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2018 N A T I O N A L C O O P E R A T I V E H I G H W A Y R E S E A R C H P R O G R A M NCHRP RESEARCH REPORT 866 Return on Investment in Transportation Asset Management Systems and Practices Spy pond partnerS, LLC Arlington, MA Hdr, InC. San Francisco, CA and Harry Cohen Palm City, FL Subscriber Categories Administration and Management â¢ Economics â¢ Policy Research sponsored by the American Association of State Highway and Transportation Officials in cooperation with the Federal Highway Administration
NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM Systematic, well-designed research is the most effective way to solve many problems facing highway administrators and engineers. Often, highway problems are of local interest and can best be studied by highway departments individually or in cooperation with their state universities and others. However, the accelerating growth of highway transportation results in increasingly complex problems of wide inter- est to highway authorities. These problems are best studied through a coordinated program of cooperative research. Recognizing this need, the leadership of the American Association of State Highway and Transportation Officials (AASHTO) in 1962 ini- tiated an objective national highway research program using modern scientific techniquesâthe National Cooperative Highway Research Program (NCHRP). NCHRP is supported on a continuing basis by funds from participating member states of AASHTO and receives the full cooperation and support of the Federal Highway Administration, United States Department of Transportation. The Transportation Research Board (TRB) of the National Academies of Sciences, Engineering, and Medicine was requested by AASHTO to administer the research program because of TRBâs recognized objectivity and understanding of modern research practices. TRB is uniquely suited for this purpose for many reasons: TRB maintains an extensive com- mittee structure from which authorities on any highway transportation subject may be drawn; TRB possesses avenues of communications and cooperation with federal, state, and local governmental agencies, univer- sities, and industry; TRBâs relationship to the National Academies is an insurance of objectivity; and TRB maintains a full-time staff of special- ists in highway transportation matters to bring the findings of research directly to those in a position to use them. The program is developed on the basis of research needs identified by chief administrators and other staff of the highway and transportation departments, by committees of AASHTO, and by the Federal Highway Administration. Topics of the highest merit are selected by the AASHTO Special Committee on Research and Innovation (R&I), and each year R&Iâs recommendations are proposed to the AASHTO Board of Direc- tors and the National Academies. Research projects to address these topics are defined by NCHRP, and qualified research agencies are selected from submitted proposals. Administration and surveillance of research contracts are the responsibilities of the National Academies and TRB. The needs for highway research are many, and NCHRP can make significant contributions to solving highway transportation problems of mutual concern to many responsible groups. The program, however, is intended to complement, rather than to substitute for or duplicate, other highway research programs. Published research reports of the NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM are available from Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet by going to http://www.national-academies.org and then searching for TRB Printed in the United States of America NCHRP RESEARCH REPORT 866 Project 20-100 ISSN 2572-3766 (Print) ISSN 2572-3774 (Online) ISBN 978-0-309-44676-1 Library of Congress Control Number 2017963651 Â© 2018 National Academy of Sciences. All rights reserved. COPYRIGHT INFORMATION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB, AASHTO, FAA, FHWA, FMCSA, FRA, FTA, Office of the Assistant Secretary for Research and Technology, PHMSA, or TDC endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not-for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. NOTICE The research report was reviewed by the technical panel and accepted for publication according to procedures established and overseen by the Transportation Research Board and approved by the National Academies of Sciences, Engineering, and Medicine. The opinions and conclusions expressed or implied in this report are those of the researchers who performed the research and are not necessarily those of the Transportation Research Board; the National Academies of Sciences, Engineering, and Medicine; or the program sponsors. The Transportation Research Board; the National Academies of Sciences, Engineering, and Medicine; and the sponsors of the National Cooperative Highway Research Program do not endorse products or manufacturers. Trade or manufacturersâ names appear herein solely because they are considered essential to the object of the report.
The National Academy of Sciences was established in 1863 by an Act of Congress, signed by President Lincoln, as a private, non- governmental institution to advise the nation on issues related to science and technology. Members are elected by their peers for outstanding contributions to research. Dr. Marcia McNutt is president. The National Academy of Engineering was established in 1964 under the charter of the National Academy of Sciences to bring the practices of engineering to advising the nation. Members are elected by their peers for extraordinary contributions to engineering. Dr. C. D. Mote, Jr., is president. The National Academy of Medicine (formerly the Institute of Medicine) was established in 1970 under the charter of the National Academy of Sciences to advise the nation on medical and health issues. Members are elected by their peers for distinguished contributions to medicine and health. Dr. Victor J. Dzau is president. The three Academies work together as the National Academies of Sciences, Engineering, and Medicine to provide independent, objective analysis and advice to the nation and conduct other activities to solve complex problems and inform public policy decisions. The National Academies also encourage education and research, recognize outstanding contributions to knowledge, and increase public understanding in matters of science, engineering, and medicine. Learn more about the National Academies of Sciences, Engineering, and Medicine at www.national-academies.org. The Transportation Research Board is one of seven major programs of the National Academies of Sciences, Engineering, and Medicine. The mission of the Transportation Research Board is to increase the benefits that transportation contributes to society by providing leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdisciplinary, and multimodal. The Boardâs varied committees, task forces, and panels annually engage about 7,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individuals interested in the development of transportation. Learn more about the Transportation Research Board at www.TRB.org.
C O O P E R A T I V E R E S E A R C H P R O G R A M S CRP STAFF FOR NCHRP RESEARCH REPORT 866 Christopher J. Hedges, Director, Cooperative Research Programs Lori L. Sundstrom, Deputy Director, Cooperative Research Programs Andrew C. Lemer, Senior Program Officer Sheila A. Moore, Program Associate Eileen P. Delaney, Director of Publications Sharon Lamberton, Editor NCHRP PROJECT 20-100 PANEL Area TwentyâSpecial Projects Jennifer Brandenburg, Volkert, Inc., Raleigh, NC (Chair) Imad S. Aleithawe, Mississippi DOT, Jackson, MS Stephen Cyrus âSteveâ Guenther, California DOT, Sacramento, CA Gareth Andrew McKay, Opus International Consultants, Novi, MI Pramen Shrestha, University of Nevada Las Vegas, Las Vegas, NV Dave A. Solsrud, Minnesota DOT, Hawick, MN Alan M. Warde, New York State DOT, Albany, NY Ermias Weldemicael, Colorado DOT, Denver, CO Morgan Kessler, FHWA Liaison Matthew Hardy, AASHTO Liaison Thomas Palmerlee, TRB Liaison
NCHRP Research Report 866: Return on Investment in Transportation Asset Management Systems and Practices presents a critical review of generally beneficial results state departments of transportation and other agencies have achieved from implementing computer-based transportation asset management systems. Such systems support facility development and maintenance decision making by facilitating use of meaningful information to analyze eco- nomic and financial consequences of alternative design, operations, and maintenance prac- tices. Adopting transportation asset management systems requires investments in staff effort and often institutional change, as well as funds for decision-support software and information management. The guidance and background information presented here will be helpful to agency staff and others responsible for ensuring that such investments yield positive returns. As the term is most generally used, transportation asset management (TAM) entails the activities a transportation agency undertakes to develop and maintain the system of facilities and equipmentâphysical assets such as pavements, bridges, signs, signals, and the likeâfor which it is responsible. The large, varied, and complex functional and geographic extent of this system has given rise over many years to disparate analytical methods and decision- making practices among agencies. The dramatic increases in recent years in use of computers and related data collection and storage capabilities have in turn motivated development and use of computer-based TAM systems that can replace outdated information management practices, spreadsheets, and databases with robust analytical tools that offer the promise of better decision making and, in turn, improved management effectiveness and transportation system performance. However, the planning, implementation, and maintenance of a TAM system requires a sig- nificant investment of time, labor, and money to acquire or develop computer software, train staff, collect and manage data, and adapt management procedures to TAM philosophy and practices. Developing the business case that making this investment will pay off is always chal- lenging. Once a decision has been made to adopt a TAM system, implementationânecessary to realize a return on investmentâcan be challenging as well. As is generally the case for transportation assets (pavements and bridges, for example) initial costs are monetary expenditures that are concentrated in the near term, whereas returns accrue over years of system use and may include conjectural or non-monetary benefits such as avoided asset-repair expenditures or asset-user time savings. In addition, the particular characteristics of agencies (for example, their sizes, reliance on in-house versus out-sourced professional services, inventories of assets under management, transportation system geography and user popula- tion, and the like) as well as their level of experience with computer-based decision support will certainly influence the returns realized on their investments in those systems. In the more than F O R E W O R D By Andrew C. Lemer Staff Officer Transportation Research Board
two decades since practical TAM systems began to be available, an extensive literature has been developed presenting the theoretical benefits of their adoption. These benefits have been mea- sured primarily in terms of reduced life-cycle costs of asset ownership; the literature contains few estimates of the actual return on investment (ROI) realized by agencies that have adopted and used TAM systems. The objectives of NCHRP Project 20-100, âReturn on Investment in Transportation Asset Management Systems and Practices,â were to (1) assess the experience of selected agencies that have adopted TAM systems, in terms of the investments made and returns realized; and (2) develop guidance for estimating the ROI for adopting or expanding TAM systems in an agency. The research team examined the experiences of several agencies with regard to developing consistent measures of investment and return, as reported by the agencies themselves. Based on the research teamâs work and the experiences of these agencies and others, the researchers described a methodology that an agency may use to assess their own experience and to plan their investments in TAM system development or acquisition. An important conclusion of the research is that the ROIs for the examples examined in this project have been positive and substantial. The research was conducted by a team led by Spy Pond Partners, LLC, with support from HDR, Inc. The research team reviewed the literature, current DOT TAM practices, and TAM systems currently in use, then collected information from several participating DOTs to esti- mate the ROIs of the agenciesâ investments in TAM systems. After the analysis methodology was documented and described in a manner that could be given to others to apply, the research team validated its application with another DOT and subsequently refined the explanations that now are presented in NCHRP Research Report 866. The primary product of this work is this research report, which describes the research and a methodology for estimating ROI. A generic spreadsheet that may be used to assist DOT personnel or others to conduct their own TAM system ROI analysis also was produced. The spreadsheet tool is available for download from the report webpage, which is accessible by searching www.trb.org for âNCHRP Research Report 866â.
1 Chapter 1 Introduction 1 Research Scope 2 Research Approach 2 Report Organization 3 Chapter 2 Framework for Estimating ROI 4 Using a Benefit-Cost Analysis Approach 5 Definition of Base Case and Investment Case 8 Benefit and Cost Categories 11 Methods for Estimation of Benefits 13 Measurement of Performance and Quantification of Input Values 16 ROI Assessment and Reporting 20 Consideration of Uncertainty 24 Chapter Endnotes 26 Chapter 3 Case Studies 26 Case Study 1: Western State 33 Case Study 2: Eastern State 39 Case Study 3: Southern State 41 Chapter 4 ROI Calculation Guidance 42 ROI Methodology 44 Step 1: Define the Purpose of the Study and the Scope of TAM Investment 46 Step 2: Identify Likely Impacts 48 Step 3: Assess Available Data 53 Step 4: Establish Modeling Framework and Choose Analytical Method 59 Step 5: Collect Necessary Data 59 Step 6: Conduct Analysis 61 Step 7: Estimate ROI and Summarize Results 66 Chapter 5 Using the ROI Calculator (ROI Tool) 66 System Requirements 66 Tool Components 67 Mapping Framework Benefits and Costs to the ROI Tool 67 Using the ROI Tool 68 Inputs Worksheet 78 Additional Parameters Worksheet 84 Summary Results Worksheet 90 Worked Examples 109 Chapter 6 Conclusions C O N T E N T S
111 Appendix A Literature Review 123 Appendix B Annotated Bibliography 140 Appendix C ROI Framework and Guidance References by Topic 144 Appendix D HERS-ST Parameter Values for the Western State Case Study 145 Appendix E Description of the Southern State Case Study 157 Appendix F Pilot of ROI Guidance and ROI Calculation Tool (ROI Tool) 167 Appendix G Supplemental Guidance on Use of Simulation Results in ROI Analysis Note: Photographs, figures, and tables in this report may have been converted from color to grayscale for printing. The electronic version of the report (posted on the web at www.trb.org) retains the color versions.