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I-17 CHAPTER 2 Performance-Based Resource Allocation Responding to trends in the 1990s that placed greater empha- transportation programs. As a result, recent and ongoing sis on public-sector accountability for more effective per- research shows considerable variability in agency resource formance, state and local transportation agencies initiated a allocation capabilities and practices nationwide. number of programs such as transportation asset manage- Some agencies have the tools needed for performance-based ment, performance-based planning, management and budget- asset management, e.g., well developed statements of policy ing, and maintenance quality assurance, among others. These objectives and performance targets, modern infrastructure efforts promoted a policy-driven, performance-based approach management systems, data collection and processing proce- to managing and developing infrastructure that encour- dures to support both performance monitoring and manage- aged identification of alternative solutions, use of economic ment system application, and an organizational culture that methods (e.g., minimization of life-cycle costs and benefit/ supports strong communication and coordination horizontally cost analysis), explicit consideration of tradeoffs in program and vertically. In contrast, other agencies lack even basic ele- resource allocation, use of quality information through for- ments, such as inventories of assets and defined performance mal data collection programs, and applications of automated measures. Furthermore, a vicious cycle ensues: agencies that decision-support systems. They also promoted definition of lack the data and analytic tools needed to show a declining con- performance measures and targets based upon stated policy dition and performance of their assets find themselves unable objectives and input from public outreach. These efforts coin- to justify spending more (in staff effort as well as dollars) to cided with innovations in planning, programming, and more improve their asset management processes that would enable flexible funding in Federal surface transportation legislation them to do better, PBRA. beginning with the Intermodal Surface Transportation Effi- In spite of uneven implementation among state depart- ciency Act (ISTEA 1991), as well as growing interest in different ments of transportation, performance management has been approaches to solving transportation problems through greater evolving steadily into an effective business process that links understanding and use of transportation operations solutions organizational goals and objectives to resources and results. and associated intelligent transportation systems (ITS) technol- Performance measures, and their attendant targets, are the ogy. Documents such as the Federal Highway Administration's lynchpin in this process. They are the link connecting goals to (FHWA) Asset Management Primer; American Association specific investments. The methods, including underlying data of State Highway and Transportation Officials' (AASHTO) support systems, by which the measures and targets are estab- Transportation Asset Management Guide [a product of lished, play a critical role in the overall success of a public agency NCHRP Project 20-24(11)]; NCHRP Report 545: Tools for Asset or private company. Management Tradeoff Analyses; and NCHRP Report 551: Perfor- PBRA takes place within an overall Performance Manage- mance Measures and Targets for Transportation Asset Manage- ment Framework, depicted in Figure 2.1, which is comprised ment reinforced these approaches among practitioners. of six basic elements described in the following paragraphs. These studies laid out the concepts, procedures, and infor- mation needed for a performance-based approach to resource Establish Goals and Objectives. PBRA decisions are allocation and many state and local agencies have benefited anchored in a set of policy goals and objectives which identify from improved decision processes resulting from their adop- an organization's desired direction and reflect the environment tion and implementation. At the same time, a number of other within which its business is conducted. For example, many state agencies still find it difficult to adopt such an approach in their DOTs have well-defined goals for the transportation system,

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I-18 Goals/Objectives Performance Measures Target Setting Quality Data Evaluate Programs and Projects Allocate Resources Budget and Staff Measure and Report Results Actual Performance Achieved Figure 2.1. Performance Management Framework. including infrastructure condition, level of service and safety, · Select the Appropriate Method(s) for Target-Setting, as well as goals reflecting economic, environmental, and com- · Establish Methods for Achieving Targets, munity values. Likewise the private sector frequently establishes · Track Progress Towards Targets, and policy goals to guide production of products and services while · Adjust Targets Over Time. defining the environmental and community context for its investment decisions. Allocate Resources. The allocation of resources (time and money) is guided by the integration of the preceding steps into Select Performance Measures. Performance measures are an organization's planning, programming, and project devel- a set of metrics used by organizations to monitor progress opment process. To the extent possible, each investment cate- towards achieving a goal or objective. The criteria for selecting gory is linked to a goal/objective, a set of performance measures, measures often include the following: and a target. Specific investment proposals are defined in rela- tion to specific targets. · Feasibility, · Policy sensitivity, Measure and Record Results. The data for each per- · Ease of understanding, and formance measure must be regularly collected and period- · Usefulness in actual decision-making. ically analyzed. The analysis should indicate how close the organization is to achieving its targets and identify the Identify Targets. Targets are a quantifiable point in time actions necessary to improve results. Many public and pri- at which an organization achieves all or a portion of its goals. vate sector organizations have tracking systems in place to These points set a performance level for each organizational monitor performance allowing senior staff to make periodic measure, such as achieving a 25 percent reduction in highway budget adjustments. fatalities by 2030. The methods used to set such a target include the following: Create Data Management Systems. "Good" data is the foundation of performance management. Effective decision- · Establish a Performance Management Framework, making in each element of the performance management · Evaluate the Factors Influencing Target-Setting, framework requires that data be collected, cleaned, accessed,