Funding and Managing the U.S. Inland Waterways System: What Policy Makers Need to Know: What Policy Makers Need to Know (2015)

4

Prioritizing Maintenance for the Inland Waterways Freight System

The U.S. Army Corps of Engineers (USACE) is responsible for providing the infrastructure and operating conditions that enable freight transportation service on the inland waterways system. As described in previous chapters, a priority for USACE is operations and maintenance (O&M) of the infrastructure to provide reliable service. In view of growing maintenance needs and continuing federal budgetary constraints, an understanding of how maintenance spending for the system is prioritized and how prioritization could be improved is important.

In an environment of system expansion, relatively recent construction, and adequate funds, a structured methodology for prioritizing spending was not as high a priority. Over time USACE districts set their O&M priorities by using a variety of methodologies and procedures, which were not standardized. With increasingly constrained budgets and an aging system, a method that can be applied consistently across the system for the strategic evaluation and prioritization of maintenance expenditures is needed. In the budget development guidance for FY 2015, USACE states that it lacks a corporate maintenance management strategy; policies, practices, and terminology are inconsistent across the organization; and maintenance investments are not aligned with a desired level of performance for the system.¹ Local asset assessment and budget request processes follow general guidelines but have many variations. Districts may develop their own asset management systems for assessing and communicating the condition

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¹ An initiative is under way (the Maintenance Management Improvement Plan) to establish a corporate maintenance program, but the schedule for implementation is unknown.

of infrastructure, the level of navigation service being provided, and needs for O&M and repairs. Furthermore, the asset assessments are not fully linked to the budgeting process.^* The acknowledged shortcomings in the budgeting process for maintenance make it difficult for USACE headquarters to evaluate and prioritize budget requests from USACE divisions on the basis of sound criteria. A systemwide strategy is needed for prioritizing maintenance regardless of whether it is funded as an O&M expenditure or as a capital project for major rehabilitation.^2,3

A strategic approach for comparing and ranking waterways investments for major repairs and O&M could offer advantages that supersede or complement the current budget guidance used within USACE for O&M and capital projects. The first section below describes an asset management strategy, referred to in this chapter as economically efficient asset management (EEAM), for ascertaining and communicating system needs for maintenance and for setting priorities for maintenance funding for the inland waterways system. A well-executed EEAM program is a method to consider for making rational investment decisions and directing funds where they are most needed to improve the reliability of freight transportation service. Such a data-driven approach could help to minimize the broader influences that affect the budgeting process. In effect, the method serves as a streamlined or abbreviated benefit–cost analysis. The next section describes a risk analysis framework being developed by USACE for prioritizing O&M investments and compares the USACE approach with the EEAM approach. Features that would promote the effective implementation of EEAM and its use in the budgeting process to

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^* Appendix H presents the USACE’s description of the status of its asset management program.

² Major rehabilitation is further defined in the Water Resources Reform and Development Act (WRRDA) as a capital expenditure for a repair or set of repairs that maintains existing infrastructure and that does not expand capacity. It must (a) exceed a maximum cost, set at $20 million in WRRDA 2014; (b) require a minimum of 2 fiscal years to complete; and (c) extend the life of the feature significantly or enhance operational efficiency. As a capital expenditure, 50 percent of major rehabilitation costs are paid by shippers via the Inland Waterways Trust Fund and 50 percent are paid by the federal government via general revenues. Repairs that do not meet the budgetary definition of rehabilitation are considered O&M; 100 percent of O&M costs, which include repairs up to $20 million, are paid via general revenues.

³ The funding of ongoing maintenance as part of O&M to prevent deferred maintenance, which results in greater costs, is more cost-effective, however.

establish maintenance budget priorities are then discussed. The final section summarizes the chapter’s findings and conclusions.

Economically Efficient Asset Management

OVERVIEW

In this chapter, EEAM refers to a conceptual tool for deciding how to prioritize investments to maintain a transportation system’s functionality. The EEAM approach includes three steps: (a) assessing demand for a service, (b) determining the condition of the asset and the risk of failure, and (c) estimating the economic consequences of failure. (Box 4-1 provides examples of EEAM implementation and sources for further information.) The approach can be developed to account for how parts of the system function within a larger national freight transportation network. EEAM is a method for establishing system priorities, not a budgeting tool. However, when it is linked to the budgeting process, information gathered from EEAM could be used to identify and rank system needs for maintenance to inform budget requests and to prioritize the spending of appropriated funds. This approach is similar to that endorsed by the Inland Waterways Users Board in its capital projects business model (Inland Marine Transportation System Capital Investment Strategy Team 2010) for capital expenditures. However, it can also apply to maintenance and rehabilitation projects to improve the reliability and performance of the system.⁴

BLENDING OF ENGINEERING AND ECONOMIC CONCEPTS

The EEAM approach incorporates both engineering and economic concepts into system assessment. The EEAM process begins with collecting the following engineering data on asset performance: the availability of the asset (its capacity to perform service), reliability (the likelihood that it will remain in service at any given time), and the overall quality of the service that the asset provides. The reason

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⁴ A recent report sponsored by the National Waterways Foundation concentrates on capital projects paid for out of the Inland Waterways Trust Fund and not the need for prioritizing and funding O&M and repair expenditures (Grossardt et al. 2014).

for rehabilitating or replacing an existing asset is to ensure that the level of service the asset provides continues or improves. If needed maintenance is deferred, which can occur when funds are limited or not readily obtainable, the availability, reliability, and service quality associated with the asset can be expected to decline.⁵

From the data on asset performance, two key pieces of information are generated: (a) how long the asset is expected to provide service at an acceptable level⁶ and (b) the likelihood that a critical component will fail before it reaches the end of its expected life. In considering whether and when to replace an asset, information on how the asset helps achieve performance goals, how performance varies as the asset

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⁵ USACE has conducted operational condition assessments at all of its lock and dam sites. This information is not available to the public, but presentations made by USACE in public forums indicate that these assessments provide all of the engineering data needed to implement an EEAM program effectively. For example, see http://www.all-llc.com/SAME-Newsletters/SAME-09-Conf/Jose%20Sanchez%20-%20SAME%20Conference_3SEP09.pdf and http://waterways.org/wordpress1/wp-content/uploads/2014/06/LS14-Hannon.pdf. For more information on engineering assessments, see Box 4-1.

⁶ For locks, an acceptable level of service consists of two parts: (a) lock processing time and (b) delays encountered during arrival at the lock before being processed through the lock. Both components require consideration in determining the traffic a lock is expected to handle within a given time frame.

ages or deteriorates, and the impact on performance if the asset failed or was removed from service is useful (Spy Pond Partners et al. 2012).

Within the EEAM framework, three approaches for collecting information about asset performance are possible: an age-based approach, a condition-based approach, and a performance-based approach. The age-based approach is used to predict the need for asset replacement or maintenance on the basis of the age of the asset or that of its critical components as a proxy for condition, performance, or reliability. The cost of replacing or maintaining the asset and the likelihood of the asset failing if it is not maintained or replaced are both considered. Failure in this context is not necessarily the inability to function but may be a condition severe enough to require immediate replacement of the asset to avoid compromising safety or the desired level of service. The weak association between age and poor lock performance (see Chapter 2) indicates that an age-based approach is the least useful for prioritizing maintenance expenditures. Of the nine river corridors analyzed in Chapter 2, the Monongahela River is the only river where age was correlated with metrics of lock performance.

The condition-based approach is used to predict the need for asset rehabilitation or replacement on the basis of the condition of the asset or that of its critical components rather than its age. Like the age-based model, it includes calculation of the cost of various actions that may be performed on an asset or its components and consideration of the likelihood of failure. Actions that should be taken to minimize owner and user costs over time are also considered. The approach takes into account the additional costs that will be incurred if actions to maintain the system are deferred.

After the engineering measures are established, economic performance measures are considered. The economic performance risks assessed may include trip (lockage) time, lost user hours, compliance, cost of alternative transportation, and safety factors.⁷ Steps to

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⁷ EEAM cannot be used to evaluate whether a project meets legal responsibilities. A decision based on EEAM principles may violate one or more legal responsibilities for operation, safety, and environmental compliance. The following are examples: maintenance of subsistence harbors, caretaker activities, critical harbors of refuge, project condition surveys, multipurpose projects when those projects are included in the minimum programs of other business lines and are not a separable element, work required by treaties, and removal of aquatic growth. See USACE 2013, F-4.

eliminate or at least minimize the risk of asset failure on the basis of the assessment of operational condition (e.g., to take action to reduce lost transportation hours or improve lock processing times) and to ascertain the improvements to system performance to ensure the greatest net benefit to system users are desirable.⁸

Like any asset management framework, EEAM is a tool for prioritizing system needs and not an end in itself. The final decisions on prioritization must weigh uncertainties and balance multiple and often conflicting objectives, such as those relating to political requirements or environmental concerns.

LEVEL OF NAVIGATION SERVICE AND LEVEL OF ASSET PERFORMANCE

Maintenance of infrastructure at the same high level across the system regardless of demand (usage) is an inefficient use of scarce funds. With EEAM, the goal is not to maintain every asset in the system at its original condition; there is no predefined level of maintenance that should be accomplished at every lock. Instead, the objective is to prioritize maintenance expenditures on the basis of information about risk and performance. The distinction between level of navigation service and level of asset performance is helpful in establishing priorities.

In the EEAM framework, level of service takes precedence over level of asset performance. Consultation with users of the asset is assumed for setting the desired service level, but in the end the managing entity would make the final determination on the basis of the asset’s effect on the overall system’s level of service. Service needs generally consist of the number of movements needed in a given time frame, with a certain percentage being accomplished at or below target levels of delay. The actual level of asset performance may be either better or worse than the level of service expected to meet user demands. For example, an asset may be over- or underdesigned for

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⁸ Data on the condition of assets in the inland waterways system are not public information, but the information presented in Chapter 2 indicates that developing such data will most likely not obligate a significant portion of USACE’s O&M budget.

its assigned level of navigation service, especially if commodities and traffic volumes have changed substantially since the asset was placed in service. A higher risk of failure or extreme delays (in terms of economic outcomes) may be more acceptable for corridors or system components that are little used for freight movement than for those that are more heavily used for that purpose.

OUTCOMES-BASED ASSESSMENT OF PERFORMANCE

The degree to which parts of the system meet goals for performance is determined by using outcomes-based assessments. Table 4-1 shows examples of possible outcomes; different weights would be assigned to outcomes on the basis of the operation and physical location of the asset. The classes of outcomes would be prioritized on the basis of the expected usage and level of service at a given facility.

TABLE 4-1 Outcomes-Based Assessment of System Investments for Maintenance and Repair

SOURCE: NRC 2012.

TABLE 4-2 Budget Objective and Criteria for Ranking Maintenance Needs

^a In its simplest form, the risk reduction ratio is the amount of risk that will be avoided divided by the budget amount requested to achieve the reduction.

Current State of Maintenance Prioritization

OVERVIEW OF CURRENT APPROACH

USACE has examined and used three basic maintenance policies at various times: fix-as-fails, advance maintenance, and rehabilitation or reconstruction.⁹ In Engineering Circular 11-2-204, USACE (2013, F-28) provides specific instructions for budgeting O&M expenses. Table F-2 of that document, Navigation Budget Performance Measures, defines the budget objective and criteria for ranking the need for maintenance expenditures, as shown in Table 4-2.

Figure 4-1 shows a simplified model of the EEAM process.

Application of an EEAM methodology would emphasize the risk aspects of this ranking approach at a system level. Risk, in this context, is the potential for unscheduled closure, decreased service level, or failure of a critical operating component. While USACE’s approach

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⁹ Under a fix-as-fails policy, minor routine maintenance is performed and repairs are made when things “break.” This would be analogous to changing a flat tire on the family car but waiting for something else to break before performing any further maintenance. An advance maintenance approach considers the asset’s age and how it is used; repairs or replacements are made on the basis of the component’s operating characteristics. This would be analogous to changing the timing belt on the family car—nothing has broken, but statistics indicate that at a certain point the replacement of that key component is a good idea.

FIGURE 4-1 Simplified model of the EEAM process.

SOURCE: Study committee.

explicitly addresses certain elements of risk at a conceptual level, the process could be improved, as described later in the chapter.

Figure 4-2 illustrates USACE’s conceptual approach to asset management, which tracks closely with the EEAM approach. The main difference between the two approaches is that EEAM emphasizes Activities 1, 3, and 5. Reliability-centered maintenance, Activity 2 in

FIGURE 4-2 USACE conceptual approach to asset management for the Ohio River Region.

SOURCE: Presentation by J. R. Fisher, USACE, Program Manager, Pittsburgh District, http://www.samehuntington.com/shared/content/Presentations/TB_S2_Fisher.pdf.

USACE’s approach, is considered one of the objectives of EEAM and therefore is not represented as a separate step. In addition, USACE’s approach takes into account economic considerations at a regional level, whereas regional considerations are not distinguished in EEAM. Regional economic considerations are typically transfers of benefits or costs from one region to another that do not affect the national economy. EEAM focuses on economic effects on the overall system rather than at specific locales. Regional considerations would only become relevant once an asset is scheduled for disinvestment; that is, the state or local interests would then have to evaluate the cost of maintaining the asset versus the benefit to be derived by their locale or region and make investment decisions accordingly. Under EEAM, this decision would not involve USACE.

As mentioned, USACE’s primary mission with respect to navigation is to provide conditions that enable the passage of commercial traffic. The main cost of providing these conditions is the maintenance of lock and dam infrastructure, but the maintenance of channels and pools is part of the cost. USACE has developed a conceptual framework (described in more detail below) that considers the age of infrastructure and other elements consistent with EEAM to prioritize repairs that would cost-effectively extend the life of an asset or critical component of the asset and achieve a reliable navigation system. The elements include the probability of failure of the infrastructure; infrastructure usage (demand), defined as whether the waterway has low, moderate, or high levels of freight traffic; and the economic consequences of failure to shippers and carriers. This approach recognizes the importance of economic consequences for strategic investment instead of assuming that all navigation infrastructure needs to be maintained at its original condition. For USACE, the goal of prioritizing investments is to produce the greatest national economic development benefit, which for commercial navigation has meant maximizing reductions in the cost of cargo transported by using USACE waterway infrastructure. In practical terms, this means reducing the risk of physical failure and maintaining a target level of delays.

Although the specific procedures of the approach are just beginning to be implemented and refined and often are not clear, the

framework is being applied at program, district, and headquarters levels to guide the identification of maintenance needs and funding requests. USACE intends to use the framework to implement a standardized assessment of assets across the system (outcomes-based assessment). The assessment is planned to cover all important aspects of asset management. However, further development is needed of the measures and methodology used to assess risk across all assets in the inland waterways system. Additional considerations that would need attention are described in the section of this chapter on implementation.

COMPONENTS OF CURRENT APPROACH

In the past, USACE has focused on determining the physical condition of assets. Currently, USACE considers the physical state of the asset and demand (level of traffic on a river or river segment) in prioritizing maintenance spending for budget requests and allocating the appropriated funds. However, these factors are not made explicit in USACE assessments of level of risk or the desired level of navigation service. USACE is beginning to develop a more comprehensive risk-informed asset management program with the components described below. These components have not been fully implemented or integrated into the budget prioritization process.

Age of Assets

Age has been used as a metric by industry and to a lesser degree by USACE in assessing and communicating the need for maintenance funds. However, the definition of age and its implications for the reliable functioning of the system are not clear (see Chapter 2). The average age of the original infrastructure does not indicate the level of funding needed for the system. Reliability and processing times are not correlated with lock age, with few exceptions. Components of the system have been rehabilitated to extend the life of the assets and to enable them to perform as originally designed, if not better (see Chapter 2). The average age of the infrastructure from the date of rehabilitation is about a decade less than the age from original construction.

Navigation assets that have been rehabilitated are more appropriately dated from the time of the latest rehabilitation. The expected life of the asset also should be “reset.”¹⁰ This approach to calculating the functional or rehabilitated age of an asset is consistent with the methodology used by the U.S. Department of Transportation to describe infrastructure such as bridges.^11,12 USACE does not track rehabilitation dates for its various lock and dam assets. This is one aspect of condition assessment that needs immediate attention.¹³ In view of the extensive rehabilitation of system assets, more specific information related to the condition and functioning of the asset, and not age, is clearly needed to assess, prioritize, and communicate funding needs. (See Chapter 2 for a model for measuring delays and unavailabilities and their impact that could be used for this purpose.)

Level of Navigation Service and Level of Asset Performance

Level of service is a key component of USACE’s plan for allocating maintenance funds, but the definition and implementation are different from what they would be under EEAM. In USACE guidance, “level of service” refers to operational hours and staffing and not to how well the facility provides shipping service to its users. The economic impact associated with the various levels of navigation service is not considered. An EEAM approach would focus on how well the system provides a service to its users and would require an economic justification for inclusion of the facility as a priority for budgeting.

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¹⁰ For example, if the expected life of a lock was originally 50 years dating from 1950 and a major rehabilitation of the lock was performed in 2000 to extend its life by 30 years, the age of the asset should be calculated from 2000 and the expected life should be shown as extending to 2030 instead of 2000. As an analogy, a towboat built in 1960 but rehabilitated in 2000 would not be considered to be 54 years old in 2014 from an operational perspective. In the same way, the age of a lock or dam facility should be adjusted when a major rehabilitation is performed.

¹¹2013 Report Card for America’s Infrastructure. American Society of Civil Engineers. http://www.infrastructurereportcard.org/bridges/.

¹²2010 Status of the Nation’s Highways, Bridges, and Transit: Conditions and Performance Report to Congress. U.S. Department of Transportation, Federal Highway Administration and Federal Transit Administration. http://www.fhwa.dot.gov/policy/2010cpr/pdfs/cp2010.pdf.

¹³ See Appendix C for a listing of the age of assets calculated from the last known major rehabilitation date generated by the committee from public documents and documents provided to the committee by USACE. In 2013, USACE initiated an effort to establish asset rehabilitation dates and to maintain these data for the future.

TABLE 4-3 USACE Definition of Levels of Service for Locks

Table 4-3 shows that USACE has defined six levels of service for locks, ranging from full service (24 hours, 7 days a week, 365 days a year) to by appointment only. The levels have been assigned on the basis of the number of commercial lockages in a year. Districts are encouraged to consider potential impacts on economic development, seasonal adjustments, and modal shifts. Data extracted from the online Lock Performance Monitoring System indicate that 168 lock sites are owned and operated by USACE (some sites may have two or even three chambers). The data indicate that nearly all sites should be staffed at a 24/7/365 or at a two-shifts-per-day level. None of the lock sites would be categorized at the bottom three levels of navigation service; 75 percent would be assigned to the highest service level.¹⁴ With 75 percent of the sites falling into the top category, this approach appears to have limited value in establishing priorities.

An EEAM approach would develop service levels that describe the degree to which the asset enables the systems of locks and dams to provide the access and reliability that navigation users need. Service

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¹⁴ See guidance memo from Richard C. Lockwood, Chief, Operations and Regulatory, Directorate of Civil Works (Acting), April 30, 2012. http://www.uppermon.org/Upper_Mon_Closure/Darcy-Manchin_enclosures_1-2-3-6Sept12.pdf.

levels could be assigned on the basis of information concerning lost transportation hours and lock processing times and each level associated with a level of risk of failure. For example, the hours of closure and the hours of delay per million tons transported would be the drivers affecting the level of potential economic harm (or benefit) for a given lock site. A lock that is programmed for a low level of service could be allowed a higher exposure to the risk of failure, unavailability, or high levels of delay since its usage is sporadic and would have a minimal effect on traffic. A lock programmed for the highest level of service would be expected to operate continuously and be available “24/7/365,” except for programmed maintenance activities and navigation accidents, and would have the lowest level of delays. Instead of relating risk to level of service in this fashion, USACE’s current objectives are to halt the trend of increasing lock outages and to maintain lock availability at least at the systemwide levels recorded for FY 2001–FY 2002.

Any definition of level of service must incorporate delay or lock processing times that are acceptable at each level. Average delays and the variance in delays affect level of service as perceived by users. Under an EEAM approach, levels of service that relate to the effects on users would be developed. A level of service would be assigned to a given lock on the basis of the economic consequences of unplanned outages, failures, or high levels of delay. The operations schedule would then be developed in such a manner as to meet the defined level of service. Table 4-4 provides a possible framework.¹⁵ “Delays” refers to average delay times as opposed to the delay encountered by any given tow. The acceptable level of delays would have to be defined in light of what have been the best service levels historically to account for seasonal peaks and base levels of delay that cannot be eliminated in practice.

An asset’s level of navigation service must be assessed as part of a system. Each lock asset in a waterway corridor depends on the other assets in that corridor, as discussed in Chapter 2. The economic

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¹⁵ The table cannot account for accidents. It is focused on expected outcomes from given levels of maintenance.

TABLE 4-4 Possible Framework for Describing Level of Service and Effects on Users

NOTE: The concept for this framework derives from the Transportation Research Board’s Highway Capacity Manual.

advantages of ensuring that one lock has minimal delays are minimized if another lock in the same corridor is allowed to have frequent delays. It may be better to have all parts of a given corridor perform at a moderate level than to have some parts performing well and some poorly.¹⁶

Delays do not affect all shippers equally. Contractual terms and the commodity being transported will affect the absolute value. However, a high percentage of barge traffic consists of bulk commodities with a relatively low unit value. Delay times and lock processing times (as opposed to the cost of the cargo involved) thus appear to be a valid metric for assessing the role of lock performance in level of service. In a business environment where there is a shortage of mobile equipment (i.e., barges), the effect of delays becomes even more critical. The level of asset performance refers to the functioning of an asset relative to its design parameters. USACE continues to consider the

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¹⁶ Chapter 2 and Appendix E give illustrations in terms of delays at a given lock and dam facility and the hours in lost transport time per million tons transported. Delays may be addressed to some degree through changes in operational procedures such as scheduling; these nonstructural approaches need to be considered in deciding on investments, as discussed in Chapters 3 and 5.

best method of assessing the level of asset performance but typically uses unscheduled outages per lock. Another metric being considered for measuring lock performance is transit times per tow. Procedures or policies have not been established for collecting and analyzing these data. Transit times per tow would be a better indicator of lock performance than lock processing time. Lock processing time data would not account for adjustments made en route. That is, captains of vessels are aware of the acceptance rate at the lock and adjust speeds accordingly, but the increase in transit time does not appear in lock transit time statistics.

Transit time can be separated into seven components:

1. Time required for a tow to move from an arrival point to the lock chamber,
2. Time to enter the lock chamber,
3. Time to close the gates,
4. Time to fill or empty the lock,
5. Time to open the gates,
6. Time for the tow to exit from the chamber, and
7. Time required for the tow to reach a clearance point so that another tow moving in the opposite direction can start toward the lock.

While lock processing times capture the physical performance of the lock, the delays encountered by tows at each lock are important for measuring the level of service. A delay refers to the time a tow must wait to move through a lock once it is at the lock and ready to be processed through the lock. Lost transportation time may be caused by lock closures (whether scheduled or unscheduled unavailability), delays (such as those due to congestion at the lock), or problems with lock operations. A standard procedure needs to be established for recording delays across all locks in the system.

Three additional operational concerns are not captured in lock processing and delay statistics. First, in some cases the total delay time at a lock may be even more important than lock processing time per tow. For locks where minimal cargo is moved, a degradation in transit times may not have a significant effect, but for locks with high cargo volumes, even a slight degradation could have a sizable effect on total

delays. Data on total delay per lock are needed to assess the level of service systemwide and at specific locks.

Second, the variance in transit times would indicate the reliability of the lock. Wide variances affect the ability of carriers to meet delivery schedules and would cause shippers and receivers to maintain larger inventories to guard against late deliveries. USACE has the data to analyze variances in lock processing times but does not do so.

Finally, the reasons for lost transportation time need to be recorded. For example, at several locks (especially on the Upper Mississippi and Tennessee Rivers), the size of the lock may require breaking apart tows (splitting the barges into lock-size groupings) to move the tow through the lock. Although the transit time per lockage may be acceptable, delays can result from the need to make two or more passes to move a tow through the lock.

In summary, the data needed for a comprehensive EEAM approach to asset management for locks are already available for the most part from USACE’s Lock Performance Monitoring System. Inconsistencies in reporting need to be corrected, and procedures may need to be revised to record additional information on lost transportation hours.

Economic Metric: Rate Savings for Users

USACE uses the cost of transportation, and specifically rate savings for shippers, as the primary basis for evaluating all types of infrastructure investments for the inland waterways, whether for capacity expansion, replacement, rehabilitation, or maintenance. The primary measure used in evaluating the condition of locks is increases in transportation costs as a consequence of lock failure or closure. Since the purpose of locks is to facilitate navigation, the metric provides useful information for assessing economic risk, an important component of EEAM.

USACE’s approach could be expanded to provide a more comprehensive assessment of economic consequences at the freight system level. For example, as part of its economic risk assessment, USACE could address such questions as the following: Will a lock closure eliminate a market for certain users? Is there enough capacity on alternative modes to move the cargo by land if a lock closes? Such factors

are important in analyzing economic consequences at a corridor or system level as opposed to the project level.

CONSISTENCY IN APPROACH TO PRIORITIZATION ACROSS ASSETS

USACE has multiple missions and responsibilities, which result in a diverse portfolio of assets to manage. Assets vary in size and complexity, span large geographic areas, and serve diverse functions. The portfolio consists of structures for river navigation, hydropower, and flood risk management; recreation areas; fish ladders; utility systems; and laboratories. These assets range from simple boat launches to massive dams, extensive levee systems, and locks as long as four football fields. Furthermore, a few single assets have multiple functions. For example, a dam may simultaneously support power generation, water supply management, flood risk management, navigation, and recreation.¹⁷ The ways in which asset management principles are implemented may vary by asset type, but the underlying philosophy and approach adopted for prioritizing maintenance need to be applied with consistency across the portfolio.

Decisions About Capital Investments for Capacity Expansion

This chapter focuses mainly on prioritizing maintenance spending given the growing demand for funds to maintain the existing infrastructure for a system that is no longer expanding. However, decisions about whether to invest in capacity expansion at bottlenecks will continue to arise. Chapter 2 shows a trend of static or declining traffic on the major inland waterway corridors. One scenario is that these traffic levels continue. However, forecasts of demand and traffic depend on a number of factors that are difficult to predict reliably, such as commodity prices, the price sensitivity of shippers, and external factors such as changes in the efficiency of other modes of freight transit (see Stern 2014, 19).

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¹⁷ See http://operations.usace.army.mil/asset.cfm for this description and more information about USACE assets.

Barge traffic may remain steady for the system overall while some corridors may experience an increase in traffic. As described in Chapter 2, 80 percent of lost transportation hours are due to delay, with most of the delays occurring at high-demand locks used for agricultural exports. This finding suggests that a main source of delay on the system is congestion related to peaks in seasonal shipping. However, adequate data are not available to explain the causes and timing of delay.

Delays due to congestion may result from the inefficient use of existing capacity (e.g., peak demand without scheduling) rather than from insufficient capacity. Service capacity may be expanded through alternatives to construction, such as an array of nonstructural options for reducing tow lockage time, especially that associated with double lockages.¹⁸ More extensive proposals involve instituting a tow traffic management system, which would attempt to schedule tow arrivals at a lock so as to reduce overall congestion levels. Proponents argue that traffic management to reduce waiting times may be the most cost-effective way to smooth out spikes in barge traffic and episodes of barges arriving at a lock at the same time.

Shipping and agribusiness industry representatives counter that while some nonstructural alternatives may be feasible to improve reliability, a traffic management system would not improve delay and provide the level of service that is needed (NRC 2004). Tows typically move over long distances and are limited in their ability to arrive at a lock at an assigned time. Few productive activities can be undertaken during a delayed arrival period, which results in a cost to shippers. Slow

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¹⁸ As described by NRC 2004, some nonstructural alternatives already in use or being planned include helper boats, industry self-help, N-up/N-down servicing, deck winches, switchboats, and mooring facilities. Helper boats are auxiliary towboats stationed at certain locks to assist tows in making approaches to locks under adverse current conditions (outdrafts). Under industry self-help, a towboat waiting in the queue disengages from its own barges and assists the tow being processed. This measure is in limited use. Under N-up/N-down servicing, when both upriver and downriver queues exist, a lockmaster can reduce overall service time by processing several consecutive tows from each queue in turn. This reduces total approach time at the expense of increased time for turning back the lock chamber. Permanent deck winches on barges reduce the time required to reassemble the tow after a double-cut lockage. [One company has equipped all of its barges with deck winches, but USACE does not foresee any further adoption of this measure (Dyer et al. 2003, 13–14).] Switchboats could be permanently stationed at congested locks to assist with and reduce time spent on double-cut lockages. With mooring facilities, for some locks, the provision of tie-off facilities closer to the lock chamber could reduce approach times and therefore reduce overall servicing time.

steaming could save some fuel, but few other operational benefits are evident beyond reducing queuing times. A properly designed analysis would take into account whether locally mitigated delay reduction through scheduling might propagate delays to other parts of the system without a systemwide reduction in delays. Furthermore, traffic management proposals to handle seasonal peaks in traffic have been criticized for misunderstanding agribusiness production and shipping flexibility during the fall harvest (that is, the fall harvest cannot be rescheduled for less river traffic). A number of NRC reports (see NRC 2004, 50, for a summary) have recommended that all feasible nonstructural measures to expand the service capacity of the system be implemented and evaluated with appropriate methods to determine whether the total physical capacity of the system limits transportation options and, in turn, growth in the economy.

Decisions about whether investments in larger locks are a better investment than other expenditures for the system require more information about delays and the ability of nonstructural alternatives or smaller-scale structural alternatives to achieve the desired level of service. Collection of data and development of performance metrics would enhance understanding about whether delay problems could be most efficiently addressed by more targeted O&M, traffic management, capacity enhancement, or some combination of these.

An asset management approach could provide information that would help in assessing the type and level of investment required for maintaining the desired level of service in specific corridors. The authorization and appropriation process for navigation could then rely on an understanding of whether a facility meets freight service needs of the system and of the investments required.

Implementation

USACE has adopted an approach to asset management that is generally consistent with EEAM. The approach appropriately includes assessment of three main elements that follow from EEAM: the probability of failure of the infrastructure; infrastructure usage (demand), defined as whether the waterway has low, moderate, or high levels of

freight traffic; and the economic consequences of failure to shippers and carriers. The framework prioritizes funding for inland waterways assets that are critical to USACE’s primary mission areas. USACE uses a standard methodology to assess the physical condition of a lock regardless of its location or service demands. The methodology takes into account the economic importance of the lock and the consequences of its failure, which depend on the amount of traffic and the type of commodities passing through the lock. The approach should, at least theoretically, allow USACE to establish maintenance priorities at the level of the system or corridor. It could provide a basis for determining the level of performance that could be attained given a certain amount of funding and the amount of funding that would be needed to reach the desired level of service throughout important parts of the system.

The general approach is appropriate, but several areas need further attention for implementation. A level of risk tolerance needs to be defined for each asset. There is no single best measure of risk tolerance. For example, USACE could decide to accept a higher level of risk for a tributary river than a mainstem river for an asset component that would take more than 3 days to repair. Another approach to defining risk tolerance would be to have all locks undergo major rehabilitation after a certain number of years, with risk tolerance defined in terms of the number of locks not rehabilitated according to schedule.

As implied in the approach, maintenance activities that do not reduce the likelihood of failure or the consequences of an event would generally not be appropriate for budgeting—an essential tenet of the EEAM framework. Furthermore, the level of analysis performed to evaluate the need for a potential project should be commensurate with the size and importance of the project. Not all projects will require a detailed analysis of current and projected traffic flows.

The measures that USACE uses in prioritizing maintenance and rehabilitation expenditures include the 5-year average amount of tonnage moved and the number of lockages performed in a year. These measures are not used explicitly to provide for an assessment or prioritization of projects on the basis of economic considerations, as would an EEAM approach. More useful metrics for prioritizing

maintenance, which would incorporate delay and other measures of system performance that have an economic effect on system users (shippers), need to be developed or refined. Under certain investment scenarios (i.e., where multiple locks are in equal level of service and risk categories but funds are insufficient to work on all of them), consideration of the economic consequences associated with the usage of individual locks may be necessary in establishing priorities. Traditionally, USACE has relied first on average annual ton-miles by river segment to assess usage and has designated waterways as high, moderate, or low use. Some locks designated as low or moderate use on the basis of annual ton-miles may service a much higher volume of traffic than annual statistics would indicate during certain periods such as the seasonal shipping of food and farm products. The ability to handle these peak periods (and the economic consequences of not being able to do so) is important to consider in addition to average annual waterway ton-miles.

For EEAM to be most effective, managers would need the ability to manage and spend O&M funds directly. In the case of the inland waterways, a direct management approach would enable USACE to have the greatest impact on the reliability of freight service given the immediate conditions (for further discussion, see the section in Chapter 5 concerning the revolving trust fund). As explained in Chapter 2, under the current budgeting process, Congress authorizes and appropriates O&M and capital funds for each project or facility. Budget requests are prepared at the USACE district level and refined and prioritized at the division level. USACE headquarters makes the final determination on project rankings across divisions and decides which requests will be submitted as part of the President’s budget request to Congress. Prioritization takes into account both information from USACE divisions about local system needs and the administration’s budget priorities. The number of maintenance projects funded depends on the amounts appropriated by Congress. In contrast, for highway transportation programs funded in the U.S. Department of Transportation, Congress approves funding at a program level but allows the states discretion in setting spending priorities. An analogous program for inland navigation operations, maintenance, and repair would still disburse

funds through the appropriations process, but the funds would be administered by USACE in a way that allows districts discretion in setting spending priorities for O&M. Policies and procedures would be needed to ensure that district- and division-level operational condition assessments are consistent with the EEAM approach and tied to decisions about spending. This approach to budgeting could minimize deferred maintenance and the associated costs and avoid the need for forecasting maintenance investments 2 to 3 years in advance, as the current budgeting process requires.

EEAM and the data-driven initiatives under way at USACE may place significantly heavier burdens on both data management and data models traditionally used to support navigation spending decisions. Improvements for an effective EEAM approach would involve determining the data most needed and the best way to standardize the collection and recording of data across USACE districts that have commercial navigation activities.

Findings and Conclusions

A standard process is lacking for assessing the ability of the inland waterways system to meet demand for commercial navigation service and for prioritizing spending for maintenance and repairs. An asset management program focused on economic efficiency, fully implemented and linked to the budgeting process, would prioritize maintenance spending and ascertain the funding levels required for reliable freight service. A well-executed program of asset management would promote rational and data-driven investment decisions based on system needs and minimize the broader influences that affect the budgeting process.

USACE has adopted a generally appropriate framework for asset management that is mostly consistent with EEAM, but it is not yet fully developed or deployed across districts. The framework recognizes the importance of economic consequences for strategic investments and does not assume, as in the past, that all navigation infrastructure needs to be maintained at its original condition. The approach appropriately includes assessment of three main elements that follow from EEAM: the probability of failure of the infrastructure; infrastructure

usage (demand), defined as whether the waterway has low, moderate, or high levels of freight traffic; and the economic consequences of failure to shippers and carriers.

Once it is fully developed, USACE’s asset management framework could be applied to decisions concerning all categories of investment in USACE’s infrastructure portfolio—O&M, major rehabilitation, and other capital spending. While maintenance is a priority for the system, decisions about whether to invest in construction for capacity expansion at key bottlenecks and how to prioritize these investments against other investments for the system will continue to arise. Decisions about whether investments in construction to expand capacity at the corridor level are economically justified would require more information about delays and the ability of nonstructural alternatives or smaller-scale structural alternatives to achieve the desired level of service. Collection of data and development of performance metrics would enhance understanding of whether delay problems could be addressed most efficiently by more targeted O&M, traffic management, capacity enhancement, or some combination of these. An asset management approach could provide information that would help to assess the type and level of investment that would maintain the desired level of service. The authorization and appropriation process for navigation could then rely on an understanding of whether a facility meets freight service needs of the system and of the investments required.

Age of construction is not a good indicator of lock condition. More meaningful measures of system condition derived from data such as those contained in the Lock Performance Monitoring System would more accurately communicate the condition of the system. A more accurate way of communicating the age of locks would be to date them from the time of the last major rehabilitation, as is done for highway infrastructure such as bridges (as explained in Chapter 2). USACE does not publish consistent records of rehabilitation dates for its assets. This aspect of the asset management process needs more attention.

Several elements of the USACE framework will need further attention before implementation. First, there is no single best measure of risk tolerance; a level of risk tolerance will need to be defined for

each asset. Second, the approach will need to be implemented systemwide to gain the greatest level of service and economic benefits. Third, whereas the data required to apply the framework are already available for the most part from USACE’s Lock Performance Monitoring System, refinements could be considered. Metrics to assess the location, timing, and reason for delays routinely could be developed and linked to data on the economic consequences of delay to prioritize investments. Under certain investment scenarios, consideration of the usage level of individual locks may be necessary in establishing maintenance priorities. For example, in some cases, the ability to handle peak periods (and the economic consequences of not being able to do so) needs to be considered rather than relying first on annual average waterway ton-miles. A consistent method of recording delays across the system would be needed, and perhaps additional information on delays recorded. Information on accidents also would be useful. Fourth, EEAM would be most effective if USACE had the ability to manage and spend O&M funds according to priorities set through the EEAM process at the district level. This would allow USACE to have the greatest impact on the reliability of freight service given the immediate conditions. Funds would still be disbursed through the appropriations process. Policies and procedures would be needed to ensure the consistent application of district- and division-level assessments under the EEAM process.

References

ABBREVIATIONS

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