FEATURE — VENUE ASSET TRENDS
significant cost overruns. This is often an issue of poor
project management, not an inherent issue for the PPP
contractual arrangement. These do not generally
impact on the ultimate owner; however they do have
an impact on the initial management. From the asset
handover/transfer perspective, the key issue to arise in
all contracts involve the following:
◆ Is the quality of the asset’s base components
capable of meeting the levels of service specified for
the design life of the assets? i.e. is the componentSkilled Park, Gold Coast Australia: as a sustainable venue,
quality as expected?according to building researchers Richard Reed & Sara
Wilkinson, it is at less risk of obsolescence, will hold its value ◆ What will the assets be like at transfer and what are
better and deliver higher productivity, less absenteeism and
the liabilities, if any, that are likely to be transferredlower rates of staff turnover.
to the ultimate owner?
◆ Was the original design optimal in terms of lifecycleof venues to ensure they are superbly presented, and
costing? Some maintenance and renewal issuesthat all reasonable measures have been taken to ensure
may only become evident after the concessionaryevents are assured of business continuity.
period depending on the design.Forbes Magazine reported that almost 15% of total
revenue generated by the ‘Ten Most Lucrative Sports One of the impacts of this is that the initial manage-
Arenas in America’ is derived from Naming Rights and ment will have significant cash flow issues and will try
General Sponsorship. Naming Rights are now in place to reduce operational expenditure to improve their sit-
at more than 70% of the venues that are used by the uation. The biggest target for these cuts will often be
teams from the five major US Sports Leagues. the planned and predictive maintenance programs.
There are a range of trends related to venue asset With young asset components this does not have an
management that can be best explained through the immediate effect, however if the problem exists for
prism of the various categories of risk. some time, the ultimate life expectancy of these com-
ponents will be reduced, requiring significant capital
Financial Risk expenditure being brought forward. In some cases, the
The increasing use of Public Private Partnerships (PPP’s) utilisation of the assets will also be less than predicted.
for sports venue projects, such as the Singapore Sports This scenario further impacts on the organisation’s
Hub, have reinforced the importance of lifecycle cost- cash flow, which will in turn result in greater pressure
ing in establishing the most appropriate asset being applied to both maintenance and major repairs
management approach, including maintenance, and optimal rehabilitation opportunities. Less use (utili-
rehabilitation and replacement schedules for sation) does warrant less maintenance for many assets
individual venue components and venues and will extend the life of many. This may be reflected
overall. The PPP method of procurement, in the reduction of the sinking fund payments that
like similar methods, is designed to deliver should be required. In some cases this may require
the services required at the lowest cost, compensation by the ultimate owner but irrespective
including funding and project delivery of this it will cause stresses on the operational activi-
costs, in most cases over a term of 25 or ties. In other cases, the usage or utilisation of the asset
more years. The objective is for the facili- system or facilities will be significantly more than the
ties to be maintained in an optimal con- initial design/contract predictions.
dition for whole of life. Where the contract allows for this income to be col-
The early PPP projects are now lected by the initial management, then it is likely that
approaching end of contract, and the con- the pressures to reduce the necessary maintenance and
ditions related to the transfer of the asset capital investments will be less. However, in this com-
are coming into focus as the single most mercial world the pressures to make greater profits
critical contractual matter for the ultimate persist. The impact of higher utilisation will impact on
owner (it having not been considered particu- ‘hours of use’ maintenance practices, and have some
larly significant at the commencement of the effect on the effective lives of some assets. These
project). In most cases, these projects have been impacts need to be assessed from the ultimate owner’s
constructed on time (or close to it) but often with perspective. ➲
WINTER 2009/10 P ANS TADIA 15
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