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Asset Sustainability Index: A Proposed Measure for Long-Term Performance

Chapter 9: Methods for Calculating Need

The case studies and examples cited in this report came from large State transportation agencies that have mature, sophisticated asset management systems. However, such systems are not required to generate sustainability ratios, particularly for smaller governments that manage smaller roadway networks. Credible sustainability ratios could be produced using at least three methods, two of which do not require commercial management systems. Although, those management systems are highly desirable they are not mandatory to produce sustainability metrics. Lack of them should not preclude a government agency from the ability to generate a credible asset sustainability index or its related ratios.

At least three methods for generating asset sustainability metrics will be described very generally. These descriptions are not intended to provide step-by-step guidance but instead only to illustrate that currently such methods are in use in the United States and have routinely produced the inputs that could be used to generate an ASI. The three methods are:

Use of Management Systems

Among the many advantages of modern pavement, bridge and maintenance management systems is their ability to produce relatively quickly a number of credible investment scenarios. They can produce pavement, bridge or maintenance programs that can be iterated on major criteria such as the amount of available revenue, the desired level of service, by treatment priorities or by combinations of the three. Such flexibility and speed can greatly assist programming analysis that could produce metrics such as those that feed sustainability metrics.

It is beyond the scope of this report to describe in detail the operating of modern management systems or to describe the many types of iterative analysis they can produce. Very briefly, the management systems are based on the following key inputs:

These kinds of outputs allow establishment of the needed investment that form the denominator of the sustainability ratios.

Despite the sophisticated computer analyses these systems produce, they still are reliant on the judgment of the agency subject matter experts for decisions on key parameters. One such parameter is how much pavement rehabilitation and replacement to realistically include in the "need" estimate. As noted in Chapter 1, thousands of lane miles of U.S. freeways have pavement structure more than 30 years old and which in many cases would warrant rehabilitation or replacement. Totaling them all in a need estimate would produce very large estimates that would dwarf credible estimates of available revenue. Engineering and economic judgment should temper the need estimate. Otherwise, the sustainability ratios are unlikely to withstand scrutiny from legislators and other policy makers.

Table 40: 10 year bridge investment need.
2012-2021 Estimated Bridge Needs
Treatment TypeTreatment Cost
Preservation$1,101,998,128.20
Rehabilitation$491,352,834.35
Replacement$2,324,800,926.00
Total$3,918,151,889.55

Table 40 is the product from one State's bridge management system regarding the needed level of investment by treatment category for the State to sustain its bridge condition targets for the next decade. Such estimates greatly facilitate the generation of the sustainability ratios and are typical of the type of estimates the management systems can produce.

Inventory-Based Estimates

Another way to estimate the needed levels of investment could be called an "inventory based method" because it relies upon applying deterioration curves to existing inventories of assets and using the results to predict needed treatments, and the treatments' costs.

Table 41: Example of pavement need estimate.
Pavement Sections Length Condition Treatment Cost/ Lane Mile Project Cost Projected Condition Remaining Service Life (Years)
00.00 - 5.255.2585Preventive Maintenance$45,000$472,5001006
5.25 - 11. 406.1555Resurfacing, 10% Full Depth Repairs$100,000$1,230,00010012
11.40 - 18.507.190None$0$0908
18.50 - 25.006.566Resurfacing$90,000$1,170,00010012
Total25   $2,872,500  

Table 41 illustrates a simplified type of analysis for the sections of one route. Based upon the conditions, the appropriate treatments are assigned to the pavements. The pavement rated 85 is slated for preventive maintenance, the one at 55 is slated for selected full depth repairs and resurfacing while the one at 66 is scheduled for resurfacing. The pavement at 90 is not scheduled for any treatment in this year. The treatment costs are estimated from unit costs and the predicted pavement conditions after treatment are shown. From the pavement conditions, the remaining service life until next treatment is predicted. The prediction can be based on formal deterioration curves, engineering judgment or a combination of the two.

This type of analysis can occur manually for a small network or through a combination of automated and manual efforts for a larger network. Such an approach is used routinely by agencies that lack management systems. The approach works for smaller networks but lacks the ability to run scenarios and iterations that can be performed in the more sophisticated management systems.

The inventory based method requires substantial manual effort to compile the network-wide information. It also lacks the sophisticated output systems to generate the standard reports that help to explain the scenarios. However, when such systems are supported by information technology staffs they have been used to produce meaningful asset management programs. While they have some disadvantages compared to the commercial management systems, they do provide transparency to the district personnel and others who can produce the inventory-based scenarios. Key inputs such as current conditions, estimated effect of treatments and estimates of remaining service life are clearly evident and not generated from "black box" analyses that are not widely understood.

The simple analysis in Table 41 relates to only two lane pavements. Expanding the analyses to include all bridge, multi-lane pavements and maintenance needs clearly requires substantial levels of effort. The level of effort they require explains the attractiveness of the formal computerized management systems and explains their expanded use in recent decades. As shown, however, in the Ohio case studies, some States have produced maintenance management processes by basing maintenance needs upon manually collected inventories of maintenance items. Such approaches could be replicated, particularly for smaller roadway networks.

Depreciation Method

A third way to calculate need would be through straight-line depreciation such as used for the GASB 34 financial reports. The GASB 34 Implementation Guide allows use of modified or composite deterioration methods in order to lessen the financial burden of reporting. Composite methods refer to depreciating groups of similar assets using the same deterioration rate. For instance, if bridges are determined to have a useful life of 50 years, each year one-fiftieth of the value of the bridge inventory is calculated as depreciation. The examples used in the GASB 34 Implementation Guide are provided primarily for determining asset valuation. They help determine the current year values of individual assets each of which was built over different years. However, the logic also can be used to determine annual needed levels of investment in the simplest scenarios for determining sustainability ratios.

Table 42: Bridge depreciation costs.
Estimated Useful Life
Bridge Cost50 Years
(2% annually)
Annual
Depreciation
$2,000,000 $40,000
$1,000,000 $20,000
$500,000 $10,000
$1,500,000 $30,000
$1,800,000 $36,000
$2,100,000 $42,000
$750,000 $15,000
$1,250,000 $25,000
$900,000 $18,000
$1,750,000 $35,000
Annual Total $271,000

In Table 42 above, the local government owns 10 bridges, each with the original bridge cost shown. Applying a 50 year service life to each structure results in annual depreciation of 2 percent. The amount of annual depreciation is shown for each structure and totaled as $271,000. Therefore under a simple straight-line scenario, the $271,000 provides the local government with an estimated amount of preservation and maintenance it should budget in order to sustain its structures. Obviously, the amount of outlay would vary considerably year to year as specific maintenance treatments are required over an inventory of different bridges, each of a different age and condition and each experiencing different loadings. However, as a number to be used as a 10-year average expenditure, the $271,000 would be consistent with the GASB 34 guidance. It could be used by a local government to inform decision makers of the order-of-magnitude levels of bridge investments necessary to sustain the community's bridge network.

Table 43: Useful service life.
Estimated Useful Life
Component 
Bridges50
Roadways25
Curbs/gutters15
Street lights15
Traffic signals18
Street Signs10

Table 43 from the GASB 34 Implementation Guide illustrates examples of estimated useful lives by asset class that could be used to calculate annualized depreciation rates. As the GASB 34 guidance notes, agencies are free to add additional categories of assets, and to subdivide them into more classes to provide more robust depreciation schedules.

Although simple in concept, this type of straight-line depreciation is used in the annual financial reports of some major turnpikes to satisfy the GASB reporting and to satisfy bond holders. Although it lacks the sophistication and detail of the other types of analysis, it could be used as a beginning method to develop the needed levels of investment that would serve as numerators in sustainability metrics.

Updated: 03/26/2013
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