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Chapter Essential Questions:

• What is asset management?
• What kinds of processes and policies relate to managing assets?
• How are equipment and fleets managed? What kinds of systems are utilized to manage assets?
• How is the disposal of an asset done with environmental considerations in mind?
• How are records of keeping and purchasing equipment and property maintained?

Lesson 1

Outcomes:

1. Define what an asset in public works and housing is
2. Describe the concept of asset management
3. Discuss what an asset is
4. Describe the difference between an appreciating asset versus a depreciating asset
5. Discuss what assets there might be in public works and housing

Assets in Public Works and Housing

In the context of public works and housing, an “asset” is broadly defined as any tangible or intangible item that has value and can be owned or controlled to produce positive economic value for its owner or controller. Let’s break down the definition with respect to both public works and housing:

Public Works: Public works pertain to infrastructure and facilities provided by the government for the public good. In this domain, assets often include:

1. Infrastructure Assets: These are foundational and strategic assets necessary for the functioning of a society. They include:
   • Roads, bridges, and highways
   • Water treatment and distribution systems
   • Sewage collection and treatment facilities
   • Public transit infrastructure
   • Ports, airports, and related facilities
   • Electrical and energy infrastructure
2. Facilities: These are buildings and structures used for public purposes, such as:
   • Government office buildings
   • Libraries
   • Schools
   • Hospitals and health clinics
   • Parks and recreational facilities
3. Equipment and Machinery: These can range from large machinery used for public works tasks to vehicles owned by the government for public service.
4. Land: Areas owned by the government where public works facilities are constructed or land that’s kept for future public use.

Housing: In the realm of housing, particularly when discussing public or government-sponsored housing, assets include:

1. Residential Buildings: These encompass individual homes, multi-family housing units, apartment complexes, and special housing facilities, such as those for the elderly or disabled.
2. Land: Plots designated for current or future residential use.
3. Internal Fixtures and Installations: These refer to integral parts of a housing unit like plumbing systems, electrical systems, installed appliances, and heating or cooling systems.
4. Shared Amenities: In multi-family or community housing scenarios, shared facilities like community centers, playgrounds, parking areas, or recreational facilities can also be considered assets.
5. Intangible Assets: These might include legal rights, such as development rights or zoning permissions, which can enhance the value or utility of a housing asset.

Asset Management

Asset management is a systematic process of developing, operating, maintaining, upgrading, and disposing of assets in the most cost-effective manner, typically with a focus on long-term performance and value generation. The concept is widely used across various sectors, from infrastructure and public works to finance and information technology. Here’s a comprehensive breakdown of the concept:

1. Holistic Approach: Asset management is not just about maintaining or fixing assets when they break. It’s a holistic approach that considers the entire lifecycle of an asset: from its acquisition or creation, through its operational use, to its eventual disposal or replacement.
2. Value Generation: The primary goal is to ensure that assets consistently offer value to the organization. This doesn’t necessarily mean maximizing profits; in the context of public assets, for example, “value” might refer to the long-term benefits an asset provides to a community.
3. Risk Management: Identifying, assessing, and managing risks associated with the use and ownership of an asset is a core component. This ensures the continuity of services and minimizes costs due to unforeseen failures or required interventions.
4. Optimized Decision-making: With comprehensive data collection and analysis, asset management allows organizations to make informed decisions about when to repair, replace, upgrade, or retire assets.
5. Lifecycle Costing: Instead of just considering the initial acquisition cost, asset management emphasizes the total cost of owning and operating an asset over its entire life. This might include maintenance costs, operational expenses, potential revenues, and the costs of disposal or replacement.
6. Sustainability: Modern asset management approaches incorporate sustainability considerations. This could mean ensuring assets are environmentally friendly, but it can also involve social and economic sustainability considerations.
7. Continuous Improvement: Asset management isn’t a “set it and forget it” process. It requires regular reviews, updates, and adjustments to adapt to changing circumstances, technologies, and organizational goals.
8. Stakeholder Involvement: Engaging with stakeholders, from end-users to maintenance teams to decision-makers, ensures that the asset management strategy aligns with the broader needs and objectives of the organization or community.
9. Long-term Perspective: While there may be short-term costs or challenges associated with particular decisions (like upgrading an asset or implementing new technologies), asset management takes a long-term perspective, focusing on the prolonged benefits and total lifecycle costs.
10. Technological Integration: Many modern asset management strategies incorporate technology, using tools like GIS (Geographic Information Systems), CMMS (Computerized Maintenance Management Systems), or IoT (Internet of Things) sensors to track asset conditions, predict failures, and optimize operations.

In summary, asset management is a strategic and systematic approach to maximizing the value that assets provide over their entire lifecycle. Whether it’s a piece of machinery in a factory, a public park in a city, or a financial portfolio in an investment bank, the fundamental principles of asset management can be applied to ensure optimal performance, cost-effectiveness, and long-term value delivery.

Appreciating Asset VS Depreciating Asset

Appreciating and depreciating assets are terms that describe how the value of an asset changes over time. Here’s a detailed breakdown of the differences between them:

Appreciating Asset: An appreciating asset is one that increases in value over time.

Depreciating Asset: A depreciating asset is one that decreases in value over time. This loss in value is often due to wear and tear, obsolescence, or other factors.

While both appreciating and depreciating assets can play a role in a person’s financial or business strategy, it’s essential to understand their respective behaviors to make informed decisions. Generally, building wealth involves investing in appreciating assets while managing and limiting exposure to depreciating ones. However, practical needs, like having a vehicle for transportation, often require acquiring assets that will depreciate over time.

Works Cited:

Hayes, A. (2022, May 17). Appreciation vs depreciation: Examples and faqs. Investopedia. https://www.investopedia.com/terms/a/appreciation.asp#:~:text=Appreciation%20is%20an%20increase%20in,an%20asset%20grows%20in%20value.

What is asset management?. IAM. (2015). https://theiam.org/what-is-asset-management