Business Plan Summary

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Business Plan

Summary

2012-2016

Program

_{Corporate, Operational & Council Services}

Service grouping

Corporate Services

Service

Asset Management

Type

Internal Service

Owner:

_{Tom Johnson, Managing Director - Corporate Assets, CAO's Office}

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Strategic Priority

Purpose

Good government

The Corporate Asset Management Division enables the management of assets through the

development and implementation of a

comprehensive and effective framework that supports decision making based on the shared principles of effective communication, risk

management, long-term planning, defined levels of service, enhanced life-cycle controls and monitoring across the entire corporation. This process

supports good government by providing the

community with appropriate levels of service while ensuring sustainability and cost effectiveness of corporate assets. Corporate Asset Management serves the decision-makers: Council, the asset owners and operators, and asset users as well as the community.

Financial & Staffing

In $000s 2010 Actual 2011 Revised _Budget

Operating budget

Expenditure: 670

Non-tax revenue: 0 0

Net (tax

supported): 0 670

Capital budget 2010 Revised _Budget 2011 Revised _Budget

Expenditure: 0 Non-tax revenue: 0 0 Net (tax supported): 0 0 Staffing FTEs: 0.0 5.0 Percentage of expenditures budget (all rate sources): 0.00 0.09 Annual per household cost of net budget ($): 0.00 3.99

Key processes

Corporate Asset Risk Management

Outsourced percentage

25%

%

Establish and manages risk associated with corporate asset management. This is undertaken through a systemized analysis and assessment of the likelihood and consequence of failure of individual and groups of assets. Societal, economic and environmental risks are considered.

Corporate Asset Management Policy and Procedures

25%

%

Establish and implement policies and procedures related to corporate asset management. This activity identifies the level of service desired from each asset and sets the parameters to sustain an acceptable level of service at an

acceptable level of risk. The levels of service are confirmed through the Council approval of procedures and policies.

Corporate Asset Life Cycle Management

25%

%

Determine and manage life cycles of corporate assets. This uses science to predict and manage the life cycle of an asset from design to decommissioning to sustain the service and optimize use of the asset. This combines computer modeling, historic knowledge and current condition analysis.

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Corporate Strategic Planning/Budgeting for Assets

0%

%

Integrate the asset management program with the capital budget

program. This enables recommendations for appropriate investment that control risk through budgeting the right amount for maintenance/monitoring and replacement/decommissioning expenses at the right time thus ensuring sustainability of service. Information regarding the condition, needs and priority of assets is made readily available through the corporate asset

management process. This information is useful in making short and long-term predictions of asset life thereby enabling the drafting of budgets based on solid comparable grounds.

Oversee Corporate Asset Management Process and Technology

25%

%

Establish, develop and oversee a Corporate Asset Management System including an asset registry to make informed decisions on a corporate basis. This involves the use of asset management software as an interface using Oracle data from all service areas to create useful information for use by stakeholders, compiling the information and providing reports that meet the needs of the users from operators to budget developers to auditors. This includes providing the data to meet PSAB 3150 reporting requirements. Spacer row turn text white when ready

Regulatory/Policy landscape

Service

Discretionary

Delivery method Legislative

New council direction, new regulations, legislative changes

The asset management process integrates broadly with most legislation while being specifically enshrined with respect to tangible capital asset inventories under Provincial legislative (PSAB 3150) requirements. Legislation is expected specifically with respect to the 'municipal asset management process'. It has just been applied to the electricity

community by the Ontario Energy Board. Electrical rate changes in 2010 were not permitted without an approved asset management plan. Within five years or less we can expect asset management plans to be a pre-requisite for obtaining future transfer funding. The

effectiveness of the asset management process may impact London's credit rating. Legislation and Legislative Guidelines:

Municipal Act

PS 3150 – Tangible Capital Assets Building Code Act

Environmental Protection Act Clean Water Act

Environmental Assessment Act Planning Act

Accessibility for Ontarians with Disabilities Act Bridges Act

etc.

Current state of this service

The City of London owns tangible capital assets with a replacement value of $12 billion including roads, sewers, water systems, facilities, parks, arenas, land, etc. Historically these have been managed through individual systems without a corporate shared basis of

information for decision making. Value is added through the consideration of assets on a corporate level as well as a service basis. This helps to ensure that limited resources are applied where needed most, minimizing risk and enhancing effective use of assets.

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Asset Management can be defined as "an integrated set of processes to minimize the lifecycle costs of owning, operating and maintaining assets, at an acceptable level of risk, while

continuously delivering an established level of service." The corporate framework for asset management is currently at the conceptual stage. The program is expected to answer the following questions.

What do we own? Where is it? What is it worth?

What is its condition and expected remaining service life?

What is the level of service expectation, and what needs to be done? When do you need to do it?

How much will it cost?

What is the acceptable level of risk?

How do you ensure long-term affordability and sustainability?

Individual departments and divisions have varying levels of established management abilities with varying levels of effectiveness. The documented listing of assets has progressed in the area of tangible assets inventory for the purpose of PSAB but more information is needed to serve the purpose of asset management. The tangible capital assets historic costing is a foundation stone for an effective asset management system.

Opportunities exist to improve existing practices, expand and systemize current data

collection and enable a framework that could provide clearer rationales for decision making by Council and staff. Failing to provide for corporate asset management can inhibit good decision making and may impact the corporate ability to obtain future transfer funding from senior levels of government.

It must also be noted that London is currently behind many other municipalities across

Canada with respect to asset management. The lack of a good corporate asset management program may impact the AAA credit rating currently enjoyed by the City.

Recent enhancements to economy, efficiency and effectiveness

Not yet available as development is still underway. Spacer row turn text white when ready

Future direction of this service

A corporate asset management program is planned to be implemented in the City of London. Existing inventory and maintenance systems are multiple and discrete to each service area constraining the ability to make a balanced corporate decision. Corporate asset management begins with looking at the existing systems and developing a framework that will enable a merging of information to support the corporate asset management program in order to effectively sustain levels of service in the long term.

Staff are planned to be resourced with appropriate equipment and training. Consultants need to be retained to support the program. The need for additional resources must be assessed on an ongoing basis to support the unit as it develops if agreed upon timelines are to be achieved.

The public expects the corporation to provide an appropriate level of municipal services in a cost effective, safe, legal and sustainable manner. Corporate asset management is a tool to balance risk with cost and societal needs providing sustainable services at an acceptable level including compliance with PSAB legislation and expected future asset management legislation.

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Level of service expectations continue to increase while costs are expected to be

reduced. Climate and legislative change will demand enhanced assets. The aging workforce, future retirements and lack of succession planning will impact the corporate ability to manage its assets and potentially its ability to sustain the existing levels of service.

Legislation will continue to rapidly evolve in the area of public sector accounting and management. Mandatory asset management is expected to be a requisite in order to

successfully source funds from transfer programs including stimulus funding initiatives. The electricity community has just been challenged with mandatory asset management

planning. Other new legislation including technical requirements such as AODA clearly impact assets and will need to be accommodated in future plans and budgets.

Objectives next 4 years

Create Corporate Asset Management Program

Develop a decision making framework involving planning, engineering, economics, and finance to best manage existing and new municipal assets.

Expected completion year 2017

Division responsible Asset Management Actions

Research asset management practices in selected municipalities.

Review and analysis of current asset management awareness and practices in the corporation.

Review and analysis of corporate expectations regarding asset management plan and provide recommendations with respect to impact on budget practices, performance measures and indicators, and reporting.

Identify level of service expectations.

Develop draft program and implement on a pilot basis. Implement Asset Management program.

Monitor and continuously improve program.

Outcomes and measures

Complete assessment of current practises by end of 2012. Complete level of service identification by 2014.

Pilot aspects of asset management 2013.

Fully implement and move to monitoring stage 2017.

Establish Asset Management Network and Team

Identify and set up a team of stakeholders and their expertise to deal with the launch of the development phase of corporate asset management. The vision of the network includes a quarterly meeting of senior management with a more frequent meeting schedule for divisional leads who are expert in the management of the individual systems.

Undertake an outreach program to identify senior stakeholders in the asset management process.

Set up a second tier of field experts to participate in the development of the asset management process.

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Educate stakeholders on asset management using meetings and Powerpoint presentations. Identify team members.

Teams of field experts meet regularly and provide minutes of meetings and decisions reached. Identify and Assess Existing Systems

Document the current status of assets and their existing management using the PSAB

information as a base and developing a common corporate matrix for the management of the data.

Assess existing systems, identify the deficiencies and corrective actions required to support a corporate overview. The current status of inventory records management in the corporation is eclectic while corporate management requires consideration of common information. This development process will require the talents of the Asset Management Division and outside consultants to collect, organize and report. Some areas have already begun this work. Outcomes and measures

Document and report existing systems. Assess information and identify gaps.

Recommend methods to address gaps in information and process.

Prepare State of the Assets Report

Report on the current state of the assets including an assessment of infrastructure gap and recommendations that address any identified issues. This is expected to take 18 months to two years to complete and is linked to the above activity.

Identify infrastructure gap and prepare report. Outcomes and measures

Report to Council on the state of the assets.

Develop Asset Management Plan/Program Strategy

Establish what a corporate asset management plan/program would look like and garner acceptance of the strategy.

Draft a corporate asset management plan. Retain consulting services with expertise in asset management and the acquisition of a software system to support the plan. Educate

stakeholders and garner acceptance by Council. Assess and select software suitable for asset management purposes and implement same in order to facilitate decision-making.

Successful performance of consultant. Acceptance of strategy by Council. Implementation of software system.

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Develop Asset Management Policies

Establish policies where necessary regarding asset management, risk assessment, priorities and levels of service.

Identify gaps in policy with respect to corporate asset management. Draft asset management policy.

Garner approval of policy by Council.

Implement policy change to address any deficiencies. Outcomes and measures

Report on gaps in policy. 2014

Prepare draft asset management policy. 2015 Achieve approval by Council. 2015

Implement follow-up policy update to address deficiencies, if any. 2017

Develop Asset Management Standards

Establish metrics and standards regarding asset management, risk assessment, priorities and levels of service. Although this is expected to take up to five to seven years to fully

implement, there will be significant progress on route. Expected completion year

2017

Address gaps in available criteria particularly expected levels of service.

Develop metrics and standards for risk, life cycle parameters and levels of service through external resources and in-house experience.

Outcomes and measures Gaps identified. 2013

Percentage completion developing criteria. 20% per year. Metrics and standards available 2017

Prioritize Investments

The information from corporate asset management is available to systemize prioritization of the maintenance and replacement of assets. This objective integrates asset management systems to support the budgeting decision-making process to enable best value for corporate investments. A sample question the system would help to answer is whether it would be better to replace the asset rather than continue to repair the asset.

Develop information in a usable friendly format for decision makers. Aid strategy development based on integrated asset management. Outcomes and measures

Develop annual reports. 2013

Stakeholder satisfaction level with available information. 2014 Enhanced prioritization. 2015

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Establish Performance Measures

Establish measurable targets for the purpose of business planning. Expected completion year

2013

Identify classes of performance measures for asset management specific to individual and groups of assets.

Identify performance measures and document for use in business planning. Outcomes and measures

Measurable targets available. Spacer row turn text white when ready

Emerging issues and challenges

Legislation

Legislative change is expected and will impact the program in a yet to be determined

fashion. The degree of impact on a developed program will be minimal compared to having legislation enacted without any corporate program available to support compliance.

Economy

Changing financial resources will impact any planning and budgeting process requiring a high degree of flexibility in management strategies. The program will still be available but need to be flexible and rerun to allow for an economic step change. Rates are set annually by

Council. Upper tier programs like stimulus funding are not predictable in the long term. For example, if the federal government boosted the capital available in 2014 to an additional $100 million for infrastructure, decisions could be made that alter the projections of asset maintenance and replacement schedules. The system would need to rerun at the new setpoint. The overall economy affects the revenues available to run the City thereby affecting the plan to reduce gap and the ability to sustain assets.

Environmental

Climate change is expected to have a significant but not yet identified impact on the status of infrastructure. For example, stormwater needs are expected to increase such that existing facilities and sewers will need to be upsized or modified. Maintenance for biological pests may trigger new programs with assets. Vegetation changes could trigger different

maintenance needs especially trees which are considered City infrastructure assets. Power and equipment particularly air conditioning may require upgrades to deal with temperature increases. Green energy modifications may be mandated. More severe weather may require upgrades to structures owned by the City.

Other

The aging workforce with associated retirements is expected to have significant impact on corporate asset management with regards to the value of knowledge. The risk associated with the loss of expertise through retirement is reduced through a strong historic database and a continual capture of data with associated asset management.

Other

The variety, risks, life cycle and vintage of assets are neither linear nor absolute. This complexity results in varying costs from year to year so that predictions of future needs are the best available but remain predictions only. Managing the complexity is its own challenge.

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2012 - 2016 Service changes with financial impact (+/-)

Corporate Asset Management Development Objective

Support the development of the corporate asset management program using the expertise of consultants specializing in the asset management area. This includes development of

strategies, policies, procedures, standards, criteria, outreach programs and reporting whereby a management consultant helps to build the framework for an asset management program. The outcome of these strategies is to increase the efficiencies and effectiveness of our investments in the City's assets.

Implementation year 2012 Target year 2017 Funding type Ongoing Budget Implications

in $000s Year ExpenditureGross Supported RevenueNon -Tax (Tax Supported)Net Budget

Operating budget Year 1: ₀ ₀ Year 2: ₀ ₀ Year 3: ₀ ₀ Ongoing annual: Beginning year 0 0 Capital budget Year 1: ₂₀₁₂ ₁₅₀ ₁₅₀ Year 2: ₂₀₁₃ ₁₀₀ ₁₀₀ Year 3: ₂₀₁₄ ₅₀ ₅₀ Future years: Beginning year 2015 50 50 Comments

Actual consultant expense to be determined by the end of 2011. The above numbers are estimated only.

Asset Management Software System and Consultants Objective

Implement an asset management computer software system to integrate data from multiple sources and provide reports in useful formats for decision makers from operators to

Council. This element supports a fundamental piece of the corporate asset management program and requires specific computer system consulting expertise. Until such a time as the program framework is designed, we cannot select the software most appropriate to meet London's needs for risk management, transparency, compliance and decision-making.

Implementation year 2012 Target year 2017 Funding type Ongoing Budget Implications in $000s Year Gross

Expenditure Supported RevenueNon -Tax

Net Budget (Tax Supported) Operating budget Year 1: ₂₀₁₂ ₄₀ ₄₀ Year 2: ₀ Year 3: ₀ Ongoing annual: Beginning year 2013 80 80

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Capital budget Year 1: ₂₀₁₂ ₅₀ ₅₀ Year 2: ₀ Year 3: ₀ Future years: Beginning year 2013 10 10 Comments

This capital budget is intended to allow for the initial purchase of software and equipment while the ongoing expense is intended to pay for updates as the software evolves. The operational expense is intended to cover the needs for a technologist to maintain and troubleshoot the asset management database.

Statistics and performance measures

A Activity measures Description of measurements

Identify the replacement value of assets on an ongoing basis as percentage complete.

2005 Actuals 2006 Actuals 2007 Actuals 2008 Actuals 2009 Actuals

2010 Expected 2010 Actuals 2011 Forecast 2012 Forecast

10

2013 Forecast 2014 Forecast 2015 Forecast 2016 Forecast

25 50 75 95

Comments

Accuracy of result is expected to improve as the asset management program develops.

Description of measurements

Develop process (% completeness and accuracy)that identifies the values of infrastructure gaps and report annually.

65

75 85 90 95

Comments

Accuracy of result is expected to improve as the asset management program and data develop.

B Efficiency measures

Description of measurements Number of user reports per year.

0

100 500 1,000 2,000 Comments

Use will accelerate as data becomes available, reports are developed online and corporate asset management reaches full implementation.

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C Effectiveness/Quality/Satisfaction measures

Description of measurements Identify percentage stakeholder satisfaction through survey of operations, administration.

20 75

Comments

Survey to be completed near commencement and completion of program.

Description of measurements

% completion of the asset registry.

5

50 95 100

Comments