Delivering VfM in asset management pdfs/Presentations/Value...Delivering VfM in Asset Management 1....
Transcript of Delivering VfM in asset management pdfs/Presentations/Value...Delivering VfM in Asset Management 1....
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CIH Delivering Value for Money Event
London, 13 August 2014
Richard Medley, Director, CIH Consultancy
Delivering VfM in asset management
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Asset management…
It’s a
whole
new
ballgame
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The pendulum has swung
Delivering for the asset • Asset performance
• Asset value
Delivering for the customer • Decent homes
• Customer experience
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Asset Management - the key drivers
Demand & Supply
• Demographic changes, including ageing population
• Fluctuations in demand for particular locations and property types (impact of welfare reform)
• Growing emphasis on choice & increasing customer
demands/expectations
Stock Condition & Sustainability
• An ageing stock profile & ‘fit for purpose issues’ with some property types
• The pressure to a deliver higher, local determined standard (Decent Homes +)
• Neighbourhood & economic sustainability
Funding, Financing & VfM
• The imperative for assets & asset planning to support the Business Plan
• The need to optimise value & use of assets (economic regulation)
• The need for proactive solutions to improve stock portfolios & their performance
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What is VfM in asset management terms?
Asset Management definition
Ensuring that current and future assets (houses, land, garages, shops etc.) fully support the organisation’s objectives – working towards having the right assets, of the right quality, in the right place, at the right time generating appropriate value to the business plan and 30 year cashflows.
Scottish Housing Regulator, Strategic Asset Management, Aug 2012, Recommended Practice
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What is VfM in asset management terms?
What’s the ultimate objective?
To manage assets to create the optimum balance between cost, quality and utilisation in the organisation’s own context.
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What’s expected of us? (by the Regulator)
• An understanding of the value of assets including details of financial, social and environmental return at a detailed enough level to enable analysis of differing values of different stock according to location or type (e.g. Net Present Values or NPVs)
• That an understanding of such returns underpins strategic asset decisions, for example:
whether to hold particular stock in its current form, dispose of it to another provider or (when vacant) on the open market, or convert it to another tenure, etc .
investment and management and maintenance spend
• A proactive approach to asset management.
Asset
management
is at the heart
of economic
regulation
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The challenge
• With the combination of regulatory requirements and the economic climate, the imperative for all social landlords to take a more ‘intelligent’ approach to asset management has never been greater.
• Through a robust process of assessment & evaluation, the ultimate objective should be to re-configure your asset base to ensure a stock of the right properties, in the right place, in the right condition which meet the right standards and which are used in the best way
But,
easier
said
than
done?
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So what comprises Asset Management?
Strategy
Performance
appraisal
Stock
condition
survey
Stock
condition
data
Neighbourhood
performance
NPV analysis Procurement
Energy Efficiency
& fuel poverty
Redevelopment
New build
Yield
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The key ingredients of VfM in asset management
• The Asset Management Strategy as the essential framework
Designed to unlock the potential of the housing stock
Delivering for the business & the customer
Built around a set of clear strategic priorities
Shaped & informed by sound stock condition survey data and the organisation’s own knowledge
1. A comprehensive, strategic approach
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The key ingredients of VfM in asset management
• The Asset Management Plan as the delivery vehicle
What you’re going to do
How you’re going to do it
How much it’s going to cost
When you’re going to do it by
Who’s going to do it
• Demonstrably delivering against the strategic objectives
• Shaped by and shared with residents
2. A clear delivery plan
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The key ingredients of VfM in asset management
• The use of Asset Performance Tools – but what is ‘performance’, what does it mean? Financial performance measures
• Net Present Value (NPV)
• Yield
Non-financial performance measures
• Meeting social objectives
• Meeting political objectives
• Economic/regeneration objectives
• But which approach is best? Which value measure should you use?
3. Understanding the ‘performance’ of your assets
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Net Present Value Analysis
(£10,000) (£5,000) £0 £5,000 £10,000 £15,000 £20,000 £25,000 £30,000 £35,000
GLEBE ROAD
DRYLEAZE COURT SHU
UPPER PARK ROAD
TANNERS PIECE
WILLOW ROAD SHU
HAZELWOOD
GLEBELANDS
DRAYCOTT
CHAPEL LANE
THE CORRIETT
CAMBRIDGE HOUSE
GROVE PARK ROAD SHU
SPRINGFIELDS COURT
THE LONG GROUND
GEORGE PEARCE HOUSE
BURDETT HOUSE
GRANGE VIEW
Per unit
NPVs can
vary
dramatically
within a
property
group,
ranging from
+£32k here
down to -£5k
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Net Present Value Objectives
Effective
asset
management
will lead to
incomes
increasing at
a faster rate
than the level
of
investment,
returning a
larger NPV
over time
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The Yield Curve
How should we go about
setting targets and moving the
yield to the right?
Gross Yield: The
annual return on
your investment
(the income ÷ the
value)
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The key ingredients of VfM in asset management
• Using performance information to inform option appraisal
Identifying the actions that will generate more value or fresh potential
Continue to invest & retain in current use
Change of use
Redevelopment
Disposal
• Identifying where the potential lies to unlock asset potential, release value, provide for reinvestment
• Balancing economic motives against social responsibilities
4. Optimising cost, quality & utilisation
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The key ingredients of VfM in asset management
• Evaluating your approach
• Monitoring its impact/return Increase in average NPV
Increase in average yield
Meeting tenant needs/demands
Impact on neighbourhood sustainability
Local economic impact
• Providing clear information and assurance to boards, elected members, residents & other stakeholders
5. Accountability – providing assurance
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The key ingredients of VfM in asset management
• Using approaches that add real value to the asset
• Shifting the balance of risk to contractors & manufacturers
• Securing greater inter-organisational and inter-personal trust
• Promotion of a culture to support innovation, learning and development of mutual advantage
• Lifecycle considerations
Landlords – long lifecycle, reduced maintenance, lower carbon and improved NPV
Residents – safety, great performance, good looks and reduced call outs
Contractors – easy to fit, reliable and offer savings and predictability when taking on long term liabilities
6. Effective, efficient procurement
“Lifecycle isn’t taken seriously by the sector and is not considered a critical component of procurement” Steve Coleman,
TakeParts
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The key ingredients of VfM in asset management
• As a ‘social landlord’ the value your assets bring also needs to be measured in broader ways:
The cost of energy efficiency works versus the benefits for reducing fuel poverty
The value of delivering local training & employment
The regenerative benefits of your asset approaches
The creation or sustaining of stronger communities
• But how to measure and monitor progress in these areas and demonstrate VfM? There are many impact tools, but CIH is developing a ‘balanced scorecard’ approach
7. Delivering wider sustainability
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Summary
Delivering VfM in Asset Management 1. A comprehensive strategic approach
2. A clear delivery plan
3. Understanding the ‘performance’ of your assets
4. Optimising cost, quality & utilisation
5. Accountability – providing assurance
6. Effective, efficient, procurement
7. Delivering wider sustainability
It’s not rocket
science, but nor
is it simple –
social landlords
are complex
organisations
operating in a
complex
environment
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What’s CIH doing?
Intelligent Assets
A package of support designed to
unlock the potential of your
housing stock • Asset strategy development
• Stock condition data quality
review
• CIH Asset Performance Tool
• Business planning
A collective, collaborative initiative
with up to 15 organisations working
with CIH & each other to define and
develop a new model that redefines
the way the sector approaches asset
management
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Thank you for listening
Any questions or anything you’d like to discuss?
Richard Medley
07799 115571
www.cih.org/assetmanagement
Asset Management…
it’s a whole new
ballgame