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RESOURCE ALLOCATION TEMPLATE This section discusses the resource allocation element of institutional architecture (Table 2.5). Table 2.6 illustrates the levels and the objectives for the next steps to improvement. TABLE 2.5. RESOURCE ALLOCATION: OPERATIONS MATURITY FRAMEWORK Institutional Architecture Level 1 Level 2 Level 3 Elements Ad Hoc Rationalized Mainstreamed Culture/leadership Mixed, hero driven Championed/ Commitment to internalized across customer mobility disciplines Organization and Fragmented, Aligned, trained Integrated staffing understaffed Resource Project level Criteria-based Sustainable budget allocation program line item Partnerships Informal, unaligned Formal, aligned Consolidated 32 GUIDE TO IMPROVING CAPABILITY FOR SYSTEMS OPERATIONS AND MANAGEMENT

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TABLE 2.6. RESOURCE ALLOCATION: LEVELS AND OBJECTIVES FOR IMPROVEMENT Strategies to Level 1 Level 2 Level 3 Advance Level Ad Hoc Rationalized Mainstreamed 1. Develop program- Ad hoc project funding. Criteria-based program- Sustainable budget line level budget estimate level needs estimated. item. From L1 to L2: Program-level needs From L2 to L3: Staged, needs-based program estimates. cost estimates. Conduct analysis of staged needs-based Develop program plan and related implementation costs, based on priority resource requirements to upgrade problem locations, network or corridor program by stages, including systems, applications, infrastructure, and staff costs. staffing, and maintenance. 2. Introduce SO&M Outside of standard Consolidated program Sustainable budget line as a top-level agency budgeting process. budget developed. item. budget line item From L1 to L2: Sustainable SO&M budget From L2 to L3: SO&M as first-tier budget development. item. Incorporate SO&M budget as part of Treat SO&M budget on a parallel basis annual and multiyear budgeting process. with other core programs. 3. Develop acceptance SO&M lacks clear position SO&M costs as eligible State budget for of sustainable in state funding. use of state funding operations. resourcing from state categories. funds From L1 to L2: SO&M costs as eligible use of From L2 to L3: Sustainable resource state funding categories. provision. Consider SO&M to be an eligible use Incorporate into state funding. of state funds (with or without separate dedicated category). 4. Develop SO&M cost-effectiveness Criteria-based program. Rational performance- methodology for ignored across programs. based investment. trade-offs From L1 to L2: Rational performance-based From L2 to L3: Efficient resource allocation investment trade-offs. across programs. Make costbenefit material available to Consider SO&M in rational process of support investment needs via transparent performance-based resource allocation. process. 33 GUIDE TO IMPROVING CAPABILITY FOR SYSTEMS OPERATIONS AND MANAGEMENT

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Resource Allocation Strategy 1: Develop Program-Level Budget Estimate Relationship to Program and Process The development of a continuing and sustainable program involving multiyear capital and operating costs requires a rational and transparent budget process equivalent to those used in other core programs. Points of Departure (Levels of Capability) and Related Improvement Strategy Level 1: Ad Hoc Project Funding In a Level 1 organization, SO&M strategy applications are often at the project level and funded on an ad hoc, unpredictable basis, or are buried in other projects (capital or maintenance) and subject to other priorities. There is often no knowledge of how much (or how little) is being spent on SO&M. The following strategies can help raise a Level 1 organization to Level 2: As a start, identify a priority, immediate action plan budget with the most visible short-run payoffs, prioritized in response to varying overall agency resources. Develop a formal planning process for SO&M, working within the DOT plan- ning and budgeting framework. Analyze costs associated with a long-term strategic program, responding to customer needs at the state-of-practice level, to establish a needs-related baseline for a continuing program. Determine regional and strategy-specific investment implications. Level 2: Criteria-Based Program-Level Needs Estimated In a Level 2 organization, there are cost estimates for a staged statewide program, in- cluding capital, operating, and life-cycle maintenance costs with clear priorities. The following strategies can raise a Level 2 organization to Level 3: Develop a staging plan and budget based on priority problem locations and net- work or corridor applications, including infrastructure and staff costs. Develop a program plan and related resource requirements to upgrade the pro- gram by stages, including systems, staffing, and maintenance. Level 3: Sustainable Budget Line Item At Level 3, the agency has a needs-related and prioritized, staged program. Responsibility Strategy 1 requires a combination of headquarters planning and SO&M program staff, working with districts and MPOs. 34 GUIDE TO IMPROVING CAPABILITY FOR SYSTEMS OPERATIONS AND MANAGEMENT

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Resource Allocation Strategy 2: Introduce SO&M as a Top-Level Agency Budget Line Item Relationship to Program and Process SO&M cannot be established as a mainstreamed, long-term, sustainable, continuously improving activity--a program--unless it is part of the formal budgeting process for capital, operations, and staff resources. Points of Departure (Levels of Capability) and Related Improvement Strategy Level 1: Outside of Standard Budgeting Process In a Level 1 organization, funding levels for SO&M are unpredictable--and typically not known in the aggregate--because funding is from multiple sources at the project levels. There is often no knowledge of the level of funding for comparison with poten- tial benefits--or in comparison with other programs. The following strategies can help raise a Level 1 organization to Level 2: Develop a budgeting process for SO&M resources that is consistent with general agency practice and involves key players. Incorporate the SO&M budget in the annual and multiyear budgeting process. Level 2: Consolidated Program Budget Developed In a Level 2 organization, SO&M-related costs are aggregated for full accounting-- capital, operating, and staffing. The following strategies can raise a Level 2 organization to Level 3: Show the relative level of investment in SO&M in the published budget. In the budget cycle, report the cost-effectiveness of past and current investments. Level 3: Sustainable Budget Line Item At Level 3, SO&M becomes a first-tier budget item. Responsibility The CEO and senior staff are responsible for this strategy. 35 GUIDE TO IMPROVING CAPABILITY FOR SYSTEMS OPERATIONS AND MANAGEMENT

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Resource Allocation Strategy 3: Develop Acceptance of Sustainable Resourcing from State Funds Relationship to Program and Process There are often categorical constraints on the use of state funds (capital and mainte- nance) that restrict use for SO&M directly. The lack of a viable source of funding leads to ad hoc and nontransparent approaches and limits the ability to plan. Furthermore, it is an indication that there is no public policy about, or accountability for, SO&M expenditures. Predictable resource flow is essential to rational program planning. Transitioning from ad hoc funding (from capital and maintenance programs) re- quires development of dedicated funding. Points of Departure (Levels of Capability) and Related Improvement Strategy Level 1: SO&M Lacks Clear Position in State Funding In a Level 1 organization, resources are suballocated from other program categories. The following strategies can help raise a Level 1 organization to Level 2: Develop a clear DOT position on SO&M (mission, vision, strategy, long- and short-range needs estimates). (Note: It may be necessary to develop an outside stake- holder support entity.) Explain the value of sustainable resources to policy makers and seek adjustment in state practice and law, as appropriate, regarding the eligible use of funds or the cre- ation of a separate budget category. Level 2: SO&M Costs as Eligible Use of State Funding Categories In a Level 2 organization, SO&M is included in state transportation budgeting proce- dures as a stand-alone category. The following strategy can raise a Level 2 organization to Level 3: Develop and submit SO&M budget needs to the legislative committee as part of the routine planning and budgeting process. Level 3: State Budget for Operations At Level 3, SO&M becomes a separate budget category for state funding. Responsibility Responsibility in this strategy is with the highest state policy-making entity (e.g., com- mission, secretary), with recommendations and staffing from DOT top management. 36 GUIDE TO IMPROVING CAPABILITY FOR SYSTEMS OPERATIONS AND MANAGEMENT

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Resource Allocation Strategy 4: Develop Methodology for Trade-offs Relationship to Program and Process In the competition for scarce resources, certain missions related to congestion and safety are most cost-effectively achieved by SO&M--compared with other capital investments. However, this fact is not made explicit in the resource allocation p rocess-- internally or externally. Points of Departure (Levels of Capability) and Related Improvement Strategy Level 1: SO&M Cost-Effectiveness Ignored Across Programs In a Level 1 organization, there is no rational analysis that relates performance to type of investment. SO&M is not consistently considered in the conventional highway project development process for both budget and investment trade-offs. The following strategies can help raise a Level 1 organization to Level 2: Develop the policy case for the need for more explicit allocation of scarce DOT resources for each major DOT objective (performance-based allocation). Develop criteria to evaluate the payoffs from varying investment types (capital, maintenance, operations, etc.) and levels across an array of appropriate objectives, and accounting for the time stream of benefits. Develop cost-effectiveness material for key agency performance objectives and demonstrate relative payoffs of different investment mixes. Level 2: Criteria-Based Program In a Level 2 organization, performance-related cost-effectiveness is a major factor in resource allocation. The following strategy can raise a Level 2 organization to Level 3: Use performance-related criteria in a rational process of performance-based resource allocation. Level 3: Rational Performance-Based Investment At Level 3, the trade-offs between SO&M and capital expenditure are considered as part of the planning process. Responsibility The CEO is responsible for this strategy, supported by planning and program staff. 37 GUIDE TO IMPROVING CAPABILITY FOR SYSTEMS OPERATIONS AND MANAGEMENT