A country on the way to palliative care ward: Overview of an oblivious crisis

We cannot expect the Sri Lankan public sector to do Australian miracles. They should start marching before running. The starting point would be the development of a Service Delivery Plan, a Resources Plan and Stakeholder Benefit Plan for each public sector organisation. Resources planning to implement the delivery of benefits would be the hardest part to implement as the current bureaucratic hurdles and outdated methods of employee recruitments, salary systems and career promotion systems would work against the establishment of world best practice methodologies. Hence, radical overhaul of public sector management processes is a must

Monday, 3 January 2022 

Multiple crises

Sri Lanka is currently dealing with multiple crises. It is a cocktail of economic, geo-political, governance, health, agricultural, educational and social crises. Having a debate among professionals themselves to decide what the core crisis is, an indication that we are at crossroads. The path we take would determine what kind of country that would be left for our future generation.

Daily FT has published numerous articles highlighting expert opinions on contemporary issues. I am yet to be convinced that anyone responsible initiate the proposed changes, heeding to such advice. It is an unfortunate situation for a developing country that decision makers arrogantly disregard views of local experts. 

 

A publicly unknown crisis

In my view, there was a core management crisis that originated 72 years ago. It crept slowly and gathered momentum in the last two decades without anyone’s notice. It was the ‘Asset Management Crisis’ which has become a slow-developing cancer, causing progressive shut-down of each valve in the corporate and public sector machinery. Now, the country is on a stretcher and on the way to the palliative care ward. The seizure of machine operation will just be a matter of time. 

The colonial masters, possibly unknowingly, practised first principles of asset management until 1948. If anyone wants to know how the British did it, one can refer to ‘The colonial economy on track: roads and railways in Sri Lanka, 1800-1905’ by Professor Indrani Munasinghe. I am perplexed that there was not a single professional in Sri Lanka who could identify the asset management crisis in Sri Lanka and expressed his/her opinion so far. There could be two reasons for this. One could be the very limited availability of local asset management professionals who have the ability to think holistically and who practise behavioural engineering. Or else, they knew about this crisis but didn’t care to discuss it openly because it would have made them responsible for finding solutions. 

I have been practising asset management for the last 22 years on a foreign land. This was after 12 years working in the Sri Lankan public sector, trying in vain to apply asset management principles. I am now well-equipped with the right experience to conduct a diagnostic assessment on asset management maturity in an organisation. It would determine the maturity level of the organisation on the application of asset management principles. I could confidently say that none of the Sri Lankan public sector organisations practise asset management. Otherwise, we would not have power shut-downs or water cut offs. 

To increase awareness of asset management among Sri Lankan professionals, I conducted three presentations. Also, I accommodated a high-level Sri Lankan Government delegation at my City Council in Australia and demonstrated them the importance of asset management. It seems that the Sri Lankan leaders still do not believe in the need of asset management. They are only obsessed with constructing new assets. 

So far, I was reluctant to write publicly on asset management for two reasons. One reason was my unwillingness to criticise local engineering professionals hurting their professional ego. The second reason was the possible flare-up of a conflict with the institutions of which I have the professional memberships if they misconstrue my opinions as a violation of their Code of Ethics. However, the time has come to raise my voice publicly. I would be careful not to pinch professionals too hard.

 

Asset management crisis

Sri Lanka is entangled in a complex asset management crisis due to political, social and cultural interferences. How could this be explained to the general public? The public needs products and services. To provide products and services, the public sector and the corporate sector must establish departments, institutions and companies. These organisations consist of people, assets, plant and equipment, software systems and management systems. In the public sector, many organisations were formed by successive governments without any long-term vision. 

Assets for such organisations were acquired without any strategic planning and analysis. Organisations were led by wrong people and supported by untrained staff. People, assets and systems were managed ad hoc manner. Hence, Sri Lanka ended up with public sector organisations managed by instincts. People became unhappy with the quality of services delivered. When the public sector was in such a chaotic governance situation, the leadership in corporate sector naturally followed the reactive pathways to survive. This is why we are yet to see world-class corporate sector organisations.

Many developed countries faced asset management crisis around 30 years ago and the professionals in those countries, with the blessing of the tamed political hierarchy, took the right decisions continually to manage assets in accordance with the best practice asset management practices. That is why the public in many developed countries gets superior services from service providers. They planned properly and acquired the assets at the right time, at the right location and ensured the assets of right quality. Not only that, they managed the assets cost effective manner within the asset life cycles. When the assets reached their end of economic lives either planners got rid of the assets or replaced or upgraded those with modern technological equivalent.

Strangely, the most powerful country in the world, the United States of America, is not known as a country excelled in advanced asset management practices. However, they were rich enough to react to the asset management crisis with band-aid solutions. Unfortunately, even for the USA, those solutions are no longer working. Realising this situation, former President Trump campaigned for a $ 1 trillion infrastructure development initiative but he failed to implement it through the Congress. 

This gave an opportunity to the newly-elected President Biden to try again and he presented a $ 2 trillion plan to ‘Rebuild Infrastructure and Reshape the Economy’ a few weeks ago. This is to fix poorly managed assets for more than half a century. It will require more funds to implement asset management practices. They need to outsource asset management experts as well. USA is good at outsourcing. Australian asset management consultants have identified business potentials five years ago and started establishing their offices in USA. On the other hand, we are bankrupt professionally and financially. Our path to recovery is harder.

 

Asset management definition

ISO 5500X Suite is the international standard for asset management. 

In this standard, an asset is defined as ‘An entity or a thing that has the potential or actual value to an organisation’. The asset management is defined as ‘The coordinated activity of an organisation to realise value from the assets’. 

One needs to understand the broader applicability of these open-ended definitions. An entity or a thing valuable to an organisation could be anything. The employees, customers, knowledge, brand, reputation, intellectual properties, physical assets and many other ‘things’ could be identified as potential or actually valuable assets for an organisation. When a definition says ‘coordinated activities’ it requires the support of strategies, policies, processes and procedures. If we want to realise ‘value’ from the assets, those coordinated activities must be formulated and executed by competent people in each professional discipline within the management process of relevant assets. 

Human resources experts must take on human resources planning responsibility as the employees are valuable assets for an organisation, but they should not operate within their own silos. The same is applicable for the physical asset custodians who are typically engineers. Advanced asset management practices applied to each asset category within each sub-system of an organisation, would bind all organisational activities together into an integrated system. The development of asset management systems needs expert professional advice.

 

Public sector asset management initiatives in Australia

Australia is known as a leader in asset management practices in the world. This accolade gained over 50 years of strenuous professional work when the rest of the world was contending with the reactionary asset management and programmed maintenance management practices. Asset management does not belong to engineers because it is a multi-disciplinary management practice. However, engineers lead the asset management function globally with the contribution of multidisciplinary professionals such as economists, valuers, sociologists, human resource planners, psychologists, asset planners, asset designers, asset maintainers, etc. 

Without engineering input, the asset management initiatives would be ineffective. Australians improved asset management practices through practical applications. During the last 25 years, the improvements in this field happened exponentially. Academic and professional institutions offer high quality asset management training for the professionals. There is a high performing Asset Management Council in Australia. In the corporate sector, there are a significant number of companies who specialised in asset management software applications. There are world-renowned asset management consultants who advise global clients tailored asset management applications for public and private sector organisations. 

After producing a series of best practice documentation over many decades, an Australia New Zealand Joint Venture led by the Institute of Public Works Engineering Australasia, produced the ‘International Infrastructure Management Manual’ on managing physical assets. Its sixth edition was issued in 2020. The working committee for this development consisted of representatives from the USA, UK and South Africa. 

ISO 55000 Standard provides ‘what to do’ aspects in asset management and the IIMM explains ‘how to do aspects’ on one category of assets, the physical assets.

The Australian Federal, State and Territories and Local Government understood the importance of asset management well-ahead of other developed nations. Early nineties, the governments had the soft approach and requested all public sector organisations to adopt Total Asset Management principles to manage public assets by issuing a TAM Manual. When soft approach did yield desired results, the stick was used. Public sector organisations were forced to shed excess assets and ineffective staff until optimum resources levels were reached to extract expected value from assets. The organisations were forced to acquire the best people, assets and apply risk and governance management practices. Organisations became lean and more focussed. 

The local government sector was the last to be reformed. Different State governments used different methods. In 2007, a new initiative was taken by the NSW State Government forcing Councils to produce asset management plans to prove assets were managed optimally. The NSW Department of Local Government enforced the ‘Integrated Planning and Reporting Framework’ on Local Councils. It integrated all Federal Level, State Level and Local Level Plans on services delivery and it required City councils to produce a Community Strategic Plan (10-years vision), Delivery Plan (4-years vision) and an annual Operational plan with the support of a Resourcing Strategy (Asset Management, Workforce Management and Financial Management Plans) and a Community Engagement Strategy. All these documents are reviewed annually. 

NSW Government did not stop there. The performance of City Councils was monitored continually and during the 2010-2015 period, a series of high-level discussion papers were circulated on further reforms to the local government. All NSW councils were assessed over a period, in terms of the financial sustainability, the effectiveness and efficiency of delivery of infrastructure and services and the sufficiency of having the scale to engage across community, industry and government. 

The end result of this process was the naming of councils as ‘Fit’ or ‘Not Fit’ for the future. As expected, the majority ended up as ‘Not Fit’. Then, the reforms were forced upon councils to merge not fit councils with the fit councils to survive. Financial support was given for the merging process. There were staff and political casualties but it had to be done by setting aside emotions. 

 

Asset management process

This is not a column to describe technical aspects of asset management. If any professional wants such information, they can watch the recording of my recent presentation on Asset Management Fundamentals at the Institution of Engineers, Sri Lanka – Women Engineers Forum.

Basically, one acquires assets for a purpose. One has to realise value from the assets. This is done through a coordinated activity. It is a balancing act of cost, risk and performance. If we have a wrong asset, at the wrong time and at the wrong place, this coordinated activity become a futile effort. We need to manage a group of different assets during their economic life cycle adopting asset management principles.

Let’s talk about just asset acquisition process practiced in Sri Lanka.

A politician visits a town to seek his/her election to the legislature and promises the gathering that he/she would build ‘the asset’ in their locality to produce jobs for the locals during construction phase and to deliver ‘benefits’ to them after the acquisition. Then, the politician directs the professionals to seek funds either locally or internationally. The obliging professionals invent imaginary cost-benefit analysis and write a project proposal to seek funds. Usually, the project is unplanned and overestimated. Thereafter, the asset is constructed at a cost well above the real market value of the asset. 

The corrupt officials, professionals and politicians share a part of the project allocation for personal gains. The public is happy that the asset provided them short-term jobs, personal benefits and ‘some’ long-term benefits, without realising the they are responsible for paying back the borrowed money for the asset. The public don’t realise that they will have to relinquish the receiving of some essential services to pay for an unplanned less productive asset. 

Often, the person who initiated the acquisition of this asset has not planned for funds to maintain the asset within its life. Hence the condition of asset deteriorates rapidly making the asset less-productive early in its economic life. This is followed by band-aid solutions. This vicious activity happened from the day Sri Lanka gained independence from the British.

In developed countries, this process happens the opposite way. When the need of an infrastructure asset is highlighted by anyone, nobody jumps and announces it to get the credit. The proposal is referred to the politicians and they direct the relevant professional authorities to get together do an in-depth study on the proposal. This is a multidisciplinary study and it includes the study of the roles and conditions of all the existing similar assets whether the new asset need can be fulfilled by the existing assets. 

To do the analysis the professionals need information such as stakeholder profiles and their needs, existing asset condition data, remaining values of assets, remaining economic lives, asset capability profiles, existing risks, future risks, life cycle costing needs of existing and proposed asset, stakeholder benefits, funding options, lifecycle cost recovery options, etc. Over the years, professionals collect such data and update data. If professionals agree on the justification of the need of the assets, then only the politicians are allowed to announce the possibility of having such an asset. Thereafter, the concept proposals will be prepared and be subjected to public scrutiny conducting the public exhibition of project documents. Until public endorses the proposal, the proposal would not be proceeded. 

However, public consultation is not an alternative for professional decision-making. Upon public endorsement, the proposal is approved by the professionals and it is passed to the politicians for formal approval. The politicians cannot change any features of the project as the value engineering facts are locked in. They only can make go or no-go decision based on the budget. If any politician found influencing of public officials to push low priority, unjustified projects into a project implementation program, such actions would be highlighted in the annual project management process audits and the accused politicians may even lose their public offices if proven guilty.

 

Sri Lankan public sector 

We cannot expect the Sri Lankan public sector to do Australian miracles. They should start marching before running. The starting point would be the development of a Service Delivery Plan, a Resources Plan and Stakeholder Benefit Plan for each public sector organisation. Resources planning to implement the delivery of benefits would be the hardest part to implement as the current bureaucratic hurdles and outdated methods of employee recruitments, salary systems and career promotion systems would work against the establishment of world best practice methodologies. Hence, radical overhaul of public sector management processes is a must. 

Establishing basic asset management processes and procedures would be the next priority. One has to remember that asset management requires the asset managers to have a holistic view of assets as a cluster and decide on the best mix of the assets to deliver the services. In addition, each asset category within the asset cluster must also be managed the same way. It is about the lifecycle management of all assets. 

With regard to physical assets, it is the combination of management, financial, economic, engineering and other practices to provide the required level of service in the most cost-effective manner. Are there competent Sri Lankan professionals available, especially engineering professionals to lead this process? To me, the failure to act so far has not been a funding issue but a capability and a professional attitude issue.

          

Sri Lankan corporate sector

According to the information available for me through the association of engineering professionals who work in the corporate sector, the top 50 companies in the private sector are, in general, good at the asset maintenance management and the facilities management. However, none of these management functions are equivalent to asset management. Hence, I doubt they apply asset management principles to manage their assets. 

In developed countries, insurance underwriters force their insurance companies to inform the clients to adopt Asset Management Standards (IS) 5500X Suite) and Risk Management Standards (ISO 3300X Suite) to manage assets. The intention is to reduce injury and asset failure claims. As an incentive, the insurance companies are ready to offer reduced insurance premiums. There is a catch here. If any client refuses to adopt asset management and risk management standards, the insurance company would keep detailed records on their discussions with clients. 

If a refusal of a claim ends up in a legal court, the insurance companies would use the documented information to justify that the client had a reasonable opportunity to prevent occurring of a particular claimable incident by adopting asset management practices. Hence, there is a high possibility that the court would take a decision in favour of the insurance companies, on the refusal of the claim. 

Irrespective of these real-life cases, the adoption of asset management practices would save resources for an organisation in the long run and the asset owner has a better chance of reaping optimum value from the assets and serving the stakeholders better.

Are Sri Lankan corporate and public sectors ready to introduce asset management practices? 

(The writer is a Chartered Professional Engineer, a Fellow and an International Professional Engineer of both the Institution of Engineers, Sri Lanka and Australia. He holds two Masters Degrees in Local Government Engineering and in Engineering Management and at present, works for the Australian NSW Local Government Sector. His mission is to share his 32 years of local and overseas experience to inspire Sri Lankan professionals. He is contactable via senevir15@gmail.com.)