Private and Public organizations seeking to maximize efficiency develop practices to get their best bang for their bucks. Organizations at all levels acquire assets to compete within their industry. Although the title of this article, Typical Contract Property Lifecycle, highlights “contract property,” the lessons apply to organizations at all levels.
Contract Property provided to organizations, also known as assets, are comprised of tools, equipment, materials, repairable units, and real estate property assets provided to organization for the purpose of executing the contract’s terms. Meaning, the ‘stuff’ given to an organization to perform the contracted work.
These assets often undergo a similar lifecycle, regardless of their ultimate purpose. A summarized contract property lifecycle is listed below:
- Planning
- Acquisition
- Utilization
- Excess Screening
- Disposition
Each stage of the contract property lifecycle includes various key components, outlined below ⬇️
Planning
The planning stage of the contract property lifecycle includes the processes, procedures, and aspects of identifying:
- who are the stakeholders
- what are the requirements identified by the customer
- when do decisions and actions need to occur
- where is the work being performed and deliered
- how is the contract going to be successfully executed (resources required and cost)
The planning stage is critical because, among other considerations, it helps an organization understand the requirements, goals, expectations and title to any assets needed to perform contract terms.
Similarly, small businesses plan when performing estimates, evaluating custom orders, and enter into new partnerships and agreements.
Acquisition and Procurement
The aspect of Acquisition includes the organization’s process to procure goods and services in support of the contract’s deliverable. In this stage organizations perform market research, conduct cost analyses, and execute the procurement of materials, equipment, tooling, and real property necessary to execute the contract.
Throughout the acquisition and procurement phase asset management professionals identify whether specific assets are already in inventory, or need to be procured. If procurement is necessary, appropriate levels of authorization are documented to ensure the correct quantity is procured and billed accordingly.
Utilization (and more)
The aspect of Utilization is a wide umbrella; at this stage, assets are being used for their intended purpose. By the time assets are issued for consumption or use, industry leading organizations receive the assets, record the receipt, perform receiving inspections, mark and identify the assets, process into short or long term storage – when applicable, and issue the assets for use.
When evaluating whether an asset is being adequately used, organizations review whether the asset is being used for its intended purpose, on the project, task, and/or contract for which it was acquired.
Failure to perform these self assessments or internal audits may lead to premature deterioration of the assets, losses (lost, damaged, destroyed, theft ), and an inability to allocate maintenance and repair costs to the correct contract or project.
Excess Screening
Screening assets is a continual aspect of the contract’s lifecycle. From the moment an asset is received, a plan should be set to ensure an asset isn’t unnecessarily kept in-house organizations often assume a cost to store, move, and inventory assets in their possession.
As an example, a pressurized container may be necessary for the customer to deliver an asset, but the out-going unit may not require a pressurized container. If that’s the case, there may not be a need to retain a bulky storage/shipping container at the end of the contract’s lifecycle. In this example, the container may be suitable for return or disposition in accordance with contractual requirements.
Industry leading organizations include a continual screening process to timely identify assets no longer needed and reduce their warehousing footprint.
Disposition
The last aspect of my truncated contract property’s lifecycle is the disposition of an asset. This aspect includes the element of returning the asset when it no longer serves its intended purpose.
Often after excess screening is performed, an asset may be deemed as unnecessary and can be discarded. Leading organizations review ways to maximize its use, through re-utilizing the asset in a different program (use for research and development, donating to a non-profit entity, repurposing to meet another need), returning to the customer, or recycling the asset for its material value and offsetting the organization’s cost.
Before taking any actions, the organization and customer must establish – as part of the planning phase – the title to said ‘excess’ assets. Failure to do so may cause a litany of financial and legal woes, especially if special handling instructions or destruction requirement exists to prevent other’s from misusing the asset.
Resources
Interested in learning more about asset management and a contract’s lifecycle?
Consider joining your local National Property Management Association chapter (full disclosure – I’m part of the Nutmeg Chapter), a non-profit membership association for professionals who are responsible for the effective and efficient management of equipment, materials, and other moveable and durable assets for their organization not for profit organization.
Learn about this, and more, by watching the numerous free pre-recorded webinars available at the NPMA YouTube Channel.
Do you have any additional comments, thoughts or recommendations?
Comment below and share your best practices to help fellow asset managers, logisticians, small business owners and industry professionals efficiently manage the assets in their possession 👇🏾