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

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9   Transportation agencies have matured significantly over the past decade through the advancement of practices in transpor- tation asset management, performance management, and the use of risk assessment. These advancements have culminated in 51 Transportation Asset Management Plans (TAMPs) filed in mid-2019 from every state department of transportation (DOT) in the United States. These TAMPs required performance mea- sures and goals, reported current and future performance, and identified gaps in performance along with strategies to mitigate the gaps. In addition, the TAMPs noted risks that threatened the agency goals and laid out life-cycle planning for transportation asset management to achieve the desired performance by manag- ing or overcoming risk. DOTs have also been asked to begin reporting performance and progress toward targets not only for asset condition, but also for safety, mobility, and resiliency. DOTs must answer tough questions, such as how to achieve the best possible results with limited resources, how to make corrections when performance does not meet expectations, and how to best empower and motivate staff to advance the agency’s mission. Agencies face these questions in light of aging infrastruc- ture, climate change, demographic change, pandemics, and new mobility technologies. However, DOTs also have new and evolv- ing tools, such as novel and recently available data; maturing enterprise information management portals; and best practices from other industries (i.e., power, water, communications, avia- tion, maritime, and transit). Capitalizing on these new resources may improve progress toward performance targets, help reduce risk and improve resilience, and meet infrastructure needs. As these individual management programs (performance management, risk management, and asset management) have become more ingrained in agency business processes, DOTs have begun to recognize the benefit of integrating these programs to streamline efforts and optimize accomplishments to achieve true portfolio management. The guidance in this report identifies best practices of integrated management programs focusing on approaches to integration, data, and software; personnel and skills; policy and agency structure; and resource requirements to accomplish true portfolio management and ties it all together with case studies that illustrate various approaches to management integration. INTRODUCTION Pandemic Lessons About Risk The 2020 COVID pandemic disrupted agencies in operations, maintenance, and capital development programs as well as most traditional funding mechanisms, highlighting the critical need for diverse risk management efforts to be integrated with performance and asset management. Conventional risk management consideration has focused on mitigating for effects of natural disasters; however, authentic resiliency requires a more comprehensive evaluation of risks within agency operations and strategy. Some observed risks that have had a significant impact on agencies nationwide due to the unique stresses of the pandemic include • Training and retention of staff during unique uncertainty, • Programmatic delay from community lockdown mandate, • Remote connectivity to enterprise systems, • Established processes and culture of data and work collaboration, and • Long-term finance implications from prolonged travel reduction.

10 Integrating Effective Transportation Performance, Risk, and Asset Management Practices Precedence for Integration The Moving Ahead for Progress in the 21st Century Act [MAP-21 (Public Law 112-141)] was signed into law on July 6, 2012, creating a performance-based multimodal program. MAP-21 ensures that states are investing their resources into projects that help reach national perfor- mance goals for federal highway programs, including system reliability, safety, freight move- ment, congestion reduction, infrastructure condition and economic strength, improved environmental sustainability, and reduced delays in project deliveries. The Fixing America’s Surface Transportation (FAST) Act, signed on December 4, 2015, provided long-term funding for surface transportation infrastructure planning and investment. The FAST Act built on MAP-21’s performance management approach, requiring states to invest resources in projects that make progress toward meeting national goals. On October 24, 2016, the Federal Highway Administration (FHWA) added a final Transportation Asset Management Plan (TAMP) rule that elaborates on MAP-21 requirements and requires agencies to define risk as well as provide guidance on how risk can be applied to the TAMP requirements. This rule defines risk management as “the processes and framework for managing potential risks, including identifying, analyzing, evaluating, and addressing the risk to assets and system perfor- mance.” Risk-based TAMPs identify and prioritize vulnerabilities and threats to the system as well as assist decision-makers with regard to how to make more resilient investments with their allocated funding. Risk-based TAMPs help agencies to recognize risk, determine high-priority risk areas, find key opportunities, gauge resiliency, and identify mitigation opportunities. However, it is important to recognize that the goal of the TAMP is not to avoid all risks, but to observe risk holistically as it occurs within an organization and determine what kind of uncertainty (i.e., decision-making, performance, natural hazard) it represents. In ongoing research as part of NCHRP Project 20-123(04), “Development of a Risk Manage- ment Strategic Plan and a Research Roadmap,” this process of risk analysis and management, coordination activities within the larger transportation system, and long-term management is being explored further. The objectives of that research are to develop a comprehensive strategic approach and action plan as well as a long-term risk management roadmap. In 2009, NCHRP Report 632 (Cambridge Systematics, Inc.) provided an overarching frame- work for applying asset management principles and practices to mature existing management systems (i.e., pavement and bridge) and for adding additional assets to improve management approaches to the Interstate Highway System. The report also provides agencies with mechanisms for moving away from patchwork approaches of addressing asset needs and instead using approaches that are more objective, repeatable, and focused on performance objectives. It gives an overview of concepts of transportation asset management, describes methods for incorpo- rating risk management into asset management, highlights existing data sets to support asset management, and notes performance measures and metrics as a cornerstone of asset man- agement principles. NCHRP Report 632 was an early resource for highway agencies. It was followed by the AASHTO Transportation Asset Management Guide (AASHTO 2020), which was an update to previous versions published in 2002 and 2013 to help agencies develop and implement a TAMP. The goal of the present study was to recognize policies (MAP-21, FAST Act), recent guid- ance, and research to provide agencies with the best practices for integrating performance, risk, and asset management (Figure 1). The addition of this information will help reduce duplicate efforts and provide the tools necessary to optimize investments, which will lead to a more complete accomplishment of performance goals while risks specific to an agency’s unique experiences and needs are balanced.

Introduction 11   Defining Terms Across the globe, transportation agencies must provide networks that are well maintained, operationally up-to-date, and reliable. It is therefore imperative that agencies effectively manage asset condition and performance while identifying and addressing potential risks and uncertainties that may affect their assets and undermine their performance goals. The three central practices of asset, performance, and risk management are defined for the purposes of this guidance as follows: Asset management: The application of asset data and management strategies to manage the condition of infrastructure assets that are needed to provide safe and secure mobility on the transportation system. Performance management: A strategic approach to achieve desired performance goals using system information to make investment and policy decisions. Risk management: Identifying and responding to the inherent uncertainties of managing a complex organization through a process of analytical and management activities related to finances, asset condition, and climate change. In other words, asset management comprises the data, modeling, treatment selection, project design, construction management, and maintenance that provide the basis for roadway network administration. Performance management is what the DOT is trying to achieve with its asset and related investments. Risk management is the understanding of trends in performance metrics, with an awareness of uncertainty and its sources and of development strategies that seek to mitigate for those uncertainties and help an agency meet its targets. Although DOTs have largely adopted some form of asset management, adoption of per- form ance management and, particularly, risk-based planning has been significantly more uneven. This is in part because current FHWA rules do not workably link performance and risk. ISO 31000 defines risk as “the effects of uncertainty on objectives.” In its broadest terms, risk is anything that could be an obstacle to achieving goals and objectives. According to FHWA, risk management is a process of analytical and management activities that focus on Figure 1. Integrated management.

12 Integrating Effective Transportation Performance, Risk, and Asset Management Practices identifying and responding to the inherent uncertainties of managing a complex organization and its assets. Traditionally, these three management areas generally operated separately within the envi- ronment of a public transportation agency, with practices working in silos with little interaction or overlap of effort. Though this has been common practice in recent times, practical experi- ence by industry-leading agencies and other organizations, as well as research, is showing that intentional integration of these management areas has been proven to provide value by creating significant efficiencies and improved overall agency performance. Establishing Value-Add Benefits The value and benefits of integrated management processes include • Better decision-making; • Incorporation of risks, mitigating where necessary and maximizing public investment; • Improved project selection; • A focus on developing a more individual commitment to agencywide goals and objectives; and • Valuable insight to the overall portfolio status and projected performance. DOTs that understand and value the benefits of integrating performance, risk, and asset management facilitate a more cost-efficient and unified agency that communicates the value of its work compellingly and transparently to its customers and legislators and can seek to codify process improvements. As an integration approach is identified and executed, it may need to be altered over time to adjust to new opportunities that present themselves in a continuous improvement cycle. At a high level, leaving out any of these management principles robs the agency of direction, while integrating them allows the agency to make the best possible case for additional fund- ing from state and federal decision-makers, thereby helping to identify which projects and investments can help to achieve broader agency goals. Neglecting any of these management principles leaves the agency vulnerable to uncertainties, while including them allows the agency not only to consider what affects the performance of its assets, but also to optimize how recognized uncertainties are addressed. Integration of these management principles also provides opportunities for discussion and collaboration with regional and local authorities. An agency culture that is healthy, collab- orative, and cooperative is vital to integration maturity and to tearing down siloed work processes. The development of such a culture is facilitated by effective data access and man- agement practices and the processes that underpin portfolio management. Beyond these benefits, integration is required. FHWA requires not only asset management, but also performance and risk management to be integrated and reported on in the TAMP. Some states also have state legislation that calls for performance and asset management to be used to manage their DOTs. In an ideal practice, performance, risk, and asset management are inseparable and interdependent. It’s Not Just for Federal Reporting . . . A Florida statute calls for specific asset and performance measures (i.e., 90% bridges meeting standards) in addition to calling for development of a macroeconomic analysis into “linkages between transportation investment and economic performance.” Title XXVI, Ch. 354, S 46

Introduction 13   Value-Add Benefits Performance Management Performance management is required to perform asset management. Performance metrics provide the context for understanding asset condition and operation, allowing a DOT to express internally and externally what “good,” “acceptable,” and “unacceptable” conditions are to the agency. Without a performance component, asset management is typically characterized as “worst-first” or “firefighter mentality,” with assets being resolved when they visibly or publicly fail. Replacing this reactive approach with tools and processes that strategically monitor performance and inform asset management will increase overall system performance. DOTs across the nation have committed to avoiding this uninformed, inefficient, and higher-cost practice. Performance management is required to perform risk management. Managing risk effectively requires clearly defining what is at risk. It isimpossible to truly gauge the seriousness of a hazard if it is not tied to measurable and communicable losses, and it is impossible to make the case for risk-taking if one cannot quantify the potential benefits. Asset Management Asset management data are required to perform performance management. Tracking performance requires data collected through asset management (e.g., work orders and work accomplishments, inspections, and planned treatments). Projecting performance requires asset management data sets and systems to estimate existing and future conditions. Asset management is required to perform risk management. To assess the impact of applicable threats and opportunities to build in resilience, DOTs must understand the condition and basic characteristics of their assets, which is provided by life-cycle management actions and an asset management program. Risk Management Risk management is required to perform performance management, particularly when projecting conditions, uncertainty about funding, program management and costs, or external threats such as extreme weather and climate change. Understanding uncertainty is a key part of communicating the true range of plausible futures for a transportation system. Risk management is required to perform asset management. All asset management systems use uncertainty in their modeling approaches. Deterioration of assets is probabilistic, and there is no guarantee that assets will need specific treatments at specific ages. Beyond this, identifying assets that are vulnerable to existing external and internal threats is critical to convincing the public that a DOT has a reliable and resilient system. As an example, the California Department of Transportation (Caltrans) conducted vulnerability assessments at the district level to provide a comprehensive evaluation of climate change effect that had an immediate impact on DOT asset management strategy. Additionally, the Minnesota DOT (MnDOT) used risk assessment as a primary factor in the development of its statewide 20-year asset investment plan, the Minnesota State Highway Investment Plan (MnSHIP). Moreover, the Colorado DOT adopted a Resilience Policy Directive and created a Resilience Program for which a Risk and Resilience Manual was developed to help calculate risks to the state’s transportation infrastructure. The identification of asset vulnerabilities to physical threats will help the agency manage its assets on the basis of the risks it might face and thereby help it to make more adequate investment decisions.

14 Integrating Effective Transportation Performance, Risk, and Asset Management Practices Identifying Challenges It is important to acknowledge that integrating performance, risk, and asset management is far from a trivial undertaking. The process affects, and therefore requires coordination with, many working groups across an organization. It requires investments in data, staff development, and a reinforcing agency structure that supports integration. Like all organizational pursuits, integration involves a number of trade-offs. Depending on the context of an agency, integration may require a sizeable investment of time on the part of some or many mid- and executive-level managers. As discussed below, successful integration requires a champion as well as executive- level buy-in. Additionally, integration will likely have an impact on many existing successful practices and structures—not eliminating them, but modifying them to support the overall vision of the effort. Because of the size and complexity of agency operations, as well as limitations in resources, such changes may be challenging to implement at the level necessary to achieve successful integration. Therefore, it is critical that agencies perform comprehensive assessments of their programs, resources, and foundational goals before undertaking integration. These challenges are the reason for the development of the guidance in this report. Though there may be obstacles to the achievement of effective integration, this report provides essential, research-driven strategies and insights to help agencies face these challenges through effective planning and provision of a comprehensive vision. Focus Areas The integration of performance, risk, and asset management will look different at every agency, depending on a variety of factors, such as network size, organizational structure, and political environment. In many states, practices of performance, risk, and asset management are explicitly separated through distinct divisions focused on individual applications such as operations and safety, maintenance, and emergency response (as in the case of the Florida DOT). In other states, risk is explicitly managed (MnDOT, for example, has a department of risk management), while performance management is interwoven throughout the agency’s various services. The Texas DOT centers performance management in its Transportation Programs Division, which implements “standards and procedures in the project delivery processes to achieve outstanding safety, planning, design, construction and maintenance performance.” Though the inherent complexities of these management areas may be a reason for many agencies to implement them through separate, distinct agency departments, this does not mean that integration is always inaccessible or overly cumbersome. It can be approached in a variety of ways, such as: • Resource sharing, such as integrated data governance structures that allow for sharing data and data responsibilities across practices, combined or overlapping funding mechanisms, or staff resources that are intentionally linked between agency departments or divisions; • Agency policies that create common goals and leadership or accountability structures, injecting integration mechanisms directly into agency practice; and • An internal culture that promotes and rewards big-picture thinking, efficiency, inventiveness, and proactivity in the daily responsibilities of agency staff. All these achievements and others require intentional leadership through identified agency integration champions, political momentum, and vision/goal setting. To support this range of potential approaches to integration, the body of this guidance has been divided into the five key focus areas shown in Figure 2. Collaborative investigation and identification of the challenges each agency will face on its particular integration journey is the first step in developing a productive integration roadmap. The process for creating this integration roadmap and examples of challenges faced by some agencies are presented later in this report.

Introduction 15   The key focus areas for management integration are summarized below and further detailed in the following chapters. Each chapter includes “Integration in Practice” examples of manage- ment integration efforts occurring around the country. Approaches to Integration. The focus of this key area is the specific methods used by an agency to employ integrated management methods. This information provides readers guidance about how they might formulate their approach to integrating one or more practices as well as what the benefits of the different approaches may be. Readers will gain insight into the possible outcomes of different approaches and methods. Data and Software Needs. What data may be needed to support various integration prac- tices and methods, and how can these data be used? This key area considers the synergies that may be available to an agency by working with other entities, including private data providers. Data visualization; data governance; software; and technical programs that can support effective acquisition, maintenance and management, and application of data are also discussed. Personnel and Skills. This key area focuses on the personnel and skill sets needed to support agency operations related to performance, risk, and asset management, as well as the integration of these practices. This area includes methods related to knowledge acquisition and retention and dealing with staff turnover, development of new competencies to support integration, and staff training and development. Policy and Agency Structure. An agency’s policies and organizational structures have a key role in the development of integrated practices. This includes considerations related to the evolution of the agency over time as integration is pursued as well as the value of leadership; communication; messaging; and a culture of cooperation, collaboration, and coordination. Resource Requirements. Various types of resources are important to creating an integrated management approach and supporting it during and beyond the transition period. This includes discussions of necessary funding levels and structures, the measurement and communication of benefits and returns on investments, and the supplemental resources that lead to optimal results. Figure 2. Key focus areas for management integration.

16 Integrating Effective Transportation Performance, Risk, and Asset Management Practices Integration Maturity NCHRP 08-113 defined a maturity scale with six levels of integrated management program maturity that describe an agency’s increasing capability to deliver effective performance, risk, and asset management practices as its program evolves. Agencies that have not yet begun the process of integrating their management practices or have not shown commitment to do so will not have reached the initial level and will fall under the preintegration level. As agencies apply this maturity assessment to the five key focus areas of integrated perfor- mance, risk, and asset management, the output trends can be actionable and utilized in taking the first steps in developing a roadmap and action plan. The key observations from the devel- opment of this scale for each of the key focus areas should be considered by any agency and prioritized, if needed, as they are on the critical path of integrating management. These critical observations are as follows: • The necessity of executive-level buy-in and a supportive organizational structure. Is there executive-level support for integrating performance, risk, and asset management? Is that support reflected in the organizational structure and agency policies that frame performance, risk, and asset management processes? Are there data sets, systems or platforms, staff training, or resources that are not accessible to certain groups within the performance, risk, and asset management structure? • The pivotal role data governance can play in identifying where integration strengths and barriers are. Do a comprehensive data governance policy and champion exist within the organization? Are data accessible by cross-divisional sources and located either on an internal network or cloud-based server that enables remote accessibility (i.e., from headquarters to field-based staff positions)? • The important role of enterprise standards. Data standards such as ISO 55000 and ISO 31000 and data glossaries are important to laying the foundation for integrated processes, commu- nications, and data and resource sharing. Are the data the agency already has understood and accessible to performance, risk, and asset managers? Is the terminology standardized across the agency and recorded for future staff training? • The need to modify agency culture to support a more cooperative and collaborative working process and enable integration efforts. Are there divisions, offices, or staff that present road- blocks to process integrations? Is an inclusive working environment included in agency vision statements and prioritized by agency executives and management? • Identification and building of policy frameworks. Does the agency have policy frameworks that are effective for management area integration? Do integration champions and process leads for performance, risk, and asset management have the ability to build policy frameworks? • Understanding the value of long-term investment planning and how to support it through milestone development, agency policy, standards, progress tracking, and partnerships. Is the long-term investment scenario published and understood by relevant staff?

Introduction 17   Figure 3 lists the characteristics of each of these six levels. The purpose of the cat- egorization of agency maturity for the integration of management practice is to help agencies assess their current prac- tices and understand the requirements for progressing through the levels. The discussion of each of the five key focus areas in the following pages further details potential opportunities and challenges in improving integration maturity within each focus area. An agency’s efforts to develop in all five of these key areas will afford it the opportunity to realize those key benefits in management integration as summarized in this section and detailed further in the remainder of this report. Figure 3. Integration maturity levels.