Knowledge base Flying the flag for asset management Jack Dempsey, founder of Asset Management Partnership LLC, discusses the failings of US government policy to adequately manage its facilities and built infrastructure, and looks at solutions, including the recent recommendation to adopt an ISO 55000 Facility Asset Management System Why outcomes matter is a question all organisations must answer. How this question is answered is determined by, and defines the purpose of, an organisation. Success is determined by interested parties that judge if the outcomes generated by the organisation fulfil its purpose. Interested parties include the organisations customers, employees, top management, other organisations, and the public to the extent that they benefit from or are impacted by its activities. Two recent US National Academies of Sciences, Engineering, and Medicine reports provide insight into how the US federal government has answered this question regarding its management of a 280 million square metre building inventory that consumes approximately US$70bn in taxpayer money every year. It seems natural that US taxpayers should expect, as an outcome, that the US federal government is going to make best use of this substantial, yet limited, asset portfolio and supporting investments. The two National Academies reports highlighted in this article demonstrate that this is not entirely the case. Together, the reports identify a systematic failure in policy, provide a detailed example as evidence of this systematic failure, and give recommendations on the implementation of a facility asset management system to remedy this failure. Author bio Jack Dempsey co-founded the Asset Management Partnership LLC, a consulting practice specialising in helping others improve outcomes through better asset management. His 30+ year experience ranges from a civil engineer and officer in the US Coast Guard to a director, consultant, adviser, convener, researcher, author, and board member focused on advanced asset management implementation. He serves on the US National Academies Board on Infrastructure and the Constructed Environment, and is a member of US Technical Advisory Group to ISO Technical Committee 251 Asset Management, an IAM Fellow, and a licensed professional engineer. Report details The first report is called Strategies to Renew Federal Facilities. This report details recommendations on how to fix the systematic failure of US federal government policys inability to continually renew its facility portfolio. The second report is Technical Assessment of the Capital Facility Needs of the National Institute of Standards and Technology. This report gives a clear example of how this systematic failure plays out at a federal agency level. Funding across life-cycles NIST has regularly underfunded this target for more than 20 years running. This has resulted in more than 60 per cent of NIST facilities failing to meet minimum condition standards. It is so bad that the agency has ranked facility condition as the number one risk to NIST mission achievement in each of the past five years The Strategies to Renew Federal Facilities report was initiated by the Federal Facilities Council. The Federal Facilities Council is a cooperative association of federal agencies within the National Academies, with a mission to identify and advance technologies, processes and management practices to improve the management, operations and evaluation of federal facilities. What the Federal Facilities Council sought in Strategies was guidance on how to develop better business cases to fund facilities across their lifecycles. The problem to be solved was chronic underfunding of facility requirements that resulted in degraded performance and sub-optimised use of limited assets and resources that is a poor outcome. In response, the National Academies commissioned an independent committee of experts to evaluate the problem and give recommendations on how to solve the problem. The Strategies committee quickly recognised the root of the problem was not related to business case development. Instead, it was rooted in understanding that the outcomes that mattered were being overlooked. The standing practice of justifying facility funding based on facility lifecycle needs is not effective. This perspective does not resonate with authorities that provide funding ultimately, the US Congress. To change this, a new justification is needed, one that focuses on outcomes that resonate with the US Congress and taxpayers. Systematic failings The Strategies committee determined that the root cause of this misalignment was a systematic failure in US federal government policy. This policy is dominated by a short-cycle budget analysis and lacks cost transparency. For example, it is impossible to determine how much funding is expended on a facility asset as part of a life-cycle cost analysis using current federal policy and accounting rules. This lack of cost transparency is further compounded by a one-year budget cycle and a five-year planning horizon that does not account for balanced and effective facility life-cycle management practices. The result is cost/benefit trade-offs related to making one life-cycle management decision or another that cannot be compared. The adage goes, you cant manage what you dont measure. Therefore, as US federal government policy does not enable collection or evaluation of asset lifecycle costs, this information is not considered in investment decisionmaking. This leads to poor management of facility assets a bad outcome. What this means is executive decision-makers never get the opportunity to fully understand the implications and consequences of decisions that defer sustaining investments of long-lived assets. The ounce of prevention is worth a pound of relief and pay now or pay later arguments are not effective because the relationship between asset resource and investment decisions is not linked to the outcomes that matter to executive decisionmakers who make budget and funding decisions. Failure to meet minimum standards This was illustrated in the second report, Technical Assessment of the Capital Facility Needs of the National Institute of Standards and Technology (NIST). NIST operates two primary research and development campuses at one of the USs oldest physical science laboratories. NISTs purpose is to promote US innovation and industrial competitiveness by advancing measurement science, standards and technology in ways that enhance security and improve quality of life. NIST products and services As detailed in the report, NIST products and services span all aspects of this spectrum ranging from home safety to manufacturing competitiveness, from pharmaceuticals to nuclear security, from election integrity to cryptosecurity, from baby food safety to natural disaster resilience, and from computer chips to infrastructure. One example of NISTs critical role is its internet time services, which receive more than 40 billion requests per day, serving more than 300 million unique devices by timestamping financial transactions and computer cloud services. Another is creating the analysis method for biopharmaceutical manufacturing of rapid tests during the COVID-19 pandemic. NISTs budget in 2022 was US$1.2bn. An independent economic analysis estimates NISTs return on investment to the US economy has a net positive 9-to-1 ratio. A US federal facility investment target is to invest from two per cent to four per cent of a facility portfolios present replacement value (PRV) in maintenance and sustainment activities. NISTs US$3bn PRV facility portfolios minimum maintenance funding target is US$60m a year. NIST has regularly underfunded this target for more than 20 years running. This has resulted in more than 60 per cent of NIST facilities failing to meet minimum condition standards. It is so bad that the agency has ranked facility condition as the number one risk to NIST mission achievement in each of the past five years. Despite all of this, much-needed funding has not been forthcoming. The NIST committee estimated the net overall impact of underfunding facility renewal requirements has been a compounding 20 per cent loss of productivity. The basic maths is that relatively minor increases in facility maintenance that reduce the 20 per cent loss in productivity would be more than paid for by leveraging the 9-to-1 benefits-to-cost ratio. From an investment standpoint, this is an easy decision to make. The reason it is not made is because of the systematic failure in US federal government policy documented in the Strategies report. Taking action NIST is only one of about 100 individual US federal agencies that are responsible for the management of federal facilities affected by this systematic failure. In fact, evidence in many Government Accountability Office, Inspector General Office, and Congressional Budget Office reports indicate the NIST storyline is indicative of a federal government-wide problem. The Strategies committee believes that outcomes do matter and, therefore, established recommendations that lead to fundamental changes in policy Recommendations To make the changes needed, the Strategies committee determined that an asset management system viewpoint was needed. Its five recommendations to correct this problem are: 1. E ach federal agency must implement a Facility Asset Management System based on ISO 55000 Asset Management standards series. 2. E ach federal agency must implement a supporting Strategic Asset Management Plan (SAMP) for its facility portfolio, signed by an accountable executive responsible for its achievement. 3. E ach federal agency must demonstrate its facility SAMP supports the achievement of the US government in fulfilment of the agencys purpose, to include mission achievement, performance, safety, resiliency, energy efficiency, climate change mitigation, social responsibility, etc. 4. M odels, data, and measures must be improved to support riskinformed resource and investment decision-making, to specifically include asset-based cost analysis and cost/benefit trade-offs relevant to executive decision-making. 5. The US government must expand use of strategies and frameworks that incentivise risk-informed cost/benefit trade-offs as the basis of resource and investment decision-making. Each federal agency must implement a Facility Asset Management System based on ISO 55000 Asset Management standards series On the surface, these recommendations do not seem remarkable if viewed through a traditional lens that asset management is just another layer of policy. Things look measurably different when it is understood that these recommendations involve fundamental changes to the US federal governments management system used to manage facility assets. This is why outcomes matter. Strategies objective is to generate real, fundamental changes to US federal government policy. The Strategies committee believes that outcomes do matter and, therefore, established recommendations that lead to fundamental changes in policy. Its recommendations directly challenge well-entrenched policy that systematically impacts the US federal governments ability to continually renew its facility portfolio. Correction of the systematic failures must overcome decades of public policy inertia and the hesitancy of executive leadership to become accountable for the efficient and effective management of facility assets. Making why outcomes matter an issue strikes at the heart of an organisations purpose. Strategies provides an exhaustive analysis of a systematic failure in US federal government policy and provides wellsupported recommendations to remedy root causes of the problem. The objective of the Strategies committee recommendations is to make better use of public assets and funding, and to help the US federal government answer a very important why outcomes matter question that is, make efficient and effective use of its limited assets and resources in the achievement of its purpose.
