Public-sector asset managers: challenges and approaches being taken

26 January 2017

Lawrence Melton and Charles Dilley introduce an RICS report on the challenges facing public-sector asset managers and approaches being taken

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All around the world, public-sector asset management (PSAM) professionals face similar challenges. These stem from advances in technology, a mobile workforce, and 50 years of growth in government real estate – resulting in large asset portfolios with major maintenance backlogs – unreliable data sets and aggressive budget cuts.

Consequently, many assets are becoming expensive, underused liabilities instead of valuable resources. Today, PSAM leaders are looking for new strategies to preserve these public assets, manage risk, make better use of technology and retain and develop talent for the future health of the sector.

The search for solutions

As a global leader in asset management standards and best practices, RICS set out to organise these professionals to work together on solutions.

During the first quarter of 2016, we arranged a series of roundtable sessions to hear directly from PSAM organisations around the world. Our research team ran 7 roundtable forums, each targeting a specific region of the globe.

Participants received questions in advance and arrived ready to engage with our research team. This research focuses on 4 strategic core disciplines.

1. Governance: this refers to the possibility of establishing regulations, policies, and standard operating procedures that guide the way that organisations manage system investments to drive business performance.
2. Standards: industry standards and best practice refer to asset management benchmarks that have been adopted by the sector.
3. Business practices: this refers to the actual practice in the functional areas – physical assets, real estate, portfolio management, facilities and operations management, property supply and logistics – across the various government regions.
4. Systems: this refers to the business systems – software, sensors and hardware automation – that support asset management.

Our concluding report, Public Sector Asset Management: Roundtable Report, was published at the 2016 Summit of the Americas in Washington DC. It details a number of systemic issues across PSAM and provides recommendations on next steps. While these findings are too extensive to cover in full, this article highlights some of the key issues.

Systemic issues

PSAM leaders emphasise an urgent need to implement global strategies to manage their portfolios better. Issues that contribute to this urgency are tighter budgets, underused assets, sustainability policies, skills gaps and the effect of technology on how they manage and use property.

Participants from all regions expressed these common frustrations, but also shared encouraging insights and the activities they are pursuing to have greater influence across their enterprise and national government bureaus.

Many assets are becoming expensive, underused liabilities instead of valuable resources

In recent years, industry managers have routinely faced budget cuts, higher operating costs, ageing assets, maintenance backlogs, siloed organisations and a lack of governance around decisions. There is a tendency for agency executives to pressure PSAM leaders to spend most of their time on short-term accomplishments before the next election rather than on the 20- to 50-year lifecycle asset plans that would ensure efficiency.

Many of the systemic issues require comprehensive strategies, and get passed on to the next administration where the cycle starts over again. Despite these frustrations, a growing sense of urgency across the public sector is giving PSAM professionals more influence over agency- and government-wide policies on asset management practices.

One of the broad transformations is the adoption of policies to reduce real-estate footprints. For years, agencies increased the number of facilities in their portfolios or sought long-term leases in order to get newer space in downtown locations. But as mobility became easier, these spaces are increasingly underused.

Recent efforts address this through accelerated asset disposal processes, reforming lease practices and increasing use of government-owned property portfolios. But these only represent a first step towards the changes that PSAM professionals want to make across the sector.

Top concerns

Our research identified 3 urgent concerns among research participants, which will require coordinated efforts to overcome: skills gaps, organisational silos and strategic asset management plans (SAMPs).

Research participants recognise a skills gap that prevents their organisations from advancing programmes to keep pace with the private sector. High employee turnover among generalists has made long-term training and development difficult. As a result, adoption of new technologies and software that would advance data modelling and asset management plan techniques lags behind industry practices.

There is a desire to further professionalise PSAM to make better use of advances in automation, sustainability technologies and information modelling; however, many agencies lack the commitment to see these programmes through to fruition.

Training and education also fail to gain traction as a result of structural issues. Government asset management organisations tend to be separated from other departments in a bureau, and are viewed by government executives as service providers rather than partners in the bureau’s core mission. Their influence lies at the periphery of the enterprise, which leaves them frustrated and with little say over operational policies that could help agencies be more efficient with their resources.

For example, decisions on IT expenditure often happen at departmental level and so miss out on opportunities for large-scale solutions that might work for multiple organisations and collectively save money.

Lack of communication often results in unproven software stacks that are not compatible with each other

This lack of communication often results in unproven software stacks that are not compatible with each other, and so unreliable data is trapped in spreadsheets rather than being readily accessible in a well-organised enterprise data warehouse. It ought to be useable across the organisation instead of remaining stuck in department data silos.

This can be particularly difficult for PSAM professionals who rely on overlapping systems to track rents, work orders, tenants’ work locations, workspace drawings, utilities, security clearances, facility information and financial transactions. These databases have a tendency to accumulate conflicting information that leaves doubt lingering over their authority to inform important decisions across the enterprise.

Getting strategic

Nowhere does this affect PSAM professionals more than in the pursuit of accurate lifecycle cost models and SAMPs. A global approach to SAMPs requires reliable data to inform top-level decisions and fill the gap between agency objectives and tactical asset management.

The first step is to consolidate systems and implement standards in data collection practices: divergent systems lead to conflict between data fields and to naming conventions that erode the integrity of the data and then require laborious processes to correct.

Second, organisations must establish SAMPs that are routinely updated and relevant to ongoing operational decisions. Issuing an annual ‘state of the portfolio’ report does not constitute a SAMP. Organisations should think of it instead as a strategic road map to guide their programmes towards common objectives for the future state of the portfolio.

Last, PSAM professionals must use SAMPs to institute measures programmes that track progress and help make asset performance clearer across their enterprise; this increased visibility is achieved by relating asset performance to an organisation’s mission, whether through sustainability goals, efforts to reduce the real estate’s footprint, or linking total lifecycle cost management to budget performance measures.

Organisations are being creative with some of these measures by reporting them on a per-tenant basis to help make the information more engaging and relevant to employees. Others use digital signage or online dashboards to display progress and promote awareness of these strategic efforts.

By making this information accessible to tenants, they understand how their behaviours have an impact on asset performance, and asset management goals become transparent rather than the responsibility of an asset management department.

It also makes asset performance visible to stakeholders across the enterprise and influences their decisions, so they are more conscious of how organisational decisions affect that performance.

One participant in the research said it best: ‘We are trying to change our strategic mindset from knowing what can be done towards education and influencing what should be done.’

PSAM organisations are working hard to control costs and optimise returns for their public stakeholders. However, the surge in public-sector real-estate ownership has put many of these institutions at risk of losses, as maintenance costs continue to rise. These pressures are compounded by dramatic changes in the way people conduct business remotely, by budget cuts and by a demand for more sustainable practices.

To help agencies succeed, asset management strategies must consider the organisation of those agencies and of government bureaus, then use this information to map where functions, systems, activities and data elements can be integrated. Efficiency at the portfolio level requires agencies to work together and support each other with relevant, timely, practical information, common standards and training specific to their objectives.

The key to developing a successful strategy and advancing PSAM practices is the ability to manage information flows and provide analysis to support long-term investment decisions that top-level executives can use to shape policy and provide value to the public.

Lawrence Melton FRICS is CEO and President and Charles Dilley is Managing Director at the Building People

Further information

• Related competencies include Asset management, Corporate real estate management, Property management
• This feature is taken from the RICS Property journal (November 2016).