Fundamentals of Asset Management Nat Coley, Economic Analysis Program FHWA Office Of Asset Management

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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 toimprove
  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?
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
  last
• longer
• Growing Congestion
• What can we do to reduce the
• inconvenience of congested roadways?
• Growing Traffic Volume
• What can we do to curb the increasing levels of
  traffic?
• Increasing Legislative Oversight
• Need to respond to pressure to be more
  transparent and
• accountable

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Asset Management Principles
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Focus of Asset Management
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Transportation Asset Management
RESOURCES
Capital Improvement
Preservation
Operations
Safety
Other
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A Resource Allocation and Utilization Process
Funding Levels
Policy Goals and Objectives
Customer Input
Analysis of Options and Tradeoffs
Resource Allocation Decisions Financial Staff
Equipment Other
Program and Service Delivery
System Condition and Service Levels
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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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Asset Management Can Support Financial Performance

• 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 the
• government.

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Asset Management Can Support Financial Performance

• 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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Proactive Role in Policy FormulationExample
MassHighway

• Governor initiated a Fix It First program
  focused on reducing structurally deficient (SD)
  bridges. Initially, resources would be allocated
  to fix current SD bridges

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Proactive Role in Policy FormulationExample
MassHighway (continued)

• Further analysis indicated that the number of SD
  bridges would increase over time with focus only
  on fixing current SD bridges

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Proactive Role in Policy Formulation
Funding Levels
Policy Goals and Objectives
Customer Input
Analysis of Options and Tradeoffs
Resource Allocation Decisions Financial Staff
Equipment Other
Program and Service Delivery
System Condition and Service Levels
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Proactive Role in Policy FormulationExample
MassHighway (continued)

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

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Tradeoff AnalysisWhat is a Program Tradeoff?
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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
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
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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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Performance Measures are Critical
Funding Levels
Policy Goals and Objectives
Customer Input
Analysis of Options and Tradeoffs
Resource Allocation Decisions Financial Staff
Equipment Other
Program and Service Delivery
System Condition and Service Levels
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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

• Maintenance
• 110 improvement in on-time delivery
• 51 improvement in on-budget delivery

• From FY 2001 to FYTD 2007
• Construction
• 345 improvement in on-time delivery
• 74 improvement in on-budget delivery

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Establish Performance TargetsExample Analyze
Resource Allocation Scenarios
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Establish Performance TargetsExample Analyze
Resource Allocation Scenarios
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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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ExamplePavement Preservation
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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?

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Management Systems

• All state DOTs have some form of pavement and
  bridge management systems
• Selected agencies have other management systems
  and analytic tools tunnels, safety hardware,
  traffic signals, culverts, etc.
• Management system uses
• Manage an inventory of assets
• Monitor condition and performance
• Perform engineering and economic analysis
• Determine budget needs and expenditures
• Determine what is working well and where work is
  needed
• Major 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 results
• Quantification of the benefits of addressing
  bridge needs and the increased cost of deferring
  needed work
• Determine the most cost-effective way to maintain
  the bridge inventory

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Other Management Systems

• Maintenance Management Systems
• Combines asset inventories, work planning, and
  work orders
• Many products exist in the market
• Culvert Management Systems
• Alabama, Maryland, Minnesota, and Shelby County
  case study
• Many adapt their BMS for use with culverts
• Adapt maintenance management systems
• Home-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 models

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 Kelvin
As a general rule, the most successful man in
life is the man who has the best information.
Benjamin Disraeli
Data 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
Data quality issues
Data Rich, Information Poor Syndrome
Shrinking resources, growing needs
Need for greater accountability
Data Business Plans
Technology Advances
Increase understanding of data value
Better payoff from IT investments
Support for data programs
Maximize use of existing data
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Data Plans Delivering Value
Established need, sound measurement methods,
precise definition, fit with other data
Design
Efficient and sustainable methods using current
technologies
Collect
Validate
Process to ensure accuracy
Document
Provide metadata for users and integrators
Store
Protect data security and integrity, enable access
Integrate
Link to other data sets
Provide access to meet user needs downloads,
reports, maps
Access
Use to support decisions, meet reporting
requirements, etc.
Use
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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 group
• The Self Assessment in Chapter 3 of the Asset
  Management Guide can help identify greatest
  opportunities for improvement

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Developing a Plan
No single correct approach to getting started
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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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FHWA Office of Asset Management

• Three Teams
• Construction 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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FHWA Office of Asset Management

• 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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FHWA Office of Asset Management

• 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 Coley
• FHWA Office Of Asset Management
• Washington, DC
• NColey_at_dot.gov
• 202-366-2171