TOWARDS IMPLEMENTING PROPERTY ASSET MANAGEMENT: ASSESSING CURRENT GOVERNMENT PRACTICES IN PROPERTY MANAGEMENT

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1 TOWARDS IMPLEMENTING PROPERTY ASSET MANAGEMENT: ASSESSING CURRENT GOVERNMENT PRACTICES IN PROPERTY MANAGEMENT Shardy Abdullah 1, Arman Abdul Razak 2, Mohd Hanizun Hanafi 3 and Abdul Hamid Kadir Pakir School of Housing Building and Planning Universiti Sains Malaysia, USM Pulau Pinang, Malaysia 1 [email protected] ; 2 [email protected]; 3 [email protected]; 4 [email protected] ABSTRACT The property asset management approach embodies a comprehensive and systematic outlook in enhancing the functions and value of property by embodying both a strategic component as well as an operational element. The Malaysian government, in realizing the beneficial impacts of this approach, has begun to try to instil property asset management in managing its properties. However, as the adoption of this approach is still very much at an infancy stage, the current practices of the government and its agencies are seen to be rather disjointed and incomprehensive. In most cases, the focus seems to be merely on property management elements, concentrating on operational maintenance activities rather than involving a strategic approach towards managing these properties. This study was therefore carried out with the aim to assess as well as analyze the current practices of the government, in gauging how far the property asset management approach has been adopted and to identify the gaps between the current management approach and a truly comprehensive property asset management. All 26 ministries within the Malaysian government were selected as the survey respondents and the subsequent data was then analysed. Study findings indicate that current government property management practices are simply limited to fulfil necessary scheduled maintenance activities while there is a clear lack of a strategic component towards adopting property asset management. Steps to minimize this apparent gap were then recommended with the hopes of enabling a more holistic approach towards managing government property assets. Keywords: Property asset management, property management, public property, Malaysian government 1. INTRODUCTION The government has always been seen as a major stakeholder of properties and facilities, either by virtue of being the owner of the properties in question or by being the major beneficiary of the functions these properties contribute towards (Nutt and McLennan, 2000). As a rational contention, the government should take the lead in spearheading a major property asset management transformation, from being just a requisite arm of its services into a well defined and effective division of the government (Mahadi, 1998). The reality however is that this effort has often led to problems of efficacy, due to inadequate information for informed decision making (Singh, 1996). It is this and other shortcomings that must be addressed if property asset management is to be fully utilized to its utmost and effective best (Singh, 1996). It is only logical to suggest that if a huge amount of finances are invested in establishing these services, it is only practical that the management of these property assets be imbued with similar financial allocations as well as a systematic implementation in terms of enhancing their capacity to function. This disparity may be due to the objectives and inner workings of the government itself. The private sector views the ownership and management of property assets as a mode of investment and as such, it is a top priority for them to manage these property assets through systematic and proven approaches (Zailan, 2001). On the other hand, governments often regard their property assets as a means towards reaching their social obligations and therefore, efforts are channelled towards maintaining the provision of services [1]

2 rather than overall well-being of the physical facilities (Avis, 1990). As long as the property assets seem to function within the accepted boundaries of providing their respective services, a proper and comprehensive system towards managing these assets is often overlooked, if not neglected (Jolicoeur and Barret, 2004). However, in recent times, the Malaysian government has been trying to substantially improve and enhance the administration and management of these property assets. Purpose-specific departments and units have been established within the government ministries and agencies to oversee and undertake property management implementation. The Malaysian government has also introduced and gazetted statutory laws and acts which regulate the management of their property assets. It is then pertinent to assess whether these steps and approaches undertaken by the Malaysian government are in line with the efforts to adopt a comprehensive property asset management. This study therefore aims the aim to assess as well as analyze the current practices of the government, in gauging how far the property asset management approach has been adopted and to identify the gaps between the current management approach and a truly comprehensive property asset management. This objective is critical because according to Mason (2004), one of the main barriers in establishing a good property asset management practice is the weakness within the property management practice itself, as there usually is a lack of clarity on the responsibilities for day to day property management between the corporate centre and the service areas, as well as the need to allow time for new management arrangements to be fully integrated within the organization. 2. THE NOTION OF PROPERTY ASSET MANAGEMENT A rather definitive description of the property asset management concept was put forth by Bulita (1994), who surmises that: Asset management, a term that came into vogue in the mid-to-late 1960s, is defined as the process of maximising value to a property or portfolio of properties from acquisition to disposition within the objectives defined by the owner. This concept uses strategic planning, which includes investment analysis and operation and marketing analysis, as well as the positioning of a property in the marketplace in accordance with market trends and conditions. As property asset management entails all the four stages of a property life cycle, involving planning, procuring/establishing, operational/utilizing and disposal, the roots of property assets management lies in the realm of strategic resource management. Within this field of management, property asset management has been placed under the approach of strategic asset management, where property asset management involves two interacting components, namely the strategic component and the operational element (University of Leeds, 2006). The strategic component focuses on medium to long term property objectives in meeting customer needs while the second operational component emphasizes the ongoing management of the property within the short to medium time frame. A true and efficacious property asset management system should encompass all relevant and critical stages of the property life cycle without the inclination to over-emphasize the operational maintenance phase alone. By having this two pronged approach, property asset management ensures that a property is managed from the initial onset of planning and follows through until the said property is disposed in a strategic manner. In executing a comprehensive property asset management approach, the smaller component of property management is still evident as this approach follows the property life cycle as mentioned earlier. Thorncorf (1965) and Stapleton (1986) define property management as a series of activities that provide direction and enable supervision in the quest to meet certain preordained interests through procedures that involve forecasting, planning, commanding, co-ordinating and controlling. Singh (1994, 1996) explains further that the property management activity is centred on controlling property interests by taking into consideration the short and long term objectives set by the property owner as well as the specific purpose for which the property is procured. Wong (1999) adds to this where he explains that the process of property management involves the activities of managing and maintaining facilities at a level that will enhance the value of the properties. These [2]

3 definitions of the property management clearly exhibit that the main concern is the achievement of property objectives through various, interconnected and synergetic activities in line with the functional capabilities, physical well-being and value enhancement of the properties. It should be reiterated that property management is implemented at the technical and operational levels while property asset management exists within the strategic level. Modern reactive management perspective advocates that stakeholders concern themselves with a more complex and wider range of functions and activities which include the adaptation of appropriate strategic approaches in managing properties more efficiently. Managing property assets should never be seen as an afterthought of the development process, but rather a systematic approach towards a definite objective. Property asset management should be made a valid managing norm rather than merely a means to create job openings (Usilappan, 2005). Property asset management needs to be addressed as an integral part of commerce as it is driven by business and service needs (Naidu et al., 2006). With proper and systematic asset management procedures, existing buildings can be made to improve in terms of performance and function as well as enhance their market value (Zailan, 2004). In his report to the United Kingdom Chancellor of the Exchequer entitled, Towards Better Management of Public Sector Assets, Lyons (2004) clearly indicates that there is an inevitable shift from the traditional model of government service delivery to a new more innovative approach in ensuring the masses are accorded with the necessary and required services. This shift has also opened up a critical need for new ways and approaches to be adopted within the management of property assets in ensuring effective and timely service delivery. Property asset management models currently in practice within the governments of the United States, the United Kingdom and Australia are embodiments of the recognition of this dire need to shift traditional practices to a more holistic approach which comprises of strategic objectives and service delivery as their main drivers (University of Leeds, 2006). Efforts to incorporate effective and systematic property asset management, especially in the public sector, have gained momentum over this past decade. Industry professionals have long been pressing for the need to manage public property assets more effectively (Marbeck, 1988; Singh 1994, 1996). As this concept is driven by the objectives and vision of property owners, misdirection within the initial strategic plans of the said owners could lead to improper managing of their properties. Different objectives and interests of property owners will undoubtedly bring about assorted approaches in implementing property asset management systems. This lack of a clear and distinct approach towards managing properties is often more evidently present within the public sector. With the concern of the government leaning towards obligatory service provision, there is no serious intention to recapture capital investment or to realize the opportunity cost of the properties (Gibson, 1994). Governments mainly view their property assets as a means towards performing social and regulatory responsibilities rather than acknowledging the inherent value of the properties themselves. As a result, there is seemingly no effort to optimize the usage of these properties, either spatially or economically, other than establishing a tried and tested approach in enabling the provision of services through daily operations. This manner of practice has caused government budgetary planning to shift towards operational maintenance costs from the more important overall strategic property planning and management (Hong, 2008). While developed nations such as the United States, the United Kingdom and Australia have already taken proactive measures to revamp their public sector property asset management as a means to address these prevalent problems (DeCarlo, 1997), Malaysia has begun to implement a systematic and comprehensive approach in managing its public sector properties since The government is now trying to create a successful and efficient generic asset management model and at the same time, a more specific and strategic model for property asset management. The need for a systematic and functional property asset [3]

4 management approach has been a long time coming, as the recent cases of mismanagement and poorly maintained Malaysian government property assets have come to light (Abdul Samad, 2007). Public resources spent on rectifying problems after they have set in is always frowned upon, since it is the general consensus that these problems could have been avoided or mitigated to a certain degree before they manifested into a tedious exercise in physical refurbishment (Ishak, 2007). Sensing this vital need, the Malaysian government has established standardized and comprehensive asset management manual and procedures. These efforts were initiated with the launch of the National Asset Management Policy in March, The launch of this policy also introduced a more systematic property asset management manual, aptly titled, The Comprehensive Asset Management Manual. The ultimate aim of this policy as well as the accompanying manual is to provide a uniform standard for all government agencies in managing their respective property assets. In 2012, the government subsequently published The Fixed Assets Management Procedure to compliment the earlier released manual. With the launch of these policies, manual and procedures, the government is clearly serious in wanting to bring effective change to the way its properties are being administered and managed at present. as the basis for the responses in a 5-range scale as depicted below: 1 for non applicable 2 for totally disagree 3 for moderately disagree 4 for agree 5 for totally agree 26 ministries within the Malaysian government were selected and furnished with the questionnaires. At the end of the stipulated response return timeframe, 12 respondents out of the total 26 duly returned their completed questionnaires. Their responses were then analyzed using descriptive statistical analysis to garner findings. 4. FINDINGS AND DISCUSSION The analysis output is as shown in the following Table 1. Both the percentage for the frequency of positive responses (a combination of the answer scales of 4 and 5) as well as the mean score for each statement will be used as the basis for elaboration on the findings. For the context of this study, a percentage of 51% or higher will denote a positive response while a mean score of 3.5 and above will illustrate tendencies towards property management practices. 3. STUDY METHODOLOGY AND APPROACH This study is basically intended to identify and gauge the manner in which government property assets are currently being managed in Malaysia. To obtain the necessary information, a structured questionnaire form was used as the data gathering tool. Five key themes of property management practices were used as the underlying basis for contention based on the framework espoused by the Aberdeen Group (2007). These five themes are process, organization, knowledge, technology and performance. These five themes were then expounded to 25 statements, with five for each respective main theme. The Likert Scale was used [4]

5 Table 1: Analysis output on current government property management practices PERCENTAGE OF NO PROPERTY MANAGEMENT FRAMEWORK CRITERIA POSITIVE RESPONSES MEAN SCORE PROCESS 1. Agencies involved throughout property life cycle 33% Activities are more towards managing rather than maintaining 17% 2.8 properties 3. Availability of standardized processes and policies 8% Agencies have little need to revamp current practices according to 50% 3.3 current needs 5. Activities are more proactive than reactive in nature 33% 3.2 ORGANIZATION 6. Existence of specific department/unit to manage properties 92% Adequate trained and skilled personnel 42% Sufficient financial resources for managing properties 25% Financial allocation used more for property management than 17% 3.2 general and scheduled property upkeep 10. Strong support in place from central government body 100% 4.4 KNOWLEDGE 11. Adequate exposure to Facilities Management concept 42% Availability of training for relevant personnel 58% Availability of routine courses for top management in aspects of 25% 3.4 Facilities Management 14. Agencies do not need own initiative to expand knowledge 25% Key personnel have a Facilities Management background 25% 2.8 TECHNOLOGY 16. Adequate required tools/equipment for management activities 67% Availability of effective information management systems 42% Extensive use of Information Technology in property management 42% 2.5 activities 19. Availability of technological transfer from outside the government 17% Tools/equipment procurement is proactive rather than reactive 50% 3.5 PERFORMANCE 21. Agencies thoroughly satisfied with property management activities 42% Users and tenants satisfied with management activities 33% Low occurrence of repetitive repair and remedial works 8% Property management performance is effectively and objectively 33% 2.8 monitored or measured 25. Unsatisfactory performance in property management is very likely to affect overall agency standing/performance 17% 2.8 Based on Table 1, in the Process theme, it can be evidently seen that a vast majority of the ministries here in Malaysia are not involved in the entire life cycle of the property. Only one third of the respondents, representing 33% attest to the fact that their involvement in the property they currently manage is from the acquisition stage until the said properties are disposed. This indicates that these ministries are involved in property management practices and not property asset management. This is due to the fact that property management only occurs during the operational and utilization phase of the property life cycle. Besides this, 50% of the respondents agree that there very little need for them to revise and modify their current management practices over time. This indicates that these ministries have yet to grasp and comprehend the concept of property asset management. [5]

6 In the aspect of Organization, the responses analyzed returned a mixed result. There are some cases where the respondents feel that the organizational structure set in place is conducive towards property management practices. These areas are the establishment of a purpose specific department within their agencies as well as the supports accorded to them by the central government body. This scenario may be perceived to be an advantage in preparing the ministries to implement property asset management in the near future. The need for a specific unit or department is a vital element in executing property asset management as these units will be able to monitor, undertake and implement all the necessary components within property asset management in a focused manner. However, the capacity of these specific departments or units need to be further enhanced in order for them to fully meet the strategic demands and needs in managing properties. A lacking aspect here is the adequacy of financial resources to enable these ministries to successfully undertake their property management activities. An overwhelming 83% of the respondents admit to utilizing a large portion of their available funds and allocation towards general property upkeep and not for overall property management. This issue needs to be addressed as according to Mason (2004), lack of funding is one of the key barriers that hampers the existence of a good property asset management practice. Under the Knowledge framework, most respondents (58%) agree that there are readily available courses for their relevant personnel in the aspect of property and facilities management. However, only 42% of the respondents seem to possess adequate exposure to property management concept. This shows there is a clear need for an increase related courses or training to enable these personnel to enhance their knowledge in property management and as a further step, to increase their knowledge in property asset management as property management is only a subset to property asset management. Another drawback in this area is the lack of training and courses for the top tier level of management. Top management personnel should be readily armed with property asset management knowledge as one of the key requisite of this practice is the strategic involvement of the top management. The aspect of Technology seems to be the area that returned the most favourable responses. Two indicators, namely, sufficient tools/equipment as well as the manner in which these tools/equipment are procured record positive responses. This shows that there is readily available hardware for these ministries to execute their management activities. However, the use of Information Technology is seemingly found wanting. More than half of the respondents (58%) feel that the use of appropriate software in their activities still needs room for expansion and improvement. Even with the hardware in place, without the presence of supporting and necessary software, these ministries will surely be hard pressed to successfully implement a comprehensive property management approach within their midst. The lack of technological transfer from outside the government also recorded a very poor positive response with only a handful of the respondents (17% and a mean score of 2.5) attesting to this fact. What this represents is that most government agencies do not have the chance or perhaps the inclination to share experiences or knowledge with private property management entities. In the final aspect of Performance, only a little less than half of the respondents (42%) are satisfied with the activities undertaken to manage the properties. This dissatisfaction is compounded by the fact that 67% of these ministries have users or tenants that are not fully satiated with the property management services accorded to them. This is an amalgamation of all the preceding aspects as most of these ministries do not truly practice a comprehensive property management approach. A high number of recurring repairs as noted by a majority of these ministries (92%) is representative of the fact that the current practices are not yielding the desired results or outcome. Another contributory element is the fact that the performance in terms property management activities does not necessarily impinge on their overall performance as only 17% of the respondents agree there is a direct connection between both achieved performances. In addition, with only one third of the respondents (33%) [6]

7 agreeing that their property management activities are objectively measured and gauged, it seems clear that the focus of most agencies is towards their core responsibilities and duties but not towards results of property management activities. 5. CONCLUSION The overall findings of the study illustrates that in Malaysia, the current property management approach adopted by the government ministries has several shortcomings or weaknesses. These setbacks clearly need to be mitigated or overcome in order to establish an effective property management practice as the foundation for the implementation of property asset management within the government sector. Corrective and remedial steps that could be immediately adopted include but are not limited to the following: Strategic property planning incorporated into the inception stage of physical property development; Ensuring key personnel have the required and relevant academic or professional training in the aspects of property asset management; Comprehension of Corporate Property Management concepts and principles by the top management of government ministries and agencies; Objectively measuring performance in terms of property management activities and incorporating the performance as one of the Key Performance Indicators for government bodies. These recommendations will only be effective if there is strong desire on the part of the government to shift its traditional maintenance outlook towards a more comprehensive property asset management approach. This study hopes that by assessing the current state of property management practices by the government, an avenue for change and transformation will take place. Future and extensive research is certainly needed to supplement the government s efforts, with the ultimate aim to make public property asset management become to key mechanism in transforming the public service sector. ACKNOWLEDGEMENT The authors would like to express their thanks and gratitude to Universiti Sains Malaysia (USM) as this study was funded under the USM Research University Grant, entitled An Investigation on Government Asset Management Procedures in Peninsular Malaysia (Account no.: 1001/PPBGN/816022). REFERENCES Abdul Samad, S. (2007) Critical Issues in Managing Government s Assets and Facilities in Malaysia, NAFAM Convention 2007, Kuala Lumpur on 13 August Aberdeen Group (2007) Real Estate and Facilities Lifecycle Management: (retrieved on November 1 st, 2009). Avis, M. (1990) Managing Operational Property Assets. Economic Review, Vol. 8, No. 5 pp Bulita, H. (1994) Fundamentals of Real Property Administration, Maryland, BOMI Inc. DeCarlo, Joseph W. (1997) Property Management. Prentice-Hall, New Jersey. Gibson, V. (1994). Strategic Property Management: How Can Local Authorities Develop a Property Management Strategy? Property Management. Vol. 12, No.3: Hong, M. L. (2008). Addressing Critical Issues in Managing Government Assets and Facilities. Universiti Sains Malaysia. Unpublished Bachelor Dissertation. Ishak, S. (2007) Utilization of Technology in Managing The Government s Assets and Facilities, NAFAM Convention 2007, Kuala Lumpur on 13 August Jolicoeur, Pierre W. and Barret, James T. (2004) Coming of Age: Strategic Asset Management in the Municipal Sector. Journal of Facilities Management, Vol. 3 No. 1 pp Lyons, M. (2004) Towards Better Management of Public Sector Assets, HM Treasury, London. Mahadi, S. (1998) Keynote Address at the CPD Program on Limited Property Management: Is There a Need? Petaling Jaya on 21 November 1998, The Surveyors 4 th Quarterly 1998 p.2. Marbeck (1988) Management of Public Building: The Need to Privatize. Seminar Property [7]

8 Management: Scope, Problems and Future Challenge, Kuala Lumpur. Mason, N. (2004) Beacon Council Scheme 2004 Round 6 Theme: Asset Management, York Consulting Ltd., Leeds, UK. Naidu, K.K., Heywood, C. and Reed, R. (2006) The Development of Corporate Real Estate Practices in India: A Survey of CRE Professional, International Real Estate Review, Vol. 9 No. 1 pp Nutt, B. and McLennan, P. (2000) Facility Management: Risks and Opportunities, Blackwell Science, London. Singh, G. (1994) Re-engineering Property Management: Sustaining Asset Value Through Effective Property Management, Conference of Property Maintenance and Management in the 90s, May 1994, Kuala Lumpur, Malaysia Singh, G. (1996) Property Management in Malaysia, Federal Publications, Malaysia. Stapleton, T. (1986) Estate Management Practice. London : The Estate Gazette Ltd. Thorncroft, M. (1965) Principles of estate management, The College of Estate Management, London Usilappan, U. (2005) Management of Public Sector Assets, Valuation and Property Services Department, Ministry of Finance, Malaysia. Unpublished paper University of Leeds (2006). Improving Property Asset Management in the Central Civil Government Estate. Version 8.0. United Kingdom: University of Leeds. Wong, K.S. (1999) Property Management in Private Practice, Kursus Pengurusan Hartanah dan Fasiliti September 1999, INSPEN, Malaysia. Unpublished lecture notes. Zailan Mohd Isa (2001) The Management of Public Property in Malaysia. International Conference FIG Working Week Mei Seoul, Korea. Zailan Mohd. Isa (2004) The Development of Performance Measurement Framework in the Management of Public Office Building in Malaysia, Kolej Universiti Tun Hussein Onn, Malaysia. Unpublished doctoral thesis. [8]