Integrating Effective Transportation Performance, Risk, and Asset Management Practices (2022)

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48 Naturally, the fuel that enables agencies to perform their regular operations is their resources— both nancial and otherwise. It also is essential that agencies identify the impact funding limitations may have on plans to integrate performance, risk, and asset management practices. ough integration may be expected to lead to eciencies and overall cost savings, such out- comes are not immediate and may not be feasible or discernible during early stages of the evolution. Agencies must therefore assess their own nancial capabilities, with the understanding that management area integration is a long-term investment. Agencies must consider how to optimally deploy available resources to achieve realistic performance levels to lower risk by using asset management and other decision aides. For this reason, it also is valuable for agencies to continuously evaluate the outcomes of their integration eorts, gaining insights on nancial and other impacts over time and relating this back to similar evaluations of previous manage- ment practices. e discussion of this nal key area outlines critical considerations in making realistic and eective integration plans that operate within an agency’s potential to support them. Agencies can also incorporate innovative solutions, as discussed and shared in practitioner examples, to enhance the eectiveness of integration as well as enable it. Assessing Needs and Capabilities e dialogue regarding resource constraints to an integrated management approach is one that should be continuous and supported. is assessment dialogue should include a cross section of agency sta to provide a comprehensive outlook on needs as well as a communication avenue for discussing capabilities and setting priorities. During the process of creating the road- map, a survey question was posed to a group of agency sta including district and headquarters sta representing performance, risk, and asset management backgrounds. “What are the most important resources Caltrans needs?” was asked, and the results were organized in a word cloud in which the most commonly entered results received the largest text size (Figure 6). Feedback on integration needs and progress can be gathered in a variety of ways, such as this survey. What is essential is that feedback is gathered from a comprehensive background of agency resources and that it is activated in the ongoing assessment dialogue to further develop integration eorts. The Financial Cost of Integration Integration of performance, risk, and asset management is an investment of time and nances into achieving more eective and more ecient outcomes. Because of this, agencies may expe- rience some “maturing pains” throughout the integration process related to implementation RESOURCE REQUIREMENTS

Resource Requirements 49   of new practices; changes to stang; or acquisition of new data, soware, or other resources. Despite the onset of such expenses, integration will ultimately lead to eciencies and improved operations that will provide a long-term return on these investments. Such nancial benets will come from reduced maintenance costs, minimized loss due to external (e.g., politics, stake- holders) environmental or nancial risks, and improved asset management. is investment to integrate is focused more on internal costs. ese costs could be dened as labor to reengineer the current processes to include all management functions and shiing of internal stang to be aligned within one division or unit. e nancial cost of integration will depend on the exibility and the agility of the state DOT. External expenses aected by the integration could include things such as new soware or hardware acquisitions or perhaps new purchased data sets. In most cases, these upgrades to operating systems, as well as dierent/ new data sets, were likely being considered without the integration. e true nancial cost of integration is the internal investment in sta, time, and resources needed for organizational change (e.g., policy, culture, tools, training and development) as integration matures. Figure 6. Important resource needs identied by Caltrans, TriMet, and MnDOT (top to bottom).

50 Integrating Effective Transportation Performance, Risk, and Asset Management Practices Integrated Budgeting As practices and agency structures become integrated, it is essential that agency budgeting similarly becomes integrated. This type of integration could be expressed as “unified budgeting.” Unified budgeting focuses budget development efforts on weighing anticipated program results against different program funding levels. By integrating performance, risk, and asset manage- ment into one budget process, DOT administrators can manage more cost-efficient and effective budgeting outlays. Cross-asset allocation should be a central strategy for agencies working to integrate their management practices, as this is a key approach to achieving efficiencies through optimized spending and reduced life-cycle, maintenance, and overall cost. Additionally, to support the long-term vision of integrated management, financial planning, while considering funding uncertainty and potential program impacts, should be structured with multiyear budgets and spending programs as opposed to annual budgets, which may not capture the long-term needs of a roadway network and lead to nonoptimized spending. The advantages of a unified budget that focuses on results are accountability, transparency, clear purpose, and improvement in organizational outcomes. Evaluation of Integration Outcomes As integration progresses over time, it is essential that agencies pursue continuous improve- ment of their management programs. Because integration brings with it a plethora of new practices, requirements, and structures, agencies should establish formalized evaluation pro- cesses. Such processes help to ensure that the integration process is being optimized for the unique and constantly changing environment in which each agency operates, leading to faster outcomes, greater returns on investments, and reduced internal complications. Creating key performance indicators to evaluate the success of the integration is key. Focusing on the business results the state DOT desires from the integration is important, as that may fluctuate, depending on the goals of the agency. These focused outcomes will drive leading indicators of how successful the agency has become at maintaining a good balance between people and process. As an example, Caltrans had a mandated review in FY 21 for the first round of investments under its efforts to integrate performance, risk, and asset management, the State Highway Operation and Protection Program (SHOPP). Nontraditional Resources As the integration of performance, risk, and asset management is a long-term investment that may lead to significant investments by an agency on the front end, it is valuable for agencies to be aware of potential nontraditional resources that may support their integration efforts. Such resources may include national grant programs, pooled research funding programs, or national research programs that can provide practical support for the development of agency- specific outcomes. Other types of nontraditional resources that can assist with integration include flexibility in the workplace and creating coworking spaces to encourage collaboration and teaming.

Resource Requirements 51   Integration Maturity: Resource Requirements To assess an agency’s level of maturity in the key topic of resource requirements, the bench- marks below may be considered. 0 2 3 Level Preintegration No actions have been taken to pursue integration within the agency. Management practices are largely siloed, with no active interest on the part of agency executives in pursuing integration and no integration champion identified. Level 1 Initial The agency has expressed interest in exploring potential integration of performance, risk, and asset management practices. Conversations have begun and executive leadership has recognized the potential value in integration. No practical changes have been made to the operations of the agency, and no formal use of resources to assist with integration has begun. Level Level Level 4 Defined The agency has begun to identify practical steps to move toward an integrated management program by developing initial documentation, pursuing a framework for uniting the budget, and creating a division or unit responsible for performance, risk, and asset management, including the establishment of metrics to monitor integration. The agency has formally begun the evolution, though day-to-day operations are largely unaffected, apart from initial pilot efforts, and any outcomes or process changes are highly tentative. Expandable, Repeatable Integration has begun to move from theory to actual practice. Agency processes are being transformed, becoming systematic and repeatable. The integration is beginning to produce some tangible outcomes, as budgeting is seen as an entire entity instead of siloed. Internal changes are taking place as integration is transcending through departments and affecting day-to-day operations throughout the agency. At this point, integration has major implications for staffing and resource needs. This stage may last for an extended period as integration permeates the agency at various levels and departments. Managed Integration has been performed across all appropriate asset classes and departments within the agency. Integrated processes are well-documented and are performing effectively, with regular significant outcomes at various levels, including a unified budget and staffing assigned to one focused division/unit. However, the vision of integration is not yet fully realized and requires active management and attention. Though performance, risk, and asset management are largely integrated throughout the agency, there are still some practical steps to take to establish integration as the standard operation of the agency. At this point, the agency may seek certification under ISO 55000 or similar programs to cement their practices, though this is not necessary. Level 5 Optimizing Integrated processes are fully deployed throughout the agency and are highly effective and consistent. Resource allocation should be in alignment with desired outcomes, and outcomes of integration are obvious and well-established. Performance, risk, and asset management are comprehensively integrated within standard operations, and the agency actively works to optimize processes and is committed to continuous improvement. At this point, the agency may have become certified under ISO 55000 or similar programs to cement its practices, though this is not necessary.

52 Integrating Effective Transportation Performance, Risk, and Asset Management Practices Integration in Practice Holistic Budgeting Processes (Highways England) With risk and performance considerations being fed into the existing asset management group, Highways England can achieve efficiencies in use of resources that would be difficult for less holistically thinking agencies. However, as with all comparable agencies, scarcity of resources at times limits the capability and capacity of the agency to pursue systemic changes. Because Highways England is such a large company, it faces many competing interests and initiatives. This can sometimes limit the level of resources that it is able to acquire to support integration efforts. Additionally, the size of its network can mean that efforts to develop data can be financially cumbersome and that implementation of new policies and initiatives can take a great deal of time. In order to address such issues, Highways England hopes to more broadly implement modern technology to monitor assets, automate data collection, and produce dynamic interfaces to improve agency efficiency with asset management practices, thus making room for more innovative approaches and strategies. To achieve a stable and effective budget, Highways England has found it is important to study and to understand the full life cycle of each road investment period. In the course of an investment period, plans capturing the full picture of asset needs and funding strategies to be implemented over the course of the next 5-year plan are presented to the government. Discussions are held as to the way finances will need to be allocated to best achieve agency goals, and determinations are made to prioritize outcomes for the investment period. Such longer-term views allow for more stability and efficiency of finances. However, because budgets are always in flux within Highways England, as is the case for many comparable agencies, itis important that they remain flexible and prepared to modify financial plans as needed. Highways England ran into some difficulty during the first road investment period due to lack of data and information about historic budgeting and expenditures, which limited its ability to accurately forecast expenses and estimate returns. This resulted from much of the project’s work expenses being lumped and documented together, which led to uncertainty about how finances have historically been allocated and used. Additionally, due to the unpredictable and nonlinear ways that some asset classes deteriorate, the agency has found it challenging to effectively measure all asset conditions—data that are essential for effective asset budgeting decisions. These have proved to be major challenges in Highways ngland’s planning cycle, as they have limited the agency’s understanding of budgeting needs as well as its ability to plan according to historic finances, so that future decisions could be informed by the effectiveness of decisions made in the past. As it moves into the second investment period, the agency hopes to mitigate these limitations as best possible by utilizing uncertainty modeling and more robust planning methods to achieve greater accuracy and confidence. Additionally, the agency is working to improve documentation methods and data collection to better serve future planning efforts.

Resource Requirements 53   To achieve its long-term goals of integration, VTrans has recognized its need for a selection of key resources beyond financing alone. Because much of the agency’s integration planning surrounds advancements in its data management and technical processes, this will require major investments in data, software, and personnel. Acquisition of large data sources can be complicated and challenging and can require large amounts of funding and time investment. However, such investments can be expected to produce long-term returns if the data are well-maintained and fully utilized. Similarly, to implement these data, investments must be made in software and computing power. Finally, investments must be made in agency staff to provide advanced training opportunities in which technical staff can learn new software, data analysis methods, and other technical skills. Such trainings can be expected to provide excellent long-term returns as capacity is built within the agency to tackle modern, advanced approaches to data analysis, optimization, reporting, and more. To increase funding to the agency, California passed a gas tax that was based on recommendations from Caltrans. The value of the gas tax was based on Caltrans’ own performance-based analysis. It is noted that the legislation, SB 1, provides the first significant, ongoing, and stable investment in the State Highway System (SHS) in more than two decades. The efforts put forth in the planning stages of the multiyear effort, depicting the rehabilitation needs and priorities of the SHS, identified financial needs while recognizing fiscal constraints. To have success in integrating performance and risk into its asset management practices, ASFiNAG, an Austrian publicly owned corporation that plans, finances, builds, maintains, and collects tolls for the Austrian autobahns, has identified executive buy-in as a key resource. Because such integration requires modifications to a broad variety of agency practices, it is important to have the support of executive leadership throughout the course of the integration to influence policy, structure, and resource allocation. Additionally, evaluation of integrated practices provides the opportunity to share results with agency executives and stakeholders, which may influence future levels of investment. Through this effort, Caltrans was able to begin to address established performance goals and shortfalls of existing budgets to meet the identified financial needs and demonstrate the impact to potential future conditions. The 2-year rolling cycle of updating performance goals against programmed and executed projects will provide the insight needed to track the return on investment to meet the agency’s goals from SHOPP over the anticipated 10-year program. Because funding remains a consistent limiting factor for ASFiNAG, as it does for most similar agencies, it is important that the asset management staff are able to identify opportunities for improved efficiency in the short and long term. Integration of performance, risk, and asset management helps to achieve this, potentially making ASFiNAG’s budget go further each year.