The 15-year regeneration of the defence estate provides an example of effective investment management that other public agencies should replicate, says Stephen Selwood CEO of the New Zealand Council for Infrastructure Development (NZCID).
“The Defence Estate Regeneration Plan identifies a $1.7 billion capital works programme over the next 15 years, including detailed project pipeline to 2022.
“Following up on the strategic White Paper released earlier this year, the regeneration plan provides estimates of capital allocations by area, giving clarity to local as well as national contractors about what is required in the short-medium term.
“Acknowledging weak asset management in the past, Defence will adopt an integrated approach to renewing assets across its 81,000-hectare estate, including outsourcing and alternate delivery models on a project-by-project basis.”
This is textbook asset management and must be commended, Selwood believes. “While Defence may be one of our more capable investment managers, as revealed through Treasury’s Investor Confidence Rating Scheme, it has also clearly benefitted from strong government funding commitment.”
He admits, however, that not every government agency is in a position to impartially review its assets, identify weaknesses and book a 15-year regeneration programme. “Instead, we often see major asset owners reliant on annual funding commitments which rise and fall with the economy and having to compete other public agencies within budget constraints.”
In such an environment, Selwood argues that it is “virtually impossible” to manage assets efficiently or signal future capacity requirements to key suppliers. “New projects are cut according to budget provisions, undermining whole-of-life project evaluation, and maintenance is deferred until such time as funding is available, even if that means a higher final cost to the taxpayer.”
The Defence regeneration plan, however, demonstrates what public agencies with future funding confidence and a long-term planning horizon can achieve.
“It is vitally important that this confidence is not shaken by unexpected funding revisions in the future and that other sectors are given similar operational support to honestly review their assets, develop and publish a long-term asset management plan and deliver on that plan over the long term,” Selwood insists.
