Nathaniel Coley, Director, Office of Asset Management, FHWA

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Fundamentals of Asset Management

Nat Coley, Economic Analysis Program FHWA Office Of Asset Management

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Topics

• Definition and Understanding Asset Management– Importance of asset management and what it can do for us– Explain the role we play in implementing

asset management

• Methods and Tools– Apply the principles of asset management– Define steps that agencies can take to

improve asset management – Identify available tools that can assist in applying asset

management – Identify performance measures that are useful in an asset

management context

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Transportation Asset Management

Asset management is a systematic process of maintaining, upgrading, and operating physical assets cost-effectively. It combines engineering principles with sound business practices and economic theory, and it provides tools to facilitate a more organized, logical approach to decision-making. Thus, asset management provides a framework for handling both short- and long-range planning.

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Why Transportation Asset Management?

“As government providers and operators of transportation systems, we face an increasingly complex challenge of improving safety, mobility and the aesthetics of our highway system in an environment of constrained resources. Implementing an asset management approach is essential to ensure that we invest the public funding entrusted to us wisely, and that we minimize long-term costs in achieving our desired service level objectives.”

Neil J. Pedersen, Administrator, Maryland State Highway Administration and Vice-Chair, AASHTO Subcommittee on Asset Management


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Why is it Important?

•Increasing congestion – between 1993 and 2002

–24% increase in passenger car VMT–32% increase in single-unit trucks VMT–39% increase in combination trucks VMT –Only a 2% increase in lane miles

•In the next 20 years–VMT will increase by 50%–Freight tonnage will nearly double

•All of this is occurring on an aging network and in a fiscally constrained environment

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What Can we do about our situation?

• Aging Infrastructure Networks Need to make what we have work better for us and lastlonger

• Growing Congestion What can we do to reduce the inconvenience of congested roadways?

• Growing Traffic VolumeWhat can we do to curb the increasing levels of traffic?

• Increasing Legislative Oversight Need to respond to pressure to be more transparent andaccountable

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Asset Management Principles

4 DECISIONS BASED ON QUALITY INFORMATION – management systems and tools are used

2 PERFORMANCE BASED – clear measures of performance and target service levels are established

1 POLICY DRIVEN – decisions reflect policy goals and objectives that define desired system condition and service levels

3 OPTIONS EVALUATED – comprehensive choices and tradeoffs are examined at each level of decision-making

5 CLEAR ACCOUNTABILITY – performance results are monitored and reported

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Focus of Asset Management

At its Core, Asset Management Focuses on Resource Allocation and Utilization

At its Core, Asset Management Focuses on Resource Allocation and Utilization

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PreservationCapital Improvement

Operations

RESOURCES

Safety Other

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A Resource Allocation and Utilization Process

Policy Goals and Objectives

Analysis of Options and Tradeoffs

Resource Allocation Decisions

Financial Staff Equipment Other

Program and Service Delivery

System Condition and Service Levels

Funding Levels

Customer Input

PreservationPreservation OperationsOperationsCapacity

ExpansionCapacity

Expansion

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Benefits of Asset Management

•Extend resources–Make our assets last longer–Make your dollars do more for you

•Get more money–Make the case for funding and have the executives and legislature understand the needs–Have your partners support you and communicate the case

•Communication, accountability, and credibility–Improved communication and collaboration within agency, across agencies, and with customers–Improved credibility and accountability for decisions

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Asset Management Can Support Financial Performance

Governmental Accounting Standards Board (GASB)- Statement 34

• provides a comprehensive framework for financial reporting with the objective of making annual reports easier to understand and more useful to the people who rely on the financial information contained therein.

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Governmental Accounting Standards Board (GASB)- Statement 34–the government manages the eligible infrastructure assets using an asset management system that has the characteristics set below:■ Provides an up-to-date inventory of eligible infrastructure assets;■ Performs condition assessments of the eligible infrastructure assets and summarizes the results using a measurable scale; and■ Estimates each year the annual amount to maintain and preserve the eligible infrastructure assets at the condition level established and disclosed by thegovernment.

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Governmental Accounting Standards Board (GASB)- Statement 34

– the government documents that the eligible infrastructure assets are being preserved approximately at (or above) a condition level established and disclosed by the government. Determining what constitutes adequate documentary evidence to meet the second requirement involves professional judgment because of variations among government asset management systems and condition assessment methods.

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Examples of Application

•Policy Development

•Tradeoff Analysis

•Economic Analysis and Life Cycle Cost Analysis

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Policy Development

Proactive Role in Policy Formulation

•Asset Management provides an opportunity to connect POLICY to ACTION•Agencies need to engage policy makers during their decision-making process

–Have an impact on external bodies that shape policies

–Frame and inform policy options

•Communicate implications of funding decisions •Reinforce accountability•Same principles can be applied to long-range planning

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Example – MassHighwayGovernor initiated a “Fix It First” program focused on reducing structurally deficient (SD) bridges. Initially, resources would be allocated to fix current SD bridges

Current SD Bridges

Number of SD Bridges

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Example – MassHighway (continued)Further analysis indicated that the number of SD bridges would increase over time with focus only on fixing current SD bridges

Current SD BridgesSD Bridges in Future Due to Deterioration

Total Number of SD Bridges


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Funding Levels

Customer Input


ExpansionCapacity

Expansion


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Example – MassHighway (continued)

New policy balances preservation and replacement needs. New budget includes increased bridge funding to address current SD bridges and manage deterioration

Manage deterioration

Reduce the number of current SD

bridges


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Tradeoff Analysis

What is a Program Tradeoff?

How many resources should we allocate to Structurally Deficient versus healthy?

Question is –

Tradeoff issue is–What are the consequences of a particular

funding allocation to pavements & bridges?

The final choice is– The allocation and set of consequences that the decision-maker prefers

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Tradeoff Analysis Example

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Economic Analysis and Asset Management

•Mechanism for evaluating and comparing long-term costs and benefits of alternatives

•Economic analysis results

– Help structure project-level tradeoffs

–Quantify & Qualify costs and benefits to the agency and to customers

–Support repeatable and transparent project justification and prioritization

•Management systems can help with economic analysis

Adam Smith

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Economic Fundamentals

•Life-Cycle Comparisons

•Inflation

•Time Value of Resources

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Life-Cycle Comparisons

16 17 18 19 20

Initial Capital

Cost

Year

Dollars

Benefits

Costs

1514131211109876543210

Typical Life-Cycle Profile

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Economic Analysis Tools

FHWA Office of Asset Management offers multiple tools to assist organizations with economic analysis•HERS-ST: uses engineering standards to identify highway deficiencies, applies economic criteria to select the most cost-effective mix of improvements for system-wide implementation•STEAM: facilitates detailed corridor and system-wide economic analysis for large transportation projects•BCA.NET: web-based benefit-cost analysis tool to support the highway project decision-making •Life Cycle Cost Analysis Process & RealCost Software: performs a project alternative analysis

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Benefit and Cost Elements

Agency Cost/BenefitDesign and Engineering

Land Acquisition

Construction

Reconstruction/Rehabilitation

Preservation/Maintenance

User Cost/Benefit

Delay/Time Saving

Crashes/Avoided Crashes

Vehicle Operating Costs

Externalities

Remaining Asset Value

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Performance Measures Basics

• Performance measurement is … – A way to link strategy to action– A process of gathering information to make well-informed decisions– A way of monitoring progress toward a result or goal (accountability is another dimension of this aspect)

• Goal of performance measurement is to align metrics to focused strategies that are achievable

– Having measures that state that one has to be good at everything is not helpful– Good measures strengthen link between strategies, actions, and results– Useful as a filter for how to respond to new initiative

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Funding Levels

Customer Input


ExpansionCapacity

Expansion

Performance Measures are Critical

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VDOT Dashboard Performance Measures Example

•2002 – Program delivery was not good – late and over

budget•Commissioner - “Change the culture”•Develop and adhere to strict definition of on-time, on-budget•Measuring on-time, on-budget required data on outputs

–Work accomplishments–Project schedule–Cost of work to date–Contract award amount

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Performance Results

From FY 2001 to FYTD 2007…

Construction

345% improvement in on-time delivery

74% improvement in on-budget delivery

Maintenance

110% improvement in on-time delivery

51% improvement in on-budget delivery

2001 2002 2003Performance Measure FYE FYE FYE FYE FYE FYE YTD1

Construction On-time 20% 30% 27% 36% 75% 84% 90%Construction On-budget 51% 61% 65% 73% 78% 86% 89%

Maintenance On-time 38% 43% 38% 51% 74% 79% 80%Maintenance On-budget 59% 71% 80% 81% 80% 88% 89%

1 As of January 08, 2007

2005 2006

VDOT On-Time and On-Budget Reported Results

20072004

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Establish Performance Targets

Example – Analyze Resource Allocation Scenarios

0

20

40

60

80

100

0 1 2 3 4 5 6 7 8 9 10

Time (Years)

Percent Pavement in Good Condition

$25M/year

$5M/year

Do Nothing

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Establish Performance Targets

Example – Analyze Resource Allocation Scenarios

0

20

40

60

80

100

0 5 10 15 20 25

Relative Budget, $Millions/Year

Percent Pavement in Good Condition in 10 Years $25M/year

$5M/year

Do nothing

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Role of Preservation

•Preservation of existing assets is fundamental in any asset management approach•Doing the right thing at the right time to the right asset•Benefits

–Make existing capital investments last longer–Stretching available funding further–Reducing the frequency of costly, time consuming, traffic disrupting rehab, and reconstruction projects

•North Carolina DOT (described in the FHWA Comprehensive Asset Management Case Study) added “preservation” as an explicit budget line item to their budget

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Example

Pavement Preservation

Time

Pav

emen

t C

on

dit

ion

PreventiveTrigger

RehabilitationTrigger

Optimal Timing

Original Pavement

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Applying

Asset Management to Operations

•Operations broadens asset management beyond a preservation focus

– Can an ITS project achieve the same objective as a proposed capital project?– Should we “trade” a decline in pavement condition for improved capacity on an existing highway?


Preservation

OperationsCapacity

Expansion

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Management Systems

All state DOTs have some form of pavement and bridge management systemsSelected agencies have other management systems and analytic tools – tunnels, safety hardware, traffic signals, culverts, etc.Management system uses:

Manage an inventory of assetsMonitor condition and performancePerform engineering and economic analysisDetermine budget needs and expendituresDetermine what is working well and where work is neededMajor challenge – tying management systems to the decision-making process

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Pavement Management Systems

Invest in strong bases and preventive maintenance to maximize pavement life at lowest life cycle cost, and rehabilitate pavements well before they become noticeably rough.Many Pavement Management Systems exist in the market

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Bridge Management Systems

A tool for managing a bridge portfolio for optimal resultsQuantification of the benefits of addressing bridge needs and the increased cost of deferring needed workDetermine the most cost-effective way to maintain the bridge inventory

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Other Management Systems

Maintenance Management SystemsCombines asset inventories, work planning, and work ordersMany products exist in the market

Culvert Management SystemsAlabama, Maryland, Minnesota, and Shelby County case study

Many adapt their BMS for use with culvertsAdapt maintenance management systemsHome-grown systems exist

Other states have custom developed systems (NJDOT) Operations Asset Management

Tools operations asset management systems are beginning to be published and made available

Traffic Operations Asset Management System (NCHRP)

Identification of operations assets (FHWA document)Signals, lighting, safety hardware, signs, others (NCHRP)

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Data and Data Management

Many agencies view themselves as data rich, but information poor Existing tools are largely under-utilized in most DOTs for asset management decision-making, especially predictive modelsAs a general rule, the most

successful man in life is the man who has the best information.

Benjamin Disraeli

When you cannot measure, when you cannot express in numbers, your knowledge is of a meager and unsatisfactory kind: you have scarcely, in your thoughts, advanced to the stage of a science.

Lord KelvinData is a lot like humans: It is born. Matures. Gets married to other data, divorced. Gets old. One thing that it doesn't do is die. It has to be killed.

Arthur Miller

A computer cannot turn bad data into good data.

John R Pierce

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Forces Driving Data Business Planning in Transportation

Fragmentation, lack of integration

Need for greater accountability

Data Business Plans

Support for data programs

Maximize use of existing data

Data quality issues

Shrinking resources, growing needs

Data Rich, Information Poor Syndrome

Increase understanding of data

value

Better payoff from IT investments

Technology Advances

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Data Plans: Delivering Value

Design

Validate

Store

Access

Use

Collect

Document

Integrate

Established need, sound measurement methods, precise definition, fit with other data

Efficient and sustainable methods using current technologies

Process to ensure accuracy

Provide metadata for users and integrators

Protect data security and integrity, enable access

Link to other data sets

Provide access to meet user needs: downloads, reports, maps

Use to support decisions, meet reporting requirements, etc.

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Moving Forward with Asset Management

There is no one right way Most important ingredient is an organizational support structure

Identify a champion Clearly define responsibilities

The scale of the effort can be big or small; agency-wide, division centric, or unit focused; involved hundreds of people or a small groupThe Self Assessment in Chapter 3 of the Asset Management Guide can help identify greatest opportunities for improvement

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Developing a Plan

Step 4 Implement actions and periodically revisit plan

Step 3Develop an asset management plan with clear set of prioritized actions

Step 2 Define gaps, needs, and opportunities

No single “correct” approach to getting started

Step 1 Establish vision and objectives

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FHWA Office of Asset Management

Mission•“provide leadership and expertise in the systematic management of highway infrastructure assets.”

•“serves as an advocate for asset management, system preservation, pavement management and analysis, bridge management and inspection, and construction and maintenance activities, as well as technology development, outreach, and partnering initiatives.”

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Three TeamsConstruction and System Preservation responsible for construction and maintenance program policy, technical support, and national outreach. Specific areasof responsibility include accelerated construction,transportation systempreservation, and continuous quality improvement initiatives such as system preservation.

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The System Management and Monitoring Team: responsible for developing & promoting systematic approaches to the management of highway assets. This work includes refiningand advancing the use of pavementand bridge management systems and developing systems where theypresently do not exist, such as for tunnels and roadway hardware. Theteam is made up of a Pavement Management Group and a Bridge Management Group.

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Evaluation and Economic Investment Team development and promotion of an array of procedures for inclusion in an engineering economic analysis toolbox, identification and dissemination of alternatives for developing data systems to support asset management, and providing assistance with implementation of relevantstandards issued by the Governmental Accounting Standards Board (GASB).

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Thank You

Nathaniel ColeyFHWA Office Of Asset Management

Washington, DC

[email protected]

Documents

Nathaniel Coley, Director, Office of Asset Management, FHWA