Progress Toward Integrated COISE

APWA International Public Works CongressNRCC/CPWA Seminar Series “Innovations in Urban Infrastructure”

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PROGRESS TOWARD INTEGRATED INFRASTRUCTURE-ASSETS-MANAGEMENT SYSTEMS: GIS AND BEYOND

by

A.C. Lemer, PH.D. 1

The MATRIX group, inc.4701 Keswick Road; Baltimore, MD, 21210, USA

Abstract

A region’s infrastructure is a collection of public assets that can be managed tomaximize public profit, the return on these assets invested in the region’s economicand social enterprises. This profit includes both monetary revenues (e.g., rates, userfees, and tax receipts) and environmental, social, and economic components for whichthere are no easily determined market values. The assets themselves are diverse anddistributed throughout the region, interacting in complex ways with the region’speople and landscape. Both private and public institutions have responsibilities forthe system’s management. The management task is beset by difficulties of datacollection, measurement, and evaluation. Geographic information systems (GIS), akey set of tools increasingly adopted by local and regional governments, represent animportant step toward truly integrated infrastructure-asset management systems, butother tools are needed as well. Relational-database management, advanced financialanalysis and optimization tools, combined with innovative data-collectiontechnologies and increased computational power will enable public works assetmanagers to gain better understanding of infrastructure performance and the public’sdemand and expectations for its infrastructure. As a general construct, an integratedinfrastructure-asset management system (IIMS) will have five principal stages: datacollection and analysis, performance modeling, scenario and management-policygeneration, decision analysis, and management reporting. The system will servedecision makers at all levels:—policy development, infrastructure-systemadministration, and operations management, including the public at large who are theinfrastructure's owners. Ongoing work illustrates how an integrated infrastructure-asset management system can improve the rate of return on public investment.

Keywords: Asset management, GIS, infrastructure management systems 1 ANDREW C. LEMER is chief executive of the MATRIX group, inc., a professional-services firm specializing in policy and feasibility studies, market analysis, anddecision-support system development, particularly in transport and civilinfrastructure systems, urban and regional development, and the design andconstruction industries. He has held faculty appointments at several leadinguniversities and served, from 1988 to 1993, as Director, Building Research Board,U. S. National Academy of Sciences. He can be reached at [email protected] or bytelephone at (410) 235-3307.

Asset Management - Meeting the Needs of the 21st CenturyProgress toward Integrated-Infrastructure-Asset Management, Lemer

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1. Introduction

Sewers, water pipes, and streets are elements of our civil infrastructure, thesupporting structure of society, society's skeleton, sinews, and nerves. Infrastructureis a complex technical system that provides us with a varied range of valuable andessential services. Taken together, the facilities of infrastructure are amongcivilization's most important assets, a storehouse of resources and wealth that eachgeneration inherits, uses, and passes on to succeeding generations. Decisionsinfluencing infrastructure development and use—asset management—undertaken andexecuted without fully recognizing the complexity, diversity, and social andtechnological evolution of the system almost inevitably squander economic,environmental, social, and cultural resources.

As public-works professionals know well, the challenges of managing theseassets most effectively, of using infrastructure to enhance the lives of present andfuture generations, are substantial. The functional components of a region'sinfrastructure are managed by myriad agencies and at several jurisdictional levels.Public-works managers, official and de facto, are many and come from diverseprofessional disciplines (e.g., lawyers, engineers, planners, financial analysts, drivers,pedestrians); each has unique perspectives, values, language and traditions thatsubvert the efficiencies of true system management. The inefficiencies arewidespread and easy to see: jammed traffic on roads designed to carry only a fractionof the current demand, newly-resurfaced city streets ripped open to repair aged sub-surface pipes, news media expressing public outrage that traffic lanes must be closedfor maintenance or that basements are flooded.

At the same time, emerging new technology, science and mathematics areinfluencing our understanding and approaches to analyzing and designinginfrastructure, and a philosophy of long-term management responsibility—the termstewardship is sometimes used—is gradually gaining public awareness and changingmanagement practice (e.g., Haas et al, 1994). Such new acronyms as ITS (intelligenttransportation systems), SCADA (supervision, control, and data acquisition) andespecially GIS (geographic information systems) signal the dramatic changessweeping through the infrastructure professions and the system itself.

2. Assets Management Defined

Applied to public-works infrastructure, "assets management" is the process ofkeeping track of and deploying the public's capital. The focus of public-works assetsmanagement is necessarily on making decisions about development, use,maintenance, repair, and retirement or replacement of sewers, highways and otherinfrastructure.

The goal of people making these decisions is—or at least should—havesomething to do with achieving maximum total return on the public's capital. Thisrather bold and not universally-accepted assertion is essentially what is termed, in thejargon of economics, a most efficient use of capital. As a criterion for decisionmaking, seeking maximum return on assets in the public sector falls within the


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tradition of "benefit-cost analysis" (BCA), a procedure that has attracted considerablecontroversy since its development late in the 19th Century. Currently-used methodsare largely an outgrowth of the dam-building practices of the Corps of Engineers andBureau of Reclamation and other agencies that must justify large-scale public-worksprojects by their long-term public benefits.

An alternative perspective is represented in "cost-effectiveness" analysis, a set ofprocedures linked most directly to military applications, where the purchasing of aweapons system could be based on a search for the system configuration that wouldmeet specified minimum requirements with the lowest total cost , e.g., getting the"biggest bang for the buck" An elaboration on cost-effectiveness procedures is "life-cycle cost analysis" (LCCA), which developed to address particularly the tradeoffbetween initial procurement cost and operations and maintenance costs likely to beincurred over the course of a system's life cycle. Analysts had learned fromexperience that greater initial spending might purchase durability that would cutfuture costs and reduce total expenditures over the ten- to twenty-year period a systemwas expected to last. LCCA is now required as a matter of policy, for example, in thejustification of federally-funded highway projects for new roads and majorreconstructions in the United States.

While BCA and LCCA differ in their perspective (e.g., BCA inherently allowsfor higher levels of spending to gain greater benefits, while LCCA presumes thatbenefits will be fixed at the target level and seeks the lowest costs), the two terms areoften used interchangeably. Regardless of the perspective, the goal of efficientlydeploying the public's capital, i.e., asset management, is a challenging one.

Meeting the challenge means dealing with two primary sets of issues (Fig. 1):

• What are the assets to be deployed, and what is their value?• How can these assets be deployed and used to gain the

greatest possible return (i.e., benefit)?

Fig. 1: The asset-management process must address two sets of issuesAnyone with experience in any infrastructure field knows these are not simple

matters. Many jurisdictions have infrastructure constructed years ago, for which noaccurate plans or other records are available. Even when the responsible managersknow what is there, they frequently have only partial knowledge of what condition itis in. Finally, even if one has a detailed description of the physical characteristics and


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condition of an element of the infrastructure, there are no generally-accepted bases fordetermining its asset value and its contribution to the well-being of the region itserves. The development and adoption of GIS database management technology ishelping to overcome these problems, although a great deal remains to be done beforepublic-works infrastructure managers will have fully functional asset-managementtools.

3. An Integrated Infrastructure Asset-management System

“Fully functional asset-management tools” would support all aspects of theasset-management process and provide decision makers with adequate and reliablebasis for making informed asset- deployment decisions. These tools, taken together,might be termed an “integrated infrastructure management system” (IIMS), integratedbecause the tools would apply equally well to roads, sewers, parks, schools, and theother particular functional forms that infrastructure capital assumes in a region. Fig. 2illustrates the five major components or tool categories in an IIMS. Two of thesecomponents–“data collection and analysis” and “performance modeling”–fall withinthe “asset identification” portion of the asset-management process, while the otherthree address “asset deployment.”


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Fig. 2: Conceptual structure of the Integrated Infrastructure ManagementSystem (IIMS)

Data collection and analysis are basic to any management system. The principaldifficulty for infrastructure has always been that the current condition of facilities isdifficult to observe and measure. Only in recent years have new technologies forremote sensing, non-destructive evaluation, pattern recognition, statistical inference,and the like begun to enable adequately sophisticated data collection. The pastseveral decade’s rapid growth in computing power and data-storage capacity has inturn made it possible to develop the GIS databases that can be used to characterizeconditions of the multi-facility systems that agencies seek to manage.

The move to GIS is important because it facilitates the identification andanalysis of interactions among infrastructure sub-systems. The conceptual approachof overlaying maps of geology, topography, functional networks, property boundaries,socio-economic characteristics, and other important factors was largely invented bylandscape architect Ian McHarg in the early 1960s (McHarg, 1969), but it was theadvent of hardware and software making computer-based GIS became widely useableand affordable by local-government agencies that gave the method its current poweras a foundation for the IIMS. Many agencies now have the capability–in principle, atleast–to establish, maintain, and access a complete inventory of their infrastructure.

These data collection and access capabilities are supporting researchers andpractitioners in their efforts to understand and model how materials and structuresbehave in response to infrastructure age, wear, and use. However, this is perhaps the


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weakest link in the IIMS information chain. Research on materials, structures, andmanagement strategies have led to substantial progress in developing effective toolsfor estimating deterioration as a function of design and construction parameters,usage, and environmental factors. Pavement- and bridge-management systemsdeveloped over the past several decades, for example, have gained wide acceptance asmanagement tools because the deterioration models that underlie their predictions oflife-cycle costs are being made more accurate by research and development activities.Similar models exist or are being developed for pipes, cables, and other infrastructureelements.

However, infrastructure performance and its modeling depend not onlyphysical and chemical relationships (e.g., stress, fatigue, corrosion), but alsoeconomic and social relationships that influence the intensity and distribution ofinfrastructure usage and what standards are used to judge whether performance isacceptable. As the Safe Drinking Water Act has demonstrated for many municipalsupply systems, these standards can change at the same time that aging and wear areat work.

Technology forecasting and the concept of obsolescence present particularlychallenging problems. (Lemer, 1997) An obsolete item–antiquated, old-fashioned, orout-of-date–is not necessarily broken, worn out, or otherwise dysfunctional, althoughthese conditions may underscore its obsolescence. Rather, the item simply does notmeasure up to current needs or expectations. The product of local water-treatmentplants did not change, for instance, when new federal water-quality standards cameinto force, but the acceptability of that product may have. In general, economic orsocial changes can substantially alter the demands placed on infrastructure, whiletechnological or regulatory changes alter our views of what is an acceptable standardfor infrastructure's services. In most cases infrastructure that is obsolete continues tofunction but at levels below contemporary standards. This substandard servicerepresents a reduction in infrastructure asset-value.

A basic assumption underlying much of the past discussion of infrastructuremanagement is that normal usage and aging of facilities and materials produces agradual deterioration that accumulates to impair the capability of the infrastructure toprovide its services. The loss of performance is then foreseeable and predictable; theprogress of deterioration may be predictably influenced by the selection of materialscharacteristics, facility design details, and other management decisions. Thepredictions then are at best uncertain or, as a mathematician might characterize it,“stochastic.”

A National Research Council study defined performance as the degree towhich infrastructure provides the services the community expects of it, measured interms of effectiveness, reliability, and cost. (Measuring, 1995) Effectiveness ismulti-dimensional, encompassing quantity and quality of service and a range ofregulatory and community concerns that may or may not be reflected in the generally-held view of what services are to be provided. For example, highways are meantprimarily to provide mobility for people and businesses in a metropolitan area, butthere are air-quality restrictions, noise problems, and visual aspects of highways thatthe community may consider in judging whether the highway system is performingadequately. The community making this judgement includes not only the drivers and


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passengers of vehicles that use the roads, but also the highway's neighbors, shippersof goods that travel by truck, and the taxpayers and government officials who ownand operate the highway network. Performance modeling thus remains a fertile areafor IIMS research and development.

The “management alternatives and scenarios generation” stage of the IIMS isthe first step in asset deployment. This step depends to some degree on theimagination and creativity of the people responsible for management, but it isinfluenced largely by the institutional and technological relationships within whichthe infrastructure systems operates. For example, federal funding policies thatcontributed 90 percent of the cost of new interstate highway construction and nothingto maintenance of those highways are now widely recognized to have encouragedoverbuilding in many parts of the country and to have been subversive to the aim oflowering total life-cycle costs of the highway system. In a similar fashion, increasedawareness of environmental impact and concern for limiting materials and energyusage have enhanced interest in renewal of materials and structures that formerlymight have been demolished and replaced.

We are coming increasingly to recognize too that infrastructure assets are, orshould be, more “fungible” (to use the financial jargon), more easily changed fromone form to another, more easily exchanged. Following the example of a city street,more state highway agencies are making the rights-of-way formerly used exclusivelyfor highway purposes available for location of telecommunication cables and transitlines. Abandoned rail lines have been converted to linear parks and hiker-biker trails.This fungibility is a potentially important means for attaining higher returns on publicassets, as development of air-rights over highways demonstrates.

“Decision analysis” has to do with making the evaluations of assets andreturns, judging what might be the preferred courses of action identified in precedinganalysis, and considering the budgetary and other allocations that will put decisionsinto practice. Large-scale network demand models, traffic-flow models, drainage-basin and stream-flow models, and multi-objective programming methods are amongthe tools that infrastructure professionals have developed over the past decades toguide their decisions. However, as the next section will discuss, measuring the valueof infrastructure assets and their productivity are key problems.

The “bottom line” of an IIMS is the management reports that it generates toassist infrastructure-asset managers. These reports will normally include bridge andhighway inventories, system maps, maintenance records, and a variety of other itemslikely to be useful for particular decision-making purposes. In this stage again GIStechnology is having an important impact, allowing public-works asset managers toreview asset performance at the sub-regional levels that users and their electedofficials typically find most interesting.

4. The Problem of Infrastructure-Assets Valuation

Most infrastructure is owned and managed by government entities that typicallyuse "fund accounting" to assure that the assets, liabilities, and commitments of theirlimited-purpose funds are fairly and accurately reported (Finney and Miller’s, 1971).


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In contrast to private business, the primary emphasis of fund or governmentalaccounting is on accountability rather than profitability.

For infrastructure, a very important consequence of governmental accountingpractices is that long-lived assets are excluded from the general fund, even if theyhave been purchased through the resources of the general fund. The reasoning behindthis exclusion is that these assets do not represent resources from which thegovernmental body intends to meet its liabilities or to earn revenue for the generalfund. There are exceptions, of course; the City of Cincinnati for example owns a railline that railroads pay to use, and revenue-generating infrastructure–e.g., airports, tollhighways, and the like–are frequently constructed with special-purpose funds andoperated as separate “quasi-governmental” entities.

The income–the gross return on invested assets–that might reasonably beattributed to infrastructure is typically indirect. Income is in fact realized, forexample, if a road improvement or a water-and- sewer extension enhances propertyvalues, leading in turn to higher property-tax revenues. Higher sales-tax receiptsmight also result from infrastructure investments that enable development orexpansion of retail and entertainment activities in a downtown or suburban area.Higher income-tax revenues can result when infrastructure improvements facilitate alocal industry's efforts to expand its workforce, increase its productivity, and competemore effectively by controlling its costs. Because none of the income in suchexamples is clearly derived from infrastructure’s development or use, there is noconventional way for the financial returns on infrastructure investment to berecognized by the public-sector entity responsible for the infrastructure, e.g., a public-works agency.

Similarly, there often is no depreciation charge at all shown in government-agency operating reports because there is no flow of funds associated with the use andconsequent wear-and-tear of public assets. In the day-to-day operations ofgovernment, this failure to recognize the full costs of infrastructure ownership–i.e.,deterioration and depletion costs in excess of the actual expenditure on operations andmaintenance–means that "excess" infrastructure-based revenues and deferred costs(e.g., for neglected maintenance) may easily be diverted to a wide range of purposesby decision makers and the public-at-large. Over the longer term, the governmententity and future generations of taxpayers may be left "holding the bag" for previousdiversions: the infrastructure facility finally deteriorates to a level that its performanceis no longer acceptable and there is no choice but to make massive repairs or retire thefacility from service. New York City's Williamsburg Bridge and the flooding of anold tunnel beneath downtown Chicago are notorious recent demonstrations of thehuge costs that are then imposed on the public, both directly (e.g., to rebuild thebridge) and indirectly (e.g., extra fuel consumed, time spent, and air pollutiongenerated because the formerly-most-direct river crossing is closed).

The failure to account adequately for infrastructure's value, for its contributionto the government entity's financial performance, is then a serious misrepresentationof the important role of infrastructure for the people and businesses that thegovernment serves, a misrepresentation with a wide range of economic,environmental and social consequences. Some of these consequences are measureddirectly in economic terms. The profits of companies that benefit from having access


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to adequate infrastructure, for example, are reported by those companies andsubsequently are included in the macroeconomic measures of the region's production(e.g., the gross national product; gross state product). World Bank studies found thatbusinesses in some less-developed countries suffered as much as a 30 percent loss ofpotential profitability because the public infrastructure was grossly inadequate. (Lee,Stein, and Lorentzen, 1986)

For many of the consequences of infrastructure, however, there are as yet nodirect economic measures at all. Research has not produced universally acceptedways for routinely estimating fully the value, for example, of a river's waters keptclean by advanced sewage treatment, or the views of distant mountains kept visible bycontrol of automotive air pollution. This is a problem for private businesses as wellas government entities seeking to account for the full environmental costs andbenefits of their activities (Rubenstein, 1994). But even if one neglects for themoment the environmental and social value of infrastructure and focuses primarily onfinancial and economic aspects of infrastructure assets, there are at least four principalapproaches to estimating value, as shown in Table 1.

Government agencies often have data only on historic expenditures, and eventhen only partial records for their infrastructure system. Given the long service life ofmany elements of the infrastructure system–often 50 to 100 years and more–thesehistorical expenditures have only limited uses as a basis for consideringinfrastructure's value. The “historical” approach to valuation is easily understood togive very low values to old but useful facilities. When “useful” entails historical orarchitectural merit, prime location, or pivotal importance in a functional network, theunder evaluation can be extreme. The historical cost does have one key virtue: it isoften seemingly exact and taken from observations, e.g., the project records(“seemingly,” because records may be old, inexact, and incomplete). Placed inappropriate context furthermore, e.g., in comparison to trends in population,developed land areas, or economic activities within a region, even very old historicalrecords can be useful to today's decision makers.

However, estimated current costs for replacing facilities and providing theoperations they support are more likely to be meaningful. These estimates aretypically derived from engineering cost models or economic approximations based onrecent data, effectively a perpetual rotation of the facilities inventory on whatmanagement accountants would term a "last-in-first-out" basis. This information islike the appraisal of a house; everyone agrees the estimate is useful and banks basetheir willingness to lend money on the number, but value is not really established untilwilling buyers and sellers reach an agreement. For most infrastructure, the equivalent“moment of truth” in valuation comes when the bid envelops are opened, or morelikely when the project is finished and the extras are totaled up; i.e., actualreplacement cost cannot be determined until the construction project or procurementis completed.

Table 1: Bases for establishing financial and economic value of infrastructure assetsApproach to Valuation

common-sense definitionAdvantages, problems Use, application


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Historic expenditures, atcost Historical records ofprocurement and relatedcosts accumulated from firstundertaking to the present;base acquisition accountingcost, what was paid in thefirst place

• Uses generally-available data• Does not account for changes in prices,

except as reflected in expenditures forupgrading and maintenance

• Neglects usage and wear, except asreflected in expenditures for upgradingand maintenance

• Neglects changes in technology andservice expectations or standards

• Direct comparison withcontemporaneous data in time-series progressions; e.g.,investment per unit land area orper capita, across regions

• Basis for valuation approach 3

Current replacement cost;estimated reproduction costEngineering cost estimate ofbid prices for building thesystem or facility at currentmarket conditions orequivalent macroeconomicbases (e.g., perpetualinventory valuation); what itmight cost to replace

• Reflects current prices and technology• Easily understandable• Conjectural; cost not determined until

actual procurement is complete

• Comparisons with other currentassets, e.g., buildings, private-sector projects

• Basis for capital budgeting

Equivalent present worth inplace Historic costs adjustedfor inflation, depreciation,depletion, and wear;comparable currentexpenditure, what it is worth"as is" (cf., used carpurchase)

• Uses generally-available data• Accounts for changes in prices and

usage• Neglects changes in technology and

service expectations or standards• Requires conjectural assumptions

• Comparison with otherinvestments, e.g., for estimatingrates of return, benefit/costanalysis

• For budgeting analyses (incomparison with value estimates2 and 4), especially regardingmaintenance policies andpractices, in context of life-cyclecost analyses

Productivity-realized value“in use” Net present valueof benefit stream forremaining service life; whatone might be willing to paynot to lose it

• Realistic reflection of importance tothe community

• Many assumptions and non-marketestimates needed

• Describing relative importanceof infrastructure to communitywell-being

• Budgeting decisions (with valueestimates 2 and 3)

Of course, the costs of construction represent only a fraction of the overall costsof infrastructure. The "life-cycle cost" is calculated to represent the likely influenceof operations, maintenance, and service usage throughout the extended service life ofa facility. If maintenance is neglected or usage imposes greater stress or wear on thefacility than was anticipated, life-cycle costs may increase. The accumulatedinfluence of wear, environment, maintenance practices, and other such factors isreflected–to the degree these influences can be estimated–in the "equivalent presentworth" approach shown in Table 1.

The real value of infrastructure lies, however in the services it provides, itsenabling role in supporting other economic and social activities. The “in-use” valuederives from that role. As a minimum, for example, an uncongested road saves traveltime for users who might otherwise have to take a more circuitous route. Similarly,having a piped supply of water relieves homeowners of the need to dig a well orpurchase water from venders (e.g., to be delivered and stored on-site like heating oil).However, the actual value of these and other infrastructure elements, much greaterthan these simple examples suggests, must generally be inferred from observations of


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what might happen to a region’s economy if the element were not there, or whatpeople might be willing to pay to avoid losing the element’s services.

Good decisions about how much to spend on infrastructure (and how to spendit) as compared with the many other demands for public and private spending, have tobe made by considering the full benefits and adverse effects of infrastructure. Suchdecisions, made in the private sector, are the basis for Wall Street’s mergers andacquisitions business. For infrastructure, one must rely on the abstract work ofeconomists who continue to find new ways of placing reasonable monetary values onmany non-market commodities, using such techniques as “contingent valuation” and“hedonic pricing.” (Lindsey, 1994; Gandal, 1994) Researchers in other fields alsoare finding ways to explore and understand how and why people value non-economicresources, and thereby producing concepts and tools that will be useful forinfrastructure-asset management. For example, social scientists have been developingtheories of “social capital” that would appear to have useful application. (Coleman,1990; Ostrom et al., 1993).

5. Assets-Management Decisions and Decision Makers

An IIMS will be useful only to the extent that it provides information that istruly helpful to decision makers responsible for infrastructure-asset management. Therange of these decision makers is in fact rather broad, and their decision-makingoccurs at three principal levels. (Fig. 3) Management reports must draw on data fromthe levels below, while decisions are implemented through actions that influence thelevels beneath. Traditional management has been based on a relatively strictseparation of the three layers, but new information technologies are driving thedevelopment of new ways of organizing the information that can make themanagement system more effective.

Fig. 3: Levels of assets-management decision


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In particular, the “client-server” model that distributed computer networkssupport places an integrated data base and packages of analysis tools at the disposal ofany user, anywhere in the decision-making framework. Senior policy makers andoperating personnel in the field can then draw equally on an information system thatresponds intelligently to the user’s specific queries, while superficially offering thesame appearance and structural organization to all users. The specific data used toprepare management reports, the reports themselves, and the types of decisions anddecision makers differ substantially among levels, but the IIMS “works” the same atall levels of decision making. Tools and procedures that computer and information-systems developers speak of “data warehousing,” database “mining,” and “on-lineanalysis processing” (OLAP) will enable agencies to pool their infrastructure recordsand extract information on performance trends. The search engines and browsersoftware familiar to Internet users are emerging as the model of IIMS access.

The potential users of the IIMS, the decision makers, are characterized inTable 2. On the one extreme–at least in terms of clear responsibility and overtly-assigned responsibilities–are the public works and other professionals who must makedecisions and take actions that directly influence the day-to-day condition of theinfrastructure system. At the other, there are the organizations, groups andindividuals within the public-at-large who pay the costs, seek the benefits and bear theadverse impacts of infrastructure decisions; these latter exercise their managementthrough the political process and in their response to prices and other factorsinfluencing their behavior. An effective infrastructure-asset management system–anIIMS–will facilitate informed decision-making by all these stakeholders in theregion's infrastructure.

Table 2:Infrastructure decision makers: the users of IIMS informationPrototypicaldecision makers

Nature of decision-makers’ concerns Preferred form, level of detail,reporting mode for infrastructureinformation

Mayor, City Council,high-level corporateofficials

Queries to staff in connection with majorbudget decisions, political judgements, andregion-promotion activities

Very brief, straightforward key-pointsummaries, e.g., report cards

Business andcommunity leadership

Interpretation of consequences forcommunity as a whole and for specificsubareas, industries, and groups

Brief, articulated executive summary,e.g., corporate annual report financialstatement

Citizenry-at-large Neighborhood- and project-specific impactsand individualized consequences (e.g., taxlevels) of programmatic decisions andoperations

Query-based analysis and reporting,on-demand and recurring, to estimateor translate program consequences

Government officials,department head toproject managers

Planning, programming, and budgetingsystem requests, using technical models andanalyses, relatable to project-levelinformation (e.g., work orders)

Query-based analysis and reporting,on-demand and recurring, withsupporting data available

An effective IIMS will incorporate and draw on the more finely detailed project-level information that are used, for example, by design engineers and maintenancepersonnel. At the same time, it will produce information on demand, in formsunderstandable to citizens seeking information or wishing to express concern aboutsome aspect of the region’s infrastructure. Fully developed, an IIMS will enablepolicy makers and operations managers to collect useful data–opinion polls,


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contingent value surveys, real-time demand levels and user behavior–frominfrastructure users and the public at large.

6. Example of the Future IIMS

The Bureau of the Census lists more than 38,000 local-government units in theUnited States; while some of these exercise no direct authority over infrastructure, inmany responsibility is distributed among two or more distinct agencies, e.g., roadsand streets are managed separately from sewer and water. It is inevitable that theIIMS envisioned here will assume several forms to satisfy the specific preferences ofindividual management entities. Just as there is competition among several suppliersof GIS, network analysis, SCADA equipment and the other software and hardwarethat are making the IIMS possible, so too there is room for several IIMS “products.”There are at least three vendors, for example, that in 1998 are offering software thatthey claim is or may be useful for management of multi-functional infrastructure;many others offer packages tailored to the particular characteristics of one sub-system,e.g., road pavement. (Table 3)

Table 3: Examples of software for infrastructure-assets managementApplication Examples

Integrated or multi-modal infrastructureasset-management

Hansen Information Technologies version 7 IMSCartéGraph viewSERIES IMS

Special purposemanagement packages

• PONTIS (bridge management, available as AASHTOware)• MicroPaver (road and airfield pavement management, offered by the U. S.

Army Corps of Engineers, and the American Public Works AssociationResearch Foundation)

• PSDI Maximo ADvantage (fleet and facility maintenance)• TransCAD (transportation network analysis, Caliper Corp.)• Taurus ActiveSCADA (Nivaltec Software)• HEC-HMS (storm-water runoff analysis, U. S. Army Corps of Engineers

Hydrologic Engineering Center)

....and more

A number of jurisdictions have started to develop what may eventually evolveinto a full IIMS; Indianapolis, Indiana, is a good example. The combined “UniGov”area of Indianapolis/Marion County covers approximately 492 sq. mi. In the period1987 to 1989, a public-private consortium of utilities, government agencies, and theIndiana-University-Purdue-University-Indianapolis joint center implemented one ofthe first automated digital, computer-resident mapping systems for the region’sinfrastructure. The IMAGIS system included facilities data as well as planimetric andtopographic information in a 30-layer GIS database. In the early 1990s, the cityadopted the MicroPAVER pavement management systems developed by the Corps ofEngineers and APWA Research Foundation and later the Hansen IMS for sewers.Currently a consultant is working with the city to upgrade and consolidate IMAGISand other systems’ data within the common framework of an ARC/INFO® system.


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The city’s progress in data collection highlights the lack of tools for easily andreliably rating and monitoring infrastructure condition and evaluating performance. Aresearch project was conducted during 1995-1997 by the city and Purdue University,with support from the National Science Foundation, to explore new ways of assessingthe importance of infrastructure to the region; for some time the mayor has beeninterested in how the city’s delivery of services to its citizens can be improved, andhas attracted media attention for “privatizing” the international airport and municipalwater and sewage systems. City workers, allowed to bid against private firms tocontinue providing solid-waste collection and disposal services, not only won thecontract but produced substantial cost savings without apparent reductions in service.City staff had circulated in 1994 an internal memorandum presenting an earlydescription of a “balance-sheet” framework for the assessment, that was a basis forthe initial research hypotheses. The central hypothesis was that the region’sinfrastructure is a valuable asset that can–and should–be managed to yield the highestpractical return on the public’s investment.

An immediate problem was the lack of a consistent basis for valuing theseassets. An early experiment in the research project involved estimating infrastructurevalues using several different perspectives (Table 4). As suggested earlier, the“historical” approach to valuation gives very low values to old but useful facilities.

Table 4: Examples of the asset-value of the road bridges in Indianapolis (data areapproximate, based on Department of Capital Assets information.Numbers in italics are strictly conjectural and illustrative.)

Bridges Value of bridgeHistorical–whatwas paid

Replacement–what itmight cost

Present worth–thevalue "as is"

In-use–what it isworth not to lose it

Brookville Roadbridge overPleasant Run (2-lane local road)

Built in 1929 for$16,570; replacedin 1986 for$375,290

Based on standardcost-estimating models,approximately$565,000

Estimate $540,000,based on average4% price inflationand normalmaintenance andwear

Estimate $60 million,based on 40-year life,time savings of $2million/ year, 4%discount rate

Michigan Streetbridge overLittle Creek

Built 1941 for$35,540

City budget estimatefor 1998 replacementwas $800,000

Indiana Avenuebridge overIndianapolisWater CompanyCanal

First crossingbuilt in 1910 for$9,940; replacedand enlarged1986, $1.25million

Part of central-areasystem; value wouldinclude time lossesand businessdisruptions

The Purdue team estimated that the total Indianapolis/Marion Countyinfrastructure asset base, taken as a whole, has a present-worth value of some $9.1billion, about $11,400 per capita. This estimate included roads, parks, schools, sewerand water systems, and other facilities developed controlled by government or quasi-government agencies in the region. For most government-administered facilities, theteam adjusted replacement-cost estimates for age and wear; asset values reported byquasi-governmental entities, e.g., the Indianapolis International Airport (now operated


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by British Airports Authority under contract to the city), were adopted net ofaccumulated depreciation.

Estimating an “in-use” value was more challenging. While there is nogenerally-available reporting of economic production at the level of metropolitan orlocal-government area in the United States, a number of economists’ studies of theIndianapolis region gave the research team a basis for estimating total income for themetropolitan area and sufficient sectoral detail to estimate the fraction of that incomeplausibly attributable to infrastructure’s services (e.g., a much higher fraction fortrucking as compared to banking). The resulting estimated annual earnings attributedto the infrastructure system was about $561 million, a simple return on assets of 6.2percent per annum. Those familiar with the debate initiated by David Aschauer’sstudies of the productivity of public investment will recognize that this rate of returnis within a range many economists might find reasonable.

These estimates are admittedly very conjectural and aggregated for the regionas a whole; with a fully-implemented IIMS more reliable estimates might have beendeveloped at township or even neighborhood levels. Developing and testingvaluation and deterioration models to enable infrastructure- asset management atregional and sub-regional levels is an opportunity for productive research anddevelopment effort.

7. Toward Full-Value Asset Management

This research and development effort can build on the powerful data-acquisitionand analysis capabilities that GIS is bringing to public works infrastructuremanagement. However, if the IIMS is to serve decision makers at all levels–policydevelopment, infrastructure-system administration, and operations management,including the public at large as the infrastructure’s owners–then we must lookultimately toward a broader view of what is the asset value of infrastructure.Decision-makers must make what some observers term a “full-cost” accounting,ultimately reporting all costs and returns attributable to infrastructure and itsoperations. In adopting this perspective, public works can draw on the work ofothers: natural-resource and environmental economists who seek to represent moreeffectively the consequences of our use–or misuse, as many argue–of forests, mineraldeposits, clean air and water, and the like, and social scientists who seek tounderstand the factors that strengthen communities and make them successful. Theterm “full-value” management may be a better descriptor of the potential of the fully-developed IIMS.

Many of the issues inherent in attempting to account for the full costs or valueof infrastructure fall under the economists’ rubric of “external economies” or simply“externalities.” As 19th-Century economist Alfred Marshall originally describedthem, external economies are favorable effects on a person or firm caused by theactions of a different person or firm. When a government agency causes municipalwater supply to be extended to a new area, for example, residents and businesses whouse the water supply experience cost-savings and health-protection benefits thatimprove their quality of life and property values. To the extent that the water supply


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diverts development from other areas in the region, residents of the region as a wholemay be beneficiaries of external economies associated with preservation of farmlandor natural areas. Externalities may be negative as well. Road users experience“external diseconomies” when the level of traffic grows and congestion begins toslow everyone’s travel. Those users who have no alternative route suffer losses oftime and higher costs of fuel burned sitting in traffic-jams. Subsequently increased airpollution is at least unpleasant for road users and neighbors, and may impose costs forhealth care and cleaning and repair of building façades.

The management or allocation of resources that have common property orpublic good characteristics–e.g., roadway capacity, clean air, clean water, views ofdistant mountains–is in fact a major class of problems associated with infrastructure.Externalities lead to misallocations of such resources, in the sense that individualsview these resources as free when in reality they impose costs on other users. Aconsequence of “full-cost” accounting will be to establish an awareness of theexistence and scale of these external effects, thereby internalizing them in themanagement decision-making process.

A second set of issues that “full-cost” accounting entails has to do with “scarcityrent.” As David Ricardo–another 19th-Century economist–described it, rent is thereturn to scarce inputs owned by a firm or individual producer of goods or services,e.g., land of a given fertility or at a particular location. When the water supply isextended, for example, the increased value of land served by the new supply, e.g., ascompared to that of an owner of otherwise-identical real estate some miles away, isassociated with an increase in demand for the scarce land within the municipal servicearea.

A third set of issues important to considering the “full value” of infrastructureconcerns social forces at work in a community, the workings of relationships peopledevelop trying to make best use of their individual resources. The term “socialcapital” has been adopted by social scientists to describe the resource value of theserelationships. (Coleman, 1990) The theory is that people accumulate social capitalwhich they invest in social opportunities from which they expect to profit. This profitcan be quite tangible when it concerns business relationships, but has to do withcommunity well-being as well. Infrastructure that links or separates segments of thecommunity–physically, socially, or even visually–can enhance or destroy socialcapital. A review of environmental impact statements prepared for infrastructureprojects over the past three decades shows that infrastructure has recognizablepolitical and cultural asset value as well, although it may be that the concept of “socialcapital” can encompass these components of value. Table 5 illustrates thecomponents of value that might be attributed to infrastructure facilities and monitoredand reported within the IIMS.

In the end, the IIMS must accommodate the interests of diverse stakeholders in aregion’s infrastructure’s performance. The responsible agency, users, and neighborsof the infrastructure system have varied views on what comprises good performance.Considering roads, for example, residents of an area want peace and quiet, no throughtraffic, and no disruptions to their own access. Groups concerned aboutenvironmental protection may prefer that everyone take transit or, better still, reducetheir travel. The agency responsible for roads wants to meet these demands while


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controlling costs, within the constraints of capital and operating budgets, whilesatisfying the demands of elected officials. All have a stake in judging infrastructureperformance.

If good performance has something to do with obtaining the greatest possiblebenefit from infrastructure, then the public-works asset manager must contend withall components of the public’s capital, to the extent that capital is deployed in orinfluenced by that infrastructure. As GIS and a variety of other new tools enhancemanagers’ abilities to face this continuing challenge, we move progressively closer toimplementing the comprehensive IIMS, but there is much still to be done.

Table 5. Varieties of capital embodied in public-works infrastructure assetsVarieties of capital Example 1

Bridge (e.g., Golden Gatein California)

Example 2Storm-drainage sewer

system

Example 3Data-cable network

Cultural • Symbolic significancefor city and region,represented in visual artsand literature

• (Likely minimalinfluence)

• Enables access to valuedinformation andcommunication

Economic • Structure has resourcevalue and replacementcost

• Reduces time and directcosts of travel, possiblycaptured by toll charges

• Real-estate values areenhanced by access orreduced by traffic effects

• Structure has resourcevalue and replacementcost

• Real-estate values areenhanced by effectivedrainage protection

• Structure has resource valueand replacement cost

• Necessary prerequisite forinformation-service,entertainment sales

Environmental • Traffic influences airquality

• Structure becomes partof landscape

• Structure may influenceslope stability, surfaceand groundwatercharacter

• Structure and use mayinfluence flora, fauna

• Structures mayinfluence slopestability, surface andgroundwater character

• Structures and use mayinfluence flora, fauna

(Likely minimal influence)

Political • Shifts growth patternsand coalitions

• Development may entaillong-lived obligationsand enmities

• Development andfunction may entailobligations andenmities

• Shifts communicationpatterns and coalitions

• Development and functionmay entail obligations andenmities

Social • Access may buildcommunity

• Distributions of benefitsand dis-benefits maystrengthen conflicts

• Disparate drainageconditions inneighborhoods mayaggravate communityconflicts

• Access and use may buildcommunity or aggravatesense of “haves” vs. “havenots”

8. References

Anthony, Robert N, (1964), Management Accounting: Text and Cases, Third edition,Homewood, IL, Irwin.


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Coleman, James S., (1990), Foundations of Social Theory, Cambridge, MA, BelknapPress, See especially Chapter 12.

Finney and Miller's (1971), Finney and Miller's Principles of Accounting: Advanced ,Sixth edition, Englewood Cliffs, NJ, Prentice-Hall.

Gandal, Neil, (1994), “Hedonic Price Indexes for spreadsheets and an empirical testfor network externalities”, RAND Jour. of Economics, Vol. 25, No. 1, pp. 160-170.

Haas, R., R. Hudson and J. Zaniewski, (1994), Pavement Management Systems,Malabar, FL, Krieger Publishing Company.

Jones, Leroy P, (1991), Performance Evaluation for Public Enterprises, DiscussionPaper 122, Washington, DC, The World Bank.

Lee, Kyu Sik, J. Stein, and J. Lorentzen, (1986), Urban Infrastructure andProductivity: Issues for Investment and Operations and Maintenance,Washington, DC, World Bank.

Lemer, Andrew, (1996 “Infrastructure Obsolescence and Design Service Life.”Journal of Infrastructure Systems, Vol. 2, No. 4, pp. 153-161.

Lindsey, Greg, (1994), “Planning and Contingent Valuation: Some Observations froma Survey of Homeowners and Environmentalists,” Jour. of Planning Educationand Research, Vol. 14, pp. 19-28.

McHarg, Ian L, (1969), Design With Nature, Garden City, NY, Natural History Press.Measuring (1995), Measuring and Improving Infrastructure Performance, Committee

on Measuring and Improving Infrastructure Performance, Board onInfrastructure and the Constructed Environment, Washington, DC, NationalAcademy Press.

Ostrom, Elinor, Larry Schroeder, and Susan Wynne, (1993), Institutional Incentivesand Sustainable Development: Infrastructure Policies in Perspective, Boulder,Westview Press.

Rubenstein, Daniel Blake, (1994), Environmental Accounting for the SustainableCorporation: Strategies and Techniques, Westport, CT, Quorum.

Documents

Progress Toward Integrated COISE