Managing a large property portfolio means making ongoing decisions about where maintenance and renewal expenditure should be directed. With limited budgets and competing demands, it's easy to focus attention on assets that are ageing, deteriorating or becoming expensive to maintain.
However, the assets in the poorest condition aren't necessarily those that pose the greatest risk.
A relatively inexpensive building component could be essential to maintaining services, while a high-value asset nearing the end of its useful life may have relatively minor consequences if it fails.
Understanding this distinction is fundamental to effective asset management.
Identifying critical assets helps organisations determine where failure would have the greatest impact and where proactive intervention is most important.
What Makes an Asset Critical?
An asset is considered critical when its failure could have significant consequences for an organisation or the people who rely on the services it provides.
The NAMS Property Manual defines critical assets as those where the consequences of failure are sufficiently severe to warrant proactive inspection and renewal. These assets generally require intervention before failure occurs, rather than relying on reactive maintenance.
Importantly, criticality is not determined by an asset's age, condition or replacement value alone.
Consider an emergency power supply serving a hospital. Even if the equipment is relatively new and performing well, its failure could disrupt essential clinical services. By comparison, deteriorating floor coverings in an administrative area may need replacement but present a much lower risk to service delivery, provided they remain safe.
The question is not simply whether an asset is likely to fail, but what would happen if it did.
Start by Understanding the Importance of Each Building
Before assessing individual building components, it's important to understand the role each property plays within the organisation.
A hospital, school or community housing property will have different operational requirements from a commercial office building. Even within the same portfolio, the importance of individual buildings may vary considerably.
For example, a passenger lift in a healthcare facility may be essential for moving patients between floors. In an office building with several lifts and accessible alternative routes, the temporary failure of one lift may cause inconvenience without significantly affecting operations.
This is where building importance becomes relevant.
The NAMS approach recognises building importance as a factor in determining component criticality. Organisations can establish a relative ranking of their properties based on the services they provide and the consequences if those services become unavailable.
This provides the context needed to assess individual components consistently across a portfolio.
Identify How an Asset Could Fail
Once building importance has been established, the next step is to consider how individual assets might fail.
Failure doesn't always mean that equipment stops working entirely. An asset may continue operating but no longer perform to the standard required.
An air-conditioning system, for example, might experience a mechanical breakdown or become incapable of maintaining the temperatures needed for its intended use.
Similarly, a roof may remain structurally sound but allow water penetration that damages equipment or makes part of a building unusable.
Understanding these potential failure modes helps asset managers identify what could go wrong and the likely consequences.
Maintenance records and previous condition assessments can provide useful evidence. Building managers and maintenance contractors may also identify recurring problems that aren't apparent from a visual inspection.
Assess the Consequences of Failure
The consequences of failure are central to determining asset criticality.
The NAMS Property Manual outlines several criteria that can be used to assess the relative importance of building components. These can be adapted to reflect the requirements of different property portfolios.
Key considerations include:
- Health and safety: Could failure create an unacceptable risk to building occupants, visitors or maintenance personnel?
- Service delivery: Would failure prevent the building from delivering an essential service or significantly disrupt normal operations?
- Financial consequences: What costs would arise from emergency repairs, operational downtime or the loss of income?
- Compliance: Could failure result in a breach of statutory requirements or expose the organisation to regulatory action?
- Appearance and amenity: Would deterioration affect the presentation or usability of a facility where these factors are particularly important?
The assessment should also consider whether the component is becoming increasingly expensive to maintain or relies on technology that is no longer supported.
Establishing a Criticality Rating
A consistent rating system allows organisations to compare assets and make informed decisions about their relative importance.
The NAMS framework uses a five-point criticality scale, where 1 represents the highest criticality and 5 the lowest.
Individual criteria can be weighted according to organisational priorities. For example, health and safety consequences may carry greater weight in healthcare facilities than appearance-related considerations.
The objective is to establish a transparent assessment process that can be applied consistently across different buildings.
Where a failure could have an unacceptable safety or compliance consequence, this should also be recognised explicitly rather than relying solely on an overall weighted score.
Consider Whether Alternative Systems Are Available
An important aspect of determining criticality is understanding what happens when an asset becomes unavailable.
Some buildings have alternative systems that allow operations to continue during an equipment failure. Others rely on a single component to provide an essential function.
For example, a failed air-conditioning unit serving a small server room might be temporarily replaced with portable cooling equipment. If this can maintain acceptable operating conditions, the immediate consequences of failure may be reduced.
However, if the same equipment serves an area where temperature control is essential and no alternative is available, the consequences could be much more significant.
This demonstrates why criticality needs to be assessed in the context of how an asset is used, rather than assigning the same rating to every component of a particular type.
Understand the Difference Between Criticality and Condition
One of the most important distinctions in asset management is the difference between an asset's criticality and its likelihood of failure.
Criticality considers the consequences if an asset fails. Condition helps inform an assessment of how likely failure may be, although maintenance history and operating performance also need to be considered.
An asset in excellent condition can still be highly critical. Equally, an asset in poor condition may have a relatively low criticality rating.
Combining these assessments provides a clearer picture of asset risk.
A highly critical component showing signs of deterioration may warrant early replacement. Another component with the same criticality rating but a low likelihood of failure may be appropriately managed through regular inspection and preventative maintenance.
This distinction is particularly important when prioritising expenditure across a portfolio where the funding available is insufficient to address every identified maintenance or renewal requirement.
Use Criticality to Inform Maintenance and Renewal Planning
Identifying critical assets should lead to changes in how those assets are managed.
Highly critical components may require closer condition monitoring or more frequent maintenance. Where the consequences of failure are unacceptable, planned replacement may be necessary before the asset reaches the end of its expected useful life.
For assets with lower criticality, it may be appropriate to extend their service life through continued maintenance, provided safety and statutory requirements are met.
Criticality ratings can also influence the timing of capital renewal projects.
By considering the consequences of failure alongside the asset's condition and expected remaining life, organisations can develop renewal programmes that direct investment towards the areas of greatest need.
Where projects are deferred due to funding constraints, this approach also helps demonstrate the risks associated with delaying expenditure.
Keep Criticality Assessments Current
Asset criticality can change over time.
A building may be repurposed, occupancy levels may increase or new services may become dependent on equipment that was previously considered non-critical.
For this reason, criticality assessments shouldn't be treated as a one-off exercise.
Ratings should be reviewed when there are significant changes to how a property is used or following events that reveal previously unidentified risks.
Maintaining criticality information within an asset register also allows it to be considered alongside condition assessments when developing future maintenance and renewal programmes.
Making Better Decisions About Your Property Assets
Identifying critical assets provides a more informed basis for deciding where maintenance resources should be directed and which renewal projects require priority.
Rather than relying solely on asset age or condition, organisations can consider the consequences of failure and make decisions that reflect the importance of the services their properties provide.
For organisations managing extensive property portfolios, this is an important step towards more effective risk-based asset management.
At SPM Assets, we help organisations use reliable property asset information to support long-term planning. Our asset lifecycle analysis enables asset managers to understand future renewal requirements and develop expenditure forecasts that take account of asset criticality.
Contact us to learn more.
Ultimately, effective asset management means knowing which assets can be allowed to deteriorate and which must be maintained before their failure becomes a problem.