Definition

Asset review and analysis is a structured and systematic process which involves the identification,
collection and analysis of relevant data for the purpose of assessing the performance of an asset
portfolio. Particular emphasis is given to physical, financial and operational planning issues.

Objectives
The objectives of the asset review and analysis process are to:
match the quantified service delivery requirements with the quantified capabilities of existing
assets
maximise return on the asset portfolio

develop disposal strategies to cater for surplus assets

develop investment strategies to overcome asset deficits

develop maintenance strategies for continuing use requirements

Benefits and risks

Benefits
The effective matching of an agency’s assets to the service delivery plan will ensure that:
service delivery objectives of the agency are efficiently supported by the agency’s asset
portfolio
utilisation and performance of portfolio assets are optimised

planning for investment, maintenance, management-in-use and disposal is coordinated, thus

avoiding duplicated effort
The conduct of a comprehensive asset review and analysis is a requirement under Public Finance
Standards (340–348) for asset management. It should be carried out annually. In addition, best
practice would indicate that a rolling review of the service delivery plan and asset plan will provide the
closest link between asset and service delivery objectives.

Risks
If the asset review and analysis process is not supported by competent advice and accurate and
relevant information, serious deficiencies in the asset planning process may result (with financial
losses recorded for the agency’s portfolio).
Consequences may include:
failure to cater for emerging service trends

failure to substantiate adequately a case for necessary funds

over-maintenance of a building scheduled for disposal or demolition

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 inappropriate or inefficient use of existing assets

failure to maximise return on the asset portfolio

The asset review and analysis process

Asset review and analysis is the ordered process of determining and quantifying the performance of
an agency’s asset portfolio in terms of effective delivery of services and economic optimisation of
assets.
Depending on the size and configuration of the portfolio, it may be necessary to review it region by
region to provide a more meaningful analysis of service and asset requirements. Alternatively, it may
be divided up according to the type of asset.
An initial investment of resources, staff and training, as well as supporting infrastructure, will be
needed to set up the asset review and analysis process. A rolling review process thereafter will lead to
a gradual improvement in asset utilisation as compared with criteria established as part of the asset
review and analysis process.
The asset manager can facilitate the process by setting up a team of multidisciplinary specialists,
comprising agency service planners, asset managers, regional staff and other asset related
professionals. Guidelines for appointing consultants are provided in the Queensland Government’s
State Purchasing Policy.
Key functions of the team are to:
participate in setting the objectives and scope of the review

collate and analyse information on the operation and performance of the asset portfolio

identify current and expected service delivery needs of the agency

A successful asset review and analysis process will produce an asset portfolio that will most
effectively meet service delivery requirements. The six phases in the process are as follows:
Establish objectives and scope of the review

Identify information

Collect information

Analyse information

Develop options and recommendations

Communicate outcomes to senior management

Establish objectives and scope of the review

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The multidisciplinary team will consider the size and configuration of the portfolio in determining the
objectives and scope of the review. It will also identify the information required for collection and
analysis, as well as the proposed methods of analysis.

Identify information

Information will be obtained either from within the agency or from external sources. Information
required falls within the following categories:
physical

financial

operational

market

government/agency policy

statutory/legislative requirements

The extent of information required will be determined by the size and configuration of the asset
portfolio, as well as by the composition of the assets (i.e. real property, plant or equipment).
By way of example, some of the information that may be obtained (and the way it may be used) is set
out below. The examples given are not exhaustive.

Physical
This information identifies and describes the physical attributes of each asset in the portfolio, including
its location, size, age and condition and the degree to which it meets current and expected usage
requirements.
Any review and analysis of real property assets should also take into account the effect that the
asset’s location has on State and local planning issues. Town planning matters (such as zoning) will
have an impact on the development potential, saleability and value of real property assets.

Financial

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This information identifies the fiscal value of an agency’s assets as well as their individual and
collective revenue and operational costs, including statutory charges. Leased assets should also be
analysed with respect to rental rates, outgoings and other terms and conditions of the lease which will
affect their financial viability.

Operational
This information identifies the performance measures and benchmarks against which asset
operations can be compared. This information is used to quantify the operational effectiveness,
functionality and use of assets.
The means used to quantify these performance measures and benchmarks should be determined in
terms of each agency’s specific service delivery objectives and requirements.

Market
Detailed market information (e.g. on value trends, inflation movement, population growth and
demographics) can be obtained from professional advisers such as economists and property analysts
and valuers. This information will help to identify the economic and market factors impacting on
individual assets and the portfolio.

Government/agency policy
The interpretation of government and agency policy enables asset planners to ensure that existing
and expected service needs of the agency are appropriately satisfied by the asset portfolio. It will also
ensure that social objectives are considered in conjunction with economic objectives when assessing
service needs.

Statutory/legislative requirements
This information will identify the commonwealth, state and local government legislative requirements,
including those for workplace health and safety, that impact on an asset’s ability to meet operational
and management requirements.

Collect information

Information, either from within the agency or from outside sources, should be collected and
maintained on an ongoing basis. Much of the information, such as the physical information and the
financial information, can be stored in the Asset Register and will be updated through the normal
business transactions of the agency. Those responsible for the review will need to conduct an
information audit/search to ensure that all relevant information is available for analysis.
Information identified as relevant is usually obtained from the following areas (examples only):
Physical information: This information is likely to be located in agency asset registers, condition
audits/appraisals, asset life cycle plans and maintenance records/plans.
Financial information: This information is likely to be available in agency financial management
systems, budget papers, valuation records, appropriation ledgers and financial statements.
Operational information: This information may be available in human resource management
systems, accommodation standards and central registers.
Market information: Value trend information on the property market is available from property

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 valuers and analysts. Information on community trends may be obtained from local/regional
groups, and information on the Consumer Price Index (CPI), population growth rates and
demographic characteristics is available from the Australian Bureau of Statistics.
Government/agency policy: This information is derived from agency’s corporate, strategic and
business plans (focusing on social as well as economic objectives).
Statutory/legislative requirements: This information is obtained from commonwealth, state and
local government statutes. Agencies should have access to an updated list of applicable
statutes as a matter of course. Relevant government bodies can assist in interpreting statutory
requirements. An agency’s legal advisers can also help if necessary.

Analyse information

The objective of the analysis phase is to compare the capacity of an asset to support service delivery
with the asset requirements expressed in the agency’s Corporate Plan. This phase of the process
establishes the link between strategic and operational aspects of asset management.
The analysis should be carried out for the entire asset portfolio, drawing on government/agency policy
information to evaluate the current and expected future use of assets. A team of multidisciplinary
asset specialists can be formed to undertake this task in a workshop environment. The portfolio
should be objectively analysed to determine to what extent assets satisfy demand and contribute to
service delivery.
The analysis will identify the performance both of individual assets and the whole portfolio in relation
to current and expected service delivery requirements. Various techniques can be used to measure
asset performance. Standards and/or benchmarks will ensure that performance is quantifiable. They
also provide a means by which divergence from nominated performance outcomes can be measured.
The analysis of asset information enables decisions to be made concerning the current utility and
future use of assets, that is, with respect to capital investment, ongoing management, maintenance
and/or disposal. The analysis phase should be designed to complement an ongoing system of asset
performance monitoring and review.
Examples of the range of analysis tools that can be used are briefly described following.

Financial analysis
Discounted cash flows can be used to determine the Net Present Value (NPV) of assets. This
technique determines the present value of the net income stream generated by owning the asset over
a specified time period. This type of analysis provides an estimate of the value of the asset in
economic terms which can then be compared with the capacity of the asset to accommodate service
delivery requirements.

Cost benefit analysis

This type of analysis focuses on the quantified operational costs of the asset and the contribution it
makes to the agency’s service delivery.

Sensitivity analysis
This technique measures ‘what-ifs’ and ‘scenarios’ to examine options and to determine probabilities
of outcomes.

Risk analysis

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Risk analysis is the systematic use of available information to determine how often specified events
may occur, and the likely magnitude of their consequences. This tool enables decision-makers to
consider possible risks when determining asset requirements in a portfolio.
Risk assessment approaches include:
The payback decision rule: This involves an assessment of the time necessary to recover initial
capital expenditure on the asset.
The risk-adjusted investment rate: This accounts for risk by adding a premium onto the required
rate of return when using time value of money financial analysis.
Conservative forecasting: This accounts for risk by adopting conservative forecasting.

Other useful risk assessment models include Ratio and Sensitivity Analysis, the Direct Utility
Approach and Monte Carlo Risk Simulation.

Comparative analysis
This method of analysis measures and compares asset performance against internal and external
benchmarks and performance criteria. Information on external benchmarks is available from various
organisations such as Building Owners and Managers Association (BOMA). The performance of
assets can then be assessed against identified options.

Trend (temporal) analysis

This technique measures relative asset performance and performance trends over time. It provides
useful information to the asset manager in determining life cycle costs of an asset and in identifying
opportunities for asset refurbishment and replacement.

Develop options and recommendations

The objective of this phase of the asset review and analysis process is to develop options and
recommendations for the current and future use of the asset portfolio. These options should be
prioritised in accordance with planning and resource allocation plans.
The use of tools such as a spreadsheet or a matrix will allow asset managers to rank assets
qualitatively according to performance criteria, and assist in the decision-making process.
Categories for which options and recommendations are proposed may include those listed below.

Assets for which there is a continuing requirement

There are two types of assets within this category. These are discussed below.

Assets performing to or exceeding service delivery standards

Strategies can be developed for these assets to maintain operational and physical performance
standards.

Assets not performing to service delivery requirements

Firstly, service and asset management practices can be improved or the asset can be refurbished,
expanded or upgraded (through capital investment). There may also be a combination of these two

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activities.
Secondly, the use of the asset can be altered. (This may or may not require capital investment.)
Further analysis can also be undertaken to determine the suitability of assets for alternative uses.
Strategies can then be developed to enhance and then maintain the service delivery potential of these
assets.
When assets are not performing to service delivery requirements and service delivery potential cannot
be enhanced it may be economic to replace with new assets.

Assets for which there is no continuing requirement

These are assets which the agency no longer requires in order to satisfy current and planned service
delivery objectives. Opportunities can be identified and strategies developed to dispose of these
assets.

Projected services for which there is inadequate or no asset capacity

This situation is brought about through deficiencies in the asset planning process and a consequent
failure to adequately meet the changing demands on operational and service delivery requirements.
Investment plans can be implemented to ensure that adequate asset resources are in place to fill the
operational objectives of the agency.
Consideration should also be given to the alternatives to asset ownership (such as rental of premises
and shared facilities) where this is cost-effective and operationally viable.
The outcome of this phase of the asset review and analysis process is that recommendations are
formatted according to the recommended future use of the asset (i.e. they are categorised broadly
according to the following proposed courses of action):
retain the asset in its current capacity

improve or upgrade the asset

identify new asset requirements

dispose of the asset

identify non-asset solutions

Communicate outcomes to senior management

The outcomes of the asset review and analysis process are recommendations on the asset portfolio,
which should be communicated to senior management for authorisation. The presentation of the
recommendations will vary according to the nature and size of the portfolio; however, documentation
should be in a form suitable for presentation to corporate management.
On approval of the recommendations, asset management strategies should be developed. Before
implementing these strategies, the asset manager should forward recommendations to the officer who
has the required level of delegation to approve the strategy.

Performance Measurement
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Analysis and review is a critical element of the asset planning process. It is important, therefore, that
the process be objectively evaluated against predetermined quantifiable performance criteria.
Performance, including the performance of any external consultants, can be determined in terms of:
level of assistance provided to decision-makers/planners

relevant and supportable options identified

level of certainty of decision-making, and the direction provided

identified improvements in asset performance

provision of information that allows the portfolio to be prioritised in terms of service delivery
requirements
achievement of an acceptable balance between operational efficiency and acceptable property-
holding costs across the portfolio
The performance measures decided will vary according to the service delivery objectives of the
agency, but may include:
percentage of the asset base which satisfies the agency’s service delivery objectives

percentage of the asset base which conforms with predetermined benchmarks of performance

Ultimately, the performance of the asset review and analysis process will be reflected in an across-
the-board improvement in asset productivity. Holding and operating costs will be reduced as
inappropriate assets are disposed of and the remaining assets are operated to benchmark levels of
performance.

Reference Material
All Queensland Government Legislation

Building Owners and Managers Association

Building Act and Regulations

Building Division

Department Of Public Works

Glossary of Terms

Heritage Legislation

Queensland Treasury

Various Planning Acts

Workplace Health and Safety Act