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

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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
History

• 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

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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

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Status of Asset Management in the United States

• Survey Questions
• Inventory of Assets
• Investment Decisions
• Workshop Agenda
• Responses

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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

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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

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Workshop Agenda

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

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SURVEY RESPONSES
Received responses from states in yellow
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SURVEY RESPONSES(CONTINUED)

• Number of Responses -- 32
• Points of Contact for Asset Management
• none -- 12
• one -- 12
• more than one -- 8

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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)

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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)

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SURVEY RESPONSES(CONTINUED)
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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.

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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.

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SURVEY RESPONSES(CONTINUED)

• States Using Decisionmaking Tools -- 31
• four tools -- 3
• three tools -- 13
• two tools -- 11
• one tool -- 4

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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

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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

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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

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How Is It Being Done?

• There are as many ways to implement asset
  management systems as there are types of entities
  and organizations

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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

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Attributes

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

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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

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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

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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

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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

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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
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Components of an AMS

• A centralized database
• Performance prediction models
• Analysis tools
• Reporting tools

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Framework for AMS
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Asset Inventory System

• Identification of assets included
• Inventory of basic characteristics
• Assessment of asset conditions
• Estimate of asset age

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Location/Asset Referencing System

• Geographic location
• Reference system
• Identifiers for equipment

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Central Database

• Contains inventory information
• Facilitates exchange of information

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Analysis Modules

• Forecast of Future Conditions
• Impact Analysis of Various Scenarios

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Reporting Modules

• Presentation of Inventory Information
• Presentation of Analysis Results
• Formats
• Graphics
• Tables
• Maps

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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
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Issues In Asset Management

• Adherence to worst-first policy
• Outside influences
• Large backlog of needs
• Lack of cooperation and coordination between users

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Hurdles to Asset Management

• Technical
• Institutional
• Implementation

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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 (contd)

• Define system elements and boundaries
• Define agency goals and objectives
• Develop system models
• Outline analysis procedures
• Develop output formats

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Benefits

• Improve decision-making process
• Improve productivity
• Improve client responsiveness

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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

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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