2.6 Asset performance indicators

Asset performance indicators allow for the asset portfolio to be reviewed in light of program delivery requirements.

Asset performance indicators provide an entity with a tool for managing its asset portfolio to assist it in meeting its program delivery requirements. Performance indicators typically take a multi-dimensional view of the asset’s contribution to meeting program delivery requirements. This multi-dimensional view would include consideration of the functionality, operational importance and usage of the asset. These are described below in Table 2.2.

Monitoring asset performance can also assist in managing and building the performance of key individual assets or groups of assets, which contributes to the accountability, decision-making and governance arrangements of program delivery.

Entities will need to make an assessment of whether the costs of collecting asset performance information are justified by the benefits gained from the data. In most cases, asset performance indicators would be useful only for entities which maintain significant individual assets of groups of assets.

Table 2.2: Performance indicators

Functionality	‘Fitness for purpose’ describes how well a current asset matches the activities it supports.
Operational importance	Operational importance reflects how heavily the asset user depends upon the asset to meet service delivery needs. In determining an operational importance rating, consideration needs to be given to the immediate availability of alternatives, and the consequences of failure.
Use	An important part of determining the asset’s relevance to business requirements is how intensively the asset is used.

 

Performance indicators rating scale

Individual assets play different roles, including direct or indirect contributions, to supporting program delivery requirements. One approach to ascertaining the level at which assets are performing, and hence assessing their relative degree of importance to an entity, is to assign each asset or asset class a rating. A typical rating scale that could be used is outlined in Table 2.3 below.

Table 2.3: Performance indicators rating scale

Functionality
1	Ideal	Ideal indicates that the asset is ideally suited to the operation and is likely to continue to be so in the foreseeable future.
2	Satisfactory	This grading applies when the asset, while it may not be ideal, meets the core operational demands placed on it.
3	Not Suitable	An asset that does not meet operational requirements, for example assets awaiting disposal.

Operational importance
1	Critical	The asset's function is absolutely essential if the operations are to be continued as intended, for example a financial management information system.
2	Operational need	A high level of operational importance to operational needs without being critical, for example fit-out.
3	Non-essential	The asset is not considered as an integral part of the operations, for example a kitchen refrigerator.
4	Not required	The asset provides no contribution to the entity's objectives, for example redundant assets or assets awaiting disposal.

Use
1	Standard	Considered to be the standard level of usage for which the area or asset has been designed, for example leasehold improvements.
2	Excessive	This grading describes an asset that is in constant or continuous use that is excessive, for example an asset running above its design specification limits.
3	Under-utilised	This asset meets service delivery needs but is not being used to its full extent possible, for example where service capacity of the assets exceeds demand.

The performance of physical assets changes over their life-cycles and ongoing monitoring of key assets is an important aspect of asset performance. Asset performance information is usually completed with other qualitative and quantitative information relevant to service delivery needs. In doing this, entities are able to develop asset performance benchmarks to assist in optimal service delivery outcomes. Asset performance benchmarks should consider the nature of the asset, its program delivery role and its relative importance.

Applying performance indicators to each key asset or asset class provides entities with a tool to assess the role of those assets on an ongoing basis. However, entities may also have valid reasons for currently maintaining assets with low ratings because of their importance to the future delivery of program outcomes.

The ratings for assigned performance indicators are then combined to determine a relative asset performance benchmark for each key asset or group of assets. An example of how asset performance benchmarks are assigned to each key asset or group of assets is provided in Table 2.4 below. The lower the total rating assessment the more critical the performance of the asset is likely to be to the entity.

Table 2.4: High-level summary of performance indicator benchmarks

Benchmarks		Example	Functionality rating	Operational importance rating	Use rating
A	High	Precious artworks/artefacts, critical systems	1-2	1	1
B	Normal	Office equipment, IT equipment, accommodation	1-2	2	1
C	Low	Items with some functional use but of little operational importance	2	3	1
D	Concern	A course of action is required to address an issue	1-3*	1-4*	1-3*

*A range of ratings is provided as different combinations across functionality, operational importance and use can provide an overall concern rating.

Performance indicators can also be collected by way of a capital management planning survey. An example of this approach is shown in Section 4.4.

Case Study 2.2 highlights how additional costs may be incurred if an entity does not regularly monitor its asset performance indicators for key assets or asset groups.

Case Study 2.2: Maintenance planning at the National Capital Authority