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Publication Number:      Date:  May/June 1999
Issue No: Vol. 62 No. 6
Date: May/June 1999


Does Asset Management Deserve A Closer Look?

by Dena M. Gray-Fisher

Does Asset Management Deserve a Closer Look?The answer to that question is a resounding "Yes!" At least that's what the board of directors of the American Association of State Highway and Transportation Officials (AASHTO) thinks. Last November, during the association's annual meeting, the board overwhelmingly approved an asset management strategic plan. The plan, developed by the AASHTO Task Force on Asset Management, outlines the activities that AASHTO plans to carry out over the next several years to help advance asset management among the organization's members.

"Asset management is more than a new management buzzword. It's a sound business philosophy that merges the use of quantitative tools with sound investment theories," said Darrel Rensink, chair of the task force and director of the Iowa Department of Transportation.

"I know there are still many questions out there about what asset management really means to the transportation industry," Rensink said. "That's exactly why the plan was developed. The activities identified in the plan will go a long way toward helping AASHTO members learn more about this business practice and its application to state transportation agencies."

Before state transportation agencies fully embrace asset management, they want and need a better understanding of its meaning, impact, and value to their organizations. Asset management is a systematic process of maintaining, upgrading, and operating physical assets. However, offering a generic definition for asset management really does little to further its understanding. What may be more beneficial is comparative illustration that examines some of the differences and similarities between personal financial management and asset management. Although the comparison may be somewhat simplistic, it does offer some clarification to a complex business practice and philosophy.

For purposes of this illustration, begin by making a mental list of your personal assets - real estate, cash, income, securities, furniture, fixtures, and vehicles. As you add to the list, it should start to become apparent that your personal assets are not all that different from those managed by state transportation agencies.

Now consider the decisions you've faced regarding your personal finances. For example, we've all wondered at one point in our lives whether we should build new, maintain the property we already have, or lease/rent. We've had to figure out how much money we have at our disposal and then make decisions about how far it can be stretched. We've also thought about the ways we could allocate our resources to give us the best return on our investment. Again, you quickly discover these investment dilemmas are not that different from the decisions made by state transportation officials.

Despite these common denominators, there are also some notable differences. For instance, there is a striking difference in the sheer numbers and values of assets maintained by states and those managed by individuals. There is also a stark difference between areas of responsibility.

Most often, our personal assets are fairly limited. That makes them relatively easy to inventory and value. On the other hand, transportation agencies are responsible for hundreds of thousands of assets, many of which have not been inventoried, and most have no assigned values.

Regarding areas of responsibility, in our personal lives, we have a duty to protect the financial and social well-being of ourselves and our families. In state government, however, the task of making sound investment decisions that affect the public at large can be an awesome responsibility. This difference alone should magnify the benefits of more states resolving to adopt asset management as a way to aid in investment decisions.

What's Happening in 1999?
AASHTO's plan calls for several activities in 1999:

  • Workshops are being conducted to expand understanding and application of asset management.
  • A scanning tour is being planned to learn from national and international practitioners.
  • A guide on asset management is being developed (a non-prescriptive, "how-to" resource for state agencies).
  • Collaboration with FHWA is continuing.
  • Additional input is being solicited from the private sector to gain from their experience.
Asset management - a disciplined investment approach.

Assest management and transportation.In our personal lives and in the private business sector, decision-makers have at their disposal analytical tools and financial models necessary for performing periodic investment analysis and performance evaluation. Decision-makers understand the risks and the relationships of investments to return. They practice asset management - a disciplined investment approach. What we know is that asset management has worked well and continues to work well for the private sector. The activities that AASHTO is embarking on will help states discover just how well it can work in the public sector.

Dena M. Gray-Fisher is the director of the Office of Media and Marketing Services for the Iowa Department of Transportation. She wrote this article on behalf of the AASHTO Task Force on Asset Management.



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