Life-Cycle Cost Analysis for Management of Highway Assets (2016)

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CONTENTS 1 SUMMARY 5 CHAPTER ONE INTRODUCTION Background, 5 Study Approach and Report Organization, 5 6 CHAPTER TWO STATE OF THE PRACTICE OF LIFE-CYCLE COST ANALYSIS TOOLS AND MODELS Common Elements of Life-Cycle Cost Analysis, 6 Life-Cycle Cost Analysis Tools and Models, 7 Life-Cycle Cost Analysis International Studies, 9 Summary, 10 12 CHAPTER THREE AGENCY PERSPECTIVES ON LIFE-CYCLE COST ANALYSIS Agency Survey, 12 Survey Participation, 12 Survey Results, 13 Summary and Findings, 16 17 CHAPTER FOUR CASE EXAMPLES ON THE USE OF LIFE-CYCLE COST ANALYSIS Life-Cycle Cost Analysis for Pavements—Utah Department of Transportation, 17 Life-Cycle Cost Analysis for Bridges—Florida Department of Transportation, 18 Washington State Department of Transportation Ancillary Asset Management, 19 Minnesota Department of Transportation Culvert Cost and Life-Cycle Management Initiative, 21 Public–Private Partnerships—A Concessionaire’s Take on Life-Cycle Cost Analysis, 22 Summary, 23 24 CHAPTER FIVE FINDINGS, CONCLUSIONS, AND FUTURE RESEARCH NEEDS Findings, 24 Future Research Needs, 25 26 GLOSSARY 27 REFERENCES 29 BIBLIOGRAPHY 30 APPENDIX A FINAL SURVEY Note: Many of the photographs, figures, and tables in this report 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.

SUMMARY LIFE-CYCLE COST ANALYSIS FOR MANAGEMENT OF HIGHWAY ASSETS MAP-21 (the Moving Ahead for Progress in the 21st Century Act) requires agencies to incorporate life-cycle cost analysis (LCCA) and risk-based analyses into their asset man- agement plans for, at a minimum, pavements and bridges on the National Highway System (NHS) and encourages similar proactive management of other transportation assets. To assist highway agencies in this task, this study was developed to provide insight as to the state of the practice of LCCA and the activities of state highway agencies. The objec- tive of this project was to develop an inventory of quantitative asset-level, project-level, or corridor-level processes or models for predicting life-cycle costs associated with the preservation and replacement of highway assets, through a literature review, nationwide survey of highway agencies, and case studies that documented specific highway agency experiences with LCCA. The literature review provided an overview of the typical costs included in LCCA. Chal- lenges associated with including these costs in 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 (e.g., ancillary assets). In addition, it is noted that although many, if not most, highway agencies are using LCCA to manage their pavement programs, many report challenges with including user costs. One potential approach to improving LCCA application 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 their life may require more rigor and data to support an LCCA as compared with assets such as traffic signal systems that may require substantially less maintenance and are not anticipated to benefit from rehabilitation. This type of approach was demonstrated through the work documented on the LCCA of advanced traffic management systems and ramp metering systems in chapter two. A thorough literature search allowed for the documentation of available LCCA tools by application level (asset, project, and program or network level) as defined in this report’s glossary of terms. As anticipated, pavements and bridges appear to be the most widely ana- lyzed using LCCA; however, models for other ancillary assets, including roadway barriers and culverts, were also identified and documented. Most state customization focused on the development of deterioration curves that better reflect individual state agency experi- ence. Although FHWA has noted that the applications contained in their 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. One study of note utilized LCCA to fully analyze the cost–benefit ratios associated with typical installations of adaptive traffic control systems and ramp metering systems. The authors captured costs associated with these systems in terms of infrastructure costs, incremental costs, and operations and maintenance costs and expanded the study to include 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 Intelligent Transportation System technologies.

2 International studies revealed a similar focus on pavements and bridges for LCCA appli- cations, and an emphasis on the resulting environmental impacts of design alternatives was noted. Some countries are in the early stages of framework development to support LCCA and are beginning to document the approach to the process as well as implications to public infrastructure investment. Building on the findings of the literature review, a national survey of state highway agen- cies was conducted. The primary purpose of the survey was to identify LCCA applications within state highway agencies and to determine challenges and data needs as provided by the survey respondents. In addition, the survey was viewed as a screening tool to identify those state highway agencies that are applying LCCA and that were interested in participating in the case development stage of the study. The survey was sent to members of the AASHTO Standing Committee on Asset Management and extensive efforts were made to increase survey participation. In the end, 41 state highway agencies participated in the survey—a response rate of 82%. According to the survey results, LCCA is currently being used by most state highway agen- cies for pavement and bridge management at all application levels. LCCA is most often being used as part of the decision-making process for analyzing asset-level design alternatives. Cur- rently, 16 state agencies are using specialized software to assist with these LCCA applications. Most notably, the survey results showed that capital costs, maintenance costs, inspection/ support costs, and user costs are the most common factors considered in LCCA analysis by state highway agencies. On the other hand, very little consideration is currently being given to the incorporation of resilience goals and uncertainty/risk factors into LCCA applications. Since the purpose of this survey was to identify challenges in applying LCCA, it is impor- tant to focus on what factors and data state agencies reported to be lacking in order to prop- erly perform LCCA or improve existing LCCA. Deterioration curves/models, uncertainty/ risk, and resilience goals were reported as lacking available data to perform LCCA. Knowl- edge gaps also exist regarding salvage value and remaining service. According to the state agencies surveyed, there is a significant lack of data available at this time to properly perform LCCA applications for assets beyond pavements and bridges. Five case examples were developed as part of this study, which documents the LCCA experiences of several states and one concessionaire. LCCA use in Utah for pavement man- agement was documented, including its use of LCCA to highlight the need for additional resources to meet the demands of deteriorating pavement assets. Next, the efforts put forth by Florida Department of Transportation to calibrate bridge maintenance recommendations were documented in a case example that included the benefits of the calibration process to allow for better allocation of maintenance dollars given the ability to delay some mainte- nance and rehabilitation efforts. The data gathered through in-field inspections over a period of several years allowed researchers to recalibrate their deterioration curves to better align with field conditions, allowing for the delay of some maintenance expenditures. Washington State DOT’s (WSDOT’s) Maintenance Division is highlighted in the next case example. WSDOT has been crafting an evidence-based approach to maintenance priority-setting, budgeting, and legislative requests for many years, in addition to an ongoing government quest for efficiency. Short of having a comprehensive cradle-to-grave LCCA system in place at WSDOT, the Maintenance Division is doing what it can within its purview. Maintenance is working partially in coordination with other programs such as Design, Construction, and Preservation to create and implement the building blocks of LCCA-based management. Similarly, Minnesota DOT’s (MnDOT’s) HydInfra is documented through a case example. HydInfra stands for “Hydraulic Infrastructure” and is the culvert and storm drainage system inventory and inspection program MnDOT has developed for pipes with spans shorter than 10 ft. To support risk analysis and life-cycle cost assessment for culverts, MnDOT recently completed an extensive culvert repair cost data collection effort. Finally, the experiences of

3 a private-sector company involved in many public–private highway ventures were docu- mented. The differences between LCCA within state highway agencies and within the pri- vate sector are captured in the case example, including the most notable difference: the way the private sector views assets from a holistic systematic view instead of as independent asset classes when conducting LCCA. Research needs that were identified through this effort include the need for more tools and guidance for agencies to apply LCCA to assets other than pavements and bridges. Although research appears to exist for specific components of LCCA, a central location that agencies can access for all of the information and example applications from their peer states is lacking. In particular, lessons learned about calibration of deterioration curves point to the need to provide better guidance to states about the importance of maintenance and performance records, to better align actual asset performance over time to all impor- tant deterioration curves, which drive much of the outcome of LCCA. Also, the benefits of LCCA for ancillary assets need to be better researched and documented. Suggestions were also made about the use of a tiered LCCA approach to remove some of the burden from capturing the costs associated with some assets that have shorter life spans and lower maintenance and rehabilitation costs, to facilitate expanded LCCA use.

5 • Comparing overall costs between different types of projects to help prioritize limited funding in an agen- cywide program; and • Calculating the most cost-effective approaches to proj- ect implementation (2). The objective of this synthesis project was to document LCCA use by state highway agencies and the challenges faced by agencies when applying LCCA. In addition, an inventory of quantitative asset-level, project-level, or corri- dor-level processes or models for predicting life-cycle costs associated with the preservation and replacement of highway assets was captured through a literature review, nationwide survey, and development of five case examples. STUDY APPROACH AND REPORT ORGANIZATION This study utilized multiple methods to gather informa- tion related to LCCA use for highway assets including the following: • A literature review of state, local, and international practices related to LCCA • A survey of highway agency asset management staff • Interviews with highway agency asset management staff. Information gathered through the data collection meth- ods has been incorporated into the following structure within this report: Chapter two – State of the Practice of Life-Cycle Cost Analysis Tools and Models Chapter three – Agency Perspectives on Life-Cycle Cost Analysis Chapter four – Case Examples on the Use of Life-Cycle Cost Analysis Chapter five – Findings, Conclusions, and Future Research Needs In the next chapter, the state of the practice of LCCA tools is reviewed to help provide a solid foundation for the further discussion contained in later chapters. CHAPTER ONE INTRODUCTION BACKGROUND MAP-21 (the Moving Ahead for Progress in the 21st Century Act) requires agencies to incorporate life-cycle cost analysis (LCCA) and risk-based analyses into their asset manage- ment plans for, at a minimum, pavements and bridges on the National Highway System (NHS) and encourages similar proactive management of other transportation assets. LCCA takes into account “the total economic worth of a usable proj- ect segment by analyzing initial costs and discounted future costs, such as maintenance, user, reconstruction, rehabili- tation, restoring, and resurfacing costs, over the life of the project segment” (1). LCCA allows agencies/owners to bet- ter understand the true cost of assets that take into account not only initial capital investment but also costs incurred by the traveling public as well as the costs associated with the ongoing maintenance requirements of various asset designs. Figure 1 provides a visual interpretation of the typical costs associated with LCCA. FIGURE 1 Typical costs associated with life-cycle cost analysis (Source: Kenneth Buddha). LCCA, whereas most often utilized at the project plan- ning and preliminary engineering stages, has several noted applications including the following: • Helping to select the most effective alternative to meet a project objective, such as replacing a bridge; • Evaluating a design requirement within a specified project, such as pavement types;