Public capital asset management:A holistic perspective
| Date | 01 April 2017 |
| DOI | https://doi.org/10.1108/JOPP-17-04-2017-B002 |
| Published date | 01 April 2017 |
| Pages | 483-524 |
| Author | Yaotai Lu |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 17, ISSUE 4, 483-524 WINTER 2017
PUBLIC CAPITAL ASSET MANAGEMENT:
A HOLISTIC PERSPECTIVE
Yaotai Lu*
ABSTRACT. U.S. state governments own a large array of fixed assets and
lease a great number of parcels of private real properties for public uses.
The purpose of this paper is to explore the public asset management system
of the U.S. state governments. First, this paper analyzes the major, current
public asset management systems and the public procurement systems
created by the Organization for Economic Co-operation and Development
and t he U.S. Go vernment Accountability Office. Based on the analysis, this
paper constructs a comprehensive public asset management s ystem that
consists of six cornerstones. Second, this paper verifies the comprehensive
public asset management system using the data collected from thirty-seven
surveyed s tate governments. The data analysis demonstrates that the
comprehensive public asset management system is supported. However,
each cornerstone of the comprehensive public asset management system
presents different strengths. Third, this paper suggests that further research
may delve into particular areas of capital asset management at the state
government level to id entify critical issues and to provide appropriate
resolutions.
INTRODUCTION
In the United States, each state government owns, uses, and
controls large quantities of capital assets. According to Governmental
Accounting Standards Board (GASB) Statement 34, all tangible and
intangible assets that are used in government operation with initial
useful lives over a single reporting period are considered capital
assets (GASB, 1999). Although each state defines capital assets by
setting different capitalization thresholds, major capital assets in
-------------------
* Yaotai Lu, Ph.D., is an Associate Professor, Coll ege of Political Science
and Public Administration, Qingdao University in China. His research
interests include public finance, public asset m anagement, and public
procurement.
Copyright © 2017 by PrAcademics Press
484 LU
each state include motor vehicle fleets, buildings, improvements
other than buildings, construction in progress, lands, equipment, and
infrastructure. Capital assets have vital functions because they
maintain state government operations and provide public services.
State office buildings are venues where hundreds and thousands of
state employees provide services and the public accepts services.
Other buildings, improvements, and facilities directly or indirectly
provide utility of service delivery and goods production. Equipment,
machinery, vehicle fleets, and software are tools that during their
useful life help employees provide service. Infrastructure assets, such
as transportation and communication systems, drainage systems,
water supply and sewer systems, dams, road networks, and lighting
systems, combine multidisciplinary strategies to provide sustainable
public services for significantly longer years than do other capital
assets.
Sadly, capital asset management in the last three decades has
witnessed, issues - such as loss, waste, misuse, obsolescence, failure,
break, collapse that keep occurring within all categories of capital
assets. Serious accidents that occurred with building, improvements,
construction in progress, and infrastructure assets have caused
damage, injuries, and loss of human lives. From 1980 to 2012, fifty-
eight bridges of all types collapsed throughout the United States
because of construction problems, striking of external forces,
substructure failure, overload, material fatigue, fire caused by traffic
crashes, river scour, inadequate maintenance, improper repair
operation, and natural disasters, among other reasons (Barbaccia,
2012). From January 2005 through June 2013, failures of 173 dams
occurred due to overtopping, foundation defects, slope instability,
structural failure of the materials used for dam construction,
inadequate maintenance, piping, and other causes (Association of
State Dam Safety Officials, 2016). Since 1980, about 50 building and
facility failures and collapses have occurred in the United States
because of construction problems, operation defects, corrosion,
material fatigue, and natural causes such as earthquake and snow
load on roof (Lememmurier, 2016). The occurrence of these disasters
and failures demonstrates that an appropriate management system
is needed for public capital assets to provide desirable performance.
These facts of catastrophic failures and accidents prove that
defects and problems exist in the practice of public asset
PUBLIC CAPITAL ASSET MANAGEMENT: A HOLISTIC PERSPECTIVE 485
management. Appropriate management systems ensure that capital
assets are inventoried according to accounting standards and
function well at lower cost, that they contribute to efficient and
effective provision of goods and service, and that they are maintained
regularly to avoid safety issues and failures. This paper undertakes a
comprehensive review of public asset management systems of U.S.
state governments. It identifies the importance, objectives and goals
of public assets. It then thoroughly analyzes the major systems and
frameworks of current public asset management and public
procurement management. The purpose of this analysis is to identify
the common factors or cornerstones in these systems and establish a
new comprehensive public capital asset management system. The
paper tests the new public asset management system by analyzing
data collected from major public asset management departments of
U.S. state governments and presents a number of suggestions about
further research that may help improve fixed asset management and
attain its goals and objectives.
PUBLIC ASSET MANAGEMENT AND ITS OBJECTIVES AND GOALS
Public asset management is the process of making and
implementing decisions regarding the acquisition, utilization, and
disposal of capital assets that a government owns, uses, and controls
(Kaganova, McKellar, & Peterson, 2006). This definition identifies the
major activities of public asset management. Acquisition includes
purchase, construction, leasing, and inventorying. In the cases of
large-scale equipment, buildings and infrastructure assets,
acquisition is a complicated process that involves planning,
solicitation and selection of sources, award of contracts, and contract
administration (Thai, 2007). Utilization includes not only regular
maintenance, inspection, and repair, but also valuation, portfolio
review, financial auditing, and asset reporting (Fernholz & Fernholz,
2007). Asset disposal is a process in which an asset is sold,
redistributed, donated, discarded, or demolished. Th is process
involves estimate of the gain or loss from the disposal, recording of
the actual gain and loss, or recording of the new asset cost for the
accounting purpose if there is a trade-in. Figure 1 shows the process
of public asset management. For the purpose of this paper, public
assets management refers to public capital asset management
because capital asset management focuses on maximizing value to a
property or portfolio of properties (Builta, 1994) while management of
To continue reading
Request your trial