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Determining Highway Maintenance Costs (2011)

Chapter: Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities

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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
×
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
×
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
×
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
×
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
×
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
×
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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Suggested Citation:"Attachment - Recommended Process for Determining Full Cost of Highway Maintenance Activities." National Academies of Sciences, Engineering, and Medicine. 2011. Determining Highway Maintenance Costs. Washington, DC: The National Academies Press. doi: 10.17226/14535.
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39 A T T A C H M E N T Recommended Process for Determining Full Cost of Highway Maintenance Activities Contents Introduction and Objective . . . . . . . . . . . . . . . . . . . . . . . . . 39 Full Cost Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Overview of Full Cost Determination Process . . . . . . . . . 40 Who Should Participate in the Calculation . . . . . . . . . . . 40 Step 1: Gather and Classify Maintenance Program Activities and Expenditures . . . . . . . . . . 40 Step 2: Allocate Maintenance Support Expenditures to Line Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Step 3: Gather and Classify Enterprise Programs and Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Step 4: Allocate a Portion of Enterprise Support Expenditures to the Maintenance Program . . . . . 44 Step 5: Combine Cost Categories to Derive Full Cost . . . 45 Calculation Options and Exceptions . . . . . . . . . . . . . . . . . 46 Additional Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Summary Process, Input, and Result Illustration . . . . . . 51 Appendix A: Documented Calculations for Selected State DOTs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Appendix B: Maintenance Cost Tracking Activities for Selected State DOTs . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 The proposed process is a recommendation of the research team at Cambridge Systematics, Inc., for NCHRP Project 14-18, Determining Highway Maintenance Costs. The process has not been approved by NCHRP or any AASHTO committee, nor has it been formally accepted for adoption by AASHTO. Introduction and Objective Because of growing demands and resource limitations for highway maintenance, state DOTs and other highway agen- cies often consider nontraditional means for financing and contracting these services. For example, some state DOTs have considered the options of outsourcing and public–private partnership of some maintenance services. However, identi- fying the most desirable option for a specific maintenance activity requires knowledge of the transportation agency’s full costs associated with such activity. Often, some of the elements making up the total cost of an activity are not appro- priately considered or, in some instances, are not included. The cost elements most frequently missed or mishandled are those related to maintenance program and agency-wide (or enterprise) support. The objective of the process is to provide state DOTs with a practical and robust methodology for determining the full costs associated with performing any particular maintenance activity. The process can be applied to any maintenance activ- ity, and it ensures that the resulting full cost incorporates a fair share of both maintenance program and enterprise support. Full Cost Context Figure 1 illustrates the state DOT maintenance activity full cost context that is the basis for full cost determination process. Various elements in this illustration will be referenced in the process description, but the following statements about the full cost context are intended to facilitate understanding: • At their highest level, DOT expenditures can be divided into two categories: line programs and support programs. Line programs are groups of activities that actually deliver the work product of the DOT—for example, maintenance and construction. Support programs, as their name sug- gests, are groups of activities that support the DOT’s line programs—for example, executive management and plan- ning and research. • Likewise, maintenance program expenditures can be divided into two categories: line activity costs and maintenance program support. Line activities are defined as activities that involve the actual performance of work directly on one or more transportation assets or work responding to an unpredictable event. Maintenance program support encompasses planning, administration, supervision, and

other functions that effectively support the maintenance program’s line activities. • Line activity costs are composed of four elements: labor, equipment, materials, and other. • In order to determine the full cost of any particular line activity, a fair allocation of both maintenance program sup- port and enterprise support expenditures must be added to the line activity cost. Overview of Full Cost Determination Process Figure 2 illustrates the full cost determination process. The sequence is deliberate and starts out in Step 1 by identifying the cost elements that are directly related to the performance of a particular line activity (i.e., LEMO). Next, the process recognizes that certain maintenance activities and expendi- tures support one or more line activities and identifies a share of these expenditures that must be allocated to each line activ- ity (Step 2). Furthermore, it recognizes that the maintenance program as a whole is supported by a variety of enterprise support programs and expenditures and identifies a share of these expenditures that must be allocated to the maintenance program (Steps 3 and 4). Finally, the process combines the results of Steps 1 through 4 to determine the full cost of each line activity (Step 5). The full cost of any particular line activ- ity can be considered to be composed of three discrete cate- gories of cost: • Line activity expenditures (LEMO), • An allocation of maintenance program support expendi- tures, and • An allocation of enterprise support program expenditures. The following sections describe each step of the calculation in more detail and present an illustrative example. Who Should Participate in the Calculation The full cost calculation requires an in-depth understanding of agency organization, activities, and financial and other infor- mation that goes beyond the maintenance program. Therefore, it is critical that input is sought from agency experts in the areas of the agency finance and information systems as well as the maintenance program itself. Such a team approach will ensure full cost coverage, ease the computational task, and enhance the credibility of the calculation. Step 1: Gather and Classify Maintenance Program Activities and Expenditures Objective The objectives of Step 1 are to collect information on all maintenance program activities and expenditures and to classify them as either line or support. 40 Figure 1. State DOT maintenance activity full cost context.

Sources of Information and Key Considerations The source of maintenance activity expenditure information varies by agency and depends on the information systems in place and agency reporting procedures and infrastructure. The most common sources of expenditure data include mainte- nance and/or financial management systems as well as annual maintenance program reports that often summarize program accomplishments and expenditures in a number of ways (e.g., by activity, activity group, geographic areas, highway func- tional class). In most cases, maintenance activity expenditures are broken down into the four LEMO components of labor, equipment, material, and other for each activity. In order to ensure the validity of the full cost calculation, there are a number of key considerations: • Labor expenditures must include regular and overtime, and must be fully burdened (i.e., salary plus fringe benefits). • Agency rental rates must account for all equipment charges. – Any excluded charges must be identified and included in either program or enterprise support. • Sign installation and maintenance costs must be calculated based on all sign shop expenditures. – Any excluded charges must be identified and included in either program or enterprise support. • Material charges must be based on material consumption. • All expenditures associated with maintenance and operation of maintenance facilities, including utilities, stores operation, and others, must be identified. – Any missing expenditures must be included in enterprise support. • All maintenance program management expenditures must be identified, including the costs associated with state and regional maintenance engineers and managers, which are sometimes excluded from maintenance management systems. – Any missing management expenditures must be obtained from another source (for example, the financial manage- ment system) and included in program support. Classification of Maintenance Expenditures Once all of the maintenance program activities and expen- ditures have been gathered, they must be classified as either line or support activities according to the following definitions. Line activity. An activity that involves the actual perfor- mance of work on, or inspection of (if required by law), one or more transportation infrastructure assets, as well as work responding to an unpredictable event. Examples of line activ- ities include pothole patching, mowing, snow and ice control, bridge inspection, and accident and disaster recovery. Support activity. An activity that is done in support of one or more line activities. Examples of support activities include administrative support, training, inspection and patrol activi- ties that identify locations where line activities must be per- formed, radio operations, maintenance program management, and stores operations. In most cases, the classification of a particular activity is obvious from its name; however, activity descriptions pro- vided in agency maintenance and procedure manuals can guide the classification where there is any question. 41 Figure 2. Full cost determination process.

Illustrative Example Table 1 identifies the set of maintenance activities, total expenditures and associated accomplishment, and the classifi- cation of expenditures as either line or support for the example. For the purposes of this example, therefore, total line activity expenditure is $17,800,000 and total support activity expendi- ture is $2,200,000. Step 2: Allocate Maintenance Support Expenditures to Line Activities Objective The objective of Step 2 is to establish the relationship between support and line activities in order to allocate an appropriate portion of maintenance program support expenditures to each line activity. Sources of Information and Key Considerations The best source of information regarding the relationships between maintenance support and line activities is the agency’s maintenance personnel. This can be supplemented by docu- mentation about agency maintenance procedures and defi- nitions, which can often be found in agency maintenance manuals, maintenance management system documentation, and training materials. The effort required to establish the rela- tionships between activities depends on both the number of activities and the clarity of definition. A key consideration for this step in the process is the objec- tive that the full cost determination process be as practical as possible. To satisfy this objective it is recommended that unless a particular maintenance support expenditure is unambigu- ously associated with only a subset of the line activities, it should be associated with all line activities. Examples of support activ- ities that are only associated with a subset of line include • Inspection and patrol support activities that result in the ini- tiation of one or more line activities. (e.g., a fence inspection support activity and fence repair, maintenance, and instal- lation line activities). • Sign shop support activities in cases where material-related line activity sign charges do not capture all sign shop expen- ditures. Sign shop support activities should be allocated to sign repair, maintenance, and installation line activities. • Nonspecific, other activities that are a catchall for admin- istrative and/or other activities that cannot be classified as one of the specific line activities within a particular group of related activities. • Support activities that are exclusively in support of winter operations line activities (e.g., winter operations super- vision, dining room and dormitory operations, mix deicer, and other winter-specific material functions). • Contract solicitation and administration support activities, which should only be allocated to contractor line activities when separate line activities exist for in-house and contrac- tor performance of a particular activity. The other key consideration for this step is selecting the basis by which each support activity expenditure is allocated to the line activities. The benchmark approach allocates sup- port activity expenditures to all supported line activities on the basis of the line activity costs identified in Step 1. Illustrative Example Table 2 presents a crosswalk between maintenance line and support activities for the example. Line activities are repre- sented by the rows, and support activities are represented by the columns. In the event that a particular line activity is supported 42 Activity Name Type Total Expenditure Accomplishment Units Crack sealing Line $500,000 75,000 Pounds Deicing Line $10,000,000 9,000,000 Pounds Sign washing Line $300,000 20,000 Each Striping Line $7,000,000 18,000 Linear feet Subtotal $17,800,000 Mix deicer Support $250,000 N/A None Training Support $200,000 N/A None Management Support $1,500,000 N/A None Stores Support $250,000 N/A None Subtotal $2,200,000 Total $20,000,000 Table 1. Example classification of maintenance activities and expenditures.

by a particular support activity, an X is displayed in the corre- sponding cell. In this case, three out of the four support activi- ties provide support to all four line activities. However, as might reasonably be interpreted from its name, the mix-deicer sup- port activity is only related to the deicing line activity. Table 3 illustrates the results of applying the benchmark approach to allocate support activity expenditures to the line activities. The allocation calculation is performed for each valid combination of line and support activities (i.e., for each X in Table 2). The support activity allocation is equal to: Where $LAIQ = line cost of line activity in question, $ASLA = line cost of all supported line activities, and $SAIQ = cost of support activity in question. For example, the allocation of the mix-deicer support activity to deicing equals Step 3: Gather and Classify Enterprise Programs and Expenditures Objective The objectives of Step 3 are to collect information on all enterprise programs and expenditures and to classify them as line, support, or special/pass-through. $10,000,000 $10,000,000 50,000 250,000.( ) = $ $2 $LAIQ $ASLA SAIQ( ) $ Sources of Information and Key Considerations In most agencies there are multiple sources of information on enterprise program expenditures. The most common sources of this data include agency and/or state financial man- agement systems and data warehouses, as well as annual agency reports. For example, a number of state DOTs prepare a CAFR, which presents detailed financial information, including changes in asset values, sources and amounts of revenue, expen- ditures broken down in a variety of ways, and associated notes and commentary. Other potential sources include agency indi- rect cost allocation plans and reports detailing annual budgets, as well as budget versus expenditure reports. In order to ensure the validity of the full cost calculation, there are a number of key issues that must be considered. For example: • If enterprise expenditure data is obtained from a CAFR or other financial report, care must be taken to ensure that all expenditure categories are fully accounted for and that no expenditures are double counted. • If enterprise expenditure data is extracted from an FMS, it is important to understand whether any expenditures are automatically allocated, and if so, which ones, on what basis, and to which other expenditures they are allocated. Classification of Enterprise Expenditures Once all of the enterprise expenditures have been gathered, they must be categorized as line, support, or special/pass- through according to the following definitions. 43 Line Activities Support Activities Mix Deicer Training Management Stores Crack sealing X X X Deicing X X X X Sign washing X X X Striping X X X Table 2. Example line and support activity crosswalk. Line Activities Allocation of Support Activity Expenditures Total Support Activity Allocation Mix Deicer Training Management Stores Crack sealing $5,618 $42,135 $7,022 $54,775 Deicing $250,000 $112,359 $842,697 $140,449 $1,345,506 Sign washing $3,371 $25,281 $4,213 $32,865 Striping $78,652 $589,887 $98,315 $766,854 Totals $250,000 $200,000 $1,500,000 $250,000 $2,200,000 Note: Some totals rounded to the nearest dollar. Table 3. Example allocation of support activity expenditures to line activities.

Line program. A line program is a logical grouping of sim- ilar activities or projects that are primarily focused on actually delivering the main work products of a state DOT. For exam- ple, construction projects make up a construction program, and maintenance activities and projects make up a mainte- nance program. Support program. A support program is one that supports the delivery of one or more line programs (e.g., agency exec- utive management, information systems, human resources, legal, and finance). Special/pass-through. Many state DOTs report expendi- tures that do not fit nicely into either the line or support cat- egories (e.g., debt-related expenditures associated with past bond issuance, or direct payments or pass-throughs to other state and local agencies). Debt-related expenditures are, in most cases, the result of agency efforts to advance larger construction programs sooner than traditional revenues would permit. In this case, debt-related expenditures have nothing whatsoever to do with the maintenance program. The classification of debt expenditures as an enterprise support program allocable to maintenance would falsely increase the allocation of enter- prise support expenditures to line activities. Direct payments or pass-throughs to other state or local government agencies, unlike construction and maintenance programs, do not involve DOT personnel administering, over- seeing, or performing work, nor do they benefit the agency in any way. The classification of direct payments or pass-throughs as a line program would falsely reduce the allocation of enter- prise support expenditures to line activities. The examples described, or any similar expenditures, must be excluded from the calculation. The full cost determination process therefore identifies a third category of enterprise expen- ditures, special/pass-through, and any expenditure identified as such is indeed excluded. In most cases, the classification of a program is obvious from its name; however, program descriptions provided in agency annual reports and budget documents can guide the classification where there is any question. Illustrative Example Table 4 lists the set of enterprise programs, total expendi- tures, and the classification of programs as line, support, or special/pass-through for the example. In this case, the equip- ment fund is classified as special/pass-through because it rep- resents all expenditures associated with the agency vehicle fleet, which are in turn charged in their entirety to the line programs through rental rates. In this case, classifying the equipment fund as a special/pass-through expenditure ensures that these charges are not double counted. For the purposes of this example, therefore, total line pro- gram expenditure is $127,500,000, total support program expenditure is $8,000,000, and $7,500,000 associated with the equipment fund is excluded from the calculation. Step 4: Allocate a Portion of Enterprise Support Expenditures to the Maintenance Program Objective The objective of Step 4 is to establish the relationship between enterprise support and line programs in order to allocate an appropriate portion of enterprise support expenditures to the maintenance program. Sources of Information and Key Considerations The best source of information regarding the relationships between enterprise support and line programs is the agency’s 44 Program Name Type Total Expenditure Maintenance Line $20,000,000 Construction Line $100,000,000 Traffic operations Line $2,500,000 Public transportation Line $5,000,000 Subtotal $127,500,000 Administration Support $5,000,000 Program delivery support Support $3,000,000 Subtotal $8,000,000 Equipment fund Special/pass-through $7,500,000 Total $143,000,000 Table 4. Example classification of enterprise programs and expenditures.

personnel. This can be supplemented by documentation about agency programs, which can usually be found in agency annual reports and budget documents. As with Step 2, a key consideration for this step in the process is the objective that the full cost determination process be as practical as possible. To satisfy this objective, it is recom- mended that unless a particular enterprise support program is unambiguously associated with only a subset of the line pro- grams, it should be associated with all line programs. For example, some state DOTs have program delivery support programs that only relate to the construction and mainte- nance programs. Similarly, enterprise expenditures related to testing and labs, sign shops, equipment/fleet maintenance and garages, and line-program–specific administration and super- vision are examples of support programs that may only sup- port the construction and maintenance line programs. The other key consideration for this step is selecting the basis by which expenditures in each enterprise support program are allocated to the line programs. The benchmark approach allo- cates support program expenditures to line programs on the basis of the line program costs identified in Step 3. Illustrative Example Table 5 presents a crosswalk between the enterprise line and support programs for the example. Line programs are repre- sented by the rows, and support programs are represented by the columns. In the event that a particular line program is sup- ported by a particular support program, an X is displayed. In this case, the program delivery support program is only related to the maintenance and construction line programs. Table 6 illustrates the results of applying the benchmark approach to allocate support program expenditures to the line programs. The allocation calculation is performed for each valid combination of line and support programs (i.e., for each X in Table 5). The support program allocation is equal to: Where $LPIQ = line cost of line program in question, $ASLP = line cost of all supported line programs, and $SPIQ = cost of support program in question. For example, the allocation of the program delivery support program to maintenance is The share of enterprise support that must be allocated to the maintenance program is therefore $1,284,314. Step 5: Combine Cost Categories to Derive Full Cost Objective The objective of Step 5 is to combine the line activity cost with the appropriate allocations of both maintenance pro- gram and enterprise support expenditures to determine the full cost of the line activities. $20,000,000 $120,000,000 3,000,000 500,0( ) = $ $ 00. $LPIQ $ASLP SPIQ( ) $ 45 Line Programs Support Programs Program Delivery Support Administration Maintenance X X Construction X X Traffic operations X Public transportation X Table 5. Example line and support program crosswalk. Line Programs Allocation of Support Program Expenditure Total Support Program Allocation Program Delivery Support Administration Maintenance $500,000 $784,314 $1,284,314 Construction $2,500,000 $3,921,569 $6,421,569 Traffic operations N/A $98,039 $98,039 Public transportation N/A $196,078 $196,078 Total $3,000,000 $5,000,000 $8,000,000 Table 6. Example allocation of support program expenditures to line programs.

Sources of Information and Key Considerations All of the information required to complete the full cost cal- culation is produced through Steps 1 through 4. At this point, the process has identified the line activity expenditures, an allo- cation of maintenance program support expenditures for each line activity, and the allocation of enterprise support expendi- tures that must be applied to the maintenance program. The next step, therefore, is to allocate the maintenance program share of enterprise support expenditures to the line activities themselves. Consistent with the approach for program support expenditures, the benchmark approach involves doing this on the basis of line activity cost. The result of this calculation is the total cost for each line activity. Dividing this amount by the accomplishment recorded by the agency for each activity (where available) provides the full cost per unit of production, which now incorporates a fair share of both maintenance program and enterprise support expenditures. Illustrative Example Table 7 draws upon numbers from Tables 1 and 3 and the results of the enterprise support cost allocation calculations. It shows the breakdown of the full cost between the three cost categories: line, program support, and enterprise support. The allocation of enterprise support to each line activity is Where $LAIQ = line cost of line activity in question, $ALA = line cost of all line activities, and $LAIQ $ALA AESM( ) $ $AESM = allocation of enterprise support to the mainte- nance program. For example, the allocation of the enterprise support to sign washing equals Table 8 presents the full unit costs for production of each of the line activities in the example. Calculation Options and Exceptions The preceding sections describe and illustrate the bench- mark approach to the full cost calculation. The benchmark approach is specifically designed for ease of use (i.e., to meet the practical requirement) and should therefore be feasible/ attainable in most, if not all, state DOTs. However, depending on the data available, the knowledge of the personnel per- forming the calculation, and the resources/time available, there are options at each step that should be considered. These are described in the remainder of this attachment. Simplified Benchmark Approach (All to All) The benchmark calculation described in the previous sec- tions accounts for two different types of maintenance pro- gram and enterprise support expenditure. The first type is general in nature and effectively supports all line activities and all line programs, respectively (for example, maintenance pro- gram and agency executive management). The second type of support expenditure is for more focused support activities and programs that only support a subset of line activities and line programs, respectively. For example, sign shop activities not $300,000 $17,800,000 1,284,314 21,646.( ) = $ $ 46 Line Activity Cost Categories Full Cost Line Program Support Enterprise Support Crack sealing $500,000 $54,775 $36,076 $590,851 Deicing $10,000,000 $1,345,506 $721,525 $12,067,031 Sign washing $300,000 $32,865 $21,646 $354,511 Striping $7,000,000 $766,854 $505,067 $8,271,921 Total $17,800,000 $2,200,000 $1,284,314 $21,284,314 Table 7. Example full cost breakdown for line activities. Line Activity Full Cost Accomplishment Units Full Unit Cost Crack sealing $590,852 75,000 Pounds $7.88 Deicing $12,067,030 9,000,000 Pounds $1.34 Sign washing $354,511 20,000 Each $17.73 Striping $8,271,921 18,000 Linear feet $459.55 Table 8. Example full unit costs for line activities.

recouped through sign material expenditures support only sign installation and maintenance activities. The second type of support expenditure can occur at both the maintenance program and enterprise levels; however, on the basis of the full cost calculations performed in this study, it is more common within the maintenance program itself. The number of maintenance activities and enterprise pro- grams varies by agency and, in some cases, can be quite large. As the number increases, so does the effort required to relate line and support activities and programs. In addition, activity and program definitions tend to become closer and differences more nuanced, which further increases the knowledge, time, and effort that can be expended developing the line and support crosswalks in Steps 2 and 4. Finally, although it is recommended that the full cost calculation be undertaken by a team with rep- resentatives from the maintenance program or finance division or office, as well as people knowledgeable in agency informa- tion systems, there may be circumstances where such a team approach is not possible. In any of these situations, the simpli- fied benchmark approach can be used to determine the full cost of maintenance activities. As its name suggests, the simplified benchmark approach simplifies Steps 2 and 4 with the assumption that all mainte- nance program and enterprise support expenditures support all line activities and all line programs, respectively, essentially plac- ing Xs in every cell of the crosswalk matrices in Steps 2 and 4. Step 2. Table 9 illustrates the results of applying the simpli- fied benchmark approach to allocate support activity expen- ditures to the line activities for the example described previ- ously. The allocation calculation is now performed for every combination of line and support activities. The support activ- ity allocation is equal to: Where $LAIQ = line cost of line activity in question, $ASLA = line cost of all supported line activities, and $SAIQ = cost of support activity in question. Using the simplified benchmark approach, now the alloca- tion of the mix deicer support activity to deicing equals Step 4. Table 10 illustrates the results of applying the simplified benchmark approach to allocate support program expenditures to the line programs. The allocation calculation is now performed for every combination of line and support programs. The support program allocation is equal to: Where $LPIQ = cost of line program in question, $ASLP = cost of all supported line programs, and $SPIQ = cost of support program in question. $LPIQ $ASLP SPIQ( ) $ $10,000,000 $17,800,000 250,000 140,449( ) = $ $ versus 250,000 calculated previously$ .( ) $LAIQ $ASLA SAIQ( ) $ 47 Line Activities Allocation of Support Activity Expenditures Total Support Activity Allocation Mix Deicer Training Management Stores Crack sealing $7,023 $5,618 $42,135 $7,022 $61,798 Deicing $140,449 $112,359 $842,697 $140,449 $1,235,954 Sign washing $4,213 $3,371 $25,281 $4,214 $37,079 Striping $98,315 $78,652 $589,887 $98,315 $865,169 Totals $250,000 $200,000 $1,500,000 $250,000 $2,200,000 Table 9. Example simplified allocation of support activity expenditures to line activities. Line Programs Allocation of Support Program Expenditure Total Support Program Allocation Program Delivery Support Administration Maintenance $470,588 $784,314 $1,254,902 Construction $2,352,941 $3,921,569 $6,274,510 Traffic operations $58,824 $98,039 $156,863 Public transportation $117,647 $196,078 $313,725 Total $3,000,000 $5,000,000 $8,000,000 Table 10. Example simplified allocation of support program expenditures to line programs.

Usingthesimplifiedbenchmarkapproach,now the allocation of the program delivery support program to maintenance is Now the allocation of enterprise support expenditures to the maintenance program is $1,254,902 (versus $1,284,314 calculated previously). Step 5. Table 11 draws upon numbers from Tables 1 and 9 and the results of the simplified enterprise support cost allocation calculation just completed, whereby the mainte- nance program share of enterprise support is now $1,254,902. It shows the breakdown of the full cost between the three cost categories of line, program support, and enterprise support that results from using the simplified benchmark approach. The allocation of enterprise support to each line activity is $LAIQ $ALA AESM( ) $ $20,000,000 $127,500,000 3,000,000 470,5( ) = $ $ 88 versus 500,000 calculated previously$( ). Where $LAIQ = line cost of line activity in question, $ALA = line cost of all line activities, and $AESM = allocation of enterprise support to the mainte- nance program. Using the simplified benchmark approach, now the alloca- tion of the enterprise support to sign washing equals Table 12 presents the full unit costs for production of each of the line activities in the example using the simplified bench- mark approach. Table 13 shows a comparison of the full unit costs for the example calculated using the benchmark and simplified bench- mark approaches. The difference in this case is very modest; however, using real and complete agency data can result in much more significant differences in full unit costs. $300,000 $17,800,000 1,254,902 21,150 ve ( ) = $ $ rsus 21,646 calculated previously$ .( ) 48 Line Activity Cost Categories Full Cost Line Program Support Enterprise Support Crack sealing $500,000 $61,798 $35,250 $597,048 Deicing $10,000,000 $1,235,955 $705,001 $11,940,956 Sign washing $300,000 $37,079 $21,150 $358,229 Striping $7,000,000 $865,169 $493,501 $8,358,669 Total $17,800,000 $2,200,000 $1,254,902 $21,254,902 Table 11. Example simplified full cost breakdown for line activities. Line Activity Full Cost Accomplishment Units Full Unit Cost Crack sealing $597,048 75,000 Pounds $7.96 Deicing $11,940,956 9,000,000 Pounds $1.33 Sign washing $358,229 20,000 Each $17.91 Striping $8,358,669 18,000 Linear feet $464.37 Table 12. Example simplified full unit costs for line activities. Line Activity Units Full Unit Cost Percent Difference Benchmark Simplified Benchmark Crack sealing Pounds $7.88 $7.96 1.01% Deicing Pounds $1.34 $1.33 -0.75% Sign washing Each $17.73 $17.91 1.01% Striping Linear feet $459.55 $464.37 1.04% Table 13. Example comparison of benchmark and simplified benchmark full unit cost.

Forward-Looking or Budgetary Approximation The sources, calculation, and tracking details for the line activity, program support, and enterprise support expendi- tures vary by agency. However, irrespective of these varia- tions, the full cost calculation requires that these costs be obtained from somewhere. The prior description of Steps 1 and 3 focuses on a backward-looking, accounting approach to determining the contributions to full cost for each category of cost. If such a forensic approach is possible, combining actual expenditures, it is the most straightforward (i.e., prac- tical) solution. However, it also is possible to make a forward- looking cost projection of the type that is done during the budget development process. Step 1: Gather and Classify Maintenance Program Activities and Expenditures The following steps provide an example of forward look- ing or budgetary approximation for determining the cost of maintenance activities. 1. Estimate the number of crew days of a particular mainte- nance activity that will be required during the next budget year; 2. Determine the crew profile that will be required to perform each activity (i.e., number and classes of maintenance personnel); 3. Estimate the average daily crew cost by using current aver- age loaded rates by personnel class as well as any cost-of- living or other adjustments; 4. Multiply the results of Steps 1 and 3 to estimate the pro- jected labor cost for the activity; 5. Review past expenditures on the activity in question and calculate the percentage of the total cost contributed by LEMO; and 6. Estimate equipment, material, and other costs using the results of Steps 4 and 5 and combine them with the labor estimate—this gives an estimate of the sum of line cost ele- ments for the activity. The process must be completed for all activities prior to moving on to Step 2. In addition, it is important to understand the extent to which maintenance program support is covered by the budget activities. In the event that certain support expen- ditures are not covered—say, for example, expenditures for the state maintenance engineer and other maintenance program support and administration—these must either be added as additional activities here and their expenditures estimated, or they must be identified as a maintenance-program–specific enterprise support expenditure in Step 3. Step 2: Gather and Classify Enterprise Programs and Expenditures As with Step 1, the preferred approach to obtaining this information is to extract it from agency information systems and/or financial reports for a complete fiscal year in the past (i.e., actual expenditure information). However, just as for maintenance program activities and expenditures, another option is to use forward-looking budgetary information as the principal input for this step. Allocation Basis Step 3: Allocate Maintenance Support Expenditures to Line Activities In order to help ensure the practicality of the full cost determination process, both the benchmark and simplified benchmark approaches described and illustrated in this doc- ument consistently use the line cost as the basis for allocating all program support expenditures to line activities. However, an agency may choose a different basis for allocating all pro- gram support expenditures or even choose different bases for different support activities. Beyond line activity cost, the most obvious alternative allo- cation basis can be found within the elements of line cost as follows: • Workman’s compensation support activity expenditures (or other support activity expenditures reasonably related to labor expended) could be allocated on the basis of labor expenditure for each line activity; • Material stores and handling support activities expendi- tures could be allocated on the basis of material expendi- ture for each line activity; • Unused equipment and other equipment support activity expenditures could be allocated on the basis of equipment expenditure for each activity; and • Contractor solicitation, administration, and oversight sup- port activities could be allocated on the basis of other expen- ditures for each activity (provided other expenditures are predominantly contractor payments). In addition, labor hours and equipment hours could be used as the basis of allocating support activity expenditures. Step 4: Allocate a Portion of Enterprise Support Expenditures to the Maintenance Program As with the allocation of program support expenditures, both the benchmark and simplified benchmark approaches described and illustrated in this document consistently use the 49

line cost as the basis for allocating all enterprise support expen- ditures to line programs. However, an agency may choose a dif- ferent basis for allocating all enterprise support expenditures, or even choose different bases for different support programs. For example, one state DOT’s indirect cost allocation plan identi- fies 25 different bases of allocation. Each of these bases is used for allocating one or more of its 34 indirect cost pools (support programs) to 21 direct programs (line programs). Examples of the different bases include total department expenditures, total district expenditures, consulting services expenditures, federal construction expenditures, nonlabor expenditures, total number of employees, total number of headquarters building employees, total right-of-way expenditures, total construction charges, and maintenance charges. Step 5: Combine Cost Categories to Derive Full Cost All allocations of enterprise support expenditures to line activities so far have been made on the basis of the line activity expenditures identified in Step 1. However, alternative approaches to allocating the maintenance program’s share of enterprise support expenditures can be considered in much the same way as has been discussed for Steps 2 and 4. In addition to the various allocation bases previously discussed (some of which might similarly be candidates here), another candidate for consideration is the line activity plus program support cost basis, whereby the allocation of enterprise support to each line activity is Where $LAIQ = line cost of line activity in question, $PSLAIQ = program support cost of line activity in ques- tion, $ALA = line cost of all line activities, $PSALA = program support cost of all line activities, and $AESM = allocation of enterprise support to mainte- nance program. Applying this approach to the benchmark example, the allocation of the enterprise support to sign washing equals Allocation Basis Considerations Provided that the data is available for all activities and/or programs, there are clearly a number of allocation bases for an agency to choose from. However, before pursuing alloca- $300,000 $17,800,000+( ) +( )[ $ , $ , ,32 865 2 200 000 ] = $ $ $1,284,314 21,375 versus 21,646 calculated previously( ). $LAIQ $PSLAIQ $ALA $PSALA AESM+( ) +( )[ ] $ tion bases other than line activity costs, agencies must con- sider two important issues: 1. Calculation complexity and level of effort: If an agency chooses to use different bases for allocation for different support activities, the complexity of the calculation will increase, as will the level of effort required and the poten- tial for error. 2. Potential for disagreement: By introducing multiple bases for allocation, an agency opens the door for debate about which basis should be used for which support activ- ities, which may ultimately weaken the perception of the validity/correctness of the full cost determination process results. Maintenance Program Expenditure Reconciliation Step 4 of the full cost process involves allocating a share of enterprise support expenditures to the maintenance program on the basis of maintenance program expenditure. As a result, in any case where the expenditure data for the full cost calcu- lation is drawn from both agency maintenance and financial management systems (MMS and FMS), the total maintenance program expenditures from both sources must be compared. In the event that there is a significant discrepancy (say greater than or equal to 10%), a reasonable attempt must be under- taken to identify its source, and a fair assessment of total maintenance program expenditures is used as the basis for determining the enterprise support expenditure allocation. If the investigation reveals that the maintenance program expen- diture from the FMS is low (compared with the MMS expen- diture), the maintenance program share of enterprise support calculated using FMS data must be scaled up by the ratio of MMS expenditure to FMS expenditure. Full Cost Versus Full Unit Cost of Production The full cost calculations described in this process result in both a total full cost for each activity considered and a full unit cost, derived by dividing the full cost by reported accomplish- ment. Although there is value in both figures, from a practical standpoint, the full unit cost is more useful and therefore more valuable. The calculation of full unit cost relies on the agency selecting useful units of accomplishment for line activities (for example, tons, yards, square feet, linear feet, each), and then capturing and recording this data accurately. As a consequence and at a minimum, any agency undertaking the full cost calcu- lation should consider its level of confidence in its accomplish- ment data and treat full unit costs accordingly. In addition, in the event that a single line activity is performed by a combi- 50

nation of in-house personnel and contractors, it is critical to understand whether accomplishment data is being recorded consistently in both cases. If, as it appears to sometimes be the case, contractor accomplishment data is either questionable or absent, then full unit costs calculated will be high. Implications of Automatic Indirect Cost Allocation Some state DOTs have implemented indirect cost alloca- tion procedures of different types directly within their finan- cial management systems. If expenditure data for the full cost determination process is extracted from the financial manage- ment system, it is important to understand what, if any, indi- rect cost allocations already have occurred. Depending on the agency, indirect cost allocation plans can be quite complex and it can take considerable effort to understand them. It is therefore recommended that, whenever possible, raw and unallocated agency expenditure data be used as the point of departure for the full cost determination process. In this way, all classification and allocation activities for both program and enterprise support expenditures occur through the full cost determination process itself, increasing the transparency of the calculation. Of course, if automatic indirect cost alloca- tions are performed in a way that is entirely consistent with the full cost determination process described in this report, the full cost of activities can be obtained directly from the finan- cial management system. However, it is paramount that the allocation procedures used to derive the full cost are reviewed, understood, and confirmed as being consistent with the full cost determination process. Full Cost Calculation for Network and Geographic Subsets The full cost determination process described here was developed in order to calculate the full unit cost of mainte- nance activities on a statewide basis. However, there is nothing to prevent its application to a subset of a state (e.g., a particu- lar functional class or another geographic designation such as a district or region), provided that the requisite portion of total line expenditure and accomplishment data for a particular maintenance activity can be readily identified. The approach for allocating program and enterprise support expenditures to a subset of total line activity expenditure is no different than to the statewide line activity total (i.e., based on the line cost amount). It must be noted, however, that from a practical standpoint, there are limits to how finely the line cost data can be sliced. At some point, it is possible that a particular mainte- nance activity is not performed in the selected geographic sub- set within the timeframe for which cost and accomplishment data has been obtained. It is therefore recommended that the full cost process be applied at higher levels of aggregation—for example, by functional class or by district, and not, for exam- ple, from milepost A to milepost B on a specific highway. Additional Considerations The full cost determination process described here enables the calculation of an agency’s full cost to perform a particular maintenance activity. However, in order to support the use of the resulting dollar amount in any other analysis or compar- ison, it is critical that it be placed into context. At a mini- mum and as previously stated, this context should include a combination of cost and units of measure for the particular activity in order to derive an agency’s total (or full) unit price for the activity. In addition, it is critical to consider the impact on level of service resulting from this expenditure. In other words, what was the condition or level of service associated with the maintenance activity at the beginning and end of the analysis period? Did the level of service fall or rise (and if so by how much) or remain flat as a result of the expenditure? In addition, if the resulting cost is going to be used as an input for a forward-looking decision and it has been derived from a backward-looking analysis (i.e., a forensic accounting exercise), inflation must be considered. Although historically inflation has been relatively modest in the area of highway construction and maintenance, more recently agencies have experienced periods of much higher inflation. This is partic- ularly important in the area of oil and petroleum products, which are important to most maintenance activities in that they drive the price of the fuel that is used by all of the equip- ment. For this reason and depending on the purpose of deter- mining the agency’s full cost for performing a particular line activity, it will be important to ensure appropriate consider- ation for inflation and apply a factor to the resulting full unit cost. Summary Process, Input, and Result Illustration Figure 3 lists the process’s five steps and the inputs and results of each. 51

52 Figure 3. Summary process, input, and result illustration.

53 Introduction This appendix illustrates the application of the full cost deter- mination process to DOTs in six states: Alabama, Arizona, Mis- souri, North Carolina, Texas, and Washington. In each case, a summary introduction to the agency and its maintenance pro- gram is provided, and then the five-step calculation process is documented using data provided by the agency from its man- agement systems, annual financial and maintenance activity reports, and other documents and reports. The purposes of this appendix are to supplement the process description and pro- vide practitioners with examples of the full cost determination process being applied in state DOTs. Contents Alabama DOT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Arizona DOT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Missouri DOT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 North Carolina DOT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Texas DOT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Washington State DOT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Alabama DOT Alabama Department of Transportation (ALDOT) is responsible for a highway network of approximately 11,000 centerline miles and 28,000 lane miles, as well as some 5,700 bridges with a total deck area of approximately 6.4 million square meters. ALDOT expended approximately $200 mil- lion on maintenance activities during fiscal year 2008 out of a total budget of approximately $1.3 billion. At its lowest level, the ALDOT Bureau of Maintenance is divided into 41 geographic maintenance districts, each of which encompasses between two and four counties. Each mainte- nance district belongs to one of nine maintenance divisions, which comprise between four and 10 counties, with overall administration and coordination being provided by ALDOT’s central office. In addition, ALDOT has a number of statewide specialty maintenance crews; for example, it has three spe- cialty bridge inspection crews as well as statewide crews for traffic signals, signs, and underwater inspections. ALDOT organizes its approximately 70 maintenance work activities into the following major categories: • Roadway and shoulder maintenance, • Drainage maintenance, • Roadside maintenance, • Traffic operations maintenance, • Structure maintenance, • Minor maintenance improvements, • Winter and emergency maintenance, • Service activities, • Overhead and support activities, and • Special maintenance. ALDOT uses the following systems to capture and manage maintenance cost data: • Maintenance management system: ALDOT currently uses a circa-1970s Jorgensen mainframe maintenance management system for both maintenance budget devel- opment and recording maintenance work accomplish- ments. The agency recently engaged a consultant to review ALDOT’s requirements and evaluate off-the-shelf MMS products, with the goal of replacing the current mainframe system with a modern MMS over the next couple of years. ALDOT’s budget development process uses the prior year’s expenditures (or budget) as its starting point, to which it applies salary escalation and cost-of-living adjustments to determine a new proposed budget. The system includes a work calendar and specifies approximately 70 separate maintenance activities. Once the budget is finalized, the system produces crew-day cards for the entire year, based on the work calendar, for each activity. Bundles of crew- day cards are then distributed to the superintendent in each of the 41 districts. A single crew-day card covers one A P P E N D I X A Documented Calculations for Selected State DOTs

day’s work of a particular maintenance activity in one of the 41 districts. Note: Activities in the structure maintenance area are bro- ken down further in the Alabama Bridge Information Man- agement System (ABIMS), where approximately 40 activities are mapped back to fewer than 10 MMS activities. • Financial management system: ALDOT’s comprehensive project management system (CPMS) is a custom-developed financial management system that has been in use since 1999. It was developed to replace ALDOT’s prior system, both in order to address the Y2K issue and to create a tighter connection between expenditures and the agency’s high- way network by integrating with the agency’s GIS. At its highest level CPMS reports costs by broad program (e.g., surface transportation preservation, administration, aero- nautical). Beneath this, and specifically in the case of routine maintenance, all expenditures are assigned to the following hierarchy: Division (1 of 9) District (1 of 41) Route class [Interstate Highway System (IHS), National Highway System (NHS), other] Account (work activity group—listed earlier) Function/activity code (e.g., mowing, ditch cleaning) Object of expenditure (salary, equipment, materials). The foundation of maintenance activity scheduling and cost tracking at ALDOT is the crew-day cards. All mainte- nance work, including certain maintenance overhead activi- ties, is recorded on a daily basis directly on the crew-day cards produced by the MMS at the end of the budget development process. Select information on the crew-day cards is then entered into both the CPMS and MMS systems by the district clerk on a daily basis as work is performed throughout the year. Labor hours are entered into the CPMS and accom- plishment data (i.e., units of production of the particular maintenance activity) and material and equipment usage are entered into the MMS. Documented ALDOT Full Cost Calculation The full cost determination process was applied to all ALDOT maintenance activities; however, for the purposes of this summary, two line activities have been selected in order to best demonstrate the benchmark process. The line activities selected are • 601 – Spot premix patching, and • 638 – Guardrail maintenance. Step 1: Gather and Classify Maintenance Program Activities and Expenditures ALDOT provided expenditure and accomplishment data for 69 different maintenance activities obtained from its Jorgensen maintenance management system for the year ending September 30, 2009. This data was reviewed in con- junction with the activity descriptions included in ALDOT’s Field Operations Manual and activities classified as either line or support. Table A.1 presents the summary results of the classification process. Pertinent observations resulting from the classification process are as follows. For the majority of the maintenance categories identified above, ALDOT specified an “other <maintenance category> maintenance” activity, in addition to a number of specific activities. Based on the “other” activity descriptions, the fact that in a number of cases the “other” expenditure amounts are a significant fraction of the sum expenditures for the specific activities, and for the sake of consistency, the ALDOT “other” activities were classified as line. ALDOT’s support activities are all of the type that supports all line activities (i.e., there are no support activities that are related to any subset of the line activities). Table A.2 shows the line activity expenditure and produc- tion information for the line activities selected. Step 2: Allocate Maintenance Support Expenditures to Line Activities Based on the nature of ALDOT’s support activities observed above, the allocation of support expenditures to line activities is 54 Activity Classification Number of Activities Total Expenditure Percentage of Total Line 56 $109,443,589 93.4% Support 13 $7,693,100 6.6% Total 69 $117,136,689 100.0% Table A.1. ALDOT maintenance activity expenditure and classification.

accomplished using the simplified benchmark (or all-to-all) approach on the basis of line activity expenditure. In this case, the program support allocation to each line activity is calculated using the following formula: Where $LAIQ = line cost of line activity in question, $ALA = line cost of all line activities, and $ASA = cost of all support activities. Therefore The allocation of maintenance program support to spot premix patching equals and The allocation of maintenance program support to guardrail maintenance equals $3,006,423 $109,443,589 211,33( ) = $ , , $7 693 100 0 $LAIQ $ALA ASA( ) $ Step 3: Gather and Classify Enterprise Programs and Expenditures Enterprise programs and expenditures were obtained from ALDOT’s financial management system (CPMS) for the fiscal year ending September 30, 2008. Program descriptions and summary expenditure information were also used from ALDOT’s 97th Annual Report for fiscal year 2008. Table A.3 details the set of enterprise programs, the total expenditures, and the classification of programs as line, support, or special/ pass-through. The following notes are provided to further explain the table, its content, and information sources. • The CPMS extracts provided by ALDOT excluded all debt service payments and transfers to other agencies (e.g., Public Safety). • The Administrative Support line item represents the total expenditure in more than 20 different offices and bureaus, $2,295,593 $109,443,589 161,36( ) = $ , , $7 693 100 4. 55 Activity ID Activity Name Line Expenditure Accomplishment Units 601 Spot premix patching $3,006,423 6,445 Ton mix 638 Guardrail maintenance $2,295,593 77,217 Linear feet Table A.2. Selected ALDOT line activity expenditure and production. Program Name Type Total Expenditure Routine Maintenance Line $117,613,257 Federal Construction Line $928,285,059 State Construction Line $67,313,172 Special Work Authorizations Line $1,007,224 Maintenance Projects Line $78,276,986 Subtotal $1,192,495,698 Administrative Support Support $67,170,364 Operations and Support Services Support $15,022,157 Other Equipment Purchases Support $9,098,918 Construction Bureau Administration Support $1,828,936 Maintenance Bureau Administration Support $4,652,871 Supervision – Division (Construction) Support $38,932,666 Supervision – District (Maintenance) Support $21,930,133 Subtotal $158,636,045 Total $1,351,131,743 Table A.3. Classification of ALDOT enterprise programs and expenditures.

which have been condensed in order to keep the table to a reasonable size. • Other Equipment Purchases are for equipment other than vehicles (e.g., engineering, lab, sign shop, traffic signal testing equipment) as well as computers and reprographic equipment. • Operations and Support Services includes claims and dam- ages, county engineers’ salaries, insurance support services, telephone and data support services, charges by other state agencies, and freight express drayage and postage support services. • Maintenance Bureau Administration and Supervision – District are maintenance-program–specific support pro- grams that are not included in the routine maintenance or the maintenance project amounts (likewise for construction). Based on the CPMS extracts, guidance from ALDOT’s Finance and Audits Bureau personnel, and ALDOT’s 97th Annual Report, total line program expenditure is $1,192,495,698, total support program expenditure is $158,636,045, and all special/pass-through expenditures have been excluded. Step 4: Allocate a Portion of Enterprise Support Expenditures to the Maintenance Program Based on the enterprise program expenditure information obtained in Step 3, ALDOT has seven support programs and five line programs. However, a number of the support pro- grams are related to only a subset of the line programs. For example, Maintenance Bureau Administration supports only the Routine Maintenance and Maintenance Projects line programs. In order to appropriately allocate enterprise support expenditures to the Routine Maintenance pro- gram, the benchmark approach must be used. Table A.4 presents a crosswalk between ALDOT’s enterprise line and support programs. The allocation calculation is performed for each valid combination of line and support programs (i.e., for each X in Table A.4). The support program alloca- tion is equal to: Where $LPIQ = line cost of line program in question, $ASLP = line cost of all supported line programs, and $SPIQ = cost of support program in question. Using this calculation the allocation of Maintenance Bureau Admin to Routine Maintenance is Table A.5 shows the results of this allocation calculation for all line programs as well as the total enterprise support expen- diture allocation to each line program. $ , , $ , , $ , , $ 117 613 257 117 613 257 78 276 986 4 +( )[ ]  , , $652 871 = 2,793,602. $LPIQ $ASLP SPIQ( ) $ 56 Support Programs Administrative Operations and Other Equipment Bureau Administration Supervision – Division Line Programs Support Support Services Purchases Construction Maintenance Construction Maintenance Routine Maintenance X X X X X Federal Construction X X X X X State Construction X X X X X Special Work Authorizations X X X Maintenance Projects X X X X X Table A.4. ALDOT line and support program crosswalk. Allocation of Support Program Expenditure Total Support Administrative Operations and Other Equipment Bureau Administration Supervision – Division Program Line Programs Support Support Services Purchases Construction Maintenance Construction Maintenance Allocation Routine Maintenance $6,624,867 $1,481,603 $897,406 $2,793,602 $13,166,937 $24,964,415 Federal Construction $52,288,025 $11,693,832 $7,082,952 $1,705,280 $36,300,398 $109,070,487 State Construction $3,791,587 $847,960 $513,609 $123,656 $2,632,268 $7,909,080 Special Work Authorizations $56,734 $12,688 $7,686 $77,108 Maintenance Projects $4,409,151 $986,074 $597,265 $1,859,269 $8,763,196 $16,614,955 Support Program Total $67,170,364 $15,022,157 $9,098,918 $1,828,936 $4,652,871 $38,932,666 $21,930,133 $138,636,045 Table A.5. Allocation of ALDOT support program expenditures to line programs.

Using the benchmark approach, ALDOT’s Routine Main- tenance program receives an enterprise support expenditure allocation of $24,964,415. Step 5: Combine Cost Categories to Derive Full Cost The final step in the full cost calculation pulls together the line expenditure for each activity from Step 1 and the allocation of program support expenditure to each activity from Step 2 and combines these with an allocation of the enterprise support expenditures that were allocated to the maintenance program in Step 4. The allocation of enterprise support to each line activ- ity is calculated as follows: Where $LAIQ = line cost of line activity in question, $ASLA = line cost of all supported line activities, and $AESM = allocation of enterprise support to the mainte- nance program. Therefore The allocation of the enterprise support expenditures to spot premix patching equals and The allocation of enterprise support expenditures to guard- rail maintenance equals Table A.6 shows the breakdown of full cost between the three cost categories of line, program support, and enterprise support for the two selected line activities. $ , , $ , , $ , , $2 295 593 109 443 589 24 964 415( ) = 523,632. $ , , $ , , $ , , $3 006 423 109 443 589 24 964 415 = 685,774 $LAIQ $ASLA AESM( ) $ Table A.7 presents the full unit costs for production of each of the line activities selected. Arizona DOT The Arizona Department of Transportation’s (ADOT) annual maintenance budget is approximately $150 million. ADOT is responsible for maintaining roughly 7,000 centerline miles of highway, representing nearly 19,000 lane miles, as well as approximately 4,500 bridges with a total deck area approach- ing 3 million square meters. ADOT’s maintenance division is organized into nine geo- graphic districts. Each district consists of several smaller units, which are referred to as maintenance orgs. ADOT also has four maintenance regions that are responsible for signing, striping, and traffic signals across the state. The region boundaries over- lap with the district boundaries, with each region spanning multiple districts. ADOT organizes its maintenance costs into the following line items for budgeting purposes: • Paved surfaces, • Roadside, • Traffic, • Landscaping, • Vegetation, • Rest areas, • Winter, • Leave, • Training, • Other operating costs (e.g., nonhighway utilities), and • Central office. ADOT uses the following three systems to capture and manage maintenance cost data: • Maintenance management system: ADOT has used a maintenance management system known as PECOS for 57 Line Activity Cost Categories Full Cost Line Program Support Enterprise Support Spot premix patching $3,006,423 $211,330 $685,774 $3,903,527 Guardrail maintenance $2,295,592 $161,364 $523,632 $2,980,588 Table A.6. Full cost breakdown for selected ALDOT line activities. Line Activity Full Cost Accomplishment Units Full Unit Cost Spot premix patching $3,903,527 6,445 Ton mix $605.67 Guardrail maintenance $2,980,588 77,217 Lin feet $38.60 Table A.7. Full unit costs for selected ADOT line activities.

over 25 years to capture usage and cost information on main- tenance resources by maintenance activity and organiza- tional unit. Field crews enter labor, equipment, and material data by activity into PECOS on a daily basis. ADOT’s activ- ity structure is updated frequently, with the total number of activities being around 250. ADOT’s Maintenance Office uses PECOS to support its maintenance planning and budg- eting processes. ADOT currently is in the process of updat- ing how cost information is handled in PECOS. • Financial management system: Maintenance expenditures also are captured in a financial management system referred to as ADVANTAGE. This system stores department-wide information on revenues and costs of all programs and is used to support business operations throughout ADOT. For the maintenance program, ADVANTAGE is used to track and manage accounts payable and accounts receivable. • Maintenance budget system: ADOT is in the final stages of implementing a maintenance budgeting system (MBS) that will enable it to develop performance-based budget requests. The MBS combines cost and accomplishment data stored in PECOS with condition data collected though ADOT’s maintenance quality assurance program. With this informa- tion, ADOT can determine the current conditions of its maintained features (which are expressed in the form of maintenance levels of service) and estimate the future costs of achieving a higher or lower level of service. For planning and budgeting purposes, PECOS is the pri- mary source of maintenance cost data used by ADOT. While the MBS is designed to support the budgeting process, it uses cost data directly from PECOS. Also, while cost information in ADVANTAGE can be a useful QA/QC tool for evaluating PECOS results, ADOT has found that the system was not designed to handle cost data in a manner that supports the maintenance management function. Most of the cost data captured in PECOS are manually entered by maintenance crews from around the state on a daily basis. Therefore, when determining the cost of activities, data quality is a major concern. To address this issue, ADOT is working to automate quality checks and to streamline the data- entry process so that there is less room for error. For example, when data is imported from PECOS into the MBS, the MBS compares the unit cost of each activity between all of the dis- tricts and flags activities where the variance is greater than a fac- tor of 4. ADOT has found that when this occurs, the issue is typically erroneous accomplishment data. Also, ADOT plans to add new activity-specific drop menus in PECOS that will guide users through the process of recording vehicle, equip- ment, and accomplishment data. Documented ADOT Full Cost Calculation The full cost determination process was applied to all ADOT maintenance activities; however, for the purposes of this summary, two line activities have been selected in order to best demonstrate the benchmark process. The line activities selected are • 422 – Guideline paint (large striper), and • 1505 – Routine fence maintenance Step 1: Gather and Classify Maintenance Program Activities and Expenditures ADOT provided expenditure and accomplishment data for 228 different maintenance activities obtained from its main- tenance management system, PECOS, for the fiscal year ending June 30, 2008. This data was reviewed in conjunction with detailed activity descriptions, and activities have been classified as either line or support. Table A.8 presents the summary results of the classification process. Pertinent observations resulting from the classification process are as follows. A number of the maintenance budget line items have an “other <budget line item> maintenance” activity defined in addition to a number of discrete line activities. These activities, which use labor hours for the unit of accomplishment, are used to record work in the particular budget line item area that does not fit within the line activities defined. These “other mainte- nance” activities are classified as support activities; however, it is clear that they should only be considered to provide support to the line activities associated with the particular maintenance budget line item. ADOT has established a number of line and support activ- ities that are specifically intended to track contractor per- formance of certain line activities and the associated contract administration expenditures, respectively. This provides another example of support expenditures that are incurred for the benefit of only a subset of line activities. 58 Activity Classification Number of Activities Total Expenditure Percentage of Total Line 158 $74,504,568 48.8% Support 70 $78,112,432 51.2% Total 228 $152,617,000 100.0% Table A.8. ADOT maintenance activity expenditure and classification.

Four support activities with some of the largest expenditures are related to equipment: unused monthly equipment, equip- ment services fuel charges, equipment parts and supplies, and equipment direct billing. These account for more than $20 mil- lion in expenditures and reflect ADOT’s approach to equip- ment rental rates (i.e., the rates are not set in order to recoup all vehicle expenditures through productive usage charges). Table A.9 shows the line activity expenditure and produc- tion information for the line activities selected. Step 2: Allocate Maintenance Support Expenditures to Line Activities Based on the observations about certain support activities in Step 1, ADOT’s program structure and data are ideal for the benchmark process. On this basis and using the descriptions of activities, a crosswalk of line and support maintenance activi- ties was developed. The number of both line and support activ- ities (158 and 70, respectively) is such that it is not possible to present the complete crosswalk or allocation in this report. Table A.10 presents the set of support activities and support expenditure allocations to each of the line activities selected, as well as the allocations to all other line activities. Please note that only the superset of support activities that apply to the two selected line activities has been included, and in order to keep the table to a single page, the final support activity line summarizes a group of support activities. The absence of an allocation in a particular cell indicates that the line activity represented by the column is not supported by the support activity represented by the row. Key observations about the support activities related to the two selected activities are as follows: • Both line activities receive an allocation of the appropriate inspection activity: inspect signs/pavement markings and statewide stripe inspection in the case of guideline paint (large striper), and annual fence inspection in the case of routine fence maintenance. • Both line activities receive an allocation of the appropriate “other” maintenance activities item: other Interstate sign/ stripe maintenance in the case of guideline paint (large striper), and other roadside maintenance in the case of routine fence maintenance. • Both line activities receive an allocation from a little over 30 broad support activities, including administrative sup- port, training, and material handling. • Guideline paint (large striper) also receives an allocation from the pavement preparation support activity. Step 3: Gather and Classify Enterprise Programs and Expenditures Enterprise programs and expenditures were obtained from ADOT’s CAFR for the fiscal year ending June 30, 2008. Table A.11 details the set of enterprise programs, the total expenditures, and the classification of programs as line, sup- port, or special/pass-through. The classifications are the result of a combination of descriptions of programs from the CAFR and other ADOT reports, as well as consultation with ADOT’s finance personnel. The information in Table A.11 was obtained from Exhibit 2 – Statement of Activities, and Exhibit 4 – Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds. The purpose and content of the different expenditure presentations included in the ADOT CAFR are such that to obtain a picture of all expenditures, information must be drawn from a combination of sources. For example, the Statement of Activities does not include the con- struction program expenditures; rather, these must be obtained from the Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds. The point here is that if enterprise expenditures are obtained from an agency CAFR, it is critical to obtain guidance from personnel that under- stand what each expenditure presentation represents in order to capture the complete range of expenditures as well as avoid any double counting. Based on ADOT’s CAFR, therefore, total line program expenditure is $1,619,756,796, total support program expen- diture is $54,918,357, and $1,713,208,401 is excluded from the calculation based on its classification as special/pass-through. Step 4: Allocate a Portion of Enterprise Support Expenditures to the Maintenance Program Based on the enterprise program expenditure informa- tion obtained in Step 3, ADOT has a single enterprise sup- port program called Administration. This single program effectively supports all ADOT line programs. Table A.12 details the allocation of enterprise support expenditures to line programs for ADOT using the simplified benchmark approach (i.e., allocate to all line activities on the basis of line activity cost). 59 Activity ID Activity Name Line Expenditure Accomplishment Units 422 Guideline paint (large striper) $814,366 77,955 Gallons 1505 Routine fence maintenance $1,418,333 55,406 Fence panels Table A.9. Selected ADOT line activity expenditure and production.

Using the expenditure information from ADOT’s CAFR, the highway maintenance program’s allocation of enterprise support is therefore $4,598,548. However, the sum of mainte- nance program expenditures obtained from ADOT’s MMS is $152,617,001, versus $135,629,139 reported in the CAFR. Weighing an understanding of both sources of data, and in order to ensure that the full cost calculation lives up to its name, the decision was made to scale up the allocation of enterprise support expenditures to the highway maintenance program by the same factor as the difference in total highway maintenance program expenditures from the two sources. Thus, the alloca- tion to the highway maintenance program will be increased by 12.53% [($152,617,001 - $135,629,139)/$135,629,139] to $5,174,527. This higher enterprise support expenditure amount is allocated between line activities in Step 5. Step 5: Combine Cost Categories to Derive Full Cost The final step in the full cost calculation pulls together the line expenditure for each activity from Step 1 and the alloca- tion of program support expenditure to each activity from Step 2, and combines these with an allocation of the enter- prise support expenditures that were allocated to the mainte- nance program in Step 4. The allocation of enterprise support to each line activity is calculated as follows: Where $LAIQ = line cost of line activity in question, $ASLA = line cost of all supported line activities, and $LAIQ $ASLA AESM( ) $ 60 Support Activity Support Activity Allocation To Total Support Activity Expenditure Guideline PNT (LG STRIPER) Routine Fence Maintenance All Other Line Activities Utilities roadway $83,605 $145,610 $4,565,437 $4,794,652 Inspection signs/pavement mark $11,119 $86,387 $97,506 Pavement preparation $6,116 $23,985 $30,101 Statewide stripe inspection $2,011 $13,920 $15,931 Other I/S sign/stripe maintenance $54,548 $423,789 $478,337 Annual fence inspection $130,492 $32,987 $163,479 Other roadside maintenance $270,268 $876,489 $1,146,757 Unused monthly equipment $233,897 $407,365 $12,772,441 $13,413,703 Record keeping $14,824 $25,818 $809,486 $850,128 Building and yard maintenance $25,560 $44,515 $1,395,729 $1,465,804 Training $61,603 $107,290 $3,363,933 $3,532,826 Leave $126,139 $219,689 $6,888,081 $7,233,909 Standby $2,033 $3,541 $111,036 $116,610 Material handling $8,509 $14,820 $464,673 $488,002 Work for equip services $16,675 $29,042 $910,575 $956,292 Stockpile material $8,705 $15,161 $475,358 $499,224 Other material overhead $5,084 $8,855 $277,628 $291,567 Administrative support $63,636 $110,831 $3,474,959 $3,649,426 Other support activity $42,796 $74,536 $2,336,987 $2,454,319 Supervision $69,389 $120,851 $3,789,134 $3,979,374 Leadperson (supervision) $34,945 $60,862 $1,908,239 $2,004,046 Transport equipment $6,701 $11,671 $365,931 $384,303 Equipment services fuel charges $75,357 $131,244 $4,114,996 $4,321,597 Equipment parts/supplies $42,259 $73,598 $2,307,615 $2,423,472 Equip direct billing $26,861 $46,783 $1,466,809 $1,540,453 All other program support $253,515 $441,532 $21,085,567 $21,780,614 Total Program Support Allocation $1,275,887 $2,494,374 $74,342,171 $78,112,432 Table A.10. ADOT support activity expenditure allocations to selected line activities.

$AESM = allocation of enterprise support to the mainte- nance program. Therefore The allocation of the enterprise support expenditures to guideline paint (large striper) equals and $ , $ , , $ , , $814 366 74 504 568 5 174 527( ) = 56,560 The allocation of enterprise support expenditures to rou- tine fence maintenance equals Table A.13 shows the breakdown of full cost between the three cost categories of line, program support, and enterprise support for the two selected line activities. Table A.14 presents the full unit costs for production of each of the line activities selected. $ , , $ , , $ , , $1 418 333 74 504 568 5 174 527( ) = 98,507. 61 Program Name Type Total Expenditure Highway Maintenance Line $135,629,139 Aeronautics Line $4,088,494 Highway Line $171,134,168 Motor Vehicle Line $110,982,343 Noncapital Including Asset Preservation Line $158,991,033 Capital Outlay (Construction) Line $989,881,588 Local Government Assistance Line $37,285,011 Arizona Highways Magazine Line $7,711,629 Highways Expansion and Extension Loan Program Line $4,053,391 Subtotal $1,619,756,796 Distributions to Arizona counties and cities Special/pass-through $1,241,109,684 Distributions to other state agencies Special/pass-through $173,405,451 Debt-related expenditures Special/pass-through $298,693,266 Subtotal $1,713,208,401 Administration Support $54,918,357 Total $3,387,883,554 Table A.11. Classification of ADOT enterprise programs and expenditures. Line Program Line Program Expenditure Percent of Total Line Program Expenditure Allocation of Support Program Expenditure Highway Maintenance $135,629,139 8.37% $4,598,548 Aeronautics $4,088,494 0.25% $138,622 Highway $171,134,168 10.57% $5,802,357 Motor Vehicle $110,982,343 6.85% $3,762,891 Noncapital Including Asset Preservation $158,991,033 9.82% $5,390,640 Capital Outlay (Construction) $989,881,588 61.11% $33,562,243 Local Government Assistance $37,285,011 2.30% $1,264,160 Arizona Highways Magazine $7,711,629 0.48% $261,465 Highway Expansion and Extension Loan Program $4,053,391 0.25% $137,431 Total Line Program Expenditure $1,619,756,796 100.00% $54,918,357 Table A.12. ADOT support program expenditure allocation to line programs.

To illustrate the difference between the benchmark and sim- plified (all-to-all) benchmark calculations, the calculation is repeated, only this time all line activities receive an allocation of all support activities. The full unit costs for production on this basis are $22.12 and $54.22 for guideline paint (larger striper) and routine fence maintenance, respectively. Missouri DOT The Missouri Department of Transportation (MoDOT) is responsible for maintaining 32,000 centerline miles of road (26% of all Missouri roads), representing nearly 75,000 lane miles, and 10,000 bridges with a total deck area of approxi- mately 7.3 million square meters. MoDOT’s annual budget for FY 2007 was approximately $2.6 billion, which included $1.5 billion for construction and $450 million for mainte- nance. MoDOT contracts approximately 20% of its mainte- nance work and self-performs the remaining 80%. MoDOT’s maintenance organization is composed of a cen- tral office at its HQ, 10 district offices, and a total of 274 main- tenance sheds. MoDOT organizes its maintenance work activities into the following six categories: 1. Safer highways and intersections, 2. Maintain highways and bridges, 3. Reduce congestion, 4. Improve roadside appearance, 5. Natural event response, and 6. Emergency preparedness. Beneath these groups are a little more than 50 discrete line activities, which MoDOT uses for the purposes of budg- eting and tracking expenditures in its maintenance pro- gram. In addition, there are approximately 70 maintenance support activities. MoDOT does not have an MMS. The key information systems used by the agency to track maintenance activities, accomplishments, and expenditures are as follows: • MoDOT’s modified FMS: Used to track expenditures in all programs, including maintenance, and feed information to the statewide accounting system SAM II. MoDOT’s FMS and the associated Financial Datamart are the bases for tracking maintenance expenditures. Each year MoDOT produces a Maintenance and Traffic Expenditure Report which pulls expenditure information from the Financial Datamart for the maintenance program and provides detailed breakdowns of expenditures for each of the 52 discrete activities in four categories: labor and fringes, cash expenditures, equipment usage charges, and inventory usage. • SAM II: The statewide accounting system. This is where all of MoDOT’s timesheet information is entered, as well as material purchase for and consumption from the DOT’s inventory. • Transportation management system (TMS): A MoDOT Planning Department system that allows the agency to inte- grate data from multiple sources such as bridge, pavement, safety, and traffic, and display it graphically to facilitate analysis and decision making. The system uses a common location referencing system built with Arc/Info. • Fleet management system: MoDOT tracks all expenditures associated with its fleet of vehicles in an agency-specific fleet management system and supports the calculation of vehicle rental rates. In addition to the Maintenance and Traffic Expenditure Report and the department-wide Tracker Report, MoDOT prepares a Performance Indicators for Highway Maintenance Operations Report on an annual basis. This report presents the current level of service overall and within a number of cat- egories for both the major and minor highways, as well as trend information. 62 Line Activity Cost Categories Full Cost Line Program Support Enterprise Support Guideline paint (large striper) $814,366 $1,275,886 $56,560 $2,146,812 Routine fence maintenance $1,418,333 $2,494,374 $98,507 $4,011,214 Table A.13. Full cost breakdown for selected ADOT line activities. Line Activity Full Cost Accomplishment Units Full Unit Cost Guideline paint (large striper) $2,146,812 77,955 Gallons $27.54 Routine fence maintenance $4,011,214 55,406 Fence panels $72.40 Table A.14. Full unit costs for selected ADOT line activities.

Documented MoDOT Full Cost Calculation The full cost determination process was applied to all MoDOT maintenance activities; however, for the purposes of this summary, two line activities have been selected: • R31C – Chip sealing, and • R323 – Bridge deck repair. Step 1: Gather and Classify Maintenance Program Activities and Expenditures MoDOT provided expenditure data for 122 different main- tenance activities from a combination of its financial manage- ment system and associated Financial Datamart for the fiscal year ending June 30, 2008. MoDOT reports accomplishment data on a regular basis, but only for a subset of the maintenance activities. Accomplishment data was extracted from MoDOT’s 2008 Maintenance and Traffic FY 2008 Expenditure Report. Based on input from MoDOT personnel and activity descrip- tions included in the Maintenance and Traffic Expenditure Report, each activity was classified as either line or support. Table A.15 presents the summary results of the classification process. Pertinent observations resulting from the classification process are as follows. The majority of the support activities that MoDOT tracks are clearly general in nature and therefore provide support to all line activities—for example, R826 – training and employee development. There are a number of support activities that focus on only a subset of line activities. For example, MoDOT has defined support activities specific to each of the six categories of main- tenance identified previously—for example, R22A – support – safer highways and intersections. Table A.16 shows the line activity expenditure and produc- tion information for the line activities selected. Step 2: Allocate Maintenance Support Expenditures to Line Activities Based on the nature of MoDOT’s support activities observed in Step 1, the allocation of support expenditures to line activi- ties is accomplished using the benchmark approach on the basis of line activity cost. On this basis, and using the descriptions of activities, a crosswalk of line and support activities was developed. The number of both line and support activities (56 and 66, respectively) is such that it is not possible to present the complete crosswalk or allocation in this report. Table A.17 is a summary of the complete allocation table presenting the support activity allocation for selected sup- port activities to the selected line activities. In addition, and in order to present a complete picture, Table A.17 includes three rows that summarize expenditures and allocations to other groups of line activities (other pavement line activi- ties, other bridge line activities, and all other line activities), and a column that details the allocation of all other support expenditures to the selected line activities and other activ- ity groups. Step 3: Gather and Classify Enterprise Programs and Expenditures Summary information regarding enterprise programs and expenditures was obtained from MoDOT’s modified FMS for the fiscal year ending June 30, 2008. In addition, a 63 Activity Classification Number of Activities Total Expenditure Percentage of Total Line 56 $324,757,064 73.2% Support 66 $118,920,291 26.8% Total 122 $443,677,355 100.0% Table A.15. MoDOT maintenance activity expenditure and classification. Activity ID Activity Name Line Expenditure Accomplishment Units R31C Chip sealing $29,872,110 4,596 Lane mile R323 Bridge deck repair $4,427,277 28,345 Square yard Table A.16. Selected MoDOT line activity expenditure and production.

review of expenditure presentations contained in MoDOT’s CAFR for the fiscal year ending June 30, 2008 was conducted. Discrepancies between the maintenance and other program expenditures were identified. However, it was discovered that this was due to highway safety and motor carrier expen- ditures being included in the maintenance program expen- ditures in the CAFR, whereas MoDOT personnel had included them with the other programs in the FMS extract. Since these other expenditures are really separate from the maintenance program, the FMS values are used for the full cost calculation. Table A.18 summarizes MoDOT’s enterprise programs, total expenditures, and the classification of programs as line, support, or special/pass-through. As a result of multiple discus- sions between the research team and MoDOT personnel about the full cost calculation, MoDOT personnel undertook some preprocessing of the raw data. This included eliminating any special/pass-through expenditures as well as grouping and summarizing support and other line program expenditures (other than maintenance and construction) into single line items. This preprocessing served to simplify this step of the cal- culation and resulted in the small number of program entries included in Table A.18. Based on the data from MoDOT’s financial manage- ment system, therefore, total line program expenditure is $2,099,076,425, and total support program expenditure is $153,868,506. Step 4: Allocate a Portion of Enterprise Support Expenditures to the Maintenance Program Given the enterprise program expenditure information obtained in Step 3, and recognizing that the single enterprise support program expenditure identified supports all three line program expenditure categories, there is no need to develop a crosswalk between line and support programs. The support program allocation is equal to: Where $LPIQ = cost of line program in question, $ASLP = cost of all supported line programs, and $SPIQ = cost of support program in question. Using this calculation the allocation of the enterprise support expenditure to maintenance is $ , , $ , , , $ , , $ 450 974 435 2 099 076 425 153 868 506 ( ) = 33,057,759. $LPIQ $ASLP SPIQ( ) $ 64 Line Activity Line Activity Expenditure Support Activity Allocation Total Program Support Allocation Support Maintain Highways and Bridge Training and Employee Development Operate Facilities All Other Support Activities Chip sealing $29,872,110 $13,008,832 $123,589 $1,395,084 $2,942,646 $17,470,151 All other pavement activities $89,095,914 $38,799,863 $368,614 $4,160,948 $8,776,672 $52,106,097 Bridge deck repair $4,427,277 $1,928,009 $18,317 $206,762 $433,775 $2,586,863 All other bridge activities $12,020,549 $5,234,760 $49,732 $561,382 $1,123,818 $6,969,692 All remaining activities $189,341,214 N/A $783,356 $8,842,593 $30,161,539 $39,787,488 Totals $324,757,064 $58,971,464 $1,343,608 $15,166,770 $43,438,450 $118,920,291 Note: Some totals rounded to the nearest dollar. Table A.17. Allocation of support activity expenditure to selected MoDOT line activities. Program Name Type Total Expenditure Maintenance Line $450,974,435 Construction Line $1,531,480,517 Other line programs Line $116,621,473 Subtotal $2,099,076,425 Enterprise support Support $153,868,506 Total $2,252,944,931 Table A.18. Classification of MoDOT enterprise programs and expenditures.

Step 5: Combine Cost Categories to Derive Full Cost The final step in the cost calculation pulls together the line expenditure for each activity from Step 1 and the allocation of program support expenditure to each activity from Step 2, and combines these with an allocation of the enterprise sup- port expenditures that were allocated to the maintenance program in Step 4. The allocation of enterprise support to each line activity is calculated as follows: Where $LAIQ = line cost of line activity in question, $ASLA = line cost of all supported line activities, and $AESM = allocation of enterprise support to the mainte- nance program. Therefore The allocation of the enterprise support expenditures to R31C – chip sealing equals and The allocation of enterprise support expenditures to bridge deck repair equals Table A.19 shows the breakdown of full cost between the three cost categories: line; program support; and enterprise support, for the two selected line activities. Table A.20 presents the full unit cost for production of each of the line activities selected. The decision to use the benchmark approach for allocating maintenance program support expenditures to line activities $ , , $ , , $ , , $4 427 277 324 757 064 33 057 759( ) = 450,663. $ , , $ , , $ , , $29 872 110 324 757 064 33 057 759( ) = 3,040,750 $LAIQ $ASLA AESM( ) $ is well supported by the descriptions of the activities included in the Maintenance and Traffic FY 2008 Expenditure Report. Furthermore, this approach is entirely consistent with the goal of fairly identifying and allocating support expenditures between the line activities that are supported. The calcula- tion was repeated using the simplified (all-to-all) benchmark approach in order to demonstrate the impact of utilizing the benchmark approach over the simplified benchmark approach. Using the simplified benchmark approach the full unit costs for production for chip sealing and bridge deck repair are $9,541.23/lane mile and $229.29/yd2, respectively. North Carolina DOT North Carolina Department of Transportation (NCDOT) is responsible for approximately 79,000 centerline miles of high- way, representing approximately 76% of the statewide total and encompassing 169,000 lane miles. NCDOT has responsibility for 16,600 highway bridges with a total deck area of approxi- mately 7.5 million square meters. NCDOT’s annual maintenance budget is approximately $800 million. NCDOT’s overall budget is approximately $4 billion annually. NCDOT performs approximately 60% of its routine maintenance work and contracts the remaining 40%. Most of its contracting involves small contracts. In addition, NCDOT currently has one fence-to-fence contract, which is a little more than one year into the agreement. NCDOT’s maintenance organization is first organized into 14 geographic divisions and a central bridge management group. Each division covers anywhere from five to 14 counties, and is itself divided into a number of districts that encompass three to four counties. Each county is assigned a county main- tenance supervisor who oversees between two and five road supervisors. NCDOT’s maintenance program currently includes approx- imately 120 discrete activities (each represented by its own 65 Line Activity Cost Categories Full Cost Line Program Support Enterprise Support Chip sealing $29,872,110 $17,470,151 $3,040,750 $50,383,011 Bridge deck repair $4,427,277 $2,586,863 $450,663 $7,464,803 Table A.19. Full cost breakdown for selected MoDOT line activities. Line Activity Full Cost Accomplishment Units Full Unit Cost Chip sealing $50,383,011 4,596 Lane mile $10,962.36 Bridge deck repair $7,464,803 28,345 Square yard $263.36 Table A.20. Full unit cost for selected MoDOT line activities.

function code—for example, 3100 – snow and ice). These activities are organized into six maintenance categories as follows: • 2700 series – miscellaneous, • 2800 series – pavement, • 2900 series – roadside, • 3100 series – maintenance, • 3200 series – traffic, and • 3300 series – bridge. In an effort to improve its cost tracking and management of the maintenance function, in December 2007 NCDOT revised the set of activities and codes in the maintenance program. The number of activities was consolidated from 700 to approxi- mately 120. As part of this consolidation effort, two of the more heavily used activities (“miscellaneous” and “payments to con- tractors”) were eliminated. These two codes tended to collect significant dollars, in the latter case almost $40 million in one year, but did not provide any insight into the nature of the work accomplished. NCDOT uses the following two systems to capture and manage maintenance cost data: • Maintenance management system – NCDOT has used an MMS since 2003. The MMS is used primarily by first-line supervisors. • Financial management system – NCDOT implemented an FMS in 2002. The central maintenance activity report- ing mechanism in the FMS is the FR1101 screen/form, which captures labor, materials consumed, and equipment usage. In contrast to the approach taken by many agencies for maintenance labor, timesheet data is entered into the FMS first, then gets transferred into the MMS. NCDOT is considering adjusting this practice, particularly given that its maintenance supervisors have PDAs that are linked directly to the MMS and could easily be used to collect and transfer maintenance timesheet data. Documented NCDOT Full Cost Calculation The full cost determination process was applied to all NCDOT maintenance activities; however, for the purposes of this summary, two line activities have been selected: • 2812 – Hot mix asphalt overlay, and • 3376 – Clean/wash bridge decks. Step 1: Gather and Classify Maintenance Program Activities and Expenditures NCDOT provided expenditure and accomplishment data for almost 400 different maintenance activities from its mainte- nance management system for the year ending June 30, 2009. Upon inspection of the data, it was evident that there were a mixture of new and old function codes (recall NCDOT recently consolidated its maintenance functions). However, using a mapping of new to old codes provided by NCDOT’s mainte- nance organization, the data was reorganized consistent with the new codes and activity definitions to the extent possible. This involved combining labor, equipment, material, and other expenditures elements as well as accomplishments for multiple old codes into a single new code. In a small number of instances, old function codes were associated with more than one new function code. In these cases, the old function expen- ditures and accomplishments were divided equally between the applicable new function codes. Finally, there were approxi- mately 80 old function codes that were not referenced in the mapping, so these were left as they were. The consolidated expenditure data was reviewed in conjunction with the detailed activity descriptions provided by NCDOT, and each activity was classified as either line or support. Table A.21 presents the summary results of the classification. Pertinent observations resulting from the classification process are as follows. A relatively small number of the line activities account for the majority of the line activity expenditure. For example, the line expenditure for activity 2812 – hot mix asphalt overlay, is just under 30% of the total line activity expenditure, and the top five line activities account for 50% of the total line activity expenditure. 66 Activity Classification Number of Activities Total Expenditure Percentage of Total Line 130 $649,281,065 79.3% Support 83 $169,032,039 20.7% Total 213 $818,313,104 100.0% Table A.21. NCDOT maintenance activity expenditure and classification.

The support activities all appear to be more general in nature, and there do not appear to be any of the “other” maintenance activities defined for the maintenance cate- gories identified previously. There is still a payment to contractor activity with a total expenditure amount of approximately $17,000,000. For the purposes of the full cost calculation this is classified as a line activity, although it is assumed that these expenditures ought to have been distributed between a number of line activities. The majority of the activities with old function codes that were not referenced in the function code mapping have rel- atively small expenditures associated with them. It appears as though the transition from the old function codes to the new function codes was still in progress for at least part of the timeframe that these expenditures were incurred. There are a considerable number of support activities show- ing relatively small expenditures; approximately 40 support activities have expenditures of less than $10,000. The 2700 series “miscellaneous” activities appear to be the major support activities, including various inspections, assess- ments, and engineering functions as well as administration and supervision. Table A.22 shows the line activity expenditure and produc- tion information for the line activities selected. Step 2: Allocate Maintenance Support Expenditures to Line Activities Based on the observations about NCDOT’s maintenance activities and in particular the general nature of the support activ- ities, the allocation of support expenditures to line activities is accomplished using the simplified benchmark (or all-to-all) approach. The number of line and support activities (130 and 82) respectively is such that it is not possible to present the complete crosswalk or allocation in this report. Table A.23 presents a por- tion of the complete support activity expenditure allocation table for the selected activities. In order to ensure that the column totals are correct, summary rows have been added for the other line expenditures in the categories associated with the selected activi- ties (pavement and bridge), as well as summary rows for the remaining three line categories (roadside, maintenance, and traf- fic). In order to ensure that the row totals are correct, columns for individual support activities, administration/supervision, and general field training are included, and catchall columns for all other miscellaneous activities (of which administration/supervi- sion is one activity) and all other support activities are included. Step 3: Gather and Classify Enterprise Programs and Expenditures A summary of rounded enterprise program expenditures for the year ending June 30, 2009, was obtained from NCDOT’s 67 Activity ID Activity Name Line Expenditure Accomplishment Units 2812 Hot mix asphalt overlay $191,604,009 138,208 Ton 3376 Clean/wash bridge decks $1,347,186 11,194,020 Square feet Table A.22. Selected NCDOT line activity expenditure and production. Line Activity Line Activity Expenditure Support Activity Allocation Total Program Support Allocation Administration/ Supervision Other Miscellaneous Activities General Field Training All Other Support Activities Hot mix asphalt overlay $191,604,009 $10,730,835 $7,653,895 $950,758 $30,546,170 $49,881,658 Other pavement activities $133,547,059 $7,479,340 $5,334,728 $662,673 $21,290,531 $34,767,272 Roadside activities $84,727,195 $4,745,170 $3,384,548 $420,425 $13,507,501 $22,057,644 Maintenance activities $133,499,392 $7,476,670 $5,332,824 $662,437 $21,282,932 $34,754,863 Traffic activities $41,746,133 $2,338,004 $1,667,609 $207,148 $6,655,312 $10,868,073 Clean/wash bridge decks $1,347,186 $75,450 $53,815 $6,685 $214,773 $350,723 Other bridge activities $43,902,197 $2,458,755 $1,753,736 $217,847 $6,999,039 $11,429,377 All other (old) activities $18,907,894 $1,058,942 $755,303 $93,822 $3,014,362 $4,922,429 Totals $649,281,065 $36,363,166 $25,936,458 $3,221,795 $103,510,620 $169,032,039 Table A.23. Allocation of support activity expenditures to selected NCDOT line activities.

Cash Management office, drawing upon data from NCDOT’s financial management system. Table A.24 details the set of enterprise programs, rounded total expenditures, and the clas- sification of programs as line, support, or special/pass-through. The classifications are the result of discussions with NCDOT personnel familiar with the objective of the full cost determi- nation process. Based on the data from NCDOT’s financial manage- ment system, therefore, total line program expenditure is $2,723,000,000, total support program expenditure is $245,500,000, and $574,900,000 is excluded from the cal- culation based on its classification as special/pass-through. Step 4: Allocate a Portion of Enterprise Support Expenditures to the Maintenance Program Based on the enterprise program expenditure information obtained in Step 3, NCDOT has a single enterprise support pro- gram that provides support to each of the five line programs, including maintenance. A crosswalk is unnecessary in this case since it would comprise only a single column and five rows and an X in each cell. The support program allocation is equal to: Where $LPIQ = cost of line program in question, $ASLP = cost of all supported line programs, and $SPIQ = cost of support program in question. Using this calculation, the allocation of administration to maintenance is $ , , $ , , , $ , , $818 300 000 2 723 000 000 245 500 000( ) = 73,776,221 $LPIQ $ASLP SPIQ( ) $ Which, in this case, is the share of enterprise support that must be allocated to the maintenance program. Step 5: Combine Cost Categories to Derive Full Cost The final step in the full cost calculation pulls together the line expenditure for each activity from Step 1 and the allocation of program support expenditure to each activity from Step 2 (revised in Step 4 in this case), and combines these with an allocation of the enterprise support expendi- tures that were allocated to the maintenance program in Step 4. The allocation of enterprise support to each activity is calculated as follows: Where $LAIQ = line cost of line activity in question, $ASLA = line cost of all supported line activities, and $AESM = allocation of enterprise support to the mainte- nance program. Therefore The allocation of the enterprise support expenditures to hot mix asphalt overlay equals and The allocation of enterprise support expenditures to rou- tine fence maintenance equals $ , , $ , , $ , , $1 347 186 649 281 065 73 776 221 = 153,077. $ , , $ , , $ , , $191 604 009 649 281 065 73 776 221( ) = 21,771,495 $LAIQ $ASLA AESM( ) $ 68 Program Name Type Total Expenditure Maintenance Line $818,300,000 Construction Line $1,590,900,000 ARRA programs Line $6,200,000 Public transportation Line $93,400,000 Other programs Line $214,200,000 Subtotal $2,723,000,000 Transfers to other agencies Special/pass-through $429,900,000 Municipal aid Special/pass-through $145,000,000 Subtotal $574,900,000 Administration Support $245,500,000 Total $3,543,400,000 Table A.24. Classification of NCDOT enterprise programs and expenditures.

Table A.25 shows the breakdown of full cost between the three cost categories of line, program support, and enterprise support for the two selected line activities. Table A.26 presents the full unit costs for production for each of the line activities selected. Texas DOT Texas DOT’s (TxDOT) highway maintenance responsi- bilities extend to a statewide network of almost 80,000 cen- terline miles. This network comprises more than 3,200 miles of Interstate highway, 12,100 miles of U.S. highways, almost 16,300 miles of state highways, almost 41,000 miles of farm- to-market roads, and about 7,100 miles of frontage and park roads. Maintenance also has responsibility for other trans- portation facilities, including parking lots and facilities at parks, as well as ferries to Gulf Coast islands operating out of Galveston and Corpus Christi. With the exception of a rela- tively small number of miles of toll roads, toll booths, and buildings in the Austin area, the Maintenance Division does not maintain the state’s toll highway system. TxDOT has a well-developed, agency-wide approach to managing its costs as well as tracking and reporting program costs and accomplishments. The budget for routine main- tenance was about $915 million for FY 2007. This total does not include additional work accomplished by contract, which is described in more detail in later sections. Routine maintenance expenditures are distributed among categories of activities as follows: • Road surface, 33.8%; • Bridge, 2.8%; • Roadside, 22.9%; • Traffic features, 32.9%; • Winter maintenance, 2.6%; and • Other categories, 5.0%. Maintenance management is decentralized among 25 dis- tricts. The central office allocates the available budget to districts based on formulas for each activity that consider factors such as each district’s respective share of the appropriate maintenance inventory, the condition of that inventory, total traffic or truck traffic, and other factors. District managers decide how to use those funds, including allocations among activities and between in-house versus contract forces. The TxDOT approach is well documented in up-to-date manuals (such as its Maintenance Management Manual and Maintenance Contract Manual) and annual bound reports [e.g., Routine Maintenance: Maintenance Division Annual Report and the annual Texas Condition Assessment Program (TxCAP)]. A wide range of reports is available from the Maintenance Man- agement Information System (MMIS) in tabular and graphical form, capturing data for individual fiscal years as well as histor- ical trend lines. TxDOT Maintenance Function A brief description of how TxDOT organizes its maintenance program financially will help in understanding cost elements, methods of analysis, and cost reporting. The descriptions below have been simplified to focus on the requirements of NCHRP Project 14-18. Selective examples give an idea of what is included in an item; more complete explanations are provided in TxDOT source documents. The examples relate primarily to maintenance, recognizing that TxDOT’s cost elements and accounting procedures apply across the board to all of the department’s functions. TxDOT defines three broad categories of maintenance: routine maintenance, preventive maintenance, and major 69 Line Activity Cost Categories Full Cost Line Program Support Enterprise Support Hot mix asphalt overlay $191,604,009 $49,881,658 $21,771,495 $263,257,162 Clean/wash bridge decks $1,347,186 $350,723 $153,077 $1,850,986 Table A.25. Full cost breakdown for selected NCDOT line activities. Line Activity Full Cost Accomplishment Units Full Unit Cost Hot mix asphalt overlay $263,257,162 138,208 Ton $1,904.79 Clean/wash bridge decks $1,850,986 11,194,020 Square feet $0.17 Table A.26. Full unit costs for selected NCDOT line activities.

maintenance. The types of work performed in each of these categories are defined in the Maintenance Management Manual (2008) by examples within selected subsets of main- tenance activity [e.g., the travel way (pavement), shoulder and side approaches, roadside, drainage, structures, traffic operations features, and emergency operations]. A sample of these work definitions is given below. While any category can in theory be performed either by state forces or by con- tract, preventive and major maintenance work is generally contracted. • Routine maintenance: Routine maintenance restores an asset to its as-constructed condition. Selected examples of pavement routine maintenance include pavement repair, leveling up the pavement surface, crack sealing, and light overlays (no more than 2-in. depth) to restore rideability. Selected examples for traffic operations include installa- tion, repair, and replacement of signs, delineators, illumi- nation, signals, and related appurtenances; installation and replacement of pavement markings; and maintenance of traffic-control cabinets. • Preventive maintenance: Preventive maintenance aims to prevent major deterioration or damage to road struc- tures and features. Selected examples of pavement pre- ventive maintenance include level-ups or milling to restore rideability, light overlays, seal coats, crack seal- ing, and microsurfacing. Selected examples for traffic operations include replacement of pavement markings, which may be performed in conjunction with pavement resurfacing. • Major maintenance: Major maintenance strengthens or improves the asset to handle current and future traffic. Selected examples of major pavement maintenance include reconditioning and stabilizing the pavement base, adding base material, light overlays, level-ups, and seal coats. Selected examples for traffic operations include installing new signal systems to upgrade outdated designs. For purposes of cost analysis, the distinction that is most important is the one between routine maintenance and pre- ventive maintenance. Routine maintenance is managed and reported in TxDOT’s MMIS. Preventive maintenance cost data are compiled from other sources and mechanisms (e.g., discus- sions among managers regarding current projects, and queries of management system databases). Maintenance activities performed by state agency versus those performed by contracted forces are managed under sep- arate budgets. The legislature has imposed a target of at least 50% of maintenance work to be contracted. TxDOT now exceeds the target when the totals of contracted routine main- tenance plus contracted preventive maintenance are combined. Districts need to balance between the two methods of deliver- ing maintenance to meet the target. The following description of the cost determination pro- cedure is based on interviews with several TxDOT managers in maintenance management, financial management, equip- ment management, and materials-and-stores management; a number of reports from the MMIS and the Financial Infor- mation Management System (FIMS); and documents, includ- ing TxDOT’s Maintenance Management Information System User Manual (2002), Maintenance Management Manual (2008), Maintenance Contract Manual (2006), TxDOT Glossary (2010), and Indirect Cost Plan, or IDCP (Proposed Adminis- trative Indirect Cost Rates, 2008). Full Cost Calculation Summary TxDOT has adopted a comprehensive, highly integrated financial accounting approach that supports all aspects of its financial management, including its indirect cost plan. Cost data associated with its MMIS is included within this department-wide financial framework. The following dis- cussion is based on FY 2009 reports of line highway main- tenance expenditures from the TxDOT MMIS, plus the considerable data on support costs in the indirect cost plan for FY 2009. TxDOT is a large, decentralized transportation agency that processes its direct and indirect costs on a district-by-district basis in addition to producing statewide summaries. While that practice has been maintained in certain cost determina- tion computations, it has proven more efficient to compute and display several results statewide rather than at a district level. Unit costs have been determined for all activities having a cost accomplishment unit—again, at a statewide level. Given the large amount of data involved, the following descriptions will present subsets of the total information to illustrate calcu- lations and results, with the understanding that corresponding calculations have been applied to other maintenance activities, cost items, and districts. Step 1: Gather and Classify Maintenance Program Activities and Expenditures Line costs associated with maintenance activities have been obtained from MMIS reports summarizing cumulative expen- ditures for FY 2009. Cost data in these MMIS reports are processed through the financial system and uploaded into the MMIS, an outcome of TxDOT’s integrated systems approach. Accomplishment data reside within the MMIS and are corre- lated with respective costs by activity. For FY 2009, statewide data are available for 121 activities, although not all districts per- form all activities in any given fiscal year. All activities within the 70

MMIS are line activities; thus, totals represent overall line costs of highway maintenance. Line costs are categorized as shown in Table A.27; most of these represent well-recognized highway maintenance line cost elements (labor, equipment, materials, etc.). Contractor costs refer to payments within the total value of the awarded contracts; contract preparation costs refer to agency expenses associated with preparing bid documents, prequalifying and communicating with contractors, advertis- ing, letting, preparing and awarding contracts, and contract execution. Table A.27 presents cost totals at a statewide level in each of the categories shown. Cost breakdowns in these categories also are available for each individual activity in each district and statewide. Step 2: Allocate Maintenance Support Expenditures to Line Activities Nomenclature The TxDOT FMIS conducts a detailed analysis of support expenditures and their allocation to line activities. To accom- modate the variances in nomenclature between TxDOT prac- tice and the terminology used in this report, “maintenance program support costs” will refer to what TxDOT describes as its “District-Office” component of costs, and “enterprise sup- port costs” will refer to what TxDOT describes as its “Head- quarters (HQ) Divisions-Offices” component of costs (i.e., costs associated with functions located in the central office). This section addresses maintenance program support costs, or the District-Office component of TxDOT’s cost computations. Enterprise support costs, or TxDOT’s HQ Divisions-Offices component of costs, are covered in the following section. Maintenance program support activities are allocated to line activities in two components: one constituting direct costs, the second constituting indirect costs. Direct Program Support Costs Program support costs that are sufficiently closely related to activity performance qualify as direct costs in FIMS and the IDCP. These direct program support costs include items such as laboratory testing charges, core drill costs, survey team costs, an allowance for the area engineer costs, and an allowance for roadway maintenance managerial costs. These support costs are allocated either to specific activities (i.e., those activities that benefitted from, for example, the testing, drilling, and survey team services) or, for the remainder of the support costs (i.e., the allowances for management), across line activity costs in proportion to their relative total cost that is represented in Table A.27. The result of this allocation is shown in Table A.28 at a statewide level. 71 Category of Activity Line Cost Total Expenditure Percent of Total Labor costs $138,567,983.08 17.1% Material costs $174,241,584.92 21.4% Equipment costs $77,212,618.16 9.5% Contractor costs $369,415,240.82 45.5% Contract preparation costs $11,065,528.59 1.4% Miscellaneous costs $41,828,735.19 5.1% Total Activity Line Costs $812,331,690.76 100.0% Source: TxDOT MMIS, Statewide Maintenance Expenditures, FY 2009. Table A.27. TxDOT maintenance activity line expenditures. Cost Component Total Expenditure Total activity line costs (from Table A.27) $812,331,690.76 Direct costs of maintenance program support $141,883,737.51 Subtotal, maintenance program direct costs $954,215,428.27 Source: TxDOT FIMS Report, Maintenance Direct and Indirect Expenditures by Activity, FY 2009. Table A.28. Summary of direct maintenance program support costs allocated to line costs.

Other maintenance-program support costs are subjected to a detailed analysis of indirect costs as described below. Indirect Program Support Costs The remaining maintenance program support costs that are regarded as indirect costs in the IDCP are organized within a number of indirect cost accounts, examples of which include the following (the grouping is only to subdivide the extensive list—each account is processed individually): • District-Level Executive Management, Accounting, Human Resources Management, District Operations Management, and Administration Management. • District-Level Design Management, Construction Manage- ment, Right-of-Way Management, Maintenance Manage- ment, Traffic Management, Planning and Development Management, Transportation Operations Management, and Safety Coordinator. • District Warehouse Operations, District Partnership Man- agement, District Headquarters Buildings and Grounds Management, Minor Repairs and Alterations to Buildings, and District Automation Operations, Region Automation, Data Center Services. • District-Level Public Information Management, Legal Counsel, Recruiting Program, Employee Relocation, Re- cycling Program Coordination, Internal Review Function. • District-Level Classroom Training (multiple categories), Educational Assistance (multiple categories). • District-Level Transportation Management System, Trans- portation Management System-Maintenance, Traffic Operations, Pavement Management, Natural Resources Management. • District-Level Administrative and Clerical Support, Switch- board and Mailroom Operations, Reproduction Services. • District-Level Inventory Adjustments, Supplies and Mis- cellaneous, Adjustments to Cash, Capital Budget Items – Noncapitalized, Depreciation-Facilities, Depreciation- Minor Reportable Property. Indirect costs are accumulated by district within each of these individual accounts; only the totals by district are given in Table A.29. Also shown in Table A.29 are the cor- responding direct costs by district for all functions (not just maintenance). Indirect costs are divided by direct costs in each district to compute a district indirect cost rate for these support costs. The indirect cost rates in Table A.29 enable one to compute the indirect costs attributable to any direct cost item in a dis- trict, including maintenance work performance. For exam- ple, assume that a maintenance job incurred a direct cost of $10,000 in District 12 (Houston). The indirect costs of pro- gram support to be allocated to this activity in this district would be 1.29% of $10,000, or $129. To take another exam- ple, assume a maintenance job incurred a direct cost of $7,500 in District 23 (Brownwood). The indirect costs of program support to be allocated to this activity would be 7.08% of $7,500, or $531. Note that at this stage, the allocation of indirect costs to a maintenance activity depends solely on the direct costs incurred by that activity. The nature of the activity (i.e., whether it is for pavement repair, roadside vegetation, winter maintenance, litter pickup, or whatever) makes no difference to the allocation methodology. By this approach, any maintenance activity may be analyzed for cost determination in this way. The full set of computations for the maintenance program would require a matrix with 25 columns (one per district) and a maximum of 121 rows (one per potential activity, realizing that a district may not record costs in all activities within a given fiscal year). In lieu of this detailed breakdown, overall results statewide are more convenient to present. Before these summarized results can be shown, however, the enterprise support costs must be addressed, since the TxDOT FIMS performs and displays program support and enterprise support calcula- tions simultaneously. Step 3: Gather and Classify Enterprise Programs and Expenditures A corresponding methodology is carried out for enter- prise support costs. In the context of the TxDOT methodol- ogy, “enterprise support costs” address the costs attributable to the central office functions in the capital, Austin. The indirect portion of these costs will be distributed among the direct costs of the central office functions plus the direct costs computed for all districts (the more than $7 million sum in the direct cost column in Table A.29). Several cate- gories of enterprise support costs are listed in Table A.30, together with indirect and direct costs accumulated within the FMIS. Step 4: Allocate a Portion of Enterprise Support Expenditures to the Maintenance Program Allocation is again done through a percentage rate computed on the basis of total indirect costs divided by total direct costs. The computation is shown at the bottom of Table A.30. For FY 2009, the rate is 2.88%. To apply indirect costs to any type of direct cost in any district, this central-office rate is added to the district rate computed in Table A.29 (hence, the simultaneous consideration of maintenance program and enterprise support costs, or district and central-office division/office indirect costs). For example, the overall rate to allocate central office and district indirect costs (or maintenance program and enterprise 72

support costs) to direct maintenance costs in District 12, Houston, is 1.29% + 2.88% = 4.17%. The corresponding rate to allocate indirect costs to direct maintenance costs in District 23 (Brownwood) is 7.08% + 2.88% = 9.96%. Step 5: Combine Cost Categories to Derive Full Cost The combined percentage distribution factors from Tables A.29 and A.30 can be applied to the direct costs of individual maintenance activities in any district to obtain total line plus support costs for that activity—or equivalently, total direct plus indirect costs. When all such district costs are aggregated to the statewide level, one obtains the sum shown at the bot- tom of Table A.31: the full costs of the maintenance program overall. Let us repeat the examples discussed earlier, using the con- solidated indirect cost rates resulting from data in Tables A.29 and A.30. In the first example, assume that a maintenance job incurred a direct cost of $10,000 in District 12 (Houston). The total indirect costs to be allocated to this activity in this district would be (1.29% + 2.88% =) 4.17% of $10,000, or $417. The full cost of the activity would therefore be $10,417. In the second example, assume a maintenance job incurred a direct cost of $7,500 in District 23 (Brownwood). The indirect costs of pro- gram support to be allocated to this activity would be (7.08% + 2.88% =) 9.96% of $7,500, or $747. Full costs of individual maintenance activities have been computed at a statewide level, representing the aggregation of results from the 25 districts. Table A.32 presents these statewide costs for five sample activities. 73 Code District Adjusted Indirect Cost for FY 2009 “IDC” Projected Direct Cost for FY 2009 “DC” IDC/DC, Percent = “District IDC Rate” 1 Paris $4,391,691 $117,631,868 3.73% 2 Fort Worth $9,734,262 $371,624,233 2.62% 3 Wichita Falls $4,804,667 $138,995,091 3.46% 4 Amarillo $4,518,547 $168,343,781 2.68% 5 Lubbock $4,346,863 $182,941,267 2.38% 6 Odessa $5,552,425 $96,093,756 5.78% 7 San Angelo $5,356,705 $80,618,706 6.64% 8 Abilene $5,037,145 $125,243,232 4.02% 9 Waco $6,293,953 $440,831,461 1.43% 10 Tyler $5,927,096 $242,483,421 2.44% 11 Lufkin $4,472,751 $188,320,619 2.38% 12 Houston $16,415,521 $1,276,201,011 1.29% 13 Yoakum $4,143,842 $174,817,785 2.37% 14 Austin $11,310,844 $362,466,180 3.12% 15 San Antonio $7,651,070 $536,136,565 1.43% 16 Corpus Christi $5,806,497 $206,765,049 2.81% 17 Bryan $3,744,395 $188,272,652 1.99% 18 Dallas $12,538,992 $854,032,214 1.47% 19 Atlanta $4,240,546 $190,424,768 2.23% 20 Beaumont $5,897,734 $312,346,593 1.89% 21 Pharr $6,835,279 $329,042,269 2.08% 22 Laredo $5,031,930 $177,869,183 2.83% 23 Brownwood $3,571,718 $50,443,372 7.08% 24 El Paso $7,295,125 $152,643,767 4.78% 25 Childress $3,676,842 $88,289,853 4.16% 1-25 District Total Expenditures $158,596,440 $7,052,878,696 Source: TxDOT IDCP, Exhibits A and C. Table A.29. District indirect cost rates, FY 2009.

Central Office Functions, Offices, Other Items Adjusted Indirect Cost for FY 2009 “ ID C ” Projected Direct Cost for FY 2009 “ DC ” IDC/DC, Percent = “ Divisions/Offices IDC Rate ” Executive Director $2,140,681 $0 Aviation $1,858,440 $64,914,200 Finance $13,879,139 ($164,574) General Services $18,361,211 $0 Audit $4,996,665 $0 Construction $12,505,637 $9,692 Maintenance $19,622,439 $2,392,404 Design $4,791,852 $2,341,321 Transportation Planning and Programming $189,525 $81,082,742 Public Transportation $701,633 $207,036,793 Vehicle Title s $0 $77,070,949 Human Resources $14,156,236 $201,401 Civil Rights $1,267,031 $91,117 Right-of-Way $3,328,996 $956,026 Travel $3,072,359 $17,585,012 Environmental Affairs $26,040,441 $1,644,274 Traffic Operations $7,991,562 $42,915,211 Technology System $55,700,647 $1,976,213 Occupational Safety $4,160,619 $0 Motor Vehicle ($142,908) $6,434,730 Comp. Claims and Refunds ($4) $0 Attorney General $4,743,851 $0 Research and Technology $25,830 $25,342,106 Motor Carrier $1,484,533 $6,871,265 Management Services ($1,414) $0 Public Information $1,621,534 $0 General Counsel $3,036,159 $0 Business Opportunity Program $1,914,002 $59,994 Bridge Division $6,984,542 $1,113 Allocation from Attorney General ’ s Office $6,044,448 $0 Allocation from State Auditor ’ s Office $2,016,018 $0 Other $11,385,689 $539,946,264 Subtotal divisions/offices $233,877,393 $1,078,708,253 District direct costs from Table A.31 $7,052,878,696 Total direct and indirect costs $233,877,393 $8,131,586,949 Divisions/Offices Indirect Cost Rate $233,877,393 $8,131,586,949 2.88 % Source: TxDOT IDCP Exhibit A. Table A.30. Summary of enterprise support functions with indirect and direct costs. Cost Component Total Expenditure Total activity line costs (from Table A.27) $812,331,690.76 Direct costs of maintenance program support (from Table A.28) $141,883,737.51 Indirect costs of maintenance program support (computed by activity and district using district rates in Table A.31, aggregated program-wide and statewide) plus indirect costs of central-office divisions/offices using the divisions/offices rate in Table A.30 $52,705,669.38 Subtotal, line plus maintenance program support costs $1,006,921,097.65 Source: TxDOT MMIS Report, FY 2009, and FIMS Report, Maintenance Direct and Indirect Expenditures by Activity, FY 2009. Table A.31. Summary of maintenance program line costs plus support costs.

Washington State DOT The Washington State Department of Transportation (WSDOT) is responsible for maintaining 7,000 centerline miles of road (8.4% of all Washington State roads), represent- ing nearly 20,000 lane miles. WSDOT also is responsible for 3,000 bridges with a total deck area of approximately 4.7 mil- lion square meters. WSDOT’s maintenance budget for the 2007 to 2009 bi- ennium was approximately $340 million and was applied to routine maintenance activities across the state, including those related to bridges, rest areas, roadsides, signs, snow and ice con- trol, and minor pavement treatments such as pothole patching and small chip seals. WSDOT self-performs more than 95% of this routine maintenance but does contract with a number of cities for certain landscaping and signal maintenance work. In addition WSDOT’s 2007 to 2009 biennium budget included $748 million for its preservation program, of which approx- imately $245 million was for pavement activities, including overlays and large chip seal projects. The vast majority (in excess of 99%) of preservation work is completed by contractors. The distinction between routine maintenance and preservation activities at WSDOT is that the latter includes projects with values in excess of $60,000. WSDOT’s total 2007 to 2009 biennial budget was $6.4 billion and included a construction improvement program of just over $3 billion. WSDOT’s maintenance organization comprises a central office at the department’s headquarters in Olympia, as well as six regional offices located around the state that coordinate the activity in a total of 24 distinct maintenance areas. The maintenance areas cover anywhere from part of one county to three counties. WSDOT groups its maintenance activities into nine main- tenance functions as follows: • Group 1 – Roadway maintenance and operations, • Group 2 – Drainage maintenance and slope repair, • Group 3 – Roadside and vegetation management, • Group 4 – Bridge and urban tunnel maintenance and operations, • Group 5 – Snow and ice control operations, • Group 6 – Traffic control and maintenance operations, • Group 7 – Rest area operations, • Group 8 – Training and testing, and • Group 9 – Third-party damage repair and disaster operations. Each maintenance function is further subdivided into a number of subgroups, and each subgroup contains a num- ber of specific maintenance activities, which are identified by unique work operation numbers. WSDOT has defined approximately 275 discrete work operation numbers. Finally, WSDOT has identified five maintenance work groups, which are used to further specify the nature of the work being con- ducted. These five work groups are as follows: Group 01 – Covers time spent actually performing the core activity; Group 90 – Covers time spent hauling materials to or from a particular maintenance activity location; Group 91 – Covers time spent changing equipment attach- ments associated with paving operations and for time spent cleaning equipment after use. Group 92 – Covers time spent in order to meet environmental requirements, such as annual meetings with the Department of Fish and Wildlife, obtaining permits to perform certain work, and maintaining/installing/removing environmental best management practices (BMP)—for example, work asso- ciated with silt fences or rock check dams; Group 95 – Covers traffic control activities; and Group 98 – Covers time that equipment is not in use. WSDOT does not have a centralized MMS but instead it uses a combination of systems in order to budget, manage, 75 Activity Line Cost Support Cost Full Cost Unit Full Cost 110 Base removal/replacement $23,644,083 $5,508,975 $29,153,059 $64.01 per CY 270 Edge repair $14,328,973 $4,636,240 $18,965,214 $1.05 per LF 511 Mowing $37,668,195 $9,746,181 $47,414,377 $29.58 per AC 562 Reshaping ditches $4,129,289 $1,375,447 $5,504,736 0.25 per LF 650 Bridge decks $1,757,129 $351,769 $2,108,897 $42.70 per SF Source: TxDOT MMIS and FMIS Maintenance Program Reports, FY 2009. Notes: CY=cubic yards; LF=linear feet; AC=acres; SF=square feet. Some totals rounded to the nearest dollar. Table A.32. Examples of statewide full cost calculations for five sample activities.

and track its maintenance activities and expenditures as follows: • Transportation reporting and accounting system (TRAINS): WSDOT’s mainframe financial management system and is a highly customized version of an American Management Systems (AMS) software package that has been in production since 1991. TRAINS is used to track all WSDOT revenues, expenditures, receipts, disbursements, resources, and obligations. • Human resource management system (HRMS): The state- wide labor system that tracks the names and hours of all Washington State employees. The information entered here feeds salary costs into the WSDOT payroll suspense file where it is combined with other employee costs such as fringe benefits. • Consumable inventory system: The 30-plus-year-old main- frame system that WSDOT uses to manage its consumable inventory. • M4 fleet management system: Used to track all costs asso- ciated with maintaining WSDOT’s equipment fleet. • There are a number of activity-specific maintenance man- agement systems used to help maintain traffic signals, high- way lighting, intelligent transportation systems, movable bridges, urban tunnels, and traffic signs, as well as a variety of databases that track work accomplishments for different activities. WSDOT currently is investigating greater integration of the various maintenance management and cost-tracking activities, either through integration of the existing systems or through the implementation of an integrated maintenance manage- ment product. In addition, WSDOT’s ongoing critical applica- tions effort is a project to explore the replacement of 11 critical systems, including the current financial management system (TRAINS) and the labor collection and distribution system. Currently, WSDOT tries to reconcile work accomplish- ments in the maintenance program from a variety of systems, including the automated data collection systems on certain vehicles and handheld PDAs. WSDOT is starting to compare the amounts recorded by these data collection devices to the consumable inventory, but it can be very challenging due to the multiple sources of data and lack of integration. Documented WSDOT Full Cost Calculation The full cost determination process was applied to all WSDOT maintenance activities; however, for the purposes of this summary, two line activities have been selected: • 2113 – Snow plowing truck, and • 2152 – Anti-icing/deicing app liquid. Step 1: Gather and Classify Maintenance Program Activities and Expenditures WSDOT provided expenditure and accomplishment data for 266 different maintenance activities (or work operations, as they are referred to within the agency) that make up its M2 sub- program, as well as total expenditure information for two rele- vant maintenance support subprograms: M1 – Maintenance Management and Support, and M5 – Inventory and Stores Administration. The two support subprograms were added as line items to the 266 other maintenance activities. The expenditure data was reviewed in conjunction with detailed activity descriptions provided by WSDOT, and each activity was classified as either line or support. Table A.33 presents the summary results of the classification process. Pertinent observations resulting from the classification process are as follows. In addition to a number of specific activities, each WSDOT work function (or group of related activities) includes a general activity—for example, 1199 – Other Roadway Maintenance as Approved by Superintendent. WSDOT has created other main- tenance activities in order to 1) capture expenditures that, although related to work function, cannot be classified as any of the specific activities, and/or 2) track cost for a specific activity, which will ultimately be transferred to the appropriate specific activity. It therefore seems reasonable to identify the other expenditures as a support activity and allocate it between the specific line activities of the work function. In a number of cases, however, the expenditure amounts for the “other” activity are a more significant fraction (i.e., greater than 30%) of the sum of specific activity expenditures. In these cases, the “other” activity has been classified as line in order to prevent potentially skewing the full cost of the other specific activities. The “other” activities for the following work functions are therefore classi- fied as line: 76 Activity Classification Number of Activities Total Expenditure Percentage of Total Line 227 $144,962,680 78.9% Support 41 $38,878,654 21.1% Total 268 $183,841,334 100.0% Table A.33. WSDOT maintenance activity expenditure and classification.

• Electrical equipment and ITS systems, • Signal systems, • Electrical services and highway lighting systems, and • Disasters. One of the activities identified in the roadway maintenance and operations work function is section safety and debris patrol. Based on the description of this activity, which indi- cates that this is a means of identifying locations where specific line activities should be conducted, it is classified as a support activity. By contrast, since the description of the winter safety patrol includes the application of sand, anti-icing, and/or deicing material, as well as minor amounts of snow removal (i.e., line activity coupled with patrol/survey), it is classified as a line activity. There are a number of activities in the snow and ice control operations work function that clearly provide support to the snow and ice control line activities alone. For example, dormi- tory and dining room operations, radio operation specifically for snow and ice operations, mixing anti-icing and deicing liq- uids, and winter field supervision. WSDOT identifies a series of program-wide support activ- ities in the training and testing work activities work function. For example, administrative support, instructor training, drug and alcohol testing, maintenance of stockpile sites, and yard and shop clean up. Table A.34 shows the line activity expenditure and produc- tion information for the line activities selected. Step 2: Allocate Maintenance Support Expenditures to Line Activities Based on the nature of WSDOT’s support activities observed previously, the allocation of support expenditures to line activ- ities is accomplished using the benchmark approach on the basis of line activity cost. On this basis, and using the descrip- tions of activities, a crosswalk of line and support maintenance activities was developed. The number of both line and support activities (227 and 41, respectively) is such that it is not possi- ble to present the complete crosswalk or allocation in this report. Table A.35 presents a support activity allocation table detailing a portion of the support activity allocation to the 77 Activity ID Activity Name Line Expenditure Accomplishment Units 2113 Snow plowing truck $7,095,338 1,763,663 Equipment mile 2152 Anti-icing/deicing app liquid $6,445,140 1,020,128 Gallon Table A.34. Selected WSDOT line activity expenditure and production. Winter Operations Support Activities General Support Activities Mixing All Other Winter Excluding Winter All Other General Total Program Line Activity Line Activity Expenditure Radio Operations Deicing Fluids Winter Field Supervision Support Activities Field Supervision Radio Operator Support Activities Support Allocation Snow blower $790,466 $5,023 N/A $27,934 $47,912 N/A N/A $141,266 $222,136 Snow plowing truck $7,095,338 $45,089 N/A $250,744 $430,069 N/A N/A $1,268,024 $1,993,926 Snow plowing – motor grader $447,444 $2,843 N/A $15,812 $27,121 N/A N/A $79,964 $125,740 Snow drift removal $543,863 $3,456 N/A $19,220 $32,965 N/A N/A $97,195 $152,836 Opening seasonal passes $613,934 $3,901 N/A $21,696 $37,212 N/A N/A $109,718 $172,527 Winter sand cleanup $1,203,747 $7,649 N/A $42,539 $72,963 N/A N/A $215,124 $338,276 Sanding $4,838,534 $30,747 N/A $170,990 $293,278 N/A N/A $864,706 $1,359,721 Anti-icing/deicing app liquid $6,445,140 $40,957 $147,118 $227,766 $390,659 N/A N/A $1,151,826 $1,958,326 Anti-icing/deicing app solid $13,736,933 $87,294 N/A $485,452 $832,636 N/A N/A $2,454,959 $3,860,341 Guide stakes/posts/signs $320,996 $2,040 N/A $11,344 $19,457 N/A N/A $57,366 $90,206 Winter drainage maintenance $373,416 $2,373 N/A $13,196 $22,634 N/A N/A $66,734 $104,937 Winter safety patrol $5,453,602 $34,656 $124,485 $192,726 $330,559 N/A N/A $974,626 $1,657,052 Avalanche control $911,866 $5,795 N/A $32,225 $55,271 N/A N/A $162,962 $256,252 All other line activities $102,187,401 N/A N/A N/A N/A $48,925 $4,546 $26,532,907 $26,586,378 Total $144,962,680 $271,823 $271,603 $1,511,644 $2,592,736 $48,925 $4,546 $34,177,377 $38,878,654 Table A.35. Allocation of support activity expenditure to selected WSDOT line activities.

selected line activities. Two catchall columns and a catchall row are included to enhance understanding and ensure that the col- umn and row totals represent the total support activity expen- diture and the total support activity allocation to each line activity, respectively. Key observations about the support activities related to the two selected line activities are as follows: • All winter operations line activities, including the two selected, receive an allocation of winter radio operations and winter field supervision. • Only anti-icing/deicing app liquid and winter safety patrol receive an allocation of mixing deicing fluids since these are the only line activities that consume deicing fluid. • WSDOT has segregated radio operations and field super- vision between winter operations activities and all other activities. Winter activities do not receive an allocation of the general field supervisions, nor do the general activities receive an allocation of the winter field supervision. Step 3: Gather and Classify Enterprise Programs and Expenditures Summary information regarding enterprise programs and expenditures was obtained from WSDOT’s financial man- agement system, TRAINS, for fiscal year 2008. Table A.36 details the set of enterprise programs, the total expenditures, and the classification of programs as line, support, or special/ pass-through. The classifications are a result of a combina- tion of prior knowledge of WSDOT’s program structure and consultation with WSDOT’s Office of Budget and Financial Analysis. The rationale for classifying three programs as special/ pass-through is as follows: • Program B is for expenditures associated with operating specific facilities, including the Tacoma Narrows Bridge, SR 520, and others that are funded by toll revenues. • Program E is a revolving fund for the purchase and main- tenance of vehicles and other equipment. Its expenditures 78 Program Name Type Total Expenditure Maintenance Line $185,637,078 Aviation Line $3,036,081 Improvements Line $1,130,398,293 Preservation Line $366,074,984 Traffic Operations Line $30,995,241 Public Transportation Line $43,370,820 Ferries Construction Line $62,786,853 Ferries Maintenance and Operations Line $227,058,867 Rail Line $39,978,457 Local Programs Line $254,425,326 Subtotal $2,343,762,001 Toll Operations and Maintenance (Tacoma) Special/pass-through $15,374,998 Operations Transportation Equipment Fund Special/pass-through $62,249,570 Public–Private Partnerships Special/pass-through $416,282 Subtotal $78,040,851 Information Technology Support $36,969,127 Capital Facilities Support $17,875,122 Program Delivery Management and Support Support $26,141,408 Transportation Management and Support Support $15,748,643 Transportation Planning, Data, and Research Support $34,605,283 Charges from other agencies Support $31,538,183 Subtotal $162,877,765 Total $2,584,680,617 Note: Some totals rounded to nearest dollar. Table A.36. Classification of WSDOT enterprise programs and expenditures.

are reimbursed through equipment rental charges to the other programs, including maintenance. To consider it in the full cost calculation would effectively be double count- ing equipment expenditures. • Program K is such a small portion of WSDOT’s expenditures (<0.02%) that WSDOT’s Office of Budget and Financial Analysis recommended it be excluded. Based on the data from WSDOT’s financial manage- ment system, therefore, total line program expenditure is $2,343,762,001, total support program expenditure is $162,877,765, and $78,040,851 is excluded from the calcula- tion based on its classification as special/pass-through. Step 4: Allocate a Portion of Enterprise Support Expenditures to the Maintenance Program Based on the enterprise program expenditure informa- tion obtained in Step 3, WSDOT has six support programs and 10 line programs. Five of the support programs effec- tively support all 10 of the line programs, but one support program, H – Program Delivery Management and Support, is focused on WSDOT’s regions and highways and thus can- not be considered to support all line programs. Table A.37 presents a crosswalk between WSDOT’s enterprise line and support programs. The allocation calculation is performed for each valid combination of line and support programs (i.e., for each X in Table A.37). The support program allo- cation is equal to: $LPIQ $ASLP SPIQ( ) $ Where $LPIQ = cost of line program in question, $ASLP = cost of all supported line programs, and $SPIQ = cost of support program in question. Using this calculation, the allocation of Program Delivery Management and Support to Maintenance is Table A.38 shows the results of this allocation calculation for all line programs as well as the total enterprise support expenditure allocation to each line program. Using the benchmark approach, WSDOT’s maintenance program receives an enterprise support expenditure alloca- tion of $13,715,125. Step 5: Combine Cost Categories to Derive Full Cost The final step in the cost calculation pulls together the line expenditure for each activity from Step 1 and the allocation of program support expenditure to each activity from Step 2, and combines these with an allocation of the enterprise sup- port expenditures that were allocated to the maintenance program in Step 4. The allocation of enterprise support to each line activity is calculated as follows: $LAIQ $ASLA AESM( ) $ $ , , $ , , $ , , , $ 185 637 078 185 637 078 1 130 398 293 36 + + 6 074 984 26 141 408 , , $ , , $ ⎛⎝⎜ ⎞⎠⎟⎡⎣⎢ ⎤ ⎦⎥ = 2,884,956. 79 Support Programs Information Capital Management and Support Transportation Planning, Charges from Line Programs Technology Facilities Program Delivery Transportation Data and Research Other Agencies Maintenance X X X X X X Aviation X X X X X Improvements X X X X X X Preservation X X X X X X Traffic Operations X X X X X Public Transportation X X X X X Ferries Construction X X X X X Ferries Maintenance and Operations X X X X X Rail X X X X X Local Programs X X X X X Table A.37. WSDOT line and support program crosswalk.

Where $LAIQ = line cost of line activity in question, $ASLA = line cost of all supported line activities, and $AESM = allocation of enterprise support to the mainte- nance program. Therefore The allocation of the enterprise support expenditures to snow plowing truck equals $ , , $ , , $ , , $7 095 338 144 962 680 13 715 215( ) = 671,304 and The allocation of enterprise support expenditures to anti- icing/deicing app liquid equals Table A.39 shows the breakdown of full cost between the three cost categories of line, program support, and enterprise support for the two selected line activities. Table A.40 presents the full unit costs for production of each of the line activities selected. $ , , $ , , $ , , $ ,6 445 140 144 962 680 13 715 215 609 7( ) = 88. 80 Allocation of Support Program Expenditure Information Capital Management and Support Transportation Planning, Charges from Total Support Line Programs Technology Facilities Program Delivery Transportation Data and Research Other Agencies Program Allocation Maintenance $2,928,130 $1,415,794 $2,884,956 $1,247,367 $2,740,903 $2,497,974 $13,715,125 Aviation $47,889 $23,155 N/A $20,401 $44,827 $40,854 $177,127 Improvements $17,830,239 $8,621,185 $17,567,339 $7,595,583 $16,690,156 $15,210,891 $83,515,394 Preservation $5,774,252 $2,791,937 $5,689,113 $2,459,799 $5,405,040 $4,925,986 $27,046,128 Traffic Operations $488,901 $236,391 N/A $208,269 $457,640 $417,079 $1,808,279 Public Transportation $684,106 $330,775 N/A $291,425 $640,363 $583,607 $2,530,277 Ferries Construction $990,363 $478,855 N/A $421,889 $927,038 $844,874 $3,663,019 Ferries Maintenance and Operations $3,581,493 $1,731,705 N/A $1,525,696 $3,352,489 $3,055,355 $13,246,738 Rail $630,597 $304,903 N/A $268,631 $590,276 $537,959 $2,332,365 Local Programs $4,013,156 $1,940,420 N/A $1,709,582 $3,756,550 $3,423,604 $14,843,313 Support Program Total $36,969,127 $17,875,122 $26,141,408 $15,748,643 $34,605,283 $31,538,183 $162,877,765 Note: Some totals rounded to the nearest dollar. Table A.38. Allocation of WSDOT support program expenditures to line programs. Line Activity Cost Categories Full Cost Line Program Support Enterprise Support Snow plowing truck $7,095,338 $1,993,926 $671,304 $9,760,568 Anti-icing/deicing app liquid $6,445,140 $1,958,326 $609,788 $9,013,254 Table A.39. Full cost breakdown for selected WSDOT line activities. Line Activity Full Cost Accomplishment Units Full Unit Cost Snow plowing truck $9,760,568 1,763,663 Equipment mile $5.53 Anti-icing/deicing app liquid $9,013,254 1,020,128 Gallon $8.84 Table A.40. Full unit costs for selected WSDOT line activities.

81 Introduction This appendix summarizes the maintenance cost tracking ac- tivities at DOTs in three states: California, Minnesota, and Ver- mont. In each case, a summary introduction to the agency and its maintenance program is provided, followed by a description of the management systems and processes used to track the var- ious categories of cost that compose the full cost of any partic- ular maintenance activity. The purpose of this appendix is to supplement both the process description and the documented calculations and to provide practitioners with additional insight into maintenance cost tracking practices at state DOTs collected during this project. Full cost calculations were not performed for these agencies because it was determined that the full cost process does not vary between agencies; the only differences re- late to the systems and other sources of input data, as illustrated by the six calculations documented in Appendix A. Contents California Department of Transportation....................... 81 Minnesota DOT ................................................................. 85 Vermont Agency of Transportation ................................. 87 California Department of Transportation Introduction The California Department of Transportation (Caltrans) is responsible for approximately 15,000 centerline miles of high- way, representing approximately 9% of the statewide total and encompassing 50,000 lane miles. Caltrans has responsibility for approximately 12,000 highway bridges with a total deck area of 21 million square meters. Caltrans’ annual maintenance budget for the year 2007/2008 was approximately $1.1 billion, representing an increase of ap- proximately $162M from 2006/2007. The total agency budget was $13.9 billion in 2007/2008. In addition to Caltrans’ main- tenance budget, which is directed primarily toward preventa- tive maintenance activities, Caltrans’ 2007/2008 budget in- cluded $2.5 billion for its State Highway Operations and Pro- tection Program (SHOPP). The SHOPP program is composed of more major projects, above and beyond preventive main- tenance activities. Caltrans coordinates the activities con- ducted under its maintenance and SHOPP programs since it must avoid expenditure of maintenance dollars in areas that are scheduled to be addressed by SHOPP projects. Caltrans uses a combination of in-house maintenance crews and contractors. In 2007/2008, approximately $420 million of the $1.1 billion maintenance budget was paid to contractors, or 38%. The Caltrans maintenance program is composed of just over 500 discrete activities organized into 16 families, which are in turn grouped into seven broader groups. The groups and fam- ilies are as follows: • HM 1 – Road Bed: – A. Flexible Pavement; and – B. Rigid Pavement. • HM 2 – Roadside: – C. Slopes, Drainage, Vegetation; – D. Litter, Debris; – E. Landscaping; – F. Environmental; and – G. Public Facilities. • HM 3 – Structure: – H. Bridges; and – J. Other Structure. • HM 4 – Traffic Control and Service Facilities: – K. Electrical; and – M. Traffic Control. • HM 5 – MTCE Auxiliary: – T. Support; and – W.Training, Field Auxiliary Services. • HM 6 – Snow and Major Damage: – R. Snow/Ice Control; and – S. Storm Maintenance. A P P E N D I X B Maintenance Cost Tracking Activities for Selected State DOTs

• HM 7 – Radio: – U. Radio Support. At its highest level, Caltrans is organized into 12 district offices and the headquarters. Each of the districts covers one or more counties and oversees activities at multiple geographically dispersed maintenance stations. The majority of maintenance activities are run by the districts, although there are some activ- ities that are coordinated on a statewide basis—for example, structures inspection. Caltrans uses the following three systems to capture and manage maintenance cost data (one integrated maintenance management system and two financial accounting systems): • Integrated maintenance management system (IMMS): Caltrans operates an integrated maintenance management system, the initial implementation of which was completed in 2003. The system is a Hanson product; however, it is now maintained and supported by another vendor. The primary users of the system are the districts. The IMMS is a work- tracking system that is used to track field maintenance staff time, activities accomplished and scheduled for mainte- nance crews, and the statewide road inventory. All charges in the IMMS must be assigned to an expenditure authority (EA), which are represented by the 16 letter codes, or fam- ilies, identified previously. • Financial accounting systems: Caltrans uses two financial accounting systems: CLASS, which is a California state gov- ernment accounting system, and TRAMS, which is a Cal- trans accounting system used for tracking expenditures. Cal- trans is working to replace TRAMS with a new integrated financial management system (IFMS), which is an off-the- shelf system. The IMMS is not reconciled to the TRAMS/IFMS because of the different uses of each system, although some data is trans- ferred from IMMS to TRAMS, specifically labor and material usage. Labor Costs Field maintenance employees fill out a daily time sheet on the IMMS and assign their time to the appropriate EA and activity along with equipment and material usage. (For exam- ple, the A series is flexible pavement and the B series is con- crete pavements.) The maintenance supervisor’s time is recorded in Staff Central (another Caltrans timesheet system) and is then automatically charged to maintenance EA. Cal- trans also has special maintenance forces—for example, struc- tures inspection personnel—who report to and are managed by the headquarters. Although their organization and report- ing structure is different from the rest of the maintenance or- ganization, their costs are still reported in the same way as all other maintenance activities. Travel time (i.e., time spent traveling between yard and site or between sites) is not tracked separately but gets charged to whatever activity is being undertaken. There are circumstances in which Caltrans maintenance per- sonnel perform work that is outside of the agency’s mainte- nance program, although this is very limited. When such “day labor” activity occurs—for example, where maintenance per- sonnel perform work on selected capital projects/activities— the maintenance personnel involved charge time against the ap- propriate capital EA, which is available within the IMMS. In other instances, nonmaintenance employees (other than contractors) effectively perform maintenance work for the agency—for example, when construction personnel per- form certain oversight functions for maintenance activities. In these cases, a portion of the maintenance budget is transferred to the appropriate construction EA(s). The production rates are also tracked, so Caltrans can estimate the benefit and the equiv- alent internal cost. Caltrans also has instances where its maintenance crews are paid for certain work by other agencies—for example, The Bay Area Toll Authority. Equipment Costs Caltrans used to calculate and utilize equivalent equipment rental rates to allocate equipment usage costs to maintenance activities. When they are tracked/utilized, Caltrans equipment charges are based on the time of possession for a particular activity and therefore include travel time as well as any down/ idle time. The features and functionality of the current account- ing system (TRAMS) are such that this calculation was deemed too time consuming, and as result, Caltrans stopped perform- ing it two to three years ago. One of the anticipated benefits of the new accounting system (IFMS) will be to better support the calculation of equivalent vehicle rental rates, and Caltrans expects to return to this approach for tracking equipment costs as and when IFMS is implemented. At the present time, and since the suspension of the rental rate calculation, Caltrans allocates a portion of total equipment costs to each program that includes a line item for equipment costs. The percent allocation was set based on the relative mag- nitude of equipment line item budgets at the time the internal rental rate calculation was suspended. Although the equipment budget can vary from year to year, the program allocation con- tinues to be based on the original budget split. Material Costs Caltrans’ IMMS calculates and maintains average unit prices for materials on a district-by-district basis. Maintenance per- 82

sonnel record material consumption on a daily basis in IMMS associated with the appropriate EA and maintenance activity, just as they do labor hours and equipment usage. Overhead Costs California’s full cost recovery policy requires state agencies to “recover full costs when goods or services are provided to others” (California Department of Finance, 2002). The policy defines “full costs” as the sum of direct and indirect costs. • Direct costs are easily identifiable with a specific objective, such as the implementation of a project or the delivery of a specific service. Examples include the cost of personnel directly responsible for the objective, material costs, and equipment expenses. • Indirect costs are not directly related to a specific objective. Examples include the cost of management staff, IT staff, and accounting staff. In order to comply with this policy, Caltrans calculates two types of indirect cost rates: 1. Program functional rates: This rate covers the indirect costs associated with an individual program and sub- program. Programs include highways, aeronautics, mass transportation, planning, and administration. Subpro- grams within the highway program include capital outlay support, local assistance, maintenance, and operations. Each subprogram has its own program functional rate. 2. Administration rates: This rate covers the costs of activi- ties accrued centrally that benefit all programs. Examples include the department’s legal services, building depreci- ation, and bond expenses. Administration rates are deter- mined first by calculating the total administration costs, and then by allocating a portion of this total to each pro- gram. These calculations are done at the program level, so each subprogram within a program has the same admin- istration rate. The combination of these two rates represents each pro- gram’s indirect cost rate. Table B.1 shows these rates for fiscal year 2008/2009. Details on how these rates are determined are provided on page 84. 83 Program Functional Administration Billing Rate 10: AERONAUTICS 37.90% 33.59% 71.49% 20: HIGHWAYS 20.10 Capital Outlay Support 33.12% 28.11% 61.23% 20.30 Local Assistance 18.30% 28.11% 46.41% 20.40 Program Development 18.30% 28.11% 46.41% 20.65 Legal n/a 28.11% 28.11% 20.70 Toll Collection n/a 28.11% 28.11% 20.70 Operations 17.23% 28.11% 45.34% 20.80 Maintenance 36.15% 28.11% 64.26% 30: MASS TRANSPORTATION 29.02% 18.43% 47.45% 40: TRANSPORTATION PLANNING 0.68% 14.08% 14.76% 50: ADMINISTRATION n/a 28.11% 28.11% Program Functional Administration Billing Rate 20.10 CAPITAL OUTLAY SUPPORT 33.12% n/a 33.12% NOTE: Rates are applied to the Direct Labor cost of work performed. Program Program Reimbursed Work Capital Outlay Support Projects - SB45 Table B.1. Caltrans indirect cost rates, fiscal year 2008/2009.

Program Functional Rate The program functional rate is the ratio of the total indi- rect cost to the direct labor, as expression (1) shows: Where FR is the functional rate, PFIC is the total program functional indirect cost, and DL is the direct labor. The total program functional indirect cost is the sum of the total functional indirect cost and of the carryforward, as ex- pression (2) shows: Where TFI is the total functional indirect cost. The total functional indirect cost is the sum of the indirect labor and the indirect operating expenses, as expression (3) shows: Where PS is the indirect labor, and OE is the indirect operating expenses. The indirect labor is computed as expression (4) shows: Where ILPY is the prior year’s indirect labor, TLPY is the prior year’s total labor, and BL is the budgeted labor for the current year. The indirect operating expenses are calculated the same way: Where IOEPY is the prior year’s indirect operating expenses, TOEPY is the prior year’s total operating expenses, and BOE is the budgeted operating expenses for the current year. The carryforward is intended to take into account the sum of money or debts from the previous year. It is the difference between the prior year’s recovery of indirect costs and the prior year’s total functional indirect costs, as expression (6) shows: Where RICPY is the prior year’s recovery of indirect cost. carryforward RIC TFIPY PY= − ( )6 OE IOE TOE BOEPY PY =  ( )5 PS IL TL BLPY PY =  ( )4 TFI PS OE= + ( )3 PFIC TFI carryforward= + ( )2 FR PFIC DL = ( )1 The prior year’s total functional indirect cost is computed the same way as the current year’s total functional indirect cost. It is the sum of the prior year’s indirect labor and the previous year’s operating expenses. The prior year’s recovery of indirect cost is the product of the prior year’s program functional rate and the difference between the prior year’s total labor and the prior year’s indi- rect labor, as expression (7) shows: The direct labor cost is the difference between the total budgeted labor and the indirect labor, as expression (8) shows: Where BL is the total budgeted labor. Administration Rate The administration rate, like the program functional rate, is the ratio of the total indirect cost to the direct labor, as expression (9) shows: Where AR is the administration rate, AIC is the total administration indirect cost, and DL is the direct labor. The direct labor remains unchanged and is calculated as expression (8) showed. However, since the administration rate is calculated for each major program (i.e., not for the subprograms), the direct labor should be calculated for each major program, summing the subprogram’s direct labor. The administration indirect cost for each program is the sum for each program of the total administration cost, legal cost, equipment depreciation cost, building depreciation cost, bond interest, and carryforward, as expression (10) shows: Where TAC is the total administration cost, LC is the legal cost, EDC is the equipment depreciation cost, BDC is the building depreciation cost, and BI is the bond interest. The total administration cost for a program (i) is the sum of the general administration cost (50.10) for a program (i), central and services cost (50.20) for a program (i), and pro- AIC TAC LC EDC BDC BI carryforward= + + + + + ( )10 AR AIC DL = ( )9 DL BL PS= − ( )8 RIC FR TL ILPY PY PY PY= −( ) . ( )7 84

fessional and technical services cost (50.60) for a program (i), as expression (11) shows: Where GAC is the general administration cost, CSC is the central and services cost, and PTSC is the professional and technical services cost. The central and services cost is the budgeted amount on the governor’s budget. The general administration cost and professional and technical services cost are computed, as expression (12) shows: Where AOEPY is the prior year’s allowable operating expenses for general administration cost, TOEPY is the prior year’s total operating expenses for general administration cost, BOE is the budgeted operating expenses for the current year for general administration cost, and BL is the budgeted labor for the current year for general ad- ministration cost. To calculate the general administration cost and profes- sional and technical services cost for each program (i), the costs are prorated to the department’s major programs, as shown in expression (13): Where BPYHi is the budgeted PY hours for program i, and TBPY is the total budgeted PY hours. The legal support cost for programs 10, 30, and 40 is the budgeted amount on the governor’s budget. The legal support cost for program 20.65 is the total budgeted legal support less tort expenditures. The equipment depreciation cost for programs 10 and 20 is the balance amount of the equipment multiplied by the equipment depreciation rate (6.67%). For programs 30 and 40, the equipment depreciation cost is shown in expres- sion (14): Where BAE is the balance amount of the equipment. EDC BAE BPYH BPYH BPYH i = +  6 67 14 30 40 . % ( ) GAC BPYH TBPY GACi i =  ( )13 GAC AOE TOE BOE BLPY PY = + ( )12 TAC GAC CSC PTSCi i i i= + + ( )11 The building depreciation cost is the balance amount on the building multiplied by the building depreciation rate (2%). The bond interest is the sum of the budgeted bonds less the rental income. The carryforward is intended to take into account the sum of money or debts from the previous year. It is the difference between the prior year’s recovery of indirect costs and the prior year’s administration indirect costs, as expression (15) shows: Where RICPY is the prior year’s recovery of indirect cost. The prior year’s administration indirect cost is computed the same way as the current year’s administration indirect cost [refer to expression (10)]. The prior year’s recovery of indirect cost is the product of the prior year’s administration rate and the difference between the prior year’s total labor and the prior year’s indirect labor, as expression (16) shows: Contracts The costs of work performed by maintenance contractors are calculated with a contract management system. However, since a lot of this work is responding to a particular incident, it can be difficult to determine exactly what work was done, and it is more challenging than with in-house personnel to track units of production. Maintenance contract expenditures can be and are rolled into the other in-house expenditures. Strict standards have been established by Caltrans for the use of personnel service contracts. For example, the contract- ing agency should clearly demonstrate that the proposed con- tract will result in actual overall cost savings to the state, but the contractor’s wages should be at the industry’s level and should not significantly undercut state pay rates. Minnesota DOT Introduction The Minnesota Department of Transportation (Mn/DOT) accomplishes most of its maintenance in-house with state maintenance employees. Mn/DOT is responsible for maintain- ing approximately 11,382 centerline miles (21,191 lane miles) of Interstate roadways and state trunk highways. Mn/DOT’s maintenance operations budget for fiscal year 2007 was $233,000,000. Minnesota counties are responsible for road maintenance on the approximate 45,000 lane miles of county road systems. Some counties will also maintain township roads under contracts with selected townships. RIC AR TL ILPY PY PY PY= −( ) . ( )16 carryforward RIC AICPY PY= − ( )15 85

Mn/DOT’s maintenance function is organized into eight geographic districts and a central office providing management and financial oversight, support for contract administration, and coordination of state road maintenance activities. Central office field support includes the fleet management unit, sign shop, and coordination of regional striping crews. Mainte- nance functions for each of the eight districts are organized into either one or two maintenance areas, which are then subdivided into truck stations sufficient to cover the road miles for winter and summer maintenance in each area. Mn/DOT organizes its maintenance costs into the follow- ing products and services for budgeting purposes: • Clear roads: – Clear obstructions (debris removal); and – Snow and ice control. • Roadsides: – Mowing and planting; – Spraying; – Brush and tree removal; and – Rest area and property management. • Smooth roads: – Pavement and shoulder repair; – Paving; and – Drainage repair. • Traffic management: – Signals, signs, and striping; – Guardrail repair; – Lighting; and – Traffic operations and systems maintenance. • Fleet management. • Bridges: – Bridge inspection; and – Bridge repair/maintenance. • Facilities management. • Regulation: – Issue permits. • Information traveler services. • Inventory control. • Infrastructure operations and maintenance administration. Maintenance Costing Systems Mn/DOT uses the following financial and maintenance management systems for collecting, integrating, and manag- ing maintenance operations cost data. These systems are de- scribed briefly in the following paragraphs. • Resource Consumption Application (RCA): RCA is a department-wide system used by all Mn/DOT maintenance and other employees to capture on a daily basis time, equip- ment, and materials used in state work activities. This infor- mation is shared with and used by several other mainte- nance management systems (discussed below), including the Work Management System (WMS), Equipment Man- agement System (EMS-M5), Building Maintenance System, the Automated Facilities Management System, and Bridge Maintenance System. RCA data, including labor hours worked, vacation hours, sick time, and holiday pay, are shared with statewide systems, including the Statewide Au- tomated Materials Management System (SAMMS), State- wide Employee Management Application (SEMA4), Min- nesota Accounting and Purchasing System (MAPS), and the statewide information access warehouse. All data entries include job number, activity code, organization code, and funding code. The RCA system also collects equipment (hours or miles of use) and materials usage data for interface with SEMA4. All data is inputted into RCA electronically with no paper forms used. • Statewide Employee Management Application: SEMA4, Mn/DOT’s human resources and payroll system, is a per- sonnel and payroll system common to most state of Min- nesota departments that tracks labor costs and related human resources administrative costs. RCA labor inputs are fed into SEMA4. SEMA4 also captures employee com- pensation data not inputted into RCA such as state-paid insurance benefits and retirement and Social Security con- tributions. It shares this data with RCA and the statewide MAPS system. • Minnesota Accounting and Purchasing System: MAPS is a statewide accounting and purchase system that gathers pay- roll information, equipment usage and depreciation data (from EMS-M5), materials usage, and other data. Equip- ment rates are used by MAPS to assign costs to jobs and ac- tivities based on the usage reported by job and activity. Sys- tem data is distributed to the information access warehouse and ongoing Mn/DOT financial application initiatives such as activity-based costing and activity-based budgeting and management. • Work Management System: WMS utilizes RCA, SAMMS, and other system inputs for work planning, preparation of field work orders, development of work plans, and creation of post-project reports (mostly for snow and ice control at present). No overhead costs are included in the labor costs reported by WMS. Thus, a comparison of MAPS and WMS costs may not give equal results since labor overhead costs are applied in the MAPS system. WMS data is used to develop Mn/DOT “dashboard” performance measures. Note that Mn/DOT Maintenance and Office of Human Resources are just beginning to develop a system or model for identifying production units or measures. Expert input from field maintenance forces is being used to establish the production unit or measurement parameters, collect the necessary data, and monitor selected projects to compare model performance with actual experience. 86

• Equipment Management System: EMS-M5, which em- ploys the FleetFocusTM web-based fleet management sys- tem, is used to collect fleet management resource informa- tion, including labor, equipment, and materials used by fleet mechanics and managers. Equipment status codes are maintained for major equipment items to track current sta- tus. EMS-M5 only tracks miles driven by each unit. Other costs for operation of mobile equipment (depreciation, fuel use, etc.) are captured in the MAPS directly or through SAMMS and SEMA4 interfaces. • Statewide Automated Materials Management System: SAMMS collects and manages material (salt, sand, etc.) usage employed in Mn/DOT’s field maintenance opera- tions, including related inventory control costs, fuel usage (from EMS), stockpile usage (from RCA) and materials usage from numerous other maintenance activities. Stan- dard English units of measure are used. Material purchases tracked through SAMMS are recorded by location code and local rates used and include a material handling cost to ar- rive at total costs. • Other systems/cost management initiatives: Other main- tenance management systems for collecting data for the management of building maintenance include the Max- imo Building Maintenance System to manage Mn/DOT’s central office and district buildings, and the Automated Fa- cilities Management System for maintenance area and rest area facilities. The bridge maintenance system is used by the central bridge office and district bridge maintenance staffs to collect bridge maintenance data. Another system used for Mn/DOT pavement maintenance projects is the Bridge and Road Construction (BARC) system, project funding for which comes from the State Transportation Improvement Program (STIP). Work under the BARC program is done under contract. Costs for projects com- pleted under this program are charged to the affected road segment, job code, and maintenance activity code. Additional cost management systems presently under de- velopment within Mn/DOT include Activity-Based Costing, Activity-Based Budgeting, and Activity-Based Management. These programs still await the development of discrete pro- duction or performance measurement units for comparative measures of project performance. Pilot programs have been run in a few Mn/DOT offices to assess measurement param- eters developed to date, but these hierarchal systems await further development of the measurement units. Contract Maintenance Only a small portion of Mn/DOT’s routine and preventive road maintenance work is accomplished under contract with others. It should be noted that depending on the size and com- plexity of the maintenance activity (and the availability of funds in the appropriate account), some activities often con- sidered as preservation or rehabilitation maintenance are usu- ally done by contract. As an example, some joint repair, con- sidered by some as preventive maintenance, is sometimes done by contract. For winter maintenance, Mn/DOT Maintenance may contract on a seasonal or ad hoc basis with small local equipment operators to maintain a relatively short segment of state trunk highway in a small rural community. Mn/DOT may also enter into agreement with local farmers in some areas for mowing of hay on roadsides. For debris cleanup, Mn/DOT enters into agreements with interested counties (mostly in the Minneapolis–St. Paul metro area) for “sentence to serve” assis- tance with litter pickup on roadsides. Similarly, Mn/DOT con- summates agreements with local Adopt-a-Highway groups for litter pickup on state trunk highway roadsides. Mn/DOT also enters into annual contract agreements with the Greenview Organization for janitorial services and minor maintenance of Mn/DOT rest areas on state trunk and Inter- state highways and selected building sites. Staffing under these contracts is accomplished mainly by retired persons who in- terface with the public and perform cleaning, minor mainte- nance, and some mowing of rest area facilities and grounds. Vermont Agency of Transportation Introduction The highway maintenance responsibilities of the Vermont Agency of Transportation (VTrans) extend to a statewide net- work of more than 2,600 centerline miles (6,500 lane miles) of state highway, of which about 700 miles are designated on the NHS. The breakout of this mileage by functional class is: Inter- state, 320 miles; principal arterial, 382 miles; major collector, 1,145 miles; urban collector, 5 miles; and minor collector or local, 10 miles. The system is largely rural: only 22% of Inter- state highways and 15% of NHS mileage is classified as urban. There are also Class 1 town highways that form an extension of a state highway route and that carry a state highway route num- ber. These roads are maintained by the respective towns, how- ever, and are not part of the state highway network. Highway maintenance in Vermont is defined as work cov- ered by the legislative highway and bridge maintenance ap- propriation. The highway routine maintenance program ex- cludes, for example, bridge reconstruction and rehabilitation, as well as separate funding for maintenance work in other modes (rail, public transit, and aviation/aeronautics). The budget for highway routine maintenance is about $65 million annually (FY 2008). VTrans’ maintenance program expendi- tures are displayed in two levels of reports: • The allotment report tracks total expenditures for mainte- nance, covering all monies appropriated by the legislature. This total includes the cost to accomplish maintenance, 87

plus administrative costs and support costs for items such as utilities, building rental and maintenance, and insurance. This total corresponds to the $65 million budget number above. • The activity cost report tracks the basic maintenance work costs (i.e., the labor, equipment, and material costs to ac- tually perform maintenance work, plus some indirect and support activities by maintenance personnel). It excludes some administrative costs and the support costs for utili- ties, rent, and so forth. The activity costs constitute about $60 million within the $65 million budget discussed above. Routine maintenance expenditures are distributed among categories of activities as follows: • Road surface, 7.2%; • Bridge, 2.4%; • Roadside, 14.2%; • Traffic features, 5.9%; • Winter maintenance, 30.6%; • Overhead activities, 36.1%; and • Other categories, 3.6%. Maintenance of the state highway network is performed through nine districts. General Information MATS Development and Philosophy The Maintenance Activity Tracking System (MATS) repre- sents a tri-state collaboration among Vermont, New Hamp- shire, and Maine. Each state works on system advances that are shared with the other partnering states, with technical as- sistance provided by a consulting firm under retainer. MATS’ capabilities thus continue to evolve, and the level of system development varies slightly among the states. The descrip- tions below represent the current implementation in Ver- mont. There is as yet no formal system documentation for general use. MATS information has been gained through in- terviews and review of an internal paper on MATS’ develop- ment and operating philosophy (Spaulding, 2008). The three agencies involved credit the development of MATS with helping their staff to think about maintenance business processes anew. There is now an understanding that maintenance management has as a first priority the accom- plishment of work to improve the transportation system. It is not solely a tabulation of expenditures that “pay the bills.” Maintenance management is seen as a three-legged model encompassing: • Transportation assets: Their group, type, and location, and what specific asset is affected by maintenance. • Maintenance work: Its group, type, and scope; what resources are used; and what work and improvements are accomplished. • Money: Its source (e.g., fund, appropriation, account, line item) and use in transactions to enable maintenance work. MATS’ development has been accomplished with key philosophies in mind (e.g., the importance of current infor- mation and the interpretation of cost as the representation of the value of something accomplished rather than the more purely financial concept of payment for an item received). The idea of information currency is embodied in opera- tions that are performed daily [e.g., the daily updates per- formed between MATS and the financial system, the input of the daily work report (DWR), and the daily input of con- tract estimated costs and accomplishments]. These opera- tions will be discussed further in the sections that follow. The idea of cost as representing value rather than a strictly financial transaction is embodied in operations such as stockpile calculations and treatment of agency and con- tracted equipment rental charges. Monthly quality checks of MATS information are conducted to identify and correct human errors. MATS interacts with several systems, either directly or through uploads and downloads to a data warehouse. For ex- ample, it interacts directly with the agency’s financial system and indirectly with its payroll system and equipment man- agement system. (Direct electronic interaction with the pay- roll system is forthcoming.) It downloads information on pavements and bridges from the data warehouse, such infor- mation having been generated and uploaded by the agency’s pavement and bridge management systems. VTrans continues to improve MATS, in conjunction with the tri-state team and its system development framework, to provide a comprehensive agency-wide approach to managing, tracking, and reporting maintenance program costs and ac- complishments. MATS has evolved as a Web-based product, and VTrans is considering loading it onto personal handheld devices such as PDAs. While application of MATS is now focused in the central office and district maintenance func- tions, MATS is sufficiently general in its approach and sys- tem capabilities to apply to other agency functions as well. VTrans is beginning to migrate the system horizontally to other divisions (e.g., Construction, Planning, Finance and Administration, Motor Vehicles). [It has been suggested that, when MATS is migrated to other divisions, its name may need to be generalized beyond maintenance (e.g., Man- aging Assets on Transportation Systems.)] MATS is also being migrated vertically to go deeper within the mainte- nance organization (to the garage level). In the future MATS may also be offered to towns. 88

Work Performance Highway maintenance in Vermont is performed largely by state agency forces. Contract work is primarily for rental of individual pieces of private equipment as well as services such as mowing, pavement leveling, certain bridge maintenance, Interstate paint striping, and emergency response. The re- porting of contract work in maintenance cost varies. For ex- ample, pavement leveling [which is funded through the state’s Pavement Management System (PMS) program] does appear in the actual cost reports for maintenance, and en- compasses work beyond traditional pavement maintenance such as patching. Emergency services work, which for system purposes is designated as a type of special event, can also be tracked by MATS for purposes of billing towns for emergency assistance and reimbursement from the Federal Emergency Management Agency (FEMA). Certain contracted bridge maintenance work, however, is not tracked in MATS, but does appear in other cost reports for bridges. Daily Work Report Work performed by maintenance crews is reported on activity work reports. These reports summarize the labor, equipment, and materials used for an activity. An activity re- port is completed for each individual activity performed dur- ing the day. The multiple activity reports for a given day are compiled within the MATS DWR to compute both costs and accomplishments of maintenance activities. Accomplishments are expressed in physical units (e.g., square yards, cubic yards, acres, lineal feet, each) as identified in the MATS activity table. The labor hours in the DWR cover the total daily work hours (eight hours) plus any overtime. Additional informa- tion is presented below for each of the component resources of labor, equipment, and materials, respectively. DWRs also establish linkages between work performed and location on the highway system. Administratively, they enable the process of opening and closing work requests and budget requests to function properly, and their cost and accomplishment data can be compared to the work plan to evaluate progress in meeting plan targets. Labor Costs Labor cost reporting and processing is straightforward. Key points are as follows: • Crews fill out daily activity reports. One report is completed for each individual activity, showing the hours worked on that activity. These activity reports for each crew are com- bined within a DWR and entered into MATS. The cumula- tive total hours in the DWR should equal the full eight-hour regular workday plus any overtime. • Travel and supporting activities (e.g., flagging) are in- cluded in the time charged to an activity. • All daily work time is covered, including time spent on in- direct activities (e.g., training, leave). • From the information in the daily work reports, MATS generates a labor time sheet entry for each employee in real time. When the payroll time period is completed, the time sheet is submitted in paper form to the payroll system. Within the tri-state MATS compact, Maine has already ef- fected this transfer of time sheet information to the payroll system electronically. Vermont is now working on a simi- lar electronic connection. • The labor cost rate is a loaded or built-up rate that in- cludes the employee’s actual hourly wage plus benefits (e.g., allowance for vacation, leave, sick time, holidays, mili- tary service) and applicable taxes (Social Security, Medicare). Data on rate burdens are contained in a MATS fringe fac- tor table. • Nonmaintenance labor does perform maintenance. Prison labor is tallied at $200 per crew per day. Volunteer labor for litter pick-up is recorded in labor hours; no cost is attributed. However, VTrans could report an equivalent cost if needed. Equipment Costs VTrans has two ways of accounting for equipment costs: the rental costs of agency equipment as managed through the central garage, and the contracted costs of private equipment. Agency Equipment The central garage manages VTrans’ fleet of vehicles and heavy equipment. As capital assets exceeding $5,000 in value and with a life of at least two years, maintenance equipment is managed according to VTrans’ policy on assets capitaliza- tion. This policy calls for: • Capital equipment assets to be recorded at purchase price plus any incidental cost (e.g., insurance during transit, freight, duties, title registration, and breaking-in costs); • Straight-line depreciation; • Physical inventories to be taken every year, with any inven- tory adjustments signed and approved by the division di- rector; and • Maintenance of records on equipment inventory through a capital asset management system maintained by the Fi- nance and Administration division, with the appropriate business managers providing information on new assets, retired assets, adjustments, and depreciation. The central garage uses a Maintenance Control and Man- agement System (MCMS) to help manage the maintenance 89

equipment fleet and provide the data needed for Finance and Administration’s capital asset management system. The MCMS tallies the purchase cost and annual maintenance and operating costs and statistics for each piece of equipment. It computes depreciation and has an algorithm to help man- agers identify whether it is more economical to overhaul or replace an aging piece of equipment. The cost profiles devel- oped through MCMS for the equipment, plus current costs of fuel and other operating items, are used to quantify equiv- alent rental rates (hourly or per mile) for equipment use. Private Equipment Determining the performance-based cost of using private equipment under contract may be complicated by different ways in which contract payment is structured. In this context, “performance-based” refers to understanding the extent to which equipment is used (i.e., its hours of operation). If the equipment is charged on an hourly basis, there is no issue— the hourly charge is equivalent to a rental rate, and the equip- ment use can be charged according to the hours worked by the crew as recorded on the DWR. If the equipment is charged on a flat daily, weekly, or monthly basis, however, reflecting its performance-based cost correctly requires additional steps and MATS features. • The additional steps needed are to estimate the hours that the equipment will be used and then to compute an equivalent rental rate. As an example: assume an excavator will be con- tracted for $3,000/month for two months. Its contract cost will be $6,000. It is estimated that during the two months, it will be used on some number of jobs by some number of crews for a total of 60 hours. The effective rental rate (or hourly charge) will be $6,000/60 hours or $100 per hour. • The relevant MATS’ features involve two options for sub- mitted private equipment cost data on the “Rental Setup” screen, based on the method of payment in the rental agree- ment. If hourly charges are the basis of payment for the pri- vate equipment, the MATS “Rental Type” is specified to use the DWR hours for the appropriate activity as the basis of payment. If another charge structure is used (e.g., daily, weekly, monthly), the MATS “Rental Type” is specified to use the vendor’s invoice as the basis of payment (e.g., $3,000 per month in the contract example above). The MATS computation of activity charges, however, would be based on the estimated hourly rate ($100 per hour in the example above) as the equivalent rental charge. • The MATS “Rental Setup” screen also includes a field labeled “Actual” that allows post-contract adjustment in the MATS data to reflect actual, rather than estimated, usage. It permits back-calculating the actual effective rate based on this actual usage. For example, if the crews actually spent 65 hours on activities using the private excavator, the correct equipment rate would be $92.31 per hour. This adjustment maintains the integrity of the unit cost and total cost data from both a performance-based and an invoice-paid perspective. Material Costs Material costs are handled by MATS either in stockpile cal- culations or as over-the-counter purchases. The MATS DWR thus has two separate tabs for processing material costs. The “Stockpile” tab is used to report use of materials that are kept in stockpiles (i.e., they have a known and continually tracked quantity). The “Materials” tab is used to report use of other materials that are consumed on an activity but whose overall quantities are otherwise not tracked. Calculations involved in the “Materials” tab are straightforward: quantity multiplied by unit price (price to be discussed below). The discussion in this section therefore focuses on the handling of “Stockpile” materials. The stockpile calculations help to track quantity and cost of materials over time, recognizing that use of materials may occur at some time after their purchase. When a DWR iden- tifies use of a material, that quantity will be charged at the appropriate unit price, and the quantity will be deducted from the stockpile. Additional adjustments are also managed for deliveries, distributions, and corrections to or from the stockpile. • A crew inserts a “Delivery” when material from a vendor is added to the stockpile. • A crew specifies a “Distribution” when material is trans- ferred from one stockpile to another. (The business rule is that the sending crew always does the distribution, to avoid missed or double counts.) The sender’s stockpile quantity is reduced and the receiver’s stockpile is increased by the amount distributed. • A correction allows recalibration of the stockpile quantity to account for inaccuracies inherent in usage reporting, partic- ularly with bulk materials such as salt or brine. (Corrections should rarely if ever be required for countable items such as pipe.) Piles of bulk materials should be periodically meas- ured and adjusted. For example, with reasonably accurate usage reporting, stockpiles of winter bulk materials will show several small corrections throughout the winter. Pricing of materials may be done through a statewide or re- gional average price, which is provided to MATS in a crew material rate table. While usage of most materials reflects a straightforward cost calculation, some issues have been iden- tified but not yet resolved: • Reuse of materials (e.g., framing lumber and plywood on bridge maintenance); and 90

• Consumable materials (cleaners, etc.) used in cleaning rest areas, which currently are not reported. (The recommen- dation is to treat these costs as expenditures that are not re- ported on the DWR.) Indirect or Overhead Costs Some indirect costs are tracked directly in MATS (e.g., fringe benefits on maintenance labor, and labor time reported in overhead-type maintenance activities); for example: • 0001-4110: Training, meetings, and conferences; leave time; general administration; working with towns; and patrol and inspection. • 5720-5760: Controlling stock and inventory, and manu- facturing and stockpiling materials. • 5860-5870: Maintainingbuildings,grounds,and equipment. Other indirect costs are factored in through nightly up- dates between the financial system and MATS. In these oper- ations the VTrans administrative costs, including executives’ salaries and administrative-position salaries, and the support costs (for utilities, building rental, building maintenance and janitorial services, etc.) are spread on a pro-rata basis among the maintenance activity and other program costs. This oper- ation enables the agency to provide total dollar-per-lane-mile costs for summer and winter periods to answer the question, “How much does it cost . . . ?” Contracts VTrans does not contract a significant amount of its main- tenance work. Approximately 5% of its work is contracted (Cambridge Systematics, Inc., 2002), and about 70% of this contract volume is for mowing. Most of the analytic issues associated with contract costs were discussed under the Equipment Costs section. One other item of import is that information on contract accomplishment as well as cost is input daily to MATS, providing up-to-date estimates of contractor billing. Level of Service and Relationship to Costs VTrans does not use a level of service approach such as that, for example, applied by Washington State. Rather, the concept is more one of the relationship of proposed work to total in- ventory and network condition, and—for a given activity—the amount of work to be accomplished for given dollars spent. 91

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Determining Highway Maintenance Costs Get This Book
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TRB’s National Cooperative Highway Research Program (NCHRP) Report 688: Determining Highway Maintenance Costs presents a process for determining a highway agency’s full costs associated with performing highway maintenance.

The process described in the report can be applied to any specific maintenance activity and is designed to help ensure that the resulting full cost incorporates a fair share of both maintenance program and enterprise support costs.

The report also documents the application of the full-cost determination process for a number of highway agencies and different maintenance activities to demonstrate the types of options, exceptions, and decisions that would be needed in order to perform the full-cost calculation.

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