Answering No. 34

March 15, 2002
GASB statement demands agencies develop efficient asset management practices

About the author: Hawbaker is director of streets and local roads for the American Concrete Pavement Association, Skokie, Ill.

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State and local governments are continually looking for better systems and strategies to manage their physical assets. The largest and possibly the most viable of these assets is the transportation infrastructure that supports the economic vitality and competitiveness of the nation, state, county or city.

With limited funds available and increasing scrutiny from taxpayers, legislators and investors, agencies are under pressure to manage physical assets like roadways in the most cost-effective way, while still providing a high level of service to the public. In addition, the burden on agencies is growing as traffic increases. Since 1973, average daily traffic has increased by 86%, while the average daily load has increased 550%. In comparison, the number of miles of roads has increased only 3%.

These trends mean government agencies must become more accountable for the condition of their roads and other infrastructure components to taxpayers, businesses, rating agencies, creditors and investors. Taxpayers and motorists have become more aware of how agencies are spending tax dollars and more intolerant of construction delays and repeated overlays. Responsible asset management shows the public that the agency is wisely investing tax dollars in the transportation infrastructure. Proper asset management also keeps taxes at the appropriate level to support the infrastructure and also may affect an agency’s ability to borrow money. By putting a solid value on its assets, including roads, the agency can provide better data to support an assessment of its creditworthiness to the financial community.

A policy statement from the Government Accounting Standards Board (GASB) is adding to the pressure on agencies to develop efficient asset management practices. GASB Statement No. 34 encourages governmental agencies to promote responsible asset management policies and procedures. It requires a more complete reporting of finances by including capital assets, such as roadways, that have traditionally been omitted from financial statements. The idea is to keep track of the value of long-lived assets and preservation activities in order to justify its expenditures. The consensus is that GASB 34 will have the greatest impact on transit and toll highway authorities, airport and port authorities, public water and sewer utilities, and local highway departments.

Tune in to the network

Asset management is a systematic process of maintaining, upgrading and operating physical assets, such as roadways and bridges, in a cost-effective way. It combines engineering, business management, economics and the latest computer-aided technology.

For pavements, the idea is to choose the pavement types and rehabilitation strategies that benefit the pavement network as a whole. This strategy allows expenditures to come through in a constant flow at the lowest cost, yet the pavement is maintained in acceptable condition. Responsible asset management includes, in the case of pavements, determining the condition of the existing pavement network and choosing the combination of activities to continually maintain both the pavements and the expenditure flow. The idea is to make decisions at a network level first and then move to the project level. Many agencies use life-cycle cost analysis to make project- level decisions.

Preventive maintenance plays a large role in any asset management program. It is obvious that deferred maintenance of infrastructure assets, such as highways, is much more expensive over the long term than investing in an ongoing program of preventive maintenance and renewal. In short, having to prematurely replace the asset costs more than preserving it. The Transportation Re-search Board reports that every dollar invested in preventive maintenance at the appropriate time in the life of pavement saves three to four dollars in future rehabilitation costs. Add user costs to the equation and the cost savings increase dramatically.

Use it all

A major goal of asset management is to improve network investment decisions. The agency should use asset management to make both the short- and long-term decisions in the planning, budgeting and operating functions so the assets stay at the highest condition level. For pavements, that means optimizing all resources to preserve the pavement network and ensure safety and serviceability.

Agencies need to develop a practical set of policies, standards and methodologies to accumulate consistent documentation about the value of assets and what is being done to preserve them. They must develop long-term network goals that emphasize preservation and proactively manage deterioration. The strategy must consider the impacts of past actions and the benefits of scheduled maintenance and renewal. It also should include a network modeling tool, deterioration rate information and cost data. 

Business decisions

The historical approach to managing pavements has been reactive—fix the worst pavements first. The investment in good or fair pavements and the use of investment history is limited.

Most agencies continue to rely on the experience and preferences of individual engineers to make pavement decisions on a project-by-project basis. They often consider initial cost only, not costs over the life of the system.

But this reactive strategy is changing. The new approach promoted by asset management practices is proactive, developing long-term network goals and emphasizing preservation. Agencies use past performance to determine future action. They consider how each project impacts the entire network. They consider long-term cost and, in response to motorist demands, user costs.

The FHWA recently established an Office of Asset Management to guide transportation agencies at all levels. AASHTO also has had a task force on asset management in place for a few years to help agencies respond to in-frastructure reporting requirements of GASB 34.

Many progressive transportation agencies at all levels are using analytical methods and tools to develop more cost-effective strategies for pavement renewal. This places greater emphasis on maintenance and life-cycle cost analysis to extend the service life of their networks. The Michigan DOT is one of these proactive agencies. 

“We realized we needed a business approach rather than a bureaucratic one,” said Tom Maki, chief operations officer for MDOT. “MDOT is a very progressive, very aggressive government agency trying to operate like a professional business.” To this end, MDOT developed a comprehensive and sophisticated pavement management system, employing the latest computer technology and talented statisticians to use past pavement performance to predict future needs and performance.

New construction

The concrete pavement industry, together with state and local agencies, is continually investigating innovative methods to efficiently renovate, re-place and expand roadways. New technologies like high early strength concrete and the maturity meter allow earlier opening to traffic. 

Construction methods like weekend closures and night work minimize user inconvenience. Contracting methods like A+B bidding, lane rental, warranties and incentives/disincentives all speed construction time and improve the finished product. The Innovative Pavement Research Foundation and the FHWA are working together to reduce cost and user delay, improve performance and foster innovation in the design, construction and preservation of concrete pavements.

California’s long-life pavement rehabilitation program showcases many innovative techniques that play an important role in the management of transportation assets. Caltrans is partnering with the FHWA, the Transportation Research Board and university researchers to find better and faster ways to reconstruct aging freeways. This program follows closely a 1995 report revealing that nearly 30% of the state’s highway lane miles required corrective maintenance or rehabilitation. The long-term program employs innovative designs and unique procedures to renew 1,800 miles of urban freeway. The program aims to limit closures on initial construction, to extend pavement life (30 plus years) and minimize future maintenance and repair throughout the state. Caltrans is willing to spend more money on promoting the safety and satisfaction of the road user, as well as spending more money up front to save money in the long run. 

Kirsten Stahl, Caltrans materials in-vestigation engineer, said, “The higher initial costs will be recouped many times when the repairs last four to five times and possibly longer.”

There also are other important considerations associated with a sound approach to asset management, including:

A successful pavement network does not need all its pavements to have a 40-year design life. It requires a mix of fixes so pavements come of age at different times to maintain a consistent flow of expenditures.

The concrete pavement industry offers a wide variety of solutions to most economically renew the pavement network. These techniques are maintenance, restoration, resurfacing (overlays) and reconstruction. Which one to use depends on the condition of the existing pavement, the traffic requirements, the design life required and the effect on the network.

Maintenance maintains serviceability and keeps the pavement at its current condition with low user impact and low cost.

Concrete pavement restoration (CPR) is used on good pavement with little deterioration. Ideally, it is the first rehabilitation procedure applied to concrete pavement when the pavement exhibits only slight deterioration. It is used to replace isolated sections of deteriorated pavement, to prevent or slow overall deterioration or to reduce the impact loading on the pavement— and to do it quickly with minimal disruption to traffic.

CPR is a series of engineered techniques that directly address pavement distress problems and solves them. These techniques are full- and partial-depth repair, diamond grinding, joint and crack resealing, slab stabilization, retrofitting dowels, retrofitting concrete shoulders and edge drains, cross-stitching and grooving.

Resurfacing is used when pavement has medium to high levels of distress and restoration is no longer effective. To rehabilitate an existing concrete road, bonded and unbonded overlays extend the life of the pavement by decades. For an existing asphalt surface, standard or ultra-thin whitetopping are quick and cost-effective ways to eliminate the continual rutting of asphalt pavement.

Reconstruction, or total removal and replacement of worn-out or insufficient pavement, is used when the pavement has high levels of distress, when overlays won’t solve the problem or when the engineer is up against outdated design features.

What will it cost in 20 years?

The Minnesota DOT is now building pavements designed for 60 years. The industry also claims concrete pavement requires little maintenance and performs reliably for decades before needing renewal. It is durable, eliminating dangerous rutting and shoving, and supports heavy trucks. The texturing of concrete pavement produces a safe, high-friction surface.

A recent study by Dr. James Cable evaluated two Iowa counties’ pavement systems over a 40-year period to determine the effect of a concrete policy versus an asphalt policy. One county’s system (County A) was primarily concrete with whitetopping for resurfacing; the other system (County B) was primarily asphalt with asphalt overlays. County A’s system developed slowly over a longer period of time, but has had little need for rehabilitation. County B’s system developed in the first 20 years at a faster rate, but has experienced significant overlays, rehab and maintenance over the last 20 years. 

The research revealed that the use of concrete for new construction and whitetopping for renewal resulted in improved performance and decreased construction and maintenance costs. The unit construction cost over the 40-year period, including initial cost and overlays, was 3.3 times more for an asphalt system than a concrete system. Additionally, the unit maintenance costs are substantially higher for County B, with asphalt 2.1 times higher than concrete.

Another study, this one by Eres Consultants, compared performance and costs of pavements on five rural interstate corridors. The sections of interstate highway have approximately equal traffic loading and represent a variety of geography and climate.  The study shows that the concrete pavements studied lasted about twice as long—about 14 years—as the asphalt pavement before failing. The definition of failure is the placement of the first overlay or major CPR on an original pavement or, for rehab, the placement of the next overlay, major CPR or reconstruction. The study also found that the cost per lane mile is lower for concrete pavement by about $1,200, or 85% of the cost of asphalt.

Watch for structuring holes

Many agencies use life-cycle cost analysis (LCCA) to determine the most cost-effective option for a particular project. LCCA is a procedure to do an economic comparison of all competing alternatives, for example, concrete and asphalt pavement. Using engineering input, it considers all significant costs over the economic life of each alternative and expresses them in equivalent dollars.

LCCA helps agencies select the most cost-effective pavement type and streamline the pavement selection process. It’s a simple mathematical procedure that takes into account the time value of money, maximizing taxpayer dollars by indicating the most effective option for each project. In fact, Michigan’s state legislature felt so strongly about the value of LCCA that it passed a law requiring its DOT to use LCCA on pavement projects over $1 million.

One of the goals of asset management is to extend the life of the system by increasing the life of individual pavements. The longer the life of the pavement, the greater the average years of service for the whole network. 

For example, if a roadway network with mostly short-life pavements is upgraded to include one-third long-life (50-year) concrete pavement, the average service life of the system is more than doubled. The average amount of needed repairs each year is cut in half. This strategy lowers costs by spreading them over longer time periods.

Incorporating long-life pavement into the system is not enough for total asset management. The agency must space pavement renewal projects evenly over the years and develop a strategy for filling in the “structural holes.” Structural holes are years where little or no renewal activities are necessary. The engineer chooses from a wide variety of options to extend pavement life a certain number of years to spread out repairs and their costs more evenly over the future years. Each project must fit into the big picture; each is one more step toward achieving network goals.

The agency evaluates the current network, determines what length of performance it needs out of its repairs and chooses those repairs that fit into the big picture. Only then does the agency compare alternatives for cost-effectiveness. This systematized approach focuses on network solutions and not just individual project solutions.

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