Nathaniel Coley, Director, Office of Asset Management, FHWA


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Nathaniel Coley, Director, Office of Asset Management, FHWA

  1. 1. Fundamentals of Asset Management Nat Coley , Economic Analysis Program FHWA Office Of Asset Management
  2. 2. Topics <ul><li>Definition and Understanding Asset Management </li></ul><ul><ul><li>Importance of asset management and what it can do for us </li></ul></ul><ul><ul><li>Explain the role we play in implementing asset management </li></ul></ul><ul><li>Methods and Tools </li></ul><ul><ul><li>Apply the principles of asset management </li></ul></ul><ul><ul><li>Define steps that agencies can take to improve asset management </li></ul></ul><ul><ul><li>Identify available tools that can assist in applying asset management </li></ul></ul><ul><ul><li>Identify performance measures that are useful in an asset management context </li></ul></ul>
  3. 3. 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.
  4. 4. Why Transportation Asset Management? <ul><li>“ 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.” </li></ul><ul><li>  </li></ul><ul><li>Neil J. Pedersen, Administrator, Maryland State Highway Administration </li></ul><ul><li>and Vice-Chair, AASHTO Subcommittee on Asset Management </li></ul>Transportation Asset Management
  5. 5. Why is it Important? <ul><li>Increasing congestion – between 1993 and 2002 </li></ul><ul><ul><li>24% increase in passenger car VMT </li></ul></ul><ul><ul><li>32% increase in single-unit trucks VMT </li></ul></ul><ul><ul><li>39% increase in combination trucks VMT </li></ul></ul><ul><ul><li>Only a 2% increase in lane miles </li></ul></ul><ul><li>In the next 20 years </li></ul><ul><ul><li>VMT will increase by 50% </li></ul></ul><ul><ul><li>Freight tonnage will nearly double </li></ul></ul><ul><li>All of this is occurring on an aging network and in a fiscally constrained environment </li></ul>
  6. 6. What Can we do about our situation? <ul><li>Aging Infrastructure Networks </li></ul><ul><ul><li>Need to make what we have work better for us and last </li></ul></ul><ul><ul><li>longer </li></ul></ul><ul><li>Growing Congestion </li></ul><ul><ul><li>What can we do to reduce the </li></ul></ul><ul><ul><li>inconvenience of congested roadways? </li></ul></ul><ul><li>Growing Traffic Volume </li></ul><ul><ul><li>What can we do to curb the increasing levels of traffic? </li></ul></ul><ul><li>Increasing Legislative Oversight </li></ul><ul><ul><li>Need to respond to pressure to be more transparent and </li></ul></ul><ul><ul><li>accountable </li></ul></ul>
  7. 7. 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
  8. 8. Focus of Asset Management At its Core, Asset Management Focuses on Resource Allocation and Utilization
  9. 9. Transportation Asset Management Preservation Capital Improvement Operations RESOURCES Safety Other
  10. 10. 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 Preservation Operations Capacity Expansion
  11. 11. Benefits of Asset Management <ul><li>Extend resources </li></ul><ul><ul><li>Make our assets last longer </li></ul></ul><ul><ul><li>Make your dollars do more for you </li></ul></ul><ul><li>Get more money </li></ul><ul><ul><li>Make the case for funding and have the executives </li></ul></ul><ul><ul><li>and legislature understand the needs </li></ul></ul><ul><ul><li>Have your partners support you and communicate the </li></ul></ul><ul><ul><li>case </li></ul></ul><ul><li>Communication, accountability, and credibility </li></ul><ul><ul><li>Improved communication and collaboration within </li></ul></ul><ul><ul><li>agency, across agencies, and with customers </li></ul></ul><ul><ul><li>Improved credibility and accountability for decisions </li></ul></ul>
  12. 12. Asset Management Can Support Financial Performance <ul><li>Governmental Accounting Standards Board (GASB)- Statement 34 </li></ul><ul><li>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. </li></ul>
  13. 13. Asset Management Can Support Financial Performance <ul><li>Governmental Accounting Standards Board (GASB)- Statement 34 </li></ul><ul><li>– the government manages the eligible infrastructure assets using an asset management system that has the characteristics set below: </li></ul><ul><li>■ Provides an up-to-date inventory of eligible infrastructure assets; </li></ul><ul><li>■ Performs condition assessments of the eligible infrastructure assets and summarizes the results using a measurable scale; and </li></ul><ul><li>■ Estimates each year the annual amount to maintain and preserve the eligible infrastructure assets at the condition level established and disclosed by the </li></ul><ul><li>government. </li></ul>
  14. 14. Asset Management Can Support Financial Performance <ul><li>Governmental Accounting Standards Board (GASB)- Statement 34 </li></ul><ul><li>– 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. </li></ul>
  15. 15. Examples of Application <ul><li>Policy Development </li></ul><ul><li>Tradeoff Analysis </li></ul><ul><li>Economic Analysis and Life Cycle Cost Analysis </li></ul>
  16. 16. Policy Development Proactive Role in Policy Formulation <ul><li>Asset Management provides an opportunity to connect POLICY to ACTION </li></ul><ul><li>Agencies need to engage policy makers during their decision-making process </li></ul><ul><ul><li>Have an impact on external bodies that shape policies </li></ul></ul><ul><ul><li>Frame and inform policy options </li></ul></ul><ul><li>Communicate implications of funding decisions </li></ul><ul><li>Reinforce accountability </li></ul><ul><li>Same principles can be applied to long-range planning </li></ul>
  17. 17. Proactive Role in Policy Formulation Example – MassHighway <ul><li>Governor initiated a “Fix It First” program focused on reducing structurally deficient (SD) bridges. Initially, resources would be allocated to fix current SD bridges </li></ul>Current SD Bridges Number of SD Bridges
  18. 18. Proactive Role in Policy Formulation Example – MassHighway (continued) <ul><li>Further analysis indicated that the number of SD bridges would increase over time with focus only on fixing current SD bridges </li></ul>Current SD Bridges SD Bridges in Future Due to Deterioration Total Number of SD Bridges Number of SD Bridges
  19. 19. Proactive Role in Policy Formulation 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 Preservation Operations Capacity Expansion
  20. 20. Proactive Role in Policy Formulation Example – MassHighway (continued) <ul><li>New policy balances preservation and replacement needs. New budget includes increased bridge funding to address current SD bridges and manage deterioration </li></ul>Manage deterioration Reduce the number of current SD bridges Number of SD Bridges
  21. 21. 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
  22. 22. Tradeoff Analysis Example
  23. 23. Economic Analysis and Asset Management <ul><li>Mechanism for evaluating and comparing long-term costs and benefits of alternatives </li></ul><ul><li>Economic analysis results </li></ul><ul><ul><li>Help structure project-level tradeoffs </li></ul></ul><ul><ul><li>Quantify & Qualify costs and benefits to the agency and to customers </li></ul></ul><ul><ul><li>Support repeatable and transparent project justification and prioritization </li></ul></ul><ul><li>Management systems can help with economic analysis </li></ul>Adam Smith
  24. 24. Economic Fundamentals <ul><li>Life-Cycle Comparisons </li></ul><ul><li>Inflation </li></ul><ul><li>Time Value of Resources </li></ul>
  25. 25. Life-Cycle Comparisons Typical Life-Cycle Profile 16 17 18 19 20 Initial Capital Cost Year Dollars Benefits Costs 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0
  26. 26. Economic Analysis Tools <ul><li>FHWA Office of Asset Management offers multiple tools to assist organizations with economic analysis </li></ul><ul><li>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 </li></ul><ul><li>STEAM : facilitates detailed corridor and system-wide economic analysis for large transportation projects </li></ul><ul><li>BCA.NET : web-based benefit-cost analysis tool to support the highway project decision-making </li></ul><ul><li>Life Cycle Cost Analysis Process & RealCost Software: performs a project alternative analysis </li></ul>
  27. 27. Benefit and Cost Elements <ul><li>Agency Cost/Benefit </li></ul>Design and Engineering Land Acquisition Construction Reconstruction/Rehabilitation Preservation/Maintenance <ul><li>User Cost/Benefit </li></ul>Delay/Time Saving Crashes/Avoided Crashes Vehicle Operating Costs <ul><li>Externalities </li></ul>Remaining Asset Value
  28. 28. Performance Measures Basics <ul><li>Performance measurement is … </li></ul><ul><ul><li>A way to link strategy to action </li></ul></ul><ul><ul><li>A process of gathering information to make well-informed decisions </li></ul></ul><ul><ul><li>A way of monitoring progress toward a result or goal (accountability is another dimension of this aspect) </li></ul></ul><ul><li>Goal of performance measurement is to align metrics to focused strategies that are achievable </li></ul><ul><ul><li>Having measures that state that one has to be good at everything is not helpful </li></ul></ul><ul><ul><li>Good measures strengthen link between strategies, actions, and results </li></ul></ul><ul><ul><li>Useful as a filter for how to respond to new initiative </li></ul></ul>
  29. 29. Performance Measures are Critical 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 Preservation Operations Capacity Expansion
  30. 30. VDOT Dashboard Performance Measures Example <ul><li>2002 – Program delivery was not good – late and over budget </li></ul><ul><li>Commissioner - “Change the culture” </li></ul><ul><li>Develop and adhere to strict definition of on-time, on-budget </li></ul><ul><li>Measuring on-time, on-budget required data on outputs </li></ul><ul><ul><li>Work accomplishments </li></ul></ul><ul><ul><li>Project schedule </li></ul></ul><ul><ul><li>Cost of work to date </li></ul></ul><ul><ul><li>Contract award amount </li></ul></ul>
  31. 31. Performance Results <ul><li>From FY 2001 to FYTD 2007… </li></ul><ul><li>Construction </li></ul><ul><li>345% improvement in on-time delivery </li></ul><ul><li>74% improvement in on-budget delivery </li></ul><ul><li>Maintenance </li></ul><ul><li>110% improvement in on-time delivery </li></ul><ul><li>51% improvement in on-budget delivery </li></ul>
  32. 32. 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
  33. 33. 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
  34. 34. Role of Preservation <ul><li>Preservation of existing assets is fundamental in any asset management approach </li></ul><ul><li>Doing the right thing at the right time to the right asset </li></ul><ul><li>Benefits </li></ul><ul><ul><li>Make existing capital investments last longer </li></ul></ul><ul><ul><li>Stretching available funding further </li></ul></ul><ul><ul><li>Reducing the frequency of costly, time consuming, traffic disrupting rehab, and reconstruction projects </li></ul></ul><ul><li>North Carolina DOT (described in the FHWA Comprehensive Asset Management Case Study) added “preservation” as an explicit budget line item to their budget </li></ul>
  35. 35. Example Pavement Preservation Time Pavement Condition Preventive Trigger Rehabilitation Trigger Optimal Timing Original Pavement
  36. 36. Applying Asset Management to Operations <ul><li>Operations broadens asset management beyond a preservation focus </li></ul><ul><ul><li>Can an ITS project achieve the same objective as a proposed capital project? </li></ul></ul><ul><ul><li>Should we “trade” a decline in pavement condition for improved capacity on an existing highway? </li></ul></ul>Analysis of Options and Tradeoffs Preservation Operations Capacity Expansion
  37. 37. Management Systems <ul><li>All state DOTs have some form of pavement and bridge management systems </li></ul><ul><li>Selected agencies have other management systems and analytic tools – tunnels, safety hardware, traffic signals, culverts, etc. </li></ul><ul><li>Management system uses: </li></ul><ul><ul><li>Manage an inventory of assets </li></ul></ul><ul><ul><li>Monitor condition and performance </li></ul></ul><ul><ul><li>Perform engineering and economic analysis </li></ul></ul><ul><ul><li>Determine budget needs and expenditures </li></ul></ul><ul><ul><li>Determine what is working well and where work is needed </li></ul></ul><ul><ul><li>Major challenge – tying management systems to the decision-making process </li></ul></ul>
  38. 38. Pavement Management Systems <ul><li>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. </li></ul><ul><li>Many Pavement Management Systems exist in the market </li></ul>
  39. 39. Bridge Management Systems <ul><li>A tool for managing a bridge portfolio for optimal results </li></ul><ul><li>Quantification of the benefits of addressing bridge needs and the increased cost of deferring needed work </li></ul><ul><li>Determine the most cost-effective way to maintain the bridge inventory </li></ul>
  40. 40. Other Management Systems <ul><li>Maintenance Management Systems </li></ul><ul><ul><li>Combines asset inventories, work planning, and work orders </li></ul></ul><ul><ul><li>Many products exist in the market </li></ul></ul><ul><li>Culvert Management Systems </li></ul><ul><ul><li>Alabama, Maryland, Minnesota, and Shelby County case study </li></ul></ul><ul><ul><ul><li>Many adapt their BMS for use with culverts </li></ul></ul></ul><ul><ul><ul><li>Adapt maintenance management systems </li></ul></ul></ul><ul><ul><ul><li>Home-grown systems exist </li></ul></ul></ul><ul><ul><li>Other states have custom developed systems (NJDOT) </li></ul></ul><ul><li>Operations Asset Management </li></ul><ul><ul><li>Tools operations asset management systems are beginning to be published and made available </li></ul></ul><ul><ul><ul><li>Traffic Operations Asset Management System (NCHRP) </li></ul></ul></ul><ul><ul><li>Identification of operations assets (FHWA document) </li></ul></ul><ul><ul><li>Signals, lighting, safety hardware, signs, others (NCHRP) </li></ul></ul>
  41. 41. Data and Data Management <ul><li>Many agencies view themselves as data rich, but information poor </li></ul><ul><li>Existing tools are largely under-utilized in most DOTs for asset management decision-making, especially predictive models </li></ul>As 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 Kelvin 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
  42. 42. 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
  43. 43. 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.
  44. 44. Moving Forward with Asset Management <ul><li>There is no one right way </li></ul><ul><li>Most important ingredient is an organizational support structure </li></ul><ul><ul><li>Identify a champion </li></ul></ul><ul><ul><li>Clearly define responsibilities </li></ul></ul><ul><li>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 </li></ul><ul><li>The Self Assessment in Chapter 3 of the Asset Management Guide can help identify greatest opportunities for improvement </li></ul>
  45. 45. Developing a Plan No single “correct” approach to getting started Step 4 Implement actions and periodically revisit plan Step 3 Develop an asset management plan with clear set of prioritized actions Step 2 Define gaps, needs, and opportunities Step 1 Establish vision and objectives
  46. 46. FHWA Office of Asset Management <ul><li>Mission </li></ul><ul><li>“ provide leadership and expertise in the systematic management of highway infrastructure assets.” </li></ul><ul><li>“ 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.” </li></ul>
  47. 47. FHWA Office of Asset Management <ul><li>Three Teams </li></ul><ul><li>Construction and System Preservation responsible for construction and maintenance program policy, technical support, and national outreach. Specific areas of responsibility include accelerated construction, transportation system preservation, and continuous quality improvement initiatives such as system preservation. </li></ul>
  48. 48. FHWA Office of Asset Management <ul><li>The System Management and Monitoring Team : responsible for developing & promoting systematic approaches to the management of highway assets. This work includes refining and advancing the use of pavement and bridge management systems and developing systems where they presently do not exist, such as for tunnels and roadway hardware. The team is made up of a Pavement Management Group and a Bridge Management Group. </li></ul>
  49. 49. FHWA Office of Asset Management <ul><li>Evaluation and Economic Investment Team </li></ul><ul><ul><li>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 relevant standards issued by the Governmental Accounting Standards Board (GASB). </li></ul></ul>
  50. 50. Thank You <ul><li>Nathaniel Coley </li></ul><ul><li>FHWA Office Of Asset Management </li></ul><ul><li>Washington, DC </li></ul><ul><li>[email_address] </li></ul><ul><li>202-366-2171 </li></ul>