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6 CHAPTER TWO STATE OF THE PRACTICE OF LIFE-CYCLE COST ANALYSIS TOOLS AND MODELS This chapter summarizes the findings of the literature review tools and models used in LCCA for highway asset management. Efforts were made to capture the state of the practice in terms of tools and models for LCCA domestically and internationally. In addition, information is provided on the primary costs and factors utilized in LCCA and the vari- ability of these throughout the practice. COMMON ELEMENTS OF LIFE-CYCLE COST ANALYSIS In this section, the typical elements of LCCA are reviewed along with some of the commonly noted challenges of each. User Costs One of the great advances in public-sector infrastructure man- agement and decision making has been the more widespread assessment and inclusion of user costs when comparing options and making design, construction, and maintenance decisions. User costs associated with work zones are of par- ticular interest. The costs associated with work zones include delays, vehicle operating costs, and costs associated with vehicle crashes. When performing maintenance activities, a lane closure is often necessary. This lane closure directly affects user costs. In sum, the user costs amassed from work zones associated with each design alternative may differ sub- stantially and, as such, it is important that the inclusion of user costs be considered in LCCA analysis to truly reflect the over- all costs of each design alternative over the life of the alter- native. A study conducted for South Carolina Department of Transportation in 2008 found that of the 33 state highway agencies that responded to an industry survey, approximately 60% of the respondents did not include user cost in LCCA, although three states noted their plans to include user costs in the future (3). This sentiment was echoed in the survey of state highway agencies described in chapter three. Agency Costs Agency costs fall into four categories: initial construction costs (capital costs), maintenance costs, preservation costs, and rehabilitation costs. Initial construction costs are the initial expenditures made by an agency to construct a proj- ect. Based on a review of relevant literature, capital costs are among the most commonly incorporated costs in LCCA; however, uncertainties with data quality and incomplete data still exist (4). Maintenance costs are a critical factor in completing an accurate LCCA. These costs include future maintenance needed to prolong the service life of an asset and meet performance requirements set forth by highway agencies. As with capital costs, the uncertainties associ- ated with maintenance costs include uncertainties with unit costs, confidence in engineering judgment, and quality of data (5). In chapter five of this document, efforts under way by Washington State DOT to improve maintenance informa- tion and costs are reviewed. This review may provide addi- tional insight into one approach to improve the confidence of maintenance costs as applied in LCCA. Preservation activities are increasingly being implemented throughout an assetâs service life to ensure the greatest service life extension possible. These activities differ from mainte- nance and rehabilitation activities in that preservation activi- ties are performed to prevent any deficiencies before they begin to surface. As a relatively optimal activity, many agen- cies may have an ideal preservation implementation schedule but mainly implement preservation projects as funds are avail- able. Uncertainty with preservation costs, as with most costs, often comes from a lack of reliable or consistently collected data. Rehabilitation costs address maintenance needs that are more extensive than routine maintenance activities. As with maintenance activities, rehabilitation activities are an impor- tant and often a costly part of a project life cycle. The duration and timing of rehabilitation activities will greatly affect a proj- ectâs overall life-cycle costs and must be obligated and proac- tively planned for to optimally and cost-effectively maintain an asset over its service life. Figure 2 provides an overview of the life-cycle costs associated with highway assets. FIGURE 2 Life-cycle costs associated with highway assets. At the end of a projectâs service life, after itâs been deter- mined it is no longer cost-effective to extend the life or
7 improve the performance, the raw materials may be recycled to net a monetary gain or produce a beneficial value to a state DOT. This monetary gain is known as salvage value and can be included in an LCCA. It is very difficult to quantify the value returned to a state DOT in the recycling of materials at the end of a projectâs service life; however, this informa- tion can be gleaned from disposal costs or from an estimate of the value of the steel, asphalt, or concrete as an input to another construction project. Highway agencies are increas- ingly trying to calculate the remaining service life in their existing assets and the life extensions that accrue with the previously described maintenance treatments. Costs applied for maintenance treatments and preservation activities are included in the remaining service value. Furthermore, when the service life of a design alternative under consideration extends beyond the period of analysis, it is important to cap- ture this remaining period using some value. With the lack of confidence in a projectâs service life, the inclusion of remain- ing service life value proves difficult and few agencies have tailored estimates of remaining service life based on their own experiences. Tools and models have been developed and utilized within the highway industry to estimate life-cycle costs and provide a mechanism to compare design alternatives, to take into account all costs associated with each design. An over- view of the tools and models most often used in the highway industry are reviewed in the next section. LIFE-CYCLE COST ANALYSIS TOOLS AND MODELS In 2011, a survey of agency LCCA tools for highway proj- ects was completed by researchers for California Depart- ment of Transportation (Caltrans) (6). Seventeen states participated in the study and provided information on the types of tools and models utilized for LCCA. Of the respon- dents, five states reported using FHWAâs RealCost, three states developed custom LCCA software, three states use custom spreadsheets, one state uses both AASHTOâs DAR- Win program (recently renamed AASHTOWare Pavement ME DesignTM) and custom software, and five states did not specify a tool for LCCA estimation (6). Pavement LCCA Tools RealCost is a software designed to assist agencies with pavement design but is often touted as being applicable to other asset classes for LCCA. RealCost is available as a free download from FHWAâs website and consists of a Micro- soft Excel 2000 worksheet with additional Visual Basic for Applications (VBA) code. The VBA code provides the ability to perform Monte Carlo simulation in the analysis to incorporate probability distributions for a number of fac- tors incorporated in LCCA. RealCost can perform LCCA in a deterministic or probabilistic manner. The deterministic approach requires the user to input the required data as dis- crete values, whereas the probabilistic approach allows the user to apply one of seven distributions to multiple input fac- tors including the following: â¢ Discount rate â¢ Annual growth rate of traffic â¢ Free flow capacity â¢ Value of time for passenger cars â¢ Value of time for single unit trucks â¢ Value of time for combination trucks â¢ Agency construction cost â¢ User work zone costs â¢ Maintenance frequency â¢ Activity service life â¢ Agency maintenance cost â¢ Work zone capacity â¢ Work zone duration. Users electing to utilize a probabilistic approach to LCCA estimates may choose between seven distributions: â¢ Uniform â¢ Normal â¢ Log normal â¢ Triangular â¢ Beta â¢ Geometric â¢ Truncated normal â¢ Truncated log normal. The deterministic approach assigns each LCCA input variable a fixed, discrete value (5). The analyst using this approach assigns values based on historical costs or pro- fessional judgement to determine the value most likely to occur for each LCCA input parameter (5). Traditionally, this approach has been the one most used to perform LCCA. The deterministic approach makes LCCA straightforward, mak- ing the process easy to accomplish with a calculator or a spreadsheet (5). The input values used in this approach pro- vide a single life-cycle cost estimate that is not reflective of the variability of input factors and does not demonstrate the uncertainty often associated with LCCA. Unlike the deterministic approach, the probabilistic approach relies on a frequency, or probability, to determine the value of the individual analysis inputs (5). This type of analysis can compute results that describe their likelihood of occurrence while simultaneously factoring in different vari- able assumptions. For example, Colorado Department of Transportation uses RealCostâs Monte Carlo simulation to randomly sample from probability distributions for each input. NCHRP Report 703: Guide for Pavement-Type Selection (7) provides some insight into LCCA for pavements. The guidance document includes a chapter specifically related to
8 LCCA and provides additional information on deterministic and probabilistic approaches to estimating life-cycle costs. The guide also provides information on determining specific inputs for pavements including salvage value (i.e., remain- ing service life and residual value), indirect/user costs, and direct/agency costs. Suggestions for data sources to support an LCCA of pavements are also provided. Some state highway agencies have made investments to customize RealCost. Caltrans has customized RealCost to reflect its design and operating conditions including updates to the traffic data module to reflect traffic patterns from its own historical databases; the addition of cost estimating mod- ules based on historical bid databases and design procedures; and the addition of graphical user-friendly interfaces to inte- grate service life, maintenance frequency, and agency costs that reflect project constraints (8). Caltrans has continued to invest in the customization of RealCost and recently released RealCost2.5CA, which includes automated cost calculation modules to estimate future maintenance and rehabilitation costs based on construction scope and pavement type. The enhancements were made to improve the efficiency of LCCA use, which has led to the adoption of RealCost2.5CA as an official LCCA tool to comply with regulatory requirements for California state highway projects (9). Indiana DOT also has made enhancements to RealCost, including improvements to the cost estimating module to be reflective of line items and unit rates based on historical data, inclusion of default or user-defined strategies for pavement preservation, and improved graphics for reporting analysis results. In particular, Indiana DOT also made changes to the tool to allow analysis to be completed for more than two pavement design and preservation alternatives at a time (10). Researchers in Nebraska have published a study apply- ing RealCost for bridge management (11). The objective of the study was to assess maintenance strategies using LCCA for deck overlay decisions, expansion joint replacement deci- sions, and deck widening versus deck replacement decisions. RealCost was used with updated deterioration and cost data based on Nebraska bridge performance using both deter- ministic and probabilistic modeling techniques. Several conclusions were drawn based on the analysis that supports LCCA use for bridge management. AASHTO has invested in pavement design software since the release of the computerized version of the 1993 AASHTO Guide for Design of Pavement Structures referred to as AASHTOWareÂ® DARWin 3.1â¢ â Pavement Design and Analysis System. DARWin has been replaced by new software, and in 2014 TRB published NCHRP Synthesis 457: Implementation of AASHTO Mechanistic-Empirical Pavement Design Guide and Software, which documents the use of the 2011 software AASHTOWare Pavement ME DesignTM (12). The software documented in the synthe- sis is based on the 2008 AASHTO Mechanistic-Empirical Pavement Design Guide: A Manual of Practice (MEPDG) and is a significant departure from previous procedures and software, which were empirically based. A summary of the models and procedures included in the software are documented in detail in NCHRP Synthesis 457 and are sum- marized here. The software is considered an analysis tool because the designer must note different properties of the various layers of the pavement design including the binder type and aggregate structure. The modules of the software include the following: â¢ General design inputs â¢ Performance criteria â¢ Traffic â¢ Climate â¢ Asphalt layer design properties â¢ Concrete layer design properties â¢ Pavement structure â¢ Calibration factors â¢ Sensitivity â¢ Optimization â¢ Reports. The study also included a survey of 57 highway agencies to determine the use of MEPDG and accompanying soft- ware. The survey revealed that, at the time, three agencies had fully implemented MEPDG, whereas another 46 indi- cated they were in the process of implementing MEPDG and eight indicated they had no intention of implementing MEPDG. Agencies indicated using MEPDG for the design and analysis of new or reconstructed asphalt pavements and jointed plain concrete pavements as well as asphalt and con- crete overlays. In February 2015, the Louisiana Transportation Research Center published the results of a pooled-fund study, TFP 5(242), which developed a full-production software titled Prep-ME to assist agencies with data preparation required to run MEPDG. The product includes comprehensive database features capable of preprocessing, importing, checking the quality of raw Weigh-In-Motion traffic data, and generat- ing three levels of traffic data inputs with clustering analysis methods for Pavement ME Design (13). The authors state that their product will help to improve the data preparation, management, and workflow of the Pavement ME Design input data module. Bridge LCCA Tools The same 2011 agency survey found that the most common tools for bridge LCCA used BridgeLCC (National Institute of Standards and Technology) and Bridge Life Cycle Cost Analysis (BLCCA) (6). BridgeLCC, developed in 2003 by Mark A. Ehlen, is based on the ASTM practice for measur- ing the life-cycle costs of buildings and building systems,
9 ASTM E 917 (14). BridgeLCC primarily is used to compare project alternatives; however, BLCCA can be applied to net- works (14, 15). BLCCA was developed under NCHRP Project 12-43 as an engineering-oriented analysis tool that includes cost models for agency, user, and vulnerability costs. The vulner- ability cost models align nicely with risk-based asset man- agement needs in that the potential costs of damage resulting from natural threats such as earthquakes, scour, and flood- ing can be determined, as well as direct threat costs such as collision, overload, or fatigue. These costs are calculated by multiplying the potential cost of a particular type of damage, such as seismic displacement or scour, by the likelihood of that damage occurring. AASHTOâs Pontis Bridge Management System was recently renamed AASHTOWare Bridge Management (BrM) and appears to be the most researched bridge management software. Florida and Virginia DOTs also published refinements of the software based on publicly available publication databases. Pontis is based on a rela- tional database management system that provides a mecha- nism to analyze structures at the element level including girders, joins, decks, and railings. Pontis supports the entire bridge management life cycle, from inventory to inspec- tion, performance assessment, strategy development, and project and program growth (16). Researchers in Virginia utilized information from bridges on the Interstate System in Virginia to develop new deterioration models. Further research revealed the need to improve data collection and recording practices for maintenance activities to better model bridge performance. Florida researchers have made significant investments to improve the deterioration mod- els within Pontis to better reflect the field deterioration of bridge elements in the state (17). In addition, efforts have been made to address the threat of natural and man-made hazards in the stateâs bridge management system includ- ing hurricanes, tornadoes, floods and scour, and wildfires, as well as advanced deterioration, fatigue, collisions, and overloads. Efforts included the incorporation of risk mod- els for each hazard, which helped the agency identify the types of bridges and specific bridge elements that are most at risk within the state. Customized Tools Several agencies have developed custom LCCA spread- sheets or applications, often to access external data reposi- tories to support the analysis (18). Two of the states in the 2011 survey had made their custom LCCA spreadsheets pub- licly available. Chapter five contains additional information about the efforts undertaken by Florida DOT to customize LCCA tools to reflect its assets performance and costs. Next, an overview of experience with LCCA applied to ancillary assets is provided. LCCA ToolsâAncillary Assets Although information is widely published on state highway agencies implementing and calibrating pavement models to support LCCA and documented LCCA use in bridge man- agement programs, very few published studies can be iden- tified to document LCCA use for ancillary assets. Although some documentation exists on LCCA use for ancillary assets including Intelligent Transportation System (ITS) technolo- gies, fleet vehicles, and road barriers, documentation that addresses state highway agencies implementing these meth- odologies within their organization is limited (19, 20). A review of one study that documents LCCA for ITS invest- ment is included here. Researchers from Syracuse University developed a com- prehensive costâbenefit framework to evaluate ITS invest- ments ranging from life-cycle cost analysis to the benefits derived from the systems from users and agencies. Research- ers studied the LCCA and benefits anticipated from both adaptive traffic control systems and ramp metering systems. Costs included in the LCCA included infrastructure costs, incremental costs, and operating and maintenance (O&M) costs. Life span was assumed to be 20 years and a fixed dis- count rate of 7% was utilized in the study. Salvage value was ignored, given the limited information on the value of ITS equipment at the end of service life. Infrastructure costs included infrastructure equipment, software installa- tions, and labor cost for installing and operating the system. Incremental costs included changing and updating signal controllers, communication lines, loop detectors, and so forth, based on a fixed schedule. O&M costs were reported to vary by system complexity. The authors also developed additional models to capture the benefits provided by adap- tive traffic control systems and ramp metering systems. The study provides information to agencies seeking to expand their LCCA to ancillary assets, including adaptive traffic control systems and ramp metering systems, and provides average cost and benefit information that may be useful for planning purposes (21). Next, international experiences with LCCA are reviewed. LIFE-CYCLE COST ANALYSIS INTERNATIONAL STUDIES A study in Switzerland performed an environmental life- cycle assessment and life-cycle analysis of processes needed to construct and maintain various pavement types applicable for the Swiss roadway network, including concrete, asphalt, and composite road pavements. The study analyzed the new construction and maintenance processes over a life span of 75 years, considered to be 1.5 times the average lifetime of a subbase layer. Costs included in the analysis for new construction were generated from the Cost Analysis 2011 available through the Swiss Builders Association. Because
10 concrete and composite pavements have not been built in Switzerland over the past two decades, the costs were deter- mined by comparison with cost values from Germany and Austria and a ratio of 1:1.53 between costs for asphalt and concrete pavements was used. The cost calculation uti- lized a discount rate of 2% and a life span of 75 years. The authors concluded that all three pavement types have very similar new construction costs; however, the concrete pave- ment resulted in overall lower costs over the analysis period. Although the new construction costs for all three types of pavement were comparable, concrete pavements were deter- mined to have high initial environmental impacts and a lon- ger service life. It was also noted that concrete pavement has specific environmental and economic benefits as compared with composite and asphalt pavements (22). An LCCA study of project-level pavement management was also conducted in Portugal utilizing the AASHTO ser- viceability concept for flexible pavements. The Portuguese Manual of Pavement Structure considers a design period of 20 years for flexible pavements while also recommending that LCCA be developed for a period of 40 years. Research- ers developed an optimization model called OPTIPAV that generates an optimal pavement structure, based on the pre- dicted annual pavement quality, construction costs, mainte- nance and rehabilitation (M&R) plan and costs, user costs, and pavement residual value at the end of the project analysis period. The model allows for 20- or 40-year design periods and compares different pavement solutions in global costs for the selected pavement structure for highways or roads (23). Highway structures in Myanmar were the focus of an LCCA study conducted at Nanyang Technology University in Singapore. The various components and statistical factors needed to conduct an analysis were discussed and a stepwise procedure was implemented to determine the cost compo- nents required. The authors performed a sensitivity analysis to illustrate the effect of uncertainties associated with various factors on the total life-cycle cost of highway structures. The analysis focused on incorporating agency costs (e.g., con- struction and maintenance costs) and user costs (e.g., delay costs, cost of additional fuel consumption, and cost of addi- tional vehicle maintenance). Accident and external cost com- ponents were excluded owing to a lack of sufficient statistical data. The study emphasized the importance of integrating an LCCA tool into the policies and practices for the design of highway structures and recommended the development of a life-cycle costing framework for transportation projects in Myanmar, to highlight the need for continued maintenance of assets and capital costs for initial investments (24). A study conducted in Iran, an oil-exporting country (bituminous materials are less costly than in other coun- tries), compared the LCC of conventional and perpetual pavements on highways. The net present value method was used and all the costs were reduced to a single time cost. Three main categories were taken into account: construc- tion costs, M&R costs, and user costs (environmental, acci- dent, and work zone costs were not included). Two software models were used to compute LCC over a period of 40 years. The results of the study show that user costs are dominant, and construction and M&R costs constitute less than 0.5% of the LCC at a discount rate of 4.88%. In addition, per- petual pavements have a 4%â20% reduction in LCC com- pared with conventional pavements. This was explained by the reduced M&R costs (elimination of reconstruction) and reduced delays for roadwork and related user costs. It was also observed that even with varying discount rates, the per- petual pavements were found to have the lowest overall life- cycle costs (25). SUMMARY This chapter provided an overview of the typical costs included in an LCCA and highlighted some of the uncertain- ties associated with these costs including unclear definitions and lack of reliable or consistently collected data. In addi- tion, tools and models to support the application of LCCA to highway assets were reviewed. It was noted that some states have taken steps to customize available tools to their assets and performance over time when such data are available. A summary of typical costs included in an LCCA is included in the chapter along with a diagram of when these costs typically occur over the life of an asset. Challenges associated with including these costs in an LCCA are also documented. The most noted hindrance to LCCA application or use appears to be the lack of information and data needed to support the analysis for assets other than pavements and bridges. In addition, it is noted that while many, if not most, highway agencies are using LCCA to manage their pave- ment programs, many report challenges with including user costs. One potential approach to improving LCCA applica- tion to ancillary assets may be the use of a tiered approach to LCCA. In such an approach, higher capital cost assets that typically require routine maintenance and rehabilitation to extend the life of an asset may require more rigor and data to support an LCCA as compared with assets that may require substantially less maintenance and are not anticipated to benefit from rehabilitation, such as traffic signal systems. This type of approach was demonstrated through the work documented on the LCCA of advanced traffic management systems and ramp metering systems. The most readily available tools for conducting LCCA appear to be aimed toward the analysis of pavements and bridges, with tools available for pavement analysis being the most readily studied and documented by highway agencies. Most state customization focuses on developing deterioration curves that better reflect individual state agency experience. Although FHWA has noted that the applications contained
11 in its tool RealCost can be applied to a range of assets, few studies were identified that documented the use of the tool to analyze assets other than bridges and pavements. The literature review revealed the limited documented LCCA use for the analysis of ancillary assets; however, some work has been completed related to the LCCA of bar- riers, fleet vehicles, and ITS technologies. One study of note utilized LCCA to fully analyze the costâbenefit ratios asso- ciated with typical installations of adaptive traffic control systems and ramp metering systems. The authors captured costs associated with these systems in terms of infrastruc- ture costs, incremental costs, and O&M costs, and expanded the study to include the documentation of the benefits of these systems. The approach used in this study provides a solid foundation on which agencies could begin to analyze the LCCA of ITS technologies. International studies revealed a similar focus on pave- ments and bridges for LCCA applications, and an emphasis on the resulting environmental impacts of design alterna- tives was noted. Some countries are in the early stages of framework development to support LCCA and are begin- ning to document the approach to the process as well as implications to public infrastructure investment. The next chapter probes further to learn more about LCCA use at various levels (asset, project, network/pro- gram) and across other highway agency asset classes based on findings of a state highway agency survey.