Government Immovable Asset Management Bill: Public hearings

Meeting report

PUBLIC WORKS PORTFOLIO COMMITTEE

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.