to keep the main body of the document concise and reader-friendly.

Processes for preparing and updating of the SAMP are described in Module 7.

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2.4.6 Preparation, approval and updating of the SAMP

The following arrangements apply:

APPROVAL
The SAMP should be approved by way of Council resolution.

SAMP REVIEW
The SAMP should be reviewed and updated annually.
Additionally, the SAMP should be reviewed when:
1. Changes occur in the regulatory environment (e.g. new
national policy or legislation);
2. When changes occur in the operating environment of the
city;
3. The city adopts a new overarching strategy (e.g. a new IDP
or city growth and development strategy), or amends its
overarching strategy; or
4. The strategic asset management component of the AM
policy is amended.

2.5 CONCLUSION
Each city should develop and implement an AM system comprising the people, policies, plans and information to deliver
value from assets. Value is determined by stakeholders and the overarching objectives of the city as articulated in its overall
strategy, and the starting point in establishing an AM system is to identify stakeholders and analyse their requirements.

The following are critical requirements for an AM system: Modules 3 to 11 provide techniques for implementing specific
aspects of the AM system. Module 12 describes AM enablers,
• Clear alignment to city strategic objectives
such as AM roles and organisation structuring arrangements,
• Responsiveness to stakeholder requirements, and the design competencies, an electronic AM system, and selection of service
of an AM system that meets stakeholder expectations delivery models.
• The establishment of a hierarchy of policies and plans, with

“
clear line of sight throughout the organisation
Each city should develop and implement
• System documentation
an AM system comprising the people,
• Strong leadership at all levels, and the fostering of an outcomes-
policies, plans and information to deliver
based AM culture embedded in a self-learning system
value from assets.”
• Commitment to continuous improvement

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APPENDIX 2.A: AM PERFORMANCE

MEASURES RELATING TO ASSE T C ARE

The following asset care performance measurement system is derived from the Monitoring and Evaluation Protocol prepared
by the Department of Public Works and the CIDB in support of the National Immovable Asset Maintenance Management
Standard:

2.A.1 Asset health checks

The following suite of measures assesses the health status of asset portfolios and the adequacy of spending on maintenance
and renewal to ensure the ongoing functioning of assets within agreed performance parameters. These measures are applied
at the level of asset portfolios e.g. potable water supply system, electricity distribution network or sports and recreation
facilities. Two measures at applied at this level, these being the asset consumption ratio and asset portfolio health grade.

2.A.1 ASSET HEALTH CHECKS

Purpose
GRADE DESCRIPTION (DRC-RV)(CRC-RV)
The asset consumption ratio measures the extent of
consumption (accumulated wear and tear) of an asset portfolio, 1 Very Good 65% or more
which is indicative of the overall health and ability of the 2 Good 52.3% to 65%
asset portfolio to continue to provide service delivery and/or
economic benefits, and the extent of asset renewal required. 3 Fair 46.7% to 52.3%
4 Poor 40% to 46.7%
Formula and source data 5 Very Poor 40% or less
The asset consumption ratio is calculated as follows:
TABLE 2.A.1: General interpretation of asset consumption ratio
DRC - RV
x 100
CRC - RV

Data on depreciated replacement cost (DRC), current

replacement cost (CRC) and residual value (RV) are sourced from
the city’s asset register.

Norm and interpretation

There is no one single norm for all asset portfolios that indicates
the point beyond which an asset portfolio requires significant
investment in renewal. That “point” is instead determined
by the performance standards adopted in the entity’s asset
management strategy for each asset portfolio and, where
appropriate, for asset sub-group types and critical assets.
However, performance standards will in general range between
60% - 40% of CRC, depending on the nature and criticality of In some conditions the asset consumption ratio masks an
assets. In instances where specific performance standards emerging renewals backlog (consider scenario 2 and scenario
have not been specified for individual asset portfolios, the 4a in the figure below). This especially tends to happen during
norm of 50% should apply. The following table provides a periods of high levels of investment in new asset creation. Cities
general indication of how to interpret the outcome of the asset should therefore also report on the portfolio health grade as per
consumption ratio. Table 2.A.1 above.

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FIGURE 2.A.1: Illustrative condition distribution for various asset portfolio health grades
1 VERY GOOD

Very Good Good Fair Poor VP

2A GOOD
2 GOOD

Very Good Good Fair Poor VP Very Good Good Fair Poor VP
3A FAIR
3 FAIR

Very Good Good Fair Poor VP Very Good Good Fair Poor VP
4A POOR
4 POOR

Very Good Good Fair Poor VP Very Good Good Fair Poor VP
5 VERY POOR

Very Good Good Fair Poor VP

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Interpretation of asset portfolio health grades:

• Scenario 1 (Very good): Overall, the asset portfolio is in
very good condition. This situation tends to manifest in
instances where initially there was limited demand or limited
investment into the asset portfolio, with major expansion in
the asset portfolio in recent times, which accounts for the
high percentage of assets in very good condition and good
condition. This situation can also exist when the nature of
assets are critical, and cared for to a high standard (e.g. for
operating theatres).
• Scenario 2 (Good): This represents a scenario where the
entity’s investment programme is skewed towards the
creation of new assets, with little investment in renewals.
The high levels of investment in new asset creation masks an
emerging renewals backlog.
• Scenario 2A (Good): This represents the typical condition
profile of a well-managed asset portfolio with a relatively
• Scenario 3 (Fair): The overall condition of the asset portfolio
small percentage of assets rated as critical, under conditions
becomes a matter of concern. Relatively high levels of
of financial constraints. The largest share of replacement
investment in new asset creation takes precedence over
value of assets are found in the condition range “Good” to
investment in renewals.
“Poor”. The renewals backlog, represented by assets in “Very
• Scenario 3A (Fair): In this scenario, there is significant
poor” condition, requires attention but is in proportion to the
investment in new asset creation, evidenced by the large
overall asset portfolio, and manageable. Investment in new
percentage of assets in very good and good condition.
asset creation does not receive priority over investment in
Simultaneously, a large proportion of assets are in fair to very
renewals.
poor condition, suggesting insufficient investment in asset
renewal and future productive capacity concerns.
• Scenario 4 (Poor): This scenario presents the case of an aging
and neglected asset portfolio. Renewals are under-funded,
and there is little asset creation activity. Urgent attention is
required to avoid large scale asset and service failures.
• Scenario 4A (Poor): This situation commonly occurs at the
end of life of first generation assets constructed at scale
and over a relatively short space of time, coupled with a
recent and sustained programme of new asset creation. This
scenario is indicative of the inability to care for large and
expanding asset portfolios. Urgent, multi-year structured
renewal programmes are required to avoid systemic
asset and service failures. In such a situation a structured
renewals programme alone is not sufficient – an optimised
asset lifecycle plan is required that also considers portfolio
optimisation (addressing over-design, redundancy etc.)
• Scenario 5 (Very poor): Asset portfolios are beyond the point
where they are functionally fit for service, and service delivery
collapse is imminent.

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2.A.2 Maintenance

2.A.2.1 REPAIRS AND MAINTENANCE AS A PERCENTAGE OF CRC

Purpose Norm and interpretation

This ratio has two applications. Applied to budgeting, it gives an Provisional norms are between 1.8% - 2.2% for civil structures,
indication of the adequacy of budgeted expenditure for repairs and upto 4.5% per annum for electrical infrastructure. These
and maintenance of assets. Applied to actual expenditure, it tests norms should be reviewed once the current replacement costs
whether the city spent adequately on repairs and maintenance. of all asset portfolios have been established on a consistent basis,
performance standards have been developed, asset lifecycle
Formula and source data strategies developed and costed, and asset management plans
The repairs and maintenance as a percentage of CRC ratio is prepared. Possible reasons for specific outcomes include:
calculated as follows:
Repairs and maintenance expenditure exceeds the norm:
REPAIRS & MAINTENANCE • An increasing expenditure trend may be indicative of high
x 100 asset-usage levels.
CRC OF IMMOVABLE ASSETS
• The entity has a deteriorating asset base requiring high
The current replacement cost (CRC) of immovable assets can be levels of major reactive maintenance.
obtained from the asset register. When the formula is applied • Renewals expenditure is incorrectly classified as repairs
for planning purposes, the amount for repairs and maintenance and maintenance expenditure thus artificially inflating
can be sourced from the asset management plan(s) or from the reported repairs and maintenance expenditure.
operating budget. When applied to assess actual expenditure, • New assets are purchased and incorrectly classified as
data on repairs and maintenance can be sourced from the repairs and maintenance expenditure, also artificially
Statement of Financial Performance. inflating reported repairs and maintenance expenditure.
• There are high levels of inefficiency in the maintenance
management function.
• Amounts calculated for either repairs and maintenance or
CRC are incorrect.
• Norms established for this ratio require review and
possible calibration.

Repairs and maintenance expenditure below the norm:

• A ratio below the norm indicates that insufficient monies
are being spent on repairs and maintenance to the extent
that it could increase impairment of useful assets.
• If an increasing expenditure trend suddenly drops to lower
levels without an increase in the fixed asset value, this may
be indicative of challenges in spending patterns. This may
be the result of lack of planning, funding constraints or
delivery capacity.

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2.A.2.2 DEFERRED MAINTENANCE

Purpose Norm and interpretation

This metric quantifies the portion of planned maintenance work The norm is 8% or less, which equates to one (1) month of
necessary to maintain the service potential of an asset that has delayed expenditure on repairs and maintenance, assuming
not been undertaken in the period in which such work was an equal spread of maintenance expenditure across the year.
scheduled to be undertaken. Spending below this level is indicative of inefficiencies in the
planning regime, funding constraints or delivery capacity.
Formula and source data Sustained levels of deferred maintenance may lead to asset
Deferred maintenance is calculated as follows: impairment.

VALUE OF PLANNED MAINTENANCE FOR THE FINANCIAL

PERIOD - ACTUAL EXPENDITURE ON MAINTENANCE
VALUE OF PLANNED MAINTENANCE FOR
THE FINANCIAL PERIOD

Data on planned maintenance can be sourced from the asset

management plan(s), and data on actual expenditure on
maintenance and repairs from the Statement of Financial
Performance.

2.A.3 Asset impairment

Purpose of this ratio Norm and interpretation
An impairment loss is the amount by which the carrying amount The generally accepted norm is 0%. This is however a target,
of an asset exceeds its recoverable amount. This can happen as not necessarily reflective of reality. Where no impairment losses
a result of many factors, such as sustained poor care of assets, are reported, it may be necessary to review impairment testing
damage caused by operator error, structural failure due to poor practices.
design and/or construction, vandalism, damage caused by
natural events such as flooding, or as a result of obsolescence
– this is not an extensive list. This ratio measures the value of
assets impaired compared to the carrying value of property,
plant and equipment (PPE) and intangible assets for a financial
period.

Formula and source data

This ratio is calculated as follows:

IMPAIRMENT ON PPE AND INTANGIBLE ASSETS

x 100
CARRYING VALUE OF PPE AND INTANGIBLE ASSETS

Data on the carrying value of PPE and intangible assets can be

sourced from either the asset register of from the Statement of
Financial Position, and data on impairment can be sourced from
the asset register.

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2.A.4 Renewal

2.A.4.1 ASSET SUSTAINABILITY RATIO

Purpose Norm and interpretation

The asset sustainability ratio determines the extent to which The norm is 100% under conditions where the demand for the
an entity replaces the asset value consumed during a period of service remains constant, or is growing. The outcome of this
review in order to maintain service delivery capabilities. It is a ratio can be interpreted as follows:
measure of the extent to which the entity maintains the value of < 100%:
its capital stock or productive capacity. If the investment in renewal of assets does not at least
equal the consumption of those assets, the entity is likely
Formula to experience future reduced service delivery capacity,
The asset sustainability ratio is calculated as follows: breakdown in assets and significant increase in repairs and
maintenance expenditure. The following are possible reasons
CAPITAL RENEWAL AND for a ratio of less than 100%:
REPLACEMENT EXPENDITURE
• The demand for the service is decreasing, and the entity
x 100
DEPRECIATION EXPENSE is deliberately scaling down or phasing out operations –
there is limited or no need to invest in asset renewal.
Data on the annual depreciation expense is sourced from the • Forced asset sweating due to financial constraints.
Statement of Financial Performance. Sourcing data on capital • Detailed plans for maintenance and renewal were not in
renewal and replacement expenditure is more tricky. It requires place that may include (1) insufficient budget requests, (2)
tracking of budgeted expenditure through the transaction lack of detailed implementation plans or (3) a combination
process, and pulling data from the general ledger. A counter- of both.
check is to sum the value of assets derecognised for renewal and • Insufficient implementation capacity.
replacement purposes in the financial period. • Inefficient planning or management resulting in renewals
work not being implemented in full during the period in
question.
• Some renewals were deliberately deferred to coincide
with a larger renewal or upgrading programme.
• Other reasons e.g. a large renewals contract was awarded
to contractor x, and this appointment is disputed in court
by contractor y.

> 100%
If more than 100% is spent it could indicate that:
• The entity is addressing a renewal backlog following a
period of asset sweating.
• Actual renewals expenditure was higher than estimated
expenditure as a result of (1) outdated estimates, (2)
sudden and/or unexpected inflation or (3) a combination
of these factors.

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2.A.4.2 ASSET RENEWAL FUNDING RATIO

Purpose of this ratio

The asset renewal funding ratio measures the extent to which
asset renewal is accommodated in the long term financial plan,
as identified in the asset management plan. Whereas the asset
sustainability measures past renewal activity, the asset renewal
funding ratio provides management with a view on future
renewal needs, and planned expenditure in relation to future
needs.

Formula and source data 2.A.4.3 GREEN RENEWALS AGENDA RATIO

The asset renewal funding ratio is calculated as follows:
Purpose of this ratio
NPV OF PLANNED CAPITAL
The National Immovable Asset Maintenance Standard supports
RENEWALS OVER 10 YEARS
x 100 the objective of environmental sustainability as expressed in:
NPV OF REQUIRED CAPITAL • The National Environmental Management Act;
EXPENDITURE OVER 10 YEARS • The Energy Efficiency Strategy of the Republic of South Africa;
• The National Climate Change Response Paper; and
Data on required capital renewal and planned capital • The Green Building Policy (draft).
expenditure is sourced from the asset management plan(s).
The need for asset renewal offers the opportunity for sustained,
Norm and interpretation incremental greening of asset portfolios through green
The norm is between 90% - 100%. If the target is not materially component and technology replacement. The green renewals
achieved on an ongoing basis, then a mounting renewals agenda ratio provides information on the size of the renewals
backlog is sure to mount, and adverse impacts on service programme and the percentage of planned expenditure on this
delivery are likely. Moreover, sustained performance below programme earmarked for green renewals.
target over time across the public works’ asset portfolios will
require future investments in renewals of a magnitude that will Formula and source data
likely create national fiscal challenges. The green renewals agenda ratio is calculated as follows:

NPV OF PLANNED GREEN RENEWAL

EXPENDITURE OVER 10 YEARS
x 100
NPV OF REQUIRED RENEWAL
EXPENDITURE OVER 10 YEARS

The asset management plan(s) provides data on planned green

renewals expenditure and required renewals expenditure.

Norm and interpretation

No norm exists for this ratio. In developing the asset management
strategy and asset management plans, asset planners should
assess the scope and feasibility of green renewals, taking into
account policy, available green materials and technologies,
lifecycle costs, implementation capacity and the outcomes of
asset lifecycle plans, and establish an appropriate norm for each
asset portfolio.

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APPENDIX 2.B: EXAMPLE OF

AM PR AC TICE SPECIFIC ATIONS/
OBJEC TIVES FOR ASSE T DATA
Note: Concepts relating to asset data are explained in Module 3: Asset data model

TABLE 2.B.1: Process performance requirements: Asset data

PROCESS PURPOSE
1. A single source reference document that contains a record of asset information considered worthy of separate
Process purpose and
identification for both asset accounting and strategic management purposes including inventory, historical,
overarching performance
condition, technical and financial information about each.
requirements:
2. A credible asset register, certified as such by the Auditor General
PROCESS PERFORMANCE REQUIREMENTS
PROCESS ATTRIBUTE PERFORMANCE EXPECTATIONS/AM OBJECTIVES
1. The external auditor annually issues an unqualified audit result or expresses a clean audit opinion
2. The asset register reconciles with the general ledger of the accounting system of the city
3. The asset register directly informs the Statement of Financial Position of the city with respect to asset position, and
Process performance
Appendices B & C of the AFS are compiled from asset register information
4. Asset data from the asset register is used for purposes of AM planning and informs budgeting for maintenance
and renewal
1. Levels of confidence for asset data have been defined (see Table 2.A.1 for an example)
2. An asset data collection and verification plan has been developed to ensure that asset data levels of confidence
Performance management can be met
3. Responsibilities for maintaining and updating of the asset register have been formally defined, assigned and
communicated
1. Standard templates and structures for new asset additions, asset verification, impairment, derecognition, the
asset register structure, landfill rehabilitation calculations, impairment calculations, working papers and asset
Work product register reports have been developed, made available and communicated
management 2. Standard approval mechanisms are defined and implemented
3. Quality assurance processes are developed
4. An audit trail of all asset movements and transactions are implemented, maintained and updated
1. Standard operating procedures for asset verification, impairment testing, asset accounting, and asset safeguarding
developed and documented
2. Competency requirements for executing asset data related processes have been determined and documented
Process definition
3. Roles and responsibilities for executing the required processes have been defined
4. Infrastructure and resources for executing the processes have been defined (e.g. handheld devices, safety clothing
and measuring equipment for asset assessment)
1. Roles, responsibilities and delegations for performing asset data and accounting processes have been formally
defined, included in approved job descriptions and/or performance contracts, and communicated
2. Personnel performing the asset data and accounting processes are competent based on stated appropriate
requirements relating to education, training, certification and experience
Process deployment 3. External service providers appointed for preparing, maintaining and updating the FAR to provide documented
proof of ISEA 3402 compliance, and the composition of the service provider’s team to reflect the necessary skills,
certification and experience to undertake these processes
4. Required infrastructure, resources and an appropriate work environment for executing asset data and accounting
processes are available, managed and maintained
Process information requirements include (limited examples only):
1. Financial reporting
• FAR financial summary
• Appendices B & C to the Annual Financial Statements
• Prior period corrections
• Reclassification of assets
Quantitative and • FAR reports at various levels within the asset hierarchy
qualitative analysis and 2. Strategic asset management
control – information • CRC/DRC overview and analysis
needs • Asset extent summary
• Presentation of risk matrix by failure mode or RUL, at asset group type level, indicating likelihood and risk
treatment cost
• Spatial presentation of both assets and of critical customers for purposes of both resilience analysis and asset
criticality analysis
• Production of asset age and renewal profiles, and initial renewals programme
• Maintenance budget requirements at asset group type level

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PROCESS PURPOSE
The following are some examples only for the types of performance measures for the (1) Asset data model, (2) Asset
data, (3) Process relationships, (4) Valuation asset register, (5) Financial asset register and (6) Internal audit:
1. Asset data model
• No unverified component types
• No unverified descriptors
• No duplicate components and descriptors
• No superfluous components not used in the VAR and FAR
• Unit rates, EULs and RVs calibrated for local conditions
• EULs and RVs in line with the AM policy
• The approach to grouping/segmentation is indicated for all component types
2. Asset data
• All assets are annually assessed for impairment
• A risk-based (indicator approach) asset verification plan is annually developed and implemented
3. Process relationships and alignment
• Process relationships, inputs and outputs between asset data and other corporate processes have been defined,
and includes budgeting, lifecycle delivery, contract management, property valuation, land management, the
issuing of Section 82 certificates, risk and insurance
Quantitative and • Process relationships listed in (a) above have been formally documented in the City’s approved AM procedures
qualitative analysis document, which is aligned with other relevant corporate procedures
and control – process 4. Valuation asset register
performance measures • No empty/null/zero EULs, CRCs, RULs or DRCs
• All fields considered “Essential are completed”
• No DRCs > CRCs
• No DRCs < RVs
• Asset IDs allocated for all assets
• Appropriate and complete location data for all components
• SG codes provided for all land and investment properties
• All assets spatially linked
5. Financial asset register
• Opening balances agree with the previous year’s closing balance
• No carrying values < RV
• Values for project capitalisation and WIP reconcile with the GL
• Supporting working papers prepared for all calculations, changes in estimates, provisions and correction of
prior period errors
• An audit trail is available and maintained for all asset related transactions
6. Assurance
• An annual internal audit is conducted covering (1) to (5) above
• Bi-annual reporting to the Audit Committee covering (1) to (5) above
1. Findings and recommendations of internal and external auditors as well as of AM assessors/auditors are analysed,
formal responses prepared, and previous period audit findings are cleared
Process innovation 2. The city actively monitors developments in accounting and AM management standards, directives issued by the
Accounting Standards Board, circulars published by the National Treasury as well as in best practice, and prepares
action plans relating to these
Process innovation 1. Post implementation reviews of all process innovation/enhancement initiatives are conducted, and reported to
implementation senior management and the audit committee

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TABLE 2.B.2: AM objectives relating to asset data confidence

REQUIRED CONFIDENCE GRADE

CRITICAL ASSETS OTHER ASSETS

ABOVE ABOVE
BELOW BELOW
GROUND & GROUND &
DATA DIMENSION GROUND GROUND
INTANGIBLES INTANGIBLES
PHASE 1

PHASE 2

PHASE 3

PHASE 1

PHASE 2

PHASE 3

PHASE 1

PHASE 2

PHASE 3

PHASE 1

PHASE 2

PHASE 3
Extent & location 4 3 2 2 2 2 4 3 3 3 3 2

Age/dominant failure mode 4 3 2 2 2 2 4 3 3 3 3 2

Other failure modes 4 4 3 4 4 3 4 3 3 3 3 2

Nature (type, size, class, and a general

4 3 2 2 2 2 4 3 3 3 3 2
descriptor)

Data confidence gradings are defined in Table 3.15. Note AM objectives relating to asset data confidence can (and should) be further
refined taking a risk-based approach, but bearing in mind that the GRAP framework requires completeness on the extent of assets.

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REFERENCES

National Treasury. October 2015. Standard for Infrastructure Procurement and Delivery Management

SABS: South African National Standard 55000: Asset Management – Overview, principles and terminology

SABS: South African National Standard 55001: Asset Management – Management systems - Requirements

SABS: South African National Standard 55002: Asset Management – Guidelines for the application of ISO 55001

The Global Forum on Maintenance and Asset Management. GFMAM Asset Management Landscape 2014

Construction Industry Development Board. May 2017. Maintenance Monitoring and Evaluation Protocol for immovable assets

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MODULE 2 System for the management of assets

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