# Presentation: 712927

## Asset Management as a Tool for Managing Highway Assets

**Asset Management as a Tool for Managing Highway Assets**

- Sue McNeil
- Professor Carnegie Mellon University
- Visiting Professor
- University of Minnesota

## Outline

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

## Asset Management 

** ****. . . Combines the use of sound engineering principles, accepted business practices, and economic theory to improve the decision-making process**

**Asset Management **

## Asset Management versus Managing Assets

- History
- Survey - Status of Asset Management in the United States.

## 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

## 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

## Status of Asset Management in the United States

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

## 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

## 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

## Workshop Agenda

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

## SURVEY RESPONSES

- Received responses from states in yellow

## SURVEY RESPONSES(CONTINUED)

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

## 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)

## 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)

## SURVEY RESPONSES(CONTINUED)

## 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.

## SURVEY RESPONSES(CONTINUED)

- States Attempting Asset Valuation -- 12
- four methods      --	1	(La)
- three methods --	7
- two methods   --	2
- one method       --	2

## 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.

## SURVEY RESPONSES(CONTINUED)

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

## 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

## Benchmarks

- Benchmarks

- 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

***Private Sector***

## Benchmarks

- Benchmarks

- 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

***Public Sector***

## Benchmarks

- Benchmarks

- 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

***Quasi-Governmental Sector***

## How Is It Being Done?

- How Is It Being Done?

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

## Goals

- 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

**Notes:**
Enhance decisionmakers’ knowledge both of inventory and of asset value
Instill a sense of ownership regarding assets at the operator/plant manager level
Recognize data as a “corporate asset”
Lend credibility in decisionmaking
Encourage decisionmakers and managers to “think globally, but act locally”
Provide opportunities to reevaluate standards
Provide a strategic implementation perspective by:
replacing turf battles with teamwork,
including training and communications,
recognizing people as assets,
including system user needs.

## Attributes

- Attributes

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

## 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

## 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

## 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

## 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

## Consequences of Poor Management

- Silver River Bridge
- National Bridge Inventory
- Miami-Dade Water Sewer Department
- Chicago Tunnel System

**Florida**

**Dade County**

**Miami**

- Kinzie

- Canal

- Chicago River

**Tunnel **
**Ruptured**

**Plugs**

**Tunnel**

## Components of an AMS

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

## Framework for AMS

## Asset Inventory System

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

## Location/Asset Referencing System

- Geographic location
- Reference system
- Identifiers for equipment

## Central Database

- Contains inventory information
- Facilitates exchange of information

## Analysis Modules

- Forecast of Future Conditions
- Impact Analysis of Various Scenarios

## Reporting Modules

- Presentation of Inventory Information
- Presentation of Analysis Results
- Formats:
- Graphics
- Tables
- Maps

## 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

## Three-Dimensional Matrix Structure

## Issues In Asset Management

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

## Hurdles to Asset Management

- Technical
- Institutional
- Implementation

## 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

## Systems Approach (cont’d)

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

## Benefits

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

## 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

## Future Issues

- Strategic investment analysis tools
- Training
- Shift in management approaches
- Knowledge in multiple disciplines (engineering, business, economics)
- Changes in technology

## Formulas for Success

- 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