US Government Efficiency Solution - Disciplined Asset Management
This Asset Management Partnership (AMP) Newsletter continues a miniseries that covers how the US Government is failing to manage its built infrastructure and how this problem can be solved.
See preceding articles at:
This article begins the second half of the miniseries on the US Government’s fiduciary failure to efficiently and effectively manage its built infrastructure. This real property portfolio consumes around $70 billion in funding each year. This failure wastes funding and resources, but more importantly it negatively impacts America’s productivity and competitiveness.
A case in point is highlighted in the US National Academies report – Technical Assessment of the Capital Facility Needs of the National Institute of Standards and Technology (NIST). This report details how chronic underfunding of basic facility maintenance and repair has reduced NIST productivity by 20%. It cited analysis that every dollar invested in NIST research generates 9 times as much to US Gross Domestic Product (GDP). The NIST annual budget currently ranges around $1.2B which equates to a $10B plus contribution to US GDP each year.
This benefit-to-cost ratio is realized through NIST research and development in high-precision measurement and calibration services, artificial intelligence and computing, communications technologies and security, and many other critical areas. This research contributes to US GDP and underpins US competitiveness in a global economy. For example, NIST research and development is also absolutely critical to the US retaining and growing domestic high-tech manufacturing that will empower future Artificial Intelligence (AI) capabilities.
The National Academies’ NIST report estimated that 63% of NIST research facilities failed to meet minimum Department of Commerce facility condition index requirements. It also identified a need to invest an average $350M each year in facility maintenance and repair for the next 12 years to resolve the 20% productivity impact due to failing facilities. This is the amount needed to fund annual maintenance and repair requirements and remove NIST’s $500M deferred maintenance backlog. The total funding over this timeframe is just over $4B and it would increase benefits to the US many times this amount.
This analysis exemplifies the difference between a “managing assets” and “asset management” business case analysis. The “managing assets” viewpoint sees facility maintenance and repair as a overhead expense on one that should be minimized. This is the dominant viewpoint of US Federal agencies. The “asset management” viewpoint sees investments in facilities as a mission enabler and source of value generation.
The distinction made in this analysis is that NIST, like other US Federal agencies, looks at facility management and operations as a “managing assets” problem. The remedy to the problem, as shown in the NIST example, is based on a preceding National Academies report titled Strategies to Renew Federal Facilities. This second report details an “asset management” solution for this chronic, universal problem. The five recommendations in this second National Academies report establish the foundation for the solution.
The first step is to get your organization’s house in order. This means executive leadership must learn to view its facilities infrastructure as a mission enabler and not a source of overhead expenses. This is a go-on-offense strategy. If this viewpoint does not register, the organization will be relegated to defensive “managing asset” action plans and strategies. The needed change also requires that organizations embrace a “systems are greater than goals” approach to performance management.
The International Organization for Standardization (ISO) has written the book on this approach. It began with the publication of ISO 9001 – Quality Management Standards that focused on process management. The body of process management knowledge rapidly expanded about a half century ago drawing on thought leaders such as W. Edward Deming and others. ISO codified this knowledge into a standard starting with the publication of ISO 9001 in the late 1980s.
In the 2010’s ISO codified this knowledge into a standard for the development of management systems – see ISO Management System Standards for the full summary. ISO 55001 – Asset Management System Requirements was the first ISO standard published using this rubric. Today ISO 55001 and ISO 9001 conform with this standard along with about two dozen other focus topics. These standards establish the foundation for the “systems are greater than goals” approach. ISO 55001 focuses on value generation and ISO 9001 focuses on process management.
These standards establish the basis for the “asset management” solution. This is the starting point for how US Federal agencies overcome their fiduciary failure in built infrastructure / real property management. The fix is US Federal agencies must develop asset management competencies and capabilities to make better use of limited resources managing the built infrastructure under their charge. What this really means is US Federal agencies must learn how to manage assets differently.
This requires organizational change. This change can be internal to US Federal agencies with executive championship. It can also come externally through US Congress via laws and regulations that mandate that US Federal agencies demonstrate competency in their ability to efficiently manage built infrastructure and the resources entrusted to them. As detailed in the first half of this AMP Newsletter miniseries, US Federal agencies are failing in this regard.
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The change starts with simple steps. First, US Federal agency leadership must be introduced to and understand the difference between “managing assets” and “asset management”. Sources that describe this are:
With this understanding leaders are ready to begin their organization’s asset management journey. This involves work as all meaningful journeys do. Benefits realized from this work fit the equation: you get out of it what you put into it. Work starts with a critical self-assessment of the organization’s asset management capabilities. See the following for more information on this:
The output of these steps is an asset management improvement roadmap. Implementation of disciplined asset management is, in itself, a continual improvement journey. There is no universal answer on how to proceed with this journey. Every journey is personal to each organization and it is guided by the organization’s values, what it values, and the purpose it was created to fulfill.
Whereas the method on how to approach this journey is the same. This is where ISO 55001 and the ISO management system body of knowledge are instructive. ISO 55001 and the asset management context and principles contained in ISO 55000 define what disciplined asset management looks like. They help organizations understand what they must do to efficiently manage assets needed to achieve organizational objectives.
In this way, disciplined asset management is simply a continual return-on-investment analysis. That is, learning how to make deliberate decisions about investments in assets that generate value for the organization. This includes actions that involve asset life cycle management through the lens of investment decision making. This is the central argument in Strategies to Renew Federal Facilities’ first recommendation. This recommendation is for US Federal agencies to apply ISO 55000 and ISO 55001 to critically evaluate their ability to efficiently and effectively manage the built infrastructure / real property they are responsible for.
Insights gained in this critical self-assessment will define the starting points for the organization’s asset management journey. These insights will advance understanding and transparency on what needs to be done next. This is the journey US Federal agencies need to start to address and remedy the points of failure identified in the first half of this miniseries. This journey can be simplified through US Congressional actions to unburden and remove impediments that disable and disincentivize US Federal agency ability and willingness to efficiently manage built infrastructure. In truth, both US Federal and US Congressional action will be needed to remedy and rectify the US Government’s fiduciary failure to efficiently manage its built infrastructure. Implementing this recommendation is the start on how to fix the problem.
If you liked this post, please like and repost it. The way to help fix the problem of the US Government’s fiduciary failure in managing its built infrastructure portfolio is to help more people understand the problem. For more information on disciplined asset management read more articles at https://amp4outcomes.substack.com/
Written to Jack Dempsey | January 7, 2025
AMP Newsletter #104
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