Asset Management as a Tool for Managing Highway Assets

1. Asset Management as a Tool for Managing Highway Assets Sue McNeil Professor Carnegie Mellon University Visiting Professor University of Minnesota

2. Outline • Asset management definitions • History • Status of asset management in the United States • Benchmarks • Goals, objectives and attributes • Components • Issues • The future

3. Asset Management • . . . is a systematic process of maintaining, upgrading, and operating physical assets cost-effectively • . . . Combines the use of sound engineering principles, accepted business practices, and economic theory to improve the decision-making process

4. Asset Management versus Managing Assets • History • Survey - Status of Asset Management in the United States.

5. 1994- Road Asset Management Guideline - Austroads 1995 - Report on Current Practice - Australia 1995 - AASHTO/FHWA Workshop - Public Private Perspectives 1997 - AASHTO/FHWA Workshop - The Future AASHTO Task Force formed History

6. History • 1998 • New York State - Concept Plan • AASHTO Task Force Strategic Plan • TAC - Primer on Highway Asset Management • APWA - Asset Management of the Public Works Manager • 1999 • FHWA - Office of Asset Management formed • OECD Asset Management Systems Working group • FHWA/AASHTO Workshop

7. Status of Asset Management in the United States • Survey Questions • Inventory of Assets • Investment Decisions • Workshop Agenda • Responses

8. Inventory of Assets • Asset management responsibilities and contacts • Inventories and condition by type of asset • Management systems and performance by type of asset • Asset valuation

9. Investment Decisions • Integration with management systems • Decision-making tools for investment • How tools are used • Use of tools across modes • Analysis to make allocations to capital versus maintenance • Quantitative evaluation of capital, operational or maintenance expenditures needs to improve performance • Comparison of effectiveness of investments • Relationship of budget expenditures to system performance • Mechanisms to provide feedback

10. Workshop Agenda • Areas responding state would be willing to discuss experiences • Areas responding state would find of interest.

11. SURVEY RESPONSES Received responses from states inyellow

12. SURVEY RESPONSES(CONTINUED) • Number of Responses -- 32 • Points of Contact for Asset Management • none -- 12 • one -- 12 • more than one -- 8

13. SURVEY RESPONSES(CONTINUED) • States with Inventories -- 32 • average per state -- 9 • percent of inventories with conditions -- 66 • Predominant Inventories (with conditions) • bridge -- 32 (31) • pavement -- 31 (31) • road and highways -- 31 (23) • traffic signals -- 26 (15) • grade crossing -- 24 (16)

14. SURVEY RESPONSES(CONTINUED) • States with Management Systems -- 32 • average per state -- 7 • percent of inventories with performance indicators -- 70 • Predominant Systems (with performance) • pavement -- 32 (29) • bridge -- 32 (29) • safety -- 25 (16) • maintenance -- 24 (16) • traffic monitoring -- 22 (10)

15. SURVEY RESPONSES(CONTINUED)

16. SURVEY RESPONSES(CONTINUED) • States Attempting Asset Valuation -- 12 • replacement cost -- 9 • historic expenditures -- 5 • equivalent value -- 4 • other -- 2 Other includes HPMS Financial Analysis package and investment/fair market basis.

17. SURVEY RESPONSES(CONTINUED) • States Attempting Asset Valuation -- 12 • four methods -- 1 (La) • three methods -- 7 • two methods -- 2 • one method -- 2

18. SURVEY RESPONSES(CONTINUED) • States Using Decision Making Tools -- 31 • cost-benefit analysis -- 28 • life-cycle costing -- 27 • trade-off analysis -- 9 • quantitative investment analysis -- 4 • other -- 9 Other includes citizen and political input, value engineering, grade crossing hazard ratings, first cost, threshold levels, and highway needs analysis.

19. SURVEY RESPONSES(CONTINUED) • States Using Decisionmaking Tools -- 31 • four tools -- 3 • three tools -- 13 • two tools -- 11 • one tool -- 4

20. SURVEY RESPONSES(CONTINUED) • Apply tools across modes -- 7 • Analysis to allocate capital vs. maintenance -- 10 • CBA of major maintenance expenditures -- 11 • CBA for operational improvements -- 11 • Evaluate how expenditure improves system -- 17 • Relate budget expenditures to system performance -- 21 • Automatic updating of systems based on expenditures -- 12

21. Benchmarks Private Sector • Have near-state-of-the-art asset management systems • Streamlined to the maximum extent and are highly cost effective • Responsive to top management, user, and customer needs

22. Benchmarks Public Sector • Some systems are comparable with the leaders in private industry • State data needs and investment analyses are more complex • Private sector further along with financial and risk analyses • Use of high-speed automated condition survey data collection equipment • Data uniformity in pavement management more problematic

23. Benchmarks Quasi-Governmental Sector • Using as much state-of-the-art technology as are private sector and state organizations • It is more difficult to benchmark status in this sector since each entity is unique

24. How Is It Being Done? There are as many ways to implement asset management systems as there are types of entities and organizations

25. Goals • To provide ready access to quantitative and qualitative data • To facilitate decisionmaking based on data • To utilize principles drawn from economics, accounting, risk management, and customer service models • To ensure efficient resource allocation and asset optimization

26. Attributes • Standardized • Understandable • Customer-focused • Mission-driven • Accessible • Flexible • Integrated • Informative

27. Attributes Required to Realize Benefits • Common performance measures and criteria • User-friendly environment • Customer focus • Accessibility within agency • Flexibility • Link to technical, management, and budgetary processes • Exchange of information

28. Quantifiable Objectives • Enhance knowledge of inventory and asset value • Develop links that tie resource allocations to savings from replacement • Establish standardized processes and protocols • Consider life-cycle costing

29. Objectives That Are Difficult To Quantify • Recognize data as a corporate asset • Create sense of ownership in assets by corporate managers and operators • Improve credibility in decision-making • Encourage processes where managers think globally, but act locally • Improve teamwork, communication, and training

30. Benefits of AMS • Improve program quality • Improve information and access to information • Facilitate economic assessment of various tradeoffs • Improve documentation of decisions • Improve information on return on investment and value of investments • Reduce short-and long-term costs

31. Consequences of Poor Management • Silver River Bridge • National Bridge Inventory • Miami-Dade Water Sewer Department • Chicago Tunnel System Florida Tunnel Dade County Plugs Miami Kinzie Canal Tunnel Ruptured Chicago River

32. Components of an AMS • A centralized database • Performance prediction models • Analysis tools • Reporting tools

33. Asset Inventory Analysis Modules Central Database Location/ Asset Referencing Systems Report Modules Graphics - Summaries - Map Links Framework for AMS

34. Asset Inventory System • Identification of assets included • Inventory of basic characteristics • Assessment of asset conditions • Estimate of asset age

35. Location/Asset Referencing System • Geographic location • Reference system • Identifiers for equipment

36. BMS Revenues Project BMS Maintenance Accounting Pavement Safety Data Congestion Budgeting Permits Contracts Equipment Materials District and Local Offices Central Database • Contains inventory information • Facilitates exchange of information

37. Analysis Modules • Forecast of Future Conditions • Impact Analysis of Various Scenarios

38. Reporting Modules • Presentation of Inventory Information • Presentation of Analysis Results • Formats: • Graphics • Tables • Maps

39. Concepts of AMS for Transportation Systems • Develop inventories • Use condition measures • Use performance measures • Need for an integrated database • Analyze techniques • Format for user-friendly outputs

40. Three-Dimensional Matrix Structure

41. Issues In Asset Management • Adherence to worst-first policy • Outside influences • Large backlog of needs • Lack of cooperation and coordination between users

42. Hurdles to Asset Management • Technical • Institutional • Implementation

43. Systems Approach to Asset Management • Identify key links between one or more strategies, where investment in one affects another • Define various strategies for improving the effectiveness of these interactions • Evaluate and implement the strategies to enhance the overall performance of the transportation system

44. Systems Approach (cont’d) • Define system elements and boundaries • Define agency goals and objectives • Develop system models • Outline analysis procedures • Develop output formats

45. Benefits • Improve decision-making process • Improve productivity • Improve client responsiveness

46. Agency Factors Contributing to Realization of Benefits • Understand philosophy • System recommendations must reflect benefits to agency • Strategy to match agency goal • Systems as a tool to complement agency experience and expertise

47. Future Issues • Strategic investment analysis tools • Training • Shift in management approaches • Knowledge in multiple disciplines (engineering, business, economics) • Changes in technology

48. Formulas for Success • Link asset management to vision and mission • Promote sustained political commitment • Acquire, train, and retain highly skilled personnel • Transform data into useful information • Facilitate information sharing • Focus on the customer