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Volume II: Guide for Performance Measure Identification and Target Setting 2.5 Designing a Performance Measurement Approach in Support of Asset Management: Key Considerations The guidelines listed above can be used to address the following questions: Content and Scope--Is our current set of performance measures sufficiently broad and inclu- sive to cover important goal areas and perspectives? Integration and Alignment--Do we have measures that are suitable for use at different levels of our organization, and are these measures sufficiently integrated and aligned to ensure con- sistency across units and efficiency in use of performance data? Support for Making Choices--Do we have measures that help us make choices among options for addressing transportation needs using an objective and unbiased approach? Support for Resource Allocation--Do we have measures that we can use for performance-based resource allocation and target-setting? Each of these questions is discussed below. Content and Scope Performance measures are needed that: Cover key policy goals and objectives, including asset preservation, service to transportation sys- tem users, and (to the extent possible) broader economic, social, and environmental concerns; Reflect physical asset condition, the extent to which transportation facilities are serving their intended functions, and the ways in which customers perceive and value the services that are being provided; Provide a long-term, facility life-cycle view in order to assist with evaluation of preservation strategies and capital versus maintenance tradeoffs (e.g., a recently resurfaced and very smooth pavement may actually be at the end of its useful life from a structural point of view; therefore, measures of structural condition, remaining life, or value provide a more long-term perspective than roughness); and Track program delivery quality, schedule, and budget adherence. Figure 2 illustrates a structure for assessing the coverage of performance measures in an agency. Columns indicate that performance measures should be in place to cover asset condition; asset ser- vice and function; and the delivery of projects and services to operate, preserve, and improve assets. Rows indicate the different views to be reflected by performance measures. The agency view includes measures required for good stewardship of the transportation system--indicators of con- dition, status, critical deficiencies, and needs. These agency measures are defined with considera- tion of both the customer view and the societal view. The customer view reflects what transportation 7

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Volume II: Guide for Performance Measure Identification and Target Setting Figure 2. Scope and Coverage of Performance Measures for Asset Management Asset Service and Asset Condition Function Delivery System Health Deficiencies Quality Physical Condition Efficiency Efficiency Remaining Life Effectiveness Activity Costs Agency View Remaining Value Benefit-Cost Accomplishments Preservation Need/Cost Improvement Schedule and Budget Need/Backlog Adherence Use of Resources Customer Accessibility, Travel Time and Cost, Delay, Reliability, Safety, Comfort, Convenience View Perception/Understanding/Satisfaction/Value Economic Health Security Societal View Environmental Quality Equity system users experience as a result of asset condition and service levels and delivery of projects and services. The societal view reflects broader economic, social, and environmental impacts that are also impacted by asset condition, service, and delivery. These measures can vary widely, but should be well-aligned with established agency policy goals and objectives. Integration and Alignment Effective use of performance measures requires that the measures be tailored to the specific decision contexts within which they will be used. Performance measures must be suitable for use by different audiences (i.e., external customers and stakeholders, political leaders, agency executives and line managers, and agency technical staff) and for different types of decisions (i.e., long-, medium-, and short-term; systemwide, corridor/subarea, and location-specific). Integration of performance mea- sures within the organization involves tailoring measures for different decision contexts while at the same time ensuring consistency across different levels. For any given policy area (e.g., pavement preservation), there is typically a large set of measures required for use at low levels of the organization (e.g., rut depth, roughness, and cracking). This can be translated into a small set of measures required by managers for making resource allocation deci- sions (e.g., percent poor pavements or percent remaining value). There is also typically a need to "roll up" location-specific measures for use at corridor, district/regional, subnetwork, and sys- temwide levels. Ideally, related measures that are required for different purposes can be derived from a relatively focused set of monitored or predicted data items and nested together to ensure ver- tical consistency. In this way, even though each part of the organization may be looking at a differ- ent technical form of the measure, they all get a consistent picture based on the same underlying data, and the overall performance-monitoring costs are kept to a minimum. The overall performance 8

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Volume II: Guide for Performance Measure Identification and Target Setting measurement and monitoring program should be designed to maximize efficiencies and provide needed support information. Support for Evaluation of Options and Priority Setting Asset management best practice implies use of performance measures for evaluation of different options for meeting objectives and for prioritization of alternative investments. This kind of analy- sis can take place in the context of a long-range planning effort, a corridor or regional study, a pro- ject development process, or a development process for a capital or maintenance program. Perfor- mance measures should be used to make the following types of tradeoff decisions: Alternative preservation strategies--for example, spending more on preventive maintenance at the right time in a facility's life cycle to increase asset life and minimize life-cycle costs. This deci- sion implies the need for predicting values of performance measures over the asset life cycle and selecting performance measures that capture the structural capacity, remaining life, or value of the asset, in addition to performance measures that reflect the current level of service to the customer. Operational versus capacity options--for example, intelligent transportation systems (ITS) investment versus capacity expansion. This decision implies the need for performance measures that focus on travel time, delay, and reliability. Modal options--for example, rail versus highway options for improving freight mobility. This decision implies the need for mode-neutral measures focusing on end-to-end shipment cost, time, and reliability. Delivery options--for example, packaging multiple projects together within a corridor versus timing work based on other factors. This decision implies performance measures that consider work zone costs associated with alternative delivery schemes. In several of these contexts, economic measures (benefit/cost or cost-effectiveness) are appropriate and useful. Support for Resource Allocation Tradeoff Analysis and Targets Performance measures must be suitable for use within a resource allocation tradeoff process involv- ing (1) understanding the current or baseline value of the performance measures, (2) projecting how the values of the measures would change under different investment scenarios (i.e., different allo- cations of a given budget across program categories), and (3) setting performance targets that reflect a realistic and balanced allocation of resources that best meets established objectives. Although true tradeoff analysis requires all three of these items, accurate trend information based on multiple cycles of condition assessments (item 1 above) can greatly improve resource allocation while the sys- tem capabilities required for items 2 and 3 are being developed. Support for tradeoffs implies that a clear causal link can be established between an allocation of resources and the observed value of a performance measure and that, for any given allocation of 9

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Volume II: Guide for Performance Measure Identification and Target Setting resources, the resulting value of the performance measure can be credibly forecast. Many perfor- mance measures are impacted by a variety of factors outside of a particular agency's control. For example, congestion levels depend not only on an agency's investment to widen roads and improve operations, but also on factors such as overall growth patterns, individual driving patterns, and gasoline prices. Therefore, there is often a need to base performance tradeoff analysis on simulated results from analytical tools. Such tools can be used to explore the likely performance impacts of a set of transportation investments under different assumptions about exogenous factors. Tools and techniques for producing forecasts of performance for a given investment level depend on having good predictive methods that are based on credible data. Therefore, ongoing tracking of asset condition over time (to support deterioration modeling), actual work activity costs (to sup- port cost modeling), impacts of implemented strategies, and other factors affecting performance (e.g., traffic trends) are important elements of an overall performance measurement program for asset management. When it is not possible to track outcomes (due to expense or difficulty of obtain- ing this information in a timely enough fashion to support decision making), output-oriented per- formance measures can be used as proxies for the outcomes of interest. A mix of output- and outcome- oriented measures can provide useful feedback for both short- and long-range decision making. The next section of this guide presents a step-by-step process for selecting performance measures based on the considerations discussed above and using them to make well-informed resource allo- cation decisions. 10