It may not be grabbing headlines, but technological developments in asset management have the potential to transform construction and the country
It has long been held that politicians in France love their Grands Projets, whereas we Brits just don’t get it. Until now. Five years ago we of the infrastructure community were battling just to get noticed. Then not only were we noticed but the political establishment embraced the idea that infrastructure mattered. And we were happy. But last year I woke up one day to find that the chancellor in particular had gone very French and had announced a new mega-project that no-one had ever thought of before, namely HS3. Then just before Christmas the government was announcing tunnels under Stonehenge and the greatest road building programme since the Romans (or the 1960s, I forget; anyway they wanted us to know it was a lot of new tarmac).
This is great, if surprising, and I worry that the enthusiasm may not endure beyond the general election. But I would argue that there is a bigger story in the sector than our sudden love affair with building stuff. It is driven not by politicians but by technology. It doesn’t grab the headlines. It is a quiet revolution. It is the revolution in asset management.
It is our existing infrastructure that we use every day; the roads and railways we use to get around, the power and water that supports our lives and the hospitals and schools that underpin our society. Generally our existing infrastructure is robust, well-managed and resilient, but overall the UK is ranked sixth for the quality of our infrastructure among the G7, and when something goes wrong, that is when the headlines appear. It is the curse of the asset manager that people only notice what you do when it all goes pear-shaped.
Unfortunately the risk of pear-shaped events is increasing. Growing population, ageing assets, environmental factors and consumer expectations are conspiring to apply pressure to our existing assets like never before. Building new infrastructure only addresses part of the resilience challenge; we also need to manage our asset base more effectively. And there is plenty of evidence that we are starting to do so, as a result of three factors:
It is the curse of the asset manager that people only notice what you do when it all goes pear-shaped
First, a growing recognition that effective asset management is not a programme led by the engineering or maintenance teams, but a programme that should be led from the boardroom. In fact, a number of organisations recognise that their value is derived almost entirely by the assets they own and the relative priority of these activities now sits alongside the shiny new investment programme. A recent survey on behalf of the Institute of Asset Management suggested that 75% of asset management professionals thought that building a co-ordinated asset management strategy at a corporate level was one of their highest priorities.
Second, as of last year we now have an internationally recognised standard for competence in asset management, ISO 55000, which superseded the previous PAS 55. The new standard encourages businesses to strive for consistency between asset management information and financial reporting information. That may not sound radical but few businesses today could achieve it. The standard is being taken up across the globe with organisations recognising that it provides a template to align their business operations to their overall commercial strategy.
Finally, and perhaps most importantly, technology is making the asset management revolution possible. BIM holds out the promise of asset information for life. Mapping technology means increasingly we know where our assets are, both for a particular network and relative to other networks. Embedded technology in assets means a constant stream of data on asset health. Data analytics creates the capacity to take all of that data, model future scenarios, and for decisions on interventions to be based not just on judgment but on an understanding of long-run financial outcomes. For asset-intensive businesses it is the route to maximising long-term profitability. For the public sector it is the key to unlocking best value. It should mean greater transparency and accountability for both shareholders and taxpayers.
And it is happening today. The interesting story on roads is not the road building programme, but the creation of Highways England as an entity empowered to manage its assets on the basis of whole-life value and cost. HS2 is striving to understand how it might procure the new railway on a basis which minimises whole-life cost. Tier One contractors are increasingly being given the chance to take on assets over their whole life - currently difficult to price, but with the promise of a much better margin than the paltry average 1% from construction if you can harness the data to take an informed view.
I am happy for our politicians to continue to focus on mega projects. We need to invest in our country and they should be the standard-bearers for that. But the quiet asset management revolution will transform the UK at least as much.
Richard Threlfall is head of infrastructure, building and construction at KPMG