Economics in Asset Management
The New York Experience

How did NYSDOT Build Tradeoff Analysis Capabilities?

Overall Approach

In 1997, NYSDOT created an internal task force to prepare a concept plan for advancing the formal implementation of TAM principles within the department. The task force prepared a document called "A Blueprint for Developing and Implementing an Asset Management System," which was released in April 1998. This nationally recognized blueprint strongly emphasized the need to use economic tradeoff analysis in developing a TAM program. In the document, the task force observed that "most transportation agencies are managing individual assets without taking a comprehensive view among these assets and evaluating all tradeoffs that must be made to ensure a program of projects results in the most benefit to the customer. Quantification of these tradeoffs is at the heart of Asset Management methodology."

In 2001, NYSDOT began development of an analysis tool that will provide a technical platform for making tradeoffs at the program level. Four pre-existing management systems that support the department's goal areas-pavements, bridges, safety, and mobility-provide input to this new tool, the TAM Tradeoff Model.

Stovepipe Management Systems

Basic, network-level, transportation management systems were established at NYSDOT as early as the 1960s. Each system is staff-developed and is unique to New York. Over time, improvements continued to be made, including the use of more sophisticated database management technology and the addition of economic analysis into asset class-level and project-level evaluation of investment candidates. NYSDOT's current transportation management systems apply to the following goal areas:

• Pavement Management: NYSDOT uses automation applications for its pavement inventory, inspection, and condition-needs forecasting. These applications were significantly refined in 1981, 1991, and 2001. The department provides project-level technical guidance to field offices on LCCA to enable more detailed evaluation of actions identified by the network-level system.

• Bridge Management: NYSDOT maintains a bridge management database and a network-level condition-needs forecasting application. The department employs formal least-cost analysis procedures in assessing bridge treatment alternatives, such as rehabilitation versus replacement.

• Safety Management: NYSDOT's Highway Safety Improvement Program uses crash data to identify statistically high accident locations for all State highways. High accident locations are investigated, and alternative countermeasures analyzed. The alternative with the highest benefit-cost ratio is programmed, either as a standalone project or as part of an infrastructure preservation project.

• Mobility: NYSDOT's Congestion Needs Assessment Model (CNAM) is used to identify and forecast the times, locations, and magnitudes of vehicular congestion on the State highway system. The model calculates "excess user cost" of recurring and incident-related delay for both automobiles and freight carriers. CNAM also contains a project-level, benefit-cost analysis module to evaluate strategies such as travel demand management actions and transportation system management activities.

The four goal areas shown in the pie chart on page 9 constitute 93 percent of the $1.3 billion State Transportation Improvement Program for 2003 for highways operated by NYSDOT.

TAM Tradeoff Model

The effort to develop the TAM Tradeoff Model resulted in an operational prototype by the end of 2002. This model draws available economic and performance data from almost 2,000 investment candidates identified by the separate management systems. The tradeoff model ranks these projects both within and among program areas based on benefit-cost ratios. Implementing projects with the highest benefit-cost ratios maximizes benefits to highway users.

The common measure of benefits in the TAM Tradeoff Model is "excess user cost." Excess user cost is defined as the cost to travelers that exceeds a level (or threshold) deemed to be reasonable by NYSDOT. For instance, travel time at level of service D or better would be deemed reasonable-but extra travel time associated with anything worse than level of service D would be excessive. In the model, the annualized benefit of a project is equal to the dollar value of the excess user cost the project eliminates in its first year of implementation. The cost of the project is the agency's investment cost, annualized based on the expected service life of the project and the discount rate specified by NYSDOT.

The power of the TAM Tradeoff Model is its ability to assess the cost-effectiveness of treating groups of assets taken together, such as facilities in a corridor. It is used as a first cut in program development. However, the TAM Tradeoff Model is intended only to provide a network- or program-level assessment of investment priorities, cutting across stovepipe system results.