Buildings Asset Management Plan (Concise)

Buildings

Asset Management Plan (Concise)

Version 3

February 2019

Mitchell Shire Council – BUILDINGS ASSET MANAGEMENT PLAN

Document Control Asset Management Plan

Document ID : NAMS>PLUS Concise Asset Management Plan Template v 3.116

Rev No Date Revision Details Author Reviewer Approver

1 26 May 2008 Endorsed by Council at its meeting 26 May 2008

2 11 November 2013

Endorsed by Council at its meeting 11 November 2013

3 February 2019 The NAMS template has been adopted for the 2018 Building AMP revision

Strategic Assets

Coordinator

Manager Finance and

Assets

Director Governance

and Corporate Performance

© Copyright 2017 – All rights reserved. The Institute of Public Works Engineering Australasia. www.ipwea.org/namsplus

http://www.ipwea.org/namsplus


TABLE OF CONTENTS

1 EXECUTIVE SUMMARY ..................................................................................................................... 1 1.1 The Purpose of the Plan.............................................................................................................. 1 1.2 Asset Description ........................................................................................................................ 1 1.3 Levels of Service ......................................................................................................................... 1 1.4 Future Demand .......................................................................................................................... 2 1.5 Lifecycle Management Plan ........................................................................................................ 2 1.6 Financial Summary ..................................................................................................................... 2 1.7 Asset Management Practices ...................................................................................................... 3 1.8 Monitoring and Improvement Program ...................................................................................... 3

2. INTRODUCTION ................................................................................................................................ 4 2.1 Background .............................................................................................................................. 4 2.2 Goals and Objectives of Asset Ownership................................................................................. 8 2.3 Core and Advanced Asset Management ................................................................................... 8

3. LEVELS OF SERVICE ........................................................................................................................... 8 3.1 Documenting Levels of Service (LoS) ........................................................................................ 8 3.2 Customer Research and Expectations....................................................................................... 9 3.3 Strategic and Corporate Goals ................................................................................................ 10 3.4 Legislative Requirements ....................................................................................................... 11 3.5 Customer and Technical Levels of Service .............................................................................. 11

4. FUTURE DEMAND........................................................................................................................... 15 4.1 Demand Drivers ..................................................................................................................... 15 4.2 Demand Forecasts.................................................................................................................. 15 4.3 Demand Impact on Assets ...................................................................................................... 15 4.4 Demand Management Plan .................................................................................................... 17 4.5 Asset Programs to meet Demand ........................................................................................... 18

5. LIFECYCLE MANAGEMENT PLAN ..................................................................................................... 19 5.1 Background Data .................................................................................................................... 19 5.2 Operations and Maintenance Plan ......................................................................................... 22 5.3 Renewal/Replacement Plan ................................................................................................... 24 5.4 Creation/Acquisition/Upgrade Plan ........................................................................................ 26

6. RISK MANAGEMENT PLAN .............................................................................................................. 28 6.1 Critical Assets ......................................................................................................................... 29 6.2 Risk Assessment ..................................................................................................................... 29

7. FINANCIAL SUMMARY .................................................................................................................... 32 7.1 Financial Statements and Projections ..................................................................................... 33 7.2 Funding Strategy .................................................................................................................... 34 7.3 Valuation Forecasts ................................................................................................................ 35 7.4 Key Assumptions Made in Financial Forecasts ........................................................................ 35 7.5 Forecast Reliability and Confidence ........................................................................................ 36

8. PLAN IMPROVEMENT AND MONITORING ...................................................................................... 36 8.1 Status of Asset Management Practices ................................................................................... 36 8.2 Improvement Plan ................................................................................................................. 37 8.3 Monitoring and Review Procedures ....................................................................................... 40 8.4 Performance Measures .......................................................................................................... 40

9. REFERENCES ................................................................................................................................... 40


This page is intentionally left blank

- 1 -


1 EXECUTIVE SUMMARY

1.1 The Purpose of the Plan

This asset management plan (AMP) details information about Building infrastructure assets, including actions required to provide the current level of service (LOS) in the most cost-effective manner while outlining associated risks. The plan defines Building services, how they are provided and what funds are required to provide the services over a 10-year planning period.

1.2 Asset Description A Council building should be considered a “site” and not an asset in its own right. A building is made up of various low, medium and high cost, replaceable components which have different useful lives. The separate components are the assets which the asset management plan needs to provide a management strategy for. These component-based strategies will roll up into a management strategy for each building site.

In 2019 Council will undertake its next condition audit which will begin the process to componentise its building data into a data structure where reporting on component level assets will be possible.

At this point the asset plan will be limited to reporting on building assets using the following categories.

• Buildings – Long Life Structures

• Buildings – Short Life Structures

• Buildings – Mechanical Services

• Buildings Fit Out Council’s buildings have significant value estimated at $126.7M market value as at 30th June 2018.

1.3 Levels of Service Mitchell Shire is undertaking two intrinsically linked pieces of work. One is Service Planning; the other is the review of the Integrated Community and Services Infrastructure Plan (ICSIP). The former will map all resource requirements for service continuity against defined levels of service, the latter will inform Council of the functional and capacity requirements for infrastructure to meet Council’s expected increase in service demand for the short (1-3 years), medium (4 -10 years) and long term (beyond 10 years).

Without having completed these two important pieces of work, it is assumed in this plan that all buildings

currently listed on Council’s register are required and will continue to be required for the term of this plan.

A third important document being developed is a Property Acquisitions and Disposal Policy. This document will develop strategic criteria to measure demand for existing and additional properties, to manage the portfolio so that each building is fulfilling a strategic purpose.

Council does have several other strategic documents and master plans that are being used to guide future service delivery across townships within the Shire. Council has succeeded in fulfilling a significant portion of the existing ICSIP plan and parts of these strategies with additional building assets added to the portfolio over the past five years. It is likely all these strategies will be revisited as part of the ICSIP 2019 review.

Council’s present funding levels are considered sufficient to meet renewal demand over the next 10 years, however this assumption must be qualified due to a number of important constraints being;

• The AMP assumes existing service levels are adequate.

• The NAMS modelling program does not factor in Council’s internal intervention levels.

• Incomplete service planning with limited defined levels of service.

• The quality of building data available to model renewal demand including the lack of building componentisation.

• Uncertainty around future growth and investment requirements, which will impact available funds for building renewals and ongoing maintenance.

• The current allocation of capital funding may be providing an inaccurate picture of true investment in renewal.

• The AMP assumes a high level of compliance with All Abilities Access and Essential Safety Measures.

The service consequences for Council of not meeting its required renewal demand will be:

• Deteriorating building assets which will impact the quality of services provided by Council

• An increased renewal gap making it more difficult over time to return services to a level which meets community expectations

• Reducing sustainability of Council’s building assets, and Council’s overall long-term sustainability.

- 2 -


• Impacting future generations of residents who will wear the cost of renewing facilities which should have been completed in the present.

1.4 Future Demand In 2013 Council completed its first Integrated Community Services and Infrastructure Plan (ICSIP) that reviewed Council operated and supported community services. The report went beyond Council services to include broader community sector services integral to the social capital of the Shire.

A second ICSIP report is currently under development as the 2013 report is now out of date with growth statistics already exceeding those estimated in 2013. The 2013 ICSIP report has still been referenced where it provides the best information regarding future service demands for the Shire.

Council’s southern areas of Beveridge and Wallan fall inside the metropolitan Urban Growth Area (UGA) and are clearly driving demand for new services. Council will have a significant challenge to fund new infrastructure to meet this service demand while needing to maintain existing services where service level expectations of the wider community are rising.

The main demands for new or upgraded services are created by:

• Expanding Greenfield Developments with population increases estimated at 4% p.a.

• Changes in service user expectations of services provided, including quality, access and availability of services.

• Changing participation, especially with regard to sporting activities and pressure on facilities to cater for different age groups and male and female amenities.

These issues will be managed through a combination of managing existing assets, upgrading of existing assets and providing new assets to meet demand and demand management as well as non-asset based solutions.

1.5 Lifecycle Management Plan

What does it Cost? The projected outlays necessary to provide the services covered by this Asset Management Plan (AM Plan) over the 10-year planning period is $12.9M in operations, maintenance and renewal as well as an additional $3.3M for new and upgrade of buildings largely funded through grants in the next two years.

1.6 Financial Summary

What we will do Estimated available funding for this 10 year period is currently $13.3M for operations, maintenance and renewal.

This is 103% of the cost to sustain the current level of service at the lowest lifecycle cost.

The allocated funding provides an amount of $39K on average per year above the projected expenditure required to provide services in the AM Plan compared with planned expenditure currently included in the Long-Term Financial Plan.

It must be noted that these budgeted figures have assumed the existing level of service is adequate for Council and community needs. Given Council has not yet adequately consulted on service level expectations, the likely response will see demand for services increase, resulting in a budget position that is below requirements to meet service expectations.

Current funding levels are shown in the figure below.

Projected Operating and Capital Expenditure

Figure Values are in current (real) dollars.

Council plan to provide Building services for the following:

• Operation, maintenance, renewal and upgrade of all building components inclusive of structural elements, floors, roof cladding, external walls, internal walls, mechanical services and fit out components to meet estimated service levels set in annual budgets.

• Major New, Renewal and Upgrade projects within the 10-year planning period include;

o Wallan Youth Service Hub o Wallan East Relocatable Early Learning

Facility

- 3 -


o Kings Park Seymour Agriculture Pavilion o JJ Clancy Pavilion o Tallarook Hall (Insurance) o Upper Plenty Hall

o Greenhill Precinct

What we cannot do Council currently does not allocate enough funding to provide all new services being sought. Works and services that cannot be provided under present funding levels are:

• Upgrade of Works Depots, specifically the Broadford Depot which is at full capacity and in poor condition.

• Renovation of Council Civic Centre in Broadford

• Provision of a Council Community and Civic Hub in Wallan

• Improved Wallan Library Services

• Improved Gymnastics Facilities in south of the Shire

• Aquatics Facilities in the south of the Shire

• Increased Stadium facilities in the south of the Shire

Managing the Risks Council’s present funding levels are sufficient to continue to manage risks in the medium term.

The main risk consequences are:

• Low confidence in some data sets that do not assist good decision making

• Limited defined levels of service meaning Council does not know if current service standards are adequate, yet current budgets are based on meeting current service levels.

Council will endeavour to manage these risks within available funding by:

• Validating current data sets to improve confidence in data, which will then better inform decision making.

• Documenting current levels of service to understand future requirements based on condition, function and capacity, in line with population growth and phasing of asset development.

• Combining information from level of service data and condition data to develop reliable long term capital works programs over a 10 year planning period.

1.7 Asset Management Practices Council’s systems to manage assets include:

• Conquest III Asset Management System

• MapInfo/Exponare GIS

1.8 Monitoring and Improvement Program The next steps resulting from this asset management plan to improve asset management practices are:

• Complete service planning to inform building asset requirements for the future.

• Undertake an audit of Council building occupancy and usage and clarify the service manager responsible for each building.

• Develop levels of service for buildings that match requirements of the service plan.

• Undertake detailed condition assessments of all Council buildings.

• Formalise a building hierarchy based on demand, criticality, utilisation and cost.

• Develop an evidence based and prioritised 10-year capital works program for renewal, upgrade and new buildings.

• Ensure the Long Term Financial Plan and Asset Management Plans are consistent, acknowledging there is currently a shortfall between requirement and available funding.

• Improve asset data sets such as year of acquisition, useful life, functionality, and componentisation information.

• Research and potentially acquire a maintenance management system to improve the management of building maintenance defects and expenditure

• Service Agreements to be put in place with occupants of building to measure the achieved LoS.

A more detailed and comprehensive improvement actions plan has been provided in section 8.2 of this plan.

- 4 -


2. INTRODUCTION

2.1 Background This asset management plan communicates the actions required for the responsive management of assets (and services provided from assets), compliance with regulatory requirements, and funding needed to provide required levels of service over a 10-year planning period.

The asset management plan is to be read with Mitchell Shire Council planning documents. This should include the Asset Management Policy and Asset Management Strategy along with other key planning documents including, but not limited to:

• Council Plan 2017-21

• Mitchell Shire Township Structure Plans

• Integrated Community Services and Infrastructure Plan 2013

• Mitchell Shire Council Annual Report 2017/18

Building assets are used to provide Council’s services across the following areas;

• Arts and Culture

• Civic Administration

• Commercial Services

• Community Services

• Compliance Services

• Early Years Services

• Youth Services

• Emergency services

• Operations

• Public Convenience

• Recreation

• Tourism

• Waste Management

The building assets covered by this asset management plan as at 30 June 2018 are shown in table 2.1.

Table 2.1: Assets covered by this Plan

Asset Category Dimension Market Value

Building – Long Life Structure 42,290m2 $116,195,228

Buildings – Short Life Structure 4,833m2 (incomplete data) $7,945,798

Building – Mechanical Services 223 units $2,605,898

Building – Fit Out 2,424 Units Forms part of overall cost of short and long-life buildings

(and represents an estimated $11M of their value)

TOTAL $126,746,924

To appropriately manage building assets, it is important to have high levels of confidence in the following data sources as a minimum;

• Levels of Service Information

• Compliance and standards

- 5 -


• Building Useful Life

• Building measurements (m2, no of buildings)

• Unit rates for replacement of components

• Building condition by component

• Building service capacity

• Building service function

• Building year of acquisition and,

• Building Replacement Value

The following information provides a summary of Mitchell Shire’s position regarding the above key points.

Levels of Service

Levels of Service Information is currently unavailable. LoS is covered in section 3 of this plan. This is an improvement action.

Building Useful Lives

The useful life is important for depreciation and renewal modelling. Council has attempted to provide a useful life for every facility in increments of 5 years. This method has generated 34 ‘asset types’ ranging from buildings planned to last 5 years up to 200 years. Normally building assets are classified as either heritage structures (usually up to 150 years), long life structures (usually up to 100 years), and short life structures (up to 50 years). The assignment of multiple useful lives is adding complexity and cost without value.

Of the current 274 buildings and structures listed in the asset register, 200 have passed the applied standard life; an additional 35 are expected to exceed the applied standard life of the buildings. This suggests the useful lives applied are inaccurate. This causes higher than actual annual depreciation. It is recommended that Council rationalise standard useful lives of buildings to no more than 4 categories.

The standard approach would include recording masonry/concrete buildings at 100 years and steel or timber frame and clad buildings at 50 years. Engineering details would be considered in the actual allocation of long and short life classifications regarding construction techniques and building materials.

Condition, function and capacity assessments may determine if the building would exceed or not reach standard life, and the condition score would be used to either accelerate depreciation or reduce it and flag the building components for renewal.

Componentisation

Each building is the sum of many different assets with different useful lives and replacement costs. It is critical these components are captured in the asset management system for ongoing management.

Council’s current approach to componentisation is good but incomplete. Components are being identified separately, but not necessarily managed as unique asset groups.

Components of buildings can be recognised as follows;

Building and Structure;

• Structure – Floors, walls and roof

• Footings

• Roof Finish and Roof Plumbing

• External Walls

• Internal Walls (Internal Walls should be considered fit out)

- 6 -


Building Fit Out;

• Ceiling Cladding

• Internal Wall Cladding

• Paint

• Floor coverings

• Fixed Cabinetry

• Hot Water services

• Light fittings

• Bathroom fit out – sinks, toilets, tap wear, showers

• Switchboards

• Partitioning

• Internal doors

• Internal glass

• Fixed IT Components/Technology

Building Mechanical Services;

• Air-Conditioning

• Heating

• Fans

• Generators

The intention of collecting this data separately is to create a unique renewal profile for building components. To do this successfully renewal value, useful life and year of acquisition is also needed along with condition information.

Officers have been working to establish rules around splitting the building value to create unique component values as the work of physically collecting this data would be significant and costly. These rules would be as follows;

The apportionment is a percentage of the overall building fair value. With a component condition score and an approximate replacement value, Council can begin to develop capital renewal programs to target component replacement.

The above table does need to go further to componentise building assets. For example, the roof is made up of three components, each with a separate useful life and value – the roof structure, the roof cladding and the roof plumbing. This can be completed as Council becomes more advanced in its asset management practices.

- 7 -


Building structure is often the most long lived and durable and does make up the greatest cost component of a building. These assets are generally given a uniform useful life. It is very different for fit out and mechanical components. While they may form a small part of replacement value, the fit out and mechanical components can be replaced four or more times through the life of the building. This can be driven by functional changes to the building or changes to service levels as much as the condition of components. This is the main reason why they should be managed separately.

All fit out components are given a standard life of 20 years which is appropriate. Mechanical services are either 15,20 or 25 years, with one asset at 50 years.

The above apportionment table suggests fit out components equate to 11% of the building market value, and mechanical services 4%. In reality these costs will vary from building to building. Some buildings may have extensive fit outs, or heating/cooling systems, such as civic centres, while others have almost none, such as storage sheds. In this way the apportionment really does need to be completed for each building type (civic centre, community hall, aquatic centre, depot shed etc).

Over the past several years Council has been attempting to model fit out and mechanical services as singular assets using the Moloney System based on the fact that these components all have a narrow useful life. The fact is that;

• Components vary markedly – tiling, stainless steel sinks, plaster ceilings, porcelain toilets, or evaporative cooling systems and extensive ducted refrigeration systems.

• They have significantly different costs

• Buildings do not have fit out and mechanical services to the same quality and quantity across the board.

Using building zones is one way to manage renewal of spaces, as opposed to renewal of singular components, which may be classed as maintenance. For example a kitchen as a “zone” can encompass the cabinetry, sinks and tap wear, dish washer, and tiling. The zone can be given a condition score and when it reaches intervention, the whole area is refurbished. Otherwise, components such as tap wear can be replaced as maintenance where they fail before the zone reaches intervention. This methodology should be explored as a practical way to manage the renewal and maintenance funding within budget.

Fit out components are not valued in the Asset Register, and not depreciated separately from the overall building. While apportionment of 11% is being applied to account for fit out to model renewal, in actual fact the overall building is being used to depreciate the building and the fit out together. This means the useful life of the structure (80 years) is driving depreciation (consumption) for fit out at the same rate even though its useful life is only 20 years.

Building measurements and Unit Rates

Building floor areas have been captured for most buildings, and these can be extrapolated to measure other components such as roof area, however it would be very useful to record each room within a building separately. Council should look to create zones within buildings e.g kitchen’s, toilets, meeting areas, etc, then renewal projects can be created for a zone with an applied unit rate to estimate cost of refurbishing building zones.

Condition assessments can also be completed by zones (using the sum of each component item e.g a light fitting, taps, cabinetry). Zones may have specific service levels based on their use (standard of a board room compared to a meeting room). This would be much more informative than applying a condition score to an entire building, or applying a condition score to a light fitting. While data would need to be collected for internal areas, unit rates can be sourced from industry documents such as Rawlinson’s Australian Construction Handbook to make this exercise more cost effective.

- 8 -


2.2 Goals and Objectives of Asset Ownership

Asset ownership is predicated on the notion that Council owns building assets to deliver services and these buildings must meet the reasonable needs of service managers and users. For the purpose of this plan, building asset ‘ownership’ is informed by the service being delivered from the building asset, thus the building is owned by the service.

Council’s goal in managing infrastructure assets is to meet the defined level of service in the most cost effective manner for present and future consumers. The key elements of infrastructure asset management are:

• Providing a defined level of service and monitoring performance,

• Managing the impact of growth through demand management and infrastructure investment,

• Taking a lifecycle approach to developing cost-effective management strategies for the long-term that meet the defined level of service,

• Identifying, assessing and appropriately controlling risks, and

• Linking to a long-term financial plan which identifies required, affordable expenditure and how it will be allocated.

Other references to the benefits, fundamental principles and objectives of asset management are: • International Infrastructure Management Manual 2015 1 • ISO 550002

2.3 Core and Advanced Asset Management This asset management plan is prepared as a ‘core’ asset management plan over a 10 year planning period. Core asset management is a ‘top down’ approach where analysis is applied at the system or network level. An ‘advanced’ asset management approach uses a ‘bottom up’ approach for gathering detailed asset information for individual assets.

3. LEVELS OF SERVICE

3.1 Documenting Levels of Service (LoS) Mitchell Shire Council does not yet have fully defined levels of service to guide required investment in buildings, to ensure satisfactory and appropriate services are being provided.

The levels of service documents are critical to the drafting of asset management plans as service levels, set the targets for investment. Without them Council is assuming levels of service are adequate, or it is taking a strictly conditional based view of building management, which does not necessarily reflect the functional and capacity capabilities or performance of building assets.

Council has commenced a service planning process which is only in its early stages. At the same time Council is also undertaking a review of the Integrated Community Services Infrastructure Plan, which is a strategic document to help Council meet future service demand. Both these documents are important to ensure the Long-Term Financial Plan is allocating resources to meet service requirements in a sustainable fashion. However, these two documents do not define the level of service for each facility, which is what is required to effectively manage a building.

1 Based on IPWEA 2015 IIMM, Sec 2.1.3, p 2| 13 2 ISO 55000 Overview, principles and terminology

- 9 -


Documenting existing levels of service (the status quo) is the best place to start a level of service exercise, and this must be completed in conjunction with service managers. Documenting existing levels of service and considering these within the broader context of service planning, will help with the subsequent review of existing LoS, to maintain, improve or reduce services, based on the broader context and keeping within Council’s ability to sustain services.

In the absence of fully documented levels of service, example templates have been provided. These will help inform service managers of their key role in asset management, to populate them to make the asset management plan meaningful, and a document that can aid their role as managers and asset owners.

3.2 Customer Research and Expectations

“The Department of Environment, Land, Water and Planning coordinate a state-wide Local Government Satisfaction Survey, which captures community’s perceptions on a range of priority areas and services provided by Councils. While Council does not currently measure satisfaction with building infrastructure’s suitability to services, it does however capture data on planning for population growth, community consultation and engagement, recreational facilities and customer service. This information is considered as an overall indication of Council’s effort to communicate and provide for future services.

The results for Mitchell Shire Council 2018 are provided in the following table and are also available on www.mitchellshire.vic.gov.au.

Table 3.1: Community Satisfaction Survey Levels

Performance Measure Satisfaction Level Very

Good Good Average Poor Very

Poor Can’t Say

Planning for Population Growth

10 20 29 23 8 10

Large Rural 7 20 29 19 10 15 Community Consultation and Engagement

7 28 34 14 8 8

Large Rural 7 30 33 15 7 8 Recreational Facilities 16 37 27 12 4 4 Large Rural 19 41 24 9 4 4 Customer Service 30 34 22 5 5 4 Large Rural 28 36 19 9 7 1

Table 3.2: Overall Community Satisfaction Survey Levels Past 6 years

Performance Measure Overall satisfaction rating 2018 2017 2016 2015 2014 2013 Planning for Population Growth

50 44 39 50 45 51

Large Rural 48 48 47 50 n/a n/a Community Consultation and Engagement

53 47 42 53 49 50

Large Rural 54 52 52 54 n/a n/a Recreational Facilities 62 62 55 60 57 57 Large Rural 66 66 65 66 n/a n/a

Customer Service 70 63 60 68 65 65

Large Rural 70 69 69 70 72 71

http://www.mitchellshire.vic.gov.au/

- 10 -


3.3 Strategic and Corporate Goals This asset management plan is prepared under the direction of Mitchell Shire’s vision, mission, goals, objectives and strategies as outlined in the Council Plan 2017-21.

Our vision is:

Together with the community, creating a sustainable future.

Our mission is:

Working with our communities to build a great quality of life

Relevant goals and objectives and how these are addressed in this asset management plan are:

Table 3.3: Goals and how these are addressed in this Plan

Goal Actions Measures

Provide opportunities for inclusive participation across the Shire

Promote and support community participation in programs across Council services including community development, youth, early years, ageing, library, leisure and recreation.

Improved participation across a range of services and programs. Increased diversity of participants in Council services, events and engagements.

Ensure our services are accessible and inclusive for all community members.

Regular promotion of All Area Accessibility, telephone typewriter and translator services.

Simplify ways the community can engage with Council and access information

Engage the community in developing the capital works program and provide regular updates about priority projects.

Publish a capital works calendar to provide the community with regular progress updates on projects.

Empower our volunteer community

Encourage and support committees of management to enable greater use of Council facilities.

Improved management and use of Council facilities.

Establish and maintain high quality roads, footpaths, parks, recreational facilities, streetscapes, bike paths and public open spaces

Ensure parks, open spaces and other assets provided by developers are fit for purpose and meet Councils design and service standards.

Fit for purpose assets are delivered which comply with Council standards.

Provide adaptable community infrastructure and participation opportunities for all ages, cultures and abilities

Provide community facilities in Greater Beveridge to meet the needs of the growing community.

The Beveridge community centre has been delivered.

- 11 -


3.4 Legislative Requirements There are many legislative requirements relating to the management of assets. These include:

Table 3.4: Legislative Requirements

Legislation Requirement

Local Government Act 1989 Sets out role, purpose, responsibilities and powers of local governments including the preparation of a long term financial plan supported by AMPs for sustainable service delivery.

Building Act 1993 Legislation governing building construction and use of buildings including essential safety measures requirements.

Building Regulations 2006 Legislation governing the construction of buildings as well as provision of Essential Safety Measures (ESM), ESM maintenance and exits and paths of travel relating to buildings

Disability and Discrimination Act

Legislation providing for safe and efficient access to and within buildings.

Occupational Health and Safety Act 2004

Legislation governing the requirement to have safe systems of work to protect employees and the public and to provide safe work places.

Environment Protection Act 1970

Code of Practice Managing Asbestos in Workplaces.

3.5 Customer and Technical Levels of Service As discussed in section 3.1, Mitchell Shire Council is yet to fully document existing levels of service to either adopt them as the prescribed level of service or adjust them to either increase or decrease levels of service based on priorities, available funding and service strategies.

Customer Levels of Service measure how the customer receives the service and whether value to the customer is provided.

Customer levels of service measures are:

Quality How good is the service … what is the condition or quality of the service?

Function Is it suitable for its intended purpose …. Is it the right service?

Capacity/Use Is the service over or under used … do we need more or less of these assets?

Organisational measures are measures of fact related to the service delivery outcome e.g. number of occasions when service is not available, condition %’s of Very Poor, Poor/Average/Good, Very good.

These Organisational measures provide a balance in comparison to the customer perception that may be more subjective.

Technical Levels of Service - Supporting the customer service levels are operational or technical measures of performance. These technical measures relate to the allocation of resources to service activities to best achieve the desired customer outcomes and demonstrate effective performance.

Technical service measures are linked to the activities and annual budgets covering:

- 12 -


• Operations – the regular activities to provide services (e.g. opening hours, cleansing, mowing grass, energy, inspections, etc.

• Maintenance – the activities necessary to retain an asset as near as practicable to an appropriate service condition. Maintenance activities enable an asset to provide service for its planned life (e.g. building and structure repairs),

• Renewal – the activities that return the service capability of an asset up to that which it had originally (e.g. building component replacement),

• Upgrade/New – the activities to provide a higher level of service or a new service that did not exist previously (e.g. a new library).

Customer and Technical service level templates have been provided here and populated with “example” levels of service to inform Service Managers of the data that could be collected from service users to begin to build a level of service profile for facilities and buildings. The template is provided for one type of building only. In reality there will be many service templates, each one being quite specific about what should be provided by the building. For example the level of service requirements may be specific about;

Levels of Service Requirements (examples)

Customer Levels of Service Technical Levels of Service

Requirements for the facility to be within 1km distance from public transport

Building footprint size

Requirements around storage of visitor/customer personal belongings

Materials used in construction/refurbishment

Requirements around kitchen facilities to be provided

Requirements for climate control

Car parking spaces on premises for staff and/or customers

Environmental sustainability design factors

The number of people the facility must accommodate

• Statutory Obligations met o Access and mobility o Electrical safety o Emergency Management and

Essential Safety Measures o Fire Services

Requirements for audio visual services, staging, and entertainment spaces (dance floors)

Requirements around all abilities access to areas of the building beyond community space

Requirements for toilets and other amenities such as hot showers

Opening hours of facilities

Location of the facilities with regard to catchments of service users

Requirements for children’s change facilities

Requirements for being accessible and inclusive to all service users

- 13 -


When these levels of service are adopted, they will create standards for the asset management plan to work from in developing resource requirements and feeding into the long-term financial plan.

Table 3.5: “Example” Customer Level of Service

Key Performance Measure

Level of Service Performance Measure Process

Performance Target

Current Performance

Service Objective: Council is providing building and facilities that support and enhance community services

Quality Provide clean and serviceable facilities

Number of customer requests

<10 per month Average 20 per month

Feedback logs Positive feedback exceeds negative feedback

50% positive and 50% negative

Service was open and available for customers at the prescribed times

Notices to customers unavailability of service

Available 100% Available 95%

Maintenance is up to date with no aesthetic impairment or dangerous areas within the building

Inspection defects found/customer complaints

<1 per week >5 per week

Function Meet user requirements and are available at appropriate times of the day

Number of customer requests relating to user requirements and or availability of service


Capacity Adequate room for participants to attend service in comfort and/or available placements to participate in the service

Number of customer requests relating to access and or availability of service Or Complaints regarding waiting lists


Table 3.5 shows the technical levels of service expected to be provided under this AM Plan. The ‘Desired’ position in the table documents the position being recommended in this AM Plan.

- 14 -


Table 3.6: “Example” Technical Levels of Service

Service Attribute

Service Activity

Objective

Activity Measure Process

Current Performance *

Desired for Optimum Lifecycle Cost **

Operations

Buildings meet the user’s needs

Annual condition inspections ESM inspections as scheduled

Condition – ad hoc and reactive ESM - annual

High use buildings – annual Medium use buildings 18 months. Low use buildings – 2 years

Buildings are kept in a clean and tidy state

Cleaning Program

High use buildings – daily Medium to low use buildings – as used

High use buildings daily Medium to low use buildings as used

Budget Cleaning $145,000 ESM - $51,250 Inspections - $0

Cleaning $180,000 ESM - $51,250 Inspections - $20,000

Maintenance

Buildings are fully serviceable and meet user needs

Number of recorded defects

Unknown Less than 10 defects reported per week, with defect number reducing due to inspection and program works

Maintenance requests completed within allocated time

No current timeframes for completing maintenance

90% maintenance requests made safe within 1 day >80% defects repaired within 2 weeks

Planned maintenance completed per annual schedule

No current data on planned maintenance performance

>90% planned maintenance annual program completed

Budget $400,000 $1,000,000 (or 2% CRC)

Renewal

Buildings meet users’ needs

Condition of Buildings

>4% of buildings in condition 4 or 5

<1% of buildings in condition 4 or 5

Budget $680,000 $1,231,000

Upgrade / New

10 year upgrade new/program defined

Not yet developed

Budget $500,000 $1,200,000

- 15 -


4. FUTURE DEMAND

4.1 Demand Drivers Drivers affecting demand include things such as population change, regulations, changes in demographics, seasonal factors, vehicle ownership rates, consumer preferences and expectations, technological changes, economic factors, agricultural practices, environmental awareness, etc.

4.2 Demand Forecasts The present position and projections for demand drivers that may impact future service delivery and use of assets were identified and are documented in Table 4.3.

4.3 Demand Impact on Assets The impact of demand drivers that may affect future service delivery and use of assets are shown in Table 4.3.

Table 4.3: Demand Drivers, Projections and Impact on Services

Demand drivers Present position Projection Impact on services

Population Growth 47,000 residents 2018 4% Growth p.a. with expectations this will increase past the next five years.

The rapid rate of growth will impact the need for new services and subsequent additional building assets to support new services. Increase demand will likely result in more and/or higher standard buildings

Increased/increasing community expectations regarding quality and quantity of services provided

Community service user expectations are changing in line with other social changes – increased working hours, flexible working hours, improved transport, changing demographic – which also change expectations around access times to facilities to participate in services.

Mitchell Shire residents are likely to work outside of the Shire, commuting to other regional cities or Melbourne, and expect to be able to access services locally, earlier in the mornings or later in the evenings.

Increased opening times which will increase cost of service provision.

Lack of Services In order to ensure the sustainability of new communities from rapid growth in Council’s south, new services are required in the short term. Examples of this

Based on the experience of a neighbouring growth Council, as a minimum a $30-40M facility would be required to meet the catchment

Where options to increase revenue are still limited the Council is faced with the challenge of attempting to balance new capital demand

- 16 -


Demand drivers Present position Projection Impact on services

would include a suggested new aquatic centre located near either Beveridge or Wallan

area projected for the region in the next decade.

against renewal requirements.

Rising costs to upgrade and renew building assets

At present there is little documented evidence to reconcile projected expenditure with future cost predictions. The asset plan is using basic assumptions around depreciation, age and condition of assets to build a reasonable expenditure forecast.

More work is required to adequately document renewal backlog and upgrade requirements for buildings. Reconciliation is required with Councils aspirations for buildings to comment on future sustainability.

Levels of service are not documented and need to be, to fully understand and communicate impacts of rising costs.

Declining utilisation of facilities

Underutilised facilities generate less user charges to assist meeting maintenance costs

There is lack of clarity across all buildings on the number of low utilised buildings. Undertake an audit of facility use to ascertain the importance and priority of buildings.

Services across the board impacted as low utilised buildings, which could be rationalised, are continually maintained, which limits available budget to service high use facilities. Options should be explored to collocate services with other facilities within the townships which means services are not reduced, facilities are better utilised, and overall costs to Council decline.

Climate Change Unknown Unknown Council requires some form of assessment and documented standards for buildings and an overarching policy strategy on limiting the carbon footprint generated by Council facilities

Building Compliance Unknown All buildings to be fully compliant as they are renewed

Improve all abilities access to public buildings and ESM

- 17 -


4.4 Demand Management Plan Demand for new services will be managed through a combination of managing existing assets, upgrading of existing assets and providing new assets to meet demand and demand management. Demand management practices can include non-asset solutions, insuring against risks and managing failures.

Opportunities identified to date for demand management are shown in Table 4.4. Further opportunities will be developed in future revisions of this asset management plan.

Table 4.4: Demand Management Plan Summary

Demand Driver Impact on Services Demand Management Plan

Rising costs to upgrade and renew buildings

Less funds available across all building assets

Undertake service planning to identify where investment should be made and where it makes sense to rationalise or consolidate, collocate and integrate services to improve utilisation of assets.

Declining utilisation of some facilities

Services impacted where low utilisation buildings continue to receive investment which does not correspond to utilisation rates.

Service Planning to identify which buildings could be rationalised.

Population Changes Increased demand in the south of the Shire where there are very few established Council owned facilities.

Service Planning with a 10-20-year horizon to be undertaken to better determine where services will be required, and as such, where investment in buildings should be targeted. The ICSIP document will assist in addressing this challenge.

Climate/Environment Changing regulations and moral decisions will see changing infrastructure investment decisions – high cost outlays with slow return on investment

Service Planning to be used to target which assets are appropriate for climate abatement/environmental asset upgrades.

Compliance Increased cost without increased utilisation

Service Planning to be used to target upgrade/renewal buildings, noting building will be required to have ESM and DDA compliance to provide community services. Can be used as a trigger to question continuation of some building stock based on level of utilisation and cost to upgrade.

Partnerships Increased external funding available to go toward community facilities from State and Federal sources

Use of advocacy, combined with informed strategic plans about population changes and increased service demand to ensure a focus on Mitchell Shire by Government.

Development Service delivery and facilities for services not keeping pace with population growth

Management of Council’s developer contributions to target facilities/development of Precinct Structure Plans as guided by Victorian Planning Authority.

- 18 -


4.5 Asset Programs to meet Demand The new assets required to meet demand can be acquired, donated or constructed. New assets will commit ongoing operations, maintenance and renewal costs for the period that the service provided from the assets is required. These future costs must be identified and considered in developing forecasts of future operations, maintenance and renewal costs for inclusion in the long term financial plan in Section 5.

The below table reflects significant growth in the value of building assets over the next 20 years. The estimates provided for figure 1 are conservative, allowing for 2% growth of building stock up to 2029, then 3% after that. It is anticipated the population growth will average 4%, but it is hard to predict if building services need to increase at this rate. It is more probable that as populations reach levels of critical mass, then staged developments of buildings for service delivery will occur. Again, Council’s 2019 ICSIP report will be the best guide for the planning of new buildings. Government funding is likely to drive new building construction more so than Council own source revenue.

Figure 1: Upgrade and New Assets to meet Demand – (Cumulative)


- 19 -


5. LIFECYCLE MANAGEMENT PLAN The lifecycle management plan details how the Mitchell Shire plans to manage and operate the assets at the agreed levels of service (defined in Section 3) while managing life cycle costs.

5.1 Background Data 5.1.1 Physical parameters

The Building Asset Management Plan draws on a body of data collected against each unique building and structure. It is important for the Asset Plan that the data is of a very high quality and has been collected to capture necessary information that can aid the life cycle management of buildings.

Building assets, like most infrastructure shows patterns of deterioration as the building ages. Therefore, we undertake long term planning, to intervene with both maintenance and capital renewal to extend the life of the building.

Knowing the age of the building is important in the modelling process. On its own the information provides little insight, but when the age is considered against condition, types of materials used in the building construction, past capital investment, and future service requirements, then in is possible to start making strategic decisions about how long to keep a building in service, when to refurbish it, or even sell or demolish it.

With regard to building fit out, there is only one date of acquisition for the entire asset group being 2016, the year the data was first entered into Conquest. This low level of data quality makes life cycle management extremely difficult.

The age profile of the assets shown in Figure 2 is for the whole building. The table does include mechanical service data, fit out assets are not included due to the incorrect acquisition date suggesting they are all near new.

Figure 2: Asset Age Profile

- 20 -


Council’s market value for buildings as at 30 June 2018 is $126.7M and the write down value is $53M. This would suggest that buildings are 42% depreciated, or almost half way through their standard life. It is difficult to draw conclusions from this information;

• If buildings were halfway through their useful lives, then Council’s condition profile should look worse than what is presented in figure 3 below.

• Depreciation is measured from the standard life of the building, buildings are predominantly exceeding this measure which implies their condition is holding beyond what is expected.

• Service level drives condition intervention, yet Council has one standard intervention of 8. It is highly unlikely a condition of 8 is acceptable to premier, high use, Council facilities.

• With no capacity or function condition data, buildings that are not fit for purpose are not captured in the equation. A poor capacity score reflects the inadequacy of a building (or building zone) and should trigger action, yet Council has no optics on this.


5.1.2 Asset capacity and performance

Assets are generally provided to meet design standards where these are available.

Locations where deficiencies in service performance are known are detailed in Table 5.1.2.

Table 5.1.2: Known Service Performance Deficiencies

Location Service Deficiency

Broadford Civic Centre Capacity to meet growth in staff numbers.

Broadford Depot Building capacity no longer adequate

Wallan Office This is a rental building but is not a viable long term option. Demand is exceeding current capacity.

Libraries Seymour, Broadford and Wallan all have space constraints (Libraries Strategy)

Libraries Wallan library is a leased premise and should be included in a Civic Hub.

Southern Kindergartens Capacity for more single room kindergartens between 2012-31 should Council continue to deliver kinder services (ICSIP). To be informed by 2019 updated ICSIP report.

Gymnastics Facilities More demand than supply in the south of Shire

Sports Stadiums More demand than supply in the south of Shire

5.1.3 Asset condition

The last condition audits of Council’s buildings were undertaken as follows;

• Building Structure Condition Assessment – May 2017 (FG Dixon Group)

• Building Fit Out – November 2015 (Macutext)

• Building Mechanical Services 2012 – 2018 (internal audits)

The condition profile of Council’s assets is shown in Figure 3. This table only includes information from the structural and mechanical services data as Council’s fit out data was too incomplete to be able to

- 21 -


enter into the NAMS Form A register, which must be completed to provide a condition profile. The fit-out asset group is valued at $11M. This is 8% of the overall value missing from fig 3.

Fig 3: Asset Condition Profile


As noted above in 5.1.1, the condition data of buildings when provided as a single condition score for the entire building, must be treated with extreme caution. When condition is aggregated across varying building components, it can mask “very poor” condition assets if the remainder of components are in good condition. While the score has been aggregated from components, most components cannot be modelled separately due to missing data. Nonetheless, a condition profile can be extracted from the components. Captured component condition is as follows;

- 22 -


Condition is measured using a 1 – 5 grading system3 as detailed in Table 5.1.3.

Table 5.1.3: Simple Condition Grading Model

Condition Grading

Description of Condition

1 Very Good: only planned maintenance required

2 Good: minor maintenance required plus planned maintenance

3 Fair: significant maintenance required

4 Poor: significant renewal/rehabilitation required

5 Very Poor: physically unsound and/or beyond rehabilitation

5.2 Operations and Maintenance Plan Operations include regular activities to provide services such as public health, safety and amenity, cleaning, utilities costs and security.

Routine maintenance is the regular on-going work that is necessary to keep assets operating, including instances where portions of the asset fail and need immediate repair to make the asset operational again, e.g. plumbing repairs, broken fittings or fixtures.

Maintenance includes all actions necessary for retaining an asset as near as practicable to an appropriate service condition including regular ongoing day-to-day work necessary to keep assets operating.

3 IPWEA, 2015, IIMM, Sec 2.5.4, p 2|80.

- 23 -


Maintenance expenditure is shown in Table 5.2.1.

Table 5.2.1: Maintenance Expenditure Trends

Year Maintenance Budget $

2017/18 $1,134,132

2018/19 $1,164,727

Council performs both reactive and programmed maintenance activities. While it is difficult to estimate demand for reactive maintenance, this is not the case for programmed maintenance which should be documented and costed. It will include activities such as painting, air-conditioning services, gutter cleaning. Once the level of service is defined for classes of buildings, establishing cyclic programs will be easier based on the these agreed service levels. Inspections of buildings will also be triggered by level of service definitions. More frequent inspections of higher profile and highly utilised buildings will raise more maintenance work to be scheduled and better managed rather than react once defects start to impact services.

Current maintenance expenditure levels are likely not meeting Council’s immediate needs. However, without documented service levels it is difficult to ascertain if maintenance expenditure is sufficient to meet desired levels of service that may be expressed by service managers or the community who access Council’s buildings for services.

There is a significant backlog of maintenance work within Council’s Conquest maintenance reporting system which suggests that building services may require additional resourcing.

Council is currently funding its operations and maintenance service at just under 1% of the current market value of the building asset group. Regarding whole of life planning for each building asset, industry standards of around 2% of replacement value are considered more appropriate. Council must ensure that when new assets are acquired that adequate provision is placed in operating and maintenance budgets. Additionally, a review of current expenditure is warranted to quantify the increase in maintenance expenditure to ensure any arrest in the decline in building condition.

Summary of future operations and maintenance expenditures

Future operations and maintenance expenditure requirements are forecast to increase over time in line with the value of the asset stock as shown in Figure 4. Note that all costs are shown in current 2018/19 dollar values (i.e. real values).

Figure 4: Projected Operations and Maintenance Expenditure

- 24 -



The capitalisation thresholds for all building components is $10,000, all works below this amount would be considered maintenance. Maintenance work is defined as work which “does not increase the service potential of the asset or keep it in its original condition”, whereas renewal returns the asset to its original condition at the same level of service. The purpose of maintenance is to slow down deterioration and delay rehabilitation. This means Council may be overstating its renewal commitment in that some maintenance tasks are being delivered through renewal programs meaning expenditure is not returning the service life of assets, yet in our modelling we are assuming this is happening.

Council needs to review its existing capitalisation policy and communicate any changes to ensure that service managers, maintenance officers, and budget officers can implement any changes to better manage budget allocations successfully.

5.3 Renewal/Replacement Plan Renewal and replacement expenditure is major work which does not increase the asset’s design capacity but restores, rehabilitates, replaces or renews an existing asset to its original service potential.

Assets requiring renewal/replacement for building structures are identified from Method 1;

Assets requiring renewal/replacement for mechanical services are identified from Method 1;

Assets requiring renewal/replacement for Building Fit Out are identified from Method 2;

• Method 1 uses Asset Register data to project the renewal costs using acquisition year and useful life to determine the renewal year. • Method 2 uses capital renewal expenditure projections from external condition modelling systems (such as Pavement Management Systems). Council’s building assets have a market value of $126M while the write down value of the building portfolio is $53M. Council will consider if the original service potential is still what is required by the service. Over time service needs change. The asset required for the service may not be a like for like replacement; the function or capacity requirements have changed, or new regulations necessitate a change to assets to increase service potential. In this regard assets will be considered for upgrade, or expansion to address service requirements with a view to the longer term (greater than 10 years) horizon. 5.3.1 Renewal ranking criteria

Asset renewal and replacement is typically undertaken to either:

• Ensure the reliability of the existing infrastructure to deliver the service it was constructed to facilitate (e.g. replacing roof cladding on the building), or

• To ensure the infrastructure is of sufficient quality to meet the service requirements (e.g. replacing a foyer carpet in a high-profile aquatic centre).4

It is possible to get some indication of capital renewal and replacement priorities by identifying assets or asset groups that:

• Have a high consequence of failure,

• Have high use,

• Have a total value representing the greatest net value,

4 IPWEA, 2015, IIMM, Sec 3.4.4, p 3|91.

- 25 -


• Have the highest average age relative to their expected lives,

• Are identified in the AM Plan as key cost factors,

• Have high operational or maintenance costs, and

• Have replacement with a modern equivalent asset that would provide the equivalent service at a savings.5

The ranking criteria used to determine priority of identified renewal and replacement proposals has not been clearly defined at a corporate level within the organisation. Some Council departments have developed good processes for generating capital works bids, using condition, function and capacity based prioritising processes, informed by strategic planning documents with a five or more year horizon.

The challenge for the organisation is to imbed this methodology throughout the organisation to ensure all buildings are being appropriately managed through informed corporate prioritisation processes, not just those buildings being well managed by departments that have good systems in place.

Overall, the quality of building data within the asset management system does need to improve substantially to enable corporate processes to improve and to achieve an increased level of confidence from management that data is correctly informing decision making. This will ensure that services, that have not necessarily developed long term strategic plans for their building assets are also receiving attention and services are not being impacted unexpectedly from asset failure, which in turn impacts the community.

Table 5.3.1. provides an example of what a priority ranking system may look like once data has been appropriately captured.

Table 5.3.1: Renewal and Replacement Priority Ranking Criteria

Criteria Weighting

Condition 25%

Capacity 25%

Function 25%

Risk 15%

Maintenance Demand 10%

Total 100%

5.3.2 Summary of future renewal and replacement expenditure

Projected future renewal and replacement expenditures are forecast to steadily increase over the next 10 years as the asset stock ages. New facilities will also come on line in this time but are less likely to impact renewal demand over the next decade. The expenditure required is shown in Fig 5. Note that all amounts are shown in current (real) dollars. The below table does show considerable spikes in demand in 2029 and 2037, with very little requirement in 2030 and 2031. This profile is driven by age and condition of existing assets, but in reality these peaks and troughs will be appropriately managed to ensure a spread of expenditure noting the funding demands that Council will also face with regard to other asset categories.

5 Based on IPWEA, 2015, IIMM, Sec 3.4.5, p 3|97.

- 26 -


Fig 5: Projected Capital Renewal and Replacement Expenditure


Figure 5 suggests Council is adequately funding its renewals in the medium term, however this data must be treated with caution. This AMP has discussed that;

• Condition data is not completely reliable

• Levels of service are required to measure intervention levels

• Condition scores are being aggregated. This can mask poor condition components in relatively good condition buildings

In addition to these three points, attention must be paid to the current rate of asset consumption (depreciation) as an indicator of renewal demand. Currently depreciation stands at $1.4M per annum. There should be balance between renewal and depreciation yet forecast renewal demand over the 10 years is only averaging $224K per annum. This requires further investigation to ensure depreciation and renewal demand reflect actual asset consumption.

Renewals and replacement expenditure in the capital works program will be accommodated in the long term financial plan. This is further discussed in Section 7.

5.4 Creation/Acquisition/Upgrade Plan New works are those that create a new asset that did not previously exist, or works which will upgrade or improve an existing asset beyond its existing capacity. They may result from growth, social or environmental needs. Assets may also be acquired at no cost. These additional assets are considered in Section 4.4.

5.4.1 Selection criteria

In setting out the capital works priority projects the below key points will be investigated to ensure project selection is meeting community expectations. This would include;

• Confirm that the building is still required for the service

• Confirm the building has adequate useful life to support long term services without major investment

• Place a priority on the building from a service perspective of High, Medium, Low

- 27 -


• Rank candidate projects from the perspective of service and service needs.

• Ask others; how does management and staff rank projects from a condition point of view or from a maintenance burden viewpoint or both

• Revise capital works plan based on input responding to the above points

• Identify second round inspections to confirm priority and to develop an initial scope of work

• Review/revise costs in light of agreed scope of works

• Confirm commitments from any funding partners

• Review/revise final capital works plan.

New assets and upgrade/expansion of existing assets are identified from various sources such as the ICSIP report, community requests, proposals identified by strategic plans or partnerships with others. Candidate proposals are inspected to verify need and to develop a preliminary cost estimate. Proposals are ranked by priority and are considered by a Capital Works Control Group, and Capital Works Board.

The Capital Works Board will use its established prioritisation matrix developed for assessment of candidate capital works projects.

5.4.2 Summary of future upgrade/new assets expenditure

Projected upgrade/new asset expenditures are summarised in Fig 6. The graph only demonstrates funding in the next two years. This information has been gleaned from the current 4-year capital works program and the LTFP. Council has been successful in accessing Government grants to provide funding for new projects. Council has many grant applications currently being considered and is working to develop more proposals beyond 2022. As these grants are approved then the projects will be included in the 4 year and LTFP capital works programs. All amounts are shown in real values.

Fig 6: Projected Capital Upgrade/New Asset Expenditure


The existing upgrade/new plan does not include a high level of certainty and is likely to be revised at this point on an annual basis.

- 28 -


5.4.3 Summary of asset expenditure requirements

The financial projections from this asset plan are shown in Fig 7 for projected operating (operations and maintenance) and capital expenditure (renewal and upgrade/expansion/new assets). Note that all costs are shown in real values.

The bars in the graphs represent the anticipated budget needs required to achieve lowest lifecycle costs, the budget line indicates what is currently available. The gap between these informs the discussion on achieving the balance between services, costs and risk to achieve the best value outcome.

Fig 7: Projected Operating and Capital Expenditure


Overall confidence that this table is a true reflection of available resources as well as required investment is “Uncertain”. See forecast reliability table at 7.4.

6. RISK MANAGEMENT PLAN The purpose of infrastructure risk management is to document the results and recommendations resulting from the periodic identification, assessment and treatment of risks associated with providing services from infrastructure, using the fundamentals of International Standard ISO 31000:2009 Risk management – Principles and guidelines.

Risk Management is defined in ISO 31000:2009 as: ‘coordinated activities to direct and control with regard to risk’6.

6 ISO 31000:2009, p 2

- 29 -


An assessment of risks associated with service delivery from infrastructure assets has identified critical risks that will result in loss or reduction in service from infrastructure assets or a ‘financial shock’. The risk assessment process identifies credible risks, the likelihood of the risk event occurring, the consequences should the event occur, develops a risk rating, evaluates the risk and develops a risk treatment plan for non-acceptable risks.

6.1 Critical Assets Critical assets are defined as those which have a high consequence of failure causing significant loss or reduction of service. Similarly, critical failure modes are those which have the highest consequences.

Critical assets have been identified and their typical failure mode and the impact on service delivery are as follows:

Table 6.1 Critical Assets

Critical Asset(s) Failure Mode Impact

Roof Cladding Building not waterproof

Damage to multiple internal asset components. Building uninhabitable – loss of productivity

Plumbing No potable water available/water leaking

Without water a building is not habitable (e.g toilets). Water leaks can cause severe damage to multiple asset components throughout the building

Electrical Electrical faults/power outages

Electrical faults may cause fire or injury/death to occupants. Power outages render building incapable of delivering services.

Mechanical Poor climate control No heating or cooling impacts on customer comfort and will impact their service experience. Example may be an air conditioner failure in a public library.

By identifying critical assets and failure modes investigative activities, condition inspection programs, maintenance and capital expenditure plans can be targeted at the critical areas.

6.2 Risk Assessment The risk management process used in this project is shown in Figure 6.2 below.

It is an analysis and problem solving technique designed to provide a logical process for the selection of treatment plans and management actions to protect the community against unacceptable risks.

The process is based on the fundamentals of the ISO risk assessment standard ISO 31000:2009.

Fig 6.2 Risk Management Process – Abridged

- 30 -


TREAT RISKS

- Identify options

- Assess options

- Treatment plans

ANALYSE &

EVALUATE RISKS

- Consequences

- Likelihood

- Level of Risk

- Evaluate

IDENTIFY RISKS

- What can happen ?

- When and why ?

- How and why ?

The risk assessment process identifies credible risks, the likelihood of the risk event occurring, the consequences should the event occur, develops a risk rating, evaluates the risk and develops a risk treatment plan for non-acceptable risks.

An assessment of risks associated with service delivery from infrastructure assets has identified the critical risks that will result in significant loss, ‘financial shock‘ or a reduction in service.

Critical risks are those assessed with ‘Very High’ (requiring immediate corrective action) and ‘High’ (requiring corrective action) risk ratings identified in the Infrastructure Risk Management Plan. The residual risk and treatment cost after the selected treatment plan is implemented is shown in Table 6.2.

Table 6.2: Critical Risks and Treatment Plans

Service or Asset at Risk

What can Happen Risk Rating (VH, H)

Risk Treatment Plan

Residual Risk *

Service Risk There is a risk that Council will not be able to continue to fund services at current levels

VH Improve asset data Develop service plans Develop LTFP

Council cannot afford full funding even if it substantially increases

There is a risk

that services

will need to

find a way to

collocate with

other

compatible

services as a

means of

keeping

services

going.

Failure to find additional revenue streams leads to service decline

H Identify opportunities for service collaboration/colocation

Service collaboration/colocation does not fully resolve service sustainability problems

- 31 -




Risk Treatment Plan

Residual Risk *

There is a risk

that declining

usage of

some

buildings will

result in them

being

disposed of.

Need to upgrade buildings to accommodate more customers where underutilised buildings are closed.

H Undertake service planning which will inform community consultation requirements about which buildings to target

Upgrade requirements cancel out benefits of closing other buildings.

To address

critical

building

issues, other

buildings may

have to be

modified to

ensure

continuity of

services.

Unforeseen costs H Undertake service Planning to include fit for purpose data

There is a risk

that some

services and

the buildings

they use will

pass to other

providers or

otherwise be

reduced to

control costs

Reduce liability of Council to provide services and building assets

M Opportunities to transfer services should be encouraged where other providers are better positioned.

Other providers have poor sustainability models

There is a risk

that without

comprehensiv

e service

planning

Council will

make poor

capital

investment

decisions.

Poor prioritisation of limited capex dollars

VH Undertake service planning

Service planning informs more need than Council can afford.

- 32 -




Risk Treatment Plan

Residual Risk *

There is a risk

that without

comprehensiv

e service

planning

Council will

make poor

capital

investment

decisions.

Unexpected, cost increases in service delivery

VH Better asset data to inform WOL predictions – use industry standards as basis for decisions.

There is a risk

that

investment

decisions will

be deferred

imposing

unrealistic

and unfair

financial

burdens on

future service

users and / or

customers.

Cost for services transferred to future rate payers

VH Use long term planning to inform Council’s borrowing strategy

There is a risk

that poor

data will lead

to poor asset

management

solutions

which in turn

will lead to

poor

decisions.

Incorrect assessment of future requirements

H Improve asset management systems

Quality of data being inputted into AMS

Note * The residual risk is the risk remaining after the selected risk treatment plan is operational.

7. FINANCIAL SUMMARY This section contains the financial requirements resulting from all the information presented in the previous sections of this asset management plan. The financial projections will be improved as further information becomes available on desired levels of service and current and projected future asset performance.

- 33 -


7.1 Financial Statements and Projections

7.1.1 Asset valuations

The best available estimate of the value of assets included in this Asset Management Plan as at 30 June 2018 are shown below. Assets are valued at $126M based on replacement value.

Gross Replacement Cost $126,747,000

Depreciable Amount $126,747,000

Depreciated Replacement Cost7 $53,182

Annual Average Asset Consumption $1,432,000

7.1.1 Sustainability of service delivery

Two key indicators for service delivery sustainability that have been considered in the analysis of the services provided by this asset category, these being the:

• asset renewal funding ratio, and

• medium term budgeted expenditures/projected expenditure (over 10 years of the planning period).

Asset Renewal Funding Ratio

Asset Renewal Funding Ratio8 191%

When renewal funding provided by the organisation is above that forecast by the NAMS modelling program, it will return a Renewal Asset Funding Ration (ARFR) above 100%, when it is insufficient to meet demand it will be below 100%.

Even though Council renewal ARFR is above 100% this needs to be treated cautiously. The modelling program does not use intervention points to flag renewal, it uses end of life. Council has intervention set at condition 8 (or condition 4 on a 1-5 scale) which would require an asset to be replaced before end of life. Once levels of service are properly defined Council will likely see more building assets having intervention points at 7, or as low as 6 for premier high use facilities. Intervention points will correlate to levels of service, and where they improve services, this will put more pressure on renewal requirements.

It is possible the practice of performing some works deemed maintenance as renewal is creating the impression that renewal demand is being met and exceeded. Maintenance work does not change the condition of a building and so would not delay renewal requirement, but when maintenance investment is modelled as renewal, it is then being assumed that condition is improving. Correcting this practice is going to see the Asset Renewal Funding Ratio decrease and will make overall changes to the 10 year financial planning model.

7 Also reported as Written Down Value, Carrying or Net Book Value. 8 AIFMM, 2015, Version 1.0, Financial Sustainability Indicator 3, Sec 2.6, p 9.

Residual

Value

Depreciable

Amount

Useful Life

Gross

Replacement

Cost

End of

reporting

period 1

Annual

Depreciation

Expense

End of

reporting

period 2

Accumulated

Depreciation Depreciated

Replacement

Cost

- 34 -


Medium term – 10 year financial planning period

This asset management plan identifies the projected operations, maintenance and capital renewal expenditures required to provide an agreed level of service to the community over a 10 year period. This provides input into 10 year financial and funding plans aimed at providing the required services in a sustainable manner.

These projected expenditures may be compared to budgeted expenditures in the 10 year period to identify any funding shortfall. In a core asset management plan, a gap is generally due to increasing asset renewals for ageing assets.

The projected operations, maintenance and capital renewal expenditure required over the 10 year planning period is $1.29M on average per year.

Estimated (budget) operations, maintenance and capital renewal funding is $1.33M on average per year giving a positive 10 year funding outlook of $39K per year. This indicates 103% of the projected expenditures needed to provide the services documented in the asset management plan. This excludes upgrade/new assets.

Providing services from infrastructure in a sustainable manner requires the matching and managing of service levels, risks, projected expenditures and financing to achieve a financial indicator of approximately 1.0 for the first years of the asset management plan and ideally over the 10-year life of the Long Term Financial Plan.

7.1.2 Projected expenditures for long term financial plan

Table 7.1.2 shows the projected expenditures for the 10 year long term financial plan.

Expenditure projections are in 2018/19 real values.

Table 7.1.2: Projected Expenditures for Long Term Financial Plan ($000)

Year Operations

($000) Maintenance

($000)

Projected Capital Renewal

($000)

Capital Upgrade/ New

($000)

Disposals ($000)

2019 $542 $413 $0 $3,182 $0

2020 $566 $432 $27 $150 $0

2021 $578 $441 $16 $0 $0

2022 $589 $449 $74 $0 $0

2023 $601 $458 $0 $0 $0

2024 $613 $467 $181 $0 $0

2025 $625 $485 $45 $0 $0

2026 $637 $495 $218 $0 $0

2027 $649 $504 $313 $0 $0

2028 $662 $514 $1,363 $0 $0

7.2 Funding Strategy Funding for assets is provided from the budget and long term financial plan.

- 35 -


The financial strategy of the entity determines how funding will be provided, whereas the asset management plan communicates how and when this will be spent, along with the service and risk consequences of differing options.

7.3 Valuation Forecasts Asset values are forecast to increase as additional assets are added to services.

Additional assets will generally add to the operations and maintenance needs in the longer term, as well as the need for future renewal. Additional assets will also add to future depreciation forecasts.

Council will need to review the current process of depreciating building fit out components as part of the overall building replacement value given fit out asset do not have the same useful lives as the structural components of the building, and as they will be replaced more frequently, they should be managed separately from building structure.

7.4 Key Assumptions Made in Financial Forecasts This section details the key assumptions made in presenting the information contained in this asset management plan. It is presented to enable readers to gain an understanding of the levels of confidence in the data behind the financial forecasts.

Key assumptions made in this asset management plan are:

• It is assumed that the existing draft LTFP and 4 year SRP information is adequate to be used as a guide for investment in building assets over the coming years.

• Council estimates population growth in the realm of 4% in the coming decade, however this does not necessarily mean buildings will increase at this rate. A conservative estimate of 2% increase in buildings has been used in this plan.

• Maintenance forecasts have been based on current budget, however service planning may reveal a larger investment in maintenance will be required in the coming years.

• Council proposes to replace buildings/building components at condition 8, however this may see service satisfaction decline sharply where buildings are required to present a high level of service. It is more realistic to suppose that the community will only be accepting of low utilisation buildings being allowed to decline to condition 8, and the community will expect higher levels of service from high use facilities (aquatic centres)

• The Mechanical Service data and condition scores have been accepted however confidence in this data is low with last inspections dating back as far as 2012.

• Building fit out was not included in the NAMS Form 2 modelling as it is assumed all acquisition dates (all at 2016) are incorrect, which will corrupt the modelling results if used.

• The financial commitments to renewal have been accepted, however there is strong evidence to suggest that some work delivered as renewal is in fact maintenance which is not returning buildings back to accepted levels of service.

• The Greater Beveridge Community Centre building has been included in this AMP as it has been commissioned, however it has not yet been entered into the asset register.

• This asset management plan has accepted the condition data at face value despite asset data not being adequate to model buildings at component level.

• Updated useful lives (UL) have been applied where the remaining life exceeds the standard life, and decreased where the remaining life is less than the standard life.

- 36 -


7.5 Forecast Reliability and Confidence The expenditure and valuations projections in this AM Plan are based on best available data. Currency and accuracy of data is critical to effective asset and financial management. Data confidence is classified on a 5 level scale9 in accordance with Table 7.5.

Table 7.5: Data Confidence Grading System

Confidence Grade

Description

A Highly reliable

Data based on sound records, procedures, investigations and analysis, documented properly and agreed as the best method of assessment. Dataset is complete and estimated to be accurate ± 2%

B Reliable Data based on sound records, procedures, investigations and analysis, documented properly but has minor shortcomings, for example some of the data is old, some documentation is missing and/or reliance is placed on unconfirmed reports or some extrapolation. Dataset is complete and estimated to be accurate ± 10%

C Uncertain Data based on sound records, procedures, investigations and analysis which is incomplete or unsupported, or extrapolated from a limited sample for which grade A or B data are available. Dataset is substantially complete but up to 50% is extrapolated data and accuracy estimated ± 25%

D Very Uncertain

Data is based on unconfirmed verbal reports and/or cursory inspections and analysis. Dataset may not be fully complete and most data is estimated or extrapolated. Accuracy ± 40%

E Unknown None or very little data held.

The estimated confidence level for and reliability of data used in this AM Plan is considered to be “Uncertain”

8. PLAN IMPROVEMENT AND MONITORING

8.1 Status of Asset Management Practices10 8.1.1 Accounting and financial data sources

Accounting and Financial data has been collected from the following sources;

• 2017/18 Annual Report

• 2017 Building Condition Audit

• TechnologyOne Finance System

• Mitchell Shire Council 2017/18 Budget Report

8.1.2 Asset management data sources

• Conquest III Asset Management System

• FG Dixon Group Building Condition Survey Data

9 IPWEA, 2015, IIMM, Table 2.4.6, p 2|71. 10 ISO 55000 Refers to this the Asset Management System

- 37 -


• Macutext Building Fit Out Condition data

• Integrated Community Services Infrastructure Plan

• 2017/18 Annual Report

• Mitchell Shire Council 4 Year Capital Works Program

8.2 Improvement Plan The asset management improvement plan generated from this asset management plan is shown in Table 8.1.

Table 8.1: Improvement Plan

Task No

Task Responsibility Resources Required

Timeline

1 Prepare Service Plans for all services. What does the service do? What are the outcomes of the service? The link between outcomes (benefits) and customers / users, should be clear.

• Set functional hierarchy of service where appropriate

• Associate buildings with the service that requires them

• Define the standard of building required to match the level of service required

ELT (Leadership) Manager Finance And Assets (Project Lead)

All Service Managers (specific areas)

Internal staff/external consultant

Ongoing to July 2021

2 Create a building hierarchy based on a buildings priority to the organisation and assign levels of service appropriate to high and low classification buildings

Coordinator Strategic Assets to lead. All Service Managers (specific areas)

Internal staff/external consultant

July 2021

3 Clearly define the current level of service being provided, the assets required, and any building maintenance standards currently being applied – this will form a starting benchmark to measure current services, their costs, and what is the gap to meet future service expectations

Coordinator Strategic Assets (Lead)

All Service Managers

Internal staff/external consultants as required

Ongoing to July 2021. Should form the first step of Service Planning

4 Rationalise the “Building Types” in Council’s asset register from 34 to a maximum of 4. These will inform the standard life of buildings as Heritage, Long Life and Short Life, and improve the consistency of modelling.

Coordinator Strategic Assets

Internal Staff December 2019

5 Redefine condition intervention points (cannot all be condition 8) once service levels have been defined.


Internal Staff June 2020

6 Review and reclassify building components and create building zones taking into consideration what each zone’s service is e.g. a kitchen, a toilet, an office, and how it will be assessed for asset management. This should inform the scope of works for the next building condition survey.



7 Develop an apportionment of replacement value across building components for each unique building noting some buildings will have no mechanical


Internal Staff March 2020

- 38 -


services or fit out, and some will have very high cost mechanical and fit out.

8 Ensure appropriate planning for both maintenance and renewal activities, that these are approved, and budget is provided to the appropriate capital or maintenance cost centre.

Coordinator Strategic Assets Manager Engineering and Major Projects

Internal staff January 2020

9 Ensure no future maintenance is being delivered as capital works.


Internal staff July 2019

10 Complete building asset audits inclusive of structure, fit out and mechanical services as one job lot – this will reduce multiple contracting, and coordination of multiple providers to access buildings. Data should also be in standard formats and contracting to be held accountable for data provided. Ensure planning has been undertaken to guarantee that data will be useful to manage building components separate to the building.



11 Develop a condition assessment manual for building components


Internal Staff August 2019

12 Review the valuation and depreciation of buildings and components. Should components be depreciated in accordance with a value and useful life separate from the overall building. This is to be work shopped between Finance and Assets

Coordinator Strategic Assets Coordinator Financial Accounting

Internal Staff November 2019

13 Develop a system of evaluating candidate building projects that takes account of service requirements, (addresses issues of capacity and fit for purpose) as well as building condition to prioritise capital work. This should form a multi-year (ideally 10 year) project plan.

Coordinator Strategic Assets All Service Managers

Capital Works Control Group


14 Investigate modelling software capable of optimising Council’s investment in buildings. Software should be capable in assisting Strategic Assets nominate an initial set of project priorities for capital works, based on sound condition data and level of service information


Internal Staff External Consultant

September 2019 For software component

15 Develop a program of data collection for buildings that is responsive to the data needs developed from item above.


Internal Staff External Consultants

October 2020

16 Collect and store the agreed priority data in the Conquest asset management system, as the one source of truth for all building assets


Internal Staff Ongoing

17 Investigate/confirm construction dates of buildings Coordinator Internal Staff March

- 39 -


as well as any significant refurbishments which may not have been correctly processed in Conquest – to reflect current useful lives.

Strategic Assets

2020

18 Implement a maintenance management system. The implementation of a robust MMS will

• facilitate the recording of all defects,

• prioritisation of effort that reflects levels of service

• develops a record to inform future maintenance bids

• facilitates better planning of periodic activities

• overtime reduces the incidence of reactive maintenance


IT Manager


January 2020

19 Ensure integrations between Council’s Conquest AMS and GIS to allow for building data to be available to Council Officers through GIS. Work with Council Officer as to what data they would like available to them in GIS.



October 2019

20 Implement service agreements with service managers for the maintenance and inspection of buildings used for each of the respective services. This will set out key responsibilities of occupiers / tenants, time frames for response and expectations for more significant works

• Coordinator Strategic Assets

• All Service Managers

• Manager Engineering and Major Projects

• Coordinator Facilities


21 Review all existing and outstanding strategies, master plans, improvement plans and the like for currency, status, completeness and incorporate all building related actions, initiatives and intentions into service plans such that summary information can populate this Building AMP.

Service Managers

Internal Staff May 2020

22 Draft a process that mandates a review of AMPs by asset manager, relevant service managers, and steering committee, reports to executive and ensures review actions are incorporated into a revised action plan

Coordinator Strategic Assets Service and Asset Management Working Group

Internal Staff Dec 2019

23 Council must review its capitalisation thresholds for building components, and as part of its budget preparations have the discipline to adhere to those thresholds in order to create predictability and certainty in renewal and maintenance investment


Internal Staff November 2019

24 Where depreciation should reflect the rate of asset consumption, investigate what is creating a gap between levels of depreciation expense and forecast renewal demand.



- 40 -


8.3 Monitoring and Review Procedures This asset management plan will be reviewed during annual budget planning processes and amended to show any material changes in service levels and/or resources available to provide those services as a result of budget decisions.

The AM Plan will be updated annually to ensure it represents the current service level, asset values, projected operations, maintenance, capital renewal and replacement, capital upgrade/new and asset disposal expenditures and projected expenditure values incorporated into the long term financial plan.

The AM Plan has a life of 2 years on account of the ICSIP project which will generate new future demand data as well as the 2019/20 condition audit, and is due for complete revision and updating by March 2020.

8.4 Performance Measures The effectiveness of the asset management plan can be measured in the following ways:

• The degree to which the required projected expenditures identified in this asset management plan are incorporated into the long term financial plan,

• The degree to which 1-5 year detailed works programs, budgets, business plans and corporate structures take into account the ‘global’ works program trends provided by the asset management plan,

• The degree to which the existing and projected service levels and service consequences (what we cannot do), risks and residual risks are incorporated into the Strategic Plan and associated plans,

• The Asset Renewal Funding Ratio achieving the target of 1.0.

9. REFERENCES

• IPWEA, 2006, ‘International Infrastructure Management Manual’, Institute of Public Works Engineering Australasia, Sydney, www.ipwea.org/IIMM

• IPWEA, 2008, ‘NAMS.PLUS Asset Management’, Institute of Public Works Engineering Australasia, Sydney, www.ipwea.org/namsplus.

• IPWEA, 2015, 2nd edn., ‘Australian Infrastructure Financial Management Manual’, Institute of Public Works Engineering Australasia, Sydney, www.ipwea.org/AIFMM.

• IPWEA, 2015, 3rd edn., ‘International Infrastructure Management Manual’, Institute of Public Works Engineering Australasia, Sydney, www.ipwea.org/IIMM

• IPWEA, 2012 LTFP Practice Note 6 PN Long Term Financial Plan, Institute of Public Works Engineering Australasia, Sydney

http://www.ipwea.org/AIFMM

http://www.ipwea.org/IIMM

- 41 -


Documents

Buildings Asset Management Plan (Concise)