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8 Introduction 1.1 Background Equipment is an essential resource in highway opera- tions. The quality of the equipment fleet has a direct impact on the agencyâs cost of operations and ability to achieve its mission. Without a high-quality fleet, highway maintenance costs go up and service levels go down. An effective equip- ment replacement program is a key component in providing a high-quality fleet. Highway agencies make large capital investments each year to replace equipment. A survey performed as part of NCHRP Synthesis 452: State Department of Transportation Fleet Replacement Management Practices (1) found that the average agency expenditure in 2011 was $18.5 million; however, survey respondents believed that amount was 40% lower than needed. Replacing equipment at the right time lowers the total ownership cost, reduces downtime, and allows highway operations to be performed more efficiently. However, there is no widely accepted process for determining optimal equip- ment replacement cycles. There is a need to develop rational processes that will (a) provide a realistic means for deter- mining optimal replacement cycles and (b) help equipment managers and administrators with the task of equipment replacement. 1.2 Project Objective The objective for NCHRP 13-04 was to develop a guide for optimal replacement cycles of highway operations equip- ment. The guiding principle was to develop rational and real- istic processes. There is considerable literature dealing with the economic theory of equipment replacement analysis. The intent of this project was to mesh theory with real-world operating considerations to achieve practical results that can be applied in a highway operations environment. C H A P T E R 1 The project also recognizes the need for processes and tools. Making equipment replacement decisions is a pro- cess that recognizes the real-life operating environment. The tool developed in the project is Excel based, which is easy to obtain, does not require proprietary software, and supports the replacement processes. 1.3 Research Approach The project was accomplished in two phases. Phase I encom- passed a literature search to identify and evaluate current practices related to equipment replacement processes, deter- mining replacement cycles, and proposing a plan for prepar- ing the guide and developing the optimization tool. The plan was executed in Phase II. 1.4 Organization of the Report The report consists of Parts I, II, and III. Part I is a research report describing the work performed to prepare the guide and develop the optimization tool. It consists of four chapters and two appendices. Chapter 1 introduces the project and discusses its back- ground, objectives, and research approach. Chapter 2 discusses the project approach in detail and presents the literature search findings on prevailing practices. Chapter 3 presents the overall project results, including discussions on â¢ Replacement factors and how they are quantified and used in highway operations, â¢ The LCCA approach for highway operations equipment, â¢ Equipment replacement processes presented in the guide, and â¢ An overview of the optimization tool used to perform LCCA and support the replacement processes.
9 Chapter 4 presents a summary of the findings and offers suggested future research. Appendix A contains the default depreciation schedules used in the optimization tool and Appendix B presents a flowchart of the equipment replace- ment process. Part II is the guide for optimal replacement cycles of highway operations equipment and Part III is the user manual for the optimization tool. The optimization tool is not included herein. The tool is available for down- load from TRBâs website at www.trb.org by searching on NCHRP Research Report 879.