Why Asset Value is Poorly Done in Asset Management Programs

JD Solomon
22 minutes ago
4 min read

Treating asset value as a last step in the process or an administrative burden will simply not get the job done. JD Solomon Inc. provides practical solutions. — Treating asset value as a last step in the process or an administrative burden will simply not get the job done.

When asset managers claim their Computerized Maintenance Management System (CMMS) or Enterprise Asset Management System (EAMS) data is 90-95% accurate, they are referring to asset attributes. In my three decades of experience, the “asset value” in the databases is usually 20-25% complete. That’s a shame because how can an organization manage “anything of value” (your assets) if you don’t understand what they are worth?

An asset is an item, thing, or entity that has potential or actual value to an organization. – ISO 55000

A Story As Old As Time

My company is usually called in to help asset management programs that are struggling or, at least, not delivering the value that senior management wants. Here is a recent version of a common story related to asset values.

“We’ve been doing formal asset management for over a decade,” explained the 40-year-old asset manager who is assigned to the engineering department. “We have patterned our program on best practices from ISO 55000.”

I asked, “Well, what are some of your accomplishments?”

“We have stood up our EAMS, built our asset hierarchies, populated most of the attributes, and started a condition assessment program,” the asset manager confidently replied. “It took some time, but we finished our asset management policy, performed a level of service assessment, and started doing risk assessments.”

“So, how is it going with assigning values to your assets?” I asked.

The blank look told me all that I already knew, “We have not gotten to that part yet. We know we need to eventually get to it, but we have had too much other stuff to focus on.”

[“Well, after a decade, how do you know the value of what you are doing?” I rhetorically asked myself.]

Why Asset Value Is Poorly Done

Large organizations manage tens of thousands of assets, each with multiple attributes. Resources and processes are rarely sufficient to maintain accuracy across this scale. Acknowledging the gap is difficult, but ignoring it undermines planning, risk management, and being able to express the value of what you are doing.

1 No One Uses It, So No One Wants to Admit It

Many asset management programs exclude asset values from their CMMS or EAMS because most systems are designed as work order engines rather than strategic investment tools. Maintenance, operations, and engineering teams typically prioritize technical attributes like horsepower, pressure ratings, and PM schedules, but view financial valuation as "accounting data" that belongs exclusively to someone else.

Without a clear mandate to link physical performance to financial outcomes, the effort required to develop and update these values is often dismissed as a low-priority administrative burden.

2 Our Databases Are Poorly Configured

An organization’s CMMS or EAMS should capture the asset value, source of the value, and year of the estimate to establish a baseline for defensible decision-making. All three fields are essential for understanding the context of any rolled-up system valuation and for indicating potential data deficiencies. Additionally, without this information, asset managers cannot accurately adjust for inflation or validate the integrity of their lifecycle cost models.

3 Asset Managers Have to Work with Accounting

In my experience, most asset managers have their technical roots in engineering and operations. That’s ironic because the traditional driver for asset management is financial accountability.

It’s easy to fall into the trap that the physical side doesn’t match up too well with the fiscal side. In practice, there are plenty of examples of that. But that’s not really the deeper issue because most asset managers fully grasp the math of accounting and understand the basics of GAAP (Generally Accepted Accounting Principles).

The friction between asset managers and accountants persists because asset managers prioritize future performance and functional risk, whereas accountants focus on historical costs and standardized depreciation. This disconnect is not a result of technical ignorance but rather a mismatch of data application and functional objectives.

While an accountant sees a fully depreciated pump as a zero-value item, the asset manager sees a critical node in the system that requires a $50,000 overhaul to prevent a million-dollar outage.

Implementation Solution: Asset Value is Equal to Asset Condition

Treating asset valuation as a periodic, standardized engineering process mirrors the rigor of condition assessments and ensures that data remains both defensible and operationally relevant. Like implementing a condition assessment program, key aspects of executing a reliable asset value program include dedicating specific teams to review these values, funding the teams similarly to the condition assessment team, and updating the database every 3 to 5 years. This systematic approach establishes a reliable baseline necessary context for long-term capital planning, risk mitigation, and achieving a fundamental outcome of any asset management program.

Solution: R&R Forecast

A Renewal and Replacement (R&R) forecast is a long-term financial projection that identifies when and how much capital will be required to renew (rehabilitate) or replace assets as they reach the end of their useful lives. The forecast serves two purposes: it shows the peaks and valleys of financial needs (which the asset management program can level and show values) and the forecast acts as a stress test for the integrity of the CMMS/EAMS database. Senior management is particularly interested in the first purpose, so getting a mandate from above is not difficult.

Asset Value is a Core Component of Asset Management

Asset value is not an optional enhancement to asset management; it is proof that the program matters. If you cannot articulate what your assets are worth today and what it will cost to sustain them tomorrow, senior management has no rational basis for funding, prioritization, or tradeoffs. Treating asset value as a last step in the process or an administrative burden will simply not get the job done. Until you can quantify the value you manage, you are not managing assets, you are simply watching them age.

Need help getting started? JD Solomon Inc. provides practical solutions to align asset values and forecast future operations and capital improvement funding needs.