||Crackerjack Team Devises Standards for Property and Asset Management
in Record Time
by Clare Coppa
Describing property management is a tricky business. Often misconstrued as real-estate
specific, property management actually locates, values, and tallies
an organizations assets. This elaborate accounting includes a
complicated array of cost and use considerations from a variety
of perspectives. Property managers might oversee the vast entirety
of equipment owned by a state government, or that of a small hospital.
An arm of resource management, property management reports the
total capital assets of an organization as required by law. The
SEC and IRS direct that capital assets are reported and maintained
in private organizations. Government property assets are reported
by similar rules contained in the Federal Property and Administrative
Services Act. Accoutrements are subject to valuation and other
Every entity (industrial, educational, or governmental) that
owns something must account for and report that its assets are
being managed efficiently and effectively, wrote Staff Manager
Pat Picariello in his April SN report on the response of ASTM Committee E53 on Property Management to the property industrys need for standardization.
Conflicting jargon and methods of recording within the profession
can be problematic when describing equipage of Grand-Canyonesque
proportions in diverse industries. Although federal standards
exist, standards for reporting private-sector property were not
available before ASTM released three standards this year.
The process began when a search for a system to develop standards
for non-government property led NPMA member John OShaughnessy,
manager, Property Administration, ITT Aerospace/Communications,
Ft. Wayne, Ind., to ASTM. In January 00, members of the NPMA
(a group of nearly 2500 property managers) approached ASTM to
establish a system to communicate a consensus opinion of our professional
community that would prescribe the best criteria and practices for property
management, wrote NPMA Executive Vice President Stephen Michelsen
from his office.
We envisioned that the benefits to property practitioners and
our employers would be the interchangeability of systems within
an organization and consistency of practices between companies,
public instrumentalities, nonprofit organizations and countries,
continued Michelsen, the director, Office of Resource Management, the U.S.
Department of Energy. In addition, property professionals and
organizations would gain a degree of operational security by being
able to demonstrate that performance, in accordance with ASTM
standards that were developed in cooperation with NPMA, would
be recognized as acceptable and valued performance.
With the spirit of a World Cup soccer team, members of ASTM Committee
E53 on Property Management swiftly developed three pivotal standards
in less than a year. The standards were drafted in February 00
and approved by the Society in January 01. The first standard
establishes uniform terminology. The others (numbers 2 and 3 below)
are referenced in the latest version of the U.S. Department of
Energy Balance Score Card, a performance measurement system.
1. Terminology for Property Managers
Offering solid nomenclature for property managers, E 2135, Standard Terminology for Property and Asset Management, is now
available. Its wordsmithing was decided through voluntary consensus
by property managers working in ASTM Subcommittee E53.02 on Data
Management under the aegis of Chairman James Dieter.
Dieter, a corporate asset and government property manager with
Honeywell Technology Solutions Inc., Md., described the group.
The task group reflected the broadening scope of the NPMA and
the profession in general. A strong core of folks in the aerospace
and defense industry, broad representation from civilian agency
government contracting endeavors, and federal property managersareas
that had in the past constituted the known portion of the professionwere
greatly enhanced by participation from representatives of colleges
and universities, state and local governments, and commercial
In his article in Standardization News, November, 00, OShaughnessy, now the
E53 membership secretary and chairman of two E53 subcommittees,
cited a verbiage dilemma. Even the terms property administration
or property management are not standardized, he said. The
terms property control, property management, property administration,
asset management, and fixed asset accounting are all widely used.
The terminology standard captures our current consensus of the
meaning of these key terms, added Dieter. Time will tell if
tracking changes to the agreed-upon meanings will shed light on
the profession or its practitioners.
Semantics is critical to property management, he continued. People
new to the professional association dont know the jargon. Depending
on the culture theyre coming from, often people use different
words to say the same thing. There isnt one word that describes
this profession unambiguously.
We manage assets that organizations use to accomplish their goals,
he explained. We manage a companys equipment. Depending on whether
it is a manufacturing or service industry, those items can be
very different, as in a hospital, university, or state government.
For example, one of the efforts I worked on was on a large NASA
contract at Goddard Space Flight Center here in Maryland. We had
about a half a billion dollars worth of property that we managed
for the government that constituted their entire ground network.
So when you were seeing the Mars Rover, the signals it sent were
relayed through the deep space network, which is a bunch of satellite
dishes out in the desert in California. And all those were the
property that was accountable to our companyall the wires and
the communications devices that take that data, process it, and
conversely send the signals to the Rover and tell it what to do.
Thats just one example.
The terminology standard will be a building block for all ensuing
standards development in this area, Dieter concluded, thus it
will potentially impact all processes for which standards are
developed. For further technical information, contact Jim Dieter, Reston, Va. (phone: 410/964-7788).
2. Assessing Loss, Damage, or Destruction of Property
In recent years, many organizations have received criticism for
the consequences of poor property management, said Stephen
Michelsen. Despite the fact that the objectives, measures and
outcomes of good property management are rarely nor consistently
defined, when they do exist, millions of dollars are directed
to fixing the problem. The net outcome is that the discipline
of property management is anything but disciplinedit has become
increasingly chaotic, wasteful and illogical. The focus of the
profession has moved to absolute control and operational compliance
as opposed to a risk-based allocation of our limited operational
assets to ensure that those durable and moveable assets which
are critical to successful operations are available where, when,
and in the condition they are needed.
A key indicator of the effectiveness of a property management
system is the amount of loss, damage and destruction (LDD) that
occurs. i.e., the better the property control system, the lower
the amount of LDD. LDD is also a key datum of risk management,
notes Lyle Hestermann, property manager, Capital Resources, Raytheon,
Ft. Wayne, Ind., which manufactures communications equipment.
Now, as a result of ASTM/NPMA cooperation, we have the first
standards that will gauge the effectiveness of policy and procedure
implementation. Because LDD is a critical indicator of the overall
health and effectiveness of a property management system, it was
critical that an LDD standard be among the first. We now have
a gauge, a ruler, a measure by which any property system can be
Responding with immediacy, members of the ASTM Subcommittee E53.04
on Re-Utilization and Disposal, chaired by Hestermann, devised
E 2131, Standard Practice for Assessing Loss, Damage, or Destruction
(LDD) of Property. The scope of E 2131 covers the assessment
of LDD of property, assets, or material. LDD occurs when such
property is found to be missing, damaged, or destroyed.
What will be improved when the standard is applied? Cost-effective
property management is the first and most important improvement,
Hestermann said. Accurate measurement of property management,
to include such cross-functional concerns like security, financial,
metrology and accountability considerations will aid industry
and governments alike to avoid costs during the acquisition process,
to reduce costs for the life cycle management of property, and
to increase the return on surplus assets.
Greatly improved, cross-functional communication between areas
such as management, quality, compliance and property management
is another important result. Instead of highly-subjective criteria
concerning what is and is not an acceptable amount of LDD, we
now have objective, consensus-based and published standards; we
have a common language with which to communicate.
For further technical information, contact Lyle V. Hestermann, Property Manager, Capital Resources, Raytheon, Ft. Wayne, Ind.
3. Inventory of Durable, Moveable Property
E 2132, Standard Practice for Physical Inventory of Durable Moveable
Property was developed by Subcommittee E53.01 on Process Management,
led by Curtis Johnson, manager, Strategic Projects for the CFO,
Sandia National Labs, Albuquerque, N.M.
Johnson supports the Sandia National Labs CFO in managing the
finance, procurement, contracts, and logistics functions for Sandia
Labs. He is an advisor to executive management council responsible
for all Sandia support functions (human resources, facilities,
security, etc.), and previously ran the personal property management
program at Sandia.
Why a standard? Physical inventory is a very expensive process
rather disconnected from the business objectives it seeks to support,
he explained. While inventory management of supplies, work-in-progress
and finished goods (all the stuff that goes into the end products
of a manufacturing organization) is a well-defined and well-understood
business process, the management of the equipment (MRO) used to
produce products is not. The government sector spends a lot of
effort and money tracking and inventorying equipment. The whole
purpose of this ought to be to ensure that the right equipment
is in the right place at the right time, ready for use. In other
words, equipment is an investment an organization makes in order
to produce products and services, and property management is performed
in order to ensure that the equipment is there and ready to do
just that. This turns out to be a risk management function.
Unfortunately, without commercial standards or even generally
accepted commercial practices, property management has evolved
more in response to political pressures than to the business needs
of the organization, Johnson averred. Perhaps the two best examples
of this are the core decisions of what property to control (control
thresholds) and how well (measured by physical inventory results,
i.e., find rates). Common practice has not evolved from the needs
of the business, but from the need to demonstrate good stewardship
of public dollars and to defend against accusations of mismanagement.
The result has generally been that the government controls far
more stuff and tracks it far more thoroughly than any private
sector entity would.
Standards have given us an opportunity to step back from our
current world and ask not what the federal rules for federal entities
are today, but rather what one ought to do in the area of property
management to support the needs of the organization. These first
few standards have been a good step in that direction. They then
become a foundation for us to use to go back and look at federal
regulation and oversight and see what makes sense going forward.
A concrete example is inventory results. Today, it is not uncommon
for government organizations to expect 99.5% find rates (i.e.,
finding 199 out of 200 items). The new standard says 98% is a
more sensible, cost-effective target to shoot for.
An organization that applies the methodology in the standard
will design and execute a physical inventory process that better
supports getting good product out the door, he continued. By
using the standard, an organization will choose to track the moveable
property that is most needed for business success. It will design
an inventory that will yield, at a minimum of effort and expense,
the information needed to determine if moveable property is adequately
controlled to meet business needs. This process allows organizations
to get the most out of their limited (and generally shrinking)
property management dollarsto mitigate the most risk for the
fewest dollars by focusing energy on the right set of property
and not attempting to control that property with rigor any higher
than what the needs of the business call for.
We worked very hard to ensure that the standards we wrote could
be applied to any industry, he concluded. In particular, we
were trying to avoid letting the current public-sector bias of
the profession cause us to write a standard that is only applicable
to government settings.
For further technical information, contact Curtis Johnson, Manager, Strategic Projects for the CFO, Sandia National Labs,
Albuquerque, N.M. (phone: 505/844-8683). Committee E53 next meets
June 27-29 in Houston, Texas. For further details, contact Pat Picariello, ASTM (phone: 610/832-9720). //
Copyright 2001, ASTM