Government Immovable Asset Management Bill: Public hearings
PUBLIC
WORKS PORTFOLIO COMMITTEE
6 March 2007
GOVERNMENT IMMOVABLE ASSET MANAGEMENT BILL: PUBLIC HEARINGS
Chairperson: Mr F Bhengu (ANC)
Documents handed out:
Government
Immovable Asset Management Bill [B1-2006]
Written Submissions to
the Portfolio Committee by Keith A Ross, Lamacs Asset Management
Doyle/Rivett-Carnac
Partnership
The Council for the
Built Environment (CBE) submission
Development Bank of
Southern Africa
The Construction
Education and Training Authority (CETA) and Built Care Immovable Asset and
Maintenance Management Consultation on GIAMB
Built Care
Immovable Asset and Maintenance Management Consultation submission
Built Care
Immovable Asset and Maintenance Management Consultation: PowerPoint
Presentation
SUMMARY
The Doyle/Rivett-Carnac Partnership and Built Care Immovable Asset and
Maintenance Management Consulting made submissions on the Government Immovable
Asset Management Bill. They raised issues such as that the failure of
government departments to establish and execute maintenance plans resulted in
the deterioration of many public assets; the absence of facility management
regulations; capacity problems across state departments; international best
practice for condition assessment cycles and standardisation of assessment
rating systems.
Members asked questions regarding terminology; how departments could avoid exploitation by
consultants; job creation and how spending on
maintenance would impact on government’s poverty reduction programme.
MINUTES
Introductory Comments by the Chairperson
The Chairperson thanked the interested parties for responding to
Parliament’s invitation to make submissions. He emphasised that their
participation was essential because it enhanced democracy. The Chairperson
stated that the Committee had initially rejected the Bill and that it was only
now moving towards approval after constructive engagement with the Department
of Public Works (DPW). He recognised that there were many challenges when
dealing with state assets and hoped that the Bill would become an Act by the
end of the month.
Doyle/Rivett-Carnac Partnership Presentation
Mr Michael Doyle,
Quantity Surveyor and Professional Valuer, highlighted that the
Doyle/Rivett-Carnac Partnership wished to impart its considerable experience
and knowledge in valuing public assets. They had handled numerous complex
valuations of public assets such as Cape Town International Airport, Goodwood
and Pollsmoor Prisons and several military bases. He was shocked and appalled
at the poor state of many of these public assets.
According to Mr Doyle, the Bill lacked a definition for best use of property.
Very often particular departments used an immovable asset because of historical
reasons and ignored practical and logical considerations. There should be a
rethink on whether the user department should have control of that asset. To
illustrate this point, he revealed that there was a tremendous amount of
under-utilised land in the greater Cape Town metropolitan area. The situation
at Wingfield Air Force base was described as the failure to use valuable land
optimally.
Their investigations unveiled that building managers did not have maintenance
plans. Departments completed repairs on an ad hoc basis and did not have
long-term maintenance strategies. This resulted in the quick deterioration of
many public assets.
Prof Keith Cattell, UCT Associate Professor: Construction Economics and
Management, remarked that from the early stages of the Bill, he could not
reconcile with the terminology- ‘immovable asset’. The term asset management
referred to a portfolio that comprised of movable and immovable assets. He was
concerned that a facility was being defined as an immovable asset. The plan was
to regulate facility management but this did not appear in the Bill. He was
equally appalled by the condition of some of the government buildings.
Regarding the custodianship idea introduced in the Bill, Prof Cattell did not
believe that the devolution of responsibility was a positive step. There would
be greater risks because of the lack of capacity at most user departments.
Facility management and quantity surveying expertise should be embedded in the
departments. Due to the absence of that expertise, consultancies and other
external experts would exploit departments. The approach in clause 12 (1)(a) of
the Bill should be reversed. Departments should finalise their immovable asset
management plan before finalising the budget with Treasury.
Discussion
Mr N Gogotya (ANC) noted that the professor was uncomfortable with the
terminology. He accused the professor of being preoccupied with semantics.
Prof Cattell answered that there was international literature on property
management and facility management. He advised that common language be used to
describe what is essentially facility management.
Ms C Ramotsamai (ANC) praised the presenters for their input. She concurred
that there was a backlog in maintenance at several government departments.
According to her the Bill sought to achieve the retention of state assets in
the hands of the state for the benefit of future generations. She wondered if
Prof Cattell had any suggestions on how departments could avoid exploitation by
consultancies.
Prof Cattell acknowledged that the question of state ownership was an
interesting and philosophical debate. He would suggest renting (as opposed to
ownership) if it were cheaper for the user department. Until departments
acquired the necessary internal capacity, they would not know whether the
advice they received from a consultancy was in their interest or not.
Mr L Maduma (ANC) enquired whether the state should demolish those buildings
that were grossly derelict.
Prof Cattell replied that unless it was structurally unsound, repair should be
the first option.
The Chairperson asked the DPW to respond to the concerns raised.
Response by DPW
Ms Lydia Bici, Deputy Director-General: National Public Works Programme, DPW,
stated that the speakers had correctly identified under-utilisation as a
problem. This Bill sought to address that specific challenge. Concerning the
terminology, DPW intended for it to be all embracing and include facility
management. She contradicted the professor’s assertion that it would be a risk
for user departments to control their own assets because of lack of capacity.
The Bill required that user departments establish asset management plans. She
was confident that capacity would be developed over time. Lastly, DPW and
Treasury had developed the Infrastructure Management Framework to deal with the
issue of maintenance.
The Chairperson was pleased with the level of engagement. He informed the
presenters that there was still time to submit further written submissions to
the Portfolio Committee because the Committee still needed to go through the
Bill clause-by-clause with DPW.
Built Care Immovable Asset and Maintenance
Management Consultation Presentation
Dr Johann McDuling,
Director at Built Care, welcomed the Bill and commended DPW on its quality.
Built Care specialised in the research, development and implementation of
immovable asset maintenance and management technology. Its many years of active
involvement in the public sector put it in a unique position to provide
valuable input and insight into this Bill.
He referred the Committee to Clause 13 (d)(iii) which stipulated that the
condition of immovable assets should be assessed every 5 years. Dr McDuling
recommended that this assessment cycle be reduced to three years. Australia set
the benchmark for international best practice of government asset management.
In Queensland, Australia, all government-building assets were assessed every 3
years. Australia was also the only country that had a complete electronic asset
register. His investigations had revealed that the KwaZulu-Natal provincial
Health Department was the only government department that carried out condition
assessment in the country. They started this process in 1997 and it is done on
a bi-annual basis. The Bill was out of sync with other government initiatives
like the Medium Term Expenditure Framework (MTEF) and Public Finance Management
Act (PFMA) that had 3-year cycles. Continuing the argument in support of 3-year
condition assessments, he reasoned that the service life of some of the
components of a building asset could be less than 5 years, and that if an
assessment was done every 5 years it could result in the condition of some
components only being assessed when it has already deteriorated beyond repair.
The Rehabilitation and Management Programme (RAMP) of DPW was credited as an
essential tool that prevented some of government’s building assets from sliding
into further deterioration. The potential for sustainable job creation in the
maintenance industry was also outlined.
Dr McDuling called for the standardisation of assessment rating systems to
ensure consistency between departments and provinces. His submission proposed
the replacement of the term “maintenance” with “preservation” because the term
“maintenance” was used to describe what were essentially repairs,
rehabilitation and replacements.
The budget allocations for maintenance were considered grossly insufficient.
This aided the perpetual backlog that all departments found themselves in.
Preventative maintenance was the cheapest and best form of maintenance.
Various schematic presentations concerning a proposed condition rating system,
a typical condition profile and other related issues were tabled.
Discussion
Ms Ramotsamai applauded the presentation. She found it very
educational. She queried what lessons could be learnt and replicated from the
KZN Health Department’s experience. She also sought an opinion about
government’s priority to reduce poverty and how this impacted on its ability to
maintain its public assets.
Dr McDuling responded that because the KZN Health Department was armed with the
necessary information, it could spend its money more responsibly and make a
difference. Furthermore, he argued that if government provided appropriate
funding, the less expensive it would be to maintain these assets and more money
would be available for job creation and poverty reduction. For instance, in the
UK, at least 50% of construction workers were employed in the maintenance
industry.
Barry Jackson, Political Analyst, Development Bank of Southern Africa (DBSA),
believed that the Treasury should provide once-off funding to restore all
national assets. He enquired whether there was any scope for stretching the
3-year condition assessment cycle for a different class of asset and facility.
Dr McDuling acknowledged that all assets and facilities have a different life
cycle. However, there would be time and cost constraints if you had different
cycles for different components of assets and facilities. The 3-year cycle was
the most ideal.
The Chairperson thanked the presenters for their submissions. He resolved that
their concerns would be pursued and debated further. He encouraged them to
continue engaging the Committee.
The meeting was adjourned.