Overview of the Local Road Asset

Management, its Processes and

Valuation
Opening Activities

Invocation
Unfreezing Activity
Expectations
Course Objectives and Outline
 Kumusta Ka? Halina’t Magsaya!
Pumalakpak pumalakpak
Ituro ang paa
Padyak sa kanan, Padyak sa kaliwa
Umikot ka, umikot ka
Humanap ng iba.
 Expectations

• We expect that this workshop will help us..

• At the end of the workshop we will be able to..
• A successful workshop will only happen if…
Why Are We Here?
 Workshop objectives
1st Day
At the end of the Workshop, the participants will be able to….

• Enhance understanding of Road Asset Management, its importance

and legal basis
• Gain knowledge on the Asset Road Management Framework and its
processes
• Acquire understanding of the Asset Road Management Plan
• Identify lessons and other insights on current asset management
practices
 Workshop objectives
2nd day
At the end of the Workshop, the participants will be able to….
• Understand asset reporting and valuation and its importance
• Strengthen knowledge on COA circular No. 2016-008 – Accounting
and Reporting Guidelines on the Local Road Asset Management
System
• Improve skills on accounting and preparing reports for local road
asset management system
• Come up with next steps for the implementation of asset
management for respective PLGUs
 Outline

• Introduction to Road Asset

Management
• Concepts and Principles
• Road Asset Management
Framework
• Road Asset Management Plan
• Introduction on Road Asset
Valuation
Thoughts,
Ideas,
Perspectives,

Stories
Road Asset
Management:
An Introduction
• The concepts presented may not
work for every local government
units.
• Sharing of successful ideas and
practices
• Different LGU needs, starting
point and approaches
• Explore what is appropriate
• Be comfortable with the strategies
 Click icon to add picture

• Asset Management is
not a New Practice;

It has changed over

time focusing on
building or creating
assets to asset renewal
or replacement.
 Reasons for (Road) Asset Management?

1. To fulfil or comply with policy,

legislative, regulatory, audit and
reporting requirements.
2. To ensure assets are managed in the
most cost effective and acceptable way
possible.
 Optimize the economic benefits
 Determine the optimal funding levels
to minimize these costs
Overview
The Big Picture
 Click icon to add picture

Where are you in the AM Journey?

What elements in the picture can you relate
or seem familiar?
Points to Ponder in the AM Journey
1. What is the end goal? What benefits do we want to see
2. Where is the organization now? It is understanding where we are now? Where
do you we want to be? And How much investment is required for us to get
there?
3. What decisions are needed to get there? Balancing trade-offs for optimization.
Balancing risk-cost and performance vs tactical, operational and strategy.
4. Which assets need to be included? Classification and nature of assets.
5. What timeframes need to be considered? Decisions should be whole of life-
cycles (cradle to grave).
6. Who will help the organization reach its goal? Insourcing or Outsourcing
History of Asset Management
• Before 1950 - Infrastructure focused • 1990’s
for military ands strategic purposes; Road Funds
Bridge Management
• 1950 -1960 - Infrastructure focused Agency Reform
on national development
• 2000
• 1970 - Equipment Management and Integrated Asset Management Systems
Maintenance Management Governance
Performance Based Contracting
• 1980’s - Pavement Management and
Private Contractors
 Legal Basis
Republic Act (RA) No. 7160 or the Local Government
Code (LGC) of 1991 mandates the Local Government
Units (LGUs) to provide basic services and facilities,
including infrastructure facilities such as roads and
bridges.
Section 17(f) of the LGC, however, provides that the
National Government (NG) may augment the basic
services and facilities assigned to an LGU when these are
inadequate to meet the requirements of its inhabitants.
JMC 2017-02 (DILG and DPWH)
• Guidelines for the Implementation of the Conditional
Matching Grant To Provinces for Road Repair,
Rehabilitation and Improvement (CMGP) for FY 2017
and thereafter
Legal Basis
• COA Circular 2015-008.
After completing the DBM pilot of directly downloading
Php6.5B to PLGUs under KALSADA in 2016, all NIPLRM
annual investments and national funding entitlements
from 2019 onwards are to be calculated using road-
asset depreciation as the major determinant of capital
funding allocations in accordance with the new COA
Circular entitled Accounting and Reporting
Guidelines on the Local Roads Asset
ManagementSystem

• DPWH Department Order 176 – 2015

Guidelines and Procedures in the Recognition and De-
recognition of Infrastructure Assets
Legal Basis
• COA Circular 2014-008
Conversion of the Philippine chart of
accounts under the new Government
Accounting System per COA 2004-
008
• Special Local Road Fund under RA
8794 (MVUC Law)
Guidelines on the Implementation of
Projects under the Special Local Road
Fund- Motor Vehicle User’s Charge
Law
Asset

An item, thing or entity that has potential or

actual value to an organization
• The value will vary depending on the
viewpoint. Value can be
 Tangible or intangible
 Financial or non-financial
• An asset has a life
 From it’s creation to it’s disposal
 Individual assets are often grouped and managed
collectively
 The Three Conditions of an Asset

The physical condition of an asset – is the state of that

physical infrastructure that allows it to meet the intended
service level based on is original functional and demand
criteria.
The functional condition of an asset - is the state of the
design of the physical infrastructure to meet the intended
service level as compared to current functional design
criteria.
The demand condition of an asset - is the ability for the
capacity of the physical infrastructure to meet the service
level required.
 Management

• The process of dealing with or controlling

things or people.
• Includes the activities of setting the strategy of
an organization and coordinating the efforts of
its employees (or of volunteers) to accomplish
its objectives through the application of
available resources, such as financial, natural,
technological, and human resources.
• “Getting things done through other people.”
Asset Management in General

Asset Management is a process that

optimizes the utilization of
properties with material value to
justify asset management costs, and
with potential, or being utilized, for
profit, extensively used in delivery of
mandated and/ or social, cultural
services, and idle or not being
utilized.

Source: Local Asset Management in the Philippines Final Report. ADB Study 2008
Asset Management in General
Is more than fixing or repairing. It is a “Coordinated
activity of an organization to realize value from
assets.” ISO 55001

Key infrastructure Asset Management concepts

• Sustainable – less impact and cost for current and
future generation
• Consider full lifecycle
• Optimize level of service, risk and cost
• Continual improvement
Asset Management in General
Maintaining a desired level of service (what you
want your assets to provide) at lowest life cycle
cost (best appropriate cost- not no cost).

However, the main purpose is customer service and

not management of assets.

We manage assets in order to provide SERVICE!

Heather Himmelberger, P.E. Director,  New Mexico Infrastructure

Finance Conference
Defining Road Asset Management
• “Transportation Asset Management is a strategic and systematic process of operating,
maintaining, upgrading and expanding physical assets effectively throughout their
lifecycle. It focuses on business and engineering practices for resource allocation and
utilization, with the objective of better decision making based upon quality information
and well defined objectives.” AASHTO, 2011
• "A systematic process of effectively maintaining, upgrading and operating assets,
combining engineering principles with sound business practice and economic rationale,
and providing the tools to facilitate a more organised and flexible approach to making
decisions necessary to achieve the public's expectations.“ OECD 21 and World Road
Association
• “A strategic approach that identifies the optimal allocation of resources for the
management, operation, preservation and enhancement of the highway infrastructure
to meet the needs of current and future customers” City Road Asset Management Plan
Defining Road Asset Management
• “A strategic approach to meeting the strategic need for the
management and maintenance of highway infrastructure assets
through a long term planning and optimal allocation of resources
in order to manage risk and meet the performance
requirements of the organization in the most efficient and
sustainable manner”. PAS 55, UK
Context of Whole Life Cycle
Optimize asset performance by ensuring safety and reducing
cost through addressing the risk to ensue that these assets are
maintained in good condition for a longer period of time.

• Whole of Life - The whole-life/life-cycle of an asset is considered

• Optimization - Maximizing benefits by balancing competing
demands
• Resource Allocation - Allocation of resources based on assessed
needs
• Customer Focus - Explicit consideration of customer expectations
Asset Management = Infrastructure and
Capital?

• Asset Management = Infrastructure Management

• Infrastructure Management = Capital Management

Language of the Accountant and General Services Officer

Language of the Engineer
Language of the Budget Officer

Information technology is now breaking down such differences in vocabulary by different

positions
Speaking the Same Language
 We recognize that a road system may

a. Collapse during Disasters

b. Fail due to Weak management
c. Fail due to Poor road design and construction
d. Break to due extreme weather condition
e. Not be in fashion or becomes obsolete
 A (Systematic) Road Asset Management may
be an answer…

Predict, Preserve, Prevent and Manage

It is sustainable by Nature
• Asset Management by
nature is sustainable
• It takes a life cycle
approach
It is Founded on thorough Understanding of Assets
It is supported by well-structured decision-
making processes
•
It provides a Framework

• What do we have?
• What condition is it in?
• What is it worth?
• What do we want it to do?
• What do we need to do to it?
• When do we need to do it?
• How much will it cost?
Why Implement Road Asset Management?

Road infrastructure is so critical to the functioning of modern societies, and

constitute the largest asset of any country. Every peso spent on the physical
infrastructure in excess, is one less peso available to be spent on social services.

In order to increase revenue generation and improve financial

performance

To enhance LGU management processes

To rationalize operating costs; and

To attain efficient utilization of assets

Why Implement Road Asset Management?

Preservation of Existing Road Network

Ensure the Best Value for Money

Connecting lagging and inaccessible areas

in the Provinces

Address climate resiliency concerns,

preserve scarce natural resources
Why Implement Road Asset Management?
A systematic way for defining needs

+ A convincing basis for requesting resources

+ A rational way to allocate resources
+ A consistent way to measure performance
________________________________________________________
= A business-like management approach and a way to
improve credibility
What are the Benefits of RAM

• Reduced life-cycle costs Better financial

management
• Defined levels of service
• The ability to track performance
• Improved transparency in decision making Better
• The ability to predict the consequences of communication
funding decisions and future funding needs
• Demonstrable asset custodianship, and
Fewer surprises
• Decreased financial, operational and legal risk
going forward
Challenges of Local Road Asset Management
Workforce Challenges

Worst first

Inadequate capital funding and cost recovery

 QUALITY OF ROADS
The Global Competitiveness Report

“2010-2011” “2011-2012”

Based on 139 Countries Based on 142 Countries

“2016-2017” “2017-2018”

Based on 138 Countries Based on 137 Countries

Source: World Economic Forum, “The Global Competitiveness Report”

43 Legend: 1 = extremely underdeveloped; 7 = extensive and efficient by international standards
 BLGF Study Summary and Conclusion

1. The local governments’ revenues are not enough to

finance the full delivery of mandated services;
2. The Plant, Property and Equipment assets comprise
more than fifty percent (50%) of total assets of local
governments and is greater than their revenues and
expenditures;
3. First class provinces and cities own about 75% of all
Plant, Property and Equipment assets of their
respective levels while and first and second classes
of municipalities possessed more than fifty (50%)
of municipal total assets;
2
 BLGF Study Summary and Conclusion

1. Philippine law provides for asset

management requirements;
2. Empowerment to the sanggunians to
provide a mechanism and the appropriate
funds to ensure the safety and protection
of all local government property, public
documents or records;
3. The Commission on Audit’s (COA) chart of
accounts is compatible with asset
management;
2
 BLGF Study Summary and Conclusion

7. Not one local government implements asset management

and most (a few does) do not practice asset management
activities, as follows:
a. On asset categorization to measure service
performance.
b. On database system.
c. On appraisal.
d. On Financial Accounting, Reporting & Analysis
e. On Rental Practices and Subsidies.
f. On Asset Management Consolidation.
g. On Asset Management Planning.
h. On Other Asset Management Practices.
2
 BLGF Study Summary and Conclusion

On asset categorization to measure service performance:

Most of the LGUs surveyed (63%) do not classify PPE assets in four
functional categories
On database system
• Fully 2/3 of the LGUs surveyed face the problem of physical inventory
and accounting records being not in balance;
• Vast majority (89%) of all LGUs surveyed do not record separately
operating costs for each department/assets;
• 82% of all LGUs surveyed do not regularly record separately
maintenance costs;
• 61% of LGUs surveyed reflected that they did not record downtime of
each machinery and transportation equipment separately;
• About 1/3 of all LGUs surveyed own properties that are not registered in
its name; 2
 BLGF Study Summary and Conclusion

On appraisal:
64% of all LGUs surveyed do not conduct periodic appraisal
on real estate properties;

On Financial Accounting, Reporting & Analysis:

• Almost half of the LGUs surveyed do not analyze financial
performance of their public enterprises;
• More than 2/3 of all LGUs surveyed do not analyze
effectiveness of operating costs;
• About 2/3 of all LGUs surveyed do not analyze effectiveness
of maintenance costs;

2
 BLGF Study Summary and Conclusion

On Rental Practices and Subsidies: 100% of LGUs surveyed do

not compute and record subsidies.
On Asset Management Consolidation: Majority (60%) of LGUs
surveyed expressed they do not have consolidated management
structure for PPE;
On Asset Management Planning: Large majority (81%) of all
LGUs surveyed do not prepare comprehensive asset management
plans;
On Other Asset Management Practices:
- 2/3 of all LGUs surveyed had not entered into any form of public
private partnership;
- 61% of LGUs surveyed do not evaluate best use of assets.
2
BLGF Study Summary and Conclusion
• These findings were well supported by 2015
COA Annual Financial Reports which showed
that 630 LGUs’ financial statements were
doubtful due to the failure of the LGUs to
conduct physical count and absence of records
such as property cards and ledger cards for PPE.
Consequently, COA cannot verify their actual
existence, reliability and accuracy
 Asset Management Elements

• Taking a LIFE-CYCLE APPROACH

• Determining CRITICALITY
• Developing COST-EFFECTIVE MANAGEMENT STRATEGIES for
the long-term;
• Providing a defined LEVEL OF SERVICE and monitoring
performance;
• CONTINUOUS IMPROVEMENT in asset management practice
• SUSTAINABLE USE of physical resources;
• Managing RISKS associated with asset failures;
Road Asset Management Context
• Managing services
Is more than
managing the • Managing denials
assets, its all
about managing • Managing changes in
the Service! Behaviro
 Road Asset Management
It starts by defining the level of service and maintaining it.

One Size doesn’t fil all – tis all about affordability and risk
 Asset Management Principle 1
Its all about the VALUE of SERVICE….
• Infrastructure assets only exist to provide
a service to the public based on their
desire and at an acceptable level of risk.
• Focuses on the objectives and the
client/stakeholder needs
 Asset Management Principle 2
Its all about QUALITY/QUALITY
ASSURANCE. Monitoring and
Conformity
Once the Local Government has decided
to offer the service – define its quality
and assure the quality.
Asset Management Principle 3
Its all about OPERATIONS AND
MAINTENANCE….

With the level of service comes

operations and maintenance
requirements over the life-cycle of
the asset
 Asset Management Principle 4
ALIGNMENT - All Infrastructure Activities are
inter-dependent, integration and line of sight

Aligned and integrated within the

organizational culture:
- Communicate change
- Gain commitment
- Develop policies and procedures
- Assign roles and responsibilities
- Monitor progress
Asset Management Principle 5
Leadership – IF YOU DO NOTHING
• Life cycle cost inflation
commitment and • Unanticipated infrastructure failures
vision • Poor resource allocation decision making
• Community and Political loss of confidence
• Legislated changes
Goals of Road Asset Management
1. Build, preserve, and operate facilities cost effectively with
improved asset performance;
2. Deliver the best value or service for taxes spent; and
3. Enhance the credibility and accountability of the
transportation agencies and departments to its governing
executive and legislative bodies.
4. Meet a required level of service in the most cost-effective way
through the creation, acquisition, maintenance, operation,
rehabilitation, and disposal of assets for present and future
customers.
RAM is based on the condition of the following:

• Strategic approach over the long term;

• Meeting stakeholders’ needs;
• Systematic approach;
• Optimal allocation of resources;
• Managing expenditure over the asset lifecycle;
• Meeting performance requirements in the most efficient way;
• Managing risk; and
• Operational delivery.
Benefits
• The specific benefits of asset management are stepping-stones to the
realization of better VALUE
What can be included in a road asset management system?

A road agency or organization is responsible for the

management of its own unique set of assets.

• Physical infrastructure, such as pavements and bridges.

• Human resources (personnel and knowledge).
• Equipment and materials.
• Other items of value such as rights-of-way, data, computer
systems, methods, technologies, and partners.

Asset Management for the Road Sector, OECD 2001

Components
• Components or Pillars of road assets
Goals that are inter-connected/integrated
despite differing level of maturity
and implementation on road asset
management.
Performa
Budget a. Policies and Plans on RAM
nce b. Allocated fund for RA
c. Inventory and Valuation of RA
Asset d. Performance Models and Program
for RA
Solutions to Asset Management
Funding – How to fund
Road Management
Systems and
Systematic Data Collection –
Degree of Collection and Detail
Governance - Road Watch, Community Reporting
and Addressing Fraud and Corruption

Cartel overcharges for road or

construction contracts
Road Agency Reform

Privatizatio
Public Corporate
n
Improving Institutional Performance
• Job Creation – Labor Intensive,
Equipment Intensive or Combination
• Decreasing government risks
• Improving performance
 Formula for Success

• Link asset management to vision and mission of

the organization
• Promote a sustained political commitment
• Acquire, train, and retain highly skilled
personnel
• Transform collected data into useful
information
• Facilitate information sharing
• Focus on the customer
Formula for Success
• Predictive life cycle risk assessment
• Corrective Actions
• Integrate risk mitigation action in
project planning
• Risk informed decision system
• Control and quantify costs and benefits
• Organize your team
 Quotes:

“ Successful Implementation of
Road/Transportation Asset
Management is fundamentally
about GOOD MANAGEMENT,
EFFECTIVE LEADERSHIP, and
achieving the RIGHT
ORGANIZATIONAL CULTURE”.

“ RAM does not happen overnight,

and requires consistent direction,
focus and attention overtime”.

AASHTO, 2011
References
• Abrice, David, Ten Images for Asset Management Sense-Making, October 6, 2015;
• Department of Transport and Main Roads, Asset Management, State of
Queensland, June 3, 2013
• Inter-County/City Municipal Associations, Real Property Asset Management,
SURGE-USAID-Philippines, September, 2017
• Worldbank, Transport Note 24, Porter, Tony, Delivering Good Asset Management in
the Road Sector Through Performance Based Contracting, March 2014
• BLGF Study Report
• Road Asset Management Systems In Developing Countries: Case Study Uzbekistan
(online)
Sharing Of PLGU Experiences on Asset
Management
 Workshop Mechanics

• Participants to group according to Province

• In the workshop group, the participants will discuss the following
guide questions:
1. What are your local road assets? Describe the status and
condition of your local road assets?
2. What are the challenges (issues, gaps and concerns) that your
province are facing in relation to road asset management?
3. What is the formula for a successful asset management in the
Local Government Units.
• Presentation - Gallery